News round-up

7 - 14 September 1997


Czech Republic: The consumer price index for August was 4.03 per cent, an increase of 0.53 per cent on the July figure, according to data released on 8 September by the Czech Statistical Bureau. The August year to year inflation rate was 9.63 per cent, rising from the July figure of 9.4 per cent.

Estonia: A Baa1 investment grade has been awarded to Estonia by Moody's, the US credit rating agency. This is the highest rating yet awarded to a former Soviet Union economy, and is the same as that given to the Czech Republic. Estonia received a BBB rating from the European credit rating agency IBCA, the same as for Hungary and Poland. These awards constitute a step towards accepting Estonia for early negotiations in its bid to join the European Union. Estonia's high grading was supported by its strong economic performance and its record of policy reforms, political consensus on economic objectives and low level of indebtedness.

Hungary: Russia will repay US$320-350 million of its outstanding $650 million debt to Hungary before the end of this year, announced Hungarian Minister of Industry, Trade and Tourism, Sabolcz Faszakas after his recent visit to Moscow. The remainder of the debt will be repaid over the course of the next three years. Part of the debt is to be rescheduled as a barter payment which will include military hardware and equipment worth $180-190 million. According to the agreement, Hungary will import merchant vessels, low-calorie coal, railroad equipment and $100 million worth of natural gas from Russia.

Romania: Romania has been awarded a long-term foreign currency rating of BB by the European credit rating agency IBCA.

Russia: A nuclear power plant in Tamilnadu, India, will be built with Russian assistance, one of a small number of mutual projects currently in their preliminary stages between Russia and various South East Asian countries. India is among the top priority countries for Russia in terms of cooperation in the nuclear power industry, according to Russian Minister of Nuclear Energy, Viktor Mikhailov. Mr Mikhailov, who was attending a conference in New Delhi organised by the International Atomic Energy Agency (IAEA) and the Indian Atomic Energy Agency, added that Russia plans to assist India in the fields of isotope production, thermonuclear synthesis, the uranium-thorium cycle in power engineering, fast neutron reactors and supermaterials for microelectronics. Russia has also signed similar agreements with Iran and China, and hopes to sign soon with Indonesia and Malaysia.

One third of the 740 credit establishments and 400 bank branches in Moscow are having such severe problems that they are likely to lose their licences, according to Konstantin Shor, head of the Central Bank of Russia's Moscow Banking Operations Department. Helping these 266 problem banks and credit establishments will be the department's major priority for the near future, he added. The department has already helped 91 banks to improve their financial status, concentrating on cash operations, volume of funds, budget accounts and deposits.

The Russian Duma may not accept the 1998 budget proposal due to discrepancies between the revenue part of the budget and the tax legislation. According to Mikhail Zadornov, Chair of the State Duma Budget Committee, there are a number of items in the budget where the figure for the revenue is set too low, such as the privatisation revenue, indicated in the budget as Rbs 6 trillion (US$1.027 billion), rather than the Rbs 14-15 trillion figure previously expected.

Personal responsibility for a number of strategic investment projects has been given by Viktor Chernomyrdin, Chair of the Russian Government, to his deputies. Russian First Vice Premier Boris Nemtsov outlined the projects as follows: an airport in Sochi, a can producing factory in Narofominsk, the Parmalat dairy factory in Nizhni Novgorod and an oil pipeline outside Chechnya.

An agreement on transport industry cooperation between Russia and the Netherlands has been signed in Moscow by Anna-Maria Jorritsma, the Dutch Minister of Transport, Public Works and the Water Economy, and Nikolai Tsakh, the Russian Minister of Transport. As part of the agreement, the Dutch will provide training and investment funding for the construction of a modern port in St Petersburg. According to Mr Tsakh, Russia will need an additional US$2 billion over and above the $1.5 billion already earmarked for the cost of the planned investments in the transport sector.

Russia and four other emerging countries of Asia and South America - China, India, Indonesia and Brazil - will at least double the production sides of their economies within the next 25 years, according to a recent report by the World Bank. This will lead to an entirely new situation in the distribution of world resources, trade and prices. It is predicted that these five economies, which together make up half of the world's workforce, will exceed the foreign trade done by the entire EU by 100 per cent by 2020. The World Bank also predicted that further liberalisation of the global economy will increase the role of transnational corporations, who already account for one fifth of the world's production and a third of world trade.

Russian Reformist Boris Nemtsov has been chosen to head a special Government commission set up to clarify the legislation governing the exploitation of Russia's natural resources. The commission is intended to protect the interests of federal and local governments, implement presidential decrees encouraging production sharing agreements, and look after incoming local and foreign investment.


Bosnia: The two main Serb and Croat parties have threatened to boycott the first local elections in the region for seven years, which were due to be held on 13 - 14 September. The Serb and Croat parties claim that there is no basis for 'free, democratic and fair elections.'

Poland: Opinion polls show that the two major parties in the parliamentary elections on 21 September are running neck and neck. Both the Democratic Left Alliance of Alexander Kwasniewski and Wlodzimierz Cimoszewisz and the Solidarity Election Action party of Marian Krzaklewski have 25 per cent of the vote. Each side is confident that they will win, but both of them will need the support of one or two of the smaller parties if they are to form a government.

Poland has postponed a decision on the purchase of US$500 million worth of anti-tank weaponry for its Huzar military helicopter. The country is caught on the horns of a dilemma: whether to buy from the Israelis or the Americans. Negotiations with Israel over the purchase of these weapons have been in progress since 1990, but this was long before Poland was considered to be a candidate to join NATO. The talks on Poland's bid to join NATO begin in Brussels on 16 September, and US firm Boeing is anxious to land the anti-tank weapon deal instead. Due to the delicate nature of the situation, no decision will now be taken until after the elections on 21 September.


Russia: A resolution allowing the issue of bonds against the debts of two companies has been passed by the Russian Government. Yuganskneftegaz and Samaraneftegaz will convert their debts to bonds worth Rbs 1.7 trillion (US$291 million).

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