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Newsline - July 27, 2004

President Vladimir Putin and Ukrainian President Leonid Kuchma met on 26 July in the Crimean city of Yalta, Russian, Ukrainian, and international media reported. Putin accused Western countries of actively trying to obstruct closer relations between the two countries. "The intelligence networks of our Western partners are trying in every way to hamper our movement toward one another," Putin told journalists, Interfax and ITAR-TASS reported. Putin added that Russian investment in Ukraine could be as high as $800 million this year. "Russian capital has breathed new life into many Ukrainian projects," Putin said, ITAR-TASS reported. He praised Kuchma and Ukrainian Prime Minister Viktor Yanukovych by name, saying "we in Russia are sincerely pleased with the success of our partners and friends." Yanukovych is widely believed to be the Kremlin's favored candidate in Ukraine's 31 October presidential election (see "RFE/RL Newsline," 20 July 2004). RC

The Prosecutor-General's Office on 26 July issued a second international arrest warrant for Yukos major shareholder Leonid Nevzlin on charges including murder and attempted murder, Russian and international media reported. In January, the authorities issued a warrant for Nevzlin on charges of numerous economic crimes, including fraud and tax evasion. "Kommersant-Daily" reported on 27 July that the charges against Nevzlin are largely based on the testimony of Igor Korovnikov, who was convicted of nine murders and numerous rapes and assaults in 2000 and sentenced to life in prison. The latest charges against Nevzlin are related to the current murder trial of former Yukos security official Aleksei Pichugin. Nevzlin is charged with ordering Pichugin to organize and commit numerous murders, including that of businessman Sergei Gorin and his wife. Nevzlin is also charged with organizing two attempts on the life of East Petroleum President Yevgenii Rybin. Nevzlin last week accused Rybin of attempting to blackmail him and asked the Prosecutor-General's Office to investigate the matter (see "RFE/RL Newsline," 22 July 2004). Nevzlin, an Israeli citizen, is currently living in Israel. "I highly doubt that the prosecutor-general will send Israel an extradition demand," Genri Reznik, Nevzlin's lawyer, told RC

Yukos shares fell by about 20 percent on Moscow markets on 26 July before trading was suspended, Russian media reported. A single share of Yukos cost $4.20. Brokerkreditservis analyst Maksim Shein told RIA-Novosti that he expects Yukos shares to slump to about $1.50 per share. Meanwhile, the Moscow Municipal Court on 27 July upheld a Basmannyi Raion Court decision to freeze the Swiss bank accounts of numerous Yukos shareholders, including those of former Yukos CEO Mikhail Khodorkovskii and Nevzlin. The court also upheld a Basmannyi Raion Court decision to freeze the personal foreign bank accounts of Yukos lawyers Anton Drel and Vasilii Aleksanyan. RC

Russia intends to open a unified antiterrorism center somewhere in southern Russia in the near future, "Vremya novostei" reported on 27 July, citing Colonel General Aleksandr Baranov, who was named commander of the Northern Caucasus Military District on 19 July (see "RFE/RL Newsline," 19 July 2004). "We need to combine everything together into a single system under unified leadership," Baranov said. He said it has not yet been decided whether the center will be located in Rostov-na-Donu, Stavropol, or Vladikavkaz. President Putin on 26 July signed into law a measure introducing life imprisonment as a punishment for terrorism, ITAR-TASS reported. Previously the maximum sentence was 20 years in prison. Crimes punishable by life in prison include terrorist acts committed by organized groups, those that lead to death or other grave consequences, and those connected with nuclear facilities or radioactive materials. RC

Ten of the 12 governors who are members of the Far East and Trans Baikal Interregional Association have sent a letter to President Putin asking him to suspend the process of converting certain in-kind social benefits such as free transportation and medicine for the elderly into cash payments, "Gazeta" reported on 26 July. According to the daily, the only two governors not to sign the letter were Chukotka Autonomous Okrug Governor Roman Abramovich and Primorskii Krai Governor Sergei Darkin. The governors charged that the planned reform violates the constitution by altering the social character of the state. The Communist Party and 16 other parties and trade unions issued a similar statement on 26 July, Interfax reported. It said that "if the Federal Assembly accepts the bills to replace social benefits with mediocre financial payments, then all that is left of the social-security system, with rights to affordable housing, education, and medical treatment" will be destroyed. JAC

Meanwhile, in a column in "Gazeta" on 26 July, Andrei Ryabov of the Carnegie Moscow Center said that neither the cabinet nor Unified Russia are unanimous in their support for the benefits-reform legislation. According to Ryabov, Prime Minister Mikhail Fradkov has started cautiously distancing himself from the "overly radical approaches" of Finance Minister Aleksei Kudrin and Economic Development and Trade Minister German Gref. He asserted that the government as a whole is acting as though it wants to shift responsibility for the fate of the reforms to the Duma. At the same time, Duma deputies are proposing so many amendments to the bill increasing the state's obligations that adopting even part of them would render the government's proposals senseless (see "RFE/RL Newsline," 23 July 2004). JAC

Data from all of the monthly opinion polls taken before the March presidential election show that President Putin's popularity has dropped from the high level it reached just before that poll, "Izvestiya" reported on 26 July. Putin's rating remains high, according to Levada Center researcher Leonid Sedov, but the number of people who think the country is moving in the wrong direction has increased and they are placing some of the blame for this on Putin. According to "Moskovskii komsomolets"on 26 July, in January of this year, 68.9-71 percent of respondents in monthly surveys taken by VTsIOM and FOM supported the president. In the most recent polls conducted this month, support had dropped to 59 percent according to FOM and 49 percent according to VTsIOM. JAC

In a comment to "Moskovskii komsomolets" on 26 July, Igor Bunin of the Center for Political Technologies noted that President Putin's ratings have only returned to normal after a predictable pre-election high. He added that his center has noticed in focus groups that Putin's supporters do not defend him as vigorously as before. "On a conscious level they blame [Pension Fund head Mikhail] Zurabov for the plan to convert in-kind benefits to cash. However, on an unconscious level, they believe that Putin is blame," Bunin said. Vyacheslav Nikonov of Politika foundation denied that there has been a decline, noting that there are different polls and different results: "ROMIR's results did not show a lowering of Putin's approval rating." However, he did say that the planned reform of social benefits could eventually negatively affect Putin's rating. JAC

Khamza Yambaev, head of the construction firm Opora, has accused people working for Ulyanovsk Oblast Governor Vladimir Shamanov of beating him and causing serious injuries, reported on 26 July. According to Yambaev, he sent Shamanov a "friendly" letter suggesting that he leave the oblast and not seek reelection. The next day, Shamanov reportedly sent a car to pick Yambaev up and bring him to his dacha for a meeting. Once there, Yambaev claims he was severely beaten on his back and below the belt in a style used by "professionals." After he fell to the ground, his attackers proceeded to kick him and the governor himself allegedly threatened to kill him. Yambaev says he can walk only with difficulty because of damage to his internal organs. He has brought his case to the local prosecutor and the media. According to the, Yambaev was originally a supporter of Shamanov and brought him to Ulyanovsk to run against then Governor Yurii Goryachev. Yambaev is known in the oblast as the head of an association of entrepreneurs and was an active member of the local branch of the Union of Rightist Forces before it fell apart. JAC

Petr Budennyi, who participated in the clean-up of the 1986 Chornobyl nuclear disaster, died on 26 July while on a hunger strike against the authorities' failure to provide him with housing that he began at the beginning of this month, NTV and reported. As an invalid/victim of Chornobyl, Budennyi, 57, was eligible for housing benefits, which he had not received for several years. Both of his legs had been amputated due to an illness affecting his blood circulation, a common ailment among Chornobyl survivors, according to He lived in Krasnodar Krai. JAC

Having assessed video footage of the 21-22 June raid on targets in Ingushetia and debriefed field commanders who participated in the attacks, Aslan Maskhadov has lauded the operation, codenamed Bekkham (Retribution), as proof of the unity and discipline of his resistance forces, reported on 27 July, citing a press release issued the previous day by Maskhadov's staff. The press release gives the number of fighters who took part in the raid as 950, of whom only six were killed. While Maskhadov himself did not take part, he confirmed that the attacks took place with his prior knowledge and approval. Field commanders Doku Umarov and Shamil Basaev did take part in the attacks, of which Basaev's website ( has posted video. The press release contains an extensive list of the weaponry, ammunition, and other military technology that the raiders claim to have captured. LF

In an interview published in "Novaya gazeta" No. 53, Moscow-based Chechen businessman Malik Saidullaev said that when he went to the Chechen Central Election Commission in Grozny to register as a candidate for the 29 August ballot to elect a successor to slain pro-Moscow Chechen leader Akhmed-hadji Kadyrov, he was surrounded in the government building by some 100 armed men and then threatened by Chechen State Council Chairman Taus Dzhabrailov that unless he withdrew "voluntarily" from the ballot, all possible measures would be undertaken to prevent him from participating. Saidullaev said that three days before he was informed last week of his disqualification (see "RFE/RL Newsline," 23 July 2004), he received a telephone call from the election commission again asking him to withdraw, but he refused to do so. Saidullaev claimed that 200,000 fake ballots are being printed in Daghestan that will be cast in favor of Chechen Interior Minister Major General Alu Alkhanov, who is widely regarded as the Kremlin's chosen candidate to succeed Kadyrov. LF

Robert Kocharian met in Yerevan on 23 July with leading members of the three governing parties to discuss constitutional-reform proposals, RFE/RL's Armenian Service reported. Agreement was reached on reducing the number of parliament seats from 131 to 121. Cutting the number of parliament seats to 101 was one of the proposed constitutional changes rejected in a referendum last year (see "RFE/RL Newsline," 29 May 2003). Armen Rustamian (Armenian Revolutionary Federation -- Dashnaktsutiun, or HHD), who was present at the meeting, said his party agreed to the downsizing of the parliament only on the condition that the number of mandates to be allocated under the party-list system be increased. He also said the HHD wants the powers of national and local governments to be enhanced and those of the president to be reduced. LF

Senior executives from Royal Armenia, one of the country's leading coffee importers, told journalists on 26 July that State Customs Committee Deputy Chairman Gagik Khachatrian personally solicited a bribe last year in return for undervaluing the price of imported coffee beans, thereby reducing the import tax the company would be required to pay, RFE/RL's Armenian Service reported. The executives said that after they refused the offer the customs retaliated by overstating the value of coffee imported by Royal Armenia at $1.8 per kilo, while the actual cost is $1.2 and the estimated cost for other importers is calculated at less than $1 per kilo. Royal Armenia won a legal action against the Customs Committee for discrimination, but the ruling that the increased tariff that was imposed on their imports be reduced has not been enforced. A customs official asked by RFE/RL about the case refused to comment. LF

Three persons suspected of involvement in abductions were arrested in Shemakha on 25 July, Baku police chief Major General Magerram Aliev announced the following day, Turan reported. The same agency reported on 27 July that two of those detained were National Security Ministry personnel. It is not clear whether there is a connection between those arrests and the dismissal on 23 July of National Security Minister Namig Abbasov, for which no official explanation was given (see "RFE/RL Newsline," 26 July 2004). LF

Former Bulgarian President Zhelyu Zhelev, who is the personal envoy of OSCE Chairman in Office and Bulgarian Foreign Minister Solomon Pasi, met in Tbilisi on 26 July with President Mikheil Saakashvili, Minister for Conflict Resolution Giorgi Khaindrava, Foreign Minister Salome Zourabichvili, and parliament speaker Nino Burdjanadze to discuss the tensions between Tbilisi and the breakaway Republic of South Ossetia, Caucasus Press and ITAR-TASS reported. Burdjanadze asked the OSCE to monitor cargo transported from Russia to South Ossetia to prevent Moscow from supplying "huge quantities" of arms to the region's leadership. Caucasus Press quoted Zhelev as urging Tbilisi to agree to unspecified concessions in order to defuse the conflict. LF

ITAR-TASS on 26 July quoted Defense Minister Giorgi Baramidze as telling state television that while Georgia insists on restoring its authority over South Ossetia, it prefers to do so by peaceful means, and therefore there is no need for his ministry to become involved. To date, Georgia has deployed Interior Ministry troops, but not army servicemen, to South Ossetia. LF

Former village council chairman Roland Kakhidze, a member of the opposition Republican Party, died in a Batumi hospital early on 26 July of complications from a stroke, Georgian media reported. Kakhidze was arrested in early June on charges of possessing drugs, which his fellow party members claims were planted by police during a search of his home. Also on 26 July, Georgian parliament speaker Burdjanadze blamed unspecified "serious [political] forces" for instigating a protest in Batumi on 23 July by several hundred market vendors against plans to relocate the city market from the center to the outskirts of Batumi, Caucasus Press reported. LF

Darigha Nazarbaeva, the head of the pro-presidential Asar party and the daughter of Kazakh President Nursultan Nazarbaev, told journalists in Astana on 26 July that her party plans to win up to 50 percent of the seats in parliament in 19 September elections, Interfax-Kazakhstan reported. Nazarbaeva, who expressed a similar statement earlier in the year, said, "We do not want to lower this target and we will actively work to this end." The Central Electoral Commission registered Asar's 13-person party slate earlier on 26 July. DK

Kazakhstan's Rukhaniyat party endorsed a party slate of seven people at a 24 July party congress in Shymkent, "Kazakhstan Today" reported on 26 July. Altynshash Zhaganova, who currently heads the Migration and Demography Agency, will lead the list. The party will also field nine candidates in single-mandate constituencies. According to Interfax-Kazakhstan, Rukhaniyat has 75,000 members; it largely supports President Nazarbaev and his policies. DK

China and Tajikistan signed a technical and economic cooperation agreement on 20 July in Beijing under which Beijing will give Dushanbe 50 million yuan ($6 million) in no-strings-attached aid, Asia Plus-Blitz reported on 26 July. Tajik Trade Minister Hakim Soliev and Chinese Deputy Commerce Minister Zhang Zhigang signed the agreement. The money will to toward social and economic projects in Tajikistan, subject to the approval of the two countries' governments. DK

Imomali Rakhmonov has asked John Olding Smee, former director of the World Bank's Second European Department, to act as one of his economic advisers, Asia Plus-Blitz reported on 26 July. Smee arrived in Dushanbe on 23 July and met with Murodali Alimardonov, chairman of the National Bank. Asia Plus quoted a National Bank spokesperson as saying, "[John] Olding Smee was invited for the continuation of economic reforms. Over the course of a year, he will [help to] deal with the country's financial and economic problems." Smee will meet with President Rakhmonov during his visit. He is also expected to travel to Tajikistan every six months for a two-week visit to develop a strategy for the country's economic development and to present regular reports to the president. DK

Fifteen people went on trial in Tashkent on 26 July on charges connected with the 28 March-1 April violence in Bukhara and Tashkent, Uzbek TV reported. The thirteen men and two women, ranging in age from 22 to 40 years of age, face accusations of terrorism, the attempted violent overthrow of Uzbekistan's constitutional system, religious extremism, and other crimes, RIA-Novosti reported. Deputy Prosecutor Murod Solihov told the court that the alleged terrorists came "under the influence of extremist religious forces operating in foreign countries," Interfax-Kazakhstan reported. Solihov went on to charge that the defendants trained at camps in Kazakhstan's border regions, while some of them traveled from there to Azerbaijan, Iran, and Pakistan's Waziristan Province to undergo instruction in bomb-making and weapons use. Solihov noted that confiscated propaganda materials belonging to the suspects encouraged "the idea of violently overthrowing the constitutional order and setting up an Islamic state with a view to establishing a single caliphate." The trial is expected to take several weeks. The official death toll in the late March-early April series of explosions and clashes with police was 47 dead, including 33 alleged terrorists, 10 policemen, and four civilians. DK

U.S. Central Command Chief General John Abizaid met with Uzbek Foreign Minister Sodiq Safaev and Defense Minister Qodir Gulomov in Tashkent on 26 July, Uzbek Radio reported. Their talks focused on bilateral cooperation and regional security issues. UzReport quoted Abizaid as saying, "We will continue to deepen cooperation between the armed forces of Uzbekistan and the United States in order to shore up peace and stability in the region and in Afghanistan. We will continue our cooperation with Uzbekistan to combat our common enemies." Abizaid went on to tell his Uzbek hosts, "I would also like to note that we are intent on boosting cooperation with your country," Uzbek Youth Radio reported. For his part, Safaev said, "We are very satisfied with the talks and think that Abizaid's visit is of significance in increasing bilateral cooperation." DK

The U.S. State Department on 26 July urged Belarusian authorities "to cease their campaign against civil society and independent voices in Belarus if they hope to have a constructive dialogue with the United States and our European partners," Belapan reported, quoting remarks by State Department spokesman Richard Boucher. The statement followed the dispersal of an opposition demonstration in Minsk to mark the 10th anniversary of President Alyaksandr Lukashenka's rule and a recent eviction notice delivered to Minsk-based European Humanities University. "The action against European Humanitarian [sic] University and the violent dispersal of the demonstration are the latest in a series of measures that demonstrate Belarusian authorities' obstructionism towards developing of a democratic society and improving relations with the trans-Atlantic community," the statement said. AM

The German-based Office of the Public Prosecutor for Belarus has urged the Greek government to deny entry to Belarusian Sports Minister Yury Sivakou, who intends to lead the Belarusian delegation to next month's Olympic Games, Belapan reported on 26 July. Lyudmila Karpenka, head of the office and widow of opposition politician Henadz Karpenka, said in an appeal to the Greek Embassy in Minsk that Sivakou is on the list of officials suspected of complicity in the alleged abduction of four prominent opposition figures in Belarus. Politicians Yury Zakharanka and Viktar Hanchar, businessman Anatol Krasouski, and journalist Dzmitry Zavadski disappeared in 1999-2000, during Sivakou's tenure as the country's interior minister. AM

President Leonid Kuchma issued a decree on 15 July removing a provision regarding the country's preparations for NATO membership from Ukraine's official military doctrine, Interfax reported on 26 July. Guarantors of Ukraine's military security now include a "strengthening of confidence among states, gradual reduction of the threat of military force, and a policy of Euro-Atlantic integration." The doctrine previously cast NATO and the EU as the basis of the European security system and pledged to prepare the country for "full-fledged membership in those organizations." AM

Russian President Vladimir Putin accused Western countries on 26 July of obstructing closer relations between Russia and Ukraine, Interfax reported. Putin made the comment while in Yalta for economic talks with Ukrainian President Kuchma; Putin also met with Ukrainian Prime Minister Viktor Yanukovych, as well as with Ukrainian and Russian businessmen. "The intelligence [communities] of our Western partners are trying in every way to hamper our movements toward each other," Putin said, adding that Russia and Ukraine can increase their competitiveness through increased integration. That fact has not gone unnoticed by "intelligences both within our countries and outside them." However, Putin said, Russia and Ukraine should not oppose the West. "We are the part of the global economic system," he said (see also "RFE/RL Newsline Part 1"). AM

Viktor Yushchenko, the leader of the opposition Our Ukraine bloc and a candidate in the 31 October presidential election, on 26 July rejected the suggestion that he might become prime minister if rival and current Prime Minister Viktor Yanukovich wins the presidential vote, Interfax reported. "I will not become premier under the circumstances I was offered," Yushchenko said. Serhiy Tihipko, chief of Yanukovych's election staff, recently suggested that Yushchenko has "real prospects" for a return to the premier's post if Yanukovych wins the presidency. Yushchenko called such speculation "a political trick" aimed at minimizing political differences between two main contenders. AM

President Kuchma has signed a decree integrating the Transport Ministry and the State Committee for Communications and Information Technology into a new Transport and Communications Ministry, Interfax reported on 26 July. Kuchma appointed Transport Minister Heorhiy Kyrpa to head the expanded ministry, the report added. AM

Thousands of demonstrators gathered outside the heavily guarded parliament building in Skopje on 26 July to protest government plans to cut the number of administrative districts from 123 to 80, MIA news agency reported. Speakers at the protest included the leaders of the major ethnic Macedonian opposition parties. Most of them stressed that they support the government's plans to decentralize the state administration but oppose the redistricting plans, arguing that the redistricting could lead to an ethnically based partition of the country (see "RFE/RL Newsline," 23 and 26 July 2004, and "RFE/RL Balkan Report," 2 and 23 July 2004). In related news, the parliament has started debating the package of laws on the decentralization and redistricting in what Macedonian media has described as a "tense atmosphere," RFE/RL's Macedonian broadcasters reported. UB

The New York-based Human Rights Watch said in a 66-page report issued on 26 July that NATO-led KFOR peacekeepers and UN police failed to protect ethnic minorities during the 17-18 March violence that swept Kosova, international media reported (see "RFE/RL Balkan Report," 1 and 16 April, and 9 July 2004). The study stressed that the international community has been in "absolute denial about its own failures" in the mainly ethnic Albanian province. "While international actors have been universally and accurately critical of [the] Kosovo Albanian leadership during and after the crisis, the dismal performance of the international community has escaped similar critical scrutiny," the report added. The study claims that in some cases, French, German, or Italian NATO peacekeepers stayed on their bases and watched as the property of Serbs or Ashkali (Albanian-speaking Roma) went up in flames. The number of peacekeepers must be increased, the report concluded. PM

KFOR spokesman Colonel Horst Pieper said in Prishtina on 26 July that peacekeepers protected minorities during the March violence in Kosova and continue to do so, international media reported. He dismissed the Human Rights Watch report as written from an "armchair position" and failing to give credit to KFOR for its efforts to stop the violence and save lives. The UN civilian administration (UNMIK) said in a statement that the study fails "to show an understanding of the extent of the challenge this violence posed to security forces. " PM

Opposition Humanist Party Deputy Chairman Codrut Seres said on 26 July that his party wants a referendum be held on Romania's accession to the European Union, the "Ziua" and "Jurnalul national" dailies reported the next day. Seres said his party believes that hasty and unprepared accession would transform Romania into a dumping market for European producers. He also said accession is unlikely as long as corruption continues to be a serious problem in Romanian society and people must struggle to survive rather than raise their professional qualifications. Seres also said the Humanist Party wants the populace to be accurately informed on the costs of accession, its advantages, and its disadvantages. Vasile Puscas, chief negotiator on European integration, countered that 80 percent of Romanians back integration and proposals to postpone it reflect not popular will but rather special interests, Mediafax reported. MS

Romania's ruling Social Democratic Party (PSD) will select its candidates for the November parliamentary elections in an electronic primary on 5 September, the daily "Romania libera" reported on 26 July. The daily quoted senior PSD official Dan Nica as saying that all PSD members are invited to participate in the internal selection process, which will produce 90 percent of the party's nominees; the party's coordination office will appoint 10 percent of those running for seats, Nica said. He added that Prime Minister Adrian Nastase will not run, claiming that in countries with a democratic tradition, party leaders are automatically included on the party list. MS

A group of 12 Moldovan demining experts left Chisinau on 26 July for Iraq, BASA-Press reported. The contingent replaces a 42-strong group that served six-months in Iraq before returning home in March. The new contingent is expected to serve for six months. According to the Moldovan press agency, officials are withholding details of the deployment for security reasons. Moldova began its participating in postwar military operations in Iraq at the invitation of the U.S. administration in September 2003. MS

The European Union's Permanent Council on 26 July condemned Tiraspol's decision to close schools teaching Moldovan (Romanian) in the Latin script, Flux reported. The EU said it "fully endorses" the recent declaration by Organization for Security and Cooperation in Europe (OSCE) High Commissioner on National Minorities Rolf Ekeus, who called the move "nothing less than linguistic cleansing." The EU also said it has "taken note" of the Russian Foreign Ministry's appeal to Tiraspol authorities "to refrain from any administrative action...until the future status and curriculums of the schools are agreed by negotiations," and said such restraint must extend beyond the negotiating period. It also called on Transdniestrian authorities to reopen immediately any closed schools (see "RFE/RL Newsline," 16 and 21 July 2004). MS

The Russian Foreign Ministry said in a statement carried by ITAR-TASS on 26 July that Moldova's decision to suspend participation in international negotiations with Tiraspol until 1 August "lends a political dimension to a humanitarian issue." The ministry said the issue of school closures can only be resolved "through negotiations, not through an escalation of rhetoric." It also said the three international negotiators (the OSCE, Ukraine, and Russia) "have expressed concern about the new negative turn in the dialogue between Chisinau and Tiraspol." The ministry stressed the need to "display wisdom and to prevent events from getting out of political control." MS

President Vladimir Voronin submitted a bill to parliament on 26 July under which the prerogatives of the Constitutional Court would be extended to include alleged infringements on human rights, BASA-Press and Flux reported. Under the proposed amendment, the Constitutional Court would be the highest and last judicial level to which individuals claiming their human rights have been infringed may appeal. Voronin said that in ruling on such cases, the Constitutional Court would be guided by the same principles that guide the European Court of Human Rights (ECHR) in Strasbourg, and he expressed the hope that the constitutional amendment will lead to a reduced number of Moldovans appealing to the ECHR. MS

As the shockwaves from the recent crisis of confidence that passed through the Russian banking sector recede, analysts and pundits have struggled to identify the effects of that crisis and to predict future developments in the sector. No consensus has emerged on the crucial questions of what caused the crisis, who benefited from it, and whether a second wave of instability looms in the near future. Perhaps most importantly, the role of the government -- and especially the Central Bank -- has come under harshly critical scrutiny.

The crisis is widely perceived as having been initiated by a Central Bank decision in May to withdraw the license of Sodbiznesbank on suspicion that it facilitated money laundering in the amount of more than $1 billion. Central Bank Chairman Sergei Ignatev told Interfax on 19 May that the decision to revoke the license had been "thought through very carefully" and he sought to assure panicked depositors that they would get their money, although he stopped short of offering a guarantee.

Center for Political Technologies General Director Igor Bunin told on 20 July that the shock going through the banking sector was "a strange crisis." After revoking the Sodbiznesbank license, "the Central Bank not only didn't bother to settle problems using politically correct methods and to manage the crisis, but it actually gave it an additional push," Bunin said.

At almost the same time, reports began to appear in the media to the effect that the Central Bank had prepared a "blacklist" of banks that were to be liquidated. Although Ignatev and other Central Bank and government officials repeatedly denied the reports, the panic was fomented by numerous earlier statements that the Central Bank is pursuing a policy of consolidation in the sector. "The most important element in the state's policy regarding credit organizations will be the stimulation of their enlargement through voluntary combination and mergers," Prime Minister Mikhail Fradkov told a cabinet session on 8 July at the height of the banking crisis, "Rossiiskaya gazeta" and other Russian media reported on 9 July. "Ekspert," No. 26, noted that one of the elements of the government policy that Fradkov articulated at that meeting is a move to compel banks to identify publicly their shareholders.

Despite the nervousness such statements provoked on the edgy interbank market, Deputy Prime Minister Aleksandr Zhukov on 20 July told Interfax that the Central Bank's steps to defuse the crisis "will encourage bank mergers and instill true competition in the industry."

Shortly after the Sodbiznesbank episode, the panic spread to Guta Bank, one of the 30 largest banks in Russia. Banking-sector analysts argued that Guta Bank was fundamentally healthy and urged the Central Bank to offer it a stabilization loan to carry it through the crisis. The Central Bank, however, responded by brokering the purchase of Guta Bank by the state-owned Vneshtorgbank at a price that many observers considered highly suspicious. On 21 July it was made public that an 85.8 percent stake in Guta Bank, which listed assets of about $1 billion, was sold for just 1 million rubles ($33,000). "Russkii fokus" this month speculated that the owners of troubled Guta Bank might have agreed so quickly to sell to state-owned Vneshtorgbank because they were "inspired by the example of 'jailbird' Mikhail Khodorkovskii," the jailed former CEO of embattled oil giant Yukos.

Many analysts have postulated a connection between the perceived threat to property rights inherent in the Yukos affair and the nervousness in the banking sector. Moscow Interbank Currency Association President Aleksei Mamontov, writing in "Vedomosti" on 19 July, said "the authorities have never recognized the fact that the reasons for the banking crisis lie not in the psychological or the regulatory sphere but specifically in the sphere of adhering to rights of ownership." He added that the banking crisis demonstrated most clearly that "incursion into these rights may be both sudden and ruinous to any credit institution." Presidential economics adviser Andrei Illarionov said on 10 July that the crisis was provoked by the actions of state agencies, particularly the Central Bank, that are leading to "the socialization or communalization of the banking system, which, strictly speaking, leads directly to nationalization," "Russkii fokus" reported.

The Center for Development on 23 July released a report predicting that capital flight from Russia will rise dramatically to $17.2 billion this year, "Vedomosti" reported. The center attributed the rise to both the Yukos affair and the banking crisis. Institute for Problems of Globalization head Mikhail Delyagin, who served as an economics adviser to former Prime Minister Mikhail Kasyanov, told "Novaya gazeta," No. 52, that the state takeover of Guta Bank shows that "nationalization is being performed to instill fear, in order to frighten business, so as to turn it into a cash cow in someone's private interests."

Association of Regional Banks Vice President and former Central Bank Deputy Chairman Andrei Sedov, in a 19 July interview with the popular daily "Komsomolskaya pravda," was unambiguous in blaming the Central Bank for the recent crisis and for creating the atmosphere for another. "[The Central Bank] cleaned up the small Sodbiznesbank, but they cleaned it up so clumsily that the entire banking system nearly collapsed," Sedov said. "Our people have a good memory. They haven't forgotten the [August 1998] default. Now it will be a long time before their confidence is restored. In effect, the banking system has been thrown back several years."

RBK reported on 26 July that a study conducted by the Levada Center on 16-19 July found that 56 percent of Russians believe that a crisis similar to the August 1998 financial meltdown could happen again in the near future, an increase of 12 percent over last year. Against the background of such jitters and the widespread lack of confidence in the motives and methods of the Central Bank, any misstep on the part of the authorities could produce an unpredictable resonance in what a 23 July "Vedomosti" editorial called "our fragile financial system."

Afghan Transitional Administration Chairman Hamid Karzai officially announced his candidacy for the post of president on 26 July, RFE/RL's Radio Free Afghanistan reported. In a surprise move, Karzai named Ahmad Zia Mas'ud, Afghanistan's ambassador to Moscow and a younger brother of slain United Front (aka Northern Alliance) leader Ahmad Shah Mas'ud, as his choice for the post of first vice president. Many had expected Karzai to nominate the powerful United Front military leader and his current first deputy, Defense Minister Marshal Mohammad Qasim Fahim, as his first deputy (see "RFE/RL Newsline," 26 July 2004). Karzai said he has fond memories of Fahim and the two spent testing times together in the past two years, adding that he is "sad that Fahim is not on the ticket." But for building a new Afghanistan, Karzai said, Mas'ud is the right choice. As expected, Karzai named Abdul Karim Khalili, currently one of his deputies, as his choice for the post of second vice president. Karzai said his other two current deputies, Ne'matullah Shahrani and Hedayat Amin Arsala, will have important positions in his government if he is elected, but he did not offer any details. AT

Marshal Fahim might back one of Karzai's opponents in the October presidential election, the BBC commented on 26 July, citing the views of unspecified observers. As the head of one of the strongest militias in Afghanistan and with the support of various other warlords, Fahim was widely viewed as a potential troublemaker if left off Karzai's ticket. An unidentified U.S. official quoted by "The New York Times" on 27 July said fears that Fahim might roll his tanks onto the streets of Kabul proved unfounded, adding that the defense minister "did not look like someone ready to go to war." On 26 July, Karzai indicated that Fahim remains defense minister, Radio Free Afghanistan reported. In a conversation with "RFE/RL Afghanistan Report" on 20 July, Nur Mohammad Qarqgen, who is participating in Karzai's campaign, suggested that Fahim had been a possible choice due to security concerns if he were not on the ticket. By passing over Fahim, Karzai appears to have taken a bold step directed against warlords and powerful officials within his own administration who command military units that are not loyal to the central government. Karzai's successful curtailment of warlords would arguably eliminate the biggest stumbling block on Afghanistan's road to recovery. AT

In an unexpected move, Education Minister Mohammad Yunos Qanuni announced on 26 July that he will run for the Afghan presidency, Radio Free Afghanistan reported. Karzai acknowledged the same day that he has accepted Qanuni's resignation from his post as education minister and wished him well. "Recently, I have had concerns," Qanuni said on 26 July, according to Reuters. "because there have been some violations in the new constitution and in the Bonn agreement, and what I had expected in the past has now been put at risk. This has prompted me to use my constitutional right to be able to serve my people." Qanuni, who like Defense Minister Fahim and Foreign Minister Abdullah Abdullah is from Panjsher Province, said he enjoys the support of those two as well as the support of Ahmad Shah Mas'ud's other brother, Ahmad Wali Mas'ud, "The New York Times" reported on 27 July. Mas'ud is also from Panjsher, and the Panjsheri group has played a dominant role in Afghanistan's transitional administration since late 2001, the New York daily commented. Some observers believe Qanuni might emerge as the most serious contender to Karzai in an election that until recently was widely expected be have been a foregone conclusion. AT

An election worker and Amir Ne'matullah Pahlawan, the head of the anticrime department of the Khas Oruzgan district of Oruzgan Province, were killed on 25 July in an attack by unidentified assailants, Peshawar-based Afghan Islamic Press reported on 27 July. Both men were riding on a motorcycle when the attackers struck. Haji Obaydullah, the district head of Khas Oruzgan, said he is not "100 percent sure who carried out the attack," adding that "we are 80 percent sure that the Taliban attacked them, because they are carrying out such attacks." Neo-Taliban elements have vowed to disrupt Afghanistan's election process. AT

Iranian government spokesman Abdullah Ramezanzadeh said on 26 July that Iran's Intelligence Ministry is ready, "if the judicial apparatus wishes," to find the "real agent in the semi-intentional murder" of Zahra Kazemi, a Canadian-Iranian photojournalist killed in state custody in Tehran in 2003 (see "RFE/RL Newsline," 10 July 2003). A court acquitted one defendant in her killing on 24 July, and the judiciary now says it is unclear who killed her (see "RFE/RL Newsline" 19, 20, and 26 July 2004). The trial and acquittal have provoked international consternation. "I asked the intelligence minister about the case yesterday, and he...said that if the [judiciary] permits and wishes it, the intelligence ministry will identify the truth of this matter, through...transparent and open investigations, and in the presence of all parties involved, including [the victim's] immediate family," ISNA quoted Ramezanzadeh as saying. Canada has recalled its ambassador in Tehran to protest the trial proceedings and is considering unspecified "other options" against Iran, AFP cited Canadian Foreign Minister Pierre Pettigrew as saying on 26 July. Ramezanzadeh conceded on 26 July that "an unpleasant and problematic affair has occurred...which should have been resolved in a manner satisfying domestic and international...opinion," ISNA reported. VS

Some 200 journalists and supporters of democratic reforms in Iran held a sit-in in the Tehran offices of Iran's press guild on 26 July to protest the recent closure of two reformist dailies by the conservative-led judiciary, Radio Farda reported the same day (see "RFE/RL Newsline," 19 and 22 July 2004). The protesters included Nobel Peace Prize winner Shirin Ebadi, who is representing the family of Zahra Kazemi (see item above), and Muhsin Kadivar, a liberal theologian, Radio Farda reported. The protest, organized by the Association in Defense of Press Freedoms, lasted much of the afternoon. "Journalists were merely intending to state their objections in this gathering," Radio Farda quoted protester Ali Pir-Husseinlu as saying. "We did not have the possibility of any greater sit-in or protest," he said. "Outside pressures were such that it could not continue any longer," he added, without specifying those pressures. VS

Brigadier General Seyyed Mas'ud Jazayeri, the public-relations chief for Iran's Islamic Revolution Guards Corps, said in Tehran on 26 July that Tehran "will give a response so vigorous" as to "destroy" Israel if that country attacks Iran, ISNA reported the same day. Jazayeri was responding to intermittent hints by Israeli officials that they might strike Iran's nuclear installations, which Israel and the United States suspect might be used one day to make nuclear weapons. Jazayeri said that if Tel Aviv and Washington "were able to, they would not wait a moment to strike Iran, but the threats they make against [Iranian] nuclear installations have no executive backing, because they know that Tehran's response will be so vigorous as to utterly destroy Israel, and what America considers its interests will be easily hit," ISNA quoted him as saying. He did not elaborate on the nature of U.S. "interests." Iran, he added, is not an aggressor but its response to aggression would be "sharp, firm, effective, and destructive." VS

The Mujahedin Khalq Organization (MKO), an Iranian rebel group hostile to the Tehran government and listed as a terrorist group by U.S. State Department and the European Union, says it now enjoys the protection of coalition forces in Iraq, where the group is confined at a military base, AFP reported on 25 July, quoting Farid Suleimani, a member of the Paris-based National Council of Resistance, a front group for the MKO. The MKO was backed by Iraqi President Saddam Hussein but disarmed by coalition forces after his ouster by U.S.-led forces. Its members are to enjoy the status of protected noncombatants under the fourth Geneva Convention, AFP reported, preventing their extradition to Iran, which wants to prosecute them on terrorist charges. Maryam Rajavi, an MKO leader, welcomed the move as a "victory" for the group against Tehran, Radio Farda reported on 26 July. Iranian government spokesman Ramezanzadeh expressed uncertainty over the report's veracity in Tehran on 26 July but said the international coalition's treatment of the MKO will "be a measure of the truth of the claims of [those] claiming to fight worldwide terrorism," ISNA reported the same day. VS

Interim Iraqi Prime Minister Iyad Allawi told Dubai's Al-Arabiyah television in a 26 July interview that those who call themselves the Iraqi resistance have no political program. Allawi told the satellite news channel that he met with members of the so-called resistance "face to face" and asked them to explain their political project to him as a citizen and not as a prime minister. He claimed to have told them: "I want to understand your project. Is it a project that calls for the return of Saddam [Hussein]? Or is it a project that calls for bringing [Osama] bin Laden or the likes to rule Iraq?" Allawi said he warned the resistance that if they subscribe to either program, then the Iraqi government will fight them. He also reported telling them: "If you have a problem with the United States, then its location and borders are known and you can confront it or open a dialogue with it." He then invited the resistance to join the political process in Iraq and told Al-Arabiyah that the men with whom he met have since responded in a positive manner. KR

Militants freed Egyptian diplomat Muhammad Mamduh Qutb on 26 July after holding him captive for four days, international media reported the same day. Qutb told MENA that his kidnappers treated him well but that they had misconceptions about a number of issues, the news agency reported on 26 July. The kidnappers said in a statement that Qutb was released because he was a polite and religious man, international media reported on 27 July. Qutb was kidnapped outside a mosque in Baghdad on 23 July. He returned to work at the Egyptian Embassy in Baghdad on 27 July, thanking all those who helped secure his release, AP reported. Meanwhile, a group identifying itself as the Mujahedin Corps claimed to be holding two Jordanian nationals hostage in Iraq and threatened to kill them within 72 hours unless their Jordanian employer withdraws its business from Iraq, AP reported on 27 July. AP Television News obtained a copy of the group's videotaped message that issued the threat. Jordan News Agency reported on 26 July that the men were abducted near Al-Qa'im along the Iraqi border with Syria, where their employer does business. KR

A militant group calling itself the Islamic Army in Iraq has abducted two Pakistanis and one Iraqi national working for a Kuwaiti company in Iraq and is threatening to kill both Pakistanis, Al-Jazeera reported on 26 July. The satellite news channel said the militant group claimed in a videotaped message that one of the Pakistanis works as a technician for U.S. troops in Iraq, while the other works as a driver for the U.S. military. The group says it has issued death sentences against the men based on what it called categorical evidence of their affiliations with the U.S. military and because Pakistani President Pervez Musharraf has said he would consider sending troops to Iraq. The group vowed to hold the Iraqi national in custody until his interrogation is complete. The Islamic Army in Iraq also issued a warning to the Kuwaiti firm Al-Tamimi, saying the fate of its employees would be the same as the Pakistanis if it continues to do business in Iraq. KR

The U.S. military dropped leaflets on the volatile Iraqi city of Al-Fallujah on 27 July warning residents that they will lose $102 million in reconstruction funds unless they halt attacks on U.S. forces and allow those forces to enter the city freely, Reuters reported. "We ask the citizens of make way for multinational forces to start the rebuilding of Al-Fallujah, and to make way for American forces to move freely in the city and make real estimates for construction," the leaflet said. The leaflets also threatened to withdraw $35 million in funding for a water-treatment upgrade, adding, "Our fight is not with the honest citizens of Al-Fallujah, but with those who want to destroy the future of Al-Fallujah and those who are doing this for their own benefits." KR