SOURCE: The St. Petersburg Times
DATE: Issue #1027 (93), Tuesday, December 7, 2004
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TITLE: Visa-Free
Cruises
May End
PUBLISHER: Staff Writer
TEXT: A bill that would bar foreign cruise ship passengers from coming ashore unless they have visas to enter Russia could cost Russia 200 million euros a year, St. Petersburg tour agencies say.
Cruise ship passengers can currently visit Russia for up to 72 hours on visa-waiver scheme.
Vladimir Pligin, a St. Petersburg deputy on the United Russia list and chairman of the State Duma's Constitutional Legislation and State Affairs committee, introduced the visa requirement to the Duma two weeks ago. It is included in an amendment to the law regulating entrance to and exit from Russia.
Obtaining a Russian visa is considered a difficult and bureaucratic process and could be a significant barrier to tourists visiting Russia, and especially St. Petersburg, which is the main Russian destination for cruise ships.
Pligin's initiative is based on reciprocity - tourists from countries that demand Russian cruise ship passengers have visas to go onshore will face the same requirement when they reach a Russian port.
Cruise ship passengers have not required a visa to enter Russian ports since 1968 when the Soviet Union joined an international convention on easing the visa regime for cruise travelers. At that time such passengers could stay in the U.S.S.R. without a visa for 48 hours.
The same rule applied in the other countries, where neither Soviet nor any other foreign passengers of cruise ships needed a visa, and could stay ashore for 72 hours. However, the Soviet Union sent few citizens abroad, fearing they would either leave or be recruited by foreign intelligence agencies.
In the last few years, especially after the terrorist attacks on the United States of Sept. 11 of 2001, many countries including Europe and the U.S., introduced visa requirements for cruise passengers from Russia.
Trying to change the situation for the better in August 2003, Russia prolonged the time passengers could stay without visas to 72 hours.
However, this concession was not reciprocated by other countries with the easing of requirements for Russian cruise passengers.
Russian legislators have decided to try to force the issue.
"We have based our idea on the principle of reciprocity," Vedomosti on Friday quoted Pligin's assistant Alexei Filimonov as saying. "We should not open ourselves to those who restrict our rights."
However, Russia and particularly St. Petersburg sea-borne tourism companies are worried by the initiative.
"It's a blow to the entire Russian cruise tourism industry, but it is a most painful blow against St. Petersburg," said Gennady Mikhailov, deputy director of Inflot World Wide St. Petersburg sea tourism agency.
"If this is introduced, foreign cruise ships just won't go to our ports, and foreign tourists won't come here because it will be very complicated to process visas," Mikhailov said.
Large Russian port cities such as Murmansk, Arkhangelsk, Kaliningrad, Sochi or Vladivostok do not receive many cruise ships - only to 15 a year. However, in St. Petersburg this year alone about 400 cruise ships, carrying 252,000 tourists, visited, he said.
Cruise ships bring significant profits not only to tourist companies but also to the city budget, he said. Beside harbor dues, which every ship pays to the city, each tourist spends an average of about $150 a day in St. Petersburg.
"If a visa requirement is introduced in Russia this tourism flow will immediately go down, and St. Petersburg will lose its successful position, which it has won in a tough competitive fight with other European port cities," he said.
Yelena Malchyonok, executive director of Arktur Travel tourism company, said she was sure introducing visa requirements for foreigners would not change the policy of other countries toward Russian cruise ship passengers.
Two years ago, trying to pressure Finland to cancel visa requirements for Russian cruise passengers, Russia introduced a similar measure for Finnish tourists, who arrive in St. Petersburg on cruise ships on group visas, she said.
However, Finland did not cancel its visa requirements for Russians, and numbers of Finnish tourists visiting St. Petersburg fell.
"Finns are afraid of illegal migration from Russia and haven't changed anything," Malchyonok said.
Even if a visa requirement is introduced for foreign cruise tourists, the St. Petersburg port is able to process only a few visitors at a time.
"It's impossible to check, for instance, 3,000 passengers of a big cruise ship quickly when at the best berth in St. Petersburg port there are only five checkpoints," Malchyonok said.
Filimonov agreed that the new law would have a negative effect on tourism, however, he said "one should not look at everything from a commercial point of view but should also think about the country's prestige."
Malchyonok disagreed, saying "one should look at the problem not from the point of view of national pride, but from the point of what the country needs."
Meanwhile, some deputies have offered to find a compromise in this situation.
"For instance, cruise passengers could receive visas when they arrive," Vedomosti quoted Konstantin Kosachyov, head of the Duma's foreign affairs committee as saying.
o
Moskovsky Komsomolets newspaper reported on Monday that the Duma has come up with another initiative regarding foreigners in Russia.
An article, in the new law, that may change the rules of entrance and exit of foreigners to Russia if accepted by the Duma, suggests shutting out foreigners who say bad things about Russia.
The article suggests refusing entry to the country and putting a black mark in passports of those who are disrespectful toward symbols of the Russian state, federal authorities, or the country's spiritual, cultural and public values.
TITLE: Voters Lukewarm About United Russia Governors
PUBLISHER: Staff Writer
TEXT: MOSCOW - Voters in six gubernatorial elections Sunday gave somewhat lukewarm backing to United Russia candidates, in an indication that people may be becoming tired of the Kremlin's managed democracy.
The elections - likely to be the last opportunity for the regions to vote for their governors without the Kremlin's approval - saw one victory and one defeat for Kremlin-backed candidates, with four races going to a runoff.
The United Russia candidate in Pskov, incumbent Governor Yevgeny Mikhailov, lost against local businessman Mikhail Kuznetsov in a runoff, while in Astrakhan, Kremlin-backed acting Governor Alexander Zhilkin won a clear victory ahead of seven other contenders.
Four other regions - Bryansk, Ulyanovsk, Volgograd and Kamchatka - face a runoff on Dec. 26 after no candidate managed to win 50 percent of the vote. United Russia led in Bryansk and Ulyanovsk, and was placed second in Kamchatka.
Analysts criticized Sunday's elections as being tarnished by manipulations, with one incumbent Communist governor struck off the ballot days before the vote and another facing a criminal investigation. With many voters casting their ballots against all candidates, rather than for United Russia, analysts said that Sunday's elections showed the Kremlin's party is still "too weak" in many regions and that people are becoming tired of "managed democracy."
"People are fed up of fake elections," said independent analyst Andrei Piontkovsky. "This is also a reason why many people voted against all. Putin's managed democracy is not getting the people's support."
"The elections were more or less fair, but not free, since they were manipulated," said Nikolai Petrov, a regional analyst with the Carnegie Moscow Center. "It's impossible to talk about free elections when days before the vote strong but 'undesirable' candidates were taken off of the ballot, while investigations were started against others."
Bryansk Governor Yury Lodkin, a Communist, was abruptly struck off the ballot late last month after being accused of using "administrative resources" to help his campaign. Another Communist governor, Mikhail Mashkovtsev, from Kamchatka, is under investigation for misuse of state funds.
In Pskov, Kuznetsov, the head of the Pskov Flour Mill and a former State Duma Deputy who is backed by the Union of Right Forces, or SPS, won 49 percent of the vote, ahead of United Russia's Mikhailov with 41 percent. More than 8 percent voted against all, Interfax reported.
Mikhailov, who was first elected in 1996 on the ultranationalist Liberal Democratic Party ticket, was running for the third time.
In Astrakhan, Zhilkin garnered 65.3 percent of the votes. Regional Duma Deputy Igor Negeryev was a distant second with 15 percent, with against all placed third, Interfax reported.
In Bryansk, against all came second with 21 percent, behind United Russia candidate Nikolai Denin with 43 percent, in a clear protest against Lodkin's exclusion from the ballot. Denin faces a runoff with SPS candidate Yevgeny Zelenko, who was placed third with 13 percent.
In Ulyanovsk the incumbent governor, retired General Vladimir Shamanov, withdrew from the race last month after being appointed an aide to Prime Minister Mikhail Fradkov.
In Shamanov's absence, Dmitrovgrad Mayor Sergei Morozov led with 28 percent of the votes. Morozov received the backing of United Russia and Sergei Kiriyenko, the presidential envoy to the Volga Federal District. Morozov faces a runoff with businessman Sergei Gerasimov, who won 20 percent of the votes, while 11 percent voted against all, Interfax reported. The turnout was 51 percent.
United Russia failed miserably in Volgograd, where more people voted against all than for its two candidates.
The region's incumbent governor, Communist Nikolai Maksyuta, faces a runoff against Nikolai Volkov, the head of the Volgograd city council. Maksyuta won 41 percent of the votes, ahead of Volkov on 13.19 percent, while 12.98 percent voted against all. United Russia Duma deputies Vladimir Goryunov and Oleg Savchenko both received less than 10 percent of the votes.
Governor Mikhail Mashkovtsev led a field of 16 candidates in Kamchatka with 38 percent of the votes, despite being investigated on charges of misusing $5 million in state funds and illegally handing out salmon quotas. Mashkovtsev faces a runoff against Boris Nevzorov, who heads a local district and was backed by United Russia. Nevzorov got 23.83 percent of the votes.
A runoff election in Kurgan was postponed at the last moment after a regional court on Saturday ruled that it could not be held one week after the first round. The local elections commission has to set a new date for the vote, where incumbent Governor Oleg Bogomolov will face off against Moscow businessman Yevgeny Sobakin, an SPS candidate.
Sunday's elections were the biggest batch remaining this year. Next year, Putin is to pick candidates and submit their names to regional legislatures for confirmation, according to a bill approved in a third reading by the State Duma last Friday. Putin will also have the right to fire regional leaders. To become law the bill, seen as a key part of Putin's drive to centralize state power, needs to be approved by the Federation Council and the president.
o
A Duma by-election in Moscow's Preobrazhensky single-mandate district, to fill the seat vacated by Deputy Prime Minister Alexander Zhukov in March, was declared invalid after only 24.49 percent of voters turned out to vote. A minimum of 25 percent is required for Duma elections to be valid.
Yabloko deputy chairman Sergei Mitrokhin was running against economist Mikhail Delyagin, a member of the nationalist Rodina party, and a United Russia candidate named, curiously enough, Alexander Zhukov.
TITLE: Police Probe Soldiers' Mothers Committees
PUBLISHER: Staff Writer
TEXT: MOSCOW - Three weeks after announcing it was forming a political party, the respected Union of Soldiers' Mothers Committees has become a target of a police investigation in what it fears is an attempt to disrupt its plans to build a viable political opposition force.
Officers from the city police's economic crimes department went to the organization's headquarters in central Moscow last week and asked for financial documents, which were then promptly handed over to State Duma Deputy Viktor Alksnis for inspection, the organization's head, Valentina Melnikova, said Monday.
Alksnis, a member of the nationalist Rodina party, accused the group last month of being "a foreign agent" seeking to undermine the defense capability of the military, and he called for a federal investigation.
"This is undoubtedly a political affair," said Melnikova, explaining she believed it was no coincidence that the visit came after the group's foray into politics. "But we gave them the documents. We're trying to do everything correctly."
Melnikova said she was incensed to learn from the anti-economic crime department that the documents had been shown to Alksnis.
"If we had known they were going to give him the documents, we would have never turned them over," Melnikova said. "Pretty soon they will be trying to dig up love letters or information about where we buy our undergarments."
A woman who answered the telephone at Alksnis' office said he would be unavailable for comment all day.
Filipp Zolotnitsky, spokesman for the economic crimes department, said he was not aware of the inspection. He said he would clarify the situation late Monday afternoon, but return phone calls to his office went unanswered.
Novaya Gazeta on Thursday published a copy of a request from the economic crimes department that was dated Nov. 30 and asked for information about the group's "sources of financing and expenditures."
It was unclear what possible infractions or crimes the organization could be investigated for, and a spokesman for the Prosecutor General's Office, which according to the document published in Novaya Gazeta is also involved in the inspection, said he could not comment immediately.
The Union of Soldiers' Mothers Committees was founded in 1989 to combat hazing and other human rights violations in the military. The group, which has committees in 53 regions, has come under fierce fire from military officials, who accuse activists of interfering in internal problems.
On Nov. 6 and 7, a total of 164 committee activists from 50 regions gathered on a boat at Moscow's Northern Port for a two-day founding congress for the United People's Party of Soldiers' Mothers. The party's main goals are to abolish the Soviet-era compulsory draft system and win seats in the next Duma elections, in 2007.
TITLE: IN BRIEF
TEXT: Extremism 'Rising'
ST. PETERSBURG (SPT) - Extremist groups have become more active in attacking foreign students in the last few years, Interfax quoted students saying at a round table on problems of foreigners studying in the city held at the Legislative Assembly on Friday.
Legislators promised to work out measures to make the city safety for foreign students.
Air Incursion Denied
ST. PETERSBURG (SPT) - The Russia military has denied an Estonian claim that a An-26 entered Estonian airspace Friday, Interfax reported Monday, quoting the air force.
"The plane took off from an airfield in Leningrad Oblast at 5:24p.m. and strictly followed its route [to Kaliningrad]," said Alexander Drobyshevsky, head of the air force press service.
Two City Chambers?
ST. PETERSBURG (SPT) - The Legislative Assembly is to vote on a bill to make the city parliament into a two-chamber body, Interfax reported Monday quoting the assembly's press service.
If the deputies are able to amend the City Charter the new upper chamber could be elected in the next six months.
Work Invitation Quota
MOSCOW (SPT) - The federal government has introduced a quota of 214,000 for issuing invitations for foreign citizens to work for 2005, Interfax reported Monday.
Metro Token Limit
ST. PETERSBURG (SPT) - St. Petersburg metro management has limited the number of tokens passengers can buy to two, Interfax reported Monday.
People had started to hoard the tokens after it was announced their price will rise from 8 to 10 rubles on Jan. 1.
Chinese Beaten
ST. PETERSBURG (SPT) - Several 16- to 18-year-olds attacked and beat two Chinese navy officers Saturday night, Interfax reported Monday.
TITLE: Lukin Throws Lifeline To Chernobyl Strikers
PUBLISHER: Staff Writer
TEXT: Federal ombudsman for human rights Vladimir Lukin has taken up the cause of hunger-striking Chernobyl liquidators, who were exposed to dangerous levels of radiation while dealing with the 1986 nuclear power plant disaster, promising to satisfy some of their demands.
Lukin, who visited the eight liquidators at Sestroretsk on the outskirts of St. Petersburg on Saturday, said he will do everything he can to convince the Supreme Court to appoint a date to hear a case to raise their state compensation payouts.
"Unfortunately, this hunger strike is not the first," Lukin said Saturday. "Two weeks ago there was a hunger strike of the same kind in Bryansk and after this I discussed the situation with Prime Minister Mikhail Fradkov. These actions have something in common - the veterans of Chernobyl are underpaid, and not only are they underpaid, they are also insulted."
"These people sacrificed the most valuable thing that they have - their health and some of them their lives to save the country from a big tragedy," Lukin said. "In any civilized country [the authorities] would have thought everyday how can they help these brave and heroic people. The authorities, themselves, have social guarantees approved by law, but for Chernobyl workers who lost their health, there are no guarantees."
The eight liquidators, on hunger-strike since Wednesday, said they paid a high price for the state's mistakes in 1986.
A medical emergency team has visited the strikers every day and given injections to three strikers who have been unwell, the workers said. One of the strikers has been taken to hospital after experiencing health complications from hunger.
"All of them [are unwell]. One had an increased blood pressure, another, who had two heart attacks in the past, had a heart complication and the third had low blood pressure," Gennady Teranov, one of the workers, said Monday in a telephone interview.
"When I got up today I felt weak," Teranov said. "I definitely feel worse today, dizzy or something."
The workers said they will end the strike if Lukin succeeds in convincing the Supreme Court to hear their case, Teranov said.
"He told us he's going to talk to them on Tuesday. If they are going to appoint the date for a hearing tomorrow, we will stop the strike," he said. "We also hope that city authorities will come up with something at their meeting at City Hall tomorrow. A representative of the Social Committee told us they are going to discuss this on Tuesday and that the governor [Valentina Matviyenko] is aware [of the problem]."
Yekaterina Maiboroda, spokes-woman for the Social Committee, said City Hall is working on the problem.
Federal Health and Social Development Minister Mikhail Zurabov promised Thursday that the government "will soon" transfer to St. Petersburg 50 million rubles ($1.8 million) in payments for about 2,300 Chernobyl workers registered in the city, she said.
"Matviyenko will send a letter to Zurabov maybe today with a request to transfer additional money for Chernobyl workers to ease the tension," Maiboroda said Monday in a telephone interview.
TITLE: Lutheran Church Marks Rededication
PUBLISHER: Special to The St. Petersburg Times
TEXT: The Finnish Lutheran church in Toksovo, 30 kilometers north of St. Petersburg, celebrated the 10th anniversary of its rededication Saturday with music, Finnish and Russian guests, and official ceremonies presided over by Rector Eero Kuukauppi.
Vyacheslav Alekseyev, deputy head of the Vsevolozhsk municipal administration, said in a speech that "happy is he who is happy at home."
But the congregation was not always able to call their church home.
Although there has been a Lutheran parish in Toksovo since 1625, when the area was under Swedish rule, the brick building now standing on the crest of the hill was built and dedicated only in 1887.
By 1917 the congregation numbered 10,791 members but in 1936 Soviet authorities closed the church, and in 1942 most of the Ingrian Finns in the area were deported to Siberia.
For many years the building was used as a club, disco and movie theater. It was returned to the Evangelical Lutheran Church of Ingria in 1990 just before the collapse of the U.S.S.R.
The Toksovo church, which serves Lutheran believers from as far away as Garbolovo to the north and Devyatkino on the edge of St. Petersburg, was restored with help from Finnish sponsors, including the Evangelical Lutheran Church of Finland. Members of Finnish congregations in Vihti, Vantaa and Sysma came to Toksovo to join in the construction work. Pews were donated by a church in Helsinki.
"This is good and bad," said Pasi Hujanen, head of the chancellery of the Evangelical Lutheran Church of Ingria. "At least the pews were not used to make coffins, but it means they weren't needed by that church in Helsinki. People didn't gather in that church anymore."
The 1994 dedication remains fresh in the memories of congregation members and local residents.
"There were about 2,000 people at the dedication in 1994," recalled Esko Haapalainen, who served the Toskovo parish for 10 years. At Saturday's celebration, the Toksovo congregation received musical greetings from St. Petersburg's Petrikirche German Lutheran church choir and a baritone from St. Catherine's Russian Orthodox Church in Murino.
A service was held Sunday with the participation of St. Petersburg diocese bishop Aarre Kuukauppi.
TITLE: Kiev's Supreme Court Orders Dec. 26 Poll
PUBLISHER: Staff Writer
TEXT: KIEV - Handing a major victory to the opposition, Ukraine's Supreme Court on Friday invalidated the Nov. 21 runoff and ordered a repeat vote for Dec. 26.
But political turmoil continued to grip the country Sunday after parliament refused to pass reforms backed by outgoing President Leonid Kuchma that would weaken the presidency and failed to amend election laws to help ensure a fair presidential vote.
The Supreme Court, siding with a complaint by opposition candidate Viktor Yushchenko that the vote was rigged, ruled that "the violation of the principles of the election law ... makes it unable to determine the voters' will." It said voters' lists had been tampered with and people had voted more than once.
The decision is a sharp rebuke to Kuchma, who backed Prime Minister Viktor Yanukovych in the election, and a slap to President Vladimir Putin, who openly supported Yanukovych and congratulated him before the election results were officially declared. Both had strongly opposed a repeat runoff and favored an entirely new election.
"We have proven that we are a nation that can defend our choice," Yushchenko told hundreds of thousands of supporters at Kiev's Independence Square. "Justice and freedom are coming back to Ukraine thanks to you, the real heroes."
The crowd, which grew steadily larger after the court's ruling Friday evening, chanted "Yushchenko! Yushchenko!" every time he paused, and he responded by blowing kisses. Then the people began singing the national anthem. Yushchenko, who had called for the new runoff, urged his supporters to continue their two weeks' of street protests until the election law is amended and the board of the Central Elections Commission is disbanded.
Putin had made no public comment about the court ruling by Sunday evening, but his close ally State Duma Speaker Boris Gryzlov scoffed at the idea that the vote would provide a way out of the country's crisis.
Western governments, which had refused to recognize the official election results, praised the ruling. Polish President Aleksander Kwasniewski, who with Gryzlov served as an international mediator in Ukraine's crisis, said in comments published Sunday that he supports Russia's role as a mediator but that foreign leaders must avoid the appearance of pushing for a specific outcome.
Building on the momentum of the court ruling, parliament met Saturday to consider opposition-sponsored bills to amend the election law and shake up the Central Elections Commission, which the opposition says turned a blind eye on complaints of voting violations.
But pro-government factions together with the Communists and Socialists managed to postpone discussion of the bills for 10 days after Yushchenko's Our Ukraine faction and its smaller allies blocked consideration of a constitutional reform proposed by Kuchma to increase the role of the parliament and the government while reducing the president's powers. Yushchenko had agreed to back the reform during negotiations with international mediators.
Kuchma on Saturday accused the opposition of not keeping its word and, thus, worsening the crisis, in a telephone conversation with Dutch Prime Minister Jan Peter Balkenende, whose country holds the rotating presidency of the European Union. Kuchma called for international mediators to return to Kiev for another round of talks Monday.
Also Saturday, leaders from eastern and southern Ukraine, which back Yanukovych, held a congress in the eastern city of Kharkiv at which they denounced the court decision as politically motivated interference in the duties of election officials. Congress participants adopted a statement calling for both candidates to prevent the country from sliding further into crisis, Interfax reported.
In Moscow, rival protesters held back-to-back rallies outside the Foreign Ministry on Sunday. About 100 people showed up for a rally organized by the liberal Union of Right Forces to protest the Kremlin's attempts to influence the situation in Ukraine, and about the same number came to demonstrate their support for Yanukovych.
Yushchenko and Yanukovych promptly restarted their election campaigns after the court decision.
"Though the Supreme Court's decision was made under huge political pressure, I have nothing else left to do but participate in the election and win," Yanukovych said through a spokes-woman.
Reports had circulated that Yanukovych might pull out of the race altogether if the court found in favor of his opponent. There were also signs that support from Kuchma and eastern clans for his candidacy was eroding.
Addressing supporters on Independence Square on Saturday evening, Yushchenko urged them to sign up to participate in his election campaign or to act as observers at polling stations.
He also urged international observers to turn out en masse to prevent falsifications even though the vote is a day after Western Christmas.
The Organization for Security and Cooperation in Europe, which harshly criticized the Nov. 21 vote after documenting numerous violations, said it was ready to deploy a full team of monitors and "will ask the 55 OSCE participating states to provide an increased number of long-term and short-term observers and the necessary budget resources," according to a statement on its web site.
Supporters in a camp of more than 500 tents pitched just off Independence Square said they intended to stay put as long as Yushchenko needs them.
Kuchma, in his first televized comment since the ruling on Monday, said that he would honor the court's decision.
TITLE: Abkhazian
Foes to Run
Together
PUBLISHER: The Associated Press
TEXT: TBILISI, Georgia - The two candidates vying for the presidency of Georgia's breakaway region of Abkhazia agreed Sunday to conduct new elections, and run on a joint ticket.
The surprise decision between opposition leader Sergei Bagapsh and former Prime Minister Raul Khadzhimba came just one day before Bagapsh promised to hold his own inauguration - a move that had threatened to stoke already high tensions in the Black Sea province.
The region has been paralyzed since the Oct. 3 presidential election, in which Bagapsh claimed victory over Khadzhimba. Neither Khadzhimba nor his patron, outgoing President Vladislav Ardzinba, accepted the results and insisted on a repeat election.
"We agreed to act as one team," Bagapsh said by telephone. "Khad-zhimba is a courageous person and we've been able to prevent the situation from being aggravated further."
He provided no other details. No date for a new election was given.
Itar-Tass reported that Bagapsh would be the presidential candidate and Khadzhimba would be the vice presidential candidate, under the agreement.
"We agreed that tomorrow we will conduct all activities aimed at defusing the situation that has arisen, so that we will be able to conduct new elections and that we will be on one team," said Khadzhimba in comments broadcast on Russian television.
Bagapsh stood alongside him outside a government building in the regional capital, Sukhumi.
Abkhazia has run its own affairs since 1993, when separatists drove out Georgian government troops, and has cultivated close ties with Russia.
The region's independence is not recognized internationally, and Georgian President Mikheil Saakashvili, who has vowed to bring Abkhazia and other separatist regions under control, has called the election illegal.
The October election was the first openly contested presidential vote in Abkhazia.
Election officials in Russia verified the election results Saturday, but concluded Bagapsh did not win the 50 percent needed to take the presidency.
TITLE: IN BRIEF
TEXT: Airport Security
MOSCOW (SPT) - The State Duma gave preliminary backing Friday to a bill aimed at significantly increasing the security presence at Russia's airports, three months after terrorist bombs downed two civilian aircraft, killing 90 people.
The amendments to the Air Code were unanimously approved by lawmakers in the first of three readings.
As well as guarding Russia's airports, police will be able to accompany suspect flights, withhold luggage and cargo, and demand information and documentation from air companies.
Parfyonov to Newsweek
MOSCOW (SPT) - Prominent television journalist Leonid Parfyonov, the former host of NTV's current affairs program "Namedni," was named editor of the Russian edition of Newsweek, NTV reported Sunday.
Parfyonov was fired from NTV in June after reading on air that the channel's leadership had barred him from airing an interview with the widow of murdered Chechen rebel leader Zelimkhan Yandarbiyev.
TITLE: City's 'Water Buses' Look for Plain Sailing
PUBLISHER: Staff Writer
TEXT: St. Petersburg's 'water buses' had a rocky start this summer, but the project will continue next year alongside a number of other tourist initiatives, said City Water Bus project representatives Monday. And vital to its future success will be government cooperation.
Ships operating as water buses were introduced to the city river routes this June, as an alternative to fixed-route boats. The seven 'buses' in operation transported about 50,000 people during the opening 2004 season, said Dmitry Belenovsky, director of non-commercial partnership City Water Bus, at a news conference.
One stop on any route was set at 30 rubles ($1), while a one-day pass was available at 350 rubles. Next year, tariffs may rise due to an expected hike in pier rentals, project members said.
However, with leasing conditions not made public until March or April, the water bus operators have practically no time to develop a thorough marketing campaign or plan additional services, said Evgeny Zubarev, head of Passenger Ship Owners Association.
The association consists of 15 private companies, which cover about 85 percent of all the water transportation in St. Petersburg, including the six companies that operate water buses.
Andrei Berezkin, head of water tourism at the city's information center, echoed his words. "The tourism business needs stability," he said. "How can we market the project abroad and then find out it will be completely changed the next year? What happened with the Moika river routes [in 2004] gave us a real blow," he said. Out of the four promised routes, only two were in operation as bridge repair works restricted traffic along the River Moika.
Tour operators' uncertainty over pier leasing is finally expected to resolve next year, as the bridges authorities committee Mosttrest (currently in charge of leasing) transfers the responsibility to the city property committee.
"We need long-term leasing contracts in order to develop operations," Zubarev said, explaining that it takes five to six years for a ship to pay off. Furthermore, operators wish to develop additional services, such as cafes and brochure kiosks, but fear double taxation from the city government.
Viktor Pakhomkov, deputy head of city's tourism and public relations committee said the authorities are thankful for the dedication of the project participants and will try to address their problems.
"What we often see is that a city committee tries to find a way to earn money for the budget, without providing for future city interests.
"That has led to a fiasco in the case of several start-up projects already," said Pakhomkov. As an example he named the gondola boats that used to cruise around the Peter and Paul fortress and offer picturesque tours of the city's most-visited attraction.
"They could not come to an agreement with the Petrograd side administration, and thus [the company] left the city for the more welcoming [city suburbs of] Pushkin and Pavlovsk," Pakhomkov said.
Cultural and educational tourism looks to be the most promising tourism segments for the city according to a Boston Consulting group study to be completed this month, Pakhomkov said.
"Water buses will allow us to make a head start in that category, and we will try to support them," he said.
Among the new tourism projects considered for next year are hop-on hop-off double-decker buses touring the city.
Tourist information center's Berezkin said the City Water Bus project is working with regular bus and pedestrian tours, as well as museums in order to link the three into a comprehensive cultural program.
Total water transportation rose by 36 percent in the city this year, with a turnover of 1,350,000 people.
When fully developed, the water buses are expected to handle daily traffic of over 10,000 people.
TITLE: Menatep Banks Ready to Spend
PUBLISHER: Staff Writer
TEXT: MOSCOW - The financial wing of the once-mighty Group Menatep is now free and clear of Yukos' main shareholder and is ready to expand, after a name change.
Both the investment and retail arms of Menatep's shrinking empire - Trust and Bank Menatep St. Petersburg - now belong to the management, Ilya Yurov, the chairman of both banks, said last week.
Completing the financial obligations of the $100 million-plus management buyout will take a few more months, but legally the two banks no longer have anything to do with Group Menatep, Yurov said.
After "sitting on a pile of cash" as the legal assault on Yukos and Group Menatep unfolded, scaring clients away, Trust is now ready to expand into retail through Bank Menatep St. Petersburg, which is being rebranded as National Trust Bank, he said.
"The sheer fact that we are still sitting here and talking about the future speaks for itself."
Yurov acknowledged that the financial performance of both banks in 2004 has been the worst in years, mainly because they lost Yukos as a client.
Trust in particular suffered because the bank, which has been repeatedly raided by officials throughout the 18-month legal assault on Yukos, decided not to risk its cash when its own survival was in doubt.
"We were literally sitting on a pile of cash, that's all we did," Yurov said.
Menatep St. Petersburg, meanwhile, took a beating during the so-called mini banking crisis that shook the financial sector this summer.
But, according to Yurov, the hard times are over. "In a country where out of 100 million economically active people only 6 million bank, the opportunities for growth are huge," he said.
"As for changing the name, surely Menatep is a very well-known brand, by now particularly. ... I'm sure it cannot be used successfully for at least a few years."
TITLE: IN BRIEF
TEXT: Inflot Signs Deal
ST. PETERSBURG (SPT) - Inflot World-Wide, a major provider of financial and infrastructure services to most of the major cruise lines of the world in the ports of the Baltic Sea, Black Sea, North Sea and the seas of Far East, has signed a contract with the Royal Caribbean Cruises, one of the world's largest cruise companies.
Inflot will serve as the as the port of call agent for all Royal Caribbean Cruises ships in the principal ports of the St. Petersburg and Tallinn area of the Baltic Sea for the 2005 cruise season.
City in India's Defense
ST. PETERSBURG (SPT) - St. Petersburg's defense industry would like to see closer cooperation with India, and start joint-ventures, said city governor Valentina Matviyenko, reported RIA Novosti.
Enterprises in the city's industrial- military sector, namely involved in machine-tool and power-generating equipment building, already fulfill Indian orders rather actively.
Matviyenko said that those enterprises would like to expand such work ties, which would create new jobs, raise wages and facilitate the local industry's subsequent development.
The governor also added, that with President Putin's visit to India, plans have been agreed to set up joint ventures to utilize the strengths of both nations: their science and technological potential. The resultant products would then be sold on the world market, Matviyenko stressed.
Recently, St. Petersburg's Consolidated Machine-Building Factories had shipped a VVER-1000 water-cooled and water-moderated reactor's body to the New Delhi's seaport in late November 2004, reported RIA Novosti. The reactor is eyed as the first power unit for India's Kudankulam nuclear power plant, the NPP.
Alcohol Shows Promise
ST. PETERSBURG (SPT) - Alcohol manufacturing will be the most promising segment of the food market in St. Petersburg, according to experts.
Considering growth potential on the Russian food production market in 2004, auditing firm Ernst & Young concluded that fine liquor, beer and wine were the most burgeoning products for the next five years. The results arrived after the firm conducted a study of 50 companies, 70 percent of which were Russian food producers and the remaining - international corporations.
According to the study, the segment for alcohol products will grow annually by 28 percent for the next five years. Meanwhile, the growth of soups, spices and sauces will reach about 26.4 percent.
Third on the listing was children's food segment with a 25 percent rise in sales volume.
TITLE: Putin Sees India as Partner in Hi-Tech
PUBLISHER: Staff Writer
TEXT: MOSCOW - Looking to cash in on India's success in creating a rival to Silicon Valley, President Vladimir Putin on Saturday called for a bilateral effort to develop information technology and tap new markets.
"I see the foundations of a strategic partnership in high-technology projects," Putin told business leaders and government officials during a tour of India's high-tech hub of Bangalore.
"We could jointly develop new high-technology products and market them to third countries," news agencies quoted Putin as saying during his three-day visit to the world's second-most populous country.
Putin pledged tax breaks and government support for Indian companies that help create in Russia so-called IT parks, special business zones for firms developing information technology, The Associated Press reported.
India is the world's leading IT outsourcer, with more than 20 percent of the global market, compared with less than 1 percent for Russia. Market watchers say Russia will continue to fall further behind unless the government provides tangible support for the industry soon.
"The Russian government occasionally expresses verbal support, but specific actions have yet to be seen," Joseph Feiman, vice president of research at Gartner, a global IT consulting firm, said by telephone from Stamford, Connecticut.
That may be changing, however. A 20-member delegation of IT specialists led by IT and Communications Minister Leonid Reiman, joined Putin in Bangalore for exploratory talks with Indian companies.
"One important topic of cooperation is on establishing information technology parks," Agence France Presse quoted Reiman as saying.
"We think the experience of India is one of the most remarkable in the world," he said. "This is something we want to implement in Russia."
India has gone from something of a technological backwater to an international powerhouse, with dozens of IT parks bringing in combined outsourcing revenues of $12.5 billion per year, inspiring other countries like China and the Philippines to intensify development of their industries, Feiman said. "The window of opportunity is closing," he said.
Russia has just one IT park, in the Moscow suburb of Chernogolovka. But another one is being built in Dubna, making the Moscow region "a testing ground" of sorts, the IT and Communications Ministry said in a statement.
The Chernogolovka pilot project is small, however, generating just a few million dollars a year in revenue and focusing on such projects as e-trade applications, medicine, and sports-related software and security systems.
Dubna, on the other hand, plans to attract 10,000 programmers to the city of 67,000 by 2012, according to Sergei Dobromyslov, the Dubna official in charge of developing the park.
"Many companies, including IBS, have shown interest," Dobromyslov said by telephone Friday.
With government support, Russia could increase its IT outsourcing revenues, which totaled just $500 million last year, to as much as $10 billion by 2010, according to IT and Communications Ministry projections.
One source of funding could come from India itself.
Deputy Prime Minister Alexander Zhukov told reporters in New Delhi on Saturday that the two governments plan to shift the use of India's $3 billion Soviet-era debt to Russia from financing traditional consumer goods to investing in joint ventures, including in the IT sector.
TITLE: RZD to Redirect Rail the Flow of Traffic in 2005
PUBLISHER: Combined Reports
TEXT: MOSCOW - State-owned Russian Railways, or RZD, which owns one of the world's biggest railway systems, plans to rebalance its traffic next year by encouraging more cargoes to be exported via land borders and by reducing shipments via major ports.
A spokeswoman for RZD said Friday that the company, whose prices are capped by the state, is entitled to boost prices by 8 percent to 8.5 percent next year.
But it wants the government to allow it to raise prices by 12 percent on destinations of major Russian ports and keep prices unchanged on inland destinations to keep the price hike within the government-set range.
"We will thus redirect cargo shipments toward land border crossings, which are well equipped but underused," the spokeswoman said by telephone. "Ports are currently enjoying windfall profits as they mainly export oil cargoes, while the railways are in the red," she added.
Cargo volumes as a whole are up 11.7 percent this year, while volumes to Russia's ports are up 28.5 percent, RZD vice president Salman Babayev said in a statement.
RZD is responsible for around 20 percent of total crude exports and for about 70 percent of refined-product exports from Russia, the world's second-largest oil exporter.
RZD data showed earlier this year that Russian crude oil and product exports by rail rose by 5 percent year-on-year in January-September as producers continued to look for extra capacity amid booming output and a lack of new pipelines.
The data also showed that oil majors have dramatically rerouted volumes, preferring deliveries to seaports, which give higher net returns than exports to inland destinations.
Crude oil deliveries to major ports rose by 58 percent and product shipments by 25 percent year-on-year, while they decreased by 24 percent and 7 percent, respectively, to inland destinations such as Central Europe, Finland or China.
Total crude oil and refined-product exports by rail stood at 80.954 million tons (2.2 million barrels per day) compared with 76.637 million tons (2.06 million bpd) in January-September 2003.
RZD also plans to triple crude and product supplies to China to 300,000 bpd by 2006, but oil majors warn they are unlikely to deliver large volumes to this inland destination unless shipping prices are significantly reduced.
(Reuters, Bloomberg, SPT)
TITLE: Indian Oil Company to Bid for Yugansk
PUBLISHER: Staff Writer
TEXT: MOSCOW - India's state-owned Oil and Natural Gas Corporation joined Gazprom in the controversial race to buy Yukos' core production unit, Yuganskneftegaz, at auction later this month.
ONGC's move has been seen by industry analysts as a possible dummy bid in support of Gazprom, the Kremlin's preferred buyer, and an attempt to make the sell-off look more transparent.
India's oil and gas minister, Mani Shankar Aiyar, announced on Friday that ONGC would take part in the Dec. 19 auction, either on its own or together with a Russian partner.
President Vladimir Putin, who was in New Delhi on a state visit to discuss trade and cooperation in the energy, arms and IT industries, welcomed bids by Indian companies for Yugansk - the first time the Kremlin has publicly invited foreign companies to bid for the Yukos asset.
"We are interested in the auction being as open as possible and in as many companies taking part in it as possible," Deputy Prime Minister Alexander Zhukov, who was accompanying Putin on the trip, told reporters Friday.
It was unclear Sunday whether ONGC would be bidding alone, or as a partner with a Russian or foreign company.
Local media in New Delhi reported that the Indian government had ordered state-run companies to work on forming a consortium to bid for Yugansk.
Yugansk, which pumps about 1 million barrels of oil per day, is to be auctioned off Dec. 19 with a starting price of $8.65 billion.
While analysts see Gazprom as the most likely buyer of Yugansk, the gas giant has yet to confirm it can raise the cash for a bid that would buy Yugansk and pay off the unit's tax debts.
Gazprom is currently trying to borrow up to $12 billion to be repaid within one year, Interfax cited a source close to the company as saying Friday. The funds are to be raised by Deutsche Bank and ABN AMRO, Interfax reported.
The acquisition of Yugansk could end up costing Gazprom $13 billion, given the starting price of $8.65 billion and Yugansk's own back tax debts of $4.6 billion, the source said. But while the full auction price has to be paid within two weeks of the sale, the tax debts could be repaid over a longer period, the source added.
The auction supersedes a Yukos EGM, called to decided whether to declare bankruptcy or go into liquidation.
However, Yukos' Moscow-based share registry, M-Reyestr, may refuse to participate in the meeting, Interfax reported last week.
Both M-Reyestr and Yukos spokes-man Alexander Shadrin have refused to comment on the reports, but a source within Yukos told Vedomosti last week that M-Reyestr's refusal to take part in the EGM was motivated by the fact that cash-strapped Yukos is already indebted to its registrar.
Pressure from the authorities appears to be a more likely reason behind M-Reyestr's alleged lack of cooperation with Yukos.
The majority of M-Reyestr's board members are individuals associated with Andrei Krainov, the third defendant in the tax and fraud case against Khodorkovsky and his business partner Platon Lebedev, Interfax reported last week, citing a source close to M-Reyestr.
Krainov has been not arrested, and remains free on the condition that he does not leave Moscow. Krainov has his own lawyers who often pursue a separate defense strategy, Khodorkovsky's lawyers have said.
In another sign of continued pressure on Yukos, prosecutors on Friday conducted a number of searches of Yugansk's headquarters in the west Siberian town of Nefteyugansk.
Local law enforcement authorities said they were performing the removal of financial documents as part of an investigation into alleged tax evasion by Yugansk from 1999, Interfax reported.
TITLE: Ssang to Produce in Russia
PUBLISHER: The St. Petersburg Times
TEXT: South Korean car manufacturer SsangYong Motor is planning to start the production of its off-road model Rexton in Russia, the company's Russian partner, Severstal-Auto said Monday.
Sales of SsangYong Motor's 2001 model Rexton began in Russia in 2003.
Vadim Shvetsov, director of Severstal-Auto, announced that his company was due to build up a new production facility for the joint project in the near future.
SsangYong will deliver and install machine-building equipment for the new production facility by September, 2005. Initially, it is expected that 10, 000 vehicles will be manufactured annually, with a planned increase in capacity of up to 25,000. A Rexton produced in Russia is planned to cost $25,000-$35,000.
Severstal-Auto will act as SsangYong Motor's distributor in Russia, Shvetsov added. Possibly, with the agreement Severstal-Auto will also launch the production of other car makes in future, he said.
TITLE: Enron, Yukos and the Gatekeepers
TEXT: A defining feature of modern Russia's political and economic landscape - the Yukos case - has been interpreted very differently inside Russia and in the West. While no Russian has any doubt about the origin of the case, Western businessmen, politicians and pundits have a variety of explanations.
Clearly, a rational Western mind cannot comprehend the idea that any government would intentionally destroy the most dynamic company and undermine the investment and business climate in a country that badly needs capital for financing its economic growth. Therefore, the foreigners have been trying to come up with a reasonable theory that would reach beyond political and personal feuds.
The prosecutors have always understood this longing and have tried to sell a few stories that would help the West rationalize the affair. Two stories seem to have been the most successful. Europeans have bought the "Berlusconi" story: Mikhail Khodorkovsky was on his way to buying political parties and media outlets to become Russia's new Silvio Berlusconi, capturing both political and economic power and subverting Russia's democracy.
This story has been disseminated quietly since the Italian prime minister, even though quite unpopular in other EU countries, is still Russia's best friend in Europe.
In the United States, the Yukos case was marketed using a reference to Americans' own recent corporate troubles. Yukos was declared Russia's Enron and was therefore to be crushed as forcefully as America's energy giant was.
Certainly, this parallel shows genuine creativity within the prosecutors' ranks
However, not only has it required Americans to have no factual knowledge of the Yukos affair, it has also signaled Russian authorities' limited knowledge of what Enron actually did. If they were aware of the details of Enron's collapse, they would probably have preferred to stay away from such comparisons.
Indeed, Enron's breakdown, as well as most other recent corporate scandals in the United States, was due to the utmost failure of the so-called "gatekeepers" of American financial markets: auditors, rating agencies, investment banks, non-executive directors.
Enron had the best auditor and worked with the most established investment banks; it was closely followed by top investment analysts; its board consisted of the most respected figures in the U.S. business world. Yet, all the gatekeepers failed completely in preventing earnings manipulation and disastrous investment decisions. It was not surprising that the response of the U.S. regulators and the public at large was directed both at Enron's management and its gatekeepers.
Enron auditor Arthur Andersen is no more, the investment banks paid huge penalties, some investment analysts' careers were destroyed, and non-executive directors suffered serious losses to their reputations.
Moreover, the regulatory reaction to the wave of corporate scandals - the Sarbanes-Oxley Act - has seriously strengthened the gatekeepers' incentives to protect outside investors' interests.
In the case of Yukos, the markets' gatekeepers worked very well, at least after 1999. The audits have not been questioned even by the prosecutors, and the 2003 market capitalization driven by analysts' optimistic reports was recently confirmed by the two independent valuations of the company's main production asset, Yuganskneftegaz.
Moreover, the two investment banks that assessed the value of Yugansk arrived at very similar numbers, even though one was hired by the Russian government and the other one by the company itself.
It is indeed very hard to blame the Yukos collapse on a flawed gatekeeper - that is, as long as we only look for one within the private sector. The real culprits were the gatekeepers within the government itself.
The Tax Ministry had been happy with the company's tax compliance until 2003.
The State Property Ministry had acknowledged in writing that there were no more problems with the privatization of Apatit, the central complaint in the Lebedev-Khodorkovsky criminal case.
The Natural Resources Ministry had had no complaints on Yukos' performance under the licensing agreements.
In other words, Russian government agencies had been as positive about Yukos until 2003 as the gatekeepers in the United States had been about Enron up until its bankruptcy in 2001. The crucial difference is that at the end of the day the U.S. authorities have prosecuted the gatekeepers as harshly as they have Enron management, while in Russia the punishment has been perfectly selective: The managers are behind bars but not the bureaucrats.
There cannot be any clearer proof that the Yukos-Enron parallel is just another smoke screen.
Yet, the Enron experience is still relevant for understanding the Yukos case. The amount of hypocrisy and often outright misrepresentation of factual information in the case has been so huge that it is very hard not to compare the Russian government itself to the flawed energy giant.
One should not agree with the conventional wisdom that hypocrisy is harmless. Certainly, pretending that the Yukos case is an example of the rule of law cannot fool the Russians any longer. We all lived in the Soviet Union, and we all learned how to decipher official propaganda.
However, the real lesson of Enron and, indeed, of the Soviet Union itself, is that it is impossible to run a bureaucratic system efficiently based on manipulated information.
As Enron's deputy CEO once complained about Enron's aggressive accounting: "With [Enron CFO Andrew] Fastow, you could never tell whether [individual] deals were clean because they were too complicated."
The government agencies have produced so many contradictory pieces of evidence that the government itself can no longer understand where the Yukos case is going, and is even less able to coordinate the agencies' moves.
As Enron was doomed to collapse under the burden of years of earnings manipulation, so are the government's attempts to maintain the interpretation of the Yukos affair as an isolated case that should not suppress Russia's investment and business climate.
Sergei Guriev is rector of the New Economic School in Moscow. This comment was provided especially for The St. Petersburg Times.
If you would like to respond to this opinion, or have an opinion of your own on economic and financial matters, we would be happy to hear it.
TITLE: State Muscle Could Be Key to Success For Real Reform in Russian Banking
PUBLISHER: Staff Writer
TEXT: The government needs to flex its political muscles in regard to reforms of Russia's banking industry in order to make the banking deposit insurance system more than a short-term solution and a dragging, costly procedure at that, analysts say.
"It will soon come clear whether or not the insurance system will be used as a mechanism to weed out unfit and improper banks, and accelerate reform in the banking sector," said Yekaterina Trofimova, a Standard & Poor's analyst on Russia. In a recent publication, S&P rating agency questioned the speed and efficiency of Russia's banking reform.
"Already announcements from the first banks to gain membership of the system present a disappointing picture; and even very weak banks have been admitted," Trofimova said.
A total of 260 banks have been approved for membership so far by the Central Bank (CB), out of over 1,100 applicants.
While currently over 1,300 banks hold a retail-banking license, CB has only revoked nine licenses since this summer's liquidity crisis.
The country's banking system has been said to be one of the riskiest in the world.
"Two-thirds of Russia's banks have failed to perform actual banking functions and should be shut," wrote the Financial Times in its recent report on Russia.
Notably, risks come from sizeable loans given by many retail banks to finance the industrial interests of their owners, said Trofimova. Other risks include the concentration of loans and securities in a single high-risk area, she said.
"Clearly, the industry would benefit from a clean-up of such risky and imprudent practices. The insurance-deposit program can provide such a possibility," said Trofimova.
However, should the CB wait until the end of the two-year implementation period before it acts, the opportunity will be lost, she said. "More political will is needed to drive the banking reform."
Introduced in January 2004, the banking deposit insurance system became the government's pioneer experience in demanding disclosure of financial operations of banks. Also it led to thorough background checks on the industry players.
"This is, perhaps, the first time in the history of the developing market that the State is taking serious responsibility for an entire segment of private business in the banking sector," said Mikhail Sukhov, CB's director of the department for financial improvement of licensing and lending organizations.
"The State has never been indifferent to where the money from banking operating went. But since the money must be insured by it, the State's interest in the character of the banking business and in its operations has doubled.
"Strictly speaking, the risks that the State should cover are primarily economic, well-governed risks. They should not be the risks of erroneous economic decisions or, frankly speaking, stealing. Nor should they be the risks of 'grey scheme' operations, and so forth," he said, speaking at the International Banking Congress in St. Petersburg this summer.
When membership results are finalized in the second quarter of 2005, banks that do not qualify will have a year to re-apply for a second round of selections. If refused a second time, the CB will revoke their retail banking license.
"There will be a very small number of banks that will either give up licenses or try to reapply," said Victor Titov, deputy director of the Association of Northwestern Banks in St. Petersburg.
Five St. Petersburg-based banks have gained entry in to the system so far, the largest being the Bank of St. Petersburg. "The banking system is a very sensitive industry and the length of the selection process makes it vulnerable," said Titov, who is also on the board of experts at the Deposit Insurance Agency - the federal body that will be responsible for operating the insurance deposit system.
"There is definitely a need for the introduction of new regulation mechanisms and fine-tuning of existing regulations. Currently, the [Deposit Insurance] Agency does not even have the power to revoke banking licenses," he said.
As for luring retail money back into the banking system, analysts say introduction of the deposit-insurance scheme, which has been adopted by the banking industries of over 70 countries, is a positive tendency, but it is no 'quick-fix' for restoring consumer confidence.
"It will take time for the retail clients to become fully aware of the State's protection and to become convinced of its efficiency," said Sergei Donskoi, an analyst at Troika Dialog. Equally, there has been no sharp increase in consumer deposits since the introduction of the scheme. The Association of Russian Banks have, however, stated that retail deposits have returned to growth since the summer's crises.
"It is important that Sberbank, which currently dominates the retail market with more than a 60 percent share, will enter the system on common terms," Donskoi said. Previously, all deposits placed with Sberbank were protected in full by a state guarantee, which placed the bank in a preferred position, he said.
His words echoed those of Titov who said the scheme should help small and medium-sized Russian banks in competing for retail customers.
The S&P report said Russian banks are expected to be more proactive and innovative in order to attract more customer funds into the retail market segment. However, "should the opportunity to accelerate the reform process be lost again, this might significantly delay the improvement of the creditworthiness of Russian banks," the report said.
TITLE: A Baltic Market Option
PUBLISHER: Special to The St. Petersburg Times
TEXT: A joint stock market for the Nordic region, uniting five stock exchanges in Stockholm, Helsinki, Tallinn, Vilnius and Riga has started functioning under the single name OMX Exchanges. For the first time in history, a number of financial platforms have been joined to create a new technological mechanism for transactions called OMX technology.
Traditionally, the size of stock markets in Nordic countries is much smaller than in central European countries such as Germany, Spain and Switzerland. If the size of the German securities market (indexed) is 1100, the Spanish - almost 800, the Swiss 700, then the figures drop significantly when we consider the Swedish market - 300 and the Finnish one - less than 200. Concurrently, Nordic stock exchanges find themselves under pressure to attract liquidity.
To gain in competition, the idea sprang up to create a single financial space, which will allow investors to work with large numbers of highly liquid shares and other financial instruments.
That's why a merger of, first, Helsinki and Stockholm stock exchanges, and, later on, the joining of Tallinn, Riga and Vilnius stock exchanges, allowed to set up the new initiative for a common stock market: OMX.
According to results from 2003, the revenue from a single trading space amounted to 294 million euros and the number of employees to 1,429. The OMX Exchanges have operations in Australia, China, Estonia, Finland, Italy, Latvia, Lithuania, Norway, Sweden, U.K. and the U.S.
There are 500 listed companies (among them, ABB, Ericsson, NOKIA, Volvo, StoraEnso, Sampo, Ventspils Nafta, TeliaSonera) and 150 trading members (such as Merrill Lynch, Credit Suisse, Citigroup, Goldman Sachs, Deutsche Bank) working on the OMX Exchanges.
Jukka Ruuska, President of OMX Exchanges, says that one of the main achievements since integration has been an increase in efficiency, along with higher liquidity: end user costs keep going down as turnover velocity continues to increase.
Another advantage has been the harmonization of trading hours, the day's structure and an introduction of a new pan-Baltic index.
There lies still more potential for growth. OMX Exchanges come seventh in the ranking of European stock exchanges on the value of cash equity trading (for January-August 2004). With an overall volume of 373 billion euros, it follows the London Stock Exchange, Euronext, Deutsche Borse, Spanish Exchanges, Borsa Italiana and Virt-x in the rankings.
In the meantime, the prospects for the future development of the stock market have already been announced. The year 2004 saw the creation of one trading platform, one access point and one trading rulebook. In 2005, plans include a cross-membership and an integrated index family, and then further on in 2006 - the introduction of a multi-currency order-book, a common list structure and standard listing rules.
The changes will later lead to one settlement system, a single register system, the same level and flow of information and a harmonized regulatory environment, Ruuska said.
TITLE: Banks Eye Bigger Slice of the Mutual Pie
PUBLISHER: Staff Writer
TEXT: Formerly cautious of advertising mutual funds alongside their other financial services, banks are now considering mass-scale campaigns to popularize the service and win a stake in this fast-developing financial sector.
Meanwhile a score of new banks look to join this market sector, and are readying plans for launching mutual fund operating companies.
"Apart from in Moscow, mutual funds were not heavily advertised this year. In some sense, banks were more interested in promoting their deposit schemes and credit services," said Natalia Krylova, press secretary of Promstroibank's (PSB) 100 percent subsidiary PSB controlling company, a mutual fund operator.
"The feeling in the [banking] industry is that consumers have grown very interested in this service, they see the potential high returns, and if we doesn't place ourselves noticeably on the market then consumers will choose elsewhere," Krylova said.
Unlike bank deposit schemes, a traditional finance product offering set returns of around 10 percent on money invested for definite periods, mutual funds are a fairly fluid and wide-ranging service.
Although in Russia since 1996, mutual funds have only picked up in popularity in the last three or so years. The last two years have seen returns on investment ranging from 30 to over 60 percent, with National League of Operating Companies (NLU)'s top award for 2004 going to PSB's "Stoik" fund which gained 71 percent in 12 months since mid-November 2003, as calculated by financial publication Dengi.
WIDE AUDIENCE
"The more high-risk funds tied to oil or telecommunication industry shares have the potential to bring high returns," said Yulia Sukhotskaya, senior client manager at Creative Investment Technologies (CIT) fund operator. "However, a mutual fund can be used just like a bank account to keep your money without its value depreciating due to inflation.
Our Money Fund, for example, is a very conservative option. We see pensioners, students, as well as business people as our potential customers."
Currently, Russia's 193 mutual funds attract around 50,000 private investors, according to Alexei Lestovkin, head of development and client service manager at AVK Dvortsovaya Ploschad, mutual fund operator.
Despite the choice of mutual funds on offer, fund operators say that only a small percentage of the population understand how these fund works or is even aware of their availability.
"Mutual funds are targeted primarily at a mass audience and they are quite accessible in terms of the amount of money that you need for the initial investment," said Igor Vasiliev, head client manager at PSB operating company.
After the bank's latest summer crisis, insiders say mutual funds present one way for banks to providing an investment platform for a mass audience that in the public eye does not necessarily associate itself directly with the banks.
Nearly all mutual fund operators, however, are subsidiaries of a major bank, tapping on the bank's client base, capital, and expertise for its working.
"Banks have a large client base and market experts that an operating company can tap into," said Vasiliev.
HOT COMPETITION
Although, as stressed by AVK's Lestovkin, a mutual fund is primarily measured not by the number of clients, but by its capital amount, the competition to attract new clients to the service is hotting up.
"The competition is less noticeable in St. Petersburg as yet, but in Moscow it's already tremendous," said Krylova.
Until now, the prominent advertiser of mutual funds in St. Petersburg has been Web-invest Bank's subsidiary, CIT, one of the largest players on the market with a 7,500 client base in Russia (as reported by the company). Its main competitors in the city are gearing up to react.
"Next year we plan to step up the amount of information available to clients. That includes not only a more prominent emergence on the Moscow market, but also we are looking to increase our presence in the regions, set up a network or agents, and publicise more," said Krylova. AVK, with 9 funds and 2,500 investors in the Northwest region, likewise see the highest development of competition occurring mainly in the regions, while promotions in St. Petersburg will depend on the other main market players.
"It depends on market conditions, but we are currently in the process of planning our new advertising campaigns for next year," said Anna Barkhatova, press secretary of AVK.
"In St. Petersburg the level of awareness of what is a mutual fund has grown well since 2000 having been actively promoted by the three main market players, but it has not reached that of Moscow," Lestovkin said.
"We have already enjoyed successful campaigns this year and last in the city. However, by now the Northwest client base makes up only 40 percent of all our investors. The rest are in the regions," Lestovkin said.
MARKET MATURITY
Sberbank's Shvedova was more cautious of the market's developments, saying that although the bank will "unquestionably step up its informational output for mutual fund services," the market segment has only recently started to mature.
"Previously mutual funds were advertised generally as a service. Now that individual funds are gaining recognition, the stability on the market has meant that there is starting to be more promotion of particular mutual funds."
Sberbank acts as an agent for six funds run by three different operating companies, of which Elby Trust is the most heavily present on the St. Petersburg market, has around 2,000 clients in the Northwest area.
"People are starting to identify the different fund products more clearly," said Shvedova.
Among St. Petersburg banks in the process of creating a mutual fund operating company are Menatep, Bank of St. Petersburg, Baltinvestbank, and Khantymansiisky Bank.
"We plant to venture on to the mutual fund market in the forthcoming year," said Natalia Shatova of BaltInvestBank end of November at a press conference.
TITLE: A Beginner's Guide to Mutual Funds
TEXT: An individual or a company places a certain amount of money in a fund, much like money is placed in a bank. First of all, the fund operator takes out a surcharge percentage from the money you have brought (usually around 1 percent, but maximum 1.5 percent). The sum deposited is added to money collected from other private investors and lumped together as one capital sum: a mutual fund.
The money of the fund as a whole is used by an investment company to buy and sell company stock, make money on the exchange markets, or invest in property. The money in the fund, in theory, should grow as the company gains profit from market dealings, hence the sum individuals have invested also grows in value.
Around two percent of the profit from the fund's dealings goes to the investment company. The rest the individual can collect when they withdraw their capital from the fund.
Before joining the fund, the investment company discusses investment strategy with the client: how long do they wish to invest for and in which fund. However, once a person has invested his money, it is the company which controls how the money is used and in which operations - although most fund operators declare and publish information on where they invest the money and of which companies they buy or sell shares. If a client decides to withdraw their sum from the fund prematurely, there is a penalty fee - which can reach 3 percent by law, but does not exceed 2 percent in most companies (dependent on how early the client collects back his sum).
Mutual funds are either open (capital can be deposited or withdrawn on any working day), interval (transactions can take place at agreed times in the year), or closed (transactions are kept in the fund until a specified time).
Each fund can invests its capital in one sector, for example, the oil industry or telecommunications, or it operate a mixed agenda: buy stock from a variety of companies.
Lower-risk funds invest in bonds, which in turn bring lower profits percentages. Chances of high percentage on return usually belong to funds which invest in shares on the Russian stock exchanges in Moscow (MICEX and RTS), St. Petersburg, and Yekaterinburg. Many mutual fund controlling companies offer a mixed alternative - minimizing the risk of share dealings with partial investment in bonds also.
TITLE: Ryan: Banking on the Future of Russia
TEXT: When Charles Ryan first arrived in Russia, not long after the failed putsch of August 1991, there was "a diminutive fellow," recalls Ryan, waiting to meet him at Pulkovo Airport. The man took him to his car, and together they drove to a meeting downtown.
The purpose of the meeting was to discuss an impending project of huge importance - the privatization of the St. Petersburg economy. At the time, Ryan was working for the European Bank of Reconstruction and Development (EBRD), and top officials from the city government were gathered around the meeting table. So Ryan was surprised when his driver sat down at the table too. "What the heck is he doing here?" wondered Ryan.
It turned out that the diminutive fellow was more than a driver. He was Alfred Kokh, who would later become the architect of Boris Yeltsin's privatization effort. And he wasn't the only future bigwig at the table. There was Anatoly Chubais, who would later lead the SPS political party; there was Boris Fyodorov, who would later become the Minister of Finance; and last but not least, there was a deputy mayor named Vladimir Putin.
The meeting became a lively, intellectual discussion of how game theory could be applied to privatization. For Ryan, a young banker from Philadelphia, it was a stimulating experience that set the tone for his future career. "I got kind of addicted to the whole process of thinking so fundamentally about why you would privatize, and how you would privatize," says Ryan. "And I was impressed by the intelligence of the people that we were dealing with."
From that moment on, Ryan enjoyed a front-row seat to the transformation of the Russian economy. Starting out as the EBRD's representative in St. Petersburg, he soon left to become a pioneering entrepreneur. In 1994, he and Boris Fyodorov started United Financial Group, one of Russia's first investment banks; over the next ten years, UFG evolved into a major player on the Russian market. But when he first arrived in Russia, Ryan never thought he'd stay for more than two years. In fact, like many expats, he came to Russia in search of adventure.
Ryan grew in Philadelphiain a deeply conservative family. While majoring in political science at Harvard University, he specialized in Soviet foreign policy, and also developed an interest in finance.
After graduating, and a short-term job with Credit Suisse First Boston, Ryan learned about the formation of the EBRD and he knew he had to get involved. The EBRD was a London-based bank with $12 billion in starting capital, and all of it was destined for private equity investments in Eastern Europe. Ryan joined it in June 1991, although he had no experience in private equity.
"I felt a little bit like a fraud," says Ryan, "in the sense that here I was, about to go out to Eastern Europe and Russia, and I was going to talk to people about private equity, who would probably think that I actually knew something about it." There was only one way to address the insecurity - practice. So Ryan decided to make a private equity investment that was 100% sure to succeed: selling Coca-Cola in Poland.
At the time, Poland was one of the most financially stable countries in Eastern Europe, and Coca-Cola was a proven success in every market it had entered. Ryan went to Poland to find the company that held the rights to sell Coca-Cola. He had found it, and he was about to make his deal, when history intervened. The August putsch happened in Moscow, Yeltsin came to power, and Russia opened up for foreign investment. The EBRD sent Ryan to St. Petersburg.
Working with the future leaders of the Russian reform effort, and getting hands-on experience in privatization was an exciting ride. Ryan also fell in love with Russia's northern capital - to this day, St. Petersburg is his favorite Russian city. But as the pivotal year of 1992 rolled on, working as an EBRD go-between for Mayor Sobchak's administration lost some of its appeal. "The reality of privatization advisory work is that it's very fascinating at the beginning, when you're setting up the framework," he says. "When you get to the level of auctioning off a bread shop for the 50th time, it's not as intellectually stimulating."
Ryan relocated to Moscow and went back to private equity investment. Over the next two years, he gained valuable experience in the strange, murkily-privatized business climate of early-1990s Russia. When Boris Fyodorov approached him with the idea of starting an investment bank, Ryan was interested.
To solve the problem of a starting capital, they turned to an experienced banker named Luqman Arnold who worked for Banque Paribas. Arnold arranged a deal where Banque Paribas gave them $1 million in exchange for a 25% stake in the new investment bank. Thus, United Financial Group was born. In October 1994, UFG got its brokerage license and began trading shares on the Russian stock market.
There was one slight complication for the would-be traders: the Russian stock market didn't really exist. Today, Ryan laughs when he recalls the primitive conditions of trading shares in 1994. "Effectively, there were about ten of us," he says, "that is, firms in town who were trying to be investment banks, all scattered in various apartments."
"Because there was no market, there was no way to know what the price of something was, or who was buying or selling. The way it worked was that you'd come in the office around nine in the morning and try to catch up on the news. Then around 10 or so, we'd start calling each other."
"Throughout the day, you'd sort of go through a loop - you'd call Brunswick, Troika, and all these other firms. They would tell you what they were buying and selling, and you would tell them what you were buying and selling. By the time you got through the loop, a picture would emerge, little by little. It was very, very chaotic. And kind of fun, too."
Ultimately, the firms decided that the situation was intolerable, and they banded together to create a real stock market. This led to the RTS, which started up in June 1995. Ryan recalls that there was a vigorous debate over a seemingly simple issue - when the stock market should open. Should its hours overlap with Vladivostok or with New York? In the end, they decided on 11am start, since New York was more important as a financial center. "It was an intriguing part of the early market," says Ryan, "thinking about such fundamental things as when you're going to open."
Explaining why he asked Ryan to co-found UFG, Fyodorov, now the bank's honorary chairman, and also an independent member of the Board of Directors of Gazprom and Sberbank, says the following.
"At that time, foreigners coming to Russia had this impression of a wild country covered with birch trees and bears roaming the streets. Charlie, on the other hand, was fascinated with the political and economic transition taking place.
"Unlike most of the other foreigners, he wasn't a know-it-all or a show off. He tried to learn, not to teach, and he learned very quickly. His rapid professional growth forced him to mature at an equal pace."
Since its origin, UFG stuck to a business strategy of staying independent - despite numerous proposed buyouts by Russian oligarchs. This strategy was vindicated after the 1998 financial crisis. With all the big Western firms leaving the market, and oligarch-controlled banks failing in droves, UFG was one of the strongest survivors left standing. "After the crisis," says Ryan, "even oligarchs valued competence over loyalty."
The strategy has born its juiciest fruit in the past few years. UFG advised British Petroleum on its colossal $6.3 billion investment in the Russian oil sector, and in 2003, Deutsche Bank bought a 40% stake in the firm. Ryan doesn't view the German investment as an opportunity to retire. "The point of it wasn't to exit," he says. "The point of it was to organize a dominant player in our industry."
A full version of this text originally appeared in "Taming of the Wild East: New Russian Entrepreneurs Tell Their Stories," a Delta Private Equity Partners copyright publication. Re-produced with permission.
TITLE: EBRD Sets New Course For Russia
PUBLISHER: Special to The St. Petersburg Times
TEXT: The European bank for reconstruction and development (EBRD) declared its new strategy for Russia in November, urging the government to speed up institutional reforms in order to maintain strong economic growth.
EBRD, the biggest investor in Russia with a portfolio of over 1 billion dollars (in 2003) and an aim to process $1.3 billion to $1.5 billion new transactions per year, has a broad range of investment operations. The bank is also known as a catalyst for foreign investment, often leading the way for many other investors in Russia. That's why possible changes in its strategy are viewed, both here and abroad, as important decisions and guidelines for upcoming investment projects.
According to the new strategy, the main priorities for EBRD in Russia are: assisting with the modernization and restructuring of key Russian industries and large enterprises through the financing of large standalone companies, and supporting reputable foreign strategic investors' emergence and expansion on the Russian market.
Other amendments are broadening the Bank's activities in promoting private entrepreneurs. That will include more active use of equity instruments, assistance in the consolidation and reform process of the financial sector, giving support to the development of the capital markets, and promoting reform of Russia's infrastructure.
The EBRD will also seek non-sovereign financing solutions, in part also for sectors financed directly by the state. The bank plans to issue ruble bonds and use local currency financing instruments for small and medium-sized companies, domestically oriented companies and municipalities.
In essence, the new strategy implies further development of regional projects, including ones in the St. Petersburg area. At the moment, the EBRD's portfolio in St. Petersburg amounts to 908 million euros, which is 69 euros per capita and 3 percent of the gross regional product.
The bank is involved in various sectors. It is the largest single provider of long-term finance to the Russian power sector, and this year it gave a loan to local energy company Lenenergo for the replacement of outdated equipment. In the area of port development, the EBRD financed improvements to the port infrastructure at Ust Luga in the Leningrad Oblast. In the road sector the bank financed the construction of two sections of the St. Petersburg Eastern Bypass as part of the country's road reform initiative. There has been further support to the St. Petersburg water company Vodokanal to cut Baltic Sea pollution: the bank backed a Southwest wastewater treatment plant project and schemes to decrease levels of water pollution. Other initiatives have involved financial backing in terms of leasing, help for telecommunications, packaging, car tires, and other industries.
The EBRD took part in supporting the construction of a flood protection barrier in St. Petersburg, as well as providing a loan to a number of machine-building and ship-building plants in the area. There has been yet another loan to Lenta cash & carry stores as part of a program of further development of the Russian retail sector. As a result, four new Lenta stores are to appear in St. Petersburg.
Together with Raiffeisenbank Austria, EBRD provided a loan for Rising Star Media, a firm which aims to build five multi-screen cinema complexes in Moscow and St. Petersburg under brand name Kinostar by 2006.
TITLE: Space for Investment in St. Petersburg
TEXT: INVESTOR CLIMATE
Over the past two years the city has been working hard to improve investment laws and set clear-cut rules for investors. The first step taken by the city was to issue local laws and local executive acts establishing the procedure for offering land on investment conditions, in addition to the granting of land mainly on the basis of competitive tenders.
As a result, several major international investors expressed interest in investing in St. Petersburg real estate, including in the retail sector. Retail investment projects include shopping centers and hypermarkets. Projects that combine retail with residential development are known as mixed use or multifunctional projects.
FDI IN RETAIL
Several European companies are at various stages of building new hypermarkets, DIY and shopping centers. It seems the potential profits in the retail sector outweigh any difficulties investors have encountered or can potentially encounter in their dealings with the local authorities.
The retail sector is still in the early stages of development and many good opportunities and land plots are available. As if to prove this point, one European company, having traveled a very thorny path to get its first shopping center built, is nevertheless planning to go ahead and open an entire chain.
Another potential investor, the Shanghai Industrial Investment Company, is discussing a project to build a multifunctional complex in the city's southwest district. The complex would cover a territory of about 260 hectares and include apartment buildings, trade and entertainment facilities, business and health centers and much more. It has been referred to in the press as a "city in a city."
This shows that investment projects are increasing in size. Both the European chains and the Chinese developer will have an enormous impact on the local economy, mainly by creating new jobs and boosting consumer spending. City officials can take advantage of the efforts of such investors to expand available residential and retail space, but they must have a plan to attract and retain investors.
CITY SUPPORT
So, in addition to modernizing the system for granting land plots, city officials have started to develop the concept of the "strategic investor," as well as the terms of cooperation and benefits that may be extended to such strategic investors under applicable laws.
Recently investors have been able to enjoy their "strategic" status with respect to infrastructure development. Whereas previously city officials burdened investors with the costs of building roads, power substations, etc., in their vicinity, now the city is more willing to assume these costs directly. The city has reached understandings with several "strategic" investors that it will build municipal infrastructure needed to support the investors' new facilities and neighboring residential and public buildings.
Such cooperation on infrastructure is a sign that the city is going beyond promises to concrete investor assistance. And this is good for any project, whether retail, housing or industrial manufacturing.
Karina Chichkanova, a senior associate at the Salans office in St. Petersburg, contributed to this commentary.
The construction of a ring road, or KAD, should certainly bring new business opportunities to the Northwest region and St. Petersburg as a city. The land plots adjoining the ring road can actually become one of the most interesting targets for investors willing to develop logistics centers, transport terminals, warehouses, mega-markets, and so on.
The opportunities are easily comparable to those around the Moscow ring road; however, as always in Russia, there are some considerations investors should take into account.
INVESTMENT FACTORS
The city authorities announced that the cost of acquiring land in St. Petersburg will decrease next year. This means that the price of land plots adjoining the ring road which are within the city limits (and most of the land surrounding the road is within the limits) should go down. In November 2004, the city government adopted a law under which the normative land price will fall from thirty-fold to nine-fold the land tax rate.
However, some grounds for concern may be found in the legislation at both federal and regional levels.
The Government of the Leningrad Oblast already in 2001 passed a notorious Decree No. 120, which prohibited any design or construction of real estate objects in the above-mentioned area without obtaining prior permission from the government of the Leningrad Oblast.
Consequently, should one fail to reach an agreement with the authorities, despite having a legitimate title, a difficult situation arises: the owner cannot exploit his own land plot to the desired extent.
FEDERAL ASPECTS
As for the federal legislation, the ring road is a federal road, and yet there exist no detailed regulations concerning the legal status of the ring road: its exact boundaries, legal definition, and the status of adjoining road territories, and more. Moreover, at a federal level, the process of determining ownership of certain pieces of land has not been completed. That means, at the moment there is a room for maneuvering for mal-fide vendors and purchasers.
Overall, the move in St. Petersburg towards transparency in land plot provision for construction - by means of tenders - should have its positive impact on developing local business.
In 2004, the commercial property market slowed down in growth. It no longer seems feasible to expect the returns of 2003 as market prices are almost stable at the moment.
Despite this, there exists a deficit of good, high-quality space in nearly all estate sectors, and consumer preference has changed from looking for what will do, to considering what is particularly suitable.
QUALITY IN OFFICE SPACE
In terms of office space, it is unlikely that the demand for A- and B-grade space will be as sought after as in 2003. There is a steady deficit in modern office buildings. This might be ameliorated by the start of 2005 as 20,000 square meters of A-grade space and more than 40,000 B-grade space come on the market.
As well as the doubling of A-grade space in the city, it means business centers will increase their share on the market, climbing to 30 percent.
In 2004, real-estate prices set in dollars rose by 10-15 percent, largely due to the dollar's inflation. In the last few years, prices have risen at a quicker pace than rents, which has resulted in commercial property being less profitable. By the end of 2004, average profit from office space will make around 15-17 percent.
FAILED CUSTOMER NEEDS
One should add that, it is not only the available space that has not been fully satisfying the leasee or the buyer needs - new construction has also not been fitting market demands. But, with a lack of competition, the percentage of empty properties on the market is falling, and leasees are having to grab what's there.
Should commercial space that is of a high quality and more in tune with potential leasee needs come onto the market, it will undoubtfully attract attention and clients, and surely guarantee the investors large returns. The introduction of high-quality space will fill a big gap on the market.
RETURNS ON STORAGE SPACE
The warehouse and storage facilities market saw a rise in prices as high as 15-20 percent in 2004. Again, the same rules apply on this market: the better quality the facility - the higher its rise in profitability. Currently, there is a high deficit of quality storage facilities, and it is acutely felt.
The returns on the warehouse market are making it more and more attractive to investors: demand for new quality developments is guaranteeing takers, and the profits from such property are almost as good as from other estate sectors. This has already led to an increase in the number of logistical centers with potential profit running at 20-22 percent.
The overall picture is one of a slow-down in terms of growth in prices and profits. At the same time, demand for higher-end property is up and this will be the biggest development in the next year.
TITLE: Euro Closes on Record High Vs. Dollar
PUBLISHER: The Associated Press
TEXT: BERLIN - The euro flirted with another record high Monday against the dollar as concerns over the U.S. trade and budget deficits and worse-than-expected U.S. employment data kept up pressure on the currency.
The euro was as high as $1.3456 in New York late Friday - the highest in its five years since the launch.
From September, the shared European currency has spiked from around $1.20 over persistent worries about the U.S. deficits and signals from the Bush administration that it would not step in to support the dollar.
It broke the $1.34 mark for the first time Friday when U.S. employment data came in weaker than expected, and the strength Monday seems to be the continued effect of that news and an overall negative sentiment toward the dollar, said DZ Bank economist Dorothea Huttanus in Frankfurt.
"The trend is your friend, that's the only force that drives markets," she said. "We really don't need any further incentive for the euro to climb higher. It's for the most part sentiment-driven." Dollar weakness has been bringing short-term benefits to the U.S., making American exports cheaper in the rest of the world. That has given U.S. President George W. Bush little incentive to step in, although the administration still says it has a "strong dollar policy."
It has the opposite effect on European exports, making products like German sports cars or French wines more expensive for the American consumer, or cutting in to producers' profits as they try to hold the prices steady.
TITLE: IN BRIEF
TEXT: Dangerous Gazprom
LONDON (Bloomberg) - The ambitions of gas company Gazprom to buy other companies and create a bigger business is bad for Russian consumers because it would reduce competition, the International Energy Agency said Friday.
Directors at the world's biggest natural-gas company are ready to vote on a proposed bid for oil giant Yukos' main production unit, enabling the company to rival ExxonMobil within a few years, a Gazprom spokesman said.
"It is not good for the Russian energy market because the economic efficiency will lose," said Fatih Birol, IEA's senior economist. "Competition is going to more or less disappear."
A "big part of the energy supply chain will be under the control of one single monopoly," Birol said. The Paris-based IEA is an energy policy adviser to 26 industrialized countries.
Gazprom owns Russia's gas pipelines, is the monopoly gas exporter, and plans to take over state-owned Rosneft.
Norilsk Pays Out
MOSCOW (Reuters) - Metals giant Norilsk Nickel offered Friday to buy back 5.84 percent of its shares for $750 million to return cash to shareholders.
The world's top nickel and palladium producer said it offered to buy 12.5 million of almost 214 million outstanding shares for 1,680 rubles ($60) per share, an 8.4 percent premium over Thursday's closing share price of 1,550 rubles.
"It is a form of paying benefits to shareholders," said investor relations head Dmitry Usanov.
Analysts said the buyback was a quick way to distribute the company's profits from high metals prices.
"In essence, the buyback is an alternative to a dividend. Norilsk has recently announced an interim dividend. If it wishes to pay an additional dividend, it will be able to do that no earlier than in the second quarter of 2005," said Fyodor Tregubenko of Brunswick UBS.
Norilsk shares closed down 38.17 rubles, or 2.5 percent at 1,515.84 rubles in Moscow.
Crude Falls 14%
WASHINGTON (AP) - Crude oil futures sank for a fourth straight day Friday, settling beneath $43 per barrel for the first time in nearly three months and capping a 14 percent decline for the week.
And if U.S. government data scheduled to be released Wednesday show another increase in crude and heating oil, that could trigger more selling, said Jamal Qureshi, market analyst at PFC Energy in Washington.
Light, sweet crude for January was down 71 cents to $42.54 per barrel on the New York Mercantile Exchange - about 23 percent below October's peak price of $55.17 per barrel.
The price of oil is still 37 percent higher than a year ago. Prices have been high all year due to strong global demand, a tight supply cushion and fears of output disruptions in Iraq, Nigeria and Russia.
Supply disruptions elsewhere could also put upward pressure on prices since the amount of excess production capacity worldwide is only about 1 percent above daily demand.
TITLE: Poor Information Leads to Blind Decision Making
TEXT: When we were preparing an article about the problems of housing construction in St. Petersburg, we came across a paradoxical situation. Although, it seems that everyone, including the bureaucrats in the city administration, recognize the extreme urgency for the city to normalize the construction market, no one knows how to do that with the necessary degree of detail.
Especially for us, the staff of the city's construction committee did an quick count of the number of building sites and their distribution, and the number of square meters of residential property that could be built on them. However, the committee was unable to determine a more complex indicator, the quality characteristics of the work in this market.
For example, in which cases the time allotted for the laying of foundations over-ran because of bureaucratic procrastination, and in which cases it was the fault of the construction companies (either because of their inflexibility or a wish to collect as many land plots as possible to secure long-term work).
Although there were fears that building sites would be frozen en masse or become subject to speculation, and the city would lose its lever of influence over investors, reflecting the administrations lack of will to offer the land for sale.
As for 2001, it was not even possible to obtain the number of sites allocated. There's nothing that can make up for the lack of information - business, for a host of reasons, cannot help in this case either.
We are often confronted with similar situations. There are even some more obvious ones than that described above about the history of the construction market. Thus, information about the freight market - it's officially called the transportation market, which is incorrect - in St. Petersburg is even less transparent and collecting it is even more difficult.
This market is closed to an even greater degree than the construction one, especially the sector that involves carrying freight by car. In the St. Petersburg branch of the federal transport inspectorate, which monitors deliveries by cars and issues licenses, I was absolutely floored to find that they did not even have a list of the main players on the market. And the official statistics about the amount of deliveries are collected on the basis of customs reports. The internal movement of goods in Russia is terra incognita. It's hardly surprising then to find out that the trucking companies behave in an interview as if they are partisans being interrogated. In the meantime, St. Petersburg positions itself as the window onto Europe - it is one of the largest Russian centers of cargo transit; the city economy depends to a large extent on this market.
The city government does not have enough information, even for our purely journalistic purposes, about the goods market. The situation is the same for markets in which the city plays a role - either through state-owned enterprises or stakes in enterprises - such as the carrying business, the book trade, publishing, drugstores, the hotel and tourism businesses.
It is unclear how the state can control and manage its property without even knowing about the market on which it works. And for the areas in which Valentina Matviyenko's team wants to extend its reforms, the lack of information is absolutely impermissible. The construction market is one of the brightest examples. It appears there is a similar situation on the market for communal housing services.
The state should monitor the details in all market segments in which it is present. Detailed information - both factual and analytical - should a priori be available to the relevant state committees: without the data, it is impossible to make informed predictions on the development of the markets, or, even more importantly, to evaluate the quality of the state regulation - so that careful changes can be made to the policies.
When there is no quality information available, fulfilling a strategic task becomes a matter of sheer chaotic luck. We are no longer talking about an economic policy but about a shot in the dark. It is here that one of the main reasons for the inefficiency of the current authorities in Russia lies. And no strengthening of the "power vertical" will help to ameliorate this.
By the way, the Japanese ministry of economics, trade and production considers its most important activity to be not the strengthening of government involvement in the life of society, but the scrupulous study of Japan's and the world's economy, the monitoring of current trends in different sectors, companies and markets. The ministry has created an extremely extensive system via which to offer that information to companies and citizens.
That system is easily accessible, free and simple to use. This is the point of view Japanese authorities have of their role in the economic life of a country. It represents a rational and a reliable achievement that is worthy of imitation.
Russia has nothing of the kind. We do not conduct systematic scientific studies of the economy; all that's available is formal statistics that are suited only to macroeconomic financial analysis. In addition, the state considers this information a commercial product - the Federal Statistics Service demands money (and it is not cheap) for any information that exceeds the most basic information presented for the shortest possible summary. What's more, even if you pay for it, the agency will not offer you any quality information.
Our economics committee gets itself out of a fix by ordering that analytical firms monitor the markets, but they do this irregularly and unsystematically.
This type of work demands a deliberate, dedicated and systematic approach. St. Petersburg and in a broader sense the Northwest region need a scientific-research institute that examines the city's economic situation. One could be created, for instance, on the basis of the Leontieff Center. In contrast to the traditions of the post-Soviet scientific-research institutes, this institute could clearly orient itself to the goal of forming a modern city administrative policy. And it should be able to provide full answer for the results of its research and predictions.
Vladimir Gryaznevich is a political analyst with Expert Severo-Zapad magazine. His comment was first broadcast on Ekho Moskvy in St. Petersburg on Friday.
TITLE: Client State
TEXT: The years of George W. Bush's sour misrule have been disastrous for many of his staunchest supporters. The Heartland folk have seen their jobs taken, liberties curtailed, communities withered, states bankrupted, prices hiked, schools neglected, pensions gutted, air poisoned, water tainted, and their children killed and maimed in an unjust war for profit that's made the world more dangerous. Yet still they swear allegiance to a leader whose every action - as opposed to the honeyed hokum of his speeches - expresses nothing but vicious contempt for those he governs.
It is, by any measure, an extraordinary situation. How can we account for it? One answer - offered up ad nauseam by Bush's cadre of media toadies - is that the rock-ribbed American yeomanry placed their dedication to "moral values" above crass economic interests. This display of transcendent idealism has excited admiration even among the defeated Democrats, whose "centrist" apparatchiks and commentators openly long for some of that red-state moral mojo.
There's just one thing wrong with this ubiquitous piece of conventional wisdom: It's a steaming crock of Crawford cowflop. The truth is that the number of voters in 2004 citing "moral values" as their priority in selecting a candidate - 22 percent - actually declined by more than 13 percent from 2000, as Frank Rich, among others, reports. In fact, the "values" vote was down almost 20 percent from the 1996 campaign, which returned the notoriously amoral Bill Clinton to office with a bigger winning margin than the tiny mandate Bush managed to muster, by hook and crook, this year.
Of course, the phrase "moral values" is just one more example of the Idiotspeak used by journalists, pollsters, advertisers and political hacks to debase the language and reduce reality to a few malleable chunks of, well, Crawford cowflop. In the degraded, aggressively ignorant context of the last election, there were apparently no moral concerns whatsoever attached to such issues as war, economic justice, capital punishment, national security, corporate crime, stewardship of the planet, upholding the Constitution or caring for the sick, elderly and poor.
No, in the idiom of Idiotspeak, "moral values" refers to one thing only: sex - abortion, homosexuality, nudity. And as we all know, sex sells. It moves some $10 billion in porn and paraphernalia in the godly United States each year; and it pumps untold billions into the secretive coffers of "religious" foundations and right-wing "nonprofits" devoted to manufacturing remunerative outrage in defense of "the family." But the fact that a shrinking sliver of the electorate still gets all wiggly at the thought of body parts and bedroom hydraulics hardly accounts for the cognitive dissonance in America today.
Yet if the flop-addled punditry can provide no answers, where can we turn? Why, to 16th-century France, where else? There we find Etienne de la Boetie - best-known as the bosom friend of the great essayist Montaigne - explaining how an entire society can be dragooned into "voluntary servitude" by a ruthless elite through an iron chain of clientage: big cheeses dispensing patronage to favored minions, who in turn act as patrons for their own proteges, and so on down the line.
La Boetie's ideas are nimbly explicated by Shakespearean scholar Stephen Greenblatt in his recent book, "Hamlet in Purgatory." Greenblatt, writing before the Bush Regime reared its gorgon head over the land, gives us a remarkably prescient reading of the coming empire's entrails:
"It may at first seem difficult to understand why so many people would willingly abandon their innate freedoms, but in fact the process [outlined by de la Boetie] is quite simple. A tiny group chooses, for strategic purposes, to declare allegiance to a single person. The qualities of that person - who may, for all anyone knows, be a dolt or a scoundrel - are not particularly relevant; what matters is his symbolic position at the apex of the system.
Nor does it greatly matter if the members of the inner circle have any serious regard for the person to whom they declare their allegiance; what matters is that their immediate dependents [clients] feel similarly bound to them, and through them, bound to the person at the pinnacle. Each of those dependents in turn has his dependents, and before long tens of thousands of people are locked into a system that is exploiting rather than protecting or serving them."
This type of clientage machine has now overspread American society like kudzu, choking off the natural growth of civic life and blocking out the light of truth. There are too many powerful people making too much money off a system of corporate rapine and military aggression to allow any reality or humanity into the equation. To keep the patronage flowing - from the White House table right down to the convenience store cleaner dependent on his boss making money from the workers at a local weapons plant - millions must pay ritual obeisance to the dolt at the apex.
Bush has refined this system by adding blood guilt to the mix; his supporters must believe in his righteousness and wisdom, or else they would have to admit their own complicity in mass murder based on deliberate deception. They would also have to acknowledge complicity in Bush's personally sanctioned apparatus of torture, exposed yet again last week, this time by the Red Cross.
No wonder they prefer voluntary servitude - and manufactured outrage, and Idiotspeak, and witless diversion - to the true moral values of responsibility and dissent. It would cost too much - in money, comfort and self-righteousness - to stand against the system. And so the machine keeps grinding on, fed by slaughter, greed and guilt.
For annotational references, see Opinion at www.sptimesrussia.com
TITLE: Israel, Egypt Swap High-Profile Prisoners
PUBLISHER: The Associated Press
TEXT: CAIRO, Egypt -- In a series of dramatic steps capped Sunday by a high-profile prisoner swap, Israel and Egypt are moving rapidly to improve relations, seizing the opportunity for a Middle East peace deal presented by Yasser Arafat's death.
A year ago, Egypt's president dismissed Israel's prime minister as incapable of making peace. Today, he calls Ariel Sharon the region's best chance for an end to hostilities. The change in attitude is also apparent in Syria and across the Gulf, as Arab nations signal they are ready to work with Sharon, a man they long have described as a butcher.
But it was Sunday's Israeli-Egyptian prisoner swap that provided the most striking example. Egyptian President Hosni Mubarak's decision to release Azzam Azzam, an Israeli Arab convicted of spying for Israel, in exchange for six Egyptian students held by Israel reversed his government's long-standing policy - and eliminated a central point of friction between the two countries over the past eight years.
Egyptian officials had accused Azzam of providing Israel with secrets about Egyptian factories - by giving women's undergarments soaked in invisible ink to an Egyptian accomplice, who was said to have used the ink to pass on the information.
The six freed Egyptian students had sneaked into Israel in August and were arrested on the suspicion they tried to kidnap soldiers and commandeer a tank.
In the past month, Egypt also has made overtures toward returning its ambassador to Tel Aviv, four years after it summoned the ambassador home to protest what it called excessive Israeli force toward Palestinians.
Relations between Israel and Egypt, the first Arab nation to recognize the Jewish state in 1979, have been particularly cold during Sharon's tenure and during the past four years of Palestinian-Israeli violence.
The recent warming appears to be a way to prepare the political ground - and the Arab and Egyptian public - for Israeli-Egyptian cooperation toward a broader peace.
Last week, in another striking departure, Egypt's Mubarak said that if the Palestinians could not achieve progress in Sharon's time, it would be very difficult afterward.
Gamal Abdel Gawad, an expert at Al-Ahram Center of Strategic Studies in Cairo, said Egyptian policies toward Israel are taking "a new, more realistic turn."
A leading Israeli newspaper, Yediot Ahronot, described the overtures as "a new atmosphere" and a "honeymoon." Shimon Shiffer, one of the paper's senior correspondents, called it "the beginning of a wonderful friendship."
In a statement, Sharon said Azzam's release was "a great additional contribution to the strengthening of the Israeli-Egyptian relations." The prime minister also thanked Mubarak for saying that peace was possible under his leadership, and said "he believes the two can achieve great things for the coming generations."
Raanan Gissin, a senior Sharon aide, also noted Egypt's recent decision to step up efforts to control its border with the Gaza Strip, where Israel maintains that arms are smuggled through tunnels.
Egypt hopes that a new Palestinian leadership will help Israel's planned pullout from Gaza - viewed as a step toward broader Mideast peace - go smoothly.
TITLE: Peasants and Indians Win
Bolivian Election Race
PUBLISHER: The Associated Press
TEXT: LA PAZ, Bolivia - Indian and peasant organizations promising better access to health care and education won every major Bolivian city in local elections Sunday, trouncing long-dominant parties in a reshuffling of the political map in South America's poorest country, unofficial results showed.
The Electoral Court did not issue official results, saying it has until Dec. 31 to do so, but unofficial results by Equipos Mori, a respected opinion poll company, said traditional parties failed to win a single large city. The results were based on an estimated 80 percent of the votes cast.
The elections were for mayors and councilors in 327 cities and towns. Voting is mandatory for the country's 4 million eligible voters.
In La Paz, the small Fearless Movement was a clear winner. In neighboring El Alto, Bolivia's fastest-growing city, a group called Progress Plan had a clear lead, the poll showed.
The new groups, including United Citizens, campaigned for cleaner streets, better access to education and health care and improved public transportation. They also oppose globalization and the trade policies of the United States.
The campaigns attracted voters frustrated with traditional parties, especially after last year's dispute over a government plan to export natural gas ended in bloody street demonstrations that killed 56 people and toppled President Gonzalo Sanchez de Lozada.
The gas issue is highly sensitive because tension between the poor Indian majority and the ruling elite runs high.
The October uprising was set off by Sanchez de Lozada's plan to export gas to Mexico and California. Opponents said the financial benefits would not reach the poor, while proponents say the money was needed to help South America's poorest country develop.
TITLE: Referendum on Ethnic Citizenship Fails
PUBLISHER: The Associated Press
TEXT: BUDAPEST, Hungary - Hungary's new prime minister, who campaigned against giving citizenship to ethnic Hungarians in neighboring countries, claimed victory Sunday when a referendum to enfranchise them failed.
There are some 2.5 million ethnic Hungarians in neighboring countries, the result of the post-World War I dismantling of the Austro-Hungarian Empire, when Hungary lost two-thirds of its territory and 60 percent of its population in the Treaty of Trianon.
The fate of ethnic Hungarians, especially in Romania, Slovakia and Ukraine, has been a charged issue. Referendum supporters said giving ethnic Hungarians dual citizenship would help heal the trauma of the 1920 treaty.
But Prime Minister Ferenc Gyurcsany's government of two months said giving passports to so many ethnic Hungarians in countries with lower living standards would trigger a mass influx and cripple Hungary's overburdened budget.
At least 25 percent of all registered voters would have had to vote one way or another for the referendum to be valid. The preliminary results showed that 18.9 percent of all voters cast ballots in favor of granting dual citizenship, with 17.8 percent voting against. Turnout was 37.5 percent, the National Electoral Office said.
Ethnic Hungarians in the non-European Union countries of Romania, Ukraine and Serbia avidly supported the referendum, noting that Hungary joined the EU in May and obtaining dual citizenship would give them an added sense of security and greater motivation to stay where they were.
Official figures indicate there are 1.4 million ethnic Hungarians in Romania, 560,000 in Slovakia, 300,000 in Serbia and 150,000 in Ukraine. Much smaller groups live in Croatia, Austria and Slovenia, the rest of Hungary's neighbors.
The government had said if 800,000 ethnic Hungarians moved to Hungary, the cost of giving them health coverage and education would be $2.9 billion - the equivalent of 2.7 percent of the country's gross domestic product.
Referendum supporters claimed those figures were distorted and Gyurcsany was using scare tactics similar to those heard in the EU during the discussion of admitting eastern European countries.
TITLE: IN BRIEF
TEXT: Explosives in Luggage
PARIS (AP) - French police on Sunday ended their practice of hiding plastic explosives in air passengers' luggage to train bomb-sniffing dogs after one such bag got lost, possibly ending up on a flight out of Paris' Charles de Gaulle airport.
The luggage that police used Friday for the exercise has not turned up yet. Three flights that arrived in Los Angeles and New York were searched, but the luggage in question was not found.
Police say there was no chance the explosives could go off since they were not connected to detonators. Still, Prime Minister Jean-Pierre Raffarin was critical of the mistake.
Mine Blast
ALMATY, Kazakhstan (AP) - Twenty-three people died and three others were injured Sunday in an explosion at a coal mine in the Karaganda region, officials said.
Eighty-seven miners were working at the site in the town of Shakhtinsk about 200 kilometers south of the capital, Astana, when the blast occurred at 3:08 a.m., said regional administration spokesman Zhanibek Sadykanov.
President Nursultan Nazarbayev sent a letter of condolence to the families of the victims and ordered the government to pay them compensation, as well as carry out a full investigation, officials said.
Sadykanov said a special commission was investigating the cause of the blast.
Village Evacuated
PARIS (AP) - A French soldier who had locked himself in an explosives depot and threatened to blow it up turned himself in Monday, the Interior Ministry said, ending a three-day standoff that prompted the evacuation of hundreds of villagers in northeastern France.
Angered about being forced to retire, 46-year-old Regis Le Tohic on Friday seized control of the depot where he worked near the town of Fere-Champenoise, about 60 miles east of Paris.
Dozens of police officers blocked off the warehouse, while rescue workers fanned out in nearby villages to escort some 400 residents beyond the safety perimeter, officials said. Flights were redirected around the area.
Earthquake in Germany
PARIS (AP) - An earthquake struck western Germany near the French border early Sunday, but there were no immediate reports of damage or injuries, officials said.
The magnitude 4.9 quake, with an epicenter near the German town of Waldkirch, occurred about 2:52 a.m., France's national seismological center said.
French authorities said hundreds of people telephoned seeking information about the temblor, but there were no immediate reports of damage or injuries.
Violence Increases
BAGHDAD (Reuters) - Guerrillas shot dead 17 Iraqis working for U.S. forces north of Baghdad Sunday and killed six other people, including three Iraqi National Guards, taking the toll from three days of violence to more than 70.
Insurgents have launched a series of attacks in Sunni areas since Friday, mainly targeting Iraqi security forces and civilians working with the U.S. military.
At least six U.S. troops have also been killed since Friday.
TITLE: Plucky SKA
Faces Down
Army Rival
PUBLISHER: Special to The St. Petersburg Times
TEXT: St. Petersburg's struggling ice hockey team SKA got a strong start in third round of the Russia's Superleague with a dramatic 3-3 tie with Moscow's Central Army Team, CSKA, Saturday evening at the Ice Palace.
Seven and a half thousand spectators turned out to watch the showdown between the Red Army teams. The game was crucial to both teams who are in a tight pack of 5 teams vying for 8th place in the standings - the lowest seeded playoff spot.
Last week at the season's mid point SKA was in 12th place of the 16 team league with 40 points, but a mere three points away from the team in 8th place. CSKA was just two points shy of the coveted play-off spot.
CSKA dominated the intense game, but SKA's Michael Watt tied the game at 3 a piece at 40.41. SKA held on for the rest of a cautiously played third period and neither team took any risks during the 5-minute overtime.
"The first two periods were intense and emotional, but clearly neither team was willing to take a risk in the third," CSKA head coach Vyacheslav Bykov at the post-game news conference. "We were playing to win, but in a duel like this game a tie is better than a loss."
"I am pleased with the result," said SKA head coach Boris Mikhailov. "Given our place in the standings it was important that we didn't lose."
SKA snapped a two game losing streak beating last-ranked Molot Prikamye from Perm 3-2 on Thursday night after a series of close games with some of the league's toughest teams.
In Omsk on Saturday, Avangard edged Ak Bars 5-4 in a showcase of National Hockey League superstars who normally play in North America. Ak Bars will look to rebound against SKA in Kazan on Tuesday night.
Kazan is packing its team with NHL players available due to the NHL lockout and last week announced it will add Buffalo Sabres defenseman Alexei Zhitnik to its roster.
A total of 290 NHL players are playing in Europe, including 59 in Russia, until the pay dispute is resolved. The NHL Players Association announced last week it will negotiate with the NHL for the first time since the lockout began on Thursday.
Meanwhile, Mikhailov reiterated that he has no interest in going after NHL players. "I am not interesting in the NHL's problems right now. I didn't ask anyone to come and play for SKA. People came to me with an interest to play and if we could find a common language, then we found a place for them on the team."
However, SKA's budget, estimated at somewhere just over $6 million, is one of the lowest in the league and doesn't put the team in a position to offer lucrative contacts.
Bykov put it another way: "I have worked hard to get my players to work as a team. I don't think it is smart to depend on NHL players to score goals. The only reason they are here is because they don't have a job. I would rather look at who I have on my farm teams and give them a chance, and build my team from the bottom up."