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Strategies & Market Trends : Investment in Russia and Eastern Europe -- Ignore unavailable to you. Want to Upgrade?


To: Paul Berliner who wrote (1056)8/24/1999 12:46:00 AM
From: CIMA  Respond to 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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To: Paul Berliner who wrote (1056)8/27/1999 4:19:00 PM
From: CIMA  Respond to of 1301
 
Communist Party Set to Gain Seats in Czech Senate

Summary:

Communists have attained their greatest popularity in the Czech
Republic since the end of the Cold War and they are poised to gain
seats in upcoming Senate elections. The rise of the party in one
of NATO's newest members signals dissatisfaction with economic
change and the sudden and very real burdens of membership in the
alliance. While the communists will not drastically alter the
Czech government, they are a bellwether of how poorly change is
being received in NATO's newest members.

Analysis:

Czech opinion polls indicate the Czech Communist Worker's Party
(KSCM), which already has 4 seats in the Czech senate, will
increase its share in upcoming elections. One-third of the 81
seats are up for grabs in the August 27 vote. The front-runner is
the dominant Czech Social Democratic Party (CSSD), now holding 23
seats. The second largest party, the right-wing Civic Democratic
Party (ODS), holds 26.

If opinion polls accurately reflect voters' intentions, the Czech
senate will be a very different place after the election.
Communist representation could double. At this point KSCM's
popularity stands at about 17 percent, with the ruling party CSSD
at 15 percent and the ODS at 23 percent.

While there is lingering resentment at the loss of Slovakia, much
of the surge in support for the KSCM and right-wing opposition
groups is pure frustration at a badly mishandled economy. The
Czech Republic, like Slovakia, is in a deep recession. Worried
about unemployment, the Czechs are increasingly interested in
trying to keep Slovak workers out of the republic.

Topping it off, the republic's decision to join the European Union,
which is struggling even to build a common currency, is widely seen
as stretching the limits of a mismanaged economy. Czech dependence
on the EU is growing, too. Czech central bankers are testing the
international bond markets, with reported plans for a US$300
million bond issue.

Though desired, the reality of the transition to the West has been
a jolting surprise to many Czechs. Acceptance to NATO earlier this
year has come with a considerable price tag. Early in the year,
western militaries began turning up the pressure for aspiring
nations to modernize their militaries. And as soon as the summit
in Washington granted the Czechs membership, they were asked to
extend overflight rights to alliance aircraft enroute to bomb
Yugoslavia. As the war dragged on, and talk of invasion mounted,
the republic faced the unpleasant prospect of having to help invade
a fellow Slavic nation.

The communists opposed entry into NATO, when the senate voted in
April, 1998, to seek membership by a margin of 64 to 2. Ever since
then, the KSCM has been taking advantage of anti-Western sentiment,
including feelings against radical economic reform. NATO's bombing
of Yugoslav bridges on the Danube River triggered Vojtech Filip,
the leader of the KSCM deputies group, to accuse U.S. President
Bill Clinton, U.S. Secretary of State Madeleine Albright, and Gen.
Wesley Clark, the NATO commander, of war crimes. Though extreme,
these accusations are consistent with the KSCM perspective.

KSCM is hostile to the growing U.S. and German influence in the
region and the West's effort to co-opt post-Soviet states for
Western strategic advances. Features of KSCM that make the party
attractive to voters are its active campaign for socialism, its
anti-corruption platform and cooperation with unions and interest
organizations.

Support for the party is genuine; but communism in the Czech
Republic is not fashionable, and is not favored by dispirited
youth. The party appears set for a promising minority role in the
parliament. Senate seats are held for six-year terms, allowing
KSCM to profit heavily.

The rise of communists in what is arguably a crown jewel for NATO
suggests a broader problem. Democracy has clearly won in what was
once called Eastern Europe. Capitalism is still an uncomfortable
companion. Poland's coalition government has begun to tackle
difficult economic reforms, particularly in heavy industry, that
were once seen as too tough. Reform is the price of joining the
EU. Poland will have to grapple with tension between its trade
unions and pro-market forces.

Hungary has created growth by selling off state-run enterprises to
foreign investors; today foreign-owned firms account for one-third
of the economy and two-thirds of exports. But Hungary, too, has a
long way to go in becoming part of the West it has ostensibly
joined.

In the Czech Republic, an increase in KSCM senate seats will give
the communists more leverage, particularly as their politics are
not entirely incompatible with other parties. With a larger senate
presence, the KSCM will be involved in more of the give-and-take of
democratic politics. This will enable it to influence the outcome
of much legislation, including legislation dealing with relations
with the West. The Czech Republic's cooperation with NATO, then,
stands a greater chance to be challenged in the long term. This
will be especially true if other parties start contending with
KSCM's popularity by borrowing from the anti-NATO, anti-EU
sentiments in their campaigns.

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To: Paul Berliner who wrote (1056)9/1/1999 1:27:00 AM
From: CIMA  Read Replies (1) | Respond to of 1301
 
Central Asia Looks To Old Master Russia

Summary:

Kyrgyzstan has asked Russia for help in fighting Islamic guerrillas
who are holding approximately 20 hostages near the Tajikistan
border. By asking for assistance, the Central Asian republic is
effectively signaling the failure to provide regional security.
Most significant of all, this is a region where the U.S. has been
actively cultivating military allies.

Analysis:

The Kyrgyz defense ministry on August 31 requested Russian military
help with fighting Islamic rebels in the south. Kyrgyz Deputy
Prime Minister Boris Silayev and Defense Minister Esen Topoyev met
Russian Prime Minister Vladimir Putin in Moscow to ask for Russia's
assistance. Putin agreed to provide Kyrgyzstan with military and
technical support, but ruled out deployment of Russian troops.
Russian Defense Minister Igor Sergeyev said August 31 that he would
consider supplying weapons and ammunition, according to ITAR-TASS
and other reports.

Kyrgyzstan has asked Russia for direct military support as well as
technical assistance. Specifically, authorities in the capital
Tashkent have asked for communications, night vision goggles and
weapons. Kyrgyz forces appear ill prepared for this struggle. Its
anti-terrorist unit has been demobilized and some reports in the
region indicate that the rebels are better equipped and better
trained.

Kyrgyzstan is a full member of the Commonwealth of Independent
States Security Council, having recently renewed its membership in
the alliance with Russia, Belarus, Armenia, Tajikistan, and
Kazakhstan. The fighting began last week after mostly Uzbek
Islamic rebels crossed the Tajik-Kyrgyz border, seizing four
villages and taking more than 20 hostages. Four hostages have been
released. The rebels' intentions are unclear, as they have not
declared their demands. About 500 to 1,000 rebels are believed to
be hiding in the mountainous region surrounding the villages.

In their efforts to deal with the crisis, officials from defense
and foreign ministries of Kyrgyzstan, Kazakhstan, Tajikistan and
Uzbekistan met in Osh, Kyrgyzstan, on August 30. They signed a
joint declaration of intent to prevent terrorism by using the most
severe measures allowed by international law. Still, their efforts
so far seem uncoordinated. On the same day, Uzbekistan launched
bombing attacks in southern Kyrgyzstan, accidentally killing three
civilians. Kyrgyzstan responded by saying the air attack has not
been authorized and it would demand compensation from Uzbekistan.

The confusion appears to have prompted Tashkent's plea to Russia.
Over the past year, Russia has offered little military hardware to
help battle the region's border disputes. Only 130 Russian border
troops are believed to remain in Kyrgyzstan. Authorities dealt
with previous hostage incidents, in July and August, by paying
ransoms. Failures to deal with Islamic groups, primarily the
"Islamic Revival Movement of Uzbekistan," have led President Akayev
to reappoint two defense ministers in two weeks. The incident
has become a profound embarrassment to the local military.
Maj. Gen. Anarbek Shankeyev was one of the first hostages taken and
guerrillas later abducted 17 reconnaissance troops.

The U.S. military has tried hard to cultivate ties with local
militaries in an effort to displace Russia as the more influential
power. Troops of the 82nd Airborne Division have held exercises
with local forces and Special Forces have trained Central Asian
troops in an effort to build up talent for joint operations,
primarily peacekeeping. Most recently, officers from the region
journeyed to MacDill Air Force Base, Florida to practice command
and control of their forces. While local troops are considered
adequate, Central Asian units generally need better technology.

Russia is positioning itself to take advantage of the outbreak of
violence in the region. Coordination between Russia and its
eastern neighbors in the struggle against Islamic extremism was one
of the main issues on President Boris Yeltsin's agenda at the
"Shanghai Five" summit. The joint declaration from the summit said
that all the parties recognized the importance of fighting
terrorists, separatists, and religious fanatics.

Ultimately, Russia appears to be interested in reasserting
influence to develop relations with Central Asia's southeastern
neighbor, China. Three high-profile meetings last week confirmed
that the two countries are reinforcing their strategic partnership
[ stratfor.com ]. Russian
President Boris Yeltsin and his Chinese counterpart Jiang Zemin
discussed closer cooperation. China is privately concerned that
Central Asian unrest is feeding separatist rebels in Xinjiang
province. Russian military assistance to Kyrgyzstan may, in fact,
be Moscow's first serious favor to Beijing.
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