RUSSIAN DEFENSE MINISTER IN UKRAINE. Igor Sergeev was in Ukraine on 26 August for talks on military cooperation and implementing the Black Sea Fleet agreement between the two countries. Ukrainian Defense Minister Olexander Kuzmuk and Sergeev signed a military intelligence accord pledging the countries' military forces will not spy on each other. They also discussed the fate of 42 Soviet strategic bombers that remain on Ukrainian territory. Russia initially wanted to buy them but has since changed its mind. The two ministers agreed that experts from both countries will discuss for which purposes the bombers will be used. Also on 26 August, President Leonid Kuchma said that military cooperation between Ukraine and Russia must be "put right". Russia has criticized the "Sea Breeze 97" naval exercises off the Crimean coast in which Ukraine is taking part with the U.S., Turkey, Georgia, Romania, and Bulgaria.

UKRAINIAN FOREIGN MINISTER IN MOSCOW. Meeting in Moscow on 27 August, Hennady Udovenko and his Russian counterpart, Yevgenii Primakov, reviewed progress in implementing agreements reached by Presidents Leonid Kuchma and Yeltsin during their May meeting in Kyiv, Russian media reported. The two ministers also signed a statement stipulating the legal aspects of the border issue. Primakov was quoted as saying that demarcation of the Russian-Ukrainian border is "not an issue for today." Border negotiations are scheduled to continue in the Russian city of Bryansk in September. Udovenko also met with Prime Minister Viktor Chernomyrdin to discuss issues related to bilateral cooperation. Udovenko announced that President Kuchma will visit Moscow in January or February 1998.

Armenian President Levon Ter-Petrossyan arrived in Moscow on 28 August for a three-day state visit. Ter-Petrossyan and his Russian counterpart, Boris Yeltsin, are to sign a new friendship and cooperation treaty. According to Russian Prime Minister Viktor Chernomyrdin, this "major treaty" will "give new impetus" to the already harmonious bilateral relations between Moscow and Yerevan. Another key agreement is expected to be signed by Armenian Energy Minister Gagik Martirossyan and the chairman of Russia's Gazprom, Rem Vyakhirev. That accord provides for the creation of a joint venture to export Russian gas via Georgia and Armenia to Turkey. Armenia will also receive Russian gas for domestic consumption at prices lower than those it paid for gas from Turkmenistan.

The initial agreement between Russia and Armenia on cooperating in the export of Russian natural gas was signed in Moscow in January 1997 by Armenian Prime Minister Armen Sargssian and Chernomyrdin. Some six months later, in late June, Vyakhirev was in Yerevan to discuss the project with Sargssian's successor as Armenian premier, Robert Kocharyan. Vyakhirev hinted at the time that Gazprom might use part of a $2.5 billion credit it had received to finance construction of the new pipeline through Armenia. Under the terms of the agreement to be signed by Gazprom and its Armenian equivalent, Armgazprom, the volume of Russian gas supplies to and via Armenia will increase from 3 billion cubic meters in 1999 to 9 billion cubic meters in 2003. Russia will receive 55 percent of the profits from the joint venture and Armenia 45 percent. Work on construction of an export pipeline and on renovating the existing pipeline network within Armenia will create some 2,000 new jobs initially. That figure may rise to between 7,000 and 10,000.

In addition to underscoring Moscow's enduring interest in mutually advantageous economic cooperation with Armenia, the creation of the joint venture highlights Turkey's increasing dependence on gas imports to meet its growing energy needs. During the ninth meeting of the presidents of Black Sea Economic Cooperation member states in Istanbul in late April, Vyakhirev and Turkish Energy Minister Recai Kutan signed a 25-year contract worth $13.5 billion, whereby Turkey will increase its annual purchases of Russian natural gas from 6 billion cubic meters to 30 billion in 2010. According to Kutan, that amount will cover approximately half of Turkey's total gas needs in 2010; by that time, as a result of the construction of several new gas-fired power-stations, Turkey will rely on natural gas for 38 percent of its total energy requirement (compared with 13 percent now). Russia will thus remain the largest single supplier of gas to Turkey, followed by Iran. (Turkey is the second largest purchaser of Russian natural gas, after Germany.)

Kutan and Vyakhirev also agreed to create two new joint ventures. One of those joint ventures will repair and upgrade the existing pipeline that supplies Russian gas to Turkey via Ukraine, Romania, and Bulgaria. (Turkey will pay $1.5 billion toward the construction of new stretches of pipeline and compressor stations.) The second will build a new pipeline either overland through the Caucasus or from Izobilnaya (100 kilometers east of Krasnodar) via Dzhubga and then under the Black Sea to Samsun on Turkey's Black Sea coast.

Gazprom board member Vladimir Rezunenko told Reuters in March that Gazprom has approached European banks to discuss credits for financing the underwater Black Sea pipeline, the cost of which is estimated at $3.3 billion. The technical difficulties involved in carrying out that project are daunting, however. The 385- kilometer pipeline would be laid at a depth of 2,100 meters in places, making it the deepest in the world. This would mean the diameter of the pipe would have to be quite narrow to withstand both external and internal pressure, which, in turn, would limit throughput capacity.

At a press conference in Moscow in early August, Vyakhirev nonetheless affirmed that Gazprom still intends to proceed with the trans-Black Sea pipeline, but he gave no indication of how long construction might take once funding is secured. The fact that Moscow and Yerevan agreed in January to build the overland pipeline suggests that Gazprom never considered the Black Sea underwater and the Caucasus overland options as mutually exclusive. Nor, apparently, did Turkey. At the Black Sea Economic Cooperation Istanbul summit in late April, Turkish President Suleyman Demirel assured his Georgian counterpart, Eduard Shevardnadze, that Ankara's commitment to the underwater Black Sea pipeline did not mean that the overland alternative through Georgia had been "removed from the agenda." As a transit country, Georgia stands to earn tariffs from the pipeline.

UKRAINE TO INCREASE MILITARY BUDGET? Security and Defense Council Secretary Volodymyr Horbulin told reporters in Kyiv on 27 August that President Leonid Kuchma and the government will urge the parliament to more than double defense spending in 1998, UNIAN reported. The government will also appeal to the parliament to allot funds to reform the military. Horbulin proposed that 3.5 percent of the projected gross domestic product, the equivalent of about $1.9 billion be spent on the military next year. The 1997 budget allots 1.5 percent of GDP for defense spending ($811 million). Horbulin also said Kyiv wants to reduce the number of generals from 386 to 280 and that it will watch the progress of Russian military reforms for tips on how to improve its own army amid staff cuts. Some 350,000 people now serve in the Ukrainian military.

KYIV WANTS CLOSER TIES WITH JAPAN. Ukrainian Prime Minister Valery Pustovoitenko on 27 August told a visiting Japanese parliamentary delegation that Kyiv wants closer links with Japan, AFP reported. Pustovoitenko said Ukraine is particularly eager to encourage the creation of joint enterprises between the two countries in electronics, construction, and oil exploitation. Juro Saito -- the speaker of Japanese House of Councilors (the upper house of parliament), who is currently in Kyiv with seven other Japanese members of parliament -- said Tokyo intends to help Ukraine with its economic and political reforms. He added that Japan would like to set up a joint Ukrainian-Japanese research center to study the effects of the explosion at the Chornobyl nuclear power station.