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

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.

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,