U.S. State Department Geographic Bureaus: Europe and Canada Bureau

U.S. Department of State 95/06/01: 33rd OSCE Report--"Implementation of Helsinki Final Act" Bureau of European Affairs

IMPLEMENTATION OF THE HELSINKI FINAL ACT
33rd OSCE REPORT
on
"IMPLEMENTATION OF THE HELSINKI FINAL ACT,
APRIL 1, 1994 - MARCH 31, 1995"

Text of the President's 33rd OSCE Report, "Implementation of the Helsinki Final Act, April 1, 1994 - March 31, 1995," submitted to Congress on June 1, 1995.

INTRODUCTION The 33rd report to Congress on implementation of commitments contained in the Helsinki Final Act and other documents of the Organization for Security and Cooperation in Europe (OSCE) covers a period of expansion of the OSCE. The CSCE was renamed the Organization for Security and Cooperation in Europe at the Budapest Summit in December 1994, to acknowledge the then-CSCE's expanded role and visibility in the fields of human rights and regional conflict management.

The states of Europe and the former Soviet Union continued to take strides in advancing the principles of the Helsinki Final Act. New conflicts in Chechnya and old ones continuing in Bosnia continued to occupy the attention of the states of the OSCE. The OSCE established a five-man outpost in Sarajevo and deployed a mission to Ukraine to investigate Crimean separatism during the reporting period.

The Russian intervention in Chechnya in December 1994 was a clear step backward for Final Act implementation, but at the same time provided another opportunity for the OSCE to demonstrate its unique capabilities as an honest broker for Europe's regional conflicts. As of April 1, 1995, agreement on the outlines of a long-term presence in Grozny had been secured and several OSCE rapporteur missions had departed for Moscow and Chechnya under the authority of the 1995 Chairman-in-Office, Hungarian Foreign Minister Laszlo Kovacs. These missions, the first outside, multilateral involvement in a Russian internal matter, raised the profile of the OSCE in the world press and demonstrated how the political commitment of the participating states to the OSCE process translates into concrete action.

At the Budapest Summit in December, 1994, President Clinton called for an upgraded CSCE. He outlined a new future for European security structures, in which the OSCE plays an enhanced role in Europe's system of interlocking alliances and organizations. Meanwhile, the assembled heads of state agreed to strengthen OSCE institutions such as the High Commissioner for National Minorities and the Office for Democratic Institutions and Human Rights, and reinvigorated existing political fora for the OSCE: the Committee of Senior Officials was transformed into the Senior Council, with a broader focus and higher level representation, and the Permanent Committee became the Permanent Council, responsible for all operational matters of the OSCE. In Paris, the Final Conference on Stability in Europe on March 20-21, 1995, concluded a French initiative, also known as the "Balladur Initiative," launched by the EU at a conference also in Paris in May 1994. It aimed at fostering good neighborly relations by applying preventive diplomacy to resolve minority and border issues among potential EU members in Central Europe and the Baltics.

Across Europe, the OSCE provided not only the foundation for democratic values, but also preventive diplomacy and early warning operations aimed at reducing tensions, preventing high-intensity conflict from breaking out, and offering support and good offices to societies in transition.

In 1994-5, the OSCE addressed a wide range of regional problems. Conflict prevention missions, sanctions monitoring, sponsorship of Nagorno-Karabakh negotiations, the High Commissioner on National Minorities, and the activities of the Office for Democratic Institutions and Human Rights demonstrated OSCE states' collective commitment to OSCE principles. The OSCE consolidated its leadership role in preventive diplomacy.

The OSCE's conflict prevention efforts, combined with its comprehensive Euro-Atlantic membership and consensus-based mechanisms, have encouraged Europe's newly democratic states to participate in the European political cooperation and security process. The OSCE has made a concerted effort to assist those states experiencing great difficulties, and assist all states to embrace the principles enshrined in the Helsinki Final Act and the OSCE's subsequent documents, with their concepts of fairness, democracy, and equality, and the rights they confer. As new and old states struggle to develop democratic institutions, the OSCE remains focused on the establishment of free market economies, and support for democratic political systems and rule of law.

This year's submission concentrates on updating the progress being made by OSCE's newly democratic states in enhancing their commitment to OSCE principles, and on noting the OSCE's wider role in managing regional conflict. The report thus evaluates the implementation of OSCE principles in the areas of security, economics, and the human dimension for the independent states of the former Soviet Union, Albania, Bulgaria, Romania, Lithuania, Latvia, Estonia, and the states of the former Yugoslavia. The defining features of the reporting period were:

-- The December 1994 Budapest Summit confirmed the central role of the OSCE in building a free and stable community embracing states from Vancouver to Vladivostok. To underline the new political impetus the Summit has given to this security structure, the name of the Conference for Security and Co-operation in Europe (CSCE) was changed to the Organization for Security and Co-operation in Europe (OSCE).

-- The OSCE's efforts to settle the Nagorno-Karabakh conflict, such as developing a plan for the establishment, composition, and operation of an OSCE multinational peacekeeping force, have been intensified.

-- The ongoing war in Bosnia-Herzegovina continued to cast a dark shadow on Europe's political landscape highlighting the need for strengthened efforts in the field of preventive diplomacy and the full compliance with OSCE principles.

-- The carnage of the Russian intervention in Chechnya, which has resulted in mass violations of human rights and thousands of casualties, and the deployment of an OSCE long term mission to the region;

-- Continued armed conflicts in Azerbaijan, Georgia, and Tajikistan;

-- Ongoing tensions relating to the ethnic minorities in the former Soviet Union in countries such as Ukraine and Moldova;

-- A good-neighborly relations agreement between Hungary and Slovakia represented an encouraging step towards solving the issue of protecting the rights of ethnic minorities, one of the most contentious political questions in Central and Eastern Europe;

-- An intensified application of the various OSCE conflict prevention and management mechanisms, many resulting from the institutional initiatives of the CSCE in Helsinki in 1992, Rome in 1993, and Budapest in 1994.

The following Implementation Review establishes base lines of compliance in each evaluated state, identifying successes and problems in the areas of security, economics, and the human dimension. As mandated by Public Law 94-304, it focuses on "actions by the signatories of the Final Act reflecting compliance with or violation of the provisions of the Final Act."

OVERVIEW OF CSCE IMPLEMENTATION

At the heart of the CSCE process are the ten principles of the Helsinki Final Act and additional commitments made over the years, which define the basic code of conduct CSCE states have adopted. The Helsinki principles are:

-- Sovereign equality, respect for the rights inherent in sovereignty;

-- Refraining from the threat of use of force;

-- Inviolability of frontiers;

-- Territorial integrity of states;

-- Peaceful settlement of disputes;

-- Non-intervention in internal affairs;

-- Respect for human rights and fundamental freedoms, including the freedom of thought, conscience, religion or belief;

-- Equal rights and self-determination of peoples;

-- Cooperation among states; and

-- Fulfillment in good faith of obligations under international law.

In 1994-5 further tangible progress was made towards an increased compliance with the Helsinki Principles. There were considerable efforts in the fields of security, restructuring and downsizing armed forces, acceding to arms control and reduction agreements, confidence building measures, and non-proliferation treaties. Tough government economic decisions in several states are bearing fruit. Free and fair elections held in formerly communist states resulted in legislatures which passed laws ensuring political and economic freedom.

Despite these promising developments, there is also ample proof of the continuing existence of old, undemocratic attitudes and habits which reflect the great difficulty in changing deeply rooted totalitarian behavior and show that many countries still have a long way to go. While laws may be written to include guarantees of political and economic freedom, their implementation remains open to question. In addition to these remaining general problems and challenges, ongoing armed conflicts, particularly in Chechnya and Bosnia, reflect that we have not yet realized the new Europe envisioned in the Helsinki Principles and the 1990 Charter of Paris for a New Europe. Such actions serve as an admonition and indicate how far Europe has to go to achieve compliance with the ideals of the Final Act.

DEVELOPMENTS IN OSCE IMPLEMENTATION REVIEW

POLITICAL CONSULTATIVE PROCESS

The Budapest Summit, held December 5 and 6, 1994, established a Permanent Council of the CSCE to ensure improved capabilities for day-to-day operational tasks, political consultations, and decision-making in Vienna. The CSCE, through the Permanent Committee, the Committee of Senior Officials, the Council of Ministers, Review Conferences, and Summits has developed into an activist, operational instrument embodying its broad definition of security, which includes human rights; democratic development; traditional territorial security; economic, environmental and technological cooperation; and arms control and confidence building.

In Budapest, OSCE states also agreed to develop a comprehensive framework for the future of conventional arms control and establish uniform non-proliferation principles among 52 nations that set the standard for Europe's non-proliferation goals. OSCE reaffirmed the peacekeeping principles adopted by CSCE foreign ministers in Rome in 1993, but a more detailed text with specific guidelines continues to be discussed in Vienna.

The OSCE also received an organizational overhaul in Budapest. At the Summit, the OSCE was designated a primary instrument for early warning, conflict prevention and crisis management in the region. The OSCE participating states agreed to strengthen the OSCE's political consultative and decision-making bodies and the capability for executive action by the Chairman-in-Office. Such capabilities were effectively used in January, when the Hungarian Chairmanship sent a rapporteur mission to Chechnya.

The Summit also agreed to take a systemic look at the institutions that encompass European security. The Summit agreed to begin discussion on a model of common and comprehensive security for the region for the twenty-first century. Discussions on this topic are ongoing, and will result in a report to the OSCE Ministerial, which will be held again in Budapest in December of 1995. An OSCE Seminar on the topic will be held this September.

PEACEKEEPING AND CONFLICT RESOLUTION

The OSCE established new missions in Sarajevo and Ukraine, and laid the groundwork for a long term OSCE presence in Chechnya. Established on June 2, 1994, the Sarajevo mission focuses mainly on support for the activities of the Ombudsmen in Bosnia-Herzegovina, who were appointed, according to the 1994 Bosnian-Croat agreement and the Federation's Constitution, by the OSCE chairman-in-office Hungarian Foreign Minister Laszlo Kovacs on December 30, 1994. The OSCE mission offers the Ombudsmen assistance and advice, and provides them with logistic support. There are five members of OSCE Sarajevo, including an American Foreign Service Officer.

The OSCE Mission to Ukraine was tasked to support the High Commissioner for National Minorities experts' mission to Ukraine and to report on the situation in the Crimea. The High Commissioner's experts mission focuses on Ukrainian/Crimean constitutional issues. The mission operates out of Kiev and maintains a part-time branch office in Simferopol. One American serves on this mission, with five other officers.

On March 30, 1995, on the margins of the first-ever OSCE Senior Council meeting in Prague, agreement was reached on the modalities for an OSCE "assistance group" to be deployed to Chechnya. This mission will have flexible staffing levels and will be based out of Grozny. Its mandate includes promoting a peaceful settlement to the Chechen conflict, facilitating the delivery of humanitarian relief, and monitoring human rights in the region. Several fact-finding missions led by the Special Envoy of the Hungarian Chairman in Office, Ambassador Istvan Gyarmati, paved the way for deployment of this high-profile mission. These missions took place from January to March, 1995.

The OSCE continued to coordinate the deployment of sanctions assistance missions (SAM) to Bulgaria, Romania, Hungary, Ukraine, FYROM, Croatia, and Albania to help those states enforce UN sanctions against the FRY (Serbia and Montenegro). Presently, 45 U.S. Customs officers serve as SAM monitors.

NAGORNO-KARABAKH

The OSCE is seeking a monitored cease-fire and resolution of the Nagorno-Karabakh conflict. In March 1992, OSCE foreign ministers created the "Minsk Conference on Nagorno-Karabakh." Armenia, Azerbaijan, Belarus, Czechoslovakia, France, Germany, Italy, Russia, Sweden, Turkey, and the U.S. were named as participants. (Hungary recently replaced the Czech Republic which had earlier replaced Czechoslovakia.)

The Minsk Group continued throughout the OSCE implementation review year to try to fulfill its mandate to convene a conference for resolving the Nagorno-Karabakh conflict. The first few months of 1994 were spent by the Minsk Group trying to stop full-scale hostilities between Azerbaijan, Armenia and the Karabakh Armenians. The Minsk Group and the Russian Federation separately were instrumental in obtaining a cease-fire among the parties by May 1994. The Minsk Group focused its efforts on developing a plan for providing stronger security guarantees to strengthen the cease-fire, confidence-building measures, particularly the exchange of prisoners, and a framework for a peace agreement. Separate Minsk Group and Russian mediation efforts with the parties to the conflict worked at cross-purposes throughout the year, hindering attempts to stabilize the cease-fire and convene the Minsk Conference. By Fall 1994, the Minsk Group, after receiving a clear request from the parties, sought to develop an international security force under CSCE auspices. Contrary to previous proposals for a Russian-led peacekeeping operation, the parties sought a multinational CSCE peacekeeping force that would stabilize the cease-fire and provide the latitude for the parties to reach a political settlement. The Russians challenged the OSCE's ability to do peacekeeping and the Minsk Group's mandate throughout November. The Budapest Summit decision in December obtained a Russian commitment to the CSCE's Minsk process -- by giving them co-chairmanship of the Minsk Group -- and to a plan to field a CSCE peacekeeping force. The decision was universally praised throughout the CSCE because it simultaneously ended the problems caused by the dual Russian/CSCE efforts and addressed the fears that Russia would control any peacekeeping operations in the region.

The Minsk Group co-Chairmanship, the first two months of 1995, worked surprisingly well. By March, however, the peace process was stalled by the parties' obstinacy in resurrecting procedural questions (who was "party to the conflict") more than a year dormant. Although the Minsk Group negotiations by May 1995, were back on track, prospects for a peace agreement were still dim as the parties' negotiation positions continued to appear unreconcilable.

STABILITY PACT

The Final Conference on Stability in Europe on March 20-21, 1995, concluded a French initiative ("Balladur initiative") launched by the EU at a conference in Paris in May 1994. It aimed at fostering good neighborly relations by using preventive diplomacy to resolve minority and border issues among potential EU members in Central Europe and the Baltics.

The Declaration adopted at the Final Conference emphasizes the importance of creating a more united Europe based on human rights and democracy. It also incorporates a long list of bilateral agreements into the Pact thus underlining the political commitment of the participating states to the Pact's objectives. The Final Conference transferred the Stability Pact to the OSCE, which is now responsible for evaluating and monitoring its implementation. How the OSCE follow-up will be structured is still under discussion.

FORUM FOR SECURITY COOPERATION

The OSCE's Forum for Security Cooperation (FSC), designed in the Helsinki Decisions as a wide-ranging forum for dealing with security issues, opened in Vienna on September 20, 1992. FSC builds on achievements embodied in the Vienna Document on Confidence- and security-building measures, the Open Skies Treaty, the Treaty on Conventional Armed Forces in Europe (CFE), and the CFE 1A Agreement. The U.S. has sought to ensure that FSC allows open-ended discussion of security issues with a view to drawing the new European democracies more closely into the OSCE framework. Since 1992, FSC has made substantial progress fulfilling its mandate. Prior to the December 1993 Rome Ministerial, FSC reached agreement on proposals to expand military cooperation and contacts, and to exchange information on defense planning. In the same period, FSC delegations reached agreement on a range of stabilizing measures for possible use in crisis situations. The crisis stabilizing measures document provides negotiators with an agreed menu of concrete steps that can be applied to forces on the ground to avoid or help resolve conflicts. FSC states also concluded a document setting out principles governing conventional arms transfers.

Prior to the 1994 Budapest Summit, FSC adopted several measures designed to enhance security and cooperation in Europe. These included:

Agreement on OSCE non-proliferation principles. This document addresses key non-proliferation goals and agreements, demonstrating the commitment of OSCE states to furthering these efforts.

An enhanced Vienna Document of confidence- and security-building measures.

A global exchange of military information to further increase transparency regarding the military forces of OSCE states.

A politico-military code of conduct committing the participating states to the democratic political control of military, paramilitary, and internal security forces.

At the Budapest Summit participating states committed to strengthening the "CSCE's contribution to security, stability and cooperation in the CSCE region so that it plays a central role in the promotion of a common security space." In this context, Heads of State directed the FSC to begin developing a framework "for arms control, including goals and methods for building, maintaining and improving stability and security in the CSCE region." The FSC will also place special emphasis on tackling regional security problems.

VD-94 IMPLEMENTATION

The Vienna Document 1992 (VD-92) contains the confidence- and security-building measures (CSBMs) adopted March 4, 1992. A revised version of the Vienna Document (VD-94), adopted in November 1994, further strengthened the CSBM regime.

Implementation of VD-94 was the central subject of the successful Annual Implementation Assessment Meetings (AIAM) in Vienna, March 13-15, 1995. No implementation concerns were raised at the 1995 AIAM, with the exception of Russia's failure to notify its military activities in Chechnya under the relevant provisions of the Vienna Document.

In accordance with the Vienna Document, 42 OSCE states exchanged information on their military forces and plans for weapons development on December 15, 1994. Five of the states which did not exchange information (Holy See, San Marino, Monaco, Liechtenstein, and Iceland) have no military forces. For the remaining states which did not exchange information, open warfare, inexperience, and limited resources contributed to the problem. Spain, Austria, Greece, Hungary and Portugal hosted air base visits in 1994. Hungary and Portugal combined their air base visits with visits to military facilities. France and the United Kingdom hosted demonstrations of new types of major weapon and equipment systems in 1994. In 1994, six notifiable military activities were conducted (five by NATO states). Of the notifiable activities, two were observable and included observation programs (both were conducted by NATO states). NATO Allies conducted 15 of the 20 CSBM inspections which took place in 1994. A total of 52 evaluation visits were conducted under the provisions of VD-94; of these, 30 were conducted by NATO Allies.

INTERSESSIONAL MEETINGS

In addition to the Budapest Summit, Committee of Senior Officials meetings were held in June, September, November and December 1994. As called for in the Budapest Summit document, a new body, the Senior Council, met in March 1995. Topics addressed included development of comprehensive principles for peacekeeping in the OSCE area, the status of Macedonia, the crisis in the former Yugoslavia, Nagorno-Karabakh, and Russian withdrawal from the Baltic states and the situation of the Russian minority in those states.

Other meetings, held under the auspices of the Office for Democratic Institutions and Human Rights (ODIHR), covered topics ranging from Rule of Law, Local Democracy, Free Media, Roma in the OSCE Region, and the Role of NGOs in a Civic Society. The ODIHR also continued with its program of regional seminars directed at Central Asian states. The Budapest Summit was preceded by a six-week Review Conference in Budapest which lasted from October 10 to December 2, 1994. At the review conference, OSCE institutions and commitments were reviewed in four working groups: OSCE Structures and Conflict Prevention, Arms Control, the Human Dimension, and Economic and Environmental issues.

ECONOMIC DIMENSION

In September 1994, Estonia hosted a seminar on Business and the Environment. The U.S. delegation included private sector representatives, officials of the Environmental Protection Association, as well as representatives of the Helsinki Commission and the U.S. Delegation to the OSCE in Vienna. At the Budapest Summit, OSCE delegations affirmed the central importance of the Economic Dimension, discussed integrating environmental issues into the OSCE agenda, and developed ways to strengthen the Economic Forum, which will be held this June, 1995, in Prague.

OFFICE FOR DEMOCRATIC INSTITUTIONS AND HUMAN RIGHTS

The Office for Democratic Institutions and Human Rights (ODIHR) continued its active program of election monitoring, seminar sponsorship, and programs in democratization and rule of law. The assembled heads of state in Budapest agreed to enhance the role of ODIHR, increase its involvement in the work of the Permanent Council, and further cooperation with international organizations active in such human dimension fields as elections monitoring. The ODIHR's Program of Coordinated Support for Newly Admitted Participating States resulted in a significant increase in OSCE efforts in the former Soviet Union, included two Judicial Conferences in December Bishkek and Almaty in December 1994, which were co-sponsored by the Bureau for Democracy, Human Rights, and Labor. In March the OSCE Permanent Council authorized the establishment of an OSCE regional office in Tashkent to further this outreach. In addition to organizing most of the meetings listed above, ODIHR monitored elections across the OSCE area and managed advisory programs in various other newly democratic states.

HIGH COMMISSIONER ON NATIONAL MINORITIES

High Commissioner Max van der Stoel continued his efforts to provide early warning and action to resolve tensions and disputes involving national minority issues that threaten international stability. He was particularly active in investigating the condition of Albanian minorities in Albania's bordering states, Crimean separatism in Ukraine and the condition of Slovakia's Hungarian minority. The Budapest Summit saluted van der Stoel's energy and authorized more resources for his offices in The Hague. The High Commissioner has proven to be one of OSCE's most effective instruments of preventive diplomacy.

U.S. IMPLEMENTATION EFFORTS IN NEW INDEPENDENT STATES

The U.S. continued its efforts to further integrate the New Independent States into the CSCE in 1994-5. At U.S. urging, the OSCE Permanent Council approved the establishment of an OSCE Liaison Office with regional Central Asian responsibilities in Tashkent. The OSCE Secretariat plans to open this office late in the summer of 1995. We have encouraged more active participation particularly from the Central Asian states, and continue to sponsor delegates from across the former Soviet Union to attend OSCE meetings and Human Dimension Seminars. We continue to support the series of regional seminars held in Central Asia to facilitate easy access for poorly financed Central Asian delegations.

PARLIAMENTARY ASSEMBLY

The OSCE Parliamentary Assembly held its third annual meeting in Vienna, July 4-8, 1994. The meeting praised the work of the OSCE's governmental institutions and called for additional resources, expanded tasks and improved procedures. The meeting also called for an open debate by the OSCE on the questions of self-determination of people and the territorial integrity of states. The next annual meeting is scheduled for Ottawa in July, 1995. Members of the Assembly monitored elections in Moldova, Ukraine, Estonia and the Former Yugoslav Republic of Macedonia during the past year. The Parliamentary Assembly, one of the institutions proposed by the Bush Administration and supported by the 1990 OSCE Paris Charter, is located in Copenhagen and has an American Secretary General.

U.S. COMMISSION ON SECURITY AND COOPERATION IN EUROPE

From 1994 to 1995, the U.S. Commission on Security and Cooperation in Europe held hearings on a range of European security-related topics, conducted briefings on various Eastern European and former Soviet Union issues, monitored elections, and sent numerous delegations throughout the OSCE area. It also participated in OSCE meetings and seminars, and wrote special reports on human rights and democratization in a number of OSCE participating states. Commission officers continue to make a valuable contribution to the operation of the U.S. OSCE delegation, particularly at OSCE meetings. The participation of the Commission at the Budapest Review Conference was particularly noteworthy.

COUNTRY REPORTS

The following reports focus on certain participating countries where notable progress on meeting OSCE standards has been achieved or where further progress is still necessary. Reports are also included on Serbia and Montenegro, and on the FYROM, although neither is currently a full OSCE participating state. Each country report begins with a general assessment of OSCE implementation, with specific assessments of the three traditional OSCE areas: security, economics (including science, technology and the environment), and the human dimension.

ALBANIA

General Assessment

Albania continues to press for democratic and economic reforms in the face of difficulties resulting from inadequate resources and lack of a democratic tradition.

Albania in general, the GOA has made good faith efforts to fulfill its obligations under international law. However, it has not fully succeeded effectively enforcing sanctions on the FRY. Albania's relations with Greece have improved dramatically this year. On Kosovo, the GOA advocates negotiation between ethnic Albanian Kosovars and Belgrade to restore the region's autonomy. Security The Albanian military fully supports civil authorities. The GOA's security policy aims at maintaining peace and stability in the Balkans and integrating into Euro-Atlantic security institutions. Its force structure has been reduced and reordered for territorial defense.

The GOA was one of the first PFP signatories in February 1994, and seeks NATO membership at the earliest opportunity. The U.S. provides economic and security assistance and engages in regular consultations, including meetings between Minister of Defense Zhulali and Secretary of Defense Perry. Albania participates in IMET programs and is eligible to receive EDA and to purchase weapons from the U.S. Albania has cooperated in CSBM evaluations and activities. It received both a CSBM inspection and a CSBM evaluation visit in 1994.

Albania's release in February of ethnic Greek Albanians convicted of treason in the Omonia case quickly improved relations with Greece. The two countries established a joint commission to study legalizing Albanian workers in Greece, opening new border crossing points, and developing economic cooperation. The GOG reacted promptly to an abortive March 19 incursion into Albania by Greek extremists.

Albania hosts an OSCE Sanctions Assistance Mission to enforce sanctions against the FRY. It has taken a variety of administrative and legal steps to counter the smuggling of oil into the former Yugoslavia, but these efforts have not stemmed the illegal flow of oil.

Kosovo remains a potential flash point, as the widespread use of force by Serbia against ethnic Albanians could spark cross-border conflict. Serbian repression has risen since it expelled CSCE observers from Kosovo in 1993. The GOA has maintained a moderate and constructive approach on sensitive issues related to the ethnic Albanian majority there.

Ethnic Albanians in the Former Yugoslav Republic of Macedonia (FYROM) seek greater access to Albanian-language education, better representation in the civil service, and more participation in government. The GOA supports these aspirations and affirms friendly relations with the FYROM.

Economic

The economy maintains strong growth, with recovery in agricultural production showing the greatest gains. An overall growth rate of 6-8 percent is expected in 1995 following 8 percent growth in 1994. Unemployment remains high, perhaps 25 percent. Inflation continues to fall and the currency remains stable. Privatization is continuing, with well over half of GDP produced by the private sector. The GOA is initiating a mass privatization program that foresees the auction of up to 800 larger state-owned enterprises using a voucher system designed by the World Bank. The government has received high marks from international, USAID, and lending institutions for adhering to a stringent economic restructuring program.

The key remaining problems in Albania's economy are an underdeveloped banking and financial sector, lack of progress on settling outstanding foreign debt, slow resolution of conflicting land and property claims, and a bureaucracy unused to enforcing and carrying out newly-passed commercial laws meant to encourage a functioning private sector market economy. Lack of clear property titles and modern credit facilities have impeded many areas of business development, and Albania remains the poorest non-belligerent country in Europe.

Sanctions against Serbia have impeded Albania's economic integration into the region, since key trade routes have been blocked. Nevertheless, Albania is proceeding to negotiate its accession to the World Trade Organization (WTO).

Human Dimension

The transition to democracy has not achieved Western civil, political, or human rights standards, partly because the country is desperately poor. Principal areas of weakness include the judiciary, the press, and commercial and property law. The judicial system has been reformed, but remains weak and subject to political pressures. Part of the weakness stems from the dearth of experience of judges, most of whom have only 3-5 years of total legal experience. Freedom of speech, press, and assembly are respected, although most broadcast media are state monopolies. The GOA recognizes the right of the Greek minority to equal treatment under the law and has pledged to provide access of ethnic Greeks to education in the Greek language and develop their own ethnic cultural identity. U.S. Embassy officers, and others including OSCE High Commissioner for National Minorities van der Stoel, have made numerous visits to southern Albania to investigate treatment of the ethnic Greek minority. The ethnic Greeks' complaints concern inadequate access to "mother tongue" education, insufficient representation in government, slow restitution of Orthodox church properties, ostensible government encouragement of non-ethnics to migrate into the area, and less-than-desired access to Greek-language media. The Embassy found that most of these complaints were related to government policies applied more or less evenly throughout the country, not targeted specifically at the minority.

ARMENIA General Assessment Armenia generally demonstrated its support for the OSCE process. President Ter-Petrosyan has committed his government to a negotiated end to the Nagorno-Karabakh conflict and has actively urged the Armenians of that region to do the same. On the other hand, Armenia continued to provide support unofficially to the N-K Armenians' military campaign. Armenia's record on evaluation visits was uneven.

The OSCE Minsk Group continued to be involved in negotiating an end to the Nagorno-Karabakh conflict. Two major accomplishments during the reporting period helped the Minsk Group toward that objective. The first was negotiating a cease-fire in May, 1994 among the conflicting parties (Armenia, Azerbaijan and Nagorno-Karabakh). Despite violations, some of which were serious, this cease-fire is still in effect. The second was achieved during the December Budapest Summit, when Russia formally agreed to give up its parallel negotiating efforts and support the OSCE's efforts to establish a multinational peacekeeping operation for Nagorno-Karabakh. Russia was named Co-chair of the Minsk Group and Minsk Conference. Sweden was succeeded by Finland as the other Co-chair in late April.

The Government continued with its economic reform program. Armenia remained politically stable, although President Ter-Petrosyan's pre-election ban against the opposition Dashnak party continued to cause concern both within the country and the international community.

Security

The conflict over the ethnically predominantly Armenian region of neighboring Nagorno-Karabakh in Azerbaijan remains the chief security problem of Armenia. President Ter-Petrosyan has repeatedly voiced his conviction that the parties to the conflict must seek a negotiated solution. His government signed the Minsk Group's revised timetable and expended considerable political capital in getting the Nagorno-Karabakh Armenians to do the same. Armenia has consistently maintained publicly that it is not a party to the conflict. It does, however, provide very significant material and logistical assistance to the Nagorno-Karabakh Armenians. Some Armenian citizens have "volunteered" to fight with the NK Armenian forces, and there continued to be recent press reports of direct involvement of Armenian regular units in the conflict.

Armenia forecast no CSBM-notifiable exercises for 1993-94. It hosted one CSBM inspection visit in July 1994, and one evaluation visit in January 1994.

Economics

The conflict in Nagorno-Karabakh continued to cause problems for Armenia's economy. Nevertheless, Armenia made significant progress in its economic reform program. As of May, 1995, the Armenian government had privatized over 85 percent of the country's farmland and was in the process of privatizing 10 large state enterprises. Such efforts are beginning to pay off. In 1994, Armenia was only one of 3 of the NIS (including 2 Baltic states) to register a positive economic growth rate. The economy is expected to grow in 1995 at an even higher rate. Little attention has been given to environmental protection in Armenia. If there has been a reduction in pollution, it is largely because the Azerbaijani blockade, the de facto Turkish embargo, the continued disintegration of Georgia, and economic decline caused by the dissolution of the Soviet Union have brought the economy to a virtual standstill. The Armenian government is attempting to re-start the Medzamor nuclear power plant later this year, a type considered unsafe by many Western nuclear regulatory agencies. In the meantime, its excessive reliance on hydroelectric power, in the absence of other sources, has caused its largest lake to be drawn down at an alarming rate.

Human Dimension

Armenia remained politically stable for the most part, although recent incidents have raised concern about its human rights record. President Ter-Petrosyan's ban against the opposition Dashnak party, its newspapers and civic organizations have raised questions about the fairness of the parliamentary elections to take place July 5. Defense lawyers involved with the Dashnak case have also been harassed. Moreover, several questions of fundamental political importance remained unsolved, such as the adoption of a new constitution which could significantly alter Armenia's state structure and the balance of power between the executive, the legislature and the judiciary. Though there were some incidents against small religious groups, there are no reports of discrimination against ethnic minorities.

AZERBAIJAN

General Assessment

The Nagorno-Karabakh conflict was the dominant factor in Azerbaijan's implementation of OSCE commitments. The OSCE Minsk Group continued to be involved in negotiating an end to the Nagorno-Karabakh conflict. Two major accomplishments during the reporting period helped the Minsk Group toward that objective. The first was negotiating a cease-fire in May, 1994 among the conflicting parties. Despite violations, some of which were serious, this cease-fire is still in effect. The second was achieved during the December Budapest Summit, when Russia formally agreed to give up its parallel negotiating efforts and support the OSCE's efforts to establish a multinational peacekeeping operation for Nagorno-Karabakh. Russia was named Co-chair of the Minsk Group and Minsk Conference. Sweden was succeeded by Finland as the other co-chair in late April.

Azerbaijan has a state-controlled economy rich in oil, gas, and cotton. The economy continued to deteriorate in 1994 because of the Nagorno-Karabakh conflict. However, Azerbaijan made progress in controlling budget and monetary emissions, and the IMF approved a Structural Transformation Facility loan for Azerbaijan in April. Azerbaijan also signed an $8 billion oil deal with Western oil companies in September, 1994.

Security

Azerbaijan has faced rebellion of the ethnic Armenians of Nagorno-Karabakh since 1988, intensifying after the dissolution of the Soviet Union and the creation of an independent Azerbaijan Republic. The conflict has resulted in the occupation by Karabakh Armenian forces of approximately 20 percent Azerbaijani territory and the displacement of hundreds of thousands of Azerbaijani people. In May, 1994, the conflicting parties agreed to a cease-fire. The Azerbaijani Government has stated its commitment to a peaceful resolution of the Nagorno-Karabakh conflict and has participated in the OSCE Minsk Group efforts toward that end.

There were two unsuccessful attempts to overthrow the Aliyev Government, one in October, 1994 and the other in March, 1995. The first resulted in charges against the Prime Minister, who fled the country. The second led to the death of the Deputy Interior Minister during a clash between government troops and paramilitary forces. Since then, the government has imposed stronger measures on opposition political parties and the media.

Due to the conflict in Chechnya, Russia closed its border with Azerbaijan in December, 1994. It remains closed, although discussions have taken place on reopening the border. There was one inspection to Azerbaijan under the Vienna Document and one evaluation.

Economics

As in Armenia, Azerbaijan is preoccupied with the Nagorno-Karabakh conflict. Thus, only minimal official effort has been focussed on reform. However, the Azerbaijani Government made progress in controlling the budget and monetary emissions, and the monthly inflation rate declined from more than 50 percent in December to less than 10 percent in March, 1995. The IMF approved a Structural Transformation Facility loan for Azerbaijan in April - the result of Baku's efforts to proceed with its first-ever IMF program. Progress in privatization, however, remained minimal. In September, 1994, Azerbaijan signed an $8 billion oil deal with a Western consortium, including four U.S. companies (a fifth U.S. company joined the deal in 1995).

Many of Azerbaijan's waterways are considered to be an ecological disaster, mostly from petrochemical pollution. Black market over-fishing of sturgeon and the pollution of the Kura river basin threaten the future of the lucrative caviar industry. In general, the conflict has diverted attention from the environmental field. The government has, however, insisted on strong pollution safeguards in the offshore oil field development contracts with the foreign oil companies.

Azerbaijan has signed scientific and technical cooperation agreements with Turkey, Great Britain, and China.

Human Dimension

Under Heydar Aliyev, the human rights situation has deteriorated. Work on a new constitution appears to have halted. The government has promised to hold parliamentary elections in 1995, but a date has not been set and a draft elections law has not yet been sent to the parliament. Opposition parties have been harassed by government forces, and harassment increased following the political crises in October 1994 and March 1995. A number of opposition leaders were arrested after the March, 1995 political crisis. The government has shut down newspapers and have prevented opposition parties from gathering.

The government controls most radio and television, and the opposition has little access to the official electronic media. The government runs some of the major print media, including the largest newspaper. The private "independent" press (much of it aligned to or owned by political parties) is active but subject to censorship. Some newspapers were closed in the wake of the political crisis in March, 1995.

Azerbaijan is a multiethnic and multifaith society. The Nagorno-Karabakh conflict has, however, taken a toll on Azerbaijan's tradition of tolerance. Ethnic Armenians are a blatant exception to Azerbaijan's good record in this field. Some 18,000 Armenians and part-Armenians, mostly in mixed marriages, remain in the country. The Government stripped many of the remaining ethnic Armenians of their official documents for both internal and external travel.

BELARUS

General Assessment

Belarus continues to fulfill its CSCE commitments in the security realm. Belarus rejects war as a means of settling disputes, and its constitution specifies non-nuclear and neutral status as goals of Belarusian foreign policy. Belarus announced in February 1995, however, that it was suspending conventional weapons destruction mandated under the CFE Treaty on grounds that it could no longer bear the financial burden.

Structural political reform saw important progress in 1994. In March, the Supreme Soviet ratified a new constitution establishing a presidential system of government as well as a constitutional court. The new constitution also provides for basic political and religious freedoms. Presidential elections were successfully held in June and July in a process recognized by international observers as generally free and fair. Parliamentarian Aleksandr Lukashenko defeated the then-prime minister in a run-off election to become the first president in Belarus' history. In December, the Supreme Soviet fixed May 14, 1995 as the date for Belarus' next parliamentary elections. The new Lukashenko government continued the previous administration's policy of "evolutionary rather than revolutionary" reform, resulting in only limited progress. For instance, the government lowered subsidies on basic foodstuffs and certain utilities, but has failed to reign in inflation or control government spending. Citing the government's failure to meet previously-agreed economic targets, the International Monetary Fund in April 1995 delayed consideration of a Stand-By Arrangement for Belarus. Privatization has largely been limited to small enterprises, and its implementation varies widely depending on the support of the local municipal government. In April 1995, however, the Ministry of Privatization set an ambitious goal to privatize seventy percent of small-scale enterprises by year's end. Belarus continues to pursue greater economic integration with Russia, specifically to remove trade barriers and customs formalities and to provide Belarusian enterprises with energy and other raw material inputs at prices roughly equal to those paid by Russian enterprises.

Security

Belarus military doctrine and public pronouncements are in accord with the OSCE principles on the inviolability of borders and non-interference in the internal affairs of other states. In its newly passed constitution, Belarus proclaims a neutral and non-nuclear status as foreign policy goals.

Belarusian armed forces declined from about 144,000 personnel at the beginning of 1993 to approximately 90,000 in 1995. Belarus continued to convert large segments of its defense industry to civilian use. Progress in identifying foreign investment partners to help in this difficult transition has been slow, but recent project grants under the U.S. Cooperative Threat Reduction Program (announced during Defense Secretary Perry's visit to Minsk in March 1994) should encourage cooperation in defense conversion between Belarusian and Western enterprises.

Belarus has cooperated closely with U.S. and OSCE entities to improve communications and provide support to international arms control verifications measures. A U.S.-Belarus continuous communications link (CCL) was established in August 1993, but entry by Belarus into the OSCE communications system has been hampered by that country's limited financial resources. Belarua recieved on CSBM evaluation in February 1994. Belarus has not yet ratified the Open Skies Treaty.

Economics

Belarus' strong dependence on Russia for energy and raw materials resulted in an upward spiral of costs and prices as Russia demanded near world prices for its goods. The Belarus economy is in serious trouble. Gross domestic product in the first quarter of 1995 reportedly declined by 12 percent over 1994 figures, while real incomes fell 3 percent over the same time period, according to Belarus government statistics. Belarus continues to pursue greater economic integration with Russia, specifically intended to remove trade barriers, tariffs and customs formalities, and to provide Belarusian enterprises with energy and other raw material inputs at prices roughly equal to those paid by Russian enterprises. Previous discussions between Belarus and Russia on possible monetary union have been shelved. Russian officials cited the disparities in national legislation, inflation rates, and general progress toward economic reform as precluding monetary union for the time being. The Belarusian ruble is the sole currency allowed for commercial transactions in the country. The scale of privatization to date in Belarus has been modest. According to Belarus government statistics, by January 1995, approximately 1100 state and municipal enterprises had been privatized. A 1993 law allows Belarusian citizens to own small plots of land (foreigners are allowed leases of up to 99 years). During President Clinton's January 1994 visit to Minsk, the U.S. and Belarus signed a bilateral investment treaty that will provide for the reciprocal protection of investments. The treaty was ratified by Belarus in October 1994, and is currently pending ratification by the U.S. Senate. Belarus has signed similar agreements with Germany, the U.K., Poland, Switzerland, and other countries.

Human Dimension

Despite the adoption in 1994 of a new constitution, the democratic election of a president, and planned parliamentary elections in May 1995, there were a number of disturbing human rights concerns in Belarus in late 1994 and early 1995.

The constitution, passed in mid-March 1994, creates a presidency as head of the executive branch and head of state and a constitutional court. The new constitution guarantees a wide range of civil and political as well as social and economic rights. The government's virtual monopoly on all forms of mass communication hampered the development of freedom of the press. Since his election in July 1994, President Lukashenko has removed the editors of four major newspapers, in each case after articles perceived as critical of the government were printed in them. In the so-called "White Spots" incident in December 1994, the government censored publication of a parliamentary report detailing alleged government corruption. A number of "independent" cable television stations have been shut down by the government for "technical reasons" in the run-up to the May 14 parliamentary elections. Such overt government control of the press has severely restricted discussion of important political issues prior to the elections.

The president instituted further restrictions banning unauthorized political gatherings and forbidding parliamentary candidates from using or receiving campaign funds from private sources, including from political parties or the candidates themselves. The candidates are limited to using only the approximately $50 allotted them by the Central Electoral Commission in their campaigns, which severely restricts the free flow of information and ideas, and limits opportunities by the public to become informed about candidates and issues before the election. In another ominous development, President Lukashenko employed special security forces in April to forcibly remove nineteen hunger-striking parliamentary deputies who had been peacefully protesting the president's policies in a government building. During the course of the action, which the government termed "an evacuation" in light of an alleged bomb threat, several of the deputies were beaten with truncheons, though none were arrested.

BOSNIA AND HERZEGOVINA

General Assessment

Bosnia remains mired in conflict with little hope for a swift resolution. The Serbs in Pale rejected international efforts to achieve a negotiated settlement, despite Belgrade's endorsement of it. The four month cease-fire negotiated by Jimmy Carter failed to bring about a dialogue between the warring parties, who instead used the time to re-arm.

Life for the civilian populace became more difficult, with frequent food shortages and Bosnian Serb attacks taking a heavy toll, particularly in the enclaves. Sarajevo became a virtual enclave following Bosnian Serb moves to close roads and air routes into and out of the capital.

The most hopeful sign last year came with the initiation of the Bosnian Federation, the Muslim-Croat association designed to shore-up support for a multi-ethnic Bosnia. Despite initial difficulties, the parties have remained willing to abide by its terms and to submit to binding arbitration to resolve their differences.

Security

Karadzic Serbs occupied about 70 percent of its land area, and their tactics included acts of genocide. The 1991 UN arms embargo remained in force, thereby leaving the country at a material disadvantage against its better-equipped opponents. A Serb and sometimes Croat blockade of transport and communications prevented all but humanitarian assistance -- and sometimes even that -- from entering. UN insistence on the neutrality and strictly humanitarian character of its activities in Bosnia entailed a "benevolent" blockade of its own, which isolated Bosnians further from the outside world and reinforced their sense of being under siege.

The Bosnian government made great strides in the past year to re-organize its armed forces into a effective military unit. The Bosnian Federation has so far failed to develop into a independent military force. However, the Bosnian government forces and the Croat militia have improved the nature of their cooperation. Bosnia and Herzegovina did not provide annual data on its military forces as mandated by the Vienna Document.

Economics

The relative health of the economies of different regions of Bosnia and Herzegovina depended on how isolated they were from the outside. Bosnian Croat-controlled western Herzegovina generally fared best in a bad situation, as it had free access to the outside world through neighboring Croatia. The territory controlled by Karadzic Serbs for the most part had no war damage at all, but bore the effects of UN sanctions against Serbia, with whose economy it was essentially integrated. UN sanctions against this part of Bosnia went into effect in 1994.

Bosnian government-held areas suffered grievously. Much of the economically important territory had been reclaimed in fighting against the Yugoslav People's Army and Karadzic Serb forces. The blockade choked off importation of spare parts, equipment, and raw materials, along with the export of finished goods. By the end of the reporting period much of Bosnia's surviving industrial capital stock was not maintained for two years and threatened with ruin. Industrial output was estimated at 5 percent of pre-war levels, mostly directed toward the war effort. Bosnians lived on the agricultural produce that could be farmed inside the country, humanitarian relief from outside donors, and a thriving black market which encouraged criminal activity, including corruption. The enclaves, surrounded and in some cases stripped of their agricultural hinterlands, were in even worse condition.

The political advances of early 1994 made possible the return of a trickle of commercial traffic to Sarajevo, and a slightly greater flow to other cities and towns. Prices of bellwether goods like tobacco, meat, and flour were falling towards more normal levels, and outside products such as fresh fruits were available in a thriving market. The withdrawal of most heavy weapons from around Sarajevo made possible the restoration of some utilities, public transportation, and other civic infrastructure, with which the U.S. and other Western countries assisted. The urgencies of war production brought about instances of remarkable technical and organizational inventiveness -- qualities which could catalyze rapid development of an entrepreneurial sector once the war is ended. The Bosnian government expressed interest in privatizing "quasi-state" enterprises which had been nationalized during war-time. This would require outside assistance in helping to resolve legal, financial, and other structural economic issues.

Human Dimension

Efforts to conclude a peaceful settlement of the conflict in Bosnia and its neighbors intensified in 1994 with the "Contact Group" plan, drawn up in June and July by the U.S., Britain, France, Germany and Russia. Under the plan, the Bosnian government would retain control 51 percent of the Republic's territory, with Serbians holding the balance. Evidencing its readiness to have peace, the Bosnian government accepted the plan, despite the loss of territory. The plan also won the public support of Serbian president Slobodan Milosevic, who initiated the Bosnian Serb assault against the Sarajevo government in 1992. However, Bosnian Serbs, voting in an August referendum, rejected the plan, as did Karadzic in direct negotiations with the Contact Group.

The Federation constitution adopted last year guarantees a right to a free trial, freedom from discrimination, rights of privacy, rights to property, freedom of speech, and freedom to change governments. However, implementation of this constitution has been hampered both by the conflict and by internal disagreements. Additionally, the Republic of Bosnia-Herzegovina maintains its powers under the previous constitution "until a final peace agreement is reached and implemented."

While democratic values have remained generally intact in areas under Federation control, that part of Bosnia under the control of Karadzic's "Serb Republic" continues to suffer an oppressive, dictatorial regime. Despite the referendum, this illegitimate regime demonstrates little adherence to democratic principles. Its hallmark continues to be its use of "ethnic cleansing" against non-Serbs in an effort to harass, intimidate and ultimately eliminate Bosnians not affiliating with it.

BULGARIA

General Assessment

Bulgaria's implementation of its OSCE commitments was generally good. Following the resignation of the government of Prime Minister Lyuben Berov in September 1994, the country held early parliamentary elections on December 18. Under Bulgaria's proportional electoral system, the Bulgarian Socialist Party won a small majority in Parliament and formed a new government under Prime Minister Zhan Videnov on January 25, 1995. President Zhelyu Zhelev, elected in January 1992 to a five-year term, continued to play a strong and moderating role both domestically and in the region.

Bulgaria joined NATO's Partnership for Peace, continued regular contacts with Western security structures, and took steps to implement UN Security Council sanctions against Serbia and Montenegro. It also undertook regular and constructive bilateral contacts with its immediate neighbors, and participated actively in regional associations such as the Black Sea Economic Forum. In July 1994, Bulgaria hosted a joint naval exercise within the PFP framework, including all Black Sea countries, plus the U.S. The country's human rights record was generally good, although problems continued with public expressions of intolerance toward religious and ethnic minorities. While the constitution provides broad guarantees for human rights, little progress was made toward specific legislation needed to implement these guarantees. Non-governmental organizations working for human rights operated without government interference, and in some cases developed a working relationship with government ministries.

Security

Bulgaria continued to play a moderate and stabilizing role in a turbulent region. The country was the eighth in Central Europe to join Partnership for Peace and continued regular contacts with NATO and Western military structures. Bulgaria hosted a multilateral exercise "in the spirit of PFP" in 1994, and plans to host a formal PFP exercise this summer. Bulgaria continued to facilitate multilateral inspections related to the Vienna Document and other international agreements. It received on CSBM inspection and three evaluations in 1994, and ratified the Open Skies Treaty in March 1994. With regard to the conflict in former Yugoslavia, Bulgaria maintained its position that no Balkan area countries should participate directly in peacekeeping or other interventions. It continued to cooperate generally with U.N. Security Council sanctions on Serbia and Montenegro, although there were some sanctions violations.

In the absence of new defense legislation and funds, little progress was made toward reforming Bulgaria's military structures. The country continued to cooperate well with CSCE sanction teams, European Union spillover monitors, and Western European Union Danube sanctions monitors. In deference to regional sensitivities, Bulgaria strictly limited its military activities in the border region.

Economics

Bulgaria made slow progress toward a market-oriented economy during the reporting period, although important international agreements were achieved to reschedule Bulgaria's official and commercial debts. Few state enterprises were privatized, and the breakup of collective farms proceeded at an exceedingly slow pace, as did reform of the banking system. On the bright side, economic growth reached 1.5-2.0 percent in 1994, reversing 4 years of declining output. Inflation averaged approximately 120 percent in 1994, but dropped to an annual rate of 60 percent in the first quarter of 1995. A value added tax went into effect in April 1994 and has had better than expected results in increasing government revenues. Other tax reform measures moved ahead as well. After a long period of appreciation, the Bulgarian currency (lev) began to weaken in late 1993 and fell sharply in March 1994, declining by approximately 43 percent before recovering partially. While this was a normal result of inflation and a loosening of Central Bank controls which kept the lev overvalued in real terms, it will have consequences for political reform and public acceptance of free market concepts.

The private sector continued to grow, especially in trade and services, and contributed over 30 percent of GDP. Energy rationing, which characterized previous years, was not imposed, and an increasingly wide range of consumer goods was available. Food remained in good supply throughout the winter, although inflation made this abundance expensive for those on fixed incomes.

Bulgaria's Association Agreement with the European Union (EU) took effect January 1, 1994. An analogous agreement with the European Free Trade Association (EFTA) entered into force in 1993. With the conclusion of its EU and EFTA negotiations, Bulgaria returned its attention to negotiating its GATT accession, with the objective of becoming a charter member of the new World Trade Organization by January 1995. Progress on bilateral market access provisions, however, was slow, and Bulgaria remains in the midst of WTO accession talks.

Bulgaria has faced several successive trade shocks during its period of economic transition. The reunification of Germany, the collapse of CMEA, the Gulf War and the imposition of UN sanctions on Iraq and nearby Serbia-Montenegro have all had disruptive impacts on the country's foreign trade flows. The Bulgarian government claims that losses from UN sanctions against Serbia have now topped $6 billion. Loss of direct land access to Europe as a result of the sanctions on Serbia has complicated Bulgarian efforts to restructure foreign trade away from Russia and toward the EU; nevertheless this shift is happening gradually. The drop in environmental pollution which occurred in previous years owing to production declines levelled off in 1994 as production stabilized. Bulgaria made good progress on a comprehensive package of laws to implement environmental safeguards and encourage sustainable development. Most of these laws were completed and now await action by the Council of Ministers and parliament. The Bulgarian-Romanian Joint Monitoring Commission continued its work on the Danube, although the problem of trans-border pollution was not resolved. The government prepared to participate in the Global Environmental Facility (GEF), with an emphasis on preservation of park lands and bio-diversity. Bulgarian scientists continued regular exchanges with counterparts in other countries, including projects to prepare a country study on climate change and to develop ecosystem modeling of the Black Sea. Nearly two hundred environmental NGO's were active during the period.

Human Dimension

The democratic processes and divisions of power largely functioned normally. In the December 18 Parliamentary elections, more than 40 political parties and coalitions participated and approximately 75 percent of the electorate voted. International observers commented that the vote was conducted in accordance with free and democratic election procedures and in a peaceful, well-organized fashion. However, CSCE and other observers voiced concern about the unequal access to the mass media for all political parties, particularly to television.

The Government generally respected freedom of speech, press, association, assembly, and travel, but xenophobia, nationalism, and anti-ethnic expression grew markedly among the population at large. Government actions and the rising level of public intolerance significantly interfered with the activities of some non-Eastern Orthodox religious groups. Police beatings of Roma during arrest continued, albeit on a reduced scale; there were no reports that the Government tried and convicted any of the perpetrators. Private citizens increasingly attacked Roma and other minority groups. The Constitution's provisions against ethnically based political parties continued to hamper political expression.

CROATIA

General Assessment

The continued prevalence of unsettled conditions in Croatia -- conflict, a hostile occupation, and major refugee flows -- complicates the government's task of implementing its OSCE commitments and makes the security basket the main focus of developments.

Roughly one-fourth of Croatia's territory is occupied by rebel ethnic Serb forces that have strong links to the government of the "Federal Republic of Yugoslavia" ("FRY"). The policing of the occupied areas by the UN Protection Force (UNPROFOR) through spring of 1995 did not prevent military attacks on Croatia from within those areas, or the abuse and harassment of ethnic minorities. The new UN Confidence Restoration Operation (UNCRO) is to take on a more limited mandate of patrolling the perimeters of Serb-held areas. Its mandate recognizes that their territory is Croatian, but its operations are unlikely to change the situation on the ground. The number of Bosnian and Croatian refugees in Croatia diminished somewhat during the year, but there has been little change in the overall numbers of refugees and displaced persons in the country who must be cared for. Economic reform and privatization is proceeding slowly, mainly due to the uncertain investment conditions. Croatia shows a general respect for the principles embodied in the human dimension, marred by continuing problems concerning the rights of minorities and press freedoms.

Security

Security issues dominate all other matters in Croatia, due to the continuing military occupation of large parts of the country by breakaway ethnic Serbs. Croatia generally continued to cooperate in international efforts to return Serb-controlled areas to Croatian government control by peaceful means, although in May 1995 it seized a key highway and surrounding land by force, in a disproportionate response to Serb provocations and violations of existing agreements.

Following the March 1994 negotiation of a stable cease fire and separation of forces, Croatia and the rebel Serbs made limited progress toward reconciling their difficulties at the bargaining table. They reached an accord on economic confidence-building in December 1994, and they have cooperated at restoring electric, water, and oil supplies cut off between the two sides in the 1991 fighting. Both sides have expressed a willingness to consider political settlement talks, under certain conditions, and Zagreb has accepted a U.S.-Russian-EU-UN proposal as a basis for negotiations. (The Serbs said they would not read it until the continued presence of UN peacekeepers was assured, and their response remained unknown as this report was being prepared.) Internationally, Croatia signed an agreement in March 1994 that will help bring peace to the former Yugoslavia by establishing a Croat-Bosniac federation in Bosnia and Herzegovina and a confederation between this federation and Croatia. The Croatian government continues to support the Bosnian Federation and the cease fire between ethnic Croat and government forces. Croatia has expressed interest in the NATO Partnership for Peace program. Croatia cooperates in the UN effort to enforce a no-fly zone (NFZ) over Bosnia and Herzegovina and consistently grants overflight clearance for aircraft involved in that effort. It has, however, violated the NFZ. Croatia cooperates with OSCE sanction teams and provides military force information to the organization. Croatia received on CSBM evaluation visit by Italy in February 1994.

Economics

While the government remains committed to market reform, Croatia -- because of unsettled conditions and higher priorities -- has only gradually implemented economic reform. Croatia had been the second richest of the former Yugoslav republics, but in 1994 its per capita income -- at $2500 -- remained substantially below the $3550 pre-war level. Economic growth resumed in 1994, at the modest level of 1.5 percent, and Zagreb's bold 1993 macroeconomic stabilization program has succeeded in stopping and even reversing hyperinflation. Privatization continues, though most efforts have been on a small scale. Export markets within the former Yugoslav states remain largely closed off and trade is only gradually being reoriented, but international financial assistance improved significantly with the resumption of World Bank lending activity in 1994. However, the uncertain security situation has kept away investors, both domestic and foreign.

Croatian environmental protection policy remains in its infancy but follows in principle the lines of Western practice. Croatia and the U.S. signed an agreement on scientific and technological exchange in March 1994, and in 1995 a joint commission held its first meeting to fund projects in this field.

Human Dimension

Croatia has enacted most of the legal structures of a pluralistic, democratic society. However, the government has not been active in extending their practical application, nor aggressive in ensuring that abuses are investigated.

Elections in early 1993 were considered fair and open by both outside and domestic observers. The Sabor (parliament) has little effective power to challenge the president. Few concrete steps have been taken to advance the agenda of greater pluralism and openness. Some actions have stifled the free expression of opposition views.

Croatia generally respects individual rights. Increasing interchange with Western societies has brought a greater awareness of government obligations in this regard. The government usually takes action to investigate and/or prosecute serious abuses, but response can be slow and ineffective, and there is little follow-up of wartime cases.

Minorities in Croatia -- in particular the roughly 11 percent Serb minority -- have been subject to crimes of violence committed by nationalist extremists. There is also evidence of the terrorizing of Serb civilians by Croat Army forces operating in Bosnia. Serbian representatives complain of discrimination and harassment in a wide variety of areas, from abnormal slowness in the issuance of government documents to employment discrimination. The government exercises a strong influence over most media, but the press prints some material critical of the government and its leaders. One important regional newspaper was subjected to an unjustified and crippling tax, presumably due to its anti-government articles.

Croatia has an organized and effective judicial system, but it is not free of ethnic bias or political influence. The President and the Constitutional Court have been engaged in a struggle (unresolved as of this writing) on the independent selection of judges. The Minister of Justice submitted his resignation to protest the government's actions. Western countries, including the United States, are providing technical assistance in the area of judicial reform.

ESTONIA

General Assessment

Estonia has institutionalized a pluralistic democratic society and a free market economy. In March, Estonia held its second free and fair parliamentary elections since regaining independence in 1991. In 1994, Estonia concluded a Free Trade Agreement with the other Baltic states and with the European Union and recently concluded an association agreement with the EU. Estonia is a model for the rest of the world in its demonstration of tolerance and for its economic reform program.

On July 26, Estonia and Russia reached agreement on the completion of Russian troop withdrawals by August 31, on the terms for social guarantees for retired officers, and on the disposition of the nuclear submarine training facility at Paldiski. Russia withdrew its active-duty troops by August 31, but the issue of troops demobilized in place after the signing of the final withdrawal agreement continues to cause concern.

The Russian Federation continued to accuse Estonia of violating the human rights of the Russian-speaking population (about 38 percent of the total population). Again, numerous international human rights experts representing intergovernmental and nongovernmental organizations visited Estonia and concluded that there was no pattern of human rights violations. They also have concluded that Estonia's laws on citizenship, aliens and naturalization, and language fully comply with Western standards. So far, those laws appear to be implemented fairly and liberally. As a full member of the Council of Europe for the past two years, Estonia signed on February 2 the Council's Basic Convention on the Protection of Ethnic Minorities.

The six month OSCE mission to Estonia, established by the OSCE Stockholm Ministerial in December 1992 to promote stability and dialogue between the Estonians and Russian-speaking communities, and which arrived in Estonia in February 1992, has been extended until December 31, 1995.

Security

The final withdrawal of Russian troops remained Estonia's highest priority until Russia's active-duty troops departed on August 31, 1994. Nevertheless, the number of troops retired or demobilized after the July 26, 1994 signature of that treaty remain a cause for concern. Estonia protested to the OSCE Russia's unilateral demarcation of the border in disregard for OSCE principles and for the borders set under the 1920 Estonian-Soviet Treaty of Tartu. Nevertheless, the two parties are working towards an agreement on the issue.

Estonia continued to build its defense forces, composed of three infantry battalions, three infantry companies, a signal battalion, a guard battalion, and a paramilitary defense league, all of whom are subordinated to the general staff of the defense forces. The Estonian border guard is subordinated to the Ministry of Internal Affairs. In the conduct of OSCE's CSBM activity, Estonia forecast no notifiable exercises for 1995. It received one CSBM evaluation visit in 1994.

Estonia sees its gradual integration into a European-wide security system as the ultimate guarantee of its security and also has begun a cooperative dialogue with the United States and other Western countries in counter-terrorism, civil aviation security matters and the fight against organized crime. Estonian Defense and Foreign Ministry officials participated in a number of NATO and NACC- sponsored seminars on civilian control of the military. Estonia signed NATO's Partnership for Peace framework document and participates actively. With Latvia and Lithuania, it initiated the formation of a joint Baltic peacekeeping battalion for eventual participation in NATO exercises and international peacekeeping and humanitarian operations, with assistance from the U.S. and others. Under Danish leadership, Estonia already has provided peacekeepers to the UNPROFOR mission in Bosnia. Economics

Estonia is a regional role model for reform. It has a balanced budget, supports free trade, is virtually tariff-free, boasts a flat tax, allows foreign ownership of commercial property, and has developed excellent port facilities that provide natural conduits for trade. Privatization is occurring at a fast clip, and more than 75 percent of its trade has been reoriented westward. Over 90 percent of small and medium-sized firms are in private hands, while two-thirds of large firms have been privatized. Last year, Estonia recorded one of the highest GDP growth rates in Europe and became the first country recovering from the Soviet era to attain a positive GDP growth rate. Only agricultural and housing privatization lag.

Estonia has already taken many of the steps it needs to attract foreign investment by establishing a stable macroeconomic framework for the economy, introducing a strong and convertible currency, opening up opportunities for foreign investment and establishing the legal framework for a market system. Estonia has maintained a strong currency, an annual inflation rate in 1994 below 45 percent, and recently concluded an association agreement with the European Union. Ever-lower inflation and similar economic growth are expected for 1995.

While macroeconomic stability has been achieved, structural adjustment is only in its preliminary stages. Personal incomes remain low, and housing and agricultural privatization-- especially restitution--are far from complete. While Estonia's financial sector is stronger, investment financing is still difficult to obtain. Growing protectionist sentiments are being voiced by members of those sectors of the economy (the elderly, farmers) which have been most adversely affected by the economic restructuring.

Significant budgetary pressure remains due to the fact that the government has been forced to cut expenditures to keep them in line with revenues available, and by the extensive arrears in payments to the government, especially from public enterprises. The Estonian Government remains concerned at discriminatory transit taxes and double tariffs applied by Russia; most adversely affected are ethnic Russian traders resident in Estonia. Environmental clean-up, especially at former Russian bases and at the industrial waste site at Sillamae, remains a serious problem. However, it is a secondary priority to more pressing economic issues. Nevertheless, pollution levels have fallen, partly due to the downturn in many heavy industries. In order to make further progress in pollution abatement, Estonia will need to make considerable investments. There is close cooperation on environmental issues with Nordic countries and the U.S. Estonia has cooperation arrangements both with the U.S. and the Nordic countries.

Human Dimension

The status of non-citizens remained at the center of political debate and continued to receive a great deal of international attention. Numerous international human rights organizations visited Estonia and concluded that the Government of Estonia was not engaged in a pattern of human rights violations but that the uncertainty about the status of non-citizens remained a potential source of limited social and political instability.

The OSCE mission which arrived in Estonia in February 1993 "to promote stability, dialogue, and understanding between the communities" has been extended again to December 31, 1995. The mission to Estonia has offices in the city of Tallinn, Narva, and Johvi. Estonian Foreign Ministry officials have stated that the Government of Estonia supports the OSCE mission and finds its presence important.

Although it seems increasingly unlikely that all resident aliens will have registered for residence permits by the Estonian Government's July 12 deadline, the clear majority of non-citizens who have registered are demonstrating that they see their future in Estonia and are adjusting to life in an independent Estonian state. Furthermore, Estonia is looking at ways to modify or simplify the registration process, short of extending the deadline. The Government also has reassured that people with temporary permits will not be denied any social guarantees. Parliamentary debates and committee meetings are still off-limits to ordinary citizens, although the press can easily get accreditation. There is no mechanism to distribute copies of bills under discussion, and the idea and tradition of public accountability does not fully exist within the parliament. Independent, vigorous media is now the Estonian standard, with only one national daily newspaper out of five Estonian and two Russian language papers still to be privatized. The state still offers indirect support to most papers through subsidized rent, printing and distribution costs. There is no discernible pattern of pressure on papers receiving support to follow a particular government line or policy. Estonian state radio and television still receive substantial government support, although there are now three independent TV channels and dozens of independent radio stations all over the country. State and independent broadcasters do not differ significantly from each other in context or content. The Estonian government recently ended retransmission of the Russian channel "Ostankino" because the network failed to pay its transmission costs. The heavily Russified northeast still receives TV and radio transmissions from St. Petersburg. Residents of northern Estonia can watch three Finnish TV channels, and many people throughout the country have access to satellite TV.

GEORGIA

General Assessment

Georgia is emerging from one of the most difficult winters in recent memory. Most Georgians have gone several months without natural gas to heat their homes and cook their meals. Electricity and water have been rationed. Food is plentiful in the markets but expensive for ordinary Georgians. Nevertheless, Georgia's political-economic stability has improved somewhat over last year as economic activity increased and the coupon actually appreciated in value against the ruble.

National politics have stabilized somewhat in the run-up to the October 1995 elections. The Parliament is busily finishing the draft constitution and reviewing proposed legislation for an elections law. Although major elements of the electoral and constitutional package remain murky, e.g., the status of regional governments and the degree of authority to be invested in the new office of the President, the process is inclusive and the public is actively engaged.

Human rights abuses continue, particularly in the separatist Abkhazia region of Georgia where the Tbilisi government cannot exercise its authority. Helsinki Commission interest in reliable reports of abuse of prisoners' human rights in Tbilisi resulted in hearings in Washington in April which focused GOG's attention on this issue.

Georgia's cooperation with the international community continued to expand. This was especially evident in Georgia's growing reliance on the OSCE and the United Nations in its efforts to reach political solutions to the separatist conflicts in Abkhazia and South Ossetia.

Security

The Georgian government has made serious, good-faith efforts to bring paramilitary organizations under control of central authorities. These efforts were, to a large extent, aided by the cessation of organized fighting in Abkhazia. The government's campaign has included bringing the nation's largest paramilitary organization, the Mkhedrioni, under government control as the "Rescue Corps" with independent governmental status.

Part of that exercise was to disarm Jaba Ioseliani's Mkhedrioni. Starting in May, Interior Ministry State Security Service troops collected much sophisticated weaponry, e.g., heat-seeking missiles, armored personnel carriers and ground-to-ground missile batteries, from Mkhedrioni units throughout Georgia. The government hopes to have the Mkhedrioni completely disarmed by Summer 1995.

Significant progress also has been made in the fight against street crime. A comparison of first quarter 1995 with first quarter 1994 crime data show that total crime has dropped more than 25 percent. The drop is consistent across all categories. Perhaps more significantly, there has been a substantial increase in the number of arrests as a percentage of incidents in major crime categories. The streets are safer; there are fewer reported crimes and the Georgian police appear to be getting better at solving them.

The government has extended its full cooperation to both the OSCE and the United Nations as those organizations have worked to facilitate negotiated settlements to the country's two separatist conflicts, in Abkhazia and South Ossetia. However, the disastrous results in Abkhazia where human rights violations and incidents are on the increase, have seriously eroded confidence in the efficacy of international mediation. The UN maintains a 136-person Observer Mission in western Georgia to monitor the cease-fire maintained by a nominally (although wholly Russian-staffed) CIS peacekeeping force. No significant progress has been made toward either a political settlement of the conflict or the return of the displaced persons to their homes. Georgia maintains friendly relations with CIS and non-CIS neighbors and participates actively in regional organizations. The government has continued the process of incorporating Georgia fully into the international community. Georgia joined CIS and has signed on as a member of the Partnership for Peace. Under the terms of the Vienna Document, Georgia received on CSBM inspection by the U.S. in 1994.

Economics

Georgia's movement toward a free-market economy was hampered by the civil war and a still-unresolved erosion of the economic infrastructure. Most Georgians live well below the poverty level. The lack of essential production inputs, the low level of foreign investment, and exorbitant prices for critical commodities have slowed economic reform and recovery. Nevertheless, things have improved somewhat and the government has made some progress towards the pursuit of sound policy.Rampant price increases have abated and the national currency actually appreciated somewhat in early 1995. Unemployment remains high and most of Georgia's industrial plant is closed, although anecdotal evidence suggests that a leveling-off has occurred in the earlier economic free-fall.

Following Chairman Shevardnadze's March 1994 visit to Washington, the World Bank announced the issue of a $75 million rehabilitation loan. That emergency shot-in-the-arm, buttressed by much humanitarian aid from the EU and the United States, helped stabilize the economic situation somewhat.

The foreign investment climate is poor but improving; the signs are positive. Cautiously optimistic about GOG's improved monetary and fiscal policy, the IMF approved an STF in December 1994. Two tranches of approximately $40 million each were paid out during the 1st and 2nd Quarters 1995. Further IMF and World Bank assistance is in the planning stages for implementation in late 1995, early 1996.

Human Dimension

The greatest impediments to significant progress in the observance of human rights have been criminal activity, economic disorder and the unsettled situation in Abkhazia. The government has documented many cases of torture, mutilation and murder of civilians. Abuses by the separatist regime continued throughout the period. Additionally, the separatists have continued to carry out ethnic-cleansing raids targeted against ethnic Georgians in isolated villages.

Georgian authorities has also been responsible for abuses of human rights. One celebrated trial of supporters of former President Zviad Gamsakhurdia attracted wide attention. Helsinki Commission interest in reliable reports of abuse of prisoners' human rights in Tbilisi jails resulted in hearings in Washington in April which focussed GOG's attention on this issue.

Codification of the rule of law has a long way to go to provide adequate protection to the public, and government accountability is far from a reality. The Georgians are now in the process of drawing up criminal and criminal procedures codes, civil and civil procedures codes as well as a uniform commercial code, election law, law on state power and a new constitution. Much is in flux. Public confidence in government remains somewhat low but it is on the rise.

KAZAKHSTAN

General Assessment

In its third year of independence Kazakhstan continued to grapple uncertainly with the task of shedding Soviet-era authoritarian political institutions and a centralized command economy. President Nursultan Nazarbayev, in his third year of a 5-year term in office, remained the leading political figure in the country and sought first to bolster his position in parliamentary and local elections in March 1994. The elections were seriously compromised by fraud and judged by international observers as not free and fair. On March 7, 1995, the Kazakhstan Supreme Court declared the elections unconstitutional. Then, on March 11, Nazarbayev announced a referendum to extend his term in office until the year 2001. The referendum took place on April 29, and the Government of Kazakhstan claimed that 96 percent of the voters approved the extension.

Although Kazakhstan is endowed with a wealth of natural resources, such as oil and minerals, its state-dominated economy continued to decline sharply in 1994, with high inflation, falling production, and a large budget deficit. Agricultural production remained largely collectivized. Bureaucratic restraints, high taxes, and rampant government corruption hampered the small but dynamic private sector. While the general macroeconomic situation stabilized in 1994, reforms to foster microeconomic, or structural, changes are still needed. Kazakh discrimination against non-Kazakhs continued. Nevertheless, Kazakhstan educated people, their pragmatic and consensus-seeking habits, and vast natural resources form a solid basis for long-term growth. Difficulties in transporting oil to Western countries threaten Kazakhstan largest potential source of export earnings.

Security

Former Soviet military forces have come under Kazakhstan command, with the notable exception of Russian strategic forces at several sites, including the Baykonur cosmodrome, the Saryshagan ABM/air defense test range, and two SS-18 ICBM sites. Kazakhstan hopes to create a small, mobile defense force of substantially fewer than 100,000 soldiers. It is developing a small coast guard/naval capability in the Caspian Sea, in part to protect valuable oil and gas interests in the western part of Kazakhstan. The Kazakhstan military suffers from severe shortages of consumables. It has available large stocks of some kinds of former Soviet military equipment. Kazakhstani officials state publicly that Kazakhstan best defense is to have good relations with its neighbors. In particular, they believe that cooperation with Russia is strategically essential. Relations between the Russian and Kazakhstani military establishments are close, as witnessed by the signing of Joint Equipment and Training Agreements in Moscow in January 1995. Many Kazakhstanis worry about Chinese "peaceful expansion"-- ethnic Chinese with money moving across the border to establish a Chinese presence in Kazakhstan. Kazakhstan and Russia have a cooperative agreement under the CIS for security along the Chinese border. Kazakhstan also seeks to maintain its security through participation in international organizations, such as the UN, North Atlantic Cooperation Council, NATO, Partnership for Peace, and the OSCE. In 1994, Kazakhstan submitted information on the armed forces stationed in its territory and annual data on its military bases. Kazakhstan received on CSBM inspection and one evaluation in 1994.

Forming security ties with the United States has been a priority for Kazakhstan. It welcomes technical assistance in defense, including in military law and the role of the military in a market economy. Kazakhstan is participating in U.S. training under the International Military Education and Training (IMET) program, including resident English-language training. The U.S. has offered technical assistance in planning a Kazakhstani coast guard in the Caspian Sea, developing an NCO corps, and planning defense resource allocation. Army-to-army contacts are being launched. The U.S. is seeking to assist Kazakhstan in defense conversion. Kazakhstan promotes cooperation among the states of Central Asia and of the other CIS. It is concerned about the fighting in Tajikistan and the possible spillover effect on neighboring states. In cooperation with Russia, Kazakhstan has sent a battalion from its 35th brigade and a unit of border guard forces to Tajikistan. It has also provided food, tents, coal, and other humanitarian aid, and encouraged a political solution to the conflict in Tajikistan.

Kazakhstan was the first signatory to ratify the START Treaty, and in February 1994 acceded to the NPT as a non-nuclear weapon state. Kazakhstan has been a cooperative partner in JCIC, SVC, and other arms control fora. Kazakhstan has signed and now implements safe, secure dismantlement (SSD) umbrella and implementing agreements with the U.S. In November, the Government of Kazakhstan delivered to the U.S. over 500 kilograms of highly enriched uranium from the Ulba Metallurgical Facility for transfer to Oak Ridge, Tennessee.

Economics

Kazakhstan economic performance has deteriorated sharply since independence. GDP has declined by one third since 1992 because of the breakdown of intra-FSU trade links and restructuring. GDP was forecast to fall 6 percent in 1994 and an estimated 15 percent in 1995.

Kazakhstan economic reform program has experienced many ups and downs. Fiscal expansion and monetization of inter-enterprise arrears early in 1994 caused inflation to soar in mid 1994, but in July 1994 the government initiated a fairly disciplined macroeconomic policy. Price liberalization is virtually complete, and privatization accelerated in 1994.

Kazakhstan introduced its own currency in November 1993. Inflation rose after the government dramatically expanded credits in spring 1994 -- to 46 percent per month in June -- and then fell after the government tightened its monetary policy. Inflation for January 1995 was 8.7 percent per month, boosted in part by the last steps on price liberalization. The tenge, Kazakhstan currency, has depreciated steadily in nominal terms since its introduction, but has appreciated in real terms against the Russian ruble and U.S. dollar. The value of the tenge is by and large freely determined.

Until last year, the Government of Kazakhstan appeared to exercise strict discipline over the budget. The deficit was 7.3 percent of GDP in 1992 and 1.2 percent of GDP in 1993. During the first half of 1994, however, the budget deficit widened. Revenues were far below forecast. In July, the government revised the 1994 budget so that Kazakhstan could continue with the stand-by arrangement. Kazakhstan received a $170 million stand-by arrangement and second drawing from the Systemic Transformation Facility (STF) of the IMF in January 1994. It also received $236 million from the World Bank. In the first months of the stand-by, the government went considerably off-track from its program goals. Poor monetary discipline, the slowness of privatization of state enterprises (which could enhance tax revenues), along with pressures on the budget caused by the worst winter in some 40 years, meant that Kazakhstan did not meet key IMF standby targets for 1994. A Consultative Group will meet in late May to determine how to cover Kazakhstan $700 million Balance of Payments financing gap. The most severe external constraint to the expansion of Kazakhstan resource-based economy continues to be uncertain oil export routes to hard currency buyers.

Kazakhstan has a commitment to economic reform and privatization, and public support for reform is strong. The World Bank-designed small scale privatization program now financed by USAID is gaining momentum. Small enterprises are being auctioned. A voucher-based system will be used to privatize medium- and large-scale companies. The State Property Committee is accelerating efforts to privatize over the next few years more than 100 very large and special state enterprises. Unfortunately, the privatization program still has loopholes which elites are using to gain or retain control over many enterprises.

The U.S.-Kazakhstan Charter on Democratic Partnership, signed by Presidents Clinton and Nazarbayev in February 1994, and a new agreement on science and technology cooperation provide a framework for cooperation in scientific and environmental fields. Recently Kazakhstan signed a 15 million U.S. dollar agreement with USAID covering Central Asia to assist with water management and public health in the Aral Sea area. A larger World Bank-led program is being prepared. The U.S. Department of Defense is assisting Kazakhstan to assess damage in the Semipalatinsk region.

Human Dimension

Basic human rights were generally respected in the past year. Fraud in the March 1994 parliamentary and local elections infringed on citizens' rights to change their government. Some good laws have been adopted at the national level, but implementation at the local level remains weak. Former Communist Party apparatchiks are in control of all levels of government, and this brakes reforms and better respect for human rights. The 1993 Labor Code and the Constitution provide for basic workers' rights, including the right to organize and the right to strike. Independent unions nevertheless suffered continuous harassment from the government and state-run unions. The primary intelligence organ, Committee for National Security (KNB), while playing an important role on key issues of countering organized crime and corruption, nuclear proliferation, foreign subversion, and terrorism, is also continuing to penetrate independent political and ecological groups and free trade unions. The KNB retains the authority to deny citizens permission to travel in and out of the country, to requisition property, and to demand cooperation by citizens. Declining wages for police, combined with the rapid growth of criminal groups which have bribed officials at all levels, has led to a less effective and more corrupt police force. Freedom of assembly and religion were generally respected. Internal freedom of movement was limited by the use of the "propiska" system of permits for residence in the capital. The state owns most printing and broadcasting facilities, especially outside the capital, and most media outlets are dependent on the government for supplies and financial support. Some media, particularly privately owned, were often critical of the government. This created problems for one independent television station, Telemax, during the election campaign in early 1994. Upset by broadcasts critical of Almaty's mayor, local authorities cut off its electricity and ultimately forced the station off the air. In March 1995, the independent press was warned not to print articles critical of the government--but this measure was resisted successfully by at least one news group. Moscow television channels are an important source of information and entertainment for people outside of Almaty because state television mainly propagandizes ethnic Kazakh nationalist views and Kazakh culture, and broadcasts in Kazakh, a language which a majority of people in Kazakhstan do not understand. This stems, in part, out of a desire to reverse decades of second-class status and repression under the Tsarist and Soviet empires. Thus, ethnic Kazakhs are instituting preferences (e.g., government jobs, "nomenklatura" privatization, university admissions) to benefit themselves.

The March 7, 1994, parliamentary and local elections reinforced popular cynicism about democratic reform due to numerous election law violations. CSCE election observers concluded that the elections did "not meet international standards for free and fair elections." Most knowledgeable observers believed that the new parliament would be transitional and not serve out its five-year term, due in large part to the election irregularities which reduced the legitimacy of the new parliament.

In March 1995, under recommendation from Kazakhstan constitutional court, President Nazarbayev dissolved the parliament on the grounds that the 1994 elections were flawed. The deputies have stated that they would contest the constitutional court ruling. In the meantime, President Nazarbayev, with the help of his Prime Minister Akezhan Kazhegeldin, will rule by decree. President Nazarbayev strengthened his decision by announcing a referendum to extend his term in office until the year 2001, precluding a presidential election in 1996. In his address at Indiana University, Secretary of State Christopher cautioned that the referendum represented a step away from democracy. The Government of Kazakhstan held the referendum on April 29 and claimed that 96 percent of the voters approved Nazarbayev's extension in office.

Kyrgyzstan

General Assessment

Kyrgyzstan continues to be the most open, progressive, and democratic of any of the former Soviet republics in Central Asia. The media are essentially free, political parties operate freely, and basic human rights are observed. On February 5, 1995 generally free and fair elections were held for seats in Parliament.

The government launched a bold and comprehensive economic reform program in 1993, aimed at establishing a policy, legal, and regulatory environment which supports private-sector expansion and sustainable, market-led growth. Unfortunately, the economy has continued to deteriorate since then -- government tax revenues are insufficient, unemployment is increasing and many recently privatized enterprises are going bankrupt. Despite these difficulties, the government remains committed to market-oriented economic reform. Continued foreign assistance will be essential.

Security

Due to the country's harsh economic situation, the newly formed Kyrgyz Ministry of Defense is facing a formidable task at maintaining its 16,000 man armed force. The shrinking budget has led to growing shortages in all areas of operation, training, and maintenance. The country has introduced a conscription system, with an alternative service option.

To help address the shortfall in personnel and the deficit of technical skills in the new armed forces, the government signed a treaty with Russia in March 1994 on military service by Russian citizens in the Kyrgyz armed forces. The document is valid until December 1999 and stipulates that Russian servicemen may serve in the Kyrgyz military on a contract basis and at the same time retain all the rights and privileges of Russian servicemen. An estimated 4,000 border guards (virtually all ethnic Kyrgyz) under Russian command are stationed in Kyrgyzstan to guard the Sino-Kyrgyzstan frontier. Russian officers still comprise about half of Kyrgyzstan officer corps. Since Kyrgyz defense capabilities will always remain limited, the government has placed a premium on good relations with its neighbors and on participation in multilateral institutions, which it perceives as the best guarantors of its security. The Kyrgyz want active involvement in these institutions and thus have provided a rotational battalion to support CIS peacekeeping efforts in Tajikistan. Kyrgyzstan has sent representatives to the CSCE, EU, NACC, and the UN.

In February 1995 Kyrgyzstan delivered its presentation document on NATO's Partnership for Peace program. The government followed this up soon after with plans to participate in PFP training exercises in the United States.

Economics

The Kyrgyz Republic's loss of subsidies from Moscow, geographic isolation, poor infrastructure, and lack of easily exploitable natural resources have left its economy in a near disastrous state since the breakup of the Soviet Union. 1995 GNP is estimated to be at just half 1991 levels. Many people can no longer survive on their official salaries and engage in the burgeoning "gray market" to make ends meet.

In 1993, Kyrgyzstan launched a bold program to transform its Soviet-style economy. The government introduced favorable laws on privatization, joint ventures, foreign trade and investment, free economic zones, and concessions to foreign investors -- all crafted to facilitate the rapid development of a market economy. Also in 1993, Kyrgyzstan became the first republic in the region to introduce its own currency.

In 1994, as Kyrgyzstan economic crisis deepened, the government accelerated economic reforms. The government removed bread subsidies, accelerated the pace of privatization, eliminated most export licensing requirements and radically cut tariffs on imports. In addition, the government introduced a decree allowing land rights to be exchanged, inherited, lent, and mortgaged for a 49-year period. In the wake of harsh budgetary cuts and tight monetary policies, inflation slowed to a monthly average of 7 percent, and to just 1 percent per month in early 1995. Unfortunately, the downward slide of the economy has continued. The number of unemployed continues to increase and many newly privatized firms are now facing bankruptcy. Despite drastic cutbacks in spending, poor revenue collection has caused the budget deficit to widen. Although the government remains strongly committed to economic reform and to getting the budget under control, even more stringent measures, particularly in the tax area, will be required. In the interim, substantial foreign assistance will be essential.

Despite the current difficult economic situation, the government remains open to foreign advice and welcomes advisors and technical assistance programs. In an early example that Kyrgyzstan embraces CSCE principles, in 1993 Bishkek served as the site for the first CSCE Economic Forum seminar in Central Asia, which promoted the establishment of small- and medium-sized businesses in economies of transition.

Human Dimension

The government continues to express strong support for human rights, democracy, and the rule of law, and in general has respected them in practice. However, concerns continue to be raised about government policy toward non-Kyrgyz ethnic minorities. In 1993, increasing domination by ethnic Kyrgyz of government, education, and other institutions and a language policy that favored official use of the Kyrgyz language created insecurity among members of ethnic minorities, primarily Russian speakers, and caused their members to emigrate in large numbers. In response to this increase in emigration, in June 1994 President Akayev issued a decree giving Russian language official status in situations where Russian speakers constitute a majority, as well as in sectors, such as health services and technical sciences, where use of Russian is particularly appropriate. This decree also provides for the fair representation of the Russian-speaking population in the national government, local state administration and on the boards of state organs and enterprises. Kyrgyzstan press is perhaps the most free in all of Central Asia. However in the fall of 1994 the government shut down two newspapers which had criticized its policies. At the same time, the government engineered a temporary parliamentary boycott, at least in part to prevent investigation of government corruption. Kyrgyzstan held a referendum on January 30, 1994 on President Akayev's leadership and his reform program. Akayev won by an overwhelming margin. Although Akayev was widely expected to win, there was some public criticism of the wide margin of victory, reminiscent of Soviet-era elections. President Akayev's term expires in 1996, when new presidential elections are scheduled.

LATVIA

General Assessment

Since regaining its independence in 1991, Latvia has made considerable progress towards reestablishing a pluralistic, democratic government and ensuring human rights for all inhabitants. In June 1993, Latvia's citizens held free and fair elections. In February 1995, Latvia became a full member of the Council of Europe.

Latvia is beginning to achieve macroeconomic stability and prosperity as it reintegrates with the West. In 1994, Latvia concluded a Free Trade Agreement with the other Baltic states and with the European Union and recently concluded an association agreement with the EU.

In November 1993, with Latvia's cooperation, the OSCE set up a mission resident in Latvia that began work to "address citizenship issues and other related matters." The mission also reports on "developments relevant to the full realization of OSCE principles, norms, and commitments," which included Russia's Helsinki Summit commitment to withdraw troops.

In July 1994, the Saeima passed a law on naturalization and citizenship which gives most non-citizens the right to apply for naturalization over the next several years. The main requirements for naturalization are knowledge of the Latvian language, history and constitution as well as a pledge of loyalty to independent Latvia. Most outside human rights experts, including the Council of Europe, deem the law to be a reasonable compromise consistent with international norms. Russia and some non-citizens did criticize the law, although the OSCE mission noted that there were inaccuracies in the Russian criticism. Russia completed the withdrawal of its military forces from Latvia on August 31, 1994. As of October 1994, however, an estimated 1,700-4,000 recently demobilized Russian officers and their families remained in Latvia illegally.

Security

On April 30, 1994, after almost two years of difficult negotiations, Latvia and Russia concluded a package of agreements providing for: the complete withdrawal of Russian military forces by August 31, 1994; continued Russian operation of an early warning radar facility at Skrunda until 1998, with an additional 18 months for dismantlement; and social guarantees for ex-soviet military officers who retired prior to January 28, 1992. A specific provision of the agreements clarified that the dissolution of military units or demobilization of forces on Latvian territory after January 28, 1992 could not be considered equivalent to their withdrawal.

Russia completed its withdrawal of active duty military forces as scheduled on August 31, but requested the Latvian government to extend the residence of 1,115 officers who had been demobilized after January 28, 1992 while they awaited housing in Russia. Latvia has extended temporarily the permits of these and other demobilized officers who remained past the troop withdrawal deadline.

Russia withdrew the last of its active duty armed forces from Latvia by the August 31, 1994 date for withdrawal set under the bilateral agreement of April 30, 1994. This marked the end of a half-century of Russian military occupation of Latvia. The withdrawal resolved a lingering issue from World War II and, aside from meeting the deadline, marked substantial progress toward a reduction of regional tensions. The Latvian and Russian parliaments subsequently ratified the agreement.

Under the agreement, 800 Russian personnel in civilian status remain to operate the ballistic-missile early warning facility at Skrunda until late 1998; they will then assist in the radar's dismantlement and are scheduled to leave Latvia by early Spring 2000. On May 4, the unfinished 19-story receiving tower at the large phased-array radar site at Skrunda was imploded successfully.

Under the terms of agreement, the Organization on Security and Cooperation in Europe (OSCE) agreed to monitor implementation of the Skrunda provisions (4 years of continued operation of the two older radars by the Russians plus another 18 months for their dismantlement). After difficult negotiations, both sides agreed to reference terms for the inspection regime. U.S. goals are threefold: to establish and enact a credible OSCE inspection regime; to ensure compliance; and to underscore that there is no linkage between the Skrunda inspection regime and the Russian-Latvian bilateral agreement on Skrunda on one side and the military pensioners agreement on the other.

There are Russian officers retired or demobilized in place after January 28, 1992 who remain in Latvia contrary to Russia's obligation to have withdrawn them by August 31, 1994. Numbers are very difficult to confirm; the Russians have submitted a list of 1,641, while the Latvians believe there may be between 1,700 and 4,000. The Latvian government has approached this issue in a low-key manner and continues to look for ways to resolve the issue quietly with Russia. By a decision of March 23, 1995 the OSCE called on Russia to accelerate the withdrawal of such officers and their dependents.

Latvia is slowly building small defense forces. It has also set up national guard type units. Latvia forecast no notifiable CSBM activities for 1995. Possibly because its military establishment is small and little developed, Latvia failed to provide annual CSBM data in accordance with the Vienna Document.

Latvia sees its gradual integration into a European-wide security system as the ultimate guarantee of its security and also has begun a cooperative dialogue with the United States and other Western countries in counter-terrorism, civil aviation security matters and the fight against organized crime. Latvian Defense and Foreign Ministry officials participated in a number of NATO- and NACC-sponsored seminars on civilian control of the military. Latvia signed NATO's Partnership for Peace framework document and participates actively. With Estonia and Lithuania, it initiated the formation of a joint Baltic peacekeeping battalion for eventual participation in NATO exercises and international peacekeeping and humanitarian operations. In February 1995, Latvia became a full member of the Council of Europe.

Economics

Since restoration of its independence in August 1991, Latvia has made steady progress toward replacing the centrally-planned, socialist system with a structure based on free-market principles. In 1994, inflation ran at 26 percent, and the budget deficit stood under 2 percent of GDP. Latvia's freely-convertible currency, the lat, has held steady or appreciated against major world currencies since it was introduced in 1993. Latvia's successful monetary policy has contributed to large financial flows into Latvia from Russia and Riga's emergence as a financial center for countries formerly in the Soviet Union.

In 1994, Latvia concluded a Free Trade Agreement with the other Baltic states and with the European Union and recently concluded an association agreement with the EU.

Structural reform has proceeded most rapidly in agriculture and in privatization of small enterprises. Over 58,000 private farms have been established and most remaining collective farms transformed into private joint stock companies. However, many of Latvia's new farmers are operating at subsistence levels due to lack of financial resources and credit. Urban and rural property controlled by the state is being returned to former owners or privatized. In 1994, the Government created a privatization agency modeled on the German Treuhandanstalt to accelerate the pace of privatization. Since November 1994, two rounds of mass privatization of enterprises, offered for share purchases through privatization certificates (vouchers), have occurred. Over 80 percent of small businesses were privatized by the end of 1994. Latvia is beginning to achieve macroeconomic stability. Consumer prices for total goods have increased ten-fold since 1991, and unemployment has increased from 3 percent in 1993 to 7 percent in 1994. Nonetheless, average real wages appear to have stabilized, and purchasing power increased in 1994 by 15 percent. Latvia's growing private sector accounts for over 55 percent of the country's GDP. Latvia showed approximately 2 percent GDP growth in 1994, and already has displayed 1 percent growth in the first quarter of 1995. Direct foreign investment grew to $155 million in 1994, which accounted for 4.5 percent of Latvia's GDP. Nevertheless, Latvia needs to continue pursuit of more aggressive reform. Financial and banking institution reform remains a high priority. This year, the Government passed an umbrella tax law encompassing personal and enterprise income, real estate, foreign investment, and value added tax. Actual tax collection remains slow, however. Greater infrastructure development which meets Western standards and greater liberalization of regulations on foreign ownership of property will draw greater Western attention and investment and consequently increase Latvia's prosperity, security and stability. The Latvian Government has noted the detrimental effect on Latvian exports of discriminatory Russian tariffs. Latvia also needs to liberalize further its own trade regime, especially on agricultural products, as it reintegrates into Western institutions.

Human Dimension

Latvian citizens participated in free and fair elections for the parliament in June 1993 and for local councils in May 1994. In March 1994 the government established a new post of State Minister for Human Rights to act as point of contact for the international community as well as Latvian residents on relevant issues. Latvia's constitutional law provides for basic freedoms and guarantees that "all persons in Latvia are equal under the law regardless of race, nationality, sex, language, social, material and occupational standing and origin." A March 19, 1992 law explicitly "guarantees to all permanent residents in the Republic regardless of their nationality, equal rights to work and wages." The law bans "any activity directed towards nationality discrimination or the promotion of national superiority or national hatred." On May 11, Latvia signed the European Convention on the Protection of Human Rights.

The most important human rights development in 1994 was the adoption of a law on naturalization and citizenship which, if implemented, will provide most of Latvia's approximately 730,000 non-citizens with the opportunity to seek naturalization over the next several years. The main requirements are knowledge of the Latvian language, history and constitution as well as a pledge of loyalty to independent Latvia.

The naturalization law provides that various categories of non-citizens will be eligible to apply for naturalization over a period extending from 1995 until early in the next century. Highest priority will be given to such categories as spouses of Latvian citizens, ethnic Latvians, citizens of other Baltic states, and persons born in Latvia. The law has met with approval from most international human rights experts, including the Council of Europe.

Owing largely to the Russification policy pursued during the Soviet occupation, ethnic Latvians comprise only about 54 percent of the total population and do not constitute a majority in any of Latvia's seven largest cities. The possibility that non-Latvians who entered the country while it was under Soviet rule and who had no proven affiliation to Latvia could control the balance of political power made citizenship and naturalization issues particularly sensitive for many Latvians.

Among the non-citizens, approximately 65 percent are ethnic Russian; there are also Ukrainian, Belarusian, Polish, Lithuanian and other communities.

The Latvian Government has strongly condemned an unexplained bomb attack which damaged Riga's sole functioning synagogue in May--the first such terrorist attack against a Jewish target since Latvia regained its independence. Security police also have seized 1,000 copies of Mein Kampf, stopped sales of the book, and charged the local publisher with inciting racial hatred.

There have been documented instances of abuses by the Latvian Department of Immigration and Citizenship against residents who are not Latvian citizens. Persons living in certain kinds of housing, especially factory dormitories and housing previously connected to the Soviet/Russian military, are frequently granted only temporary residence permits which make it difficult to participate fully in Latvian society. In some instances, decisions by the Department of Immigration and Citizenship were overturned by the courts, but the Department continued to refuse to carry out the court orders. Most common was the Department's refusal to register certain non-citizens as permanent residents even though they were legally qualified for this status. This Department also has raised unofficial legal obstacles for foreign missionaries of what Latvian law describes as "non-traditional religions and religious groups" (those without a major historical presence in Latvia). These barriers have appeared despite official sanctions against such practices. International experts, Latvian Government officials, and domestic human rights activists agree that Latvia should now place high priority on implementing the naturalization law and other related legislation fairly and impartially and on providing greater opportunities for non-citizens to learn the Latvian language.

LITHUANIA

General Assessment

Lithuania has made considerable progress towards the establishment of a pluralistic democratic government and ensuring the respect for human rights. Freedom of the press, the right to associate, and the right of citizens to change their government are fully respected. The results of the autumn 1992 parliamentary elections, as well as the March 1995 municipal elections, clearly demonstrate Lithuania's democratic and internal political stability.

As Lithuania reintegrates with the West, macroeconomic indicators show improvement in every category except tax collection, which the Government claims now is its number one priority. In 1994, Lithuania concluded a Free Trade Agreement with the other Baltic states and with the European Union and recently concluded an association agreement with the EU.

Relations between the Lithuanian authorities and the Polish and Russian communities have improved greatly under the current Government. Lithuania also has signed friendship treaties with neighboring Poland and Belarus. Lithuania has advanced in the support of human rights, especially in the creation of the new Government "Ombudsman" institution, which enables people to challenge public policy decisions. On April 27, the Lithuanian parliament unanimously ratified the European Convention on the Protection of Human Rights.

The Russian armed forces completed their withdrawal from Lithuania on August 31, 1993. Notwithstanding, Russia continues to violate Lithuanian airspace. Lithuania took an active part in the work of the OSCE, NACC, and PFP in line with its goal of eventually integrating itself into a European-wide security system. Lithuania signed on the Partnership for Peace program in January 1994. It formally applied for NATO membership, with the understanding that this is a long-term goal.

Security

Securing the withdrawal of the Russian troops (completed on August 31, 1993) had been the pre-eminent national security goal of Lithuania since its de-facto independence in August of 1991. The achievement of this goal was facilitated by Lithuania's flexible stance towards the Russian military's social concerns, including the liberal provision of citizenship and housing for those Russian officers choosing to remain in Lithuania.

Although the withdrawal significantly strengthened Lithuanian sovereignty, its leadership remains concerned about the heavy presence of Russian military forces in the Kaliningrad district, a Russian enclave separated from Russia by Lithuania, Poland and Belarus. Nevertheless, Lithuanian officials indicate that transit traffic from Russia to Kaliningrad is proceeding normally. In January 1995, both countries agreed to a temporary continuation of current military transit rules. At the same time, Russia granted Lithuania MFN.

Russia has regularly violated Lithuanian airspace on a routine basis. After a particularly flagrant violation on March 29, the Lithuanian Government temporarily suspended all Russian military overflights to Kaliningrad. Subsequently, Lithuania has implemented tougher new regulations based on ICAO standards to regulate all overflights.

Lithuania has made considerable progress in creating its own defense forces subject to civilian control. The State Defense Council is responsible for major security and defense issues. Roughly 10,000-12,000 personnel are on active-duty in the regular army and the home guard reserve. A small navy and air force are in the process of formation, although severe financial constraints hamper their development. According to the Constitution, all of these formations are subordinate to the Minister of National Defense. Jurisdiction over the 4,000- strong border troops, which had been subject to the Defense Ministry, was transferred to the Interior Ministry in 1994. Lithuania sees its gradual integration into a European-wide security system as the ultimate guarantee of its security and has begun a cooperative dialogue with the United States and other Western countries in counter-terrorism, civil aviation security matters and the fight against organized crime. Lithuania officially applied for NATO membership in January of 1994, although President Brazauskas made clear that he saw NATO membership as a long-term goal. Lithuanian Defense and Foreign Ministry officials participated in a number of NATO- and NACC-sponsored seminars on civilian control of the military. Lithuania signed NATO's Partnership for Peace framework document and participates actively. With Latvia and Estonia, it initiated the formation of a joint Baltic peacekeeping battalion for eventual participation in NATO exercises and international peacekeeping and humanitarian operations. Under Danish leadership, Lithuania already has provided peacekeepers to the UNPROFOR mission in Bosnia.

In 1994, Lithuania received one CSBM inspection and one evaluation visit.

Economics

Lithuania is gradually transforming a centrally planned economy into a market-oriented system. Most housing and small businesses are now privately owned. Over 142,000 new private farms have been established which cover well over one-third of the country's total arable land. Newly created small firms (over 140,452 registered) are rapidly growing in number and steadily expanding the range of products and services offered.

Since the June 1993 introduction of a stable currency, backed by a currency board and pegged to the U.S. dollar, Lithuania has achieved significant success in stimulating investment and in reducing inflation. Compared to the 183 percent annual rate for 1993, inflation in 1994 stood at approximately 48 percent. In 1994 the economy also turned a corner, registering slight positive growth. Trends for reduced inflation and increased productivity are expected to continue. Trade with Western countries increased from 8 percent of the total in 1992 to over 24 percent in 1994. Economic reintegration with the West is a high priority. Approximately 50 percent of Lithuanian workers are in the private sector, which accounts for half of Lithuania's GNP. In 1994, the Government privatized 70 percent of its state property, and to date has registered 4,362 foreign/joint ventures, whose authorized capital exceeds $248 million. State companies are now authorized to sell up to 50 percent of their shares for hard currency without cabinet approval, and many of over twenty commercial banks offer a full range of international banking services. The Government also is removing some restrictions on foreign ownership of land. The IMF has extended stand-by credits to Lithuania and has endorsed the Government's anti-inflationary economic program.

Lithuania needs to pursue more aggressive reform. This includes further reform of its financial, banking, and social insurance institutions. In this process, Lithuania also needs to develop greater infrastructure development which meets Western standards. More fair and equitable treatment of Western businesses and greater liberalization of regulations on foreign ownership of property will draw greater Western attention and investment and consequently increase Lithuania's prosperity, security and stability. While overall tariff rates have decreased, Lithuania must further liberalize its trade regime, particularly on agricultural products, as it reintegrates into Western institutions.

Lithuania's severe financial problems make difficult any large-scale efforts to combat environmental degradation. With the help of multilateral financial institutions and individual donor countries, however, modest progress are being made in constructing water-purification systems in Klaipeda, the country's port, and Palanga, a seaside resort in northern Lithuania. Lithuania is experiencing a surge in new opportunities for cooperative contacts with scientists and medical practitioners throughout the Western world.

Human Dimension

With the results of the 1992 parliamentary elections and the conclusion of recent nationwide municipal elections, Lithuania has made considerable progress toward establishing a pluralistic democratic government that protects the human and civil rights of its citizens. Freedom of the press, the right to associate and the right of citizens to change their government are fully respected. Because of a dramatic rise in the crime rate the parliament passed a preventive detention law which allows the police to hold suspected members of organized criminal groups for up to two months of investigative detention before beginning court proceedings. While popular domestically, the length of detention exceeds OSCE standards.

Lithuania's citizenship law--which came into effect in December 1991--contributed significantly to the overall satisfaction of the country's ethnic minorities (19 percent of Lithuania's population). There have been no serious complaints from the inhabitants of Lithuania regarding the availability of citizenship or the rights of non-citizen residents.

Lithuania also has created a new Government "Ombudsman" institution, which enables people to challenge public policy decisions. On April 27, the Lithuanian parliament unanimously ratified the European Convention on the Protection of Human Rights.

Relations between the Lithuanian authorities and the ethnic Polish and Russian communities are very stable. The Polish and Russian minority communities have access to Polish and Russian-language education, newspapers, television and radio programming, and other ethnically based organizations. Lithuanian officials have encouraged international and non-governmental human rights groups to visit Lithuania and monitor the observance of human rights.

THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA

General Assessment

The Former Yugoslav Republic of Macedonia (FYROM) reaffirmed and largely respected Helsinki principles, despite its continued exclusion from full OSCE membership. The beleaguered country's efforts to attain membership in Western European organizations continued to be complicated by Greece's objections to the country's self-chosen name, "Republic of Macedonia," and disputes over the country's symbols and constitution. By the end of the reporting period, the FYROM had acceded as either full member, or observer, to almost all existing international organizations. To date, 110 countries have recognized the FYROM, while 52 countries, including all of the European Union partners except Greece, have established full diplomatic relations with the FYROM. Although the military has been placed under civilian oversight, efforts to develop a modern, disciplined, and effective force have been hampered by economic hardship. During the reporting period, the United States signed a military memorandum of cooperation with the Macedonian Defense Ministry and Secretary of Defense Perry, as well as Chief of JCS Shalikashvili, visited Skopje. Closer security cooperation will introduce the fledgling Macedonian army to U.S. military organization and guiding democratic principles.

Continuing international sanctions against Serbia and Montenegro and a Greek blockade of the southern border have taken a heavy toll on the country's economic health and slowed progress toward the transformation of the economy. As a result, a small number of Macedonians have profited by flagrantly violating Serbia sanctions, while the majority suffers economic deprivation. An OSCE Sanctions Assistance Mission (SAM) operates from Skopje with full government support.

Regarding the human dimension, President Gligorov's tripartite coalition of centrist parties won parliamentary elections in November, 1994; Gligorov was elected for a second term in the country's first presidential elections by direct popular vote. Moderate ethnic Albanian MP's, while no longer part of the coalition, cooperate with the government on most issues. Gligorov named four ethnic Albanians to ministerial posts. The two major nationalist opposition parties chose to boycott the second round of elections, citing fraud, and do not participate in government. While noting technical irregularities in electoral procedures, international observers declared elections free and fair. The government recognizes that progress must be made on rights for ethnic minorities, but appears constrained by the possibility of a nationalist backlash and by the country's difficult economic situation. Ethnic Albanians' attempt to open a private Albanian-language university in Tetovo was squelched by the government, ending in violence.

Security

In the security area, the FYROM established its own armed forces in 1992, following withdrawal of the Yugoslav National Army from the country's territory. The military continues to represent a force of only 10-15,000 soldiers who possess virtually no heavy weaponry to include tanks and artillery or aircraft. Foreign assistance has been slowed by the country's struggle to overcome its isolation.

The UN deployed peacekeepers in the FYROM in December 1992 in an effort to prevent the potential spillover of conflict from other areas of former Yugoslavia. Since July 1993, about 550 American troops make up half of the once all-Nordic UNPROFOR/FYROM contingent. The FYROM has cooperated with the OSCE mission in Skopje since 1992.

Economics

In the economic sphere, the FYROM continued to struggle with the collapse of its major markets in the former Yugoslavia, due to international sanctions against Serbia and Montenegro. Prior to independence some 60 percent of the country's trade was with Serbia, and an additional 20 percent or so travelled north over Serbia's transportation network. The country had succeeded in redirecting almost 70 percent of its trade through the port of Thessaloniki, when the government of Greece imposed a blockade against FYROM commerce in February 1994, exacerbating an already critical situation. The FYROM argues the step is illegal under international law, although Greece defends its action as a political step intended to protect itself against the FYROM in the dispute over the country's name, symbols, and constitution. Real GDP fell by approximately 8 percent in 1994, for a total decline of 35 percent since 1990. In the period since sanctions were imposed, unemployment has grown to over 35 percent; real wages have plummeted by an average of 9 percent per year since 1990, severely eroding living standards.

Initial attempts at economic stabilization failed, but in 1994, following the adoption of ambitious macroeconomic program, an impressive degree of financial stabilization has been observed. Inflation, which stood at approximately 55 percent in 1994, is expected to be significantly lower this year. Progress on vitally needed structural reforms has been slower, despite the passage of important legislation, but is now receiving more attention from the government and donors. In late 1992 and early 1993, the FYROM joined the World Bank and IMF as one of the successors to the former Socialist Federal Republic of Yugoslavia. It has accepted responsibility for its share of the former Yugoslavia's debt.

Human Dimension

President Gligorov's tripartite coalition of centrist parties won parliamentary elections in November, 1994; Gligorov was elected for a second term in the country's first presidential elections by direct popular vote. Moderate ethnic Albanian MP's, while no longer part of the coalition, cooperate with the government on most issues. Gligorov named four ethnic Albanians to ministerial posts. The two major nationalist opposition parties chose to boycott the second round of elections, citing fraud, and do not participate in government. While noting technical irregularities in electoral procedures, international observers declared elections free and fair.

Over the course of the reporting period, the government by and large respected OSCE human dimension principles, although most of the FYROM's minorities demanded improvements in their status. It recognizes progress on rights for members of ethnic minorities must be made, but appears constrained by the possibility of a nationalist backlash and by the country's difficult economic situation. A private Albanian-language university was shut down by government authorities in February, resulting in riots and violence. The government saw the university as a step toward autonomy for largely ethnic Albanian Western Macedonia, while ethnic Albanians protested their lack of access to higher education in their mother tongue. Gligorov's government is presently working on expanding Albanian-language education opportunities within the FYROM's existing university system. An extraordinary national census conducted in July/August 1994 was funded and organized by the Council of Europe. Although there was some initial resistance to participation by ethnic Albanians, who feared the census would be biased against them, all but a very small number did finally participate. International observers declared that the census was fair by international standards.

MOLDOVA

General Assessment

The Moldovan government continues to take its OSCE commitments seriously. Moldova has solicited OSCE involvement in negotiations to reach a political settlement with separatist Trans-Dniester. A OSCE long-duration mission has operated in Moldova since March 1993 but has not been able to carry out the full scope of its mandate because of separatist opposition. Moldova continues to press for more full OSCE involvement in the work of the joint control commission, monitoring the "security zone," and participating to some extent in the implementation of the agreement on the withdrawal of the Russian 14th army. Moldova has accepted the recommendations made by the OSCE mission as the basis of future negotiations on the status of Trans-Dniester.

Upon Moldovan request, the OSCE's Office of Democratic Institutions and Human Rights (ODIHR), the Council of Europe, and other international entities observed the early parliamentary elections held on February 27, 1994. They were assessed as Moldova's first free and fair multiparty democratic elections. Moldova also successfully conducted local elections in April 1995, and held a referendum in predominantly ethnic-Gagauz regions in March 1995 in accordance with an autonomy agreement approved by the Moldovan parliament earlier in the year. The Ministry of Defense continues to plan a small, professional force of less than half of 1 percent of the population, and has no intentions of involving it in domestic conflict or in political affairs. The Ministry has welcomed and solicited Western training for its forces. The Moldovan military currently numbers fewer than 20,000 persons.

The new Moldovan government, appointed in April 1994 after the parliamentary elections, reaffirmed its commitment to a reformist economic course. Moldova is the second former Soviet republic to have successfully concluded an IMF standby arrangement. In the past year inflation has dropped sharply. In the first two months of 1995, inflation averaged at about 2.5 percent, in contrast to 16.7 percent during the corresponding period the previous year. An ambitious privatization program is currently being implemented. Overall, production and industrial output statistics continue to show a decline from previous years, though figures for 1994-95 were demonstrably effected by a prolonged drought followed by serious flooding in 1993-94.

Moldova's severe budgetary and fiscal restraints severely restrict the ability of government officials to participate in scientific and technological exchanges, or in meetings taking place in Western cities. However, Moldova has given priority to the OSCE and has sent more representatives to Vienna and Prague than to other international activities.

Security

The current government is committed to settling all disputes by peaceful means, and forces have standing orders not to respond to provocation.

The Moldovan military has been very cooperative with civilian authorities. Officers at all levels have appeared to be favorably disposed to a possible civilian minister of defense. Chisinau does not have effective control of the separatist Trans-Dniester, which is highly militarized and hosts a Russian 14th Army that has openly sided with the separatist regime. Moldova received on CSBM evaluation visit in 1994.

Economics

Moldova has made significant progress toward a free market economy. The government has complied with IMF conditions for a standby arrangement and has successfully introduced and maintained the value of a national currency. A comprehensive privatization program has begun.

Human Dimension

Legal protection for the rights of individual citizens, and in particular for minorities, are enshrined in the new constitution, which entered into force in August 1994. Moldova solicited the advice of recognized Western experts while drafting the constitution.

The multiparty parliamentary elections held February 1994 were generally free and fair. A proportional representation system with the whole country as a single district resulted in four parties being represented in parliament, with a moderate Agrarian Democratic Party receiving 54 percent of the seats. Local government elections in April 1995 were conducted in a similar manner to the parliamentary elections, with no major discrepancies observed. According to the election law, in municipalities where less than 50 percent of the voters participated, council chairmen will be appointed by the President.

Most of the press is government-financed, which tends to limit its independence, but there is no indication that the government has used its financing to limit criticism. In addition there is a small and growing private press that is free to operate and to criticize authorities.

ROMANIA

General Assessment

Romania has continued to progress in implementing its OSCE commitments. It became a member of the Council of Europe, received Most Favored Nation status from the U.S., and became the first country in the region to join the NATO Partnership for Peace program. In February 1995 its association agreement with the European Union went into effect.

Although difficult economic conditions persisted, there were encouraging signs of recovery. Economic growth resumed in 1993 and continued at a quickening pace in 1994, aided by a tough IMF-backed stabilization plan. The Government's Council for National Minorities, widely hailed in 1993, was largely ineffective in 1994. Despite official condemnation, disturbing expressions of extremist nationalism directed against Jews, Roma (Gypsies), and ethnic Hungarians occurred in 1994. In August 1994 two members of an ultranationalist party were appointed to cabinet positions in the Romanian government. One month later, the incumbent Justice Minister announced that he had become a member of the same ultranationalist party.

Security

In January 1994, Romania became the first former Warsaw Pact country to sign up for NATO's Partnership for Peace program, and participated in the first PFP field exercise in Poland in September 1994. In March 1994, Romania appointed its first civilian defense minister. Romania has been training a battalion-sized force for international peacekeeping duties, and will deploy it soon to Angola.

Romania is seeking to develop good relations with all its neighbors, but is currently placing the most emphasis on Hungary and on concluding a bilateral treaty that would normalize relations between the two countries. The major remaining obstacle to a treaty is the issue of autonomy for Romania's ethnic Hungarian minority and Council of Europe Recommendation 1201, which mentions autonomy. Many Romanians find Recommendation 1201 difficult to accept; Hungary seeks its inclusion in any treaty, and can point to its acceptance by Slovakia in the recently signed Hungarian-Slovak basic treaty. The Romanian and Hungarian sides continue to negotiate.

A bilateral Open Skies Treaty is in effect between Romania and Hungary. Romania ratified the multilateral Open Skies Treaty in the Spring of 1994.

Romania is a party to the CSBM agreement and to the Open Skies Treaty. Romania received three CSBM evaluation visits in 1994 but no CSBM inspections.

Military relations with the U.S. remain on a very positive course. In addition to the initiation of an International Military Education and Training program (IMET) in 1993, the U.S. European Command deployed a military liaison team to Bucharest in the same year; this team has proven to be very active and cost-effective. In spring 1994 the U.S. removed Cold War-era prohibitions and restrictions on the transfer of defense articles and services to Romania.

Economics

Romania has made measurable progress in its efforts to create a market economy. Prices have been freed, trade has been liberalized, and virtually all remaining subsidies on consumer goods have been removed. By the end of 1994 the private sector, which accounted for nearly 35 percent of GDP, played a leading role in such areas as retail sales, investment, and job creation. Progress also continued in the titling of land returned to private farmers.

The IMF Board approved a new Standby Agreement with Romania in May 1994, contingent on liberalization of the foreign exchange regime and other reform steps. A "mass privatization" bill, which was approved by parliament in March 1995, should accelerate Romania's privatization program by privatizing approximately 3000 state-run companies.

GDP, which had fallen for four consecutive years, stabilized in 1993 and registered 3.4 percent growth in 1994. At the same time, steady progress was made in reducing the monthly trade gap. Monthly retail price inflation, which averaged 12.1 percent in 1993 (the equivalent of an annual rate of inflation of 256 percent), declined to only 4.1 percent in 1994. Romania's association in 1993 with the EU and EFTA were important manifestations of the government's goal of closer integration into the Euro-Atlantic community. Restoration of MFN trading status with the U.S. in November 1993 likewise has yielded expanded trade with the U.S.

Romania has engaged in scientific exchange programs with private U.S. and European institutes, but the lack of resources continues to be a limiting factor. In 1993, the government signed science and technology agreements with India, Greece, and Moldova, and continued activities under existing agreements with China and Italy. Although no formal agreements exist, joint research programs and exchanges continue with the U.S., Germany, and France.

Romania is a signatory to nearly all international environmental agreements. While domestic concern for environmental issues continues, progress has been hindered by lack of resources. In 1993, the government formally adopted an ambitious comprehensive strategy for environmental protection. However, the financing remains unclear. The U.S. and Romania are about to conclude a "Globe" agreement on international environmental science and education.

Human Dimension

Non-governmental human rights organizations were free to operate. There are no legal barriers to the free exercise of religious belief, and there are now more than 200 registered religious organizations in Romania. Controversies between the Orthodox and the Uniate (Greek-Catholic) churches over former Uniate properties confiscated under the Communist regime continue.

State-run radio and television remain the only nationwide broadcasters. Broadcasts include foreign programs and Hungarian-language programs. In 1994, private broadcasting expanded greatly. By year's end, 25 independent television stations and 65 independent radio stations were broadcasting. However, the Ministry of Telecommunications restricts power, broadcast range, and transmitter access hours for private stations.

Romanians have extensive and growing access to foreign broadcasts due to the proliferation of cable television throughout the country. Foreign news publications may be imported freely and distributed, but their high cost limits their circulation. The press was free of censorship, although there were allegations of governmental manipulation of newsprint supplies and the newspaper distribution network. In April 1995, the Senate passed its version of a sweeping revision to the communist-era penal code. This bill contains several controversial provisions, particularly in the areas of libel, slander, and insults against officials. The provisions are very loosely drawn and provide additional penalties if the offenses are committed in the media. The Chamber has not yet passed its version of the revised penal code.

The Government created a consultative Council for National Minorities in 1993 to provide a forum for dialogue between the Government and all official minorities and to make recommendations to the Government regarding minority issues. Less than six months after the Council's inception, however, the delegates of the Hungarian Democratic Union of Romania (UDMR) withdrew, charging that the Council had failed to make substantial progress. Many minorities and other observers state that the Government seldom acts on the Council's recommendations.

Attacks in the nationalist-extremist press against Jews, Roma, and Hungarians continued in 1994. In May, angry villagers in Racsa set fire to all 11 Roma homes in retaliation for the murder of an ethnic Romanian shepherd by two young Roma, even though the Roma had already been arrested. Police arrested 14 people who are now free awaiting trial. However, the Government has failed to prosecute those responsible for the lynching of 3 Roma and the burning of 13 Roma houses in Hadareni in 1993, despite claims by the county prosecutor's office that sufficient evidence existed to arrest several suspects.

Ethnic Hungarians continue to claim they suffer cultural discrimination, which, in turn, draws sharp reactions from Romanian nationalists. Ethnic Hungarians express particular concern about a draft education bill now under consideration by the Romanian parliament which, they say, would restrict bilingual education in certain subjects and disciplines. In August 1994, two members of an ultranationalist party on which the government depends for support in parliament were appointed to cabinet positions. One month later, the incumbent Justice Minister announced that he had become a member of the same ultranationalist party.

There was little official initiative on women's issues. In 1994, large numbers of impoverished and apparently homeless but not necessarily orphaned children roamed the streets of the larger cities, causing acute concern among youth organizations. Human rights organizations reported that detainees did not always benefit from full legal protection. The military status of the police is considered to be a significant cause of insufficient investigation of charges of abuse. Human rights organizations complain that the military prosecutor fails to investigate thoroughly charges of police abuse.

The 1992 law on the reorganization of the judiciary, which took effect in 1993, provides for the establishment of a four-tier legal system, including appellate courts. Final recourse is to the Supreme Court or, for constitutional matters, to the Constitutional Court.

Organizations of all kinds, including unions, political parties, and minority groups were free to associate and demonstrate. Unions representing divergent sectors of the economy carried out strikes, or threatened to strike, throughout 1994. Romanian citizens were free to travel and to emigrate. Of an estimated 60-80 thousand illegal migrants believed to reside in Romania, less than 2000 were registered as asylum seekers in 1994. A parliamentary committee was established in June 1993 to oversee the activities of the Romanian Intelligence Service (SRI). However, the oversight committee does not have full budgetary control over the SRI. Although there was little documented evidence of interference with privacy, suspicion of governmental monitoring of conversations and correspondence persisted. Cultural exchanges were free of political constraint, and academic freedom was respected.

THE RUSSIAN FEDERATION

General Assessment

Russia's overall implementation of OSCE commitments during 1994-95 was fair. The lack of respect for international humanitarian norms and principles of human rights in Russia's military operation in Chechnya is of deep and continuing concern to the U.S. government and international community. The U.S. and other countries have repeatedly urged Russia to respect international humanitarian law and to take into account the Code of Conduct which Russia and all other OSCE participating states adopted in December 1994.

Freedom of assembly, association, religion, speech and media are generally respected in Russia, although many important acts of legislation in these areas have still not been passed. Movement continues toward holding elections as scheduled -- Parliamentary elections in December 1995 and Presidential elections in June 1996. In preparation for these elections, a restructuring of the government-oriented political parties is occurring to secure increased legitimacy and support within the traditional political class and intelligentsia.

For the most part, Russia continues to act in accordance with the security and arms control obligations it assumed under the Vienna Document. However, Russia has not yet ratified the Open Skies Treaty, and did not provide notification of its military activities in Chechnya as required under the Vienna Document. Russian forces are involved in peacekeeping operations in several states of the former Soviet Union and the former Yugoslavia. All Russian troop formations have departed from Estonia, Latvia and Lithuania with the exception of an early warning radar site in Latvia.

The Russian government continues to make progress toward a market economy. The economy continued to contract, adding to concerns about future economic well-being, even as economic statistics suggested that Russia's economy may be turning a corner. The dramatic decline in industrial production since 1991 probably bottomed out in summer 1994. The government's resumption of determined anti-inflation policies in early 1995 brought monthly inflation rates below 10 percent and the Standby arrangement with the International Monetary Fund negotiated by the Russian government provides for an austere budget. The Russian government has embarked on a program of tax reform and has expanded the privatization program. Massive re-distribution of wealth, coupled with the weak legitimacy of public institutions, has been accompanied by a troubling criminalization of the economy and public life. The re-alignment of relationships between money, interests and political power continued.

Economics

Russia continues to face serious economic problems stemming from decades of government economy and the disruption of its traditional commercial and industrial ties following the dissolution of the Soviet Union. Since 1991, GDP has fallen by more than 40 percent, greater than that experienced by the United States during the great depression.

The dramatic decline in industrial production as Soviet-era supply lines across new international borders were disrupted probably bottomed out in summer 1994. The bulk of the production declines have come in military production. On balance, in fact, production declines have probably improved national economic well-being by reducing grossly inefficient activities. The downside, however, has been rising (although hidden) unemployment.

By the beginning of 1993, Russia had freed prices on 85 percent of all wholesale and retail goods, and many remaining controls on energy, housing, transportation and others were eliminated during the course of the year. The resulting dramatic increase in prices (inflation during 1993 was 900 percent) made inflation control a top government priority. The government's austerity program began to show results in 1994, but experienced setbacks in the autumn; annual inflation in 1994 was a little less than 300 percent. Resumption of determined anti-inflation policies in early 1995 has brought the monthly rates below 10 percent; the government expects to reach 2 percent monthly inflation by the end of the year. The Russian government has successfully negotiated a Standby arrangement with the International Monetary Fund. An important part of this program is an austere budget, approved by the Duma and passed into law, with a projected deficit around 5 percent of GDP. The Russian government still has problems in collecting revenues, and has embarked on a program of tax reform that is intended to rationalize the tax code and improve tax collection. A significant amount of taxable income goes unreported. The government is also working to limit monetary financing of the budget deficit by creating a domestic market for government-backed securities and bonds. Other elements of the IMF-approved program included abolition of customs exemptions, export taxes and other market-distorting measures.

The privatization program continues to expand. Voucher privatization put 70 percent of Russian firms partially or fully into private hands. The government has issued decrees to begin the second stage, cash privatization, which it hopes will attract significant direct investment.

A September 1993 land decree permitted the sale of agricultural land (with several restrictions) among Russian citizens. High percentages of urban residential units have been privatized and can be sold on the market. In Moscow a substantial amount of residential property was privatized by the end of 1993. As part of second-stage privatization, the government has issued more liberal regulations that advance land reform. Foreigners still cannot purchase real estate in Russia but can lease it for 50 years and sometimes longer.

A bankruptcy law passed in March 1993 provided the basis for several test cases in the courts. However, only a handful of enterprises have gone through bankruptcy proceedings. In December 1993 President Yeltsin signed a decree outlining criteria and procedures for reorganizing and eliminating unprofitable state enterprises through mandatory bankruptcy proceedings. Differences in income distribution have widened steadily in the uneven transition to a market economy. However, the Russian statistical service's data indicate that real income has been rising continuously since the initial drop after price liberalization in June 1992. Real wage income has fallen during the same period, suggesting that many Russians have been less dependent on wages for their income, as they move into the private sector. Although official unemployment levels have remained low, much employment and under-employment remains hidden. The government estimates that as much as 13 percent of the adjustable work force is employed in the cash underground economy. The government's social welfare system is slowly adapting to respond to the changing needs of the populace.

Security

The Russian Federation continues to act for the most part in accordance with the obligations it assumed under the Vienna Document. However, Russia did not provide notification of its military activities in Chechnya as required under the Vienna Document. Russia conducted one CSBM evaluation visit and one inspection, and received six CSBM evaluation visits and three inspections.

Russia continues to maintain its station in the OSCE communications network and is using the station for receipt and transmission of notifications pursuant to the Vienna Document. The Russian military is facing a painful process of reform, made more difficult by funding shortages and a lack of consensus about the direction these reforms should take. Russian forces are involved in peacekeeping operations in several states of the former Soviet Union and the former Yugoslavia, and these operations have been the subject of much discussion and some complaints within the OSCE. Particularly in Georgia/Abkhazia and Moldova/Trans Dniester, Russian forces have sometimes been accused of destabilizing the situation in an effort to gain a political advantage. At the same time there are indications that the Russians are making good faith efforts to bring the Abkhaz to a political settlement. To date, however, Russia has failed to implement or bring into force the troop withdrawal agreement reached with Moldova in October 1994.

All Russian troop formations have departed Lithuania, Latvia and Estonia. A troop withdrawal agreement has been initialed with Estonia and awaits ratification. A troop withdrawal agreement with Latvia has been ratified by both parties. Russia and Latvia and Russia and Estonia are working to resolve residual issues such as the demobilization-in-place of officers.

Science and Technology

U.S.-Russian science and technology cooperation continues to grow dramatically through the auspices of the Joint Commission on Economic and Technological Cooperation (Gore-Chernomyrdin Commission). The Commission has expanded to eight committees: Business Development, Defense Conversion, Energy Policy, Environment, Health, Science & Technology, Space, and Agriculture. Its fifth session will be held in June 1995 in Moscow. Commission members have now begun to examine issues that cut across the work of several committees in order to enhance the GCC's effectiveness. (Some examples of this work include telecommunications initiatives between the Science & Technology and Business Development Committees, and the space biomedical center--which draws on technical expertise from the S&T, Space and possibly Health Committees.) The Energy Committee continues its work on the shutdown of plutonium production reactors in Russia and the development of alternative energy sources for the affected regions; Department of Energy laboratories have also significantly expanded their collaborative work with Russian institutes on nuclear materials protection, control and accounting. The U.S. and Russia are also continuing initiatives to upgrade the safety of nuclear power reactors in Russia.

Meanwhile, the U.S.-Russian partnership in space has entered an unprecedented era of "firsts" in cooperation. In February 1995, another Russian was a member of the crew on a U.S. Space Shuttle mission (the first such cosmonaut served on a mission in January 1994). This February mission saw the first rendezvous of the U.S. shuttle with the Russian MIR space station. In March 1995, the first U.S. astronaut was launched to the MIR station on a Russian spacecraft. The astronaut, Norm Thagard, has been working on board the MIR since March, and will be brought home to the U.S. following the first-ever docking of the U.S. Space Shuttle with the MIR, and crew exchange, in June 1995. These missions are perhaps the most visible elements at this time of our joint commitments under the international space station program. Negotiations to finalize Russia's accession to the international space station partnership are proceeding apace (an April round was held in Washington and another round is planned for July in Moscow). The U.S. and Russia are also conducting extensive activities to integrate U.S. hardware with Russian vehicles. We have, moreover, a robust agenda of joint efforts in aeronautics, earth, and space sciences underway through the Gore-Chernomyrdin Commission's Space Committee.

On environment issues, the U.S. continues to help Russia improve environmental quality through a number of projects, including its contribution of $18 million to natural resource management and biodiversity in Khabarovsk under the Freedom Support Act. This effort is part of a four-year environmental initiative targeting sustainable development. The Russian government and private non-governmental organizations have paid increasing attention to environmental problems, with debate focussing on a variety of issues to include nuclear waste disposal, the Komi oil spill, and others. Japan and Russia are continuing discussions on implementation of their agreement from August 1994, which called for Japan to provide treatment facilities for processing liquid low-level nuclear waste in the Vladivostok area. The USG and GOR are also discussing the terms for implementation of the September 1994 agreement between Presidents Clinton and Yeltsin for step-by-step expansion and upgrading of a treatment facility for liquid low-level radioactive waste in Murmansk. Completion of both of these treatment facilities will allow Russia formally to adhere to the prohibition on ocean dumping of liquid radioactive wastes under the London Convention.

Under the "human dimension" of science cooperation, the International Science and Technology Center (ISTC) will hold a meeting of its governing board in June 1995, to consider a sixth round of project proposal funding. This multilateral non-proliferation program has now funded 130 projects since it formally opened its doors in March 1994. Some $60 million have been expended on these projects, employing approximately 8200 scientists and engineers, most of whom were previously engaged in efforts related to the development of weapons of mass destruction in the former Soviet Union. Membership has expanded from the original partners of the U.S., Japan, the European Community and Russia to include Kazakhstan, Belarus, Armenia and Georgia. The United States' initial contribution of $25 million has been augmented with an additional $10 million for the Center's headquarters in Moscow, $6 million for a branch office to be established in Almaty, Kazakhstan and $5 million for a similar office in Minsk, Belarus.

To complement the work of the ISTC, the U.S. and Russia announced during the May 1995 Summit the establishment of a Civil Research and Development Foundation for the NIS. This foundation will support collaborative basic and applied research and development. This Congressionally authorized, non-governmental Foundation will be established by the U.S. National Science Foundation making use of a $5 million gift from philanthropist George Soros and $5 million from the Department of Defense.

Human Dimension

Russia's ill-conceived and badly executed military operation in the republic of Chechnya overshadows Russia's overall implementation of OSCE commitments. In the course of the two months it took for the Russian forces to capture the republic's capital of Groznyy, at least 2,000 Russian soldiers, several thousand Chechen fighters and perhaps 15-20,000 civilians -- ethnic Russians as well as Chechens -- were killed; huge areas of the capital were destroyed. Russian forces were repeatedly and credibly reported to have used indiscriminate and excessive force against non-combatants. From December 11 when the military operation against Chechnya began to this writing on May 15, 1995, Russian forces gained daytime control of large swaths of territory in Chechnya as high levels of fighting continued -- including unconfirmed reports that Russian forces employed toxic chemicals against Chechen fighters and civilians. The tragedy in Chechnya is a symptom and a result of Russia's uneven movement toward a functional democracy. Although Chechnya represents a serious setback for the development of democracy in Russia, Russia has made progress in human rights and political reform over the past four years. Elections have generally been free and fair. Parliamentary elections are scheduled for December 1995 and presidential elections for June 1996. Despite much public discussion about postponing the elections, President Yeltsin has repeatedly pledged that they will be held as scheduled. Yeltsin and the parliament are currently working on provisions in the draft electoral laws determining the strength of federation-wide parties relative to individual candidates and setting the nominating requirements for presidential candidates. The political environment in Russia is more unclear now than at any time since the standoff at the White House in October 1993. A number of competing election blocs have been formed. Russian reformists who charged the Russian government with major human rights abuses in Chechnya are increasingly politically isolated. Largely as a result of Chechnya, Yeltsin is isolated from his traditional reformist allies, and his popularity has fallen to historic lows. Thus far, Yeltsin's misfortune has not redounded to the benefit of any other political leader; no other politician has emerged as a natural successor. The low popularity of all the likely candidates, coupled with the enormous apathy of the Russian electorate, renders the election outcomes profoundly unpredictable for now.

The 1993 Constitution subordinates the legislative to the executive. Coordination between the two houses of parliament -- the upper house (Federation Council - 170 members) and the lower house (State Duma - 450 members) -- is predictably troublesome. Both houses of Parliament are divided among many parties. Groups with little attachment to democracy, including communists and extreme nationalists, hold large numbers of seats, slowing the passage of laws on democratic and economic reforms. The judiciary is still weak. The reconvening of the Constitutional Court is an important and anxiously awaited step in Russia's judicial reform. It remains to be seen what role the Court will play. Suspended by President Yeltsin in October 1993, the reconstituted and redefined Constitutional Court held its first session on March 16. The 1993 Constitution empowers the Court to arbitrate disputes between the executive and legislative branches and between Moscow and the regional and local governments. The Court is also authorized to rule on violations of constitutional rights, examine appeals from various bodies, and participate in impeachment proceedings against the President. The July 1994 Law on the Constitutional Court prohibits the Court from examining cases on its own initiative and limits the scope of issues the Court can hear.

In the past three years, the Russian Government has made substantial efforts to reform the criminal justice system and judicial institutions. Despite these efforts, judges are only beginning to assert their constitutionally mandated independence from other branches of government. This has been hampered by the slow passage of laws and by inadequate funding for judicial reforms on the part of Federation and regional governments. In addition, judges have not received necessary training and are totally dependent on the Ministry of Justice for court infrastructure and financial support and on local authorities for their housing.

Russia's federal structure is still evolving. Yeltsin has opposed most local elections, preferring to appoint regional governors directly. The war in Chechnya has not spawned separatist movements elsewhere. Relations between Moscow and the Federation components are largely stable.

Russia's human rights record remains uneven despite human rights guarantees in the 1993 constitution. One of the most basic differences from pre-democratic times in Russia is the empowerment of human rights NGOs and the press to investigate and publish. The often critical coverage of Chechnya has demonstrated the degree to which the media are free and express a wide range of views. The government placed intermittent restrictions on press covering the war in Chechnya, citing the need to protect military secrets and to ensure journalists' safety. The government also put heavy pressure on media representatives to follow the official line on the conflict.

Making democracy a reality in Russia is hampered by the limited public trust of virtually all public institutions. Average Russians have a poor understanding of the benefits of democracy, associating it with social disorder, crime, corruption and economic hardship they have recently experienced. There is still a great deal of official and societal ambiguity on the place of human rights in Russia. The Duma relieved Parliamentary Human Rights Ombudsman Sergey Kovalev of his duties after he publicized Russian atrocities in Chechnya. Instances of harassment of political opponents and human rights activists by elements of the security services continue, making the recent expansion of the powers of the Federal Security Service, a successor to the Soviet KGB, a cause for concern. Freedom of assembly, association, religion, speech and media are generally respected in Russia, although many important acts of legislation in these areas have still not been passed. President Clinton recognized the reality of freedom of emigration by declaring that Russia is in compliance with Jackson-Vanik provisions. Certain practices, however, have not been codified into law due to the difficulty of passing legislation. The law proposed in 1991 on exit and entry is still being implemented even though it is not officially in the law books.

Restrictions on freedom of travel are still imposed through the selective enforcement of the "propiska" (residence permit) system, most often against dark-complexioned people. Refugees from Central Asia and the Caucasus still meet discrimination in the major cities.

Anti-Semitism continues to be a problem in Russia despite welcome efforts by Russian officials to discourage it and all forms of anti-democratic behavior. Statements by Russian leaders cannot by themselves eradicate the roots of intolerance. Efforts to discourage all forms of intolerance at all levels of the Russian government should be encouraged.

In addition to human rights violations in Chechnya and the issues discussed above, other issues of special concern include: unclear or unenforced laws, police brutality, unfit prison conditions, hazing in the armed forces, violence against women and bureaucratic obstacles to the development of independent labor unions.

SERBIA AND MONTENEGRO

General Assessment

Serbia and Montenegro or "Federal Republic of Yugoslavia" --"FRY"--has not been allowed to participate in OSCE meetings since 1992 and made no significant progress towards implementing OSCE commitments, despite Belgrade's acceptance of the Contact Group peace plan for Bosnia. OSCE commitments to adopt responsible security policies appear to have been disregarded. Despite Belgrade's closure of its border with Serb-held Bosnian territory, some elements within the "FRY" appears to have continued military and economic support to ethnic Serbs in Bosnia and Herzegovina, facilitating the consolidation of Serb control over 70 percent of the territory of Bosnia and Herzegovina. Despite a UN Security Council resolution calling for its continuation, the "FRY" refused to extend the mandate of the OSCE missions to Kosovo, Sandzak, and Vojvodina. Following departure of the missions, there was a marked increase in the level of violence against Albanians in Kosovo and Muslims in the Sandzak region. At the same time Hungarian and other ethnic minorities in Vojvodina were frequently subjected to intimidation and arbitrary police action.

Under the impact of the UN sanctions the "FRY" economy continued to deteriorate. While the introduction of the convertible dinar and strict monetary measures temporarily stabilized the economy and halted the hyper-inflation, it faces a bleak future without any significant easing of the sanctions and fresh infusion of hard currency. The re-opening of Belgrade airport to international traffic in late 1994 has not produced significant economic gains for the "FRY."

Security

The "FRY" made slight progress towards responsible security policies in support of OSCE principles. Most significantly, it broke ranks with the Bosnian Serbs and supported the Contact Group peace plan. In August 1994, Belgrade announced it would close its border with Serb-held Bosnia. However, despite assertions to the contrary, some elements within the Belgrade regime appear to have continued contributing military and economic support to the Bosnian Serbs. Overall, the border closure has been meaningful. With the expulsion of OSCE monitors, the Serbian security police, a heavily armed force of 70-80,000, stepped up human rights violations of members of ethnic minorities in Kosovo and the Sandzak. Military and state security forces were used to intimidate and repress the majority (90 percent) ethnic Albanian population in Kosovo and the Muslim population in Sandzak. Deployment of troops as a show of force, training exercises during which village life was disrupted, unlawful searches and seizures, police crackdowns in pursuit of alleged draft dodgers, and the threat of conscription into the VJ were all tactics used against ethnic Albanian citizens. Serbian authorities have established a virtual police state in Kosovo, complete with a rubber-stamp judiciary, which they have employed to silence or contain all forms of local resistance.

Economics

Progress towards a free market was subordinated to the "FRY's" efforts to cope with a collapsing economy, accelerated by UN economic sanctions imposed in May 1992. Hyperinflation characterized the economy as the government freely printed money to pay its bills. Economic deterioration accelerated noticeably in the summer of 1993 as the government, recognizing it lacked adequate foreign exchange reserves to purchase key crops, ran the currency printing presses 24 hours per day. Resulting sharp price increases were compounded when the government imposed price controls on producers, which served only to discourage farmers from selling their produce, thereby inducing food shortages throughout the country.

To stabilize the economy, the government introduced a new convertible "super dinar" and tight monetary controls in January 1994, halting hyperinflation and stabilizing the value of the dinar. From that date prices on food, clothing and other essential consumer items stabilized, but pressure on prices and on the "super dinar" grew steadily throughout the year; adroit government action limited public awareness that the "super dinar" was gradually depreciating throughout the year. The government steadily ran down its foreign exchange reserves by providing military and economic support to the self-proclaimed Serb republics and by purchasing illegal imports at high prices to maintain agricultural production and create the illusion of stability in key industries. Without significant sanctions relief and a new infusion of hard currency to bolster dwindling foreign exchange reserves, the economy faces a bleak future and will require years to recover even if sanctions come off. The "FRY's" human capital base is also deteriorating steadily in the face of a persistent "brain drain."

In the areas of cultural exchange and environmental protection, the "FRY" made little progress. Scientific, technical, and cultural exchanges were prohibited under the initial UN sanctions. A slight easing under UNSCR 943 has reopened the possibility for cultural exchanges, and has allowed increased foreign support for such programs. Environmental protection has been accorded low priority in the allocation of scarce budgetary resources. As an unintended side effect of UN sanctions, air and water quality have probably improved with the drastic decline in industrial production (down by more than 40 percent officially from the previous reporting period).

Human Dimension

The Government continued to inflict egregious abuses on the one-third of the population who are not ethnic Serbs, and repressed voices of opposition in the ethnic Serb community as well. Government officials carried out sanctioned extrajudicial killings, torture, brutal beatings, arbitrary arrest, and a general campaign to keep the non-Serb populations repressed. While an atmosphere of fear and violence pervades all of Serbia-Montenegro, the ethnic Albanians of Kosovo and the Muslims of Sandzak suffer the heaviest abuses. Repressive acts against these minorities increased dramatically after the Government forcibly removed the OSCE monitoring missions in 1993. Political and economic conditions continue to deteriorate in the Serbian province of Kosovo. Its autonomy was removed unilaterally by Serbian authorities in 1989, who have subsequently forced most ethnic Albanians out of their jobs and severed them from government services and the formal economy. Serbs are responsible for severe repression in Kosovo, including extra-judicial killing and torture. The province is firmly under the thumb of the heavily armed Serbian police.

As a result, ethnic tensions remain extremely high. Rejecting any restoration of autonomy, ethnic Albanian leaders seek international support for Kosovar independence which the Serbs vehemently oppose. Most recently, over 200 ethnic Albanian former policemen were arrested arbitrarily, one of whom appears to have died in custody.

Kosovo remains one of the primary obstacles to a comprehensive settlement in the Balkans. The United States supports the return of political autonomy and full human rights, but opposes independence or a UN protectorate for Kosovo. Most of the population nationwide is dependent for news on electronic media, which is firmly under government control. Through Serbian radio and television, the government exerts editorial control over most news programming. Blatant anti-Muslim or anti-Albanian propaganda constitutes a substantial portion of regular news programs.

Publication of printed material critical of the government has been more limited this year, most notably by the Government move to take over the previously semi-independent daily "Borba." The weekly news magazine "Vreme" remain uncensored, although circulation is low. The same is true of "Nasa Borba," the independent daily which formed as a response to the government takeover of "Borba." "Bujku," the only Albanian language newspaper, faced occasional difficulties, but for the most part appeared daily, its editorial policy dominated by the major Albanian political party, the Democratic League of Kosovo (LDK). SLOVENIA

General Assessment

Slovenia continues to make significant progress towards establishment of a democratic, pluralistic society and a market based economy. As a member of the Council of Europe and the CSCE, it is strongly committed to respect human rights. There is a free press covering the gamut of political opinion. There are over thirty independent radio stations and one independent television station. Slovenia has made progress towards privatization and a free market economy. Basic economic indicators show the economy has turned the corner. The country finished 1995 with a 4-5 percent rate of growth in GDP. It has a surplus in its current account, rising foreign currency reserves of almost $3 billion, a manageable foreign debt, and an inflation rate that fell to 18 percent in 1994. Privatization, which has been slow, speeded up in 1994 and is expected to accelerate even more in 1995. Slovenia has sought to maintain good relations with its neighbors and has pursued the path of negotiation and discussion where bilateral problems have arisen, as with Italy and Croatia. Relations with Austria and Hungary are excellent. Slovenia has been accepted as a member of CEFTA, upon completion of a free trade agreement with Poland.

Slovenia adjoins a war zone and is concerned about possible spill-over effects of the current conflict to the south. It seeks to play a constructive role in the region. The member countries of NATO have approved Slovenia's participation in the Partnership for Peace.

Security

At the closest point, UN protected areas are only 10 miles from Slovenia's border. Slovenia is concerned that any widening of the conflict could affect it, with negative consequences for its economic restructuring and further integration into the Western community. Consequently, Slovenia has warmly welcomed new diplomatic initiatives to end the fighting.

Slovenia has a small though capable territorial defense force. It has no weapons industry, and the Yugoslav National Army removed virtually all heavy weaponry when it evacuated Slovenian soil following the 10-day war for Slovene independence in June 1991. Further, Slovenia cannot procure police riot control items or defensive weapons like air defense radar systems because of the 1991 UN embargo on military shipments to all parts of the former Yugoslavia. Slovenia has therefore launched a diplomatic initiative to be exempted from the embargo. Slovenia is a member of NATO's Partnership for Peace program and is the first OSCE country not a member of the North Atlantic Cooperation Council to gain access to the program. Slovenia has responded enthusiastically is proving to be an active participant, despite the complications caused by its being subject to the UN arms embargo on all the states of the former Yugoslavia. Slovenia sees the PFP as an opportunity to contribute to the enhancement of security and stability in Europe as well as a major step towards its progressive integration into the Euro-Atlantic community of nations. Slovenia has participated fully in implementing the Vienna Document. It provided data on its military forces in December 1994, and received one CSBM evaluation visit in January 1994.

Economics

Slovenia has made remarkable progress over the past two years in stabilizing and transforming its economy. Real GDP stabilized in 1993 and bounced back in 1994 with a growth rate of between 4 and 5 percent; inflation has dropped from one of the highest rates in central Europe to one of the lowest and unemployment, still statistically high at 14 percent, has been in decline for the past year.

Behind this progress has been a number of factors, including favorable initial conditions, which included a market-oriented economic system with liberalized prices, a high degree of openness to foreign trade and a greater degree of market discipline than was evident in other economies in transition. To this, the government has added a strong dose of fiscal and monetary discipline.

On the other hand, privatization has been slow and uneven. Many companies claim to have been privatized, but the ownership is still unclear. Slovenia also recognizes that it needs foreign capital to restructure its economy but has displayed a cautious attitude toward foreign investment. The current constitution prohibits foreign ownership of land, while the commercial code requires a majority of Slovene national directors in joint stock and limited liability companies.

Slovenia is a member of the IMF, World Bank, and European Bank for Reconstruction and Development. A cooperation agreement with the European Union is in effect, and exploratory negotiations have begun on an association agreement. Free-trade agreements have also been signed with the Czech Republic, Slovakia and Hungary; one with Poland is scheduled for signature in 1995. The Slovene government and the World Bank have jointly sponsored a major study on the environmental problems facing Slovenia. These include waste disposal, water pollution, and protection of natural and historic properties. There is, however, a lack of technical expertise and political resolve within the government to move rapidly.

The U.S. and Slovene governments have signed an agreement for scientific and technological cooperation, including an agreement on intellectual property. There is a long tradition of exchange in these areas with Western democracies.

Human Dimension

Slovenia held its first free and fair elections as an independent nation in December 1992, which led to a coalition government. The basic freedoms associated with a democratic society are in place.

Italian and Hungarian minorities are guaranteed representation in the Slovene parliament. These minorities have their own schools and television or radio stations. The war in Bosnia has created a refugee problem for Slovenia, but reports from the UNHCR indicate that refugees are being cared for in a proper and humane manner. Refugee children are being taught in their own language.

The press is relatively free from government control and often has been critical of government policies and officials. The state television and radio stations are controlled by a board elected by the parliament. There is one operating independent television station and at least forty independent radio stations. There is freedom of religion and association.

Workers have the right to strike and to petition the government, and have done so several times during 1994-95. A non-governmental human rights commission functioned in Slovenia in 1994, but is to be replaced by an ombudsman on the Swedish model.

TAJIKISTAN

General Assessment

The Government of Tajikistan's cooperation with the OSCE and its adherence to OSCE principles has been mixed. While the ongoing Tajik civil conflict has complicated the situation, the Government has made only limited efforts to improve its performance on human rights and political/economic reform. The Government welcomed the establishment of a small OSCE mission in Tajikistan in early 1994 but rejected many of the mission's suggestions for the new constitution and the electoral law.

The conflict between the Government and the armed opposition continues to dominate the national scene. Although a cease-fire was in effect through most of the past year, sporadic fighting continued, especially along the Tajik-Afghan border, where an estimated 16,000 Russian and other CIS border guards are deployed. The Government and the opposition continued to participate in UN-mediated peace talks. The Third Round of talks in October 1994 resulted in a prisoner exchange and the establishment of a Joint Commission and a United Nations observer operation to oversee implementation of the September 1994 cease-fire agreement. The economy continued its sharp decline. Food and fuel shortages caused some social unrest. The Government has indicated its intention to introduce economic reforms but has lagged in the implementation. In May 1995 the Government introduced a new national currency and announced plans to free prices on key commodities and to accelerate privatization.

In the human dimension, the Government's performance remained poor. Government forces are believed to have committed serious human rights abuses, including assassinations and torture. Both the November 1994 presidential elections and the February 1995 parliamentary elections were marred by fraud, intimidation, and restrictive nomination processes. The Government continued severe restrictions on freedom of the press and opposition political activity, but cooperated well with UNHCR on the return of refugees and displaced persons.

Security

The civil conflict between the Government and opposition forces based in Afghanistan dominated the security environment. Fighting decreased after peace talks began in April 1994, but resumed in the second half of the year, with heavy fighting taking place in the center of the country and along the Tajik-Afghan border. A September 1994 cease-fire agreement entered into force in October 1994, was extended several times, and remained in effect through May 1995. However, fighting continued to flair sporadically along the Tajik-Afghan border, with several serious clashes occurring in April 1995. The cease-fire was monitored by a Joint Commission of the government and opposition established under the September 1994 peace agreement, assisted by a 40-person UN Mission of Observers in Tajikistan (UNMOT), established under a UN Security Council resolution of December 1994. UNMOT reported several cases in which government or opposition forces were found to have violated the cease-fire.

Internal security is the responsibility of the Ministries of the Interior, Security, and Defense. In addition, an estimated 25,000 Russian and CIS forces are deployed in the country. These forces include a Russian Army division, which is part of the CIS peacekeeping force, and Russian-commanded border guards composed of forces from Russia, Tajikistan, and three Central Asian states. The Government relies heavily on the Russian/CIS border guards to protect the Afghan frontier against intrusions by armed opposition forces. The border guards often fired into Afghanistan to suppress hostile fire and to disrupt preparations for attacks into Tajik territory. Russian aircraft are believed responsible for airstrikes in northern Afghanistan in December 1994 and April 1995, which resulted in hundreds of civilian casualties. The National Army of Tajikistan is still in a formative stage and is composed of no more than a few thousand regular troops. It is supplemented by several quasi-independent militias formed during the civil war and several thousand security forces under the control of the Ministries of Security and Internal Affairs. The UN-mediated inter-Tajik dialogue between the government and the opposition began in April 1994 and progressed through three formal rounds and several series of consultations. The third round, which took place in Islamabad in late October 1994, resulted in a prisoner exchange and the establishment of the Joint Commission and UNMOT. A fourth round was scheduled to take place in Almaty in late May 1995 following the first-ever official meeting between President Rahmonov and opposition leader Nuri in Kabul.

Through its participation in the UN-led peace talks, the Government has shown evidence of its willingness to use peaceful means to settle disputes. However, it has also frustrated peace efforts by delaying implementation of agreed confidence-building measures and by unilaterally scheduling elections, without regard to the peace process. These actions led the UN Secretary General to temporarily suspend UN involvement in the peace process for several weeks in July/August 1994 and contributed to delays in scheduling the fourth round of talks in the first half of 1995.

Tajikistan did not provide data on its military forces as required under the Vienna Document.

Economics

Tajikistan has suffered serious economic dislocations as a result of the civil conflict, poor economic management, and the collapse of the former Soviet economy. At the end of 1993, the size of the economy was estimated to be only 40 percent of its 1988 level. Figures for 1994 were not available, but the worsening economic situation suggests another steep decline in output. Despite a series of loans from Russia, the government fell months behind in paying salaries and pensions. There were critical shortages of fuel for heating, transport and industry. Shortages of wheat and flour led to social unrest in Dushanbe and other cities in late 1994. Food assistance from the U.S., the European Community, and others was essential in helping meet chronic gaps in grain supplies.

The financial situation is particularly acute. The national debt is roughly 100 percent of annual GDP and investment capital is scarce. The Russian ruble remained the national currency up to May 1995, when the Government introduced the Tajik ruble. At the same time, the Government announced plans to free up the prices of key commodities and to accelerate plans for privatization. While the government made some steps towards reform, these were largely legislative exercises with little practical implementation. Approximately 90 percent of the economy remains in government hands; much of that which has been privatized is under the control of work collectives. In early 1995, the government further restricted the market by increasing the state orders for cotton and aluminum and limiting the issuance of export licenses.

The Government has focused little attention on environmental reform, although it has participated in regional planning sessions and actions related to the Aral Sea crisis.

Human Dimension

The civil conflict continues to give rise to widespread human rights abuses and humanitarian problems. Government and government-related forces committed serious human rights abuses, including scores of brutal political assassinations and the torture and beating of detainees and prisoners. Pro-government forces allegedly killed several mullahs with ties to the Islamic Revival Party. There were credible reports that pro-government militia forces terrorized noncombatants in Tavildara District, beating, raping, and killing civilians and looting their homes. The Government prosecuted no one for political or extrajudicial killings in 1994, and the procurator general's office closed all cases in which alleged murderers were from the same region as the president and his closest advisors. Opposition forces are believed responsible for the murder of several Russian army officers as well as attacks on buses carrying Russian military personnel. Both sides executed prisoners.

The Government made little progress toward democratization in the past year. Most opposition political activity was banned and many government opponents were either jailed, in exile, or active in the armed opposition. Emomali Rahmonov, who served as Chairman of the Supreme Soviet and Head of State since November 1992, was elected president in November 1994. The presidential election witnessed genuine competition between the two candidates, Rahmonov and former prime minister Abdullajanov, both of whom conducted active nationwide campaigns. However, the election, which also included a referendum approving a new constitution, was marred by fraud and intimidation.

Parliamentary elections held in February and March 1995 also fell far short of international democratic standards. A restrictive nomination process precluded any significant participation by opposition parties and ensured in advance that the elections would serve to strengthen the current government's hold on power. Freedom of expression, including freedom of the press, is severely restricted. The Government maintains strict control over the press and tolerates little or no criticism. Several journalists, including some with close ties to the Government, were assassinated in the past year. Others were arrested, jailed, or forced into exile. While some journalists associated with the opposition have continued to work, most have been replaced or have fled Tajikistan.

The Government worked closely with the UNHCR on behalf of refugees and internally displaced persons. The Government made strides toward implementation of the law on returning homes of displaced persons to their rightful owners. It also cooperated with UNHCR and the International Organization for Migration in setting up convoys to return internally displaced persons to their areas of origin.

TURKMENISTAN

General Assessment

Turkmenistan has increased its participation in OSCE-sponsored events. While Turkmen leaders continue to express publicly their commitment to OSCE principles, this commitment has not been reflected in government actions in most areas. The opening of a Turkmen embassy in Vienna has enhanced contacts with the OSCE. On security matters, Turkmenistan has generally adhered to its international obligations, continued the development of peaceful relations with neighboring states, expanded its contacts with Western military organizations, and avoided participation in regional conflicts.

Its transition to a free market system has moved very slowly, and the government continues to control all aspects of the economy. No progress has been made in the development of democratic processes based on respect for human rights. Many of the government's actions show a lack of commitment to the rule of law, as shown by the flimsy evidence produced for cases against dissidents Mukhammed Aimruadov and Koshall Garaev. There is no free press, and opposition parties are still not tolerated. Dissidents were beat up in Ashgabad and Moscow. Finally, the Government of Turkmenistan refused to grant exit visas for the family of Saklatov, who were granted refugee status by the U.S. Immigration and Naturalization Service in Moscow.

Security

Turkmenistan advanced its efforts to develop an independent military during the year, although it is still dependent on an overwhelmingly Russian officer corps serving under contract. Border forces which patrol the southern boundary with Afghanistan and Iran are commanded by Turkmen commanders with Russian deputies. Turkmenistan has continued its policy of developing friendly relations with neighboring and regional states. Furthermore, it has expanded its contacts with military organizations in Western states and has increased its contacts with NATO. Turkmen military officers are trained in Turkey and Russia. The Turkmen military received a small grant from the United States for English language instruction and will participate in expanded training programs in 1995-96. Turkmenistan has continued its policy of non-interference in the internal affairs of its neighbors. While it maintains contacts with several of the factions in war-torn Afghanistan, it has not provided support to any side. Similarly, it has avoided involvement in conflicts in Tajikistan and the Caucasus. Turkmenistan has shown no interest in participating in regional peacekeeping forces. President Niyazov has declared Turkmenistan to be "positively neutral" but has applied for membership to the non-aligned movement. Ties with Russia remain exceptionally close. Turkmenistan received on CSBM inspection and one evaluation in 1994.

UKRAINE

General Assessment

The government of Ukraine continues to make progress in the realization of its OSCE commitments. Although the lack of institutional depth in many parts of the central government inhibits its ability to implement these commitments, the pace of implementation is increasing with the momentum for reform. The process of educating Ukrainian citizens so that they are aware of, and can demand, their rights, continues, but will take some years to complete. While structural change has been uneven, it has been steady and recently has been gaining momentum.

Security

The government's efforts to adopt responsible security policies continue to show results. Despite great economic hardship, the military continues to be reduced to a realistic size. Also, thanks to the appointment of Ukraine's first civilian Defense Minister in August, 1994, Ukraine is making progress in its transition to civilian control. Defense expenditures in 1994 continued their downward trend, probably ranging between 3 percent-4 percent of GDP, down from the 1993 4 percent-5 percent estimates.

The transition from an authoritarian society to one based on democratic norms has been steady. The President is Ukraine's commander-in-chief, and the Minister of Defense the nation's top defense official, but that Minister is now a civilian. In addition, President Kuchma has created a National Security Council which advises him on questions related to national security policy and reports to him on matters related to the defense establishment. The parliament is responsible for the defense budget as well as drafting and adopting Ukraine's defense and security doctrine.

The government advocates the use of solely peaceful means to settle disputes. Ukraine has no troops stationed in neighboring countries, and is not involved in local or regional military conflicts. Ukraine has made significant contributions to international efforts, including the dispatch of two battalions, one serving with the UN peacekeeping forces in Bosnia, and the other in Croatia, and cooperation with the OSCE sanctions assistance effort.

Ukraine has participated actively in implementing the OSCE's Vienna Document. Ukraine provided full data on its military forces in December 1994 as required by the Vienna Document. It received three CSBM evaluation and three inspection visits in 1994. Ukraine has yet to ratify the Open Skies Treaty.

Economics

The government has launched an aggressive economic reform program with the support of a $1.5 billion IMF stand-by program. It has reduced the budget deficit and inflation, although the inflation rate remains high. Official GDP declined 23 percent in 1994, and is expected to contract further in 1995. However, the unofficial private economy is expanding and providing alternative employment. The government has floated the exchange rate, liberalized prices, and eliminated most export restrictions. It is implementing a massive privatization program, starting with small and medium size enterprises, most of which it intends to privatize by the end of 1995. The government is just beginning to address privatization of the important agricultural sector.

U.S. businesses have expressed increased interest in Ukraine, although Ukraine still needs to take further steps to improve its business climate, particularly strengthening its commercial law, reducing corruption and controlling the growth of organized crime. Ukraine has many severe environmental problems, which are made even more complex by the economic crisis. Environmental protection institutions lack the resources to enforce environmental regulations. However, Ukraine is working with U.S. and international agencies to improve the application and enforcement of environmental requirements. Furthermore, the government has offered to close the unsafe Chernobyl nuclear power plant, which provides 5 percent of Ukraine's electricity, by the year 2000.

Ukrainian participation in scientific and technological exchanges is high. The respective Ukrainian institutions are anxious to join in cooperative relationships as a possible way to compensate for declining state subsidies.

Human Dimension

Ukraine has made steady progress towards an open, tolerant, pluralistic and democratic society over the last four years. Following Ukraine's first since independence transition of presidential power in mid-1994, and the most democratic parliamentary elections to date, momentum for economic and political reform has increased dramatically. The government has stepped up efforts to reign in corruption, and, through gradual turn-over in the bureaucracy, has sought to engage the government more directly in the implementation of reform.

Ukraine continues to be governed by a 1978 Soviet constitution, modified by the introduction of a multiparty Presidential system. Though the 1994 presidential and parliamentary elections were judged to have been generally free and fair, continued disagreement between the two branches is impeding movement to adopt a new constitution. In presidential elections held in June and July, Leonid Kuchma defeated incumbent Leonid Kravchuk and four other candidates. The first post-Soviet elections for the 450-member Rada (parliament), held in the spring, resulted in a much fragmented legislature. Though the Rada initially was dominated by well-organized leftist forces, more recently the numbers have favored deputies supporting reform.

The government's respect for human rights, including for minorities, continues to be good. One of the first laws the government passed after independence was on the rights of minorities, which the OSCE High Commissioner for National Minorities stated could stand well as model legislation for some Western European countries. Various ethnic communities in Ukraine have developed cultural societies, established schools, and created advocacy groups with local and national constituencies to influence government dealings with minorities. Despite economic hardship, the government at all levels has supported the efforts of minority groups with financial and in-kind subsidies. There is no official state religion. The 1991 law on freedom of conscience and religion provides for the separation of church and state. Obstacles to complete religious freedom still exist at the local level where the bureaucracy in some places has delayed but not denied registration of religious organizations. A 1993 amendment of the 1991 law has been used to restrict the activities of non-native religious organizations. Foreign religious workers have had difficulties obtaining or renewing visas, although early in 1995 the government provided visas for Mormon missionaries after a lengthy delay.

Laws on press freedoms are fairly broad and complete, and criticism of the government is tolerated. Because most media are state owned and supported, there is a general tendency to self-censorship. Nevertheless, there is increasing criticism of governmental policies in the press, and improvement of investigative and advocacy journalism.

The government has been criticized by many Ukrainian politicians and citizens as unaccountable. Ukrainian bureaucracies are often unresponsive to citizens' demands. There is little transparency in most government agencies, and it is therefore difficult for citizens to comprehend the processes of government and petition for changes. The rule of law thus continues to suffer in Ukraine. Some laws to reform the system have been enacted, but few have been effectively implemented.

The criminal justice system follows the former Soviet model. Because there is no right to release on bail and the court system is over-crowded, accused individuals can expect to wait long periods in jail for their case to come to trial. The conviction rate for those charged remains at the level of the Soviet period -- 99 percent.

The climate of fear that characterized Soviet Ukraine has disappeared. Individually, Ukrainians feel free to speak out against the government and governmental abuses, and are not uneasy around police and security forces. There is active debate of Ukrainian public issues in many public fora.

UZBEKISTAN

General Assessment

The Government of Uzbekistan is accelerating its economic reforms toward a free market economy. Its steps toward a multi-party democracy have been much more tentative, and the 1995 extension of the presidential term until 2000 was a step backward.

The Government of Uzbekistan continues to focus its attention on maintaining independence and stability and has not relaxed its rigid political control. Although it continues to support progress towards democracy as a long term goal, it does not currently allow democratic processes to function freely. Freedom of association is hampered by restrictive registration requirements for civic groups and political parties alike. Severe limitations on freedom of speech and the press persist. On the other hand, although Uzbekistan is now largely ruled by executive decree, the government is attempting to put a modern legal framework into place, with the assistance of foreign experts. The economic sphere is one area where the Government of Uzbekistan is beginning to relinquish some control. The distribution of housing and some land into private hands has enhanced the economic independence of the average citizen. During 1994, the Government carried out a variety of macroeconomic reform measures that will make its economy more market-oriented. It plans to accelerate the pace of privatization in 1995. Uzbekistan economic ties with world markets are increasing in almost every sector, a development which has helped accelerate the movement toward relaxation of central economic controls. The Government has passed new laws to promote and protect foreign investment, and has signed trade agreements with many states.

Uzbekistan is a non-nuclear state and a signatory to the non-proliferation treaty. It supports collective security through the United Nations. For budgetary reasons it participates only minimally in international organization activity, but it opened mission offices in Vienna and New York even before some important bilateral embassies, such as Paris or London. The Government of Uzbekistan became more involved in the OSCE process in 1994-95, and Uzbekistan representatives regularly participate in OSCE meetings and seminars. As Uzbekistan gains more experience as an independent state it is becoming more aware of OSCE norms, practices and requirements. Security Uzbekistan has acceded to a number of arms control agreements, but like some other non-nuclear successor states to the USSR, has given arms control a low priority. Uzbekistan is reviewing but has not yet signed the Chemical Weapons Convention. The government has cooperated in nuclear arms control inspection activity by providing a blanket diplomatic aircraft clearance for U.S. aircraft carrying inspection teams to Kazakhstan. No INF inspections are carried out in Uzbekistan, and the government does not participate in INF implementation activities such as SVC meetings. Uzbekistan acceded to the Nuclear Nonproliferation Treaty (NPT) in 1992, and supported indefinite and unconditional extension of the NPT at the NPT review and extension conference. Uzbekistan also concluded a safeguards agreement with the International Atomic Energy Agency in January 1994.

With regard to fulfilling CSBM obligations, Uzbekistan did not forecast any notifiable military activities for 1994. Uzbekistan received one CSBM inspection in October 1994, and provided cooperation beyond the Vienna Document requirements. As a state forming a new military structure, Uzbekistan received a 2-year waiver from the OSCE requirement to report its force structure and size. In December 1994, Uzbekistan met its requirement to deliver its first report on force structure.

In national security affairs, Uzbekistan maintains close relations with Russia and the other CIS states, and is a member of the CIS Defense Council. At the February 1995 CIS summit, Uzbekistan agreed to join a CIS-wide air defense system. Uzbekistan is making progress in scaling down its military forces to a targeted level of about 30,000 mobile forces.

Uzbekistan also cooperates with its Central Asian neighbors in defense matters. An agreement signed in January 1994 between the defense ministers of Uzbekistan, Kazakhstan and Kyrgyzstan provided for cooperation in air defense, as well as in supply and transport.

Uzbekistan regards instability in its neighboring states as the major threat to its national security, but takes the position that a collective, peaceful resolution to such conflicts is necessary. An Uzbekistan army battalion is participating in a joint CIS force to protect the border of Tajikistan from Afghanistan. Uzbekistan officially rejected charges in 1994 by the Government of Afghanistan that it was providing military support and supplies to the forces of General Dostum, one of the belligerents in Afghanistan's internal conflict. Uzbekistan has supported a United Nations role in settling Afghanistan's and Tajikistan's internal conflicts through negotiations among opposition groups. Border security against low-level infiltration is a high priority. The Government of Uzbekistan says that it fears incursions by illegal narcotics traders, armed Islamic militants, and ethnic extremists. Uzbekistan has formed its own border guard, responsible for Uzbekistan border with Afghanistan, as well as the borders with other former soviet republics.

The Government of Uzbekistan has joined NATO's Partnership for Peace but has not put forward presentation documents. Economics

The Government has continued its movement toward a free market economy with a series of important initiatives, including major cuts in subsidies, freeing of prices for most consumer goods, increased interest rates, and reduction of government regulation of business. Inflation, which was close to 1000 percent in 1993, fell sharply in the second half of 1994. The President has declared that economic reform is Uzbekistan main near-term goal. In 1994, the government began a series of privatization auctions to speed the process of equitably disposing state property. In 1995, its goal is to privatize large state enterprises. Many smaller enterprises, homeowners and private farmers already have either title to their property or long-term control of it with the expectation of eventual ownership. Most state farms have been turned into collective farms that operate partially on the basis of leaseholds or worker cooperatives. The acreage in privately farmed plots has doubled over the past year, and the government is encouraging the establishment of larger private farms.

The instability and inconvertibility of Uzbekistan currency has been a major impediment to foreign investment and trade. The currency has stabilized somewhat since the som replaced the temporary som-coupon in July 1994, but convertibility remains a problem. It is difficult for private businesses and individual citizens to buy foreign currency legally, which has encouraged unofficial transactions.

Interest in environmental protection is high in Uzbekistan but because of the competing demands for government money and attention and the magnitude of the tasks of remedial or preventive actions, little has been done so far to ameliorate polluting activities. The government is cooperating in regional planning with the other Central Asian states to address the Aral Sea disaster, and is working closely with World Bank experts to outline specific project proposals for long-term improvement of water management.

Uzbekistan is open to scientific and technical exchanges, especially where assistance from foreign governmental and non-governmental sources is available. Human Dimension The Government of Uzbekistan does not allow challenges to its rule, but does allow freedom in private spheres. A March 26, 1995 government-orchestrated referendum extended President Karimov's term of office for an additional three years to 2000. Expression of opinion is severely limited in the media and criticism of the government is not allowed. Political opponents of the government have been charged with non-political crimes in which the government appears to plant the evidence.

On the positive side, on December 25, 1994, Uzbekistan held its first multi-party parliamentary elections. Religious freedom has greatly expanded since 1991. The government tries to maintain peace among ethnic groups, although Uzbek speakers are favored in jobs by the shift to greater use of Uzbek (the official language). Freedom of travel out of and within Uzbekistan has increased. The Government of Uzbekistan has also made establishing the rule of law one of its main goals.

On March 26, 1995, a referendum was held on whether or not to extend the president's term. All publicity before the referendum was organized in favor of the proposal. Due to the voting method, in which only voters against the referendum question marked their ballots, it was easy to observe voters' choices. Official reports stated that 98.9 percent of the electorate supported the extension of the president's term, exaggerating actual participation rates.

Freedom of speech remained severely limited during the reporting period. The majority of Uzbekistan newspapers are government-owned and controlled. Although the constitution prohibits censorship, it is widely practiced and the government tolerates no criticism of its actions. All foreign news is channeled through the national information agency, Uza, which subscribes to ITAR-Tass, but no western wire services. In early 1994, television broadcasts from Russia were sharply reduced and replaced with entertainment programs from India and Turkey. A crackdown on the opposition in early 1994 appeared to be in direct response to the circulation of a foreign-published edition of the opposition Erk party newspaper, considered "anti-government" literature. In March 1995, other Erk activists were sentenced to prison for the crime of distribution of propaganda against the government, although their sentences were subsumed under a stricter sentence for the crime of activities to overthrow the constitutional order. This charge was related both to illegal distribution of opposition newspapers and to the illegal training of Uzbekistani students studying in Turkey in paramilitary techniques. In 1994 and early 1995, some opposition activists and sympathizers were charged with non-political crimes. Relatives and opposition members claim the police plant the evidence (usually some bullets or a few grams of narcotics) in these cases. Participants in non-political cases have also accused the police of planting evidence or coercing confessions to achieve convictions. In April 1995, an opposition leader and his son were abducted and beaten by unknown assailants before being released the same day.

Freedom of religion is provided for in the constitution, as is the principle of separation of church and state. Before independence there were less than 100 working mosques in Uzbekistan. By the close of 1993 there were more than 5000. Religious education is becoming more widespread, although it is not included in state schools. While Islam is the religion of the majority, ethnic minorities may also practice in relative freedom. A German Lutheran church, a Polish Roman Catholic cathedral and synagogues have all been returned to use by their religious communities.

While the government of Uzbekistan repeatedly and publicly expresses support for the continued peaceful presence of the dozens of ethnic minorities in Uzbekistan, many members of minority groups believe there are limited opportunities for non-Uzbeks in the wake of Uzbekistan independence. However, Uzbekistan citizenship law is admirably inclusive, including none of the language and residence requirements of other CIS states.

In January 1995, the government announced a reform of exit procedures which should increase the ability of Uzbekistanis to travel. In the past, exit visa requirements and elaborate and complicated passport application procedures had often served as a convenient vehicle to interfere with the travel abroad of Uzbekistan citizens. Now all Uzbekistanis over age 16 will have a single passport for both internal identification and international travel, and one exit visa will be in effect for two years and apply to travel to all foreign countries. There are no major restrictions on emigration itself, although emigrants may face restrictions on the export of personal property and the sale of real estate.

At the same time, the government has removed travel controls on foreigners generally by eliminating through bilateral agreements the requirement for internal visas for all nationals of the U.K., France, Germany and the Republic of Korea.

Representatives of foreign and international nongovernmental organizations have had problems obtaining the right to work and reside legally within Uzbekistan, and have endured some petty harassment from police officials in the two years since independence. In early 1994, however, the government moved to improve working conditions for such groups by facilitating the registration process and ensuring full freedom of movement for them within the country.

The government repeatedly has stated its goal of a law-governed state, but serious obstacles persist, including corruption and disrespect for the law. Moreover, courts and judges remain effectively subordinate to the state. The government is in the process of rewriting almost all of the legislation it inherited from the USSR and has already rewritten the criminal law, criminal process and administrative law codices. These new codices reflect changes in Uzbekistan by including sections on private business and the environment.

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