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Newsline - October 20, 1998


More Russians slipped into poverty in September compared with August, Interfax reported on 19 October. Last month, the amount of the population living in poverty reached more than one-third. Real incomes plunged 12.4 percent during the first nine months of the year, compared with the same period in 1997, while consumer prices swelled 38.4 percent in September alone--the biggest monthly rise in three years. Nationwide, the number of unemployed increased by 0.5 percent, while the rate of unemployment as of 1 October was estimated at 11.5 percent. "Segodnya" reported on 17 October that the number of jobless in Moscow rose 10 percent from mid- September to mid-October. JAC


Russian gross domestic product shrank 9.9 percent in September, following an 8.2 percent drop in August, Interfax reported on 19 October. The State Statistics Committee called it the largest economic drop since 1994. Industrial output dropped 14.5 percent in September; automobile production was particularly hard hit, sustaining a 35 percent decline. Among the nation's export industries, fuel dropped 4.6 percent, iron, steel, and non-ferrous metals fell 16 percent, and logging, timber, pulp, and paper industries 6.4 percent. First Deputy Prime Minister Yurii Maslyukov told a conference of defense industry executives that the nation's natural monopolies could be used to pull the Russian economy out of its crisis. According to Interfax, he added that "the lending potential of the Central Bank should be better used for export industries and for the construction of houses and roads." JAC


The IMF mission arrived in Moscow on 20 October--one day after IMF Managing Director Michel Camdessus declared that his agency is unlikely to provide any new money soon, calling on the West to provide Russia with humanitarian assistance to avert hunger. "Kommersant-Daily" dubbed the offer of humanitarian assistance "Camdessus's legs," a reference to "Bush's legs," or the U.S. poultry imports, especially chicken legs, that flooded the Russian market as food aid during President George Bush's administration. The newspaper noted that the IMF is waiting for the government to present its economic plan, but "all last week Maslyukov and other government officials said that the emergency budget for the fourth quarter was not yet ready." The newspaper also reported that Karelia and other raions in Leningrad Oblast have already received humanitarian assistance from Scandinavian countries. JAC


Russian legislators are continuing to pressure the presidential administration. State Duma Security Committee Chairman Viktor Ilyukhin (Communist Party) declared on 19 October that he has drafted legislation requiring an independent medical examination of President Boris Yeltsin. NTV reported that the Impeachment Commission has completed preparation of three clauses of the bill of indictment and are currently deciding whether to prepare two more or speed ahead with a vote. "Sovetskaya Rossiya" reported on 17 October, that 79 members of the Federation Council voted in favor of a motion asking Yeltsin to resign voluntarily. Twenty-eight members voted to reject the motion, while 68 members either did not vote or failed to attend the session. JAC


Meanwhile, the presidential administration is trying to characterize continued calls for Yeltsin's resignation as politically motivated and to link the completion of President Yeltsin's term in office with stability. Oleg Sysuev, presidential first deputy chief of staff, told Ekho Moskvy that the country does not need early elections and that "President Yeltsin will work until 2000 for the sake of calm and stability in Russia." CIS Executive Secretary Boris Berezovskii told reporters on 17 October that he is categorically opposed to the early resignation of Yeltsin. Earlier in an interview with BBC, Berezovskii said that the era of President Yeltsin is over and that he should go. He added "Of course, that is conditional on what the alternative is, but I think that today we have alternatives better than him" (see "RFE/RL Newsline," 17 September 1998). JAC


Russian Defense Minister Igor Sergeev told ITAR-TASS on 20 October that Russia is ready to offer the OSCE its own aircraft to conduct flight observations of the situation in Kosova. The previous day, Russian diplomatic sources told Interfax that a "high-ranking Russian diplomat" will be one of two deputy chairman of the OSCE verification mission in Kosova. The team is still being formed, but the same diplomatic sources predicted that international observers could be in place in Kosova in November. Meanwhile, two top cabinet officials, Foreign Minister Igor Ivanov and First Deputy Prime Minister Maslyukov, called on the State Duma to ratify START II. Maslyukov told the military newspaper "Krasnaya zvezda" that if Russia does not ratify START II, "no one in the world will understand us." Earlier, cabinet officials warned that NATO air strikes against Yugoslavia would kill any chance of START II ratification (see "RFE/RL Newsline," 5 October 1998). JAC


Having recovered from his heart attack, Yabloko leader Grigorii Yavlinskii returned to the Duma on 19 October and declared his intention to run for president in 2000. Yavlinskii told reporters that he does not think that President Yeltsin's ill health is sufficient reason to hold early elections. He denied reports that Yabloko was poised to form a coalition with the Union of People's Power and Labor, led by Duma deputy Andrei Nikolaev. Yavlinskii added that all presidential candidates should undergo an independent medical examination. JAC


The trial of environmentalist and former Russian Navy captain Aleksandr Nikitin began in St. Petersburg on 20 October. Nikitin was arrested in 1996 on charges of high treason and espionage for publicizing information about aging nuclear submarines near the Kola Peninsula and their waste disposal practice. Nikitin's case has attracted much international attention, and the trial, according to Reuters, will be monitored by more than 20 international human rights organizations (see "RFE/RL Newsline," 1 July 1998). JAC


Krasnoyarsk authorities have arrested two members of the Church of Jesus Christ of the Latter Day Saints for "illegally infiltrating a military unit," ITAR-TASS reported on 20 October. Aleksandr Gorovoy, chief of the Krasnoyarsk Interior Ministry, explained that the two men said that they committed the offense in order "to hold religious discussions with the servicemen." He added that they face possible deportation. On 17 October, two Mormon missionaries were attacked in Ufa in what authorities say was a random act of violence (see "RFE/RL Newsline," 19 October 1998). JAC


Speaking on Chechen Television on 19 October, Shariah Security Minister Aslanbek Arsaev issued an ultimatum to all kidnappers to release the estimated 103 people currently being held hostage in Chechnya within three days, Interfax reported. Arsaev threatened "a large- scale operation" to neutralize armed kidnappers should they fail to comply with that demand. Also on 19 October, the Russian Federal Security Service told Interfax it cannot confirm the claim by Arsaev's first deputy, Supyan Akhmadov, that Russian Presidential envoy Valentin Vlasov, who was abducted on 1 May, has been moved from Chechnya to Dagestan. Vlasov has undergone an appendectomy in captivity, according to "Nezavisimaya gazeta" on 20 October. LF


Mutinous Georgian army units retreated to their west Georgian base on 19 October following an artillery exchange with regular army units on the outskirts of Kutaisi, Caucasus Press reported. Three men were killed in that exchange. The regular army troops under the personal command of Defense Minister Davit Tevzadze recaptured the tanks and armored personnel carriers seized by the rebels. The insurgents, meanwhile, released National Security Minister Djemal Gakhokidze, whom they had taken hostage together with two generals and the presidential representative in Imereti. Akaki Eliava, the leader of the mutiny, has fled. LF


"Izvestiya" on 20 October quoted Eliava as demanding the resignation of Georgian President Eduard Shevardnadze. Eliava told Caucasus Press on 19 October that he was protesting the plundering of Georgia by a corrupt leadership. But Shevardnadze's press spokesman, Vakhtang Abashidze, told the news agency that the rebels were demanding the restoration of what they termed the "legal government" formed by Gamsakhurdia in 1990. Shevardnadze, for his part, claimed that the insurrection was intended to sabotage plans for exporting Azerbaijan's Caspian oil via Georgia. LF


Meeting on 19 October with a delegation from the Armenian General Benevolent Union, Robert Kocharian expressed gratitude for that organization's assistance since Armenia regained its independence, RFE/RL's Yerevan bureau reported. But he also appealed to Diaspora Armenians to share their "experience and capabilities" to promote economic revival, which he characterized as his "number one priority." LF


Four of the five Azerbaijani opposition leaders who boycotted the 11 October presidential election may meet soon with three defeated candidates to discuss joint actions, Turan reported on 19 October. The five boycotters and defeated candidate Ashraf Mehtiev issued a statement on19 October condemning gerrymandering and the "usurpation of power" by President Heidar Aliev. They added that they will not recognize the legitimacy of any international agreements signed by Aliev's leadership. Musavat Party chairman Isa Gambar, Democratic Party chairman Ilyas Ismailov, and defeated presidential candidate Nizami Suleymanov all cast doubt on the sincerity of Aliev's 18 October plea for dialogue with the opposition, but at the same time they did not reject that appeal out of hand. LF


The Azerbaijani Supreme Court has rejected a suit by defeated presidential candidate Etibar Mamedov, refusing even to consider his 20-page statement and accompanying evidence of the alleged falsification of the 11 October vote, Turan reported on 19 October. Mamedov's Azerbaijan National Independence Party plans to hold a march in Baku on 24 October to protest the ruling. LF


Muhammed Sharif Himmatzoda has been named chairman of the legal subcommission of Tajikistan's National Reconciliation Commission, ITAR-TASS and Interfax reported on 19 October. Himmatzoda, formerly chairman of the Islamic Renaissance Party of Tajikistan, was chosen by representatives of the United Tajik Opposition. He replaces Otakhon Latifi, who was killed in Dushanbe on 22 September by assailants still at large. BP


In the first nine months of 1998, crime more than doubled in Tajikistan, compared with the same period last year, ITAR-TASS reported on 19 October. The increase in the theft of weapons accounts for the growing number of crimes committed with guns or acts of terrorism employing explosives. There has also been an increase in mafia wars and kidnappings. BP


Petr Svoik, co- chairman of the opposition movement Azamat, has been hospitalized after suffering a heart attack, RFE/RL correspondents in Almaty reported on 20 October. Svoik was serving a three-day jail sentence for participating in a meeting of the For Fair Elections movement earlier this month (see "RFE/RL Newsline," 16 October 1998). BP


The IMF plans to send a delegation to Minsk in early November to discuss the Belarusian government's request for an emergency loan to help cover its loss of grain exports to Russia, an IMF spokeswomen told RFE/RL on 19 October. Those discussions may not lead to a loan, however, she suggested. On the one hand, Belarus has not complied with IMF requirements for such loans in the past. On the other, the IMF has had relatively little contact with Minsk since its representative there left the country along with other diplomats in the summer. PG


In a message to Yugoslav President Slobodan Milosevic, Belarusian President Alyaksandr Lukashenka said again that his country will provide assistance to Belgrade if NATO applies force in Kosova, Interfax reported on 19 October. Lukashenka's message was made public during a 17-18 October visit to Belgrade by Belarusian Security Council State Secretary Viktor Sheiman. PG


The U.S.-based Committee to Project Journalists has named Pavel Sheremet, Minsk bureau chief of Russian Public Television and chief editor of "Belarusskaya delovaya gazeta," as one of five international journalists to be honored in New York on 24 November, RFE/RL reported on 19 October. A CPJ press release said that Sheremet has become a symbol of courage for standing up to President Lukashenka's campaign to suppress that country's independent media. PG


Russian President Boris Yeltsin and Ukrainian President Leonid Kuchma agreed during a 19 October telephone conversation that their joint anti-crisis task force will convene in Moscow on 23 October, Interfax reported. They also said that a planned meeting of Russian and Ukrainian businessmen in Kharkiv on 30 October could give "a new impulse to bilateral economic cooperation," according to the Russian news service. PG


Ukraine's Health Ministry and UN officials have reported a rise in the number of Ukrainians suffering from thyroid cancer, dpa reported on 19 October. "The disease is a consequence of the catastrophe at the Chornobyl nuclear power plant," Ukrainian Health Minister Andriy Serdyuk told Interfax. Some 1,030 children now suffer from this disease in Ukraine, Serdyuk said, whereas "not long ago," there were only 800 to 900 victims. PG


Ukraine's Emergencies Ministry told Reuters on 19 October that a moderate earthquake shook Crimea the previous day, but the ministry reported no deaths or damage. Earlier officials at Ukraine's Geodesic Institute said that the remaining seven seismological stations in Crimea (out of the 13 that had existed there in 1991) would close by the end of this year because of a lack of funds. PG


An Estonian government spokesman told BNS on 19 October that Moscow's decision to name Deputy Prime Minister Valentina Matvienko as cochairman of the Estonian-Russian intergovernmental commission will help improve bilateral relations. "For the Estonian government this is positive news," the spokesman commented, adding that "we hope the co-chairs of the commission will meet in Tallinn soon." Matvienko was named last week to replace Oleg Sysuev, former deputy prime minister and currently presidential first deputy chief of staff, as joint commission head. Estonian Prime Minister Mart Siimann is the other co-chair of the commission. JC


Ahead of an Organization for Economic Cooperation and Development conference in Tallinn on the economic development of the Baltic region, Siimann met with OECD deputy secretary-general Kumiharu Shigehara, BNS reported on 19 October. The news agency reported that Siimann asked about Estonia's chances of being admitted to the OECD, but no further details were given. Shigehara also met with Estonian President Lennart Meri, who thanked the OECD official for the launching earlier this year of a regional program for the Baltics. An important part of that program is a survey of the Baltic economies by the OECD Secretariat. Estonia, Latvia, and Lithuania all applied to join the OECD in late 1996. JC


Ninety-one-year-old Aleksandras Lileikis, who is suspected of having committed war crimes during the Nazi occupation of Lithuania, has been ordered to appear in a Vilnius court on 5 November, dpa reported on 19 October. In accordance with a report on Lileikis's state of health submitted last week by a team of Lithuanian doctors (see "RFE/RL Newsline," 13 October 1998), a Vilnius judge ruled that Lileikis is healthy enough to appear in court "as long as there are no stress situations that could catalyze his death." Lileikis's trial has been repeatedly postponed owing to his alleged poor health. JC


The Polish government on 19 October said that it was disappointed by an Oswiecim municipal court decision blocking Warsaw's efforts to take control of a disputed parcel of land near the former Nazi death camp at Auschwitz, the PAP news agency reported. The government said the decision, which makes it impossible for the central authorities to prevent radical Roman Catholics from erecting crosses there in clear defiance of the Church hierarchy and despite protests by Jewish groups, "harms Poland's image abroad." The PAP agency said the government may appeal the decision. PG


Vaclav Havel said on 19 October that Czechs should be more concerned about their own xenophobia and worry less about whether Britain will impose visa regulations on them, CTK reported. Havel made his comments after an hour-long meeting in London with British Prime Minister Tony Blair. A spokesman for Blair said the two leaders discussed steps being taken by the Czech government designed to improve social conditions for Roma and prevent them from seeking refuge in Britain. Havel also met with Queen Elizabeth II. He is due to arrive in Belfast on 20 October. PB


Ladislav Hruska, the mayor of the Bohemian city of Usti nad Labem, called on President Havel to apologize for his comment that the city's residents are racist, CTK reported on 19 October. Havel said in a radio address before his trip to the UK that the city's plan to build a wall separating apartment blocks inhabited largely by Roma from houses in which ethnic Czechs live is "undemocratic" and will harm the country's reputation. Hruska said that he would file suit against the president if Havel were not in such poor physical health. PB


Jan Kavan told his British counterpart, Robin Cook, that he hopes Slovakia will be admitted to the "first group" of countries seeking admission to the EU and NATO, an RFE/RL correspondent in London reported on 19 October. Kavan said the new Slovak government will be "united by its determination to offset the undemocratic legacy of the Meciar government." Kavan and Cook discussed the problems caused by Czech and Slovak Roma applying for asylum in Great Britain during the past several months. PB


Prime Minister Viktor Orban on 19 October expressed surprise at a recent statement by Independent Smallholders' Party (FKGP) deputy chairman Zsolt Lanyi. Commenting on the party's failure to win any seats on the Budapest City Council in the local elections, Lanyi allegedly told reporters on 18 October that the FKGP's participation in the coalition is a mistake and that the party must review its policy. FKGP chairman Jozsef Torgyan attributed Lanyi's comment, as published, to the "usual distortion and indecent approach of the media." He said Lanyi had approved the FKGP's policy at the party's 19 October meeting. MSZ


A spokeswoman for the United Nations High Commissioner for Refugees said in Prishtina on 19 October that the UNHCR has canceled plans to send out two humanitarian aid convoys from the capital pending a clarification of the military situation on the ground. Serbian spokesmen say that the Kosova Liberation Army (UCK) recently took advantage of the agreement reached by Yugoslav President Slobodan Milosevic and U.S. special envoy Richard Holbrooke to reoccupy lost territory and to attack Serbian police. They add that the security forces are restoring order. At the same time, the Serbian spokesmen deny Kosovar reports that the Serbs are shelling villages. Kosovar officials argue that the Serbs have responded to the killing of four policemen by launching an assault on unarmed civilians (see "RFE/RL Newsline," 19 October 1998). Western diplomats are unable to "determine which side is telling the truth," the "Washington Post" reported. Diplomats do not agree among themselves whether the movement of the security forces violates the agreement, the "Financial Times" added. PM


British Foreign Secretary Robin Cook said on 19 October in London that the UCK has recently committed "several breaches of the cease-fire. Such continuing acts of hostility serve only the interests of those who wish to undermine the political process and return to war.... We have no intention of NATO being conscripted as a sort of air force" for the UCK. PM


In Paris, the international organization Reporters without Frontiers appealed on 19 October to Adem Demaci, the political spokesman for the UCK, to do all he can to secure the release of two Tanjug journalists who are believed to have been captured by the UCK (see "RFE/RL Newsline," 19 October 1998). In Belgrade, the Yugoslav government said in a statement that the disappearance of two men is a "blow to the implementation of the Milosevic-Holbrooke agreement and the agreement on the OSCE verification mission.... It is inadmissible that teams of journalists are being abducted...before the very eyes of the international community." PM


General Momcilo Perisic, who is chief of the army's general staff, told the Belgrade daily "Blic" of 20 October that the politicians, not the army, are responsible for the conflict in Kosova. He argued that "the basic problem is that a shadow state has existed [in Kosova] for years.... There are very few politicians" who are willing to admit that they cannot solve the problem and make way for those who can. Perisic added that armies do not make policy and that the mission of the army is to defend the country. He noted that "Serbs have been fighting a war since 1991 and we still have no allies. Not even the Russian Federation has declared itself our ally. We have never been so isolated for so long and we have never [before] been without allies." Perisic concluded that "one doesn't make war against the entire world." PM


Ljubco Georgievski, who is the leader of the Internal Macedonian Revolutionary Organization (VMRO-DPMNE), said in Skopje on 19 October that Macedonia has entered a new era by giving victory to VMRO and its ally, the Democratic Alternative, in the previous day's parliamentary elections (see "RFE/RL Newsline," 19 October 1998). Spokesmen for the governing Social Democrats (SDSM) replied that Georgievski's initial vote tallies are inaccurate and that the SDSM could still win in the second round on 1 November. Official results are expected shortly. PM


Ankica Lepej, a 23-year veteran employee of the Zagrebacka Banka, said in Zagreb on 19 October that she recently provided the independent daily "Jutarnji List" with information about the account balance of Ankica Tudjman, the wife of President Franjo Tudjman. Lepej said that she could not keep such information secret at a time when public attention is focused on the private wealth of politicians. She faces up to five years in prison if convicted of wrongdoing. Tudjman's office said in a statement that he believed that he was obliged to make public information only about the property he owns, not about his or his wife's bank accounts, RFE/RL's South Slavic Service reported. Some opposition politicians suspect that Tudjman's opponents within his own Croatian Democratic Community leaked the information about the bank account to the media. PM


A Tirana court on 19 October ordered the detention pending trial of Eqerem Spahia, a leader of the monarchist Legality Party, and Sali Shehu, a former Tirana district police chief. The Tirana Prosecutor-General's Office has charged both with organizing and participating in an armed uprising in Tirana on 14 September, ATSH reported. The prosecutor-general has presented photos of Spahia and Shehu among crowds of armed people attacking the office of the prime minister. The prosecutor also submitted a videotape showing Spahia saying on state television that "the government [of former Prime Minister Fatos Nano] is toppled" and that "the situation is under the control of the [opposition coalition] Union for Democracy," (see "RFE/RL Newsline," 14 September 1998). FS


The Democratic Party's National Council, meeting in Tirana on 19 October, failed to adopt a statement on the draft constitution drawn up by the governing coalition during the Democrats' nearly year-long boycott of the parliament (see "RFE/RL Newsline," 19 October 1998). The party leadership, however, strongly criticized a recent proposal that any referendum on the constitution be valid regardless of voter turnout. "Albanian Daily News" on 20 October suggested that "the Democrats were upset by the proposal, as it will make it more difficult for them" to count on the defeat of the draft in a referendum owing to a low turnout. Observers noted that the Democrats do not seem to have prepared themselves for a public debate on the draft and have not produced an alternative draft. FS


Romanian President Emil Constantinescu accepted the resignation of Sorin Dimitriu on 19 October, Reuters and Rompres reported. Dimitriu, who also resigned as head of the State Ownership Fund, said the reasons for his resignation are "deeper than the apparent dissatisfaction with the campaign against myself and the institutions" that he heads. Dimitriu had often been the subject of criticism from Prime Minister Radu Vasile, who alleged that privatization was moving too slowly. Dimitriu said "to approach privatization as a race against the dangerous." Constantinescu appointed Vasile as interim privatization minister. PB


Andrew Vorkink, the World Bank representative for Romania, said on 19 October that the bank is committed to granting Bucharest financial assistance, Rompres reported. Vorkink, speaking after a meeting with Senate President Petre Roman, said the aid is needed to support Romanian programs on restructuring the financial and agricultural sectors in an effort to speed up reforms. Roman said Dimitriu's resignation is a clear signal that privatization must resume in a different way. PB


Ion Ciubic said after a meeting with Romanian Foreign Minister Andrei Plesu that close relations between the two countries "give us hope for the future," Rompres reported on 19 October. Plesu is in Chisinau for the eighth meeting of the Committee for Relations between Moldova and Romania. Plesu said the two men had discussed, among other topics, the countries' respective economic difficulties. Ciubic commented that the working meetings have allowed bilateral relations to "intensify." PB


Delegates to the ruling Union of Democratic Forces (UDF) party congress in Sofia agreed on 19 October to push for greater economic reforms, Reuters reported. Party leader and Premier Ivan Kostov said "political complacency is unforgivable..., society expects action from us. Our mission is to build the new Bulgaria." The conference, the UDF's first since coming to power in April 1997, approved resolutions calling for rapid privatization, the closing of unprofitable enterprises, bringing laws into line with EU standards, and working to join the EU and NATO. PB


British Foreign Secretary Robin Cook, who arrived in Sofia on 19 October, said his trip to Bulgaria is to show Britain's commitment "to the territorial integrity and security" of the Balkan countries, Reuters reported on 20 October. Cook, speaking after a meeting with Prime Minister Kostov, said the two agreed that the instability in Kosova cannot be allowed to "spill over into wider insecurity in the region." Cook said he would like to see Bulgaria join the EU "as soon as possible." He said that Britain and Bulgaria should develop stronger economic ties. PB


by Floriana Fossato

Russian Prime Minister Yevgenii Primakov has repeatedly underlined the importance of having regional leaders on his side to prevent local tendencies toward independence dividing the country.

Sakhalin governor Igor Farkhutdinov, who presides over a region where offshore energy resources are estimated by some experts to rival those of the North Sea, was one of the first governors to hold talks with the new prime minister. The focus of that meeting was almost certainly how to speed up the development of oil and gas projects on Sakhalin as well as how to deal with the threat of social unrest on the Far Eastern island. For despite Sakhalin's great natural wealth, the level of poverty in the region is one of the highest in Russia, with more than a third of the population of 600,000 people officially registered as living below the subsistence line.

Farkhutdinov's main aim at the talks would likely have been to forge the same cooperative links with Primakov as he had with the previous Moscow government on a key issue, namely securing the passage through the parliament of legislation guaranteeing the protection of foreign investment in Russia.

Since the early 1990s, the Communist-dominated State Duma has put obstacles in the way of laws guaranteeing the protection of foreign investment for consortia and a share of the oil and gas extracted. Those terms are included in the so-called production-sharing agreements (PSA) signed by local authorities and the consortia.

Local officials have tried to galvanize the Duma into taking action and are frustrated by the lack of results. Galina Pavlova, director of the Sakhalin local department for offshore oil development, told RFE/RL in a recent interview that "instead of working together, the Duma obstructs everything...; as a result we are, with our own hands, destroying our own possibilities."

Farkhutdinov says passage of the necessary laws is a critical issue for Sakhalin if the big foreign oil companies already working there are to remain committed to developing the region's resources. "At a time when foreign capital is fleeing Russia, this is not happening on Sakhalin," he commented. "Sakhalin cannot go on without money, but if we want to overcome this difficult situation and not become a burden for the state, we need legislation even more than financing."

Enormous sums of money are at stake. Foreign consortia have said that the first three major projects, called Sakhalin-1, -2, and -3, could result in investments totaling $36 billion.

Sakhalin-2, the only project on target so far, is scheduled to begin production next spring. Those prospects, however, could suffer if the Duma decides not to approve a bill amending existing legislation to comply with tax breaks and provisions included in PSA. Meanwhile, Sakhalin-2 managers put on a brave face.

Sakhalin's road toward the desired oil and gas wealth has not been an easy one. Vladimir Sorochan, the editor of the newspaper "Sovietskii Sakhalinsk," said that prospects for oil production, coupled with plans for developing rich gas fields, provoked "euphoria" earlier in the 1990s, when it was thought that there would be cheap energy, jobs, and positive developments for the island.

But the situation "has changed radically over the years," Sorochan commented. "People have understood they will have to wait a long time for tangible results," he said, "while hopes of jobs are fading and the governor, instead of improving people's lives in decrepit cities and villages, seems more interested in grandiose plans like the building of an international airport."

Farkhutdinov denies those charges. "If the oil projects finally get under way, 20,000 permanent jobs will be created over the years...and an international airport would be a sound investment, if only because every meeting with foreign investors starts with the question: what's your airport like?" The regional administration has also announced that the first $20 million bonus from the Sakhalin-2 project is to be used for urgent construction projects such as a new school or hospital.

After the breakup of the Soviet Union, Russian authorities acknowledged that extraction and production operations in Sakhalin's oil sector required expensive and sophisticated technologies that the country did not have. So they started offering the reserves to consortia dominated by, and often composed entirely of, foreign companies. Foreign oil companies were lured by the prospect of gaining access to offshore oil reserves estimated at 29 million barrels.

There is interest also in Sakhalin's vast gas resources. Farkhutdinov told RFE/RL that the development of gas resources would provide cheap energy for the island and would thereby solve the problem of energy cuts owing to the non-payments crisis in the coal sector. That crisis led to the coal miners strikes this summer that paralyzed Sakhalin for weeks.

Even more important, said the governor, noting Sakhalin's proximity to Asian markets, energy companies involved in the oil projects, would help build natural gas pipelines running to Japan, South Korea, and China. This is the last in a three-part series on Russia's Far East by Floriana Fossato, an RFE/RL correspondent based in Moscow.