THE CABINET WANTS TO REWRITE THE BUDGET WITHOUT THE DUMA

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THE CABINET WANTS TO REWRITE THE BUDGET WITHOUT THE DUMA

Izvestia, October 16, 2002, p. 2 EV

The Cabinet is attempting to significantly expand its powers at the expense of the legislature. Following the Economic Development Ministry’s failure to prevent a bill on state regulation of energy tariffs from being passed by the Duma, a second attempt was made yesterday at a meeting of the Federation Council commission on natural monopolies. If this bill becomes law, electricity tariffs will be reviewed once a year, before the annual federal budget is passed.

Vyacheslav Kravchenko, a head of department at the Economic Development Ministry, and Igor Redkin, deputy chairman of the Federal Energy Commission (FEC), insisted on amendments which would enable the Cabinet to adjust tariffs independently during the year. If the bill as it stands is passed by the Federation Council, the Cabinet’s only recourse would be to appeal to the president.

The Federation Council’s natural monopolies commission supported the bill. The legal conflict here lies in the fact that it is impossible to revise tariffs without changing some of the figures in the federal budget – but amending the budget during the year is the prerogative of the Duma.

Committee deputy chairman Valentin Mezhevich said at the commission meeting: “Electricity tariffs ought to be revised as many times as the economic situation requires.” In his view, this is essential, since a significant number of electrical power plants use coal and fuel oil, which are purchased at market prices. Market prices fluctuate.

Vyacheslav Kravchenko from the Economic Development Ministry said the bill as it stands would “distort the nation’s already-unstable fuel balance”.

Igor Redkin of the FEC warned that if this law comes into force, the FEC would only be able to set approximate tariffs, which wouldn’t even be linked to an analysis of company budgets; and this would mean a substantial loss of revenue for electricity companies, which could not be compensated for.

Some senators supported the Cabinet officials. They agreed that regulating tariffs once a year could only be implemented for state-funded organizations. Kravchenko said: “Such organizations represent only 10% of electricity consumers.”

DISPUTE OVER CURRENCY REGULATION LAW

Izvestia, October 16, 2002, p. 5 EV

The Finance Ministry and the Central Bank, which worked together to produce the new law on currency regulation, have taken note of Prime Minister Mikhail Kasianov’s criticism and agreed to amend their creation to take the proposals of other interested agencies into account. However, the regulators are not prepared to change their stance completely, and continue to defend their right to some freedom to maneuver. In the event of strong resistance from their principal opponent – the Economic Development Ministry – Finance Minister Alexei Kudrin and Central Bank chief Sergei Ignatiev will be helped out by some Duma members who will submit their own version of the bill to the Duma. However, the prime minister does have some chance of completely changing the concept behind the bill: on Monday evening, he proposed to examine the option of creating a single agency for the purpose of currency monitoring.

On Monday, Finance Minister Alexei Kudrin held a meeting to discuss the bill which had provoked the prime minister’s displeasure the day before. The meeting was attended by opponents and the undecided, as well as supporters. Seven agencies sent their representatives to the meeting: the Finance Ministry, the Central Bank, the Economic Development Ministry, the State Customs Committee, the Taxes and Duties Ministry, the Federal Securities Commission, and the Justice Ministry. After the meeting, Kudrin said: “We agreed to organize some extra work on the bill, and discussed the general approach; work will continue tomorrow at the Central Bank. I hope that by Thursday we will be able to present a final, consolidated version of the bill to the Cabinet.” He added that the Finance Ministry does not object to clarifying some points of the bill, and “there are no differences of opinion about the level of deregulation” among state officials.

At present, the bill maintains the right of the Central Bank and the Finance Ministry to monitor all substantial foreign currency transactions (lending and borrowing; operations involving securities, whether nominated in foreign currency or rubles; the operations of crediting organizations, apart from banks; currency operations involving foreign exchanges). Moreover, state officials do not wish to abolish the requirement that exporters must sell part of their foreign currency revenue to the state for rubles, even though major companies have repeatedly insisted on this; however, the upper limit for this requirement will be around 30% (it is now 50%).

The prime minister disliked the Finance Ministry’s effort so much that last Friday he removed it from the agenda of the next Cabinet meeting, requesting the authors to take the information provided by the Economic Development Ministry into account, and amend the draft of the bill “to take it further along the path of deregulation”. Then Kasianov introduced his sensational addition, instructing the agencies to look at a proposal for creating a single currency monitoring agency.

The Economic Development Ministry is insisting on more radical changes. It supports the wishes of exporters: voluntary reporting on capital transactions, equalizing the rights of residents and non-residents, the right to freely open bank accounts abroad, to purchase shares and property abroad, and so on. The Economic Development Ministry does not object to gradually lowering the mandatory currency sale requirement, with a view to eventually eliminating it, but favors doing this according to a schedule set down in law.

The Finance Ministry and the Central Bank do not agree with all of the criticism of their work. The regulators point out that complete freedom would create a risk of another economic crisis like the one in 1998. A senior Central Bank official told us: “We should not forget that every measure we take with respect to the economy has consequences for the public.” Another active participant in improving currency legislation – Mikhail Zadornov, deputy chairman of the Duma budget committee – regrets that it’s taking so long to coordinate the views of different agencies. He says: “We’re waiting for November. If there is no agreed-upon version of the bill by then, we will submit our own bill.”

PUTIN’S REPRESENTATIVE MEETS WITH MASKHADOV’S PEOPLE

Nezavisimaya Gazeta, October 16, 2002, EV

Last Sunday, in Znamenskoe, the capital of the Nadterechnyi district of Chechnya, a meeting took place between Abdul-Hakim Sultygov, President Putin’s special envoy for human rights and liberties in Chechnya, and 14 members of the parliament of Chechnya elected in 1997, at the same time that Aslan Maskhadov was elected president. Their conversation lasted for around three-and-a-half hours.

According to Abdul-Hakim Sultygov, at the meeting with members of “Maskhadov’s parliament” he discussed a broad range of issues: from observance of human rights in Chechnya to methods for political settlement of the crisis there. Participants in the meeting agreed to set up a joint group which will operate on a permanent basis.

One result of the meeting was coordination of positions on the question of regulation, the ultimate aim of which would be a referendum on a constitution for Chechnya. Moreover, work has begun on a draft agreement on social consensus in Chechnya. Members of “Maskhadov’s parliament” agreed that such a document was necessary, and said they were prepared to develop some proposals. They will also express their views when a draft constitution is made available for public debate.

According to our sources, as the Chechen members of parliament left the Nadterechnyi district after the meeting, they were detained by local police. After Sultygov intervened, and their ID papers were checked, this misunderstanding was resolved and they were released.

This provides further confirmation of the need to take the position of “the other side” into account in the process of political regulation of the Chechnya crisis. Regardless of other views, members of the parliament of 1997 are acknowledged by Maskhadov’s side as “elected” and “legitimate”. The major challenge now facing those who are taking part in the conflict is to stop the fighting before any kind of democratic processes go ahead.

Incidentally, the inclusion of the members of “Maskhadov’s parliament” in the political process was also noted by the European Council observers present in Znamenskoe.

BASHKORTOSTAN BRANCH OF LIBERAL RUSSIA SUPPORTS BEREZOVSKY

Nezavisimaya Gazeta, October 16, 2002, EV

The decision by the political council of Liberal Russia to expel co-leader Boris Berezovsky from the party has drawn a strong negative response from the Bashkortostan branch of Liberal Russia.

The political council of this regional branch has issued a statement in support of the criticism Berezovsky directed at Liberal Russia leaders in his interview with the “Zavtra” newspaper – this criticism was the reason for his expulsion. The Bashkortostan branch described the criticism as necessary, timely, and useful.

The Bashkortostan branch of Liberal Russia says it is taking this stance because Liberal Russia has found itself in a difficult position: “a) the Justice Ministry has refused to register it as a political party; b) the leaders are making feeble attempts to defend plagiarized elements of policy platforms which are alien to liberals against the seemingly unlawful demands of lawyers; c) there is a lack of strong links between the party headquarters and regional branches; d) funding has been cut off for regional branches, created with great effort and at great risk; e) the statements of the party leaders are vague, and their actions are confused”. In this situation, Berezovsky’s criticism is logical and well-founded. The authors of the statement note that Berezovsky was the one who breathed life into Russia’s liberal movement, and it is doubtful whether Sergei Yushenkov and Valeriya Novodvorskaya have the authority to deny him his party leadership role.

Representatives of the party’s Bashkortostan branch have expressed their views, in the name of the region’s 1,200 party members, at a working conference of regional branch leaders in Moscow. Bashkortostan branch leader Viktor Shmakov said that at the next party congress they plan to demand that Berezovsky stay on as a co-leader. Shmakov also proposed that Berezovsky should take it upon himself to organize a meeting of the party’s federal political council in London, where he has been living in recent months. In his assessment of the potential consequences of the expulsion of Boris Berezovsky, Shmakov said that without such a leader, Liberal Russia will be unable to get past the 5% barrier in the next Duma elections.

KURIL ISLANDS NOT ON THE AGENDA

Trud, October 16, 2002, EV

President Vladimir Putin has met in the Kremlin with Japanese Foreign Minister Yoriko Kawaguti. They had much to discuss. The state of trade relations between the two neighboring nations of Russia and Japan cannot fail to arouse concern. In the past year alone, trade turnover has fallen by 11%. This concern found expression as an agreement to prepare a package of economic resolutions by January 10, when Japanese Prime Minister Junichiro Koizumi is scheduled to visit Russia. The topic of four Russian islands to which Japan lays claim was not raised during the talks. Observers believe that the opinions of Russia and Japan remain diametrically opposed on this issue.

SETTING AN EXAMPLE

Parlamentskaya Gazeta, October 16, 2002, EV

Governor Alexander Tkachev of the Krasnodar territory has signed a resolution establishing the Kuban security council.

For a number of reasons, Krasnodar has become a border region in recent years: the events in Chechnya, terrorist attacks in the adjacent Stavropol territory, the instability along the Russian-Georgian border. Moreover, thanks to its geographic position, Krasnodar remains the main – almost the only – region of Russia to have strategic sea-ports on its territory. Over half of Russia’s foreign trade cargo passes through them.

Not surprisingly, all this heightens interest in the Krasnodar territory – not only from potential investors. Thus, setting up a security council in Kuban is a timely move. It is meant to ensure the defense of the rights and liberties of citizens and of the vital interests of society and the state. Its members include the heads of all security and law enforcement agencies operating in Krasnodar. The security council is chaired by the governor himself.

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