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08/01/1998 19:02:41 FOCUS-Russia offers aid, Chechen leader sees hope

(Adds Yeltsin meeting Kiriyenko paras 6-8)

NAZRAN, Russia, Aug 1 (Reuters) - Russian Prime Minister Sergei Kiriyenko

offered on Saturday to make good on promises of economic aid to devastated rebel

Chechnya, prompting the region's leader to say after a meeting that he had "new

hope".

"We need stability and peace in Chechnya and the whole North Caucasus...We

need to settle Chechnya's economic problems," Kiriyenko told a joint news

conference after two hours of talks in Nazran, capital of Ingushetia, a region

adjoining Chechnya.

"We must also provide work for the citizens of Chechen, considering there

was a war and the whole economy was ruined," he said, saying poverty was the

driving force behind the violent anarchy gripping much of Chechnya and affecting

its neighbours.

Chechnya President Aslan Maskhadov -- a former Soviet artillery colonel who

led the guerrilla army that forced out Russian troops in 1996 after 21 months of

carnage -- has complained bitterly that Chechnya has seen little of the money

promised under a peace treaty he signed in the Kremlin a year ago with President

Boris Yeltsin.

"After today's meeting we have new hope that the agreements will, if only in

part, be put into practice," Maskhadov said.

Yeltsin met Kiriyenko immediately after his return from Nazran at his

Gorky-9 country residence to discuss the results of the talks, the Kremlin press

service said.

"The head of the government informed the president that the questions of

securing peace, stability and order (in Chechnya) had been discussed at the

meeting," it said in a statement.

"The president noted that an economic growth and a rise in the people's

living standards is necessary to reach calm in the Caucasus. The president also

underlined the need to secure law and order and to fight crime and terrorism."

Despite the cordial talks in Nazran, the heavy security, including

helicopter gunships, served to reinforce the sense of unease around Chechnya.

The most notable of dozens of kidnap hostages, some of them foreign, is

Yeltsin's personal envoy, who was seized on May 1.

Seen as a moderate in Moscow despite his refusal to waver on claims to

sovereignty, Maskhadov's perceived failure to win concrete compensation from the

Russian government has helped undermine his authority in the million-strong

Moslem region.

Kiriyenko, 36, only took office four months ago and so is largely free of

involvement in the eyes of the Chechens with the assault on them launched by

Yeltsin in December 1994. He already admitted this week the government had not

kept its promises.

"Kiriyenko was not among those who started the war. He gathered signatures

to stop the war," Maskhadov said of him.

Freely elected in January 1997, Maskhadov has struggled to rein in kidnap

gangs and, recently, Islamic fundamentalists. He survived an assassination

attempt 10 days ago, winning a vote of confidence from Yeltsin and his offer of

talks with Kiriyenko.

"There is a lawfully elected president and executive in Chechnya who have

the support of the people and we will give those authorities all the help we

can," Kiriyenko said, making clear that, for all Maskhadov's reluctance to toe

Moscow's line, his rule is still preferable to anarchy or to Moslem hardliners.

Underlining that Russia still regards Chechnya as an integral part of the

federation, Kiriyenko pledged to do more to see that pensions and other state

benefits reached the region and offered to grant it the status of "free economic

zone", rather like the tax-free enclave of Kaliningrad on the Baltic.

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