RUBLE FALLS BELOW 30 TO THE DOLLAR

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RUBLE FALLS BELOW 30 TO THE DOLLAR

Trud, December 14, 2001, p. 2

The exchange rate has crossed the psychologically important barrier of 30 rubles to the dollar, putting paid to recent forecasts by some experts that the American financial system would collapse.

By the way, Central Bank chairman Victor Gerashchenko said recently that fluctuations within the range of 0.10 rubles to the end of the year would not be of fundamental importance. Stability of gold and currency reserves is much more significant. However, something extraordinary happened with the reserves over the last week of November. Over 2001, except in March, the gold and currency reserves have been growing steadily. But from November 23 to 30 they declined by 3.4% at once – from $38.6 billion to $37.3 billion. Was this an accidental fluctuation of an indicator which is so important for Russia’s economy overall, or was it the onset of an unfavorable trend?

Only time will tell. If the reserves continue to decline, the current minute fluctuations in the ruble/dollar exchange will turn out to be the prelude to more tempestuous developments.

If oil prices continue to fall, the Central Bank will only be able to maintain the current reserves, not increase them; which may accelerate the ruble’s devaluation.

Gerashchenko will not support the ruble exchange rate at the expense of a considerable outpouring of hard currency reserves. Injections of rubles into the economy, which the Central Bank has done due to its large-scale repurchase of hard currency from exporters, will also decline; this will ease pressure on the hard currency market. Sudden and substantial drops in the ruble’s value will be replaced by prolonged periods of marking time at the levels which have been reached. The average exchange rate factored into the 2002 budget – 31.50 rubles to the dollar – will most likely be maintained.

LUKOIL INTENDS TO LIQUIDATE THE TV-6 NETWORK IN ORDER TO RESTORE IT AND SELL

Izvestia, December 14, 2001, p. 2

At a press conference yesterday it was announced that the LUKoil-Garant pension fund intends to get the broadcasting license of the TV-6 network withdrawn by court order; then to win the tender for the license, create a new profitable company, and sell it.

LUKoil-Garant Vice President Leonid Fedun was obviously disappointed with the results of the TV-6 board meeting the day before, at which it was decided to submit the issue of liquidation for discussion at a general shareholders’ meeting.

LUKoil considers that discussion is superfluous: to execute the court decision is the only thing needed. As is said, the company is preparing an appeal to the court about withdrawing the license from TV-6.

In case this happens, the current minor shareholder hopes to win the tender for purchasing the license for these frequencies and offer the recent management of the TV company to participate in establishing a new company. Since Yevgeny Kiselev (the present managing director of TV-6) has never said a bad word about LUKoil.

Mr. Fedun puts the blame for all adversities connected with TV-6 on its major owner Boris Berezovsky, who first arranged an additional issue, declining the oil company’s share to 1%, then proposed that LUKoil should buy a 75% stake for $500 million or else sell its 15% stake for the sum of $7-10 million.

In response to TV-6’s accusations that LUKoil had invested only $4,000 in the company, Leonid Fedun keeps insisting that the investments totaled $50 million, but had not been entered properly in book-keeping records in early 1990’s. Asked how much more his company is ready to invest, Mr. Fedun replied that they won’t spare any expense.

CHECHNYA: FIGHTING IN ARGUN AGAIN

Izvestia, December 14, 2001, p. 3

It was reported yesterday that heavy fighting is taking place in Argun, the third-largest city in Chechnya. “Considerable forces from Khankala were brought up to the city early in the morning, and also an element of local commandant’s office was involved. Now a special operation is underway in the city and skirmishes are observed in the course of it,” Izvestia were told at the republic’s security ministries.

Some 200-250 guerrillas are located in Argun both legally and illegally. They leaders of separatists ordered them “not to surrender alive.” Therefore they have been offering severe resistance. According to military sources, “the operation is a scheduled one.” However, report Izvestia’s sources, a decision to carry out a special operation was made after the guerrillas machine gunned a column of the federal troops in the city a few days ago. The reports were mentioning only six soldiers wounded. However, according to Izvestia’s sources, the losses were much more extensive. According to sources in the grouping’s command, “we will sweep Argun completely.”

YAKUTIA ELECTIONS: NIKOLAEV WITHDRAWS FROM THE RACE

Izvestia, December 14, 2001, p. 4

An intrigue surrounding the presidential elections in Yakutia, scheduled for December 23, has twisted into an absurd spiral. Yesterday the incumbent President Mikhail Nikolaev was completely eliminated from the list of candidates. However, this happened not at the urgent request of the federal government, which insisted on canceling Nikolaev’s registration, but by the “goodwill” of Nikolaev himself, who announced his withdrawal from the race on Wednesday. Having refused to fight for reelection, Nikolaev called on his supporters to vote in favor of his chosen successor – Vyacheslav Shtyrov, head of the ALROSA diamond company. The paradox in this situation is that on December 11 the Supreme Court of Yakutia disqualified Shtyrov from the elections.

However, the implementation of this decision has been suspended already: the Supreme Court required the materials of the case in Moscow and Nikoleav’s successor is likely to participate in the elections. The only problem is whether the people will participate in them.

CONTROVERSY IN ST. PETERSBURG

Moskovskii Komsomolets, December 14, 2001, p. 1

Once President Putin spoke out on December 12 to refute Federation Council Speaker Sergei Mironov, saying that extending the presidential term in office was out of the question, the public froze. Political analysts immediately began asking whether we had witnessed a three-move PR campaign, or whether everything is much simpler – Mironov had said something foolish, spoken without thinking.

According to our sources, no one has accused Mironov of expressing constitutional initiatives. The president, who was in Greece that day, was annoyed.

Phone talks between Athens and the Kremlin started almost immediately after the head of state was told what Mironov had said. When the phone contacts were over, an official of the Presidential Administration even expressed regret that the new speaker had not waited at least a month before making any such important announcements.

Mironov should have looked closely at what was taking place around him and what the speaker of the upper house could do and what he could not, said the official.

Thus, the extreme guile and prudence of top officials are confirmed. However, every cloud has a silver lining. President Putin has once more received an opportunity to declare in public his readiness to abide by the Constitution.

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