SOURCE: The St. Petersburg Times
DATE: Issue #1056 (22), Tuesday, March 29, 2005
**************************************************************************
TITLE: Citizens
Cool On
Outsiders
PUBLISHER: Staff Writer
TEXT: After attacks on African, Chinese and Bangladeshi students in the city over the weekend, the St. Petersburg Agency for Social Information on Monday released research containing alarming figures about ethnic intolerance in the city.
Nearly every fourth respondent, or 23.6 percent, said they "strongly dislike" people from the Caucasus. Another 13.2 percent named Azeris as the ethnic group they liked least, while another 10.5 percent admitted to hating Chechens. Only 15.8 percent of people said they didn't feel negative about any nationality.
The agency polled 2,400 locals, aged 18 and over in October and November of 2004.
The most positive ratings were given to ethnic Slavs, with Russians most favored at 16.7 percent, followed by Ukrainians (13.8 percent), Belorussians (12.4 percent) and Jews (5 percent).
Akif Gasymov, executive director of Azerbaijan's national-cultural autonomy in St. Petersburg, said the Chechen conflict, growing numbers of terrorist attacks and frightening TV reports from the Caucasus play key roles in forming vicious stereotypes.
"Having routinely seen many chilling reports from the Caucasus about kidnapping, terrorism and drugs, people inevitably develop bad associations," Gasymov said.
There are 100,000 Azeri children in St. Petersburg, most of whom have one ethnically Russian parent, he said.
"When people get used to seeing us around and learn that we are normal human beings, hatred will go," he said. "And once life gets better, everyone will think we are friends, not enemies."
The three foreign students who had non-Slavic appearances were injured in separate attacks in the city over the weekend.
Manuel Bernard, 26, an Angolan student of the Agriculture Academy in Pushkin, was attacked by several young people in metro wagon at Nevsky Prospekt metro station on Sunday night.
Desire Deffo, deputy head of the African Union in St. Petersburg, said Monday in a telephone interview that Bernard had been hospitalized with head injuries and slash wounds from a knife. He was in a satisfactory condition.
A St. Petersburger and a Muscovite were detained in connection with the attack, Interfax reported.
Deffo said Bernard had described the attackers as skinheads.
Saiful Islam, 26, a fifth-year medical student from Bangladesh, was attacked near Lesnaya metro station on Saturday afternoon.
About seven young people attacked him from behind and gave him head injuries that required hospitalization, Mozibul Haque, head of the city's Bangladeshi community, said Monday.
Islam said his attackers did not look like skinheads - they were dressed in ordinary clothes and didn't have shaved heads, Haque added.
Also Saturday, a group of people on Nevsky Prospekt beat up a Chinese student of the St. Petersburg Conservatory.
He was hospitalized with head injuries, Interfax reported.
Deffo said the city government is taking too little action to deter the attackers from striking again.
"Many attackers get away with these attacks without punishment and feel they can keep doing it," Deffo said. Most of the attackers are skinheads, he added.
Roman Mogilevsky, head of the Agency For Social Information, said economic instability and low standards of living led to high levels of xenophobia.
The agency's survey showed that many citizens have negative views not only of different ethnic groups, but also of countries.
The United States led the ratings of the most unpopular country with 17.2 percent. Georgia came second with 13.8 percent, followed by Iraq (11.4 percent), Ukraine (10.2 percent) and North Korea (10.0 percent).
Mogilevsky said a lack of interaction with people of different ethnicities led to intolerance.
Fifty-five percent of local citizens have never traveled abroad, according to the survey.
Seventy-one percent of respondents replied "no" to a question asking if they personally know any foreigners who study, work or do business in the city. Only 14 percent of respondents have foreign colleagues, 9 percent study with people from other countries, and 3 percent do business with them.
Mogilevsky said the public is not to blame for the results.
"These are the natural consequences of the city not being a cosmopolitan place for many years," he said.
TITLE: Disputed Parliament Takes Control in Bishkek
PUBLISHER: Combined Reports
TEXT: BISHKEK - Kyrgyzstan plunged deeper into confusion Monday when a parliament, whose disputed election led to a coup ousting President Askar Akayev, assumed authority and the new leaders jostled for power.
With the impoverished Central Asian state looking increasingly rudderless, differences emerged between acting president Kurmanbek Bakiyev, named within hours of the March 24 coup that forced Akayev to flee, and Felix Kulov, a popular opposition leader in charge of security.
"Today we have two presidents ... in some areas three or four governors and up to six regional leaders in the provinces," declared the speaker of the new parliament.
"We need to stop the disintegration of authority which is threatening the integrity of state," Omurbek Tekebayev said, adding that Akayev still remained the legal head of state.
"The rule of the Kalashnikov [rifle]" will take over throughout the country if the crisis is not solved, he said.
The new legislature, discredited though it is by the disputed February-March election that triggered the coup, assumed authority when the old assembly bowed out Monday.
"The old parliament has ... passed all responsibility to the new one. They do not want friction," deputy Nikolai Bailo said.
The bizarre development only underscored the uncertainty among the country's new authorities.
Tekebayev told deputies that parliament's first task would be to confirm Bakiyev as prime minister.
He said nothing about Bakiyev's appointment by the old parliament as acting president, but described its decision to name June 26 for new presidential elections as illegal.
The constitutional crisis stoked tension in the mainly Muslim former Soviet state of 5 million where mass looting broke out after the coup, though there was calm over Sunday night.
The new leaders have warned of civil war erupting and Bakiyev's supporters say a plot to kill him has been uncovered.
It was the opposition's allegations that the parliamentary poll was rigged that led to anti-Akayev unrest in the south of the country and then in the capital, climaxing in crowds storming government headquarters in Bishkek.
The two rival legislatures have since been meeting on different floors of the same parliament building.
Bakiyev had said the old legislature should stay on at least until the disputes over the election had been resolved.
But Kulov, a popular opposition figure released from jail by protesters immediately after government buildings were seized, set himself at odds with Bakiyev by announcing Sunday he would obey orders only from the newly-elected assembly.
Bakiyev himself appeared to be softening his position regarding the discredited election. "All the unrest was directly linked to the parliamentary elections. At the same time I am very far from saying that there was a total mess in all 75 constituencies."
He played down differences with Kulov, acknowledging there were points of friction, but adding: "I would not call it a dispute." He said they would work out their differences soon.
The unrest over disputed elections followed a pattern established by two other ex-Soviet states, Ukraine and Georgia, which have also seen a change of guard following protests.
Kyrgyzstan, a mountainous country bordering China, lies in a region, rich in oil and gas deposits and is viewed with keen interest by Moscow and Washington. Both have military bases in the country.
The dramatic events in Kyrgyzstan last week did not go unnoticed in other former Soviet republics that are ruled by long-serving authoritarian figures.
n The Uzbek opposition voiced hope for similar events soon in this tightly controlled country.
At a meeting Friday, the Free Peasants and Erk opposition parties and local rights groups welcomed Akayev's fall from power.
"We are sure the process of democratic reforms that started in Kyrgyzstan will highly influence all parts of Central Asia," they said in a joint statement.
Uzbek President Islam Karimov's government has long drawn international criticism for a lack of democratic reforms, poor human rights record and stagnating economy.
n In Baku, a key opposition leader on Friday warned the Azeri authorities against rigging the November parliamentary elections. Isa Gambar, head of the Musavat party, which this month formed an alliance with two other major opposition forces, said that another revolution could happen in Azerbaijan if President Ilham Aliyev tried to fix the results of the elections.
n In Astana, Kazakh President Nursultan Nazarbayev on Friday blamed the Kyrgyz leader's weakness for the collapse of his government at the hands of opposition protesters, Interfax reported.
Nazarbayev, who faces re-election next year, said that severe social and economic problems had also contributed to Thursday's popular uprising.
n In Kiev, the presidents of Ukraine and Georgia, who came to power after mass protests like those that drove out Akayev, expressed hopes on Friday for a peaceful resolution of the tensions in Kyrgyzstan.
n In Minsk, police on Friday drove demonstrators calling for President Alexander Lukashenko's resignation away from his office as the government criticized Kyrgyzstan's opposition for its seizure of power.
About 1,000 opposition demonstrators tried to gather at a central square near the presidential palace in Minsk but were pushed away by police. Officers in riot gear then chased demonstrators along the streets of the capital, beating some with truncheons. Thirty-four people were detained for taking part in an unsanctioned rally.
(Reuters, AP, SPT)
TITLE: Group Says to Restore Novgorod Republic
PUBLISHER: Staff Writer
TEXT: While some Finns dream of getting back parts of Karelia ceded to the Soviet Union in World War II, some Russians living in northwest regions are calling for their territories and minds to be free of Moscow's influence from even longer ago.
A group of people formed by writer and publisher Alexander Vertyachikh have declared themselves "citizens of the free Novgorod Republic which was illegally annexed by Moscow tsars in 1471-1479."
"We don't recognize Moscow's regime of occupation, whether it be monarchical, Soviet, democratic or presidential," says a letter by the group posted at livejournal.com/userinfo.bml?user=ru_sever and supported by 33 users.
Neither Vertyachikh nor other supporters could be reached Monday for comment. Nor was any comment available from the office of Ilya Klebanov, the presidential envoy to the Northwest region, where most of the territory to which the group pretends is located.
"Our final aim is to set up a Northern Russian Republic within the historic borders of the Novgorod republic. We appeal to all interested citizens, regardless of their nationality or political beliefs, and organizations to join our liberation movement," the letter said.
The Novgorod Republic once included huge territories from the Kola Peninsula in the north to the town of Torzhok in the south and included lands that are today part of the Baltic States.
The group's letter says they believe all elections and tax collections on the territory of the former republic are illegal.
The ideology of the movement is described by Vertyachikh in his article "Russia is Expected to Face a Crisis of an Unprecedented Scale," posted at http://sever.inache.net/krax.html. Its main conclusion is that Russia will collapse if it continues its current policies of economic development.
In his article Vertyachikh says that in 2003 the fuel and power sector accounted for 26.3 of Russia's GDP and 56.3 percent of exports and made Russia the No. 1 exporter of raw materials in the world. Russia is among the countries that have the biggest gap between poor and rich people, with 20 percent of the population classified as poor, 36 percent with low income and only 9 percent of people classified as a middle class, he said.
"By 2007, our country could face a crisis of two kinds, demographic and technological. The first will appear because the economy is not getting additional educated human resources and the second would be caused by worn-out equipment."
Vertyachikh said about 70 percent of equipment is worn out in Russia, while in European countries and the United States this figure is from 25 percent to 30 percent. Those countries invest two or three times as much in replacement of old equipment.
"There is a typical Asian model of power developing in Russia, with the state system working not as a managing tool, but as a system 'to feed authorities,'" the author wrote.
"The country, in fact, does not live in a unified economic space any more," Vertyachikh said. "People do not trust the ruble. The north is independent from the south, the west from the east."
Russia must change its ideology and pay attention to the interests of individuals rather than following the current policy of keeping together its huge territory, Veryachikh said.
Yury Vdovin, co-head of the city branch of human rights organization Citizen's Watch, said any declarations aiming at a division of Russian territory are illegal, but paying more attention to the interests of citizens makes good sense.
"Any attempts to divide Russian territory are against the constitution," Vdovin said Monday. "On the other hand, this is the constitution that says that interests of a person should be a priority. But it is one thing to declare something and another to fulfill it, which does not happen in Russia."
Yury Novolodsky, a member of St. Petersburg Board of Lawyers, said the movement supporting a Northern Russian Republic is likely to face legal problems if they continue to spread their ideas in their current form.
"They already have problems, judicial or mental, depending on if they are serious or just decided to joke," Novolodsky said Monday in a telephone interview.
"Any organization that is operating on Russian territory should act in line with the current legislation and if it declares that it does not recognize the government or its laws, it is likely to face administrative prosecution and even criminal prosecution," Novolodsky said.
TITLE: Ecologists Ask Firms
To Act to Save Forests
PUBLISHER: Staff Writer
TEXT: Karelian ecologists have called on Russian and Finnish wood processing companies to boycott doing business with wood company OAO Karellesprom to pressure it to stop felling virgin forests in Karelia.
The students' ecologist organization SPOK has appealed to Finnish companies Stora Enso and Thomesto, and the heads of Russian Segezh and Kondopozhsky cellulose paper plants to suspend its wood purchases from Karellesprom from April 5.
SPOK head Alexander Markovsky said Monday in a telephone interview that Karellesprom intends to cut timber in the last virgin forests of Karelia.
"These forests not only have the oldest trees, but also a unique ecological system, where rare animals and plants have their niches," he said. If humans intrude into the forests, the ecological systems will be destroyed, he added.
The forests in question are located in Pundozhsky district of the Karelia region and cover about 100,000 hectares.
"In European countries, no such untouched forest is left," Markovsky said, adding that the part which Karellesprom intends to fell could be added to the Bodlozersky National Park, which is one of the largest nature reserves in Europe.
Nikolai Durnyev, deputy head of Karellesprom, said in a telephone interview from Petrozavodsk, where the company has its head office, denied Karellesprom has been felling virgin forest in the area mentioned by SPOK.
"Yes, we have a lease for that area but we have not felled virgin forest there so far," Durnyev said.
Markovsky said that it is not Karellesprom itself that was cutting the wood, but its subcontractors.
Durnyev added that the government had licensed the company and that the ecologists should also talk to the region's authorities on the matter.
"Now that the European Union says that Karelia is the lungs of Europe and that many districts in the region are to be protected, local people will lose their jobs," he said.
If SPOK's appeal harmed Karellesprom's reputation or business, the company may take court action, he said.
Olga Rogozina, ecology manager for Stora Enso, said the company had received SPOK's letter and will make a response because it is "an important problem." The company always checks where the wood that it buys comes from. "The company's policy does not allow it to buy wood from virgin forests," Rogozina said.
Mikhail Tarasov, ecology manager at Thomesto, said that SPOK's suggestion about a boycott was "a very serious demand," which would require " a substantial check of the information." That would take some time.
TITLE: Ingush NGO
Leads Protest
PUBLISHER: The Associated Press
TEXT: NAZRAN, Ingushetia - Several hundred protesters gathered Monday in Ingushetia's main city, Nazran, in a challenge to the region's Kremlin-backed leader.
The rally, organized by a nongovernmental organization, was not authorized by the authorities, and police drafted extra units to prevent the protesters from meeting as planned opposite a major monument to the Ingush deported to Central Asia under Stalin.
They also arrested one of the protest leaders, Boris Arsamakov, the local branch of human rights organization Memorial said.
The participants demanded that the federal government in Moscow redraw the boundaries between Ingushetia and neighboring North Ossetia to return territory that previously belonged to the Ingush. Some pushed for the resignation of Ingush President Murat Zyazikov, accusing him of failing to resolve the issue.
The disputed Prigorodny district has been a flashpoint of tensions between the Ossetian and Ingush ethnic groups. War broke out between them in 1992, killing hundreds and leading to the expulsion of some 75,000 ethnic Ingush from the region. Efforts to allow the return of Ingush refugees have met with sometimes violent resistance.
Zyazikov, the former chief of the regional branch of the Federal Security Service was elected president of Ingushetia in 2002.
TITLE: Environmentalists Welcome
Ratification of Vienna Treaty
PUBLISHER: Staff Writer
TEXT: Russia's ratification of the Vienna Convention on Civil Liability for Nuclear Damage this month is a positive step that will lead to progress in nuclear waste handling, international environmentalists said last week.
Under the treaty, Russia is committed to allocating $60 million that will be used as insurance that would be paid out in compensation if a nuclear accident occurs.
Environmental organizations say that while the sum is not in line with estimates of the harm done by such accidents, it is better than nothing.
"I'd say the insurance is quite a virtual thing," Vladimir Chuprov, Greenpeace's nuclear energy expert said Friday in a telephone interview from Moscow. "The Federal Nuclear Power Agency is obliged to somehow set aside $60 million in case an accident happens."
"This is a small amount of money when the sums being paid in compensations for Chernobyl disaster, which are estimated at more than $200 billion, are taken into account," he added..
The treaty was originally opened for signing on May 21, 1963, and came into force on Nov. 12, 1977. Thirty countries have joined the treaty before Russia signed it on May 8, 1996.
A law to ratify the treaty was passed by the State Duma in the beginning of this month year. It was approved by the Federation Council and signed by President Vladimir Putin.
Chuprov said Russia is already paying $1.5 billion a year in compensation for the damage to the health of people who cleaned up after the Chernobyl disaster.
"For the big problems that are the result of the existence of nuclear energy, this insurance money is just a fig leaf, but at least we now have a fig leaf," he said.
But Bellona, an environmental organization based in Oslo, Norway, said the impact of the ratification of the treaty will be extremely positive for Russia, especially in relation to the program to dispose of the radioactive material in old submarines in northern Russia.
"We welcome this decision because this shows Russia recognizes international rules for nuclear responsibility; it significantly eases, among other matters, assistance and cooperation of other countries with Russia in projects to provide nuclear safety and the clean -up of nuclear submarines in particular," Interfax quoted Bellona spokesman Igor Kudrik as saying Wednesday.
Within the next few years, members of the G-7 group of leading industrial countries will transfer up to $20 billion to Russia to finance nuclear safety measures, environmentalists said.
Sergei Antipov, deputy head of the Federal Nuclear Power Agency, said Friday it will take from 15 to 20 years to tackle the harmful consequences of the activity of Russia's nuclear fleet.
"We estimate that it will take until 2010 to clean up decommissioned nuclear submarines," Interfax quoted him saying.
"But that is just for the submarines. Regarding the liquidation of all the harmful consequences of the nuclear fleet's activity, it will take at least 15 or 20 years."
The main problem for Federal Nuclear Power Agency is to clean up coastal navy bases that have big amounts of liquid and solid radioactive waste from nuclear submarines stored on their territory, Antipov said.
Of the 250 nuclear submarines built by Russia and the Soviet Union, 195 have been decommissioned. All radioactive materials have been removed from 111 of these. It is expected that more submarines will be decommissioned off in the near future, according to Federal Nuclear Power Agency.
"But these will be single vessels. There won't be such a fast rate of decommissioning as there was before," Antipov said.
TITLE: Corporate News
TEXT: In August 1853 on the order of Russian Tsar Nikolai I, Vice Admiral E. V. Putyatin arrived in Japan, which at that time had a closed-country policy. He conducted complex negotiations with Japanese representatives with the aim of establishing diplomatic relations between the two states. As a result of the extended negotiations in February 1855 the Treaty on trade and the border between
Russia and Japan, also known as the Simodsky Treaty, was signed. It laid the foundation for the future. development of relations between our two countries.
The St. Petersburg Japanese Spring Festival, which is dedicated to the 150th anniversary of the establishment of interstate relations between Japan and Russia, is being held in St. Petersburg.
With the sponsorship of JT International, the festival has several events, among which are exhibitions in the Central Navy Museum and the concert in the Yusupov Palace.
The Central Naval Museum hosts a special exhibition dedicated to the 150th anniversary of the establishment of the first diplomatic links between Russia and Japan. One hundred and fifty years ago a ship sailed from St. Petersburg, carrying Admiral Putyatin on a mission of establishing interstate relations between Russia and Japan. This remarkable event became the starting point in a series of business, political, and cultural contacts between our city and Japan.
The exhibition features the history of the mission, original historical exhibits and the paintings of famous modern St. Petersburg artist Natalya Maksimova who visited Japan last winter to depict the historical places of the mission and provide artistic evidence of how the heritage of these important events is carefully kept in Japan.
The exhibition is the major event organized by the Russia-Japan Friendship Society for the Festival of the Japanese culture.
On March 29, 2005, a unique concert of traditional Japanese liturgical music will be held at the Yusupov Palace Theater in St. Petersburg - it will be performed by a choir from the Land of the rising sun. This concert was initiated by a group of prominent Japanese public figures.
This is a major event in the chronicle of cultural ties between Russia and Japan which will contribute to the rapprochement of our countries and strengthen friendship and mutual understanding between the two peoples.
This event has a special meaning as it will be held in a year which marks the 150th anniversary of establishment of interstate relations. The choice of St. Petersburg as the venue was not an accident: it was precisely from here that the ship of Russian admiral Putyatin sailed away with a mission to establish diplomatic relations with Japan.
The Japanese side attaches great importance to the upcoming concert of traditional liturgical music. The Embassy of Japan in Russia and the Consulate General of Japan in St. Petersburg are providing extensive support to the event. A delegation of JT CEOs led by JT Chairman of the Board and Representative Director Yoji Wakui will come to the city on the Neva from Tokyo.
TITLE: Developers Overrule Citizens' Protest Voice
PUBLISHER: Staff Writer
TEXT: The decision regarding Baltic Pearl real estate project development lies in the hands of the city administration and the developer, not the city residents, many of whom are influenced by misleading stereotypes, city officials said Monday.
Despite outcries from certain citizen groups, the Chinese state-owned Shanghai Overseas United Investment corporation has received approval this month to begin preliminary project works on a $1.3 billion land development project in the Krasnoselsky district.
The final investment agreement on the project, labeled "China Town" in the local press, is expected to be signed when St. Petersburg's Governor Valentina Matviyenko visits Shanghai in mid-May.
"The administration has already made the decision to go ahead with the development that both sides find appropriate," Maxim Sokolov, head of St. Petersburg's committee for investments and strategic projects, said Monday at the presentation of public opinion poll results concerning the Baltic Pearl project.
The opinion poll, conducted by the city's Social Information Agency, showed that 34 percent of the city's population supported the real estate project, while 41 percent opposed it.
Regardless of numerous assurances given by both the city officials and the Chinese company - also the largest financier of the $1.3 billion development - certain residents have cried foul over plans for what they call a go-ahead for a "Chinese expansion."
An initiative group of Krasnoselsky district residents petitioned the Legislative Assembly to hold a citywide referendum on the Baltic Pearl project earlier this month.
Were the Legislative Assembly deputies to approve the move, a referendum could determine the future of the project.
However, holding such a citywide referendum would be the wrong way to proceed, Alexander Belousov, a Legislative Assembly deputy, said at the results' presentation.
"We have lots of foreign investors and developers in the city, and all fears of the so-called 'Chinese invasion' are nonsense," Belousov said.
"There are many American, Dutch, and other financiers involved, and we are not scared of a massive migration from those countries, are we?" he said. "It's money that the Chinese investors will bring to the table and money doesn't stink," Belousov said.
Meanwhile Sokolov expressed surprise that 48 percent of all Krasnoselsky district residents who participated in the survey were negatively disposed towards the project.
"They are the ones who will benefit the most from the project in terms of growing real-estate prices and an increase in overall living standards," he said.
Head of the Social Information Agency that conducted the research, Roman Mogilyovsky said that political will be needed to overcome the xenophobia and racism of those residents who oppose the project.
"It is important to note that the majority of 18 to 34 year olds supported the project, while the 55 and older residents tended to oppose it," he said.
"Referendums usually tend to stop large projects," he said, citing a Disney Land project in Lisy Nos suburb as an example. The project, introduced to city residents in the beginning of the '90s was voted down due to fears of a rise in prostitution.
"And what do we have now? We have the prostitution, but we missed out on all the advantages that could have come from [a Disney Land]," Mogilyovsky said.
"We have to decide whether St. Petersburg is a city that is looking to the future and developing or one that's residing in the past," he said.
TITLE: Baltika's Subsidiary Hit With Fines
PUBLISHER: Staff Writer
TEXT: Federal tax authorities are demanding over $12.1 million in taxes and fines from St. Petersburg-based Baltika, Russia's largest brewer by output and sales, according to the company's report for last year.
Based on Baltika's consolidated financial data for 2004, a total of $10.598 million has been claimed against Baltika's fully owned subsidiary Leasing-Optimum, while $1.513 million in back taxes relate to the beer manufacturer itself, Interfax reported Friday.
Baltika's spokeswoman Marianna Volodina said Friday the charges emerged as a result of a tax audit completed by federal authorities at the end of last year. The company is in the process of appealing against the demands in court, Volodina said in an e-mail.
The claims against Leasing-Optimum, which acts as Baltika's leasing agent, originated from what the authorities say was misreported revenue from leasing brewing equipment to Baltika and other brewers between May 27, 2002, and Dec. 31, 2003.
The company expressed confidence that the Court of Appeals, where the case has been filed, will rule favorably on the company's behalf.
"There have been positive precedents made under analogous circumstances [which deal with Russian regions having different accounting rules on how to treat leasing]," the company's report said.
Out of $1.513 million charged to the beer manufacturer itself, $1.297 million result from disagreements between auditors over the amount of revenue taxes paid by the company.
"The tax authorities questioned certain transactions, including several technical service fees that occurred during the [company's] transformational period, as well as expenses connected to the services of [the firm's] airplane," the report said.
"Based on the results the company has also filed a complaint to the Court of Appeals, and the management believes the probability of a positive decision is great," the report said.
The company reported a 31 percent gross profit increase for last year, for a total figure of $444.8 million. Earnings before interest, tax, depreciation and amortization advanced 11 percent to $252.5 million. The company's net income was not disclosed.
Baltika is 79 percent owned by Baltic Beverages Holding AB, a venture between Scottish & Newcastle and Carlsberg A/S, and its financial reports are prepared in accordance to US GAAP standards.
TITLE: ACE Hopes for Secure Future
PUBLISHER: Staff Writer
TEXT: MOSCOW - Global insurer ACE unveiled its Russian subsidiary on Monday despite a brewing insurance scandal in the United States.
Evan Greenberg, president and CEO of the Bermuda-based company, has arrived in Moscow to open up shop.
"We are very pleased that ACE has been approved to conduct commercial property and casualty insurance business ... in Russia," Greenberg said in a statement.
Greenberg was due to meet Deputy Finance Minister Sergei Shatalov on Monday, Vedomosti reported, citing unnamed sources within the ministry.
ACE was tight-lipped about Greenberg's visit and the details of the company's Russian business. New York-based spokesman Robert Grieves refused to comment on ACE's Russia strategy or on the investigation of the company in a dozen U.S. jurisdictions.
ACE has been drawn into a series of insurance scandals that brought down Greenberg's father, AIG CEO Maurice "Hank" Greenberg, and his brother, Marsh & McLennan CEO Jeffrey Greenberg.
The U.S. probes do not appear to have stopped Russian regulators from approving ACE's subsidiary after the group incorporated its Moscow representative office in October.
The Russian subsidiary will be headed by Mark Serebrennikov, the former head of the department dealing with foreign insurers at the Federal Agency for Insurance Oversight, Kommersant reported Monday, citing nobody.
In an interview with Vedomosti, ACE's managing director did not rule out branching into life insurance, a form of saving and investing common in the West but hardly developed in Russia.
"[Foreign] companies are coming to Russia to do life insurance," said Pavel Samiyev, an insurance expert at Expert Rating Agency.
Samiyev said he expects the life insurance segment to grow by 40 percent to 45 percent this year. "This is the segment that will see the biggest boom within the next five to ten years."
Foreign-owned subsidiaries have been allowed to sell life insurance since January 2004 but have been held up by low levels of collective investment, said Samiyev. There are some 40 foreign-owned insurers in Russia.
TITLE: Jet Project Secures $100M In a State Bank Loans Deal
PUBLISHER: Staff Writer
TEXT: MOSCOW - The government on Friday threw its weight behind the Sukhoi-led Russian Regional Jet project, widely believed to be crucial to jumpstart the country's decaying domestic civil aviation industry, by committing at least $100 million in loans from state banks.
Sukhoi, better known for its fighter jets, on Friday signed a long-term framework agreement with four state owned banks - Vneshtorgbank, Vneshekonombank, Sberbank and Roseximbank - to finance the project with at least 2.7 billion rubles ($98 million) in government-backed loans.
"We will pull off this project one way or another, be it through loans or buying equity," Vneshtorgbank chairman Andrei Kostin said at the signing ceremony.
Friday's agreement is a major boost for the short-haul passenger plane, which has so far been financed by Sukhoi itself, said Konstantin Makiyenko, deputy head of the Center for Analysis of Strategies and Technologies, a defense think tank.
"It is inspiring: The Russian government is supporting a domestic project, the same as France has been doing for Airbus," Makiyenko said.
Sukhoi has so far invested $70 million into the project, which requires overall financing of $700 million, Sukhoi general director Mikhail Pogosyan said at the ceremony.
Sukhoi, in consultation with Boeing, won the government tender to create a regional jetliner in 2003. Developed as a family of jets seating 65, 75 and 95 passengers, the jet is due to test-fly in November 2006 and enter mass production in 2007.
Sukhoi has estimated demand for the new jets at 800 planes by 2020, with potential international sales totaling $18 billion. So far, only No. 2 domestic carrier Sibir has committed to buying 50 of the 95-seater jets.
TITLE: High-Speed Train to Fly to Moscow in Three Hours
PUBLISHER: Staff Writer
TEXT: MOSCOW - By 2008, the fastest way to fly from Moscow to St. Petersburg will be by train - three hours from city center to city center.
With the wheels greased by the countries' top leaders last December, Russian Railways, or RZD, and Germany's Siemens Transportation Systems expect to drum up a deal as early as next month that will make a 250- kilometer-per-hour train a reality.
Western engineering and Russian production will adapt Germany's high-speed InterCity Express trains to fit Russia's wider tracks.
Both parties are tight-lipped on details ahead of sealing the agreement, but they see it as "an earnest and long-term" link-up, according to an RZD statement.
"We think that Siemens is coming to the Russian market for serious and long-term cooperation," RZD president Gennady Fadeyev was quoted as saying in the company statement.
Siemens has completely agreed to conditions set forth by Russia, RZD said, following a pre-contract meeting earlier this month between Fadeyev and STS president Hans Schabert.
The most important conditions provide for production to take place mainly in Russia and include Russian suppliers and project partners.
In Fadeyev's vision, domestic production and supply of components should grow from 30 percent in 2007-2008 to 80 percent in 2015.
Thirty Russian companies will be invited to take part in the new project, Fadeyev has said. A joint venture will be set up among Siemens, Russian manufacturers and investment banks to finance the project, whose cost is estimated to grow to $2 billion.
The venture will develop, test and arrange investment for production. The Russian model will have to be wider than the German trains in order to fit Russia's tracks, which are wider than Europe's.
RZD's role in the venture has yet to be specified, said Andrei Garanichev, adviser to RZD vice president Valentin Gapanovich, but once the Russian ICE has been designed and built, the company will purchase 60 trains. The price has not been specified but will hover around 20 million euros ($26 million) per train, Garanichev said.
RZD has promised that within the next three years, it will upgrade the track to handle the high-speed traffic, equaling the investment to be made by the Siemens joint venture.
The technical specifications on the train are yet to be worked out, Garanichev said.
The new service will run at first between Moscow and St. Petersburg and between St. Petersburg and Helsinki. RZD is eyeing such potential destinations as Nizhny Novgorod, Rostov-on-Don and Kiev.
"We have to see how popular the pilot Moscow-St. Petersburg route will be," Garanichev said. "But with three hours between the center of Moscow and the center of St. Petersburg, we expect half the passengers who fly to switch to rail."
Aeroflot operates 52 weekly flights between Moscow and St. Petersburg, but even though the flight lasts just over an hour, it still takes extra time to get to and from the airports, making up for the difference.
Currently, the fastest train between St. Petersburg and Moscow takes 4 1/2 hours.
RZD's pending contract with Siemens will be the final step for Russia's own high-speed train. The Sokol prototype was built at the Transmash plant in the Leningrad region and was to enter service in 2002, but the project was abandoned after being deemed unfit for high-speed use on Russian tracks.
"By choosing Siemens, we recognize that our technology is lagging behind," said Igor Nikolayev, an expert with the FBK consulting firm.
"And RZD is right not to be waiting for our own technology to develop. Borrowing is a wise move."
Nikolayev said that the RZD-Siemens contract will be a winning deal for both parties.
"Siemens seems to be ready to transfer technology, and while the Western European market has limitations, Russia offers new opportunities for the company to supply its product," he said.
"RZD's experience with Russian plants has been negative. The plants simply do not have the technology to make these trains of aluminum alloys," said Yevgeny Konovalov, head of the consulting department at Business Systems Development, an RZD adviser.
He said that upgrading infrastructure for the new train will not be a problem for RZD, but "if they want to run a service to Kiev, Ukrainian infrastructure will have to be upgraded too." Louis Thompson, a former railways adviser at the World Bank and currently a consultant on rail issues in Europe and China, said that prospects for the ICE line are good.
"The distance is at the upper end of the typical high-speed rail distance, but the demographics are good, and the lack of good highway connections combined with the weather problems for air [travel] in winter means that rail has a strong market potential," he said.
A potential connection to Western Europe may not immediately be in the cards, however.
"Given the distances and the change of railway gauge, I would initially be concerned about the economic feasibility," Thompson said.
The Siemens agreement will follow another contract, signed earlier this month by RZD, Transmashholding and Berlin-based Bombardier Transportation for the production of EP10 dual-voltage passenger locomotives.
The $16 million deal covers the production of 12 such locomotives through 2006. The first EP10 train will run between Moscow and Kiev, and future destinations will include Smolensk, Minsk and Nizhny Novgorod.
TITLE: Transport Tenders Must Be Truly Open
TEXT: Last Wednesday's announcement that a tender would be held for fixed-route minibus licenses, or marshrutkas, was part of City Hall's reform of public transport.
The reform is being introduced to transform the city's transport sector into a market with competition and to eliminate the state monopolist Passazhiravtotrans. In addition, Smolny's reformers have changed the system of transporting passengers. If previously, Passazhiravtotrans serviced about 85 percent of so-called "social transport," and private firms carried passengers in marshrutkas, now each carrier must service both commercial and "social" passengers in a particular area.
The reformers consider that this will raise the responsibility of the carriers and the quality of service offered to beneficiaries because they will have to fulfill strict requirements set for transport enterprises. The city was divided into 62 sectors, and tenders were held for licenses in each one. In addition, 49 sectors were created in the suburbs.
The idea of the reform was not bad, but the tender can already be considered a failure. Real tenders were conducted in only 14 out of the total 111 sectors. Although 25 companies participated, only two came out as victors; Passazhiravtotrans, which won 13 sectors, and Trety Park, which won 1 sector. There was only one applicant to provide a service in 15 city sectors and five suburban sectors - so they were given those sectors outright. And no one at all wanted to operate in eight city sectors and 32 suburban ones. Applications were not correctly carried out in 25 city sectors and 12 suburban ones and so the tenders for them were suspended.
The reformers, who failed to offer a practical tender system, are to blame. The main barrier was the condition specifying that an applicant company must own buses which can accommodate large numbers of passangers - enough to operate successfully in all the sectors for which the company was bidding.
The purpose of any tender is that one of the contenders wins. The others all lose. In the above case, that would mean that buses previously bought by losers would stand idle - there is little work for them. With the tender, then, the officials made it a condition that companies bidding in the process own all the necessary buses. Being obliged to own buses before the tender meant that the most applicants would have to spend vast sums on buying buses. It could have led some companies to near bankruptcy. That most St. Petersburg carriers did not fulfill this adsurd condition is a feather in their cap - they take a much more responsible attitude toward their work than the bureaucrats of Smolny.
However, this problem did not exist for just one of the contenders - Passazhiravtotrans. It was capable of buying any number of buses without taking any risks - because it buys them using budget money and not from its own revenues. There is a suspicion that this was what the bureaucrats who were responsible for running the tender were counting on. Their real goal was not to introduce a market for public transport, but, under the pretense of reform, to give their state-owned enterprise an even greater share of the commercial passenger routes.
Igor Mikhailov, a deputy in the Legislative Assembly, made a totally sensible recommendation last year. City Hall should buy or lease buses for all the welfare routes and sublease them or rent them out to the winners of the tender. That would make the tender a competition for sectors not for buses. This suggestion takes away the financial risk of participating in a tender. Moreover, it is more logical and principled. The main achievement of private carriers - who don't have ample money to invest in their fleets - is their more effective organization of work. That is true of all private firms compared to state ones. The reform should therefore have been based on this achievement. It is hard to call what the bureaucrats have done anything other than sabotage. The best that Governor Valentina Matviyenko can do in such circumstances is to somehow annul the results of the tenders and conduct them again, but with new, rational rules.
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: IN BRIEF
TEXT: Debt Interest Denied
BERLIN (Reuters) - The German Finance Ministry declined to comment on a newspaper report that it is demanding a 500 million euro ($648 million) premium on early redemption of 5 billion euros owed by Russia.
Welt am Sonntag quoted an internal Finance Ministry document as saying that Germany should demand between 105 percent and 110 percent of the nominal value of the outstanding debt.
A spokesman for the German Finance Ministry declined comment, saying that the negotiations were being conducted through the Paris Club of creditor nations. Germany is Russia's biggest creditor.
Ruble Hits 5-Week Low
MOSCOW (Reuters) - The ruble sank to a five-week low against the dollar, tracking the euro, which was itself trading around six-weeks lows to the U.S. currency, dealers said Monday.
Some traders said the Central Bank had dipped in and out of the market, offering to buy dollars at 27.77-27.78 and 27.80-27.82 rubles to smooth the currency's fall, in line with its normal policy.
"Our market has become completely dependent on the euro/dollar," said Aljba Alliance dealer Artyom Roshchin.
Khodorkovsky Trial
MOSCOW (AP) - The last act in the nine-month trial of Mikhail Khodorkovsky opened in a Moscow court Monday as prosecutors insisted in concluding remarks that the oil tycoon's guilt had been proven.
Prosecutor Dmitry Shokhin began reading through the list of charges facing Khodorkovsky and his business partner Platon Lebedev in a protracted statement that is expected to conclude with a request for sentencing.
Prosecutors have previously asked for a maximum sentence of 10 years for both men if convicted.
Tomskneft Tax Bills
MOSCOW (Bloomberg) - Yukos' biggest remaining production unit faces criminal charges filed by tax police, who accuse the subsidiary's managers of selling 4 billion rubles ($140 million) worth of oil illegally in 2002, Interfax reported.
The unit, Tomskneft, pumped and sold 3.2 million more tons of oil in 2002 than its license allowed, earning the company 3.95 billion rubles in "illegal revenue," the news agency said.
It said its source was the tax crime department of the Interior Ministry's Tomsk branch.
Sibneft Wins Auction
MOSCOW (Reuters) - Sibneft said Monday that it had won an auction for two oil fields in the Khanty-Mansiisk autonomous district in Western Siberia, with oil reserves of almost 50 million tons (365 million barrels).
Sibneft said in a statement that it had paid a total of 543.11 million rubles ($19.61 million) for the rights to blocks 2 and 3 of the Salym field, a price of 6 cents and 4 cents per barrel, respectively. Under the auction terms, Sibneft can explore the fields for five years, with an option to continue to the production phase.
Mosenergo Profit Up
MOSCOW (Bloomberg) - Mosenergo, which supplies most of Moscow's power, said profit rose 18 percent last year because it sold more electricity to users as the economy expanded for the sixth straight year.
Net income rose to 2.05 billion rubles ($73.7 million) from 1.73 billion rubles in 2003, the company said Monday on its web site.
Sales rose 28 percent to 89.3 billion rubles.
The company sold 4.1 percent more electricity than in 2003.
Mosenergo's cost of sales rose 20 percent to 75.7 billion rubles last year.
The company's interest payments almost doubled to 1.27 billion rubles in 2004.
Last year, Mosenergo sold to the region 73.98 billion kilowatt-hours of power it produced and 8.52 billion kilowatt-hours of power bought on the wholesale market.
Chinese Mine Loan?
MOSCOW (Reuters) - Metropol investment house said Monday it had reached a preliminary agreement with two Chinese mining firms that could extend it a loan to build a zinc ore enrichment plant in Russia.
Within a month, Metropol will prepare a detailed proposal to Shui Kou Shan Nonferrous Metals Group Ltd. and Taizhou Huatian Industry Co. on loan terms to finance the project, spokesman Filipp Chistov said.
"We intend to supply concentrate from the plant primarily to domestic consumers and export some of it," he said.
TITLE: Team Spirit Motivates Mobile Wunderkind Nogotkov
PUBLISHER: Staff Writer
TEXT: To say that Maxim Nogotkov is a people person might seem only fair when you consider his line of work. He is, after all, the president and owner of a business that exists to sell communication possibilities to a mass audience.
Yet Nogotkov, founder of Maxus and its Svyaznoi chain of mobile phone retail stores, extends the metaphor. He trusts communication to engender respect in people: for others, for business and for Russia, which in his field at least, he rates as still "two years behind the West."
"What we sell is the chance for people to communicate, be friendlier and respect each other. That's [what makes] the atmosphere of a city, of a country, even," Nogotkov told a group of St. Petersburg businesspeople at a recent seminar.
"Our company will only focus on Russia because I have the ambition to return respect toward Russia on the world stage," he said.
"For me, respect is not won back through force, it returns through having a unique and attractive culture."
A grand ambition at the age of 28 - even if, with 1,000 Svyaznoi stores and a $1.3 million turnover predicted by the end of 2005, Nogotkov would be well qualified to lead a seminar titled "How to build business success in Russia."
At school, Nogotkov was a stubborn model pupil. His dreams were academic, to pursue a career in programming, which is what he enrolled to study at Moscow State Technical University in 1993.
The idea of commerce struck Nogotkov the student as rather second-rate, at best a means to an end. While in school, he stumbled upon an opportunity to buy calculators, audio equipment, and later radio telephones in bulk, and resell them through advertisements in the paper and through fliers. This sideline continued at university.
"I didn't go into [trade] from a love for calculators or anything. I needed money and I figured here was a way of making it," Nogotokov says.
As a career field, business still seemed impersonal and hardly respectable.
"At the beginning of the '90s it was hard to find a single person in Russia who did not count it as their duty to steal from entrepreneurs or from industry," Nogotkov recollects.
Nogotkov felt he was destined to be an outstanding programmer, but he started to question his dreams. As a second year university student in 1995, Nogotkov was counting on his knowledge to earn him $1,000 a month ... "but it was about 10 times less than the sum I earned then through trade."
So why programming?
He did not go to his final second-year exam - he did not even feel like there had been a choice.
"I couldn't take it much longer. Usually, I put 100 percent into whatever I do. Here I was in a situation where my efforts were divided between studies and business. I hated that incompleteness," Nogotkov says. Quitting university in June 1995 resolved other doubts, too.
"Working with a computer got rather tiring. You never meet people. In sales, you are communicating all the time," he said. "It's much more energized."
By October, Maxus was registered as an electronic goods wholesaler, the company's name taking something from the owner's, and possibly being an uncanny reflection of Maxim Nogotkov's dedication.
"He is a very serious, curious personality," recollects George Abdushelishvi, co-founder of Ward Howell International executive search in Russia. "When he first stepped into our office, Maxim was extremely young and none of us had any idea that he could be our client.
"He gave us a hard time, peppering us with dozens of questions about our work methods and results. It was very professional, very much detailed, which was surprising because Maxim had never had a chance to learn it from a business school or a multinational corporation," Abdushelishvi says.
Initially, Nogotokov saw his company's future exclusively in wholesale and distribution. It was, after all, a territory naturally inherited from Nogotkov's trading as a student on Moscow's hi-tech and electric goods markets.
The team of five at the first Maxus store soon grew from an initial group of friends and partners, mostly fellow students who had also quit university, to a business with an annual turnover of $100,000. Although the company expanded, Nogotkov maintained his focus on people, which he believed to be integral to business.
Nogotkov picked a team-oriented staff and promoted team-based bonuses, rather than individual bonuses - a factor which Nogotkov says differentiates his company's corporate structure from that of their main competitor today, Euroset.
"Euroset has a more individualistic corporate culture. If a person does well - fantastic, they get good money. With all due respect, I think that views humans as robots who must sell day-in day-out," Nogotkov says. "I can't deny, it is effective: small salaries, huge bonuses. But I think I have more respect for people than to do that."
Nogotkov's sense of personal contacts extended to dealings with suppliers and clients. While other distributors worked through larger bulk buyers, Nogotkov set a goal of establishing direct, personal relations with electronics manufacturers.
"In each case, I presented myself, the company, our figures," Nogotkov says, marking the winning of a direct supply contract with Siemens in 1998 as a vital catalyst. Soon nearly all the other major manufacturers signed a distribution contract with Maxus.
The company continued doubling its turnover annually, meanwhile becoming the country's largest distributor of mobile handsets with a 12 percent market share. Business was good. By early 2000 a drop in network connections and call costs led to a mobile retail boom, with companies like Euroset and Technomarket expanding rapidly.
In Nogotkov's mind, Maxus was set up as a wholesaler, not retailer. But why not retail?
"We start with what we know, with what we are close to already," Nogotkov says. In April 2002, Maxus launched 81 Svyaznoi brand mobile retail shops.
The market was already considered in its first steps of maturity, and for the first six months Svyaznoi ran at a loss. Pressed by a territorial rule, then ordered by mobile networks, Svyaznoi had to settle for less attractive shop spaces.
Even the initial "trial-out" buys of six Arteks and eight Grand-Prix mobile retail stores in 2001, plus the conversion of all Maxus wholesale outlets to a unified Svyaznoi brand in 2002, did not spare the company from a difficult initial period.
"We had just a 2 percent market share in Moscow ... it was a long, drawn-out battle," Nogotkov says.
Transferring the main focus of the company's activity, Nogotkov invested all his energy into retail, learning from the successes and mistakes of other market players. Nevertheless, Nogotkov contests allegations that Svyaznoi has copied its development and marketing strategies from other firms.
"The industry was invented abroad. The now largest mobile retail company in Europe, Carphone Warehouse, started in the U.K. in 1989. Euroset was launched in Russia in 1997," Nogotkov said.
"We don't model ourselves on Euroset, we look more to Europe. And [Yevroset co-founder Yevgeny] Chichvarkin does the same," he said.
Much of the "tail-chasing," Nogotkov explains, is due to the greater affluence of Western buyers, which can see new products and ideas appear on the European mobile market quicker.
But imitations of marketing and development aside, Abdushelishvili does see something unique in Nogotkov and his company.
"Maxim is definitely a local phenomenon, representative of the young generation who believes in values. He believes in the team he is building," Abdushelishvili says.
And values, after all, are not subject to cheap imitations.
TITLE: Changes Looming for the Cards Used to Phone Overseas
PUBLISHER: Staff Writer
TEXT: MOSCOW - Tear up your calling cards and put your mobile on standby: Making direct international phone calls on your landline may again make financial sense once the shakeup of Russia's long-distance telephone market is complete.
Liberalization and rule changes from the IT and Communications Ministry may halve the cost of international calls, push up mobile charges and eventually edge many card operators out of the market altogether.
Currently, the most straightforward way to call abroad is simply to pick up a regular landline phone and dial the number. But convenience does not come cheap: A call to the United States will set you back 19.50 rubles (70 cents) per minute during business hours.
Rates on MTS mobiles are considerably higher, but smart users will have a MegaFon O'Lait SIM card on hand, which offers a flat rate of 23 cents per minute for numbers in 150 countries, including the United States.
A calling card can cut your costs dramatically. MTU-Intel offers 4 cents per minute to the United States, a price made possible by routing traffic over the Internet. But what you save in price you lose in convenience - most IP cards require you to punch in dozens of digits before each call, and quality varies.
The first change to hit the telephone market will be the revoking of Rostelecom's long-distance monopoly at the end of March, a move that should eventually slash call prices from regular phones.
Rival long-distance operators - likely Golden Telecom, Transtelecom and MTT - should be ready to compete with Rostelecom toward the end of 2005, roughly six months after they are expected to receive long-distance licenses, according to Aton analyst Yelena Bazhenova. Subscribers will then have a choice for calling abroad.
The first victim of this change is likely to be Rostelecom's artificially high international rates, which subsidize below-cost line rental rates. Bazhenova predicts a halving of prices within the next few years.
Even more dramatic savings could follow if Moscow fixed-line monopoly MGTS were to buy a long-distance license and offer IP telephony from regular phone lines.
The company offered such a service last fall, but it withdrew the service in February, citing new licensing regulations requiring providers of IP telephony to have a long-distance license rather than a data license.
Although MGTS could likely afford the estimated $50 million required to fulfill the requirements for a long-distance license, conflicts of interest make such a bold move unlikely. For example, 28 percent of MGTS is owned by Svyazinvest, which also owns 51 percent of Rostelecom, the likely loser in such a move.
"MGTS has the money for a license, but it is a question of principle," Bazhenova said. "They would need permission, and it is a big question as to whether they would get permission."
When the new IP rules were announced in February, it looked like the calling card market could be obliterated. An editorial in Vedomosti on Feb. 7 warned that the rules could lead to the bankruptcy of as much as 80 percent of IP telephony operators, as the requirement to either buy a license or sign deals with long-distance license holders would destroy their business models.
The threat of a collapse now seems to have been postponed. Data licenses will be sufficient until they run out, which means the end of 2007 for many firms. But card rates are likely to rise, posing a threat to smaller operators.
"Prices will go up gradually as operators gradually move to the new system, where they will have to route their international traffic via licensed operators under the new rules of connection," said ACM-Consulting's Yelena Sayapina. "But much of the increases will just cut into companies' margins."
"IP telephony will lose its competitive advantage because companies will have to pay operators who have long-distance licenses," iKS-Consulting's Tatyana Tolmacheva said. "Their prices will depend greatly on what they are charged for their traffic and how they are able to agree with these operators. IP providers who won't change their business will simply leave the stage."
Long-distance competition may eventually push down international rates for mobile users, but the planned introduction of fixed rates - possibly before the end of 2005 - is set to increase costs.
"If interconnect rules [for mobile operators to connect calls between different networks] are changed, it will have an effect on all prices, and international and intercity rates represent the one area where they can increase prices," Bazhenova said.
However the markets look in 2005 or 2006, the cheapest way to call abroad is likely to remain bypassing the country's phone system by plugging your phone into the Internet. Skype, which has 165,000 users in Russia, offers calls for 2 cents per minute to most of the West using a headset or handset connected to your PC. And its prices are blissfully indifferent to changing regulations.
TITLE: The Economists Strike Back
TEXT: One year ago, President Vladimir Putin started his second term in office. He promised to use the combination of political stability and fiscal strength built up during the previous four years to push the economic and administrative reform agenda devised by the liberal economists in the Cabinet led by Economic Development and Trade Minister German Gref and Finance Minister Alexei Kudrin. But despite the promise to push the economy from natural resource dependency and vulnerability to greater depth and balance, Russia became more hooked on oil than ever. And instead of a wider wealth distribution, very little has actually changed. The recently published Forbes list of billionaires, for example, tells a story of even greater economic concentration in natural resource industries and a dangerous widening of the wealth gap between rich and poor.
Looking at the evidence of the past 12 months, many investors and business leaders thought Putin was distracted from his previously stated economic priorities as he struggled to contain the infighting in the government. Others feared he had become complacent about the economy in the face of ever increasing oil and gas revenues. Either way, the weight of evidence led many observers to conclude that the liberal economists in government were steadily losing influence and that this had led to an increase in the risk of doing business and investing in Russia.
However, over the past couple of weeks, there have been signs that the president has drawn a line in the sand on some of the issues that distracted him from the reform agenda. As part of this apparent change, influence is returning to the economic liberals. Of course, it is too early to assume this to be the start of a determined return to the original reform plan, but these recent events are encouraging for investors and business leaders who have been waiting for some reaction from Putin to the deterioration of the public's confidence in his government. It is also encouraging that on Monday, for the first time in his second term, the president scolded his government for not tackling the red tape stifling entrepreneurial initiative and stalling growth of small to medium-sized enterprises, or SMEs. The chiding came only one week after Kudrin won the upper hand over the potentially disastrous VAT reduction and after Putin's publicly reported meeting with the previously marginalized Gref. Re-emphasizing the need to push domestic growth is a very positive reaction to the public dissatisfaction with recent trends in the economy.
Reducing the VAT rate from 18 percent to 13 percent was seen as an easy way to toss as much as $11 billion to consumers and businesses and therefore as a neat step toward keeping GDP growth high. But apart from making it even harder to keep inflation under control, the $11 billion plan would have meant losses in federal budget revenue that could only have been balanced out by higher future oil revenues. This kind of thinking is called the California Disease, when governments base budget expenditure projections on optimistic revenue assumptions that are in turn based on extending current growth trends in one critical industry - only to be left with a large deficit when that trend fails. This danger was highlighted by Kudrin and Gref ahead of last year's election, but until recently it seemed that their warning was being brushed aside. Other Cabinet members were more focused on the short-term political expediency of boosting GDP growth.
Putin's return to the subject of creating growth conditions in the domestic manufacturing industries and the SME sector - and hopefully tackling corruption, which costs businesses over $50 billion annually - is also very encouraging. One of the reasons he cited for the Cabinet reshuffle last February was to avoid any disruptions in the program to remove operational obstacles in these areas, and to create a series of legislative, administrative and budgetary incentives to push growth. A "competitive Russia" and "economic diversification" were very much the buzzwords at the start of Putin's second term, and the indicated pace of reform gave investors yet another buzzword to salivate over, that of "speed economics."
Instead, the administration became bogged down with Yukos and distracted by Beslan and the Ukrainian elections. Against this backdrop, it seemed that those who favored the politically easy route forward were displacing the liberal economists. Or even worse, it seemed the siloviki, who once worked with a common purpose to establish unchallenged Kremlin control, were now breaking into groups that either wanted to pursue a different economic model or just wanted to enjoy the benefits they felt entitled to as the country's new elite.
A plethora of factors have contributed to the recent decline in public confidence in the president and his government: the slowdown in economic growth in the latter part of 2004 until the surge in oil prices sent it up again; the botched monetization of social benefits; the lack of progress in Chechnya; the loss of influence in former Soviet republics; and the general air of political uncertainty. It is clearly time for Putin to fix the problem or risk political instability as the 2008 election approaches. While he has promised not to change the Constitution, the group at the top of the Kremlin power structure will certainly want their choice of succession options to prevail. To make this happen, they will need public support.
Over the past year, Russia's fiscal strength has continued to grow, yet very little of that economic strength has flowed into the underlying economy. The main reason is a lack of progress in advancing some of the reforms set out by Putin as key priorities of his second presidency. Progress was never made due to the influence shift in the Cabinet and the assumption that high oil and gas revenues would magically find their way into the economy and into the pockets of a broad segment of the population. The magic is working far too slowly. This has given rise not only to voter disillusionment, but also to a huge wealth gap: The richest Russians own 15 times more than the poorest. In other emerging economies, this level of disparity has led to political instability and regime change.
This is something Putin will want to avoid. Plan B has clearly not worked. It is time to dust off Plan A and to let the economic liberals in the Cabinet have their day.
Christopher Weafer, chief strategist at Alfa Bank, contributed this comment to The St. Petersburg Times.
TITLE: The Land of Free Cattle
Cautions Developers
TEXT: With little regulation available on the subject of reclassifying land in the federal Land Code, investors and builders alike waited for State Duma's new law on the subject with anticipation. Some local authorities (including the Leningrad Oblast) had even adopted their own reclassification laws in an attempt to deal with the issue.
Such local laws will now be cancelled or updated, as the federal law "On Reclassification of Land and Land Parcels" took effect on 5 January 2005. What the law will now complement is a complex regulatory system concerning land use and construction activity.
THE DEAL
The new law establishes rules and procedures for reclassifying land from one category to another, as well as attributing unclassified land to a certain category, which is essential. Furthermore, the law mandates that regional authorities publicize the legal requirements of applications to reclassify non-federal agricultural and reserve lands (not to be confused with "land parcels").
As regards the Leningrad Oblast, the regional law formerly in effect is now cancelled. However, Leningrad Oblast legal acts that are subordinate to the abolished law have not been expressly or implicitly repealed. Thus, the application of these acts may potentially create inconsistency and uncertainty at the local level.
THE CHANCES
Since most usable land in the Leningrad Oblast is agricultural, one of the most intriguing aspects of the new law is its permission to reclassify agricultural land only in exceptional cases. Vast areas of agricultural land that have been unused for a long time are very attractive for real estate developers, but their use for industrial projects necessarily requires reclassification.
It is important to understand that the law's limitation on the conversion of agricultural land into other categories applies only to farmland. The Law does not restrict the reclassification of other (auxiliary) agricultural lands or land parcels, such as land beneath buildings and structures used for agricultural purposes. Such land may be reclassified pursuant to the general procedure.
To assign farmland to the category of industrial land, for example, one needs to prove that such land is unsuitable for agriculture. Certain valuable farmland may not be reclassified at all.
"UNSUITABLE LAND"
The term "land unsuitable for agriculture" caused quite a stir among those interested in re-classification of farmland.
This agitation may be exaggerated, however, as the term "land unsuitable for agriculture" is certainly not new. In fact, it had been a feature of the Land Code up until the adoption of the new law. According to the Land Code's former provision (now abolished), construction on land unsuitable for agriculture did not require reclassification as industrial land.
Previously, one was required to prove the unsuitability of land for agriculture by presenting evidence that the agricultural land was degraded or contaminated. The right legal approach appears to continue under the new law.
CASE BY CASE
Still, under the new law reclassification remains burdensome and depends to a great extent on the willingness of the authorities to cooperate in every given case. Moreover, the Land Code requires applicants for the reclassification of agricultural land to pay compensation for the loss of agriculture.
While Russian law provides for some statutory estimation techniques, the particular figures may be a matter of dispute with state authorities. However, refusals to reclassify land, as well as decisions on reclassification, can be challenged in court.
It is important to bear in mind that the Law does not apply to reclassification of land in settlements, St. Petersburg among them. There can be "lands of agricultural use" within the city limits, which are nevertheless listed in the settlement land category, not the agricultural land category.
Agricultural land as such may fall in a suburban zone. Town-planning regulations may have to be changed before settlement land designated for agricultural use can accommodate an industrial or another non-agricultural project.
Olga Poleshchuk and Oleg Zadubrovsky are lawyers at PricewaterhouseCoopers in St. Petersburg. They contributed this comment to The St. Petersburg Times.
TITLE: Checks, Lies And Payslips
PUBLISHER: Staff Writer
TEXT: Official employment statistics in Russia, and St. Petersburg in particular, differ drastically from independent research. While the Unified State Register of Companies and Enterprises lists 300,000 companies in St. Petersburg, independent experts contest these figures.
Alexei Moiseyev, director of HR projects at the Moscow-based Institute for Comparative Social Research, or CESSI, argued that only half the number of enterprises are actually active and functioning.
In addition, the most progressive and lucrative employers among the active companies tend to be foreign firms, although their employees make up just 1 percent of the labor force in St. Petersburg, Moiseyev said at a press conference last week.
According to CESSI, an independent Russian research agency, there are only 800 active foreign companies in the city, as opposed to the officially registered number of over 2,000. Of the 800, Finnish companies have the largest representation (16 percent), followed by U.S. firms (13 percent) and German enterprises (11 percent).
MONEY RULES
Although industry analysts note that there has been a resurgence among Russian companies to offer more competitive and multi-faceted salary packages, companies with foreign capital still appear one step ahead in providing advanced remuneration schemes.
"Among other perks, foreign companies are keen to offer their employees some shares in the company's stock, whereas Russian firms aren't ready to do that yet," said Natalia Ganina, general director of consulting and recruitment agency Ancor.
About 15 percent of firms in the city offer their employees stock, according to a wages survey Ancor released last week.
Based on a survey of 54 large local companies that employ about 20,000 people in St. Petersburg, Ancor calculated that an average monthly gross wage of an office manager was $790 (not including a compensations package), a secretary - $525, shift supervisor at a factory - $1007, while system administrators earned $853.
All the companies, Russian and foreign, that took part in the research were selected for their transparency, large size, and variety of job positions, Ancor said.
Ancor's executive manager Maria Margulis added that research shows that in the first half of 2005, most polled companies are planning a raise in salary for their staff of around 8 percent to 10 percent.
Ancor's selection criteria goes some way to explain the stark contrast between such salary figures and the general monthly expectations of St. Petersburgers.
Head of the city's trade, investment and economic development committee, Vladimir Blank, said last month that the average nominal salary in St. Petersburg had reached 8,625 rubles ($311) in November 2004. The figure was a 15 percent hike compared to November 2003 results.
Meanwhile, the minimum survival level was calculated as 2,919 rubles ($105) in the last quarter of 2004.
DOMESTIC BOOST
If foreign companies generally tend to have a more attractive remuneration level, Russian companies give a greater chance for growth, says Ancor's Margulis.
Olga Andreyeva, business development manager at Coleman Services St. Petersburg, takes this even further. She sees domestic companies catching up with their foreign counterparts and in some cases out-doing them in terms of staff salary packages.
Andreyeva says that larger numbers of Russian companies have started offering a more diverse staff compensation package, more flexible bonus policies and, in some cases, even higher wages.
"In many Western companies all salaries are set by the head office, and every increase has to be approved by them, which is sometimes a painstaking and time-consuming process," Andreyeva said.
"Besides, many foreign top managers find it difficult to understand how Russian managers can give people 20 percent to 30 percent raise a year, when in the West a traditional pay rise is somewhere between 3 percent and 7 percent annually."
SWITCH TO RUBLES
According to a 2004 survey conducted by PricewaterhouseCoopers, most companies list only the salaries of top management in U.S. dollars, while the rest of the staff salaries are calculated in rubles.
Among the 45 foreign, 2 Russian and 6 Russian companies with foreign capital polled by PricewaterhouseCoopers, the majority transferred staff salaries to bank accounts in rubles; only about 19 percent to 26 percent paid wages in foreign currency.
Over the past year, several of the companies surveyed have changed their policy in favor of ruble-dependent salaries due to a decline in the dollar exchange rate.
The research concluded that almost all companies review their staff salaries on a regular basis. The most popular reason for a review was because of an employee's professional achievements (92 percent.)
In addition, 74 percent of firms alter wages because of changes in the labor market, while 51 percent alter salaries in accordance with inflation and increased living costs.
In 2004, none of the companies polled by PricewaterhouseCoopers decreased their staff wages, while 94 percent gave their employees a raise. The increase was between 9 and 12 percent in rubles and 8 percent in foreign currency payments.
TITLE: Smells Like Team Spirit? Not Likely
PUBLISHER: Staff Writer
TEXT: When it comes to assessing the spirit of corporate culture, recruitment experts and HR managers stress that companies are built on teamwork. But, try telling that to the employees, especially those working in large sales departments.
Many sales staff complain that "socialist"-like grouping stifles individual effort and ignores different performance levels among staff.
Speaking on condition of anonymity, a sales manager at a St. Petersburg publishing company criticized the popular "team" corporate culture of his advertising sales department for being too even-handed.
He explained that a significant percentage of the company salary depends on bonuses, which the whole team of sales staff receives only when the sales targets for each month have been met.
How much each sales person contributes to attaining the monthly sales targets has no importance in the corporate culture of the publishing company, he said.
"I think it's not fair when one sales manager met 75 percent of his plan and the other got 140 percent of his. [At the end of the month] the percentages are combined to make the general 105 percent, after which both people get an equal five percent bonus," the manager said.
"Such system causes low motivation for employees, when more successful sales managers don't see why they have to put more effort into their work for no direct compensation," he said.
The issue of recognizing individual effort does not fall on deaf ears, say industry insiders, but companies must have a wider scope of vision.
Natalya Zavyalova, head of the recruitment department at Kelly Services in St. Petersburg, said from her experience "team spirit is almost always important for a company's success."
The view was upheld too by Yury Mikhailov, managing partner at Consort St. Petersburg recruitment agency, who speculated that one of the factors making the social aspect so important in a company working in Russia could also be the legacy of the Soviet era.
Mikhailov estimated that only about 1 percent of firms could be seen as moving towards an individual corporate culture in St. Petersburg. Encouraging employees to work alone for company goals would only be profitable for a small niche of companies, he said.
"I think that small-size firms with strong sales function can rely on individuals and encourage intra-company competition," he said. "In individualist organizations, the so-called "lone wolf" [professions] - sales staff, lawyers, consultants, designers, and software developers - feel more natural and enjoy their freedom," he said.
While large companies may adopt different corporate cultures in various departments - to separate the more individual-based sales or programming work from teamwork-orientated departments - the most important thing, recruitment specialists say, is to inform employees of the kind of ethos expected to prevail in the workplace.
"The most important thing is that staff are aware of what corporate culture is made of and what is expected of each individual member by way of achieving coherent, combined results," Mikhailov said.
IDENTIFYING IDENTITY
The point at which team culture starts to create tensions, instead of bonding a collective, is when the company treats all staff as a mass, forgetting to care for personal aspirations and motivations.
The practice of balancing the group and individual motivations of an employee can be done through a combined assessment, says Yekaterina Serebrenikova, HR manager at Motorola's software developing center in St. Petersburg, which employs about 450 staff.
Serebrenikova explained that the center's ethos is based on teamwork, yet in order to make each of its employees motivated the company practices a combined type of assessment for both team and individual work.
The assessment mirrors the process of developing new software, which requires a lot of individual work that needs to be coordinated to fit together at the end, Serebrenikova said.
"I think such a combination of assessments has an obvious advantage since it provides both objective evaluation and good motivation for the personnel," Serebrenikova said.
The motivational balance works in another way at the Sindbad travel firm, explains its general manager Rashid Velemeyev. Sindbad bases its corporate culture on a so-called "win-win" principle.
"This principle implies that a person can't win without the company's win, and vice versa - the company can't win without having each of its employees achieving their goals," Velemeyev said.
Nonetheless, Velemeyev said that Sindbad's corporate culture varies depending on the company's department, and in the departments that focus on sales, managers usually work individually and get individual bonuses.
"The company also follows a policy that the growth of one's wealth depends only on the person. The more responsibility and work a person is ready to take on, the higher his salary," Velemeyev said, adding that a system of individual sales plans proved very effective at the firm.
One of the most important points to borrow from an individualist culture was the idea of personal responsibility and the ability to solve problems without attracting outside forces.
The rules at Sindbad also state that employees should resolve issues only with the people who those issues directly involve, without third parties, Velemeyev said.
Such accountability and responsibility form a large part of individual culture, agrees Consort's Mikhailov. The worst corporate culture in his opinion is formed on the basis of top-down power.
"The culture of power" - where owners or top managers decide everything without any attempt to listen to their subordinates - results in neither staff nor business surviving the atmosphere of "muscle, force, order and commands," Mikhailov said.
TITLE: Taking Aim at Team Building
PUBLISHER: Staff Writer
TEXT: When it comes to blurring the lines between work and play, there's nothing quite like corporate celebrations.
However, if you think a 'social hour' with a flute of Champagne and ginger bread cookies for New Year's is enough to mark the holiday in the company of fellow employees, think twice! Russian employees expect their parties lavish, their holiday season long, and their glasses ... steamed up from the excitement.
"I think we spend about four times more per person on corporate events here than we would in the States," said James Beatty, an American partner at EMG accounting company, who has worked in both the American and Russian corporate environments.
"[In Russia] we even give 'birthday' bonuses, which I think would be unheard of in the States," Beatty said in an e-mail.
About half of Russian companies mark holidays such as New Year's and company anniversaries with special entertainment, according to Begin Group agency research.
About 40 percent of companies also celebrate smaller events throughout the year, including minor holidays, birthdays and project completions. Only eight percent of all Russian companies do not organize any special corporate events at all.
When it comes to partying, Beatty says his company follows the Russian tradition to the brim.
"We have at least four big parties a year with a lot of food and drink. Also the quality, substance of the parties is much more extensive than in normal U.S. companies," Beatty said.
A traditional corporate Christmas party in the U.S. would involve serving hors d'oeuvres and cocktails to the employees at the company office. Polite socializing lasts about two hours, after which everyone is happy to return home to families. A separate reception might be held for company partners and the board of directors.
"People tend to eat and drink less in the West, and socialize more during corporate events," said Julia Zavilevskaya, HR manager at DataArt, a local software producer with headquarters in New York.
"Our headquarters on 5th Avenue holds a traditional Christmas party for directors and business partners," she said. Being a Russian company, DataArt keeps some flavor of Russia even in New York: the party offers caviar and a wider drinks selection than usual, Zavilevskaya said.
Beatty explains the difference in corporate event cultures by the difference in general social practices.
"I think that a Russian 'collective' is a much closer group than it is in the U.S., where people tend to keep a distance between their work environment and their personal life. In Russia, the line is crossed more often than in many Western countries," he said.
Local HR managers, however, are convinced that crossing that line is a positive thing in personnel management - it promotes team spirit, increases company loyalty and overall justifies the money and time spent on the organization of extensive corporate events.
"It's hard to measure the so-called return on investment of such events, but creative and fun parties definitely lift the office mood, improve internal communications, and promote teambuilding - all of which result in increased productivity," said Tamara Achba, marketing director of Kelly Services recruitment agency in St. Petersburg.
She said for their 2005 New Year's celebration, the agency had a creative group of employees develop an original party scenario two to three months in advance.
Budgets for corporate holiday events usually vary from $10,000 to $60,000 in St. Petersburg, partly depending on whether the company organizes the event itself or engages an outside "party planner."
Unlike Moscow, where extravagance is taken a step further, the northern capital has not yet seen parties with budgets of over $100,000, said Mikhail Voronin, the founder of Podyozhiki, a company that specializes in party organization, both private and corporate.
That does not mean St. Petersburg parties could be called restrained in any way. Northwest telecom giant Peterstar, recently purchased by Telecominvest, spent $50,000 on its 2005 New Year's festivities. The company rented out the Ethnographic Museum, where it wined and dined 500 employees for over six hours.
"There was [popular cross-dressing singer] Verka Serduchka and Maxim Leonidov [ex-lead singer of a late '80s pop group], acrobats, caricaturists and magicians. The show program was hosted by TV host Sergei Prokhorov," said a Peterstar employee who attended the event.
The evening started with a cocktail reception attended by everyone from top management to pick-up drivers, before transferring to a large hall for an evening meal and a concert, said the employee, who asked to remain anonymous.
"This is when I understood what a huge company ours is, just seeing everyone together in one room," the employee said, adding that spending time with colleagues outside the office definitely resulted in a warmer feeling towards the company.
"It was fun getting drunk together," the employee added with a smile.
TITLE: Firms Fight Staff Flight
PUBLISHER: Staff Writer
TEXT: While employers say they are fully satisfied with the professional skills of their potential employees in Russia, company loyalty is still seen as shaky ground in some industries.
"We have no problems with the professional level of the people that come to interview for us. However, often it is hard to determine the personal values that would motivate a person to work specifically for our company," said Lilia Yasakova, an HR manager at Finnish firm Nokian Tyres.
The tire manufacturer looks to hire 115 staff before the end of 2005 for its new factory in the suburbs of St. Petersburg. The task is not easy.
"We really want 'our' people to work at the plant, those who will not leave the company in six months attracted by marginally higher salaries elsewhere," Yasakova said, adding that the company banks on internal recruitment, work-motivational factors and its prestigious reputation to keep staff turnover low.
The Finnish firm will have to work hard to achieve anything like the staff retention rate its plants enjoy in Finland, where most workers stay with the company 14 years and leave mostly due to retirement.
Staff turnover is an expensive business. A recent report by Begin Group analytical agency said that replacing one mid-level employee costs approximately double that employee's annual salary. Based on research by the Saratoga Institute, the report estimated that at the current staff turnover rate on the domestic market, the cost of replacing staff swallows 60 percent of company revenues.
Installing a healthy corporate spirit, among other motivational factors, can help to decrease such expenditure and stabilize the turnover numbers, but statistics show that no matter what, certain industries are simply more prone to retain personnel than others.
"A healthy annual turnover rate varies between 3 percent and 10 percent, however, some industries, such as retail, hospitality and restaurant businesses can post annual turnovers that exceed 50 percent," the report from Begin Group said.
In contrast, industries where people are the company's main asset, like IT and consultancy services, usually have low turnovers.
One company that seems to have found the right way to manage its staff is the St. Petersburg office of consultancy firm KPMG. Speaking at this month's American Chamber of Commerce meeting, the firm's HR manager for St. Petersburg Marina Grinevskaya, said their office lost only one person to an outside firm last year. A further ten staff received intra-company transfers to KPMG's Moscow office.
"It is important to find out what people want. Personal and open conversations can lead to dynamic improvements and quickly remove any small obstacles that could potentially develop into factors prompting a person to look for a job change," she said.
"What we found out during our annual study last year is that interesting work, a well-respected company and career growth all come before monetary compensation," she said.
One way that Swedish furniture retail giant IKEA fights high staff turnover is by allowing employees to promote their own careers, the company's personnel director in St. Petersburg, Julia Miloradova, said at the chamber meeting.
"Anyone can choose to advance within the company, even those people who work part-time or are counted as base-level staff," she said.
IKEA practices several training programs to develop its managers, which Miloradova said results in "very small turnover at mid- and top-manager level." The furniture retailer also runs a horizontal promotions program under which a manager can move across departments.
"This is a great motivator. It makes work interesting and showcases other opportunities at the firm," Miloradova said.
Despite a generally high turnover in the hotelier industry, Grand Hotel Europe lost just 42 out of 550 permanent staff in 2003, Andrei Krutilin, who headed the hotel's HR department before its sale to the Orient Express chain last month, said at the meeting.
"There's always a tender point in a person's career when he or she develops into a specialist," Krutilin said. "People reach a plateau where they stall in their professional development."
To keep motivation fresh for those at the "plateau" stage, the hotel runs special programs where employees become assistants to top management, Krutilin said. This can eventually lead to a promotion to such positions.
TITLE: Job Options for Expats Dry Up
PUBLISHER: The St. Petersburg Times
TEXT: Sandra Mayr (name changed), 27, who came to St. Petersburg more than half a year ago, has learned the bitter truth about job hunting abroad. Despite such a resume, her dreams of quick employment with a respectable company burst like a bubble.
I had no idea what it meant to look for a job abroad and underestimated the difficulties, Mayr said. A good education and previous work experience in no way guarantee being hired, she said.
CATCHING UP ON
COMPETITIVENESS
The times when the mere fact of being a native English- or other European language-speaker was enough to be hired in Russia have gone. Russian graduates are quickly catching up on education standards and competitiveness, and, in addition, know the domestic economy and mentality more closely.
When I came to Petersburg more than a decade ago, the job market situation was very different. Business was undeveloped. Back then, when everything was starting from scratch, just having someone who knew how things in the West worked and could organize imports or contracts was crucial, said Christopher Hamilton, an expatriate from the U.S.
After Russia's economic crisis back in 1998, many foreigners left the country and were replaced with local employees, who did not require visas or work permits and thus were less expensive for the company. Gradually, Russian job seekers started to fill the demand for trained personnel.
The '98 crisis seems to have altered the Russian labor market's demand for foreign staff.
We keep all resumes we receive from foreign citizens, but there are rarely job offers where companies are searching for a non-Russian candidate specifically, said Natalia Zavyalova, recruitment manager at Kelly Services in St. Petersburg.
For a foreign citizen much more documents have to issued, and the whole process takes more time as well as money. Why not choose a Russian who can do the same job but with less effort [on behalf of the company]?
HUNTING FOR A JOB - A STEEPLECHASE?
The changed situation on the labor market can be a bitter pill to swallow for foreign jobseekers, especially for young expatriates who are not trained in a specific field.
I have tried finding a job here [in St. Petersburg] for quite some time, said Chris Condlin, a young American. But since I did not want to teach English 24 hours a day to make a living, I decided to accept a job offer in Moscow.
Success with getting hired by a company depends to a large degree on the professional skills of a candidate.
It is often the case that restaurants are looking for chefs with a foreign background. Professional translators or copy editors do have certain advantages as well, as these jobs usually require native speakers, said Yelena Dobromyslova, recruitment manager at B-I Link.
In addition, foreign job seekers find it challenging to adjust to Russian salary levels. According to official figures issued last month by the city's Trade, Investment and Economic Development Committee, the average St. Petersburg salary lies between $285 and $357. And while many young Russians still live with their parents, foreign citizens have no such way of saving on rent payments. A decent one-room apartment costs at least $200 a month, and in the city center $500 is not unusual.
GETTING STARTED
Knowing the market often turns out to be vital to job-hunting success.
The job markets look different everywhere. It can be the case that there is little demand in one field in one place but good prospects [for such specialists] in another city, Zavyalova said.
Having a good social network is a further crucial factor.
As a rule, foreign citizens use their contacts to change jobs or get started. They are recommended by friends, who, on the other hand, fall also back on them if necessary, Zavyalova said.
And if the job hunt turns out to be a fruitless one, why not turn entrepreneur?
If you can't find the job you are looking for, create it, Hamilton said. There are lots of entrepreneurs who came to Russia and filled niches waiting to be filled.
GETTING THROUGH THE BUREAUCRATIC JUNGLE
The main obstacle for foreign citizens continues to be the nigh impenetrable bureaucratic jungle.
It is a nightmare to get a work permit or a visa. The bureaucracy should be improved, said Peter Morley, a U.K. citizen who has lived in Russia for several years.
According to the system for issuing work permits to foreign employees, which came into force two years ago, foreigners planning to come to Russia to work must have a prior valid work permit or a job confirmation document.
A person who enters Russia with a business visa and wishes to obtain a work permit afterwards has to leave the country and reapply for a work permit and a new visa through the hiring organization.
For their part, employers are required to have permission to hire foreign labor and must check that the employee has a valid work permit.
AN OPPORTUNITY TO RECHARGE BATTERIES
Despite the difficulties involved in getting a job, St. Petersburg keeps attracting young people from all over the world. According to a survey conducted by Teleplus, about 10,000 expatriates are currently living in Russia's cultural capital.
The most important thing is to be flexible, Condlin advises. Then things often fall into place by themselves.
TITLE: Training the Right Way to Serve
PUBLISHER: Special to The St. Petersburg Times
TEXT: The expansion in Russia of Western fast food giant Subway may not have been especially rapid up to now, but the store numbers of the sandwich bar could be about to skyrocket; and all that the American company has to do is be a good teacher.
Subway Russia has announced plans to create no less than 50 stores in Russia, 10 of those in St. Petersburg, by the end of 2005, but the catalyst of the expansion will be Russian businesspeople, trained and licensed as franchisees by the U.S. company.
In order to maintain the company's standards, Subway has even opened a training center in St. Petersburg recently that all potential franchisees must attend.
"A franchise agreement stipulates that every franchisee agrees to participate in a special training course to learn the concepts, the rules and the technological know- how for their new business," Lyudmila Puzanova, director of Subway's training center told business daily Delovoi Petersburg.
In the days of the Soviet Union people used to complain profusely about the quality of goods and services, but the choice was very limited. Since the perestroika era the options have considerably improved, but one thing still noticed by most foreigners is the lack of either service know-how or its application.
The training and know-how that a global company such as Subway among others can provide have been warmly welcomed by many Russian entrepreneurs.
Inna Nazarova is the first Subway franchisee to have completed a two- week program at the Subway training center in St. Petersburg, and is now a proud owner of a the U.S.-brand franchise in the Siberian city of Tyumen.
"The program was very interesting but challenging," Inna Nazarova said in a telephone interview from Tyumen. "The two weeks that I spent in St. Petersburg gave me a lot of insight into the operational principles of a large restaurant company.
"The things that at first proved difficult were the American terms and Western economics logic," she said, adding, however, that the classes were conducted in Russian.
Although the economics part may have taken a while to sink in, some things were less stressful.
"One of my first challenges was to learn how to bake specialty bread," Nazarova said. After some baking successes, "everything went very smoothly for me. The training was very practical," she said.
Since returning to her native Tyumen, Nazarova said she has been in regular contact with the St. Peterburg training center and has received a lot of support from its teachers and staff.
The sandwich bar chain is just one of several global fast food chains that have picked franchise licensing as a way of expanding their operations in Russia.
Among others, McDonalds and Baskin-Robbins already operate their training centers in St. Petersburg, while pizza chain Sbarro conducts training at its center in Moscow and lists a training manager in St. Petersburg as well. The training courses at such companies last between two weeks and three months.
American food holding Yum Brands Inc. has sold licenses to four franchisees to open its Pizza Hut and KFC restaurants in Russia.
While working independently from one another, all franchisees are in regular contact with the holding that coordinates their work and provides free training and advice. Yum Brands runs a 3-tier training program: for top managers, managers and restaurant waiting staff.
The largest of the Russian franchisees is Pizza Nord in St. Petersburg. The company owns 18 out of the 28 Pizza Hut and KFC restaurants in the country.
Pizza Nord's general director Vladislav Ivanov and operations project manager Irek Khaibulin, went through their first fast food retail training in 1994. Their company started to expand actively at the end of 2000, with 10 new restaurants opened just in 2003.
Khaibulin explained that the company runs two-month training programs for its restaurant staff, including managers. Pizza Nord's training center is on the premises of Pizza Hut and KFC restaurants near Petrogradskaya metro station in St. Petersburg.
The important components of personnel training at the fast food franchise are a "Customer Mania" mindset and feedback, Khaibulin said.
Naturally, alongside training and a 40-ruble hourly wage, the company pays out bonuses when a restaurant exceeds its monthly targets.
The strength of the franchise training programs lie in imparting globally acquired knowledge to domestic entrepreneurs and thus supporting the chain's brand image in Russia, said Rachel Shackleton, general director of Concept Training.
"It helps to guarantee and ensure customer expectations are not disappointed due to differentiation from the main brand in terms of quality, service levels, consistency and overall image," Shackleton said.
"The training support provides the main organization with a method of control while providing the franchisee with support to get their business off to a strong start."
Futhermore, in-company training centers help to show entrepreneurs that opening a business, such as a restaurant, is not only about investments and the brand name, Shackleton said.
"Another positive aspect of this training support is that it provides the new owner with a clear understanding of the importance of training of human resources to provide an effective business," she said.
TITLE: A Guide to Russian-Foreign Relations
PUBLISHER: Staff Writer
TEXT: If a Russian business partner says that something is "impossible," it is still "negotiable."
"This is at least one of the things foreign businessmen should know in order to achieve success in Russia," said Irina Pshenichnikova, associate professor at the International Management Department of the St. Petersburg State University.
Speaking at this month's Cross-Cultural Business Communication conference, Pshenichnikova said that when working in Russia foreigners should be tolerant and in answer to questions "Why?" be prepared to hear "zhizn takaya" ("Such is life").
The conference gathered both foreign and Russian top managers, who came to share their experiences with the specifics of business collaboration between people of different cultures.
GERMANY
Nils Kalle, German consultant at QM Bureau, who lived in Russia for nine years, said the difficulties in communication between German and Russian business partners may arise exactly because of cultural differences, which may create misunderstanding.
"The German mentality is based on such principles as 'exactly,' 'on time, and '100 percent,'" Kalle said. "While in Russia, German businessmen come across such notions as 'maybe,' 'approximately' and 'somehow,'" he said.
"Germans desperately care about exact structure, transparency, and every tiny detail," he said.
"Russians are not afraid of big deals and do them well. But they don't worry so much about being a bit late, and can ignore details. Those culture differences can be exactly the ones to sometimes scare away Germans," Kalle said.
Kalle said that one of his German clients who was to make a deal with Russian colleagues refused to do so only because the chief of the Russian office did not introduce him to some of the assistants present at the negotiations.
"I saw how during negotiations my German client was really worried and kept looking at the people in the room that he was not introduced to. In the end he was not willing to deal with that company," he said.
THE U.S.
American James Beatty, partner of EMG LLG company, who has lived in Russia for 10 years, said Russian and American working people mainly differ in their views on "vacation time, team work, tax and customs."
Beatty said in the U.S. an annual vacation period comes to two weeks, and for Americans who open a business in Russia, it's strange to hear that Russian employees expect not less than four weeks' annual leave.
In a Russian office, people feel "almost like [in] their family," where they celebrate their birthdays and share money with those in trouble.
Meanwhile, Americans tend to be more individualistic and in the office care mainly about their work.
"Besides, when my clients start a business in Russia I instantly advise them to never apply logic to customs and tax, and not to expect help from either one," Beatty said.
There is an amusing difference between American and Russian workaholics, Beatty said. American ones come to work as early as possible, "getting irritated that there's not yet anyone in the office at 6 a.m.," while Russian ones tend to stay at work late, "willing to have everyone working until midnight."
SWEDEN
If one needs to deal with Swedes, he must be prepared to value teamwork and accept long summer vacations. In July and August the streets of Stockholm become almost deserted.
Lyudmila Murgulets, vice-president of the Stockholm School of Economics in Russia, said Swedes are very polite and tolerant; they have excellent listening skills and are great at reaching a consensus that appeals to all.
One of the biggest virtues valued in Sweden is modesty.
"It's a policy of the so-called expensive watch hidden behind a sleeve. That is, they do everything possible not to show that their financial situation is better than that of others," she said.
However, for Swedes, whose historical situation has fostered a climate of safety and stability, it's psychologically hard to open a business in Russia, a country they connect with certain unpredictability, Murgulets said.
At the same time, general manager of Kelly Services CIS, Yekaterina Gorokhova, who also worked in Sweden for a few years, said that from her observations the security also makes Swedes a bit too relaxed.
"I must say that Russian offices often work harder than some Swedish ones and are more dynamic," Gorokhova said.
Gorokhova said she was surprised that in Sweden employees normally leave the office exactly at 5 p.m., the official end of the working day, and don't stay longer even if the work has not been completed. Gorokhova said that in Russia people usually work longer hours.
THE NETHERLANDS
Henry Everaars, former consul of the Netherlands in St. Petersburg, said that dealing with Dutch is very easy.
"We are simple, flexible. We try to put ourselves in the place of our potential clients, and can adjust to a system that works in this or that country," Everaars said.
THE BEER FACTOR
When in Rome, do what the Romans would like to see you do - that seems to be the export policy of Russia's largest brewery Baltika, Dmitry Kistev, export director of Baltika, said at the conference.
The three major factors that Baltika, which exports to 36 countries, takes into account in foreign markets are "the cultural and religious peculiarities of a country, Russia's image in that country and the state of Russia's international relations with that country," Kistev said.
When entering the Iranian market, Baltika took into consideration the fact that Iran's population is 98 percent Muslim, a religion that prohibits alcohol. In tact, the brewery came up with "Baltika 0," a non-alcohol beer.
To win the Israeli market, Baltika applied for a kosher certificate. In Western countries, such as Britain, Germany, and the U.S., where interest in Russia is currently high, Baltika markets its product with an accent on the Russian origin of the beer.
"In China, where a certain part of the population favor Europeanization, we accordingly presented ourselves as a European beer," Kistev said.
When researching perceptions about Russia in other countries, Kistev said the company is often shocked by results.
"Unfortunately, some countries still view Russia as quite backward," he said.
SOUTH KOREA
Pshenichnikova, who has experience working in South Korea, said that any nation's culture reminiscent of an "iceberg," in that "only 10 percent of a man's behavior is visible [externally]," while the other "90 percent, the foundation ideas and values, are hidden in the people's subconsciousness."
Pshenichnikova said that when she first arrived in South Korea she often had a tough time trying to understand what messages Koreans were tactfully trying to signal.
"I was surprised to know that in South Korea people prefer to give and receive bad news as late as possible, while for instance Russians and Americans prefer to know them as early as possible," she said.
She said that the Korean approach was conditioned by their culture of not wishing to ruin the harmony of their surroundings with negative information.
JAPAN
The success of a business or a product may not carry over to another country unless it takes into account the local mentality, said Pshenichnikova.
As an example, she listed the case of Procter and Gamble.
When the U.S. firm entered the Japanese market in 1973, it chose an American marketing approach: aggressive advertising, an accent on low price and big economical packages.
However, Japanese, who traditionally prefer to avoid aggression and think that low price indicates bad quality, did not buy the company's product.
In the end Procter and Gamble had to rethink its marketing strategy completely.
TITLE: Russia Lucky Against Euro Minnow
PUBLISHER: Combined Reports
TEXT: Russia scored an underwhelming 2-1 away win over Liechtenstein in their World Cup Group 3 qualifying match in Vaduz's Rheinpark stadium on Saturday. Also, England, the Netherlands and Italy all posted comfortable wins, but 1998 champion France was held to a 0-0 draw by Switzerland.
In Liechtenstein, two first-half goals - the first a fierce strike from Russian forward Alexander Kerzhakov, and the second a tame 25-yard shot from Andrei Kariaka that Liechtenstein keeper Peter Jehle allowed to slip under his body - were, in the end, enough for Russia.
However, coach Georgy Yartsev will be counting his blessings after a stunning 41st-minute Thomas Beck free-kick got the home side back into the match, and Russian goalkeeper Vyacheslav Malafeyev brilliantly deflected away an injury-time Mario Frick shot from all of six meters out at the end of a nervy second half for the Russians.
Russia has now taken 10 points from five games, three behind joint group leaders Slovakia and Portugal. It will have a chance to maintain pressure on the leading two with a trip to Estonia on Wednesday.
France could have a hard time guaranteeing itself a berth in the next year's World Cup finals. It is tied at the top of Group 4 with Israel and Ireland, which drew 1-1. All three teams have nine points.
France labored to a 0-0 draw with Switzerland at the Stade de France, with striker David Trezuguet, Patrick Vieira and Sylvain Wiltord all missing chances. Goalkeeper Fabien Barthez made several key stops.
France has drawn its last six home games, scoring only two goals, since coach Raymond Domenech took charge in July.
In Tel Aviv, substitute Abas Suan scored in injury time with a powerful 25-meter shot through the box to give Israel the 1-1 draw. Ireland had taken a fourth-minute lead through Clinton Morrison.
After Ireland, France and Israel, Switzerland has six points, and Cyprus and Faeroe Islands have one point each.
Italy was the only team in Group 5 to play and its 2-0 win over Scotland increased its lead to 12 points, five more than second-place Norway.
In Manchester, England, Joe Cole celebrated his first competitive start with England's opening goal in the 46th minute against Northern Ireland.
Michael Owen scored his 29th international goal and Frank Lampard added another. England's fourth was through a Chris Baird own-goal.
England's 4-0 win maintains its lead of Group 6, now with 13 points, one more than Poland, which crushed Azerbaijan 8-0. Austria, which topped Wales 2-0, is third with eight points.
Milan Baros, Tomas Rosicky and Jan Polak all scored for the Czech Republic in its Group 1 win. Finland got three goals off three shots in the second half, the first from veteran striker Jari Litmanen. Aki Riihilahti also scored, while Jonatan Johansson got the final goal a minute after coming off the bench.
"It was a wild game," Czech Republic coach Karel Bruckner said.