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Strategies & Market Trends : Investment in Russia and Eastern Europe

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To: Paul Berliner who wrote (1056)8/24/1999 12:46:00 AM
From: CIMA   of 1301
 
Announcement of Rebel Withdrawal Will Not Ease Caucasus Tension

Summary:

A spokesman for rebel leader Shamil Basayev has announced that
Dagestani rebel forces will fully withdraw from the Tsumandinsky
and Botlikhsky districts to regroup against Russian forces. The
announcement comes on the heels of a high-powered Russian
offensive. We do not believe that the withdrawal will bring peace
to the region; on the contrary, Russia will use the continued
presence of the guerrillas as an excuse to maintain its forces in
the area and to justify its attempt to regain control over the
region.

Analysis:

The tempo of Russian air strikes and reported rebel casualties
taken in the past 72 hours was unprecedented in previous fighting.
Pilots flew over 80 sorties and more than 140 rebels were
reportedly killed. Reports indicate that the Russians used cruise
missiles to flush out rebel positions. The strategy apparently
worked, as the rebels announced on August 23 that they were pulling
out of the contested districts. That evening, Magomed Tagayev
declared from the press office in Grozny that rebel forces were
leaving their positions in southwest Dagestan.

Basayev's spokesman said that the withdrawal was actually the
beginning of Phase II of the operation to take Dagestan. However,
scattered, poorly armed and outnumbered, the fractious bands of
rebels are unlikely to renew a full frontal assault on Russian
forces. Rebels have no support from the Dagestani population and
nothing to show for their campaign so far.

We believe that Basayev will now turn to the guerrilla tactics he
is more familiar with and that are more applicable to his current
situation. He will also appeal for more funding and more support
from allies in Pakistan, Saudi Arabia, Uzbekistan, Afghanistan and
the UAE. A prolonged guerrilla war in the North Caucasus means
that Russia's deployment in the region will remain as the nature of
the conflict changes from a conventional land war that favors the
Russians to a guerrilla war, of the type seen in Chechnya and, in
the 1980s, in Afghanistan.

Although the guerrillas are trying to turn the conflict to their
tactical advantage, Russia is likely to try to turn it to a
strategic advantage. Russia now has the opportunity and the troop
presence to regain influence in Chechnya, Dagestan, Ingushetia and
North Ossetia.

Russia's FSB, the successor to the KGB, announced this last week
that rebel elements were moving into North Ossetia to disrupt
ethnic relations in the already divisive region. As a result,
Russian police forces and armor have deployed to Vladikavkaz, North
Ossetia, Khasavyurt and Kislyar in northern Dagestan, Makhachkala
and Buynaksk in the east and will eventually push toward the
periphery of Chechnya.

Throughout the conflict, Russia has gradually inflated the troop
strengths of the guerrillas in Chechnya, allowing Moscow to in turn
increase military pressure. What had been 400 to 500 rebels in two
villages on August 21, became over the weekend a total rebel
reserve force of 2,750, all in Chechnya, scattered across seven
villages. If the Defense Ministry's claims are correct, Russia will
have to enter Chechnya and disperse to find and fight the rebels.

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