|Tuesday, 15 October 2019|
RFE/RL Newsline, Vol. 2, No. 19, 98-01-29
From: Radio Free Europe/Radio Liberty <http://www.rferl.org>
Vol. 2, No. 19, 29 January 1998
[A] TRANSCAUCASUS AND CENTRAL ASIA
[B] SOUTHEASTERN EUROPE
[C] END NOTE
[A] TRANSCAUCASUS AND CENTRAL ASIA
 ARMENIAN OPPOSITION LEADER CALLS ON PRESIDENT TO RESIGNNational Democratic Union Chairman Vazgen Manukyan told journalists on 28 January that his party is currently holding talks with other opposition forces on how to mobilize public pressure on President Levon Ter-Petrossyan to force him to step down, Noyan Tapan and RFE/RL's Yerevan bureau reported. Manukyan reiterated that Ter-Petrossyan is the key obstacle to a just solution to the Nagorno-Karabakh conflict and the democratization of Armenia. He said his own views on how to resolve the Karabakh conflict are identical with those of the Karabakh leadership. Manukyan also said that the war is unlikely to resume because "Azerbaijan would lose it on the same day it starts it," adding that he believes a negotiated settlement of the conflict is still possible. LF
 ARMENIAN PARLIAMENT SPEAKER SAYS THERE IS "NO CRISIS"In an interview carried by Noyan Tapan on 28 January, Babken Ararktsyan played down the discord within the country's leadership over how best to resolve the Karabakh conflict. Arakstsyan conceded that the Karabakh conflict has generated internal tensions, but he denied that those tensions constitute a "crisis." He reaffirmed the commitment of the ruling Armenian Pan-National Movement to the de facto independence of Karabakh, to security guarantees for the Karabakh population, and to the ongoing peace talks under the aegis of the Organization for Security and Cooperation in Europe. Ararktsyan said he does not think the attacks earlier this month on three senior officials are capable of "jeopardizing internal stability," hinting that the parliament will not demand the government's resignation. LF
 KARABAKH PRESIDENT REITERATES OBJECTIONS TO PEACE PLANAddressing the parliament of the unrecognized Nagorno-Karabakh Republic on 28 January, Arkadii Ghukasyan, the enclave's president, again argued that the "phased" peace plan proposed by the OSCE Minsk Group co- chairmen is "dangerous" for Karabakh because it stipulates a withdrawal of Armenian forces from occupied Azerbaijani territory before a decision on the enclave's future status. He commented that the proposal thus means Azerbaijan has no incentive to make concessions, Noyan Tapan and RFE/RL's Stepanakert correspondent reported. Ghukasyan pointed out that the "phased" plan increases the chances that hostilities will resume because it destroys the existing balance of military forces. But he also stressed that he does not reject the so-called "consolidated" approach to peace talks, which entails first resolving the issue of Karabakh's status vis-a-vis Azerbaijan and then holding talks on other issues. LF
 AZERBAIJAN LINKS RELATIONS WITH RUSSIA, CIS TO KARABAKHAzerbaijani Foreign Minister Hasan Hasanov told Interfax on 28 January that his country's future relations with both Russia and the CIS are contingent on Moscow's position on resolving the Karabakh conflict and on whether it insists that Armenia return the weaponry it received illegally from Russia from 1993-1996. Hasanov said that Moscow is to blame for the difficulties that have arisen in resolving the Karabakh conflict because of its policy of supplying arms to Armenia and the agreements on military cooperation that it has concluded with Yerevan. LF
 RUSSIAN ARMS SHIPMENT TO ARMENIA INTERCEPTEDA convey of six trucks belonging to the Group of Russian Troops in the Caucasus was detained on 28 January at the Georgian-Armenian frontier, Caucasus Press reported the next day, quoting the Georgian Ministry of National Security. The trucks were loaded with ammunition and weapons and were headed for Armenia on orders from the Commander of the Group of Russian Forces in the Caucasus Lieutenant-General Viktor Kazantsev. They were forced to turn back. LF
 TURKEY, GEORGIA DISCUSS OIL TRANSITGeorgian presidential foreign policy adviser Archil Gegeshidze told journalists on 28 January that Ankara is trying to convince Tbilisi of the merits of the Baku-Ceyhan route for the main export pipeline for Azerbaijani (and possibly also some Kazakh) Caspian oil, Interfax and Caucasus Press reported. Gegeshidze, who held talks with visiting Turkish Deputy Foreign Minister Mohammed Ali Irtemcelik on 28 January, said that construction of a Baku-Ceyhan pipeline would not detract from the importance of the pipeline from Baku to the Georgian Black Sea port of Suspa, scheduled to begin operations this fall. He added that he and Irtemcelik also discussed possible Russian participation in the export of Caspian oil via Turkey since "the isolation of Russia is in nobody's interests." LF
 KAZAKHSTAN HAS NEW FOREIGN INTELLIGENCE SERVICEKazakhstan has set up a Foreign Intelligence Service, ITAR-TASS and Interfax reported on 28 January. Major-General Zhenis Ryspayev, who will head the service, said the new agency does not intend to spy on other countries but will coordinate activities with the special services of CIS states. He added that the new service, who is directly subordinate to the president, will monitor the activities of extremist religious groups, drug smugglers, and mafia groups in order to assess potential threats from foreign terrorist groups. BP
 KAZAKHSTAN DENIES SENDING MISSILES TO IRANAlso on 28 January, Ryspayev denied press reports from abroad that Kazakhstan has sold SS-20 or SS-21 missiles to Iran, ITAR-TASS and Interfax reported. Ryspayev said sales of any weapons "are so closely monitored...that it's practically impossible to [carry them out] secretly." He added that with the help of the U.S., Kazakhstan became a nuclear-free state in 1995 and has not produced any missiles since then. BP
 TURKMENISTAN TO RESUME GAS SUPPLIES TO UKRAINEUkrainian President Leonid Kuchma met with Turkmen President Saparmurat Niyazov in Ashgabat on 28 January. Niyazov promised to resume supplies of natural gas to Ukraine this year, even though Ukraine still owes about $600 million for earlier supplies. A dispute between Ashgabat and the company contracted to deliver the gas to Ukraine, Turkmenrosgaz, led to suspension of deliveries last March. Niyazov said his country will ship 15 billion cubic meters of gas to Ukraine but added that the delivery depends neither on Ashgabat nor on Kyiv." The pipeline bringing gas from Turkmenistan to Ukraine runs through Russia. Kuchma is scheduled to meet with Russian President Yeltsin in Moscow on 30 January. BP
 DATE OF NEXT CIS SUMMIT BROUGHT FORWARDCIS Executive Secretary Ivan Korotchenya told Interfax on 28 January that the next CIS summit will be held on 19 February in Moscow. Following the cancellation of the summit scheduled for mid-January, it was announced earlier this month that the next summit will take place in late March. According to Korotchenya, the top item on the agenda will be reforming the administrative structure of the CIS and developing trade between its members. LF
[B] SOUTHEASTERN EUROPE
 SERBS KEEP UP PRESSURE IN KOSOVOSerbian police shot and wounded an ethnic Albanian teenager in Kosovska Mitrovica on 28 January, an RFE/RL correspondent reported from Pristina. In Kosovo Polje, Serbs in civilian clothes beat Albanian high school students, sang nationalist songs, and damaged the building housing the private school. A similar incident took place in Ljipljan. Police sealed off a village near Decani, fired machine guns at unspecified targets, and beat several male villagers. Meanwhile, police stepped up patrols in Pec, Malisevo and Klina the Belgrade daily "Danas" wrote. PM
 KOSOVO SERBS STAGE PROTESTSome 2,000 Serbs demonstrated in Zvecan,. near Kosovska Mitrovica, on 28 January to protest what they called "Albanian terrorism and separatism." Speakers also denounced Belgrade's policies, which they say have led to the current tensions in Kosovo. The son of a Serbian politician killed by Albanians the previous week told the crowd that the Serbian authorities "must protect every Serb, every Serbian home, from Albanian separatism and terrorism" (see "RFE/RL Newsline," 26 January 1998). Another speaker said that the current "terrible situation" has been brought about by "those who lead this country [but] have no answer to the [Albanian] separatist strategy." The speaker added, however, that Serbs should "be dignified and show the world that we are the victims, not those who kill us." PM
 COUNCIL OF EUROPE CONDEMNS BELGRADE'S KOSOVO POLICYThe Council of Europe's parliamentary assembly passed a resolution in Strasbourg on 28 January condemning "Serbian repression of the ethnic Albanian population of Kosovo." The resolution said that Belgrade's policies have "led to armed resistance" in the region. The text added that Yugoslavia is itself to blame for its continued international isolation and that, if Belgrade wants to rejoin the international community, it must implement constitutional reforms guaranteeing freedom of the press, an independent judiciary, and protection of basic civil rights. A Yugoslav delegation in Strasbourg asked that references to Kosovo be dropped on the grounds that the province is the internal affair of Serbia, but the assembly ruled that human rights violations cannot be considered solely one country's internal affair. PM
 ANOTHER CAR BOMBING IN MONTENEGROA bomb destroyed the car of Darko Rapopovic, a top police official, in Podgorica in the night of 26-27 January, an RFE/RL correspondent reported from Podgorica on 28 January. A bomb demolished the car of the commander of special police forces in Podgorica on 24 January (see "RFE/RL Newsline," 26 January 1998). The previous week, police forces prevented demonstrators loyal to outgoing President Momir Bulatovic from disrupting the inauguration of reformist President Milo Djukanovic. PM
 LUKASHENKA IN BELGRADEBelarusian President Alyaksandr Lukashenka arrived in the Serbian capital on 28 January for talks with Yugoslav officials, AFP reported. Lukashenka said he hoped to "expand and deepen cooperation" between the countries, which, he said, have "common historic roots and warmest friendly bilateral relations." The two countries signed a friendship treaty last year. Lukashenka is the first leader of a former Soviet republic to visit Belgrade. He is to meet with Yugoslav President Slobodan Milosevic and other officials. PB
 BOSNIAN SERB HARD-LINERS YIELD ON PARLIAMENTParliamentary speaker Dragan Kalinic of Radovan Karadzic's Serbian Democratic Party agreed at a meeting of representatives of Bosnian Serb political parties in Bijeljina on 28 January that the 31 January session of parliament will take place in Banja Luka, which is President Biljana Plavsic's stronghold. Kalinic and other Karadzic loyalists had wanted the meeting to be held in the small but politically neutral town of Teslic. Prime Minister Milorad Dodik, a supporter of Plavsic, told RFE/RL on 26 January that the hard-liners have become more cooperative in recent days because of pressure from Belgrade (see "RFE/RL Bosnia Report," 28 January 1998). PM
 NO DEVALUATION OF CROATIAN KUNAPrime Minister Zlatko Matesa said in Zagreb on 28 January that there will be no devaluation of the kuna, which currently trades at roughly one to $6. He added that the stability of the kuna is a cornerstone of the government's economic policy and that the authorities will continue their tight money policy in 1998. Matesa said the government does not want to undermine citizens' confidence in the kuna and the value of their savings. Many foreign experts consider the kuna overvalued by at least 20 percent; they expected that the government would devalue it in order to boost exports. Matesa, however, said that the government will not devalue the currency in order to help some businesses solve what he called their "internal problems." PM
 SLOVENIAN NAZI VICTIMS SEEK $1.2 BILLIONA spokesman for the Association of Victims of the 1941-1945 Occupation said in Ljubljana on 27 January that his organization demands $1.2 billion from the German government on behalf of some 45,000 Slovenes. The spokesman stated that the money represents reparations for "internees, refugees, abducted children, forced laborers, prisoners-of-war, and those who died in concentration camps or who were murdered" during World War II. He added that the association will also press claims against Italy and Hungary, which, together with Germany, occupied Slovenia during that war. PM
 AUDITORS DECLARE ALBANIAN PYRAMID BANKRUPTA spokesman for the French auditing company Deloitte & Touche said in Tirana that the VEFA investment company has only $7 million in assets and that it has only a small income from its business activities, "Koha Jone" reported on 28 January. VEFA is believed to have received more than $300 million in recent years from some 90,000 investors. The spokesman for the French firm, which has an Albanian government contract to audit the records of the last surviving pyramid scheme, added that VEFA is losing $200,000 a month because of poor management. He also said the French company is investigating recent Albanian media reports that VEFA owner Vehbi Alimucaj has $40 million in bank accounts in Greece. FS
 EU AGREES ON ALBANIAN EAST-WEST HIGHWAYForeign Minister Paskal Milo said in Tirana after returning from Brussels on 28 January that the EU and the Albanian government have agreed to start constructing an east-west highway in March. The EU is providing $165 million for the project, which will eventually link Durres with Istanbul. Elsewhere, a group representing Italian investors has expressed concern for the safety of foreign businessmen following the killing of an Italian shoe- factory owner in Tirana on 27 January. Italians have launched some 200 small and medium-sized businesses in Albania, far more than any other nationality. And in Kukes, gunmen attacked an arms depot on 28 January, "Koha Jone" reported. A shoot-out continued for hours before the unidentified attackers withdrew. FS
 ROMANIA'S DEMOCRATIC PARTY WITHDRAWS FROM GOVERNMENTFollowing talks between President Emil Constantinescu and the leaders of the coalition parties on 28 January, the presidential office released a statement the next day saying the participants "take note" of the decision of the Democratic Party to withdraw its ministers from Victor Ciorbea's government. However, the Democrats will continue to support the coalition in the parliament. A new protocol on how the coalition will function under the new conditions is to be drawn up by 2 February. The coalition leaders agreed to work out a program for accelerating reform and improving cooperation among its parliamentary deputies. They also agreed to "refrain from public declarations likely to produce tensions among the coalition members." MS
 NEW GOVERNMENT LINEUP TO BE ANNOUNCED NEXT WEEKPrime Minister Ciorbea on 29 January said he will announce the new composition of the government on 2 February. Taking into consideration what he called Romania's "vital interests," President Constantinescu has asked Defense Minister Victor Babiuc and Foreign Minister Andrei Plesu to stay in the government. Babiuc has said he will quit the defense portfolio. Democratic Party Deputy Chairman Traian Basescu said his party is agreed that Plesu, an independent nominated by the Democrats, should stay on as foreign minister. MS
 TIRASPOL THREATENS TO SEND ARMY TO SECURITY ZONEThe Transdniester authorities are threatening to send armored cars into the security zone if Chisinau does not revoke the appointment of police Colonel Vitalie Bruma to the Joint Control Commission, BASA-press and Mediafax reported on 28 January. The separatists claim that by appointing Bruma as a member of the commission, which is overseeing the truce, President Petru Lucinschi wants to block that body's activities. Moldovan presidential counselor Anatol Taranu said that the separatists themselves are using the appointment of Bruma as a "pretext" for blocking the commission's work. Tiraspol opposes Bruma's appointment because he claimed in media interviews that the separatists are producing military equipment. MS
 AUSTRIA PROBES SUSPECTED ILLEGAL BANK TRANSFERS FROM BULGARIAWolfgang Schussel said in Sofia on 28 January that his government is trying to establish whether money was illegally transferred from Bulgaria to private bank accounts in Austria, an RFE/RL correspondent reported. He said bank secrecy laws hamper the investigations. There are suspicions that former members of the Bulgarian communist nomenklatura who later became businessmen had secretly transferred funds to Austria in the 1980s. Ivan Kostov's cabinet has said that former Communists illegally funneled thousands of millions of dollars from state funds into private bank accounts in Vienna. MS
[C] END NOTE
 COUNTRIES ACCEDING TO EU FACE MACROECONOMIC CHALLENGESby Michael Wyzan
At a seminar organized by the Vienna Institute for Comparative Economic Studies on 22 January, George Kopits, assistant director of the IMF's Fiscal Affairs Department, discussed the requirements that countries acceding to the EU will have to meet and the policy issues facing them.
On balance, he was upbeat about the ability of the five postcommunist countries invited by the European Commission in July 1997--the Czech Republic, Estonia, Hungary, Poland, and Slovenia--to meet those requirements. Indeed, in many important respects, they are ahead of Greece and the Iberian countries as they prepare for accession.
Those countries will have to adhere to "ERM2" for two years before adopting the euro. That is, they must use the exchange rate mechanism currently followed by most EU members before the euro is introduced next year. That means keeping their currencies at a parity to the euro with a 15 percent corridor in each direction.
The countries slated for accession may also have to meet the various "Maastricht criteria" (including a budget deficit no larger than 3 percent of GDP). It is safe to assume that they will need to adhere to such institutional requirements as using market-based monetary instruments and maintaining central bank independence from political influences.
Other tasks include eliminating all trade barriers with the other EU members; establishing the common external tariff; and implementing common procedures for consumer and environmental protection, public procurement, banking regulation, and tax harmonization.
As a benefit, the five countries will have access to the Structural Funds (SF), the Cohesion Fund (CF), and perhaps to the Common Agricultural Policy (CAP). While the transfers potentially allocated to them could be enormous according to current criteria, it seems likely that the amount available to them will be limited to 4 percent of GDP.
The five countries seem to be doing rather well in meeting those criteria. Inflation and long-term interest rates have come down, although they remain above the EU averages. There is progress on adopting market-based monetary tools and establishing central bank independence. Budget deficits in several countries already fulfill the Maastricht criteria, although there may be significant extrabudgetary and quasi-fiscal expenditures. Their external sectors are already liberalized, and there is progress on antimonopoly and consumer-protection legislation.
However, much remains to be done in the areas of environmental standards, banking regulation, harmonization of indirect taxation (especially rates of value-added tax and payroll contributions), and procurement procedures.
It is unclear is whether the countries acceding to the EU will be able to operate within ERM2, given the myriad pressures on their exchange rates. There are factors that may lead to the appreciation of their currencies, including foreign direct investment and short-term capital inflows, and the productivity-driven adjustment of their prices to the levels of their EU neighbors. But there are also pressures for depreciation. Growth of wages tends to exceed that of labor productivity; budget deficits and rapid monetary growth persist; and speculative capital occasionally flows out.
Another issue is whether the countries can remain within the EU's fiscal guidelines while dealing with major structural challenges. Accession will bring some budgetary advantages, including transfers under the SF, CF, and CAP programs; the elimination of sectoral subsidies; reform of budgetary practices; and lower interest costs.
At the same time, accession will also pose budgetary challenges, such as the need to co-finance the transfer programs (such as the SF, CF, and CAP) and make national contributions to the EU budget, eliminate tariffs against imports from EU members, and adopt the common external tariff. Those countries will also have to provide for tax harmonization, which will force major reductions in VAT rates; adopt EU accounting practices; and incur restructuring costs, especially for investments in the infrastructure.
Despite such challenges, Kopits is generally optimistic about the outcome of accession. The process has been successful in Spain and Portugal, although less so in Greece. The five postcommunist countries have many similarities with the three Mediterranean ones at the time of their accession: low income levels, low productivity, a need for enterprise restructuring, and scope for infrastructure investment.
Many differences between the transition and Mediterranean countries suggest the former have more advantages than did the latter: they are more open to foreign trade and capital movements (especially than was the case of Spain and Greece), have smaller macroeconomic imbalances, and, ironically, have less widespread state ownership following their privatization efforts. However, the enlarged EU will be different from the European Community of the 1980s, particularly since the community was a customs union only, not a single market, and did not have a common monetary policy.
In the author's view, the five countries seem better prepared for accession than many observers realize. There is more doubt about the viability of upcoming changes to the EU's functioning--especially the single currency and reform of the transfer programs--than about the ability of those countries to adopt current procedures.
The author is an economist living in Austria.
Reprinted with permission of Radio Free Europe/Radio Liberty