SOURCE: The St. Petersburg Times
DATE: Issue #1078 (44), Tuesday, June 14, 2005
**************************************************************************


TITLE: Alternative
 Service No
 Pushover
PUBLISHER: Staff Writer
TEXT: The stench in the room is suffocating despite the windows being open wide. 
 
A skinny naked man is sitting on his narrow bed waiting for his diapers to be changed, staring emptily into space. His two roommates are asleep. The contours of their bodies are barely visible under the blankets.
 Stanislav Gazaryan, 21, moves swiftly, cleaning up the mess and giving the man an encouraging smile. Dressed in a clean light-blue uniform, Gazaryan is the first conscript to perform alternative military service in St. Petersburg.
 A native of Maikop in the southwest of Russia, he began his 3 1/2-year service two weeks ago as a medical orderly at the city's home No.1 for the elderly and those needing long-term care. Gazaryan's shift runs from 9 a.m. until 5 p.m., and he is fed and sleeps at the home.
 "Yes, of course, changing diapers and washing people's dirty bodies is not a young man's dream job, especially considering that not all of them are mentally stable," Gazaryan said. "But I am rewarded by the thought that I am doing something more useful for society than running around with a gun."
 A draftee choosing alternative service is required to serve 21 months if he has completed higher education and 3 1/2 years if he hasn't. 
 If they weren't approved for alternative service, draftees, like every man in the country, are supposed to serve in the army for two years.
 Sergei Gurov, a leading specialist with the city government's Labor and Social Policy Committee, said St. Petersburg, with its notoriously low birth rate and high numbers of old people - a quarter of citizens are over 60 years old - is in dire need of more alternative servicemen.
 The committee is overseeing Gazaryan's posting.
 In social home No. 1, only 148 of 306 staff vacancies are filled. It comes as no surprise when you learn that medical orderlies like Gazaryan earn a monthly wage of 3,000 rubles ($105.30).
 As director Mikhail Smertin points out, almost all of the home's 401 residents have relatives, but these relatives only "show up here once a month to get what is left of the poor people's meager monthly pension."
 Gazaryan and another serviceman who has just arrived oversee 25 residents each in one of the so-called "charity departments," where the most frail patients are housed. The conscripts wash, dress, feed and help the patients move. The patients have almost no visitors and get hardly any external help.
 "Naturally, they are unable to fully serve everyone during their shifts, and we don't expect them to," Smertin said. "The guys start with a quick run through the ward and then help where they are most urgently needed."
 Gazaryan said part of his service involves listening to people's depressing stories. 
 "They can't go to a crisis center, so every day I learn who got here after a road accident, and who got kicked out by a drinking relative," he recalls.
 Gurov said the city's huge interest in alternative servicemen clashes with lack of draftees' interest.
 The two principal reasons for draftees not wanting to perform alternative service are its long term and that there are no opportunities to serve in their home town. The draftees apply for alternative service in their regions, but the decision where they will serve is taken in Moscow.
 "If only people were allowed to serve where they live or anywhere close, I am sure there would have been plenty of requests," Gurov said.
 Gazaryan said he was told that he couldn't refuse the placement Moscow made for him to serve unless he had a very serious reason.
 "You can't just say you don't like the city or that the social home doesn't sound appropriate," he said. "You could end up in court."
 This year, St. Petersburg's medical and social organizations have offered 1,000 requests for alternative servicemen. After careful selection, 419 places were offered, but this summer the city will get a total of only eight draftees.
 Lawyer Yelena Filonova from Legal Consultancy No. 65 of the St. Petersburg Collegium of Lawyers, who advises local human rights group Soldiers' Mothers, said that people are not queuing up for alternative service because they find the law governing it repressive.
 "The law on alternative service was initially designed for the people not to use it," she said. "The complete list of jobs and locations, although it does exist in Moscow isn't always available at military commissions. The law is so loose that someone could end up working as a cleaner on a military base or work on a construction site in the north."
 Comparing alternative service to the Soviet-era practice of exile, Filonova also said that the process of getting it is both humiliating and illegal. When applying for it, a draftee needs to prove they are a conscientious objector to military service by either being a pacifist or belonging to a religious confession that forbids it.
 "But how on earth can you prove that," Gurov wonders. "By bringing a paper from the police that you were detained while causing a trouble at an anti-war demonstration? It is not clear what papers they can bring to show they are religious or a pacifist." 
 The military commissions request a certificate from a religious community saying you are a member of that community. Such is the case of Gazaryan who is a member of Jehovah's Witnesses.
 "But it is clearly not that it is only by belonging to a religious community that you can have a conscience," Filonova said adding that such requests by the military may violate Article 24 of the Constitution, because religious belief is part of a people's private life.
 To get accepted for alternative service, conscripts need to take the standard military medical examinations. And if someone is disqualified for medical reasons from the regular service, they will be automatically disqualified from the alternative service, too. 
 Some local businesses have already tried to benefit from hiring alternative serviceman.
 Gurov said local construction companies who submitted their requests to get draftees, have been refused. "They just wanted to cut costs by replacing immigrants by the draftees."
 This year, the list of available places includes medical orderlies, cleaners and workers in several local old people's homes, hospitals, including a psychiatric ward and several psychoneurological wards. But there are requests for a qualified personnel, too. For instance, the Prometheus center, which is dedicated to helping orphans, offered placements for a librarian, a medical sister, a doctor, a computer programmer, a joiner, a carpenter and a cook.

TITLE: Alternative
 Service No
 Pushover
PUBLISHER: Staff Writer
TEXT: The stench in the room is suffocating despite the windows being open wide. 
 
A skinny naked man is sitting on his narrow bed waiting for his diapers to be changed, staring emptily into space. His two roommates are asleep. The contours of their bodies are barely visible under the blankets.
 Stanislav Gazaryan, 21, moves swiftly, cleaning up the mess and giving the man an encouraging smile. Dressed in a clean light-blue uniform, Gazaryan is the first conscript to perform alternative military service in St. Petersburg.
 A native of Maikop in the southwest of Russia, he began his 3 1/2-year service two weeks ago as a medical orderly at the city's home No.1 for the elderly and those needing long-term care. Gazaryan's shift runs from 9 a.m. until 5 p.m., and he is fed and sleeps at the home.
 "Yes, of course, changing diapers and washing people's dirty bodies is not a young man's dream job, especially considering that not all of them are mentally stable," Gazaryan said. "But I am rewarded by the thought that I am doing something more useful for society than running around with a gun."
 A draftee choosing alternative service is required to serve 21 months if he has completed higher education and 3 1/2 years if he hasn't. 
 If they weren't approved for alternative service, draftees, like every man in the country, are supposed to serve in the army for two years.
 Sergei Gurov, a leading specialist with the city government's Labor and Social Policy Committee, said St. Petersburg, with its notoriously low birth rate and high numbers of old people - a quarter of citizens are over 60 years old - is in dire need of more alternative servicemen.
 The committee is overseeing Gazaryan's posting.
 In social home No. 1, only 148 of 306 staff vacancies are filled. It comes as no surprise when you learn that medical orderlies like Gazaryan earn a monthly wage of 3,000 rubles ($105.30).
 As director Mikhail Smertin points out, almost all of the home's 401 residents have relatives, but these relatives only "show up here once a month to get what is left of the poor people's meager monthly pension."
 Gazaryan and another serviceman who has just arrived oversee 25 residents each in one of the so-called "charity departments," where the most frail patients are housed. The conscripts wash, dress, feed and help the patients move. The patients have almost no visitors and get hardly any external help.
 "Naturally, they are unable to fully serve everyone during their shifts, and we don't expect them to," Smertin said. "The guys start with a quick run through the ward and then help where they are most urgently needed."
 Gazaryan said part of his service involves listening to people's depressing stories. 
 "They can't go to a crisis center, so every day I learn who got here after a road accident, and who got kicked out by a drinking relative," he recalls.
 Gurov said the city's huge interest in alternative servicemen clashes with lack of draftees' interest.
 The two principal reasons for draftees not wanting to perform alternative service are its long term and that there are no opportunities to serve in their home town. The draftees apply for alternative service in their regions, but the decision where they will serve is taken in Moscow.
 "If only people were allowed to serve where they live or anywhere close, I am sure there would have been plenty of requests," Gurov said.
 Gazaryan said he was told that he couldn't refuse the placement Moscow made for him to serve unless he had a very serious reason.
 "You can't just say you don't like the city or that the social home doesn't sound appropriate," he said. "You could end up in court."
 This year, St. Petersburg's medical and social organizations have offered 1,000 requests for alternative servicemen. After careful selection, 419 places were offered, but this summer the city will get a total of only eight draftees.
 Lawyer Yelena Filonova from Legal Consultancy No. 65 of the St. Petersburg Collegium of Lawyers, who advises local human rights group Soldiers' Mothers, said that people are not queuing up for alternative service because they find the law governing it repressive.
 "The law on alternative service was initially designed for the people not to use it," she said. "The complete list of jobs and locations, although it does exist in Moscow isn't always available at military commissions. The law is so loose that someone could end up working as a cleaner on a military base or work on a construction site in the north."
 Comparing alternative service to the Soviet-era practice of exile, Filonova also said that the process of getting it is both humiliating and illegal. When applying for it, a draftee needs to prove they are a conscientious objector to military service by either being a pacifist or belonging to a religious confession that forbids it.
 "But how on earth can you prove that," Gurov wonders. "By bringing a paper from the police that you were detained while causing a trouble at an anti-war demonstration? It is not clear what papers they can bring to show they are religious or a pacifist." 
 The military commissions request a certificate from a religious community saying you are a member of that community. Such is the case of Gazaryan who is a member of Jehovah's Witnesses.
 "But it is clearly not that it is only by belonging to a religious community that you can have a conscience," Filonova said adding that such requests by the military may violate Article 24 of the Constitution, because religious belief is part of a people's private life.
 To get accepted for alternative service, conscripts need to take the standard military medical examinations. And if someone is disqualified for medical reasons from the regular service, they will be automatically disqualified from the alternative service, too. 
 Some local businesses have already tried to benefit from hiring alternative serviceman.
 Gurov said local construction companies who submitted their requests to get draftees, have been refused. "They just wanted to cut costs by replacing immigrants by the draftees."
 This year, the list of available places includes medical orderlies, cleaners and workers in several local old people's homes, hospitals, including a psychiatric ward and several psychoneurological wards. But there are requests for a qualified personnel, too. For instance, the Prometheus center, which is dedicated to helping orphans, offered placements for a librarian, a medical sister, a doctor, a computer programmer, a joiner, a carpenter and a cook.

TITLE: Officials Say Terrorists Behind Train Bomb
PUBLISHER: Staff Writer
TEXT: MOSCOW - A bomb derailed a passenger train heading to Moscow from Grozny on Sunday in what officials described as a terrorist attack designed to cloud celebrations on the Day of Russia holiday. 
 
More than 30 passengers and crew received medical treatment Sunday, and eight were hospitalized. Five remained in Moscow hospitals Monday afternoon, Interfax reported.
 No one has claimed responsibility for the bombing, but the timing and choice of target suggests that the attack is related to the conflict in Chechnya. In the past, Chechen rebels have tried to time major attacks with national holidays or important anniversaries. 
 The bomb, which the Federal Security Service said contained the equivalent of 5 kilograms of TNT, detonated on tracks 150 kilometers south of Moscow as the train's locomotive passed overhead at about 7:10 a.m.
 The blast ripped off a rail, sending the locomotive and the first four train cars veering off the tracks. But the concrete masts of an electricity line running along the tracks prevented them from turning over. The train had just departed from Uzunovo Station and was moving slowly. 
 "My car jolted forcefully. I could barely walk to the emergency brake and then push it," train conductor Aishat Iskhazhieva said on NTV television. 
 "I thought something had happened right under my car." 
 The train was carrying 304 people, including 270 passengers and 34 crewmembers, RIA-Novosti reported, citing the Moscow region prosecutor's office. 
 The office opened an investigation of suspected terrorism.
 Transportation Minister Igor Levitin said Monday that an assistant train engineer noticed two men moving quickly away from the site of the explosion and into nearby woods as passengers poured out of train cars shortly after the blast.
 "They behaved differently from the others," Levitin said, Interfax reported.
 The train crew was questioned by investigators from the Federal Security Service and Moscow region prosecutor's office in the woods, according to media reports.
 RIA-Novosti, citing a source close to the blast investigation, said the attacker or attackers might have had an accomplice at Uzunovo Station.
 "It is likely that an accomplice of the terrorists sent word during the short stop at the station and his associates planted the explosives in a matter of minutes," the source said. 
 Otherwise, the bomb would have been spotted by station workers, who regularly check the tracks, or a passerby, the source said.
 The explosion left a crater 1.5 meters wide and a half a meter deep. Investigators found a wire running from the crater to a spot 50 meters away in the woods, Federal Security Service spokesman Nikolai Zakharov said on NTV. 
 Zakharov said a remote control device used to detonate the bomb was found and it appeared to be homemade.
 Four and a half hours after the blast, a commuter train sent from Moscow delivered the passengers from the derailed train at Paveletsky Station, where they underwent a security screening. 
 "Special services screened the passengers to find out whether possible participants in the incident were among them," Alexei Panteleyev, a deputy governor of the Moscow region, told NTV. 
 Deputy Interior Minister Alexander Chekalin went to Paveletsky to oversee the questioning. 
 Also, 70 passengers received counseling at the station by a team of psychologists and psychiatrists from Moscow's Serbsky Institute, Interfax reported.
 The train connection between Grozny and Moscow resumed in 2001 after a five-year break related to the fighting in Chechnya. The re-launch of service was trumpeted by the Kremlin as a step toward a return to normalcy in the restive republic.
 Security was extra high on trains in Chechnya. National newspapers reported at the time that Chechen rebels were considering planting bombs on train tracks in Chechnya.
 Pro-Moscow Chechen officials on Sunday were quick to accuse the attackers of attempting to pit Russians and Chechens against one another.
 "This is a specific targeted action aimed at inciting ethnic hatred between the Russians and the Chechens, but no one will succeed," said Eddi Isayev, the spokesman for Chechnya's representative office in Moscow, RIA-Novosti reported. "June 12 is our common holiday."
 Coverage of the train bombing dominated Russian airwaves Sunday, giving way only to reports from a Kremlin awards ceremony hosted by President Vladimir Putin. (See story, page 3)
 The damaged railroad tracks were repaired late Sunday, and train service resumed at about midnight, Interfax reported, citing railroad officials.
 Meanwhile, Interior Minister Rashid Nurgaliyev ordered an increase in the number of police patrols at railroad stations and the deployment of police guards on all trains, Deputy Interior Minister Alexander Chekalin said Sunday, Interfax reported.
 Chekalin also said joint teams of police officers and railroad workers will be formed to inspect railroad tracks for explosives.
 Previous security measures included random passport checks and sniffer dogs to inspect the luggage of passengers arriving from Chechnya and Dagestan.

TITLE: Officials Say Terrorists Behind Train Bomb
PUBLISHER: Staff Writer
TEXT: MOSCOW - A bomb derailed a passenger train heading to Moscow from Grozny on Sunday in what officials described as a terrorist attack designed to cloud celebrations on the Day of Russia holiday. 
 
More than 30 passengers and crew received medical treatment Sunday, and eight were hospitalized. Five remained in Moscow hospitals Monday afternoon, Interfax reported.
 No one has claimed responsibility for the bombing, but the timing and choice of target suggests that the attack is related to the conflict in Chechnya. In the past, Chechen rebels have tried to time major attacks with national holidays or important anniversaries. 
 The bomb, which the Federal Security Service said contained the equivalent of 5 kilograms of TNT, detonated on tracks 150 kilometers south of Moscow as the train's locomotive passed overhead at about 7:10 a.m.
 The blast ripped off a rail, sending the locomotive and the first four train cars veering off the tracks. But the concrete masts of an electricity line running along the tracks prevented them from turning over. The train had just departed from Uzunovo Station and was moving slowly. 
 "My car jolted forcefully. I could barely walk to the emergency brake and then push it," train conductor Aishat Iskhazhieva said on NTV television. 
 "I thought something had happened right under my car." 
 The train was carrying 304 people, including 270 passengers and 34 crewmembers, RIA-Novosti reported, citing the Moscow region prosecutor's office. 
 The office opened an investigation of suspected terrorism.
 Transportation Minister Igor Levitin said Monday that an assistant train engineer noticed two men moving quickly away from the site of the explosion and into nearby woods as passengers poured out of train cars shortly after the blast.
 "They behaved differently from the others," Levitin said, Interfax reported.
 The train crew was questioned by investigators from the Federal Security Service and Moscow region prosecutor's office in the woods, according to media reports.
 RIA-Novosti, citing a source close to the blast investigation, said the attacker or attackers might have had an accomplice at Uzunovo Station.
 "It is likely that an accomplice of the terrorists sent word during the short stop at the station and his associates planted the explosives in a matter of minutes," the source said. 
 Otherwise, the bomb would have been spotted by station workers, who regularly check the tracks, or a passerby, the source said.
 The explosion left a crater 1.5 meters wide and a half a meter deep. Investigators found a wire running from the crater to a spot 50 meters away in the woods, Federal Security Service spokesman Nikolai Zakharov said on NTV. 
 Zakharov said a remote control device used to detonate the bomb was found and it appeared to be homemade.
 Four and a half hours after the blast, a commuter train sent from Moscow delivered the passengers from the derailed train at Paveletsky Station, where they underwent a security screening. 
 "Special services screened the passengers to find out whether possible participants in the incident were among them," Alexei Panteleyev, a deputy governor of the Moscow region, told NTV. 
 Deputy Interior Minister Alexander Chekalin went to Paveletsky to oversee the questioning. 
 Also, 70 passengers received counseling at the station by a team of psychologists and psychiatrists from Moscow's Serbsky Institute, Interfax reported.
 The train connection between Grozny and Moscow resumed in 2001 after a five-year break related to the fighting in Chechnya. The re-launch of service was trumpeted by the Kremlin as a step toward a return to normalcy in the restive republic.
 Security was extra high on trains in Chechnya. National newspapers reported at the time that Chechen rebels were considering planting bombs on train tracks in Chechnya.
 Pro-Moscow Chechen officials on Sunday were quick to accuse the attackers of attempting to pit Russians and Chechens against one another.
 "This is a specific targeted action aimed at inciting ethnic hatred between the Russians and the Chechens, but no one will succeed," said Eddi Isayev, the spokesman for Chechnya's representative office in Moscow, RIA-Novosti reported. "June 12 is our common holiday."
 Coverage of the train bombing dominated Russian airwaves Sunday, giving way only to reports from a Kremlin awards ceremony hosted by President Vladimir Putin. (See story, page 3)
 The damaged railroad tracks were repaired late Sunday, and train service resumed at about midnight, Interfax reported, citing railroad officials.
 Meanwhile, Interior Minister Rashid Nurgaliyev ordered an increase in the number of police patrols at railroad stations and the deployment of police guards on all trains, Deputy Interior Minister Alexander Chekalin said Sunday, Interfax reported.
 Chekalin also said joint teams of police officers and railroad workers will be formed to inspect railroad tracks for explosives.
 Previous security measures included random passport checks and sniffer dogs to inspect the luggage of passengers arriving from Chechnya and Dagestan.

TITLE: Russian Kilometer 'Longer'
PUBLISHER: The St. Petersburg Times
TEXT: A Russian kilometer is longer than a kilometer anywhere else, says a motorcyclist who led a ride from Vladivostok to St. Petersburg.
 
"I'm sure that it was more than11,000 kilometers," said Lord Nicholas Fairfax, the leader of the White Nights Ride, a group of British and German aristocrats and a Russian businessman who rode to raise money for charity.
 The distance is officially about 10,000 kilometers.
 He couldn't tell exactly because after what he called a "very serious accident outside Kazan his speedometer was frozen at 6,281miles (10,108 kilometers)," he said at a ceremony opposite St. Isaac's Cathedral marking the end of the ride on Sunday.
 As the crow flies, Kazan is 1,200 kilometers east and south of St. Petersburg. No one was hurt in the incident, but motorcycles were damaged and three riders came off when confronted by a truck that fell on its side blocking the road.
 "A Russian kilometer is different to any known measure of distance," Fairfax said.
 "Forget all the stuff you learned in school about a kilometer being five-eighths of a mile. We have discovered a Russian kilometer is about 1.1 miles." 
 On the way, they would ask a Russian companion, Maxim, how far to the next stop.
 "He would say, 'About 110 kilometers,'" Fairfax said. "About 2 1/2 hours and 150 miles (241 kilometers) later, we would still have 20 kilometers to go."
 A band played to welcome the group of 10 aristocrats and although the rain lifted for the brief ceremony, Halifax welcomed the "rather English weather."
 The team left Vladivostok on May 2 and rode BMW R1150 GS Adventure motorcycles in what was said to be the first motorcycle ride across Russia.
 The ride raised $850,000 for more than 20 charities in Russia and paid for operations for 35 seriously ill children, organizers said. Its patron was Prince Michael of Kent.
 Photographs taken by the riders are on display at the Union of Artists at 38 Bolshaya Morskaya.

TITLE: Russian Kilometer 'Longer'
PUBLISHER: The St. Petersburg Times
TEXT: A Russian kilometer is longer than a kilometer anywhere else, says a motorcyclist who led a ride from Vladivostok to St. Petersburg.
 
"I'm sure that it was more than11,000 kilometers," said Lord Nicholas Fairfax, the leader of the White Nights Ride, a group of British and German aristocrats and a Russian businessman who rode to raise money for charity.
 The distance is officially about 10,000 kilometers.
 He couldn't tell exactly because after what he called a "very serious accident outside Kazan his speedometer was frozen at 6,281miles (10,108 kilometers)," he said at a ceremony opposite St. Isaac's Cathedral marking the end of the ride on Sunday.
 As the crow flies, Kazan is 1,200 kilometers east and south of St. Petersburg. No one was hurt in the incident, but motorcycles were damaged and three riders came off when confronted by a truck that fell on its side blocking the road.
 "A Russian kilometer is different to any known measure of distance," Fairfax said.
 "Forget all the stuff you learned in school about a kilometer being five-eighths of a mile. We have discovered a Russian kilometer is about 1.1 miles." 
 On the way, they would ask a Russian companion, Maxim, how far to the next stop.
 "He would say, 'About 110 kilometers,'" Fairfax said. "About 2 1/2 hours and 150 miles (241 kilometers) later, we would still have 20 kilometers to go."
 A band played to welcome the group of 10 aristocrats and although the rain lifted for the brief ceremony, Halifax welcomed the "rather English weather."
 The team left Vladivostok on May 2 and rode BMW R1150 GS Adventure motorcycles in what was said to be the first motorcycle ride across Russia.
 The ride raised $850,000 for more than 20 charities in Russia and paid for operations for 35 seriously ill children, organizers said. Its patron was Prince Michael of Kent.
 Photographs taken by the riders are on display at the Union of Artists at 38 Bolshaya Morskaya.

TITLE: Putin Speech Hails Freedom, Democracy
PUBLISHER: The Associated Press
TEXT: President Vladimir Putin celebrated a national holiday marking Russia's independence with an elaborate Kremlin awards ceremony Sunday.
 
Putin decorated artists, archaeologists and scientists with state awards brought to him by square-jawed, goose-stepping guards in gilded ceremonial dress. In a televised speech marking the Day of Russia, he said the country's constitution is "one of the most democratic in the world" and gives first priority to personal rights and freedoms.
 "The Day of Russia means for us the inseparable unity of such values as democracy, statehood and patriotism," Putin told the laureates and the government ministers, religious leaders and other guests at the reception, in remarks broadcast on state-run Channel One television.
 "There is no doubt that the more freedom there is for the creative spirit of citizens, the greater the success of our nation and the higher the authority of our country will be," Putin said in the address in a soaring hall in the Grand Kremlin Palace.
 Critics at home and abroad accuse Putin of backsliding on democracy and suppressing dissent, and liberals held a demonstration Sunday in support of jailed oil tycoon Mikhail Khodorkovsky and others who, organizers claim, are political prisoners.
 Formerly known as Independence Day, the holiday marks the Russian parliament's June 12, 1990, declaration of sovereignty from the Soviet Union. Putin's predecessor, Boris Yeltsin, who led Russia's independence drive and was elected president on the same day in 1991, created the holiday 12 years ago.
 But Russia's independence meant the breakup of the Soviet Union - an event most Russians regret and Putin has called an enormous national tragedy. The holiday was renamed the Day of Russia in 2002 and transformed into a celebration of Russia itself and the unity - however fragile - of the huge, ethnically diverse country.
 In his address, Putin called the holiday "our common national day" and did not utter the word "independence" in his address. He said that "in the past decade and a half, our country has traveled an extremely difficult path of reform."
 The recipients of the six awards handed out Sunday included poet Bella Akhmadulina, singer Anna Netrebko (see photo, page 4), a pair who restored a 14th century church destroyed in World War II, a mathematical physicist, the space scientists who created a powerful telescopic device and archeologists who discovered and studied relics of an ancient culture in the Altai mountains.

TITLE: Putin Speech Hails Freedom, Democracy
PUBLISHER: The Associated Press
TEXT: President Vladimir Putin celebrated a national holiday marking Russia's independence with an elaborate Kremlin awards ceremony Sunday.
 
Putin decorated artists, archaeologists and scientists with state awards brought to him by square-jawed, goose-stepping guards in gilded ceremonial dress. In a televised speech marking the Day of Russia, he said the country's constitution is "one of the most democratic in the world" and gives first priority to personal rights and freedoms.
 "The Day of Russia means for us the inseparable unity of such values as democracy, statehood and patriotism," Putin told the laureates and the government ministers, religious leaders and other guests at the reception, in remarks broadcast on state-run Channel One television.
 "There is no doubt that the more freedom there is for the creative spirit of citizens, the greater the success of our nation and the higher the authority of our country will be," Putin said in the address in a soaring hall in the Grand Kremlin Palace.
 Critics at home and abroad accuse Putin of backsliding on democracy and suppressing dissent, and liberals held a demonstration Sunday in support of jailed oil tycoon Mikhail Khodorkovsky and others who, organizers claim, are political prisoners.
 Formerly known as Independence Day, the holiday marks the Russian parliament's June 12, 1990, declaration of sovereignty from the Soviet Union. Putin's predecessor, Boris Yeltsin, who led Russia's independence drive and was elected president on the same day in 1991, created the holiday 12 years ago.
 But Russia's independence meant the breakup of the Soviet Union - an event most Russians regret and Putin has called an enormous national tragedy. The holiday was renamed the Day of Russia in 2002 and transformed into a celebration of Russia itself and the unity - however fragile - of the huge, ethnically diverse country.
 In his address, Putin called the holiday "our common national day" and did not utter the word "independence" in his address. He said that "in the past decade and a half, our country has traveled an extremely difficult path of reform."
 The recipients of the six awards handed out Sunday included poet Bella Akhmadulina, singer Anna Netrebko (see photo, page 4), a pair who restored a 14th century church destroyed in World War II, a mathematical physicist, the space scientists who created a powerful telescopic device and archeologists who discovered and studied relics of an ancient culture in the Altai mountains.

TITLE: IN BRIEF
TEXT: Latvia 'Worst Enemy'
 </b>

MOSCOW (SPT) - The public believes Latvia is Russia's worst enemy while Russian's best friend is Belarus, a poll conducted by the Levada Center last month showed, UPI reported Sunday.
 Latvia headed the list of Russia's enemies with 49 percent of respondents seeing it in a negative light. Lithuania came next with 42 percent, then Georgia with 38. Estonia and the U.S. held fourth and fifth places in the list of enemies with 32 and 23 percent of respondents respectively.
 Belarus led the list of Russian friends, with the support of 46 percent of respondents. Germany, ranked second with 23 percent support. Next on the list were Kazakhstan, Ukraine, India and France with 20, 17, 16 and 13 percent of respondents favoring these states.
 Eleven percent of respondents called the United States a friend of Russia.
 The Levada Center, Russia's independent and most-respected public opinion agency, polled 1,600 Russians older than 18 years of age at the end May to determine how the general population sees the outside world.
 
 
<b>Gas Quota Discussed
 </b>

ST. PETERSBURG (SPT) - Russia could raise the question of removing part of Estonia's quota for greenhouse gas emissions, Interfax reported Valery Serdyukov, Leningrad Oblast governor as saying at a meeting with Andre Pung, the consul general of Estonia in St. Petersburg, last week.
 The proposal was made during a discussion on the possible closure of Leningradslanets company, which provides fuel for Narva power plant located in Estonia. Earlier in May the plant ended its contract with the company, reportedly in order to sell its quotas for greenhouse gases emissions.
 "This is not right when the unified complex, which was working on grounds of a particular technology for tens of years, is being ripped apart," Interfax cited Serdyukov as saying.
 The Narva power plant consumes 95 percent of shale mined in the oblast annually or up to 1.2 million metric tons. The Estonian power company said the agreement Leningradslanets was ended because of huge debts Leningradslanets kept failing to pay.
 
 
<b>Navy Officer 'Drunk' 
 </b>

ST. PETERSBURG (SPT) - The regional forensic laboratory found alcohol in the blood of an officer of St. Petersburg Navy Institute who drowned in a dinghy that capsized with trainee navy officers in the Gulf of Finland last week.
 An investigation concluded that six navy students went out to sea in the dinghy with two drunken officers. Only two people have survived the accident - one officer and one student.
 The military prosecutor's office of Leningrad Military District has initiated a criminal case of abuse of power that was followed by severe consequences.
 
 
<b>Lavrov Urges Balance
 </b>

SZCZECIN, Poland (SPT) - The Council of the Baltic Sea States "must observe a balance of interests among all the member states and not become anyone's appendage," Russian Foreign Minister Sergei Lavrov said Friday at meeting of the council in the Polish town of Szczecin, Itar-Tass reported.
 "To reduce all the work of the CBSS to the function of an instrument of the EU and an additional forum in the dialogue between the EU and Russia is incorrect and counterproductive," Lavrov said.
 Lavrov said the council should concentrate more on solving the problems of restrictions that occurred because of the current border regulations.
 Lavrov has also expressed Russia's continuing concerns over the question of the EU border around the Kaliningrad region.

TITLE: IN BRIEF
TEXT: <b>Latvia 'Worst Enemy'
 </b>

MOSCOW (SPT) - The public believes Latvia is Russia's worst enemy while Russian's best friend is Belarus, a poll conducted by the Levada Center last month showed, UPI reported Sunday.
 Latvia headed the list of Russia's enemies with 49 percent of respondents seeing it in a negative light. Lithuania came next with 42 percent, then Georgia with 38. Estonia and the U.S. held fourth and fifth places in the list of enemies with 32 and 23 percent of respondents respectively.
 Belarus led the list of Russian friends, with the support of 46 percent of respondents. Germany, ranked second with 23 percent support. Next on the list were Kazakhstan, Ukraine, India and France with 20, 17, 16 and 13 percent of respondents favoring these states.
 Eleven percent of respondents called the United States a friend of Russia.
 The Levada Center, Russia's independent and most-respected public opinion agency, polled 1,600 Russians older than 18 years of age at the end May to determine how the general population sees the outside world.
 
 
<b>Gas Quota Discussed
 </b>

ST. PETERSBURG (SPT) - Russia could raise the question of removing part of Estonia's quota for greenhouse gas emissions, Interfax reported Valery Serdyukov, Leningrad Oblast governor as saying at a meeting with Andre Pung, the consul general of Estonia in St. Petersburg, last week.
 The proposal was made during a discussion on the possible closure of Leningradslanets company, which provides fuel for Narva power plant located in Estonia. Earlier in May the plant ended its contract with the company, reportedly in order to sell its quotas for greenhouse gases emissions.
 "This is not right when the unified complex, which was working on grounds of a particular technology for tens of years, is being ripped apart," Interfax cited Serdyukov as saying.
 The Narva power plant consumes 95 percent of shale mined in the oblast annually or up to 1.2 million metric tons. The Estonian power company said the agreement Leningradslanets was ended because of huge debts Leningradslanets kept failing to pay.
 
 
<b>Navy Officer 'Drunk' 
 </b>

ST. PETERSBURG (SPT) - The regional forensic laboratory found alcohol in the blood of an officer of St. Petersburg Navy Institute who drowned in a dinghy that capsized with trainee navy officers in the Gulf of Finland last week.
 An investigation concluded that six navy students went out to sea in the dinghy with two drunken officers. Only two people have survived the accident - one officer and one student.
 The military prosecutor's office of Leningrad Military District has initiated a criminal case of abuse of power that was followed by severe consequences.
 
 
<b>Lavrov Urges Balance
 </b>

SZCZECIN, Poland (SPT) - The Council of the Baltic Sea States "must observe a balance of interests among all the member states and not become anyone's appendage," Russian Foreign Minister Sergei Lavrov said Friday at meeting of the council in the Polish town of Szczecin, Itar-Tass reported.
 "To reduce all the work of the CBSS to the function of an instrument of the EU and an additional forum in the dialogue between the EU and Russia is incorrect and counterproductive," Lavrov said.
 Lavrov said the council should concentrate more on solving the problems of restrictions that occurred because of the current border regulations.
 Lavrov has also expressed Russia's continuing concerns over the question of the EU border around the Kaliningrad region. 



TITLE: Swiss Court Says Adamov
 Should Be Freed From Jail
PUBLISHER: The Associated Press
TEXT: BERN, Switzerland - A Swiss court ruled Thursday that former Russian nuclear energy minister Yevgeny Adamov should be released from detention, but he remained in prison pending an appeal from the Swiss Justice Ministry, a spokesman said.
 
The Federal Criminal Court upheld an appeal from Adamov, but the ministry immediately appealed the decision to the country's supreme court. Adamov will remain in custody until the court rules on that appeal, said Justice Ministry spokesman Folco Galli.
 &quot;The federal supreme court hasn't responded yet, but at the moment he's still in detention,&quot; Galli said.
 Lawyers for Adamov, who was originally arrested in Switzerland on a U.S. warrant, appealed May 17 against his detention on the basis that Switzerland violated his immunity as a former minister.
 Lanny Breuer, Adamov's American attorney, told a news conference in Washington that the Swiss court found that Adamov's arrest was illegal and violates Swiss and international law.
 &quot;This decision shows that without question the Swiss courts are independent and have shown, in our view, great wisdom,&quot; Breuer said. &quot;The rule of law in Switzerland remains strong despite, in our view, the overreaching of the United States government and the United States Department of Justice.&quot;
 In Washington, Justice Department spokesman Bryan Sierra declined to comment on the ruling or its future implications. He said the department does not &quot;comment on extradition on specific cases.&quot;
 He referred questions to the U.S. Attorney's office in Pittsburgh, which didn't return a message.
 At the United States' request, Adamov was arrested May 2 during a visit to his daughter in the Swiss capital Bern. He has since been indicted by a U.S. federal grand jury in Pittsburgh on conspiracy to transfer stolen money and securities, conspiracy to defraud the United States, money laundering and tax evasion.
 The United States says he diverted up to $9 million from U.S. Energy Department funds intended to improve Russian nuclear security.
 Russian authorities, concerned that he could divulge nuclear secrets if extradited to the United States, have demanded he be sent instead to Russia to face allegations concerning the illegal appropriation of money intended for nuclear security.
 In Moscow, the Foreign Ministry and prosecutor general's office declined to comment on the Swiss court ruling.
 The United States still has yet to file for Adamov's extradition, but has until June 30 to make an official request.


TITLE: Swiss Court Says Adamov
 Should Be Freed From Jail
PUBLISHER: The Associated Press
TEXT: BERN, Switzerland - A Swiss court ruled Thursday that former Russian nuclear energy minister Yevgeny Adamov should be released from detention, but he remained in prison pending an appeal from the Swiss Justice Ministry, a spokesman said.
 
The Federal Criminal Court upheld an appeal from Adamov, but the ministry immediately appealed the decision to the country's supreme court. Adamov will remain in custody until the court rules on that appeal, said Justice Ministry spokesman Folco Galli.
 &quot;The federal supreme court hasn't responded yet, but at the moment he's still in detention,&quot; Galli said.
 Lawyers for Adamov, who was originally arrested in Switzerland on a U.S. warrant, appealed May 17 against his detention on the basis that Switzerland violated his immunity as a former minister.
 Lanny Breuer, Adamov's American attorney, told a news conference in Washington that the Swiss court found that Adamov's arrest was illegal and violates Swiss and international law.
 &quot;This decision shows that without question the Swiss courts are independent and have shown, in our view, great wisdom,&quot; Breuer said. &quot;The rule of law in Switzerland remains strong despite, in our view, the overreaching of the United States government and the United States Department of Justice.&quot;
 In Washington, Justice Department spokesman Bryan Sierra declined to comment on the ruling or its future implications. He said the department does not &quot;comment on extradition on specific cases.&quot;
 He referred questions to the U.S. Attorney's office in Pittsburgh, which didn't return a message.
 At the United States' request, Adamov was arrested May 2 during a visit to his daughter in the Swiss capital Bern. He has since been indicted by a U.S. federal grand jury in Pittsburgh on conspiracy to transfer stolen money and securities, conspiracy to defraud the United States, money laundering and tax evasion.
 The United States says he diverted up to $9 million from U.S. Energy Department funds intended to improve Russian nuclear security.
 Russian authorities, concerned that he could divulge nuclear secrets if extradited to the United States, have demanded he be sent instead to Russia to face allegations concerning the illegal appropriation of money intended for nuclear security.
 In Moscow, the Foreign Ministry and prosecutor general's office declined to comment on the Swiss court ruling.
 The United States still has yet to file for Adamov's extradition, but has until June 30 to make an official request.


TITLE: Neighbor's NATO Bases 'Pose a Threat'
PUBLISHER: The Associated Press
TEXT: MOSCOW - The Kremlin cannot prevent ex-Soviet republics from joining NATO, but it would view any foreign military bases in neighboring countries as a threat, Interfax quoted Defense Minister Sergei Ivanov as saying Friday. 
 
Ivanov said in an interview with Profil magazine that he would not rule out more former Soviet republics following the three Baltic states and joining NATO in the next seven to 10 years, according to Interfax, which obtained the text in advance of publication. 
 &quot;If Georgia or Ukraine decides to join NATO, they will join. We cannot prevent this, and we probably shouldn't,'' Ivanov said, according to the report. He said many countries want to join NATO because &quot;without this they won't let them into the European Union.'' 
 The statement came as an acknowledgment of Russia's waning influence as other former Soviet republics turn to the West, seeking closer integration with - and eventual membership in - NATO and the EU. 
 Russian officials have said that its neighbors are sovereign and free to form their own foreign policy. But they have watched warily as NATO has expanded eastward, taking in first former Warsaw Pact members and then Estonia, Latvia and Lithuania last year. 
 In Georgia and Ukraine, new Westward-leaning presidents have replaced longtime leaders with close Russian ties in the past two years, and Moldova's leadership has recently turned its back on Russia to seek closer ties with Europe. 
 With NATO growing, Ivanov reiterated Russian warnings that foreign base on its doorstep would be seen as an aggressive move and said there are no grounds for placing U.S. or NATO bases in Georgia, where Russia recently agreed to withdraw its troops from two Soviet-era bases by the end of 2008. 
 &quot;I have said repeatedly: If a serious military base appears in the Baltics, we will interpret it as a threat to Russia. There is no other way to explain a base in this region,'' Interfax quoted Ivanov as saying. 
 At the same time, he said that the Western alliance has changed since the Cold War, and that a country joining NATO does not mean that major military bases will be established on its territory, according to Interfax. 
 U.S. officials have said Washington has no plans for bases in Georgia, where it has trained troops. 
 Ivanov said the idea that bases in Georgia could be needed because of its proximity to the Middle East was &quot;an insufficient argument. There are already [U.S.] bases in Iraq, Afghanistan, Qatar, Bahrain, Kyrgyzstan, Uzbekistan and a number of other countries.'' 
 Ivanov said that because of links between the Russian and Ukrainian defense industries, Ukrainian membership in NATO would force Russia to &quot;invest quite big money to avoid any kind of dependence on supplies of products and parts from Ukraine,'' the report said.

TITLE: Neighbor's NATO Bases 'Pose a Threat'
PUBLISHER: The Associated Press
TEXT: MOSCOW - The Kremlin cannot prevent ex-Soviet republics from joining NATO, but it would view any foreign military bases in neighboring countries as a threat, Interfax quoted Defense Minister Sergei Ivanov as saying Friday. 
 
Ivanov said in an interview with Profil magazine that he would not rule out more former Soviet republics following the three Baltic states and joining NATO in the next seven to 10 years, according to Interfax, which obtained the text in advance of publication. 
 &quot;If Georgia or Ukraine decides to join NATO, they will join. We cannot prevent this, and we probably shouldn't,'' Ivanov said, according to the report. He said many countries want to join NATO because &quot;without this they won't let them into the European Union.'' 
 The statement came as an acknowledgment of Russia's waning influence as other former Soviet republics turn to the West, seeking closer integration with - and eventual membership in - NATO and the EU. 
 Russian officials have said that its neighbors are sovereign and free to form their own foreign policy. But they have watched warily as NATO has expanded eastward, taking in first former Warsaw Pact members and then Estonia, Latvia and Lithuania last year. 
 In Georgia and Ukraine, new Westward-leaning presidents have replaced longtime leaders with close Russian ties in the past two years, and Moldova's leadership has recently turned its back on Russia to seek closer ties with Europe. 
 With NATO growing, Ivanov reiterated Russian warnings that foreign base on its doorstep would be seen as an aggressive move and said there are no grounds for placing U.S. or NATO bases in Georgia, where Russia recently agreed to withdraw its troops from two Soviet-era bases by the end of 2008. 
 &quot;I have said repeatedly: If a serious military base appears in the Baltics, we will interpret it as a threat to Russia. There is no other way to explain a base in this region,'' Interfax quoted Ivanov as saying. 
 At the same time, he said that the Western alliance has changed since the Cold War, and that a country joining NATO does not mean that major military bases will be established on its territory, according to Interfax. 
 U.S. officials have said Washington has no plans for bases in Georgia, where it has trained troops. 
 Ivanov said the idea that bases in Georgia could be needed because of its proximity to the Middle East was &quot;an insufficient argument. There are already [U.S.] bases in Iraq, Afghanistan, Qatar, Bahrain, Kyrgyzstan, Uzbekistan and a number of other countries.'' 
 Ivanov said that because of links between the Russian and Ukrainian defense industries, Ukrainian membership in NATO would force Russia to &quot;invest quite big money to avoid any kind of dependence on supplies of products and parts from Ukraine,'' the report said.

TITLE: Pyatyorochka to Buy Out Its Franchise Operator
PUBLISHER: Staff Writer
TEXT: Grocery retailer Pyatyorochka will buy out its franchise operator in the Southern Urals in order to start consolidating the company's franchise activities, the chain said Monday, Dow Jones reported.
 
As part of the deal, Pyaterochka's operating subsidiary Agrotorg will acquire the Economtorg franchise network, which consists of 19 stores and a warehouse with a total net selling area of over 10,000 square meters, as well as a head office and a training center.
 The deal will be worth $11 million, covering 100 percent of Economtorg's shares and the value of its assumed debt. The transaction is expected to be completed by the end of 2005, the company said. Economtorg has operated Pyatyorochka's franchises in the Sverdlovsk region and its capital of Yekaterinburg, Russia's fifth largest city. By the end of 2006 the operator looked to add 23 additional Pyatyorochka outlets in the area to the existing 17 stores. Economtorg's turnover was estimated at about $20 million in 2004.
 Since the St. Petersburg-based grocery chain raised about $600 million from its initial public offering in London's, Pyatyorochka said it would concentrate on regional expansion to off-set the heavy concentration of its stores in Russia's two main cities, Moscow and St. Petersburg. The grocer announced last month plans to open 1,000 additional stores across the country.
 In the Urals region, the grocery retailer planned to launch 90 franchise stores by 2005, mainly to be based in Perm, Chelyabinsk and Ufa, according to the Dow Jones report. 
 &quot;We expect demand for high quality products, competitive prices and modern retail environments to continue growing in the Urals region,&quot; said Pyaterochka Chief Executive Oleg Vysotsky, the news agency reported.
 &quot;Our franchise network is already well-placed to become the leader in grocery retaining in the region and our acquisition of the Economtorg network farther strengthens our position,&quot; he said.
 o
 
MOSCOW (Bloomberg) - Pyatyorochka Holding's initial public offering in London raised a total of $639 million after banks managing the sale exercised an over-allotment option.
 
Credit Suisse First Boston and Morgan Stanley, which managed the IPO last month, sold an additional 3.2 million global depositary receipts for $13 per share, the same price as the May 6 IPO, Pyaterochka said in a Regulatory News Service statement.
 Pyaterochka founders Andrei Rogachev and Alexander Girda last month sold 46 million global depository receipts, or about 30 percent of the grocer, for $13 each. Shares of Russia's largest supermarket chain closed Monday in London at $13.10, giving the company a market value of $2 billion.
 The over-allotment option raises the total number of global depository receipts issued to 49.1 million, or 32 percent of the company's share capital, the statement said.

TITLE: Pyatyorochka to Buy Out Its Franchise Operator
PUBLISHER: Staff Writer
TEXT: Grocery retailer Pyatyorochka will buy out its franchise operator in the Southern Urals in order to start consolidating the company's franchise activities, the chain said Monday, Dow Jones reported.
 
As part of the deal, Pyaterochka's operating subsidiary Agrotorg will acquire the Economtorg franchise network, which consists of 19 stores and a warehouse with a total net selling area of over 10,000 square meters, as well as a head office and a training center.
 The deal will be worth $11 million, covering 100 percent of Economtorg's shares and the value of its assumed debt. The transaction is expected to be completed by the end of 2005, the company said. Economtorg has operated Pyatyorochka's franchises in the Sverdlovsk region and its capital of Yekaterinburg, Russia's fifth largest city. By the end of 2006 the operator looked to add 23 additional Pyatyorochka outlets in the area to the existing 17 stores. Economtorg's turnover was estimated at about $20 million in 2004.
 Since the St. Petersburg-based grocery chain raised about $600 million from its initial public offering in London's, Pyatyorochka said it would concentrate on regional expansion to off-set the heavy concentration of its stores in Russia's two main cities, Moscow and St. Petersburg. The grocer announced last month plans to open 1,000 additional stores across the country.
 In the Urals region, the grocery retailer planned to launch 90 franchise stores by 2005, mainly to be based in Perm, Chelyabinsk and Ufa, according to the Dow Jones report. 
 &quot;We expect demand for high quality products, competitive prices and modern retail environments to continue growing in the Urals region,&quot; said Pyaterochka Chief Executive Oleg Vysotsky, the news agency reported.
 &quot;Our franchise network is already well-placed to become the leader in grocery retaining in the region and our acquisition of the Economtorg network farther strengthens our position,&quot; he said.
 o
 
MOSCOW (Bloomberg) - Pyatyorochka Holding's initial public offering in London raised a total of $639 million after banks managing the sale exercised an over-allotment option.
 
Credit Suisse First Boston and Morgan Stanley, which managed the IPO last month, sold an additional 3.2 million global depositary receipts for $13 per share, the same price as the May 6 IPO, Pyaterochka said in a Regulatory News Service statement.
 Pyaterochka founders Andrei Rogachev and Alexander Girda last month sold 46 million global depository receipts, or about 30 percent of the grocer, for $13 each. Shares of Russia's largest supermarket chain closed Monday in London at $13.10, giving the company a market value of $2 billion.
 The over-allotment option raises the total number of global depository receipts issued to 49.1 million, or 32 percent of the company's share capital, the statement said.

TITLE: Broker: Surge in IPOs Hinders Russian Stocks
PUBLISHER: Staff Writer
TEXT: MOSCOW - The unprecedented surge in recent public share offerings is partly responsible for the lackluster performance of the stock market since the beginning of the year, said a report from brokerage Aton Capital.
 &quot;It appears one of the key reasons the market has been treading water is ... oversupply of Russian shares,&quot; wrote Aton's equity strategist Alex Kantarovich in the report. High political risk is usually blamed for weak stock performance in Russia, he added.
 The report estimates that new shares worth $2.9 billion have been sold on the Russian market since the beginning of the year, over twice as much as all Russia's previous initial public offerings.
 Recent share flotations have included grocery chain Pyatyorochka, which brought in $600 million in May, and steel company EvrazHolding, which raised $422 million this month.
 The Morgan Stanley Capital International, or MSCI, index of Russian shares has risen by 4.5 percent in the year to June 8, compared with the average 8 percent growth in other Eastern European emerging markets. 
 Critics say the Aton report assumes there is a fixed amount of money allocated for investment in Russia.
 &quot;The decisive factor is the aversion to Russian risk on the part of international portfolio investors,&quot; said Christopher Granville, strategist at United Financial Group, which invests in a number of emerging markets. &quot;It's not as if there is a fixed sum of money available for investment in Russian equities.&quot;
 Rather than blaming IPOs for weak stock performance in Russia, other investors point to broader issues affecting markets globally, such as the high oil prices and the weakness of the dollar. The MSCI index of all emerging markets has grown by just 3.5 percent in the year to June 8. 
 Prices are likely to stabilize once investors know which direction U.S. interest rates are going, Vladimir Savov, senior strategist at UralSib Bank said.

TITLE: Broker: Surge in IPOs Hinders Russian Stocks
PUBLISHER: Staff Writer
TEXT: MOSCOW - The unprecedented surge in recent public share offerings is partly responsible for the lackluster performance of the stock market since the beginning of the year, said a report from brokerage Aton Capital.
 &quot;It appears one of the key reasons the market has been treading water is ... oversupply of Russian shares,&quot; wrote Aton's equity strategist Alex Kantarovich in the report. High political risk is usually blamed for weak stock performance in Russia, he added.
 The report estimates that new shares worth $2.9 billion have been sold on the Russian market since the beginning of the year, over twice as much as all Russia's previous initial public offerings.
 Recent share flotations have included grocery chain Pyatyorochka, which brought in $600 million in May, and steel company EvrazHolding, which raised $422 million this month.
 The Morgan Stanley Capital International, or MSCI, index of Russian shares has risen by 4.5 percent in the year to June 8, compared with the average 8 percent growth in other Eastern European emerging markets. 
 Critics say the Aton report assumes there is a fixed amount of money allocated for investment in Russia.
 &quot;The decisive factor is the aversion to Russian risk on the part of international portfolio investors,&quot; said Christopher Granville, strategist at United Financial Group, which invests in a number of emerging markets. &quot;It's not as if there is a fixed sum of money available for investment in Russian equities.&quot;
 Rather than blaming IPOs for weak stock performance in Russia, other investors point to broader issues affecting markets globally, such as the high oil prices and the weakness of the dollar. The MSCI index of all emerging markets has grown by just 3.5 percent in the year to June 8. 
 Prices are likely to stabilize once investors know which direction U.S. interest rates are going, Vladimir Savov, senior strategist at UralSib Bank said.

TITLE: Chinese Invest in Economy Cars
PUBLISHER: Staff Writer
TEXT: MOSCOW - A group of four investors including China's First Automotive Works has started producing passenger cars for the Russian market at a boiler factory in Biisk, a small town in Eastern Russia, one of the investors said Monday.
 The project aims to produce at least 1,000 cars this year, with $5 million to $7 million to be put into the venture, said Valentin Vertiprakhov, general director of car dealership UralYuzhMash, one of three Russian investors.
 The other two are Biisk Boiler Factory, where the cars are being produced and Yekaterinburg-based DDT-Eurotrade, which has more than 20 dealerships in the region.
 To begin with, the companies will manufacture a trial batch of 50 vehicles using parts imported from China, Vertiprakhov said. The first vehicles to be produced will be rugged SUVs and pick-up trucks to be sold under the name Admiral. Later, they may produce trucks.
 The cars will sell at $16,000 to $20,000, Vertiprakhov said, adding that the starting price will sink to $12,000 when local components will be used.
 Jin Lei, head of a First Automotive Works export unit confirmed the assembly project was underway but declined to give further details. Analysts said they see a market for the cheap locally-made and imported Chinese vehicles, but warned poor quality will remain a concern.
 First Automotive Works, or FAW, which started making cars in 1953, already sells its cars in Russia through a Moscow-based dealership IRITO. Like other overseas companies, First Automotive Works is attracted to Russia by growing consumer demand at a time when the Chinese market is increasingly saturated. FAW is China's biggest state-owned automaker, boasting 35 assembly plants and 14 joint ventures, including those with Volkswagen and Toyota.
 In the Russian market, FAW and its partners will compete with Pekinsky Dzip or Beijing Jeep, which is owned by Siberian oil trader Transervis. Beijing Jeep operates a business importing Chinese SUVs and pick-ups with a similar name Tianye Admiral made by Hebei Zhongxing Auto. Beijing Jeep plans to open an assembly plant by early 2006 in Siberia, which will eventually produce 20,000 Chinese cars a year.

TITLE: Chinese Invest in Economy Cars
PUBLISHER: Staff Writer
TEXT: MOSCOW - A group of four investors including China's First Automotive Works has started producing passenger cars for the Russian market at a boiler factory in Biisk, a small town in Eastern Russia, one of the investors said Monday.
 The project aims to produce at least 1,000 cars this year, with $5 million to $7 million to be put into the venture, said Valentin Vertiprakhov, general director of car dealership UralYuzhMash, one of three Russian investors.
 The other two are Biisk Boiler Factory, where the cars are being produced and Yekaterinburg-based DDT-Eurotrade, which has more than 20 dealerships in the region.
 To begin with, the companies will manufacture a trial batch of 50 vehicles using parts imported from China, Vertiprakhov said. The first vehicles to be produced will be rugged SUVs and pick-up trucks to be sold under the name Admiral. Later, they may produce trucks.
 The cars will sell at $16,000 to $20,000, Vertiprakhov said, adding that the starting price will sink to $12,000 when local components will be used.
 Jin Lei, head of a First Automotive Works export unit confirmed the assembly project was underway but declined to give further details. Analysts said they see a market for the cheap locally-made and imported Chinese vehicles, but warned poor quality will remain a concern.
 First Automotive Works, or FAW, which started making cars in 1953, already sells its cars in Russia through a Moscow-based dealership IRITO. Like other overseas companies, First Automotive Works is attracted to Russia by growing consumer demand at a time when the Chinese market is increasingly saturated. FAW is China's biggest state-owned automaker, boasting 35 assembly plants and 14 joint ventures, including those with Volkswagen and Toyota.
 In the Russian market, FAW and its partners will compete with Pekinsky Dzip or Beijing Jeep, which is owned by Siberian oil trader Transervis. Beijing Jeep operates a business importing Chinese SUVs and pick-ups with a similar name Tianye Admiral made by Hebei Zhongxing Auto. Beijing Jeep plans to open an assembly plant by early 2006 in Siberia, which will eventually produce 20,000 Chinese cars a year.

TITLE: JTI Acquires KRES Neva
PUBLISHER: Staff Writer
TEXT: Japan Tabacco International (JTI) intends to buy St. Petersburg-based KRES Neva plant, owned by Standard Commercial Tobacco, for $14 million, Interfax reported Friday, citing JTI's press service.
 
Meanwhile, KRES Neva's sales and logistics department will continue working as previously, fulfilling all current contract obligations, a JTI representative said.
 KRES Neva is located 15 km away from the Petro tobacco factory that JTI already owns and which supplies the firm's Russian and Ukranian plants with main tobacco components used for cigarette production.
 Standard Commercial's decision to sell KRES Neva was interpreted as &quot;timely&quot; by the JTI management.
 &quot;This purchase will allow us to keep high quality standards,&quot; said Garry Wilson, JTI vice president for CIS countries and director of St. Petersburg factory Petro, Interfax reported.
 Rick Cofield, general director of JTI Marketing and Sales, called the purchase of the local cigarette producer a strategic deal for JTI.
 &quot;Despite the tax problems that we have been facing recently, the deal over KRES Neva is another confirmation of JTI maintaining faith in the future of Russia and in the investment climate that we have once again discovered here,&quot; Cofield said, Interfax reported.
 In March this year JTI's St. Petersburg plant, Petro, was handed a $15 million back-tax bill by the federal tax service. 
 The claim was added to the $79 million bill the tax authorities presented before the JTI's Marketing and Sales division.
 In both cases, the company has challenged the authorities' claims, with some within JTI slamming the back-tax bills as a tactic by the officials bent on limiting the tobacco manufacturer's expansion in Russia.
 JTI is a branch company of Japan Tobacco Inc., the world's third-largest cigarette maker, which sells its products in 120 countries. In 2004, the company's total profit reached $39.5 billion.

TITLE: JTI Acquires KRES Neva
PUBLISHER: Staff Writer
TEXT: Japan Tabacco International (JTI) intends to buy St. Petersburg-based KRES Neva plant, owned by Standard Commercial Tobacco, for $14 million, Interfax reported Friday, citing JTI's press service.
 
Meanwhile, KRES Neva's sales and logistics department will continue working as previously, fulfilling all current contract obligations, a JTI representative said.
 KRES Neva is located 15 km away from the Petro tobacco factory that JTI already owns and which supplies the firm's Russian and Ukranian plants with main tobacco components used for cigarette production.
 Standard Commercial's decision to sell KRES Neva was interpreted as &quot;timely&quot; by the JTI management.
 &quot;This purchase will allow us to keep high quality standards,&quot; said Garry Wilson, JTI vice president for CIS countries and director of St. Petersburg factory Petro, Interfax reported.
 Rick Cofield, general director of JTI Marketing and Sales, called the purchase of the local cigarette producer a strategic deal for JTI.
 &quot;Despite the tax problems that we have been facing recently, the deal over KRES Neva is another confirmation of JTI maintaining faith in the future of Russia and in the investment climate that we have once again discovered here,&quot; Cofield said, Interfax reported.
 In March this year JTI's St. Petersburg plant, Petro, was handed a $15 million back-tax bill by the federal tax service. 
 The claim was added to the $79 million bill the tax authorities presented before the JTI's Marketing and Sales division.
 In both cases, the company has challenged the authorities' claims, with some within JTI slamming the back-tax bills as a tactic by the officials bent on limiting the tobacco manufacturer's expansion in Russia.
 JTI is a branch company of Japan Tobacco Inc., the world's third-largest cigarette maker, which sells its products in 120 countries. In 2004, the company's total profit reached $39.5 billion.

TITLE: Gazprom, E.ON AG Consider JV in Romania
TEXT: MOSCOW/LONDON (Bloomberg) - Gazprom, Russia's natural gas export monopoly, may secure partnership with E.ON AG, Germany's biggest utility, in energy distribution projects in Romania.
 
Ruhrgas AG, a gas unit of E.ON, last August won a bid to buy a majority stake in Distrigaz Nord SA, a Romanian distributor of the fuel. The sale still has to be completed, the Romanian government said last month.
 Gazprom, which seeks access to gas users in Europe, where the Russian company supplies a quarter of consumed fuel, is in talks with E.ON on possible joint projects in gas production, marketing and power generation. Germany's E.ON is also buying power distribution assets in Romania.
 &quot;We have an opportunity to enter assets bought by E.ON in Romania,&quot; Alexander Medvedev, a Gazprom deputy chief executive, said Monday in Moscow. &quot;We have an opportunity to defend our interests not only by entering any assets but also through contract relations.&quot;
 E.ON may join Gazprom and its partner BASF AG, the world's largest chemicals company, in a venture that will develop the Yuzhno-Russkoye gas field in Siberia. E.ON and Gazprom have been in talks on the field's development and construction of a gas pipeline from Russia under the Baltic Sea to Germany since at least last year.
 &quot;With E.ON cooperation is continuing on both the North-European pipeline and the Yuzhno-Russkoye field,&quot; Medvedev said. &quot;E.ON has potential for both projects, but on Yuzhno-Russkoye we need to see not only the equivalent cost but also strategic advantages for us.&quot;
 Gazprom ended its plans to buy a 16.33 percent stake in Slovensky Plynarensky Priemysel AS, also known as SPP, Slovakia's largest pipeline company, Medvedev said.
 The gas monopoly last year said it agreed with Ruhrgas and Gaz de France, which between them hold 49 percent of the pipeline company, to extend through 2005 its option to buy the stake in SPP.
 &quot;Considering our plans to develop export roots in Europe, we've made a decision that there is no need to exercise this option,'' Medvedev said. &quot;Considering capacities that we have and plans to develop the North-European pipeline, economically our participation is not expedient.''
 Ruhrgas and Gaz de France in 2002 paid $2.8 billion to buy the stake in SPP from the Slovak government, which holds a majority in the pipeline company.
 Slovensky shipped 82.7 billion cubic meters of gas last year, up 14 percent from 2003. Sales to domestic clients fell 4.4 percent to 6.3 billion cubic meters because of warm weather.

TITLE: Gazprom, E.ON AG Consider JV in Romania
TEXT: MOSCOW/LONDON (Bloomberg) - Gazprom, Russia's natural gas export monopoly, may secure partnership with E.ON AG, Germany's biggest utility, in energy distribution projects in Romania.
 
Ruhrgas AG, a gas unit of E.ON, last August won a bid to buy a majority stake in Distrigaz Nord SA, a Romanian distributor of the fuel. The sale still has to be completed, the Romanian government said last month.
 Gazprom, which seeks access to gas users in Europe, where the Russian company supplies a quarter of consumed fuel, is in talks with E.ON on possible joint projects in gas production, marketing and power generation. Germany's E.ON is also buying power distribution assets in Romania.
 &quot;We have an opportunity to enter assets bought by E.ON in Romania,&quot; Alexander Medvedev, a Gazprom deputy chief executive, said Monday in Moscow. &quot;We have an opportunity to defend our interests not only by entering any assets but also through contract relations.&quot;
 E.ON may join Gazprom and its partner BASF AG, the world's largest chemicals company, in a venture that will develop the Yuzhno-Russkoye gas field in Siberia. E.ON and Gazprom have been in talks on the field's development and construction of a gas pipeline from Russia under the Baltic Sea to Germany since at least last year.
 &quot;With E.ON cooperation is continuing on both the North-European pipeline and the Yuzhno-Russkoye field,&quot; Medvedev said. &quot;E.ON has potential for both projects, but on Yuzhno-Russkoye we need to see not only the equivalent cost but also strategic advantages for us.&quot;
 Gazprom ended its plans to buy a 16.33 percent stake in Slovensky Plynarensky Priemysel AS, also known as SPP, Slovakia's largest pipeline company, Medvedev said.
 The gas monopoly last year said it agreed with Ruhrgas and Gaz de France, which between them hold 49 percent of the pipeline company, to extend through 2005 its option to buy the stake in SPP.
 &quot;Considering our plans to develop export roots in Europe, we've made a decision that there is no need to exercise this option,'' Medvedev said. &quot;Considering capacities that we have and plans to develop the North-European pipeline, economically our participation is not expedient.''
 Ruhrgas and Gaz de France in 2002 paid $2.8 billion to buy the stake in SPP from the Slovak government, which holds a majority in the pipeline company.
 Slovensky shipped 82.7 billion cubic meters of gas last year, up 14 percent from 2003. Sales to domestic clients fell 4.4 percent to 6.3 billion cubic meters because of warm weather.

TITLE: ABN, Barclays Plan Loan to Rosneftegaz
PUBLISHER: Bloomberg
TEXT: MOSCOW -- ABN Amro Holding and Barclays Plc are arranging a $2 billion loan to Rosneftegaz, the Russian state-owned oil company that's buying a stake in Gazprom, bankers involved in the deal said.
 
The five-year, amortizing loan for Rosneft will refinance existing debt and is in addition to a loan of about $8 billion needed to pay for the Gazprom stake, bankers said. The bankers declined to say who is arranging the loan for Moscow-based Rosneft to buy 10.7 percent in Gazprom, a stake worth $7.4 billion at today's share price.
 Morgan Stanley valued Gazprom at $78.1 billion to $92.3 billion and Rosneft at about $25 billion, the Federal Property Agency said May 30. Dresdner Kleinwort Wasserstein put Gazprom's worth at between $93.3 billion and $107.0 billion. Gazprom's market capitalization is $69 billion based on the price of locally traded shares Monday and $82 billion based on the price of its depositary receipts traded in London.
 The loan that ABN and Barclays are syndicating to other lenders is secured on Rosneft's export receipts. The interest margin is 1.80 percentage points above money market rates, according to the bankers, who declined to be identified. Rosneft's senior unsecured debt rating was cut to B-, six levels below investment grade, by Standard &amp; Poor's last month. S&amp;P said Rosneft's financial profile has deteriorated due to the company's high debt level following its $9.3 billion acquisition of Yuganskneftegaz.
 S&amp;P also pointed out that Rosneft is negotiating with creditors over waiving covenants on $1.9 billion of loans it breached with the extra debt used to buy Yugansk.
 Rosneft is rated Baa3 levels, the lowest investment grade, by Moody's Investors Service. Moody's also rates Russia at the same level.

TITLE: ABN, Barclays Plan Loan to Rosneftegaz
PUBLISHER: Bloomberg
TEXT: MOSCOW -- ABN Amro Holding and Barclays Plc are arranging a $2 billion loan to Rosneftegaz, the Russian state-owned oil company that's buying a stake in Gazprom, bankers involved in the deal said.
 
The five-year, amortizing loan for Rosneft will refinance existing debt and is in addition to a loan of about $8 billion needed to pay for the Gazprom stake, bankers said. The bankers declined to say who is arranging the loan for Moscow-based Rosneft to buy 10.7 percent in Gazprom, a stake worth $7.4 billion at today's share price.
 Morgan Stanley valued Gazprom at $78.1 billion to $92.3 billion and Rosneft at about $25 billion, the Federal Property Agency said May 30. Dresdner Kleinwort Wasserstein put Gazprom's worth at between $93.3 billion and $107.0 billion. Gazprom's market capitalization is $69 billion based on the price of locally traded shares Monday and $82 billion based on the price of its depositary receipts traded in London.
 The loan that ABN and Barclays are syndicating to other lenders is secured on Rosneft's export receipts. The interest margin is 1.80 percentage points above money market rates, according to the bankers, who declined to be identified. Rosneft's senior unsecured debt rating was cut to B-, six levels below investment grade, by Standard &amp; Poor's last month. S&amp;P said Rosneft's financial profile has deteriorated due to the company's high debt level following its $9.3 billion acquisition of Yuganskneftegaz.
 S&amp;P also pointed out that Rosneft is negotiating with creditors over waiving covenants on $1.9 billion of loans it breached with the extra debt used to buy Yugansk.
 Rosneft is rated Baa3 levels, the lowest investment grade, by Moody's Investors Service. Moody's also rates Russia at the same level.

TITLE: IN BRIEF
TEXT: Gazprom Exports Up 
 </b>

LONDON (Bloomberg) - Gazprom, which supplies about a quarter of Europe's natural gas, expects export sales to rise 37 percent this year because of higher volumes and prices.
 The state-controlled Russian company expects 2005 export sales of $25 billion, Alexander Medvedev, a deputy chief executive at Gazprom, said Monday in Moscow. That's higher than the $20 billion of gas Medvedev said in April he expected Gazprom to export and compares with $18.3 billion last year.
 "Gazprom is aiming to expand its presence in the European market and is using more new forms and methods for gas trading, such as spots and short-term deals," the company said in a statement on its web site. "We are also aiming to get close to end-users of gas in several European countries."
 Gazprom plans to export 145 billion cubic meters of the fuel to Europe this year, the company said in the statement. It said in April it expected to ship 150 billion cubic meters to Europe this year. The company didn't give a reason for the new forecast.
 
 
<b>Russia Repays Debt
 </b>

MOSCOW (Bloomberg) - Russia made 250 billion rubles ($8.9 billion) in foreign debt payments in January through May, as the government used higher revenue from oil exports to clear its debt to the International Monetary Fund ahead of schedule.
 The government paid 179 billion rubles of principal on its debt and 70.2 billion rubles in interest, the Finance Ministry said on its web site Monday. The government borrowed 4 billion rubles abroad in the period, the statement said.
 Russia's foreign debt stood at $114.4 billion at the start of the year.
 Russia said in May it plans to repay $15 billion in debt early to governments that belong to the so-called Paris Club of creditor nations. The agreement will save Russia $6 billion through the end of 2020, when the country is scheduled to finish paying off its debt to the club, the Finance Ministry said at the time.
 
 
<b>Inflation Rate to Fall
 </b>

MOSCOW (Bloomberg) - Russia's inflation rate will fall in the coming months, central bank Chairman Sergei Ignatyev said, Interfax reported.
 The inflation rate is higher now that it was at the same time last year, which is "disturbing," the news service quoted Ignatyev as saying in Moscow. The reasons for the higher inflation rate "aren't of a monetary character," Interfax reported him as saying. Ignatyev expects the rate to stabilize later this year, the news service said.
 The central bank chairman also said the ruble is expected to strengthen this year by a greater amount than last year, Interfax reported. The bank seeks to avoid "sharp" ruble gains, Ignatyev said, the news service reported.
 
 
<b>Gazprom Eyes Northgas 
 </b>

MOSCOW (Bloomberg) - Gazprom, Russia's state-controlled gas company, said it will acquire 51 percent of Northgas, an independent producer, settling a legal battle and restoring Gazprom's control of a gas field.
 "The signing of this agreement allows us to restore control over an important gas-extracting company, which had previously belonged to Gazprom,'' said Gazprom Deputy Chief Executive Alexander Ananenkov in an e-mailed statement Monday
 A Moscow court in April stripped Northgas of a license to tap the Severo-Urengoi gas and gas condensate field.

TITLE: IN BRIEF
TEXT: <b>Gazprom Exports Up 
 </b>

LONDON (Bloomberg) - Gazprom, which supplies about a quarter of Europe's natural gas, expects export sales to rise 37 percent this year because of higher volumes and prices.
 The state-controlled Russian company expects 2005 export sales of $25 billion, Alexander Medvedev, a deputy chief executive at Gazprom, said Monday in Moscow. That's higher than the $20 billion of gas Medvedev said in April he expected Gazprom to export and compares with $18.3 billion last year.
 "Gazprom is aiming to expand its presence in the European market and is using more new forms and methods for gas trading, such as spots and short-term deals," the company said in a statement on its web site. "We are also aiming to get close to end-users of gas in several European countries."
 Gazprom plans to export 145 billion cubic meters of the fuel to Europe this year, the company said in the statement. It said in April it expected to ship 150 billion cubic meters to Europe this year. The company didn't give a reason for the new forecast.
 
 
<b>Russia Repays Debt
 </b>

MOSCOW (Bloomberg) - Russia made 250 billion rubles ($8.9 billion) in foreign debt payments in January through May, as the government used higher revenue from oil exports to clear its debt to the International Monetary Fund ahead of schedule.
 The government paid 179 billion rubles of principal on its debt and 70.2 billion rubles in interest, the Finance Ministry said on its web site Monday. The government borrowed 4 billion rubles abroad in the period, the statement said.
 Russia's foreign debt stood at $114.4 billion at the start of the year.
 Russia said in May it plans to repay $15 billion in debt early to governments that belong to the so-called Paris Club of creditor nations. The agreement will save Russia $6 billion through the end of 2020, when the country is scheduled to finish paying off its debt to the club, the Finance Ministry said at the time.
 
 
<b>Inflation Rate to Fall
 </b>

MOSCOW (Bloomberg) - Russia's inflation rate will fall in the coming months, central bank Chairman Sergei Ignatyev said, Interfax reported.
 The inflation rate is higher now that it was at the same time last year, which is "disturbing," the news service quoted Ignatyev as saying in Moscow. The reasons for the higher inflation rate "aren't of a monetary character," Interfax reported him as saying. Ignatyev expects the rate to stabilize later this year, the news service said.
 The central bank chairman also said the ruble is expected to strengthen this year by a greater amount than last year, Interfax reported. The bank seeks to avoid "sharp" ruble gains, Ignatyev said, the news service reported.
 
 
<b>Gazprom Eyes Northgas 
 </b>

MOSCOW (Bloomberg) - Gazprom, Russia's state-controlled gas company, said it will acquire 51 percent of Northgas, an independent producer, settling a legal battle and restoring Gazprom's control of a gas field.
 "The signing of this agreement allows us to restore control over an important gas-extracting company, which had previously belonged to Gazprom,'' said Gazprom Deputy Chief Executive Alexander Ananenkov in an e-mailed statement Monday
 A Moscow court in April stripped Northgas of a license to tap the Severo-Urengoi gas and gas condensate field.
 
 



TITLE: Gazprom Eyes Oil off Sakhalin
PUBLISHER: Staff Writer
TEXT: Gas giant Gazprom wants to buy into two oil fields on Sakhalin Island in the Far East as it seeks to branch into the oil business, Alexander Medvedev, head of Gazprom's export unit, said Friday.
 
Gazprom, which expects to have money to spend once the government increases its stake in the company, wants to buy state-owned oil company Rosneft's 20 percent stake in the Sakhalin-1 field, news agencies reported.
 &quot;We are ready to make Rosneft an offer it can't refuse,&quot; Medvedev said. The Sakhalin-1 project has estimated reserves of 2.3 billion barrels of oil and 17 trillion cubic feet of gas.
 In a separate move, Gazprom is also interested in acquiring a 25 percent stake in Sakhalin-2, owned by Royal Dutch/Shell-led Sakhalin Energy. Medvedev said Gazprom planned to swap a stake in its 100 billion cubic meter Zapolyarnoye gas field in Western Siberia for the stake in the Sakhalin-2 oil and gas project.
 Royal Dutch/Shell told Reuters that the talks with Gazprom were at an advanced stage, but declined to give a timeline for a deal.
 Medvedev's comments come ahead of the government's anticipated purchase of Gazprom shares. It has previously said it plans to increase its current 39.3 percent stake in Gazprom to a majority before the company's June 24 shareholder meeting.
 &quot;As soon as the government completes the purchase of the controlling stake in Gazprom, we will find ourselves with serious investment resources,&quot; Medvedev said.
 On Wednesday, Economic Development and Trade Minister German Gref pegged the amount the government is prepared to pay for a 10.7 percent stake in Gazprom at between $6 billion and $8.5 billion.
 The extra 10.7 percent would be enough to give the government a majority in Gazprom.The exact sum to be paid will be discussed during the June 15 Gazprom board meeting.
 The government plans to sell some of its stake in Rosneft to pay for a purchase of Gazprom shares. But Rosneft, whose long-planned merger with Gazprom fell through in May amid disagreements between the two companies' senior management, said it was not considering selling its stake in Sakhalin-1.
 &quot;If they want to talk about buying something, they need to first check if someone is selling it,&quot; Rosneft spokesman Vladimir Voyevoda said. &quot;For now, we do not have any intentions to sell.&quot;
 &quot;A deal clearly makes sense,&quot; said Kaha Kiknavelidze, oil and gas analyst at brokerage Troika Dialog. Rosneft is saddled with some $20 billion of debt after the controversial purchase of Yukos' main production unit Yuganskneftegaz.
 Gazprom will have to find a home for the billions it is set to get from the government. Reformists within the government have voiced concern that the chase after assets is making Gazprom bloated. In November, Gref said the company was a &quot;hyper-monopoly&quot; that was buying up &quot;all imaginable and unimaginable types of businesses.&quot;
 But diversification could make strategic sense from a political and corporate standpoint, said Alexander Blokhin, energy analyst at the Antanta Capital brokerage. &quot;All the largest companies in the world earn money from both oil and gas,&quot; Blokhin said.
 Gas prices tend to lag oil prices by between six and nine months, which allows energy companies to hedge risks, he said. If the oil price drops sharply, for example, then gas revenues support companies' bottom line until they can cut costs. And the government would like to integrate its oil and gas holdings in one large player that it could control, Blokhin added.
 The government positions held by senior executives at the two companies could also make the issue complicated, said Caius Rapanu, senior oil and gas analyst at UralSib investment bank.
 Igor Sechin, deputy chief of staff at the Kremlin, is Rosneft chairman, while chief of staff Dmitry Medvedev is chairman of Gazprom's board. To become a global player, Gazprom must first build up contacts through joint ventures, Rapanu said.
 &quot;Every asset that Gazprom gets may be leveraged in the future in order to get other assets in areas of the world where Gazprom wants to go. It may get into Sakhalin [projects] with someone, and that someone will then give it a share of retail distribution in his country,&quot; Rapanu said.
 
 o
 
MOSCOW (Bloomberg) - The government may decide as early as today how much to offer for a 10.7 percent stake in Gazprom, the world's largest natural gas producer, as President Vladimir Putin seeks to gain full control of the company.
 
Putin's government needs to at least match the current market price to show international investors that shareholder rights count, said Chris Weafer, chief strategist for Moscow-based Alfa Bank. Russia wants to lure back some of the $9.5 billion investors pulled out of the country last year after the dismantlement of Yukos.
 &quot;It would send a hugely negative signal to the market if the government is ready to use its strong position in the company to ignore the concerns of minority shareholders,'' Weafer said.

TITLE: Gazprom Eyes Oil off Sakhalin
PUBLISHER: Staff Writer
TEXT: Gas giant Gazprom wants to buy into two oil fields on Sakhalin Island in the Far East as it seeks to branch into the oil business, Alexander Medvedev, head of Gazprom's export unit, said Friday.
 
Gazprom, which expects to have money to spend once the government increases its stake in the company, wants to buy state-owned oil company Rosneft's 20 percent stake in the Sakhalin-1 field, news agencies reported.
 &quot;We are ready to make Rosneft an offer it can't refuse,&quot; Medvedev said. The Sakhalin-1 project has estimated reserves of 2.3 billion barrels of oil and 17 trillion cubic feet of gas.
 In a separate move, Gazprom is also interested in acquiring a 25 percent stake in Sakhalin-2, owned by Royal Dutch/Shell-led Sakhalin Energy. Medvedev said Gazprom planned to swap a stake in its 100 billion cubic meter Zapolyarnoye gas field in Western Siberia for the stake in the Sakhalin-2 oil and gas project.
 Royal Dutch/Shell told Reuters that the talks with Gazprom were at an advanced stage, but declined to give a timeline for a deal.
 Medvedev's comments come ahead of the government's anticipated purchase of Gazprom shares. It has previously said it plans to increase its current 39.3 percent stake in Gazprom to a majority before the company's June 24 shareholder meeting.
 &quot;As soon as the government completes the purchase of the controlling stake in Gazprom, we will find ourselves with serious investment resources,&quot; Medvedev said.
 On Wednesday, Economic Development and Trade Minister German Gref pegged the amount the government is prepared to pay for a 10.7 percent stake in Gazprom at between $6 billion and $8.5 billion.
 The extra 10.7 percent would be enough to give the government a majority in Gazprom.The exact sum to be paid will be discussed during the June 15 Gazprom board meeting.
 The government plans to sell some of its stake in Rosneft to pay for a purchase of Gazprom shares. But Rosneft, whose long-planned merger with Gazprom fell through in May amid disagreements between the two companies' senior management, said it was not considering selling its stake in Sakhalin-1.
 &quot;If they want to talk about buying something, they need to first check if someone is selling it,&quot; Rosneft spokesman Vladimir Voyevoda said. &quot;For now, we do not have any intentions to sell.&quot;
 &quot;A deal clearly makes sense,&quot; said Kaha Kiknavelidze, oil and gas analyst at brokerage Troika Dialog. Rosneft is saddled with some $20 billion of debt after the controversial purchase of Yukos' main production unit Yuganskneftegaz.
 Gazprom will have to find a home for the billions it is set to get from the government. Reformists within the government have voiced concern that the chase after assets is making Gazprom bloated. In November, Gref said the company was a &quot;hyper-monopoly&quot; that was buying up &quot;all imaginable and unimaginable types of businesses.&quot;
 But diversification could make strategic sense from a political and corporate standpoint, said Alexander Blokhin, energy analyst at the Antanta Capital brokerage. &quot;All the largest companies in the world earn money from both oil and gas,&quot; Blokhin said.
 Gas prices tend to lag oil prices by between six and nine months, which allows energy companies to hedge risks, he said. If the oil price drops sharply, for example, then gas revenues support companies' bottom line until they can cut costs. And the government would like to integrate its oil and gas holdings in one large player that it could control, Blokhin added.
 The government positions held by senior executives at the two companies could also make the issue complicated, said Caius Rapanu, senior oil and gas analyst at UralSib investment bank.
 Igor Sechin, deputy chief of staff at the Kremlin, is Rosneft chairman, while chief of staff Dmitry Medvedev is chairman of Gazprom's board. To become a global player, Gazprom must first build up contacts through joint ventures, Rapanu said.
 &quot;Every asset that Gazprom gets may be leveraged in the future in order to get other assets in areas of the world where Gazprom wants to go. It may get into Sakhalin [projects] with someone, and that someone will then give it a share of retail distribution in his country,&quot; Rapanu said.
 
 o
 
MOSCOW (Bloomberg) - The government may decide as early as today how much to offer for a 10.7 percent stake in Gazprom, the world's largest natural gas producer, as President Vladimir Putin seeks to gain full control of the company.
 
Putin's government needs to at least match the current market price to show international investors that shareholder rights count, said Chris Weafer, chief strategist for Moscow-based Alfa Bank. Russia wants to lure back some of the $9.5 billion investors pulled out of the country last year after the dismantlement of Yukos.
 &quot;It would send a hugely negative signal to the market if the government is ready to use its strong position in the company to ignore the concerns of minority shareholders,'' Weafer said.

TITLE: Courtyard Marriott to Open
PUBLISHER: Staff Writer
TEXT: One of the most long-delayed hotel projects in Moscow, the 218-room Courtyard Marriott, at 7 Voznesensky Pereulok, will finally open its doors to guests this summer.
 
Even though the building was completed nearly 1 1/2 years ago, it has never opened as a hotel. Instead, builder and owner Baltic Construction Company, due to reasons that were never made public, offered it up for sale for a whopping 60 million euros ($73 million).
 No buyer has been found, though, and the hotel will welcome its first guests as soon as the end of July, said the Courtyard Marriott's general manager, Marco Fien.
 The four-star hotel consists of three interconnected buildings, including a two-story historical building facing Voznesensky Pereulok, and cost an estimated $35 million to build. It features two restaurants, four conference rooms totaling 300 square meters, a 360-square-meter atrium with a capacity of up to 400 people, and underground parking for 65 cars. 
 The hotel will be operated by U.S. hotel giant Marriott International, which directly manages only one other hotel in Moscow, the 475-room Renaissance. 
 The three Marriott hotels in the city - the Marriott Tverskaya, the Marriott Royal Aurora and the Marriott Grand - are operated by a franchisee, Interstate Hotels &amp; Resorts. 
 The estimated rack rate will be $295 per night, Fien said.
 Located across from St. Andrew's Anglican Church and near the Moscow Conservatory, the Courtyard's location could be one of the best of any hotel of its class in Moscow. 
 For example, the Novotel City Center and the recently opened Holiday Inn Lesnaya are located much further from the historical center - near the Novoslobodskaya and Belorusskaya metro stations, respectively.
 &quot;The hotel will be catering to transient business travelers; this is what the Courtyard brand is all about,&quot; Fien said, suggesting that the hotel's proximity to the Japanese Embassy could help it capture some of the business travel demand coming from Japan, in addition to the expected Western clientele.
 Fien was confident that due to growing demand and lack of quality accommodation, the hotel would easily &quot;carve out its niche on the market.&quot;
 The Courtyard opening was &quot;a long time coming,&quot; said Scott Antel, partner at Ernst &amp; Young and head of its Hospitality Consulting and Legal Advisory Group. 
 &quot;This is not the time to be doodling around on opening, when you have such a market,&quot; he said, referring to record-setting occupancy rates and revenues for Western-standard hotels citywide, driven by a shortage of quality accommodation. 
 Occupancy rates at Moscow hotels well exceed 70 percent, while the average room rate is currently $250, according to Ernst &amp; Young figures.
 Marina Usenko, vice president at Jones Lang LaSalle, estimated that with an average room rate of $200 and 65 percent occupancy, a hotel such as the Courtyard would be capable of bringing in at least $7 million in profits after its first year of operations.
 &quot;This is an excellent location,&quot; she said. &quot;For the next three to five years, at the very least, they will not face competition in Moscow.&quot;
 The existence of several other Marriott hotels in Moscow allows cross-selling with the Courtyard. For that reason, as well as being part of Marriott's global reservation system, the hotel should not experience any occupancy problems, said Stephane Meyrat, senior consultant at Hotel Consulting &amp; Development Group. 
 &quot;It will take a slice of the market without breaking it back too much,&quot; he said.

TITLE: Courtyard Marriott to Open
PUBLISHER: Staff Writer
TEXT: One of the most long-delayed hotel projects in Moscow, the 218-room Courtyard Marriott, at 7 Voznesensky Pereulok, will finally open its doors to guests this summer.
 
Even though the building was completed nearly 1 1/2 years ago, it has never opened as a hotel. Instead, builder and owner Baltic Construction Company, due to reasons that were never made public, offered it up for sale for a whopping 60 million euros ($73 million).
 No buyer has been found, though, and the hotel will welcome its first guests as soon as the end of July, said the Courtyard Marriott's general manager, Marco Fien.
 The four-star hotel consists of three interconnected buildings, including a two-story historical building facing Voznesensky Pereulok, and cost an estimated $35 million to build. It features two restaurants, four conference rooms totaling 300 square meters, a 360-square-meter atrium with a capacity of up to 400 people, and underground parking for 65 cars. 
 The hotel will be operated by U.S. hotel giant Marriott International, which directly manages only one other hotel in Moscow, the 475-room Renaissance. 
 The three Marriott hotels in the city - the Marriott Tverskaya, the Marriott Royal Aurora and the Marriott Grand - are operated by a franchisee, Interstate Hotels &amp; Resorts. 
 The estimated rack rate will be $295 per night, Fien said.
 Located across from St. Andrew's Anglican Church and near the Moscow Conservatory, the Courtyard's location could be one of the best of any hotel of its class in Moscow. 
 For example, the Novotel City Center and the recently opened Holiday Inn Lesnaya are located much further from the historical center - near the Novoslobodskaya and Belorusskaya metro stations, respectively.
 &quot;The hotel will be catering to transient business travelers; this is what the Courtyard brand is all about,&quot; Fien said, suggesting that the hotel's proximity to the Japanese Embassy could help it capture some of the business travel demand coming from Japan, in addition to the expected Western clientele.
 Fien was confident that due to growing demand and lack of quality accommodation, the hotel would easily &quot;carve out its niche on the market.&quot;
 The Courtyard opening was &quot;a long time coming,&quot; said Scott Antel, partner at Ernst &amp; Young and head of its Hospitality Consulting and Legal Advisory Group. 
 &quot;This is not the time to be doodling around on opening, when you have such a market,&quot; he said, referring to record-setting occupancy rates and revenues for Western-standard hotels citywide, driven by a shortage of quality accommodation. 
 Occupancy rates at Moscow hotels well exceed 70 percent, while the average room rate is currently $250, according to Ernst &amp; Young figures.
 Marina Usenko, vice president at Jones Lang LaSalle, estimated that with an average room rate of $200 and 65 percent occupancy, a hotel such as the Courtyard would be capable of bringing in at least $7 million in profits after its first year of operations.
 &quot;This is an excellent location,&quot; she said. &quot;For the next three to five years, at the very least, they will not face competition in Moscow.&quot;
 The existence of several other Marriott hotels in Moscow allows cross-selling with the Courtyard. For that reason, as well as being part of Marriott's global reservation system, the hotel should not experience any occupancy problems, said Stephane Meyrat, senior consultant at Hotel Consulting &amp; Development Group. 
 &quot;It will take a slice of the market without breaking it back too much,&quot; he said.

TITLE: IN BRIEF
TEXT: <b>VTB Wants Early Buy
 </b>

ST. PETERSBURG (SPT) - Vneshtorgbank (VTB), the country's second-largest bank, plans to speed up its buying of 50 percent of St. Petersburg-based PromStroiBank, the president of VTB Andrei Kostin said Friday, Interfax reported.
 Kostin said he believed the shares purchase, which would increase VTB's stake to 75 percent, will take place as early as fall, not the end of the year as previously planned.
 
 
<b>Severstal Looks East
 </b>

ST. PETERSBURG (SPT) - Severstal Group holding wants to establish business operations in China, possibly in the area of carmaking, but as yet cannot find a Chinese partner, the company's vice president Maxim Tevs said Friday, Interfax reported.
 Speaking at the second Russia-China Investment Forum, Tevs said the holding had been looking at the possibility for a long time, but a lack of a favorable Chinese partner has been restraining Severstal's ambitions.
 "We would like to set up a joint venture in the north eastern province of China that would concentrate on goods with high added value. This could be car components," Tevs said, as cited by Interfax.
 
 
<b>Aeroflot to Buy 50 Jets
 </b>

LE BOURGET, France (Reuters) - Russian flag carrier Aeroflot is close to finalizing a deal to buy up to 50 short-haul passenger jets from domestic manufacturer Sukhoi, a source told Reuters on Monday.
 Aeroflot and Sukhoi were "finalizing the contract" for RRJ-75 planes, an industry source said at the Paris Air Show. The deal may also include 20 options.
 The jets sell for up to $25 million each. Sukhoi was also in negotiations for major aircraft orders with two other airlines, the source said.
 
 
<b>Thales in Sukhoi Deal
 </b>

PARIS (Reuters) - French defense electronics company Thales has signed a $120 million contract with Russia's Sukhoi Civil Aircraft to provide flight decks for its regional jets, the company said Monday. 
 It said Sukhoi had selected Thales to equip its new RRJ regional jets with a flight deck similar to that of Airbus's new A380 jumbo, and that the new aircraft would be ready for the Russian national and export markets "as soon as 2007."
 
 
<b>Welteke on Bank Board
 </b>

MOSCOW (Bloomberg) - Ernst Welteke, the former Bundesbank president who resigned amid a criminal probe last year, joined the board of Center-Invest, Russia's 98th-largest bank by assets.
 Welteke was elected an independent director of the Rostov-on-Don based bank, which is partly owned by the European Bank for Reconstruction and Development, at its annual meeting on June 8, Welteke said Friday in an interview posted on the bank's web site.
 
 
<b>Yukos Director Arrested
 </b>

LONDON (Bloomberg) - Russian authorities arrested Antonio Valdez-Garcia, general director at Yukos' Fargoil unit, on his arrival in Russia, Interfax reported Monday, citing the press center of Yukos' former chief executive, Mikhail Khodorkovsky, who is in jail.
 The Prosecutor General's office is investigating Yukos and Fargoil for allegedly embezzling 31 billion rubles ($1.1 billion) in December 2001, the news service said. 



TITLE: IN BRIEF
TEXT: VTB Wants Early Buy
 </b>

ST. PETERSBURG (SPT) - Vneshtorgbank (VTB), the country's second-largest bank, plans to speed up its buying of 50 percent of St. Petersburg-based PromStroiBank, the president of VTB Andrei Kostin said Friday, Interfax reported.
 Kostin said he believed the shares purchase, which would increase VTB's stake to 75 percent, will take place as early as fall, not the end of the year as previously planned.
 
 
<b>Severstal Looks East
 </b>

ST. PETERSBURG (SPT) - Severstal Group holding wants to establish business operations in China, possibly in the area of carmaking, but as yet cannot find a Chinese partner, the company's vice president Maxim Tevs said Friday, Interfax reported.
 Speaking at the second Russia-China Investment Forum, Tevs said the holding had been looking at the possibility for a long time, but a lack of a favorable Chinese partner has been restraining Severstal's ambitions.
 "We would like to set up a joint venture in the north eastern province of China that would concentrate on goods with high added value. This could be car components," Tevs said, as cited by Interfax.
 
 
<b>Aeroflot to Buy 50 Jets
 </b>

LE BOURGET, France (Reuters) - Russian flag carrier Aeroflot is close to finalizing a deal to buy up to 50 short-haul passenger jets from domestic manufacturer Sukhoi, a source told Reuters on Monday.
 Aeroflot and Sukhoi were "finalizing the contract" for RRJ-75 planes, an industry source said at the Paris Air Show. The deal may also include 20 options.
 The jets sell for up to $25 million each. Sukhoi was also in negotiations for major aircraft orders with two other airlines, the source said.
 
 
<b>Thales in Sukhoi Deal
 </b>

PARIS (Reuters) - French defense electronics company Thales has signed a $120 million contract with Russia's Sukhoi Civil Aircraft to provide flight decks for its regional jets, the company said Monday. 
 It said Sukhoi had selected Thales to equip its new RRJ regional jets with a flight deck similar to that of Airbus's new A380 jumbo, and that the new aircraft would be ready for the Russian national and export markets "as soon as 2007."
 
 
<b>Welteke on Bank Board
 </b>

MOSCOW (Bloomberg) - Ernst Welteke, the former Bundesbank president who resigned amid a criminal probe last year, joined the board of Center-Invest, Russia's 98th-largest bank by assets.
 Welteke was elected an independent director of the Rostov-on-Don based bank, which is partly owned by the European Bank for Reconstruction and Development, at its annual meeting on June 8, Welteke said Friday in an interview posted on the bank's web site.
 
 
<b>Yukos Director Arrested
 </b>

LONDON (Bloomberg) - Russian authorities arrested Antonio Valdez-Garcia, general director at Yukos' Fargoil unit, on his arrival in Russia, Interfax reported Monday, citing the press center of Yukos' former chief executive, Mikhail Khodorkovsky, who is in jail.
 The Prosecutor General's office is investigating Yukos and Fargoil for allegedly embezzling 31 billion rubles ($1.1 billion) in December 2001, the news service said.

TITLE: Gazprom's Media Strategy Full of Holes
TEXT: Is the possible acquisition of Izvestia by Gazprom a deal or a joke? Last week, it was announced that the state-controlled gas monopoly was about to purchase control of Izvestia from ProfMedia, which also owns Komsomolskaya Pravda and other media properties.
 
Now the focus in the media has shifted to the motivation for the potential sale. Various observers are asserting that it is another attempt by President Vladimir Putin to get more control over the press. Gazprom's takeover of NTV in 2001 was widely viewed as an assault on press freedom by Putin. Could the Izvestia deal be the next step in some master plan?
 Let's apply some reality testing to that proposition. Izvestia has a circulation of about 235,000. By comparison, its sister paper, Komsomolskaya Pravda, has a circulation in the millions. For this reason, the suggestion that Izvestia's sale would mean a takeover of the print media sounds more like a joke.
 Yet while the potential sale would not necessarily result in complete control of the press, could it be a good business deal? 
 It sounds like Gazprom may get Izvestia at a good price. Georgy Bovt, a former Izvestia managing editor and current editor of Profil magazine, said ProfMedia paid $40 million when it acquired its stake in Izvestia. How much will Gazprom pay? This has not been officially announced. But $10 million to $20 million is the speculation among publishers polled by Vedomosti.
 Buying a newspaper property for half price or better sounds like quite a deal. Now, let's reality test that, too. Izvestia is certainly a good name, recognized by all. But, is it also a good business, one worthy of Gazprom's investment?
 In developed countries, newspaper profitability comes from advertising revenue. Circulation revenue usually just covers the cost of distribution and perhaps promotion. In the United States, for example, newspapers average around 58 percent advertising content. That provides enough revenue to pay professional wages to staff, to pay market value for rent and printing services - so as to avoid relying on the subsidies that are so common in Russia - and to produce profits that will offer a return on investment for owners.
 How much advertising is in Izvestia? On the positive side, Izvestia has been improving as a product lately. It has added color, a weekend supplement, an improved opinion page and other features. 
 Yet there seems to have been little concomitant gain in advertising. This may be a sign that the advertising, editorial and circulation departments are failing to function according to a unified plan. A leadership vacuum at the top is a frequent cause of this kind of uncoordinated activity. Thus, if we analyze the deal as a purchase of a profitable business, at first glance, it does not make a lot of sense.
 What's more, it is hard to understand why the gas monopoly would want to expand its role in the media business. In 1996, when Gazprom acquired a 30 percent stake in NTV, then-CEO Rem Vyakhirev explained that he planned on using the television network to communicate with his 1 million shareholders, which was why Gazprom was buying in. 
 The present Gazprom management may have a similar goal in sight for Izvestia, but not all shareholders are on the same page. 
 Investment fund Hermitage Capital, a Gazprom minority shareholder, has been critical of the rising costs of the gas giant's non-core business activities. Buying a newspaper that may be on shaky financial ground certainly could reinforce that concern.
 Regardless, perhaps the discussion of the Izvestia sale has done some good by focusing public attention on the need for Gazprom to finally get out of the media business. Following the takeover of NTV in 2001, Putin characterized Gazprom's role as an interim one. It has been quite an extended interim period.
 However, there is actually good business sense behind the idea of holding the Gazprom media properties until now. Earlier, media advertising was largely not a tax deductible business expense for Russian companies, due to tax laws left over from the Yeltsin era. A private-sector initiative successfully advocated for a change in the Tax Code. Thus, in mid-2002, advertising finally became a legitimate business expense in Russia and is now fully tax deductible.
 In part, as a response to this improved business regulation, there is now an advertising boom underway in Russia. As a result, foreign publishers are flocking to the Russian market, companies like Sanoma, News Corp. and others. Many believe that Russia is the world's fastest-growing ad market. 
 What better time could there possibly be for the Kremlin to make good on the promise that Gazprom would be just a transient player in the media market? Now is the time for Gazprom's media holdings to go up for sale.
 Gazprom is in no position to take the admirable editorial improvements started by the Izvestia staff and translate them into success in business terms. The company has displayed an absence of business acumen in the media field. Over the course of its stewardship of NTV, the channel has lost value as a brand and lost its reputation as a source of independent news. It remains successful because of the favorable ad market. 
 Thus, Gazprom could sell its media holdings now and not experience the impact of the mismanagement of its media brands. On the other hand, if Gazprom stays in the media business, it would certainly look like the company was more interested in propaganda than profits. But this is a fool's game.
 Russians are smart, literate people. They can recognize phony news stories that are bought and paid for. Indeed, many viewers and readers are upset by the hidden advertising and other distasteful content that is all too often foisted upon them. In increasing numbers, media consumers have been calling for the reinstitution of regulation to end this nonsense. Moreover, newspapers that are felt to be pure propaganda render poor value to advertisers because these outlets engender distrust. If all Gazprom managers really want is to be propagandists, not businesspeople, then the joke is on them.
 
 <i>William Dunkerley is an independent media business consultant working in Russia and other post-communist countries. He contributed this comment to The St. Petersburg Times </i>

TITLE: Gazprom's Media Strategy Full of Holes
TEXT: Is the possible acquisition of Izvestia by Gazprom a deal or a joke? Last week, it was announced that the state-controlled gas monopoly was about to purchase control of Izvestia from ProfMedia, which also owns Komsomolskaya Pravda and other media properties.
 
Now the focus in the media has shifted to the motivation for the potential sale. Various observers are asserting that it is another attempt by President Vladimir Putin to get more control over the press. Gazprom's takeover of NTV in 2001 was widely viewed as an assault on press freedom by Putin. Could the Izvestia deal be the next step in some master plan?
 Let's apply some reality testing to that proposition. Izvestia has a circulation of about 235,000. By comparison, its sister paper, Komsomolskaya Pravda, has a circulation in the millions. For this reason, the suggestion that Izvestia's sale would mean a takeover of the print media sounds more like a joke.
 Yet while the potential sale would not necessarily result in complete control of the press, could it be a good business deal? 
 It sounds like Gazprom may get Izvestia at a good price. Georgy Bovt, a former Izvestia managing editor and current editor of Profil magazine, said ProfMedia paid $40 million when it acquired its stake in Izvestia. How much will Gazprom pay? This has not been officially announced. But $10 million to $20 million is the speculation among publishers polled by Vedomosti.
 Buying a newspaper property for half price or better sounds like quite a deal. Now, let's reality test that, too. Izvestia is certainly a good name, recognized by all. But, is it also a good business, one worthy of Gazprom's investment?
 In developed countries, newspaper profitability comes from advertising revenue. Circulation revenue usually just covers the cost of distribution and perhaps promotion. In the United States, for example, newspapers average around 58 percent advertising content. That provides enough revenue to pay professional wages to staff, to pay market value for rent and printing services - so as to avoid relying on the subsidies that are so common in Russia - and to produce profits that will offer a return on investment for owners.
 How much advertising is in Izvestia? On the positive side, Izvestia has been improving as a product lately. It has added color, a weekend supplement, an improved opinion page and other features. 
 Yet there seems to have been little concomitant gain in advertising. This may be a sign that the advertising, editorial and circulation departments are failing to function according to a unified plan. A leadership vacuum at the top is a frequent cause of this kind of uncoordinated activity. Thus, if we analyze the deal as a purchase of a profitable business, at first glance, it does not make a lot of sense.
 What's more, it is hard to understand why the gas monopoly would want to expand its role in the media business. In 1996, when Gazprom acquired a 30 percent stake in NTV, then-CEO Rem Vyakhirev explained that he planned on using the television network to communicate with his 1 million shareholders, which was why Gazprom was buying in. 
 The present Gazprom management may have a similar goal in sight for Izvestia, but not all shareholders are on the same page. 
 Investment fund Hermitage Capital, a Gazprom minority shareholder, has been critical of the rising costs of the gas giant's non-core business activities. Buying a newspaper that may be on shaky financial ground certainly could reinforce that concern.
 Regardless, perhaps the discussion of the Izvestia sale has done some good by focusing public attention on the need for Gazprom to finally get out of the media business. Following the takeover of NTV in 2001, Putin characterized Gazprom's role as an interim one. It has been quite an extended interim period.
 However, there is actually good business sense behind the idea of holding the Gazprom media properties until now. Earlier, media advertising was largely not a tax deductible business expense for Russian companies, due to tax laws left over from the Yeltsin era. A private-sector initiative successfully advocated for a change in the Tax Code. Thus, in mid-2002, advertising finally became a legitimate business expense in Russia and is now fully tax deductible.
 In part, as a response to this improved business regulation, there is now an advertising boom underway in Russia. As a result, foreign publishers are flocking to the Russian market, companies like Sanoma, News Corp. and others. Many believe that Russia is the world's fastest-growing ad market. 
 What better time could there possibly be for the Kremlin to make good on the promise that Gazprom would be just a transient player in the media market? Now is the time for Gazprom's media holdings to go up for sale.
 Gazprom is in no position to take the admirable editorial improvements started by the Izvestia staff and translate them into success in business terms. The company has displayed an absence of business acumen in the media field. Over the course of its stewardship of NTV, the channel has lost value as a brand and lost its reputation as a source of independent news. It remains successful because of the favorable ad market. 
 Thus, Gazprom could sell its media holdings now and not experience the impact of the mismanagement of its media brands. On the other hand, if Gazprom stays in the media business, it would certainly look like the company was more interested in propaganda than profits. But this is a fool's game.
 Russians are smart, literate people. They can recognize phony news stories that are bought and paid for. Indeed, many viewers and readers are upset by the hidden advertising and other distasteful content that is all too often foisted upon them. In increasing numbers, media consumers have been calling for the reinstitution of regulation to end this nonsense. Moreover, newspapers that are felt to be pure propaganda render poor value to advertisers because these outlets engender distrust. If all Gazprom managers really want is to be propagandists, not businesspeople, then the joke is on them.
 
 <i>William Dunkerley is an independent media business consultant working in Russia and other post-communist countries. He contributed this comment to The St. Petersburg Times </i>

TITLE: Investors
 Feel 'Blind' Post Yukos
PUBLISHER: Staff Writer
TEXT: Although the word Yukos seems to have ingrained itself into the consciousness of most businesses eyeing Russia, the main effect that the court case had was not the dismantling of Yukos itself, but the regulatory issues unearthed in the process. 
 
Now, despite a largely positive outlook on investment, the government's tightening control over strategic sectors of the economy has investors united in demanding one thing - a clear set of game rules. 
 Analysts say that profits to be gained in Russia's natural resources mining sector and consumer markets compensate for the risks and the disadvantages of working in the country's unstable transitional economy, but the government needs to outline its role in business development in order to see long-term growth. 
 &quot;The uncontrolled meddling in business by state bureaucrats [in the Yukos case] broadened into much bigger investor concerns over the government's role in the economy,&quot; said Chris Weafer, chief analyst at Alfa Bank.
 That bodes rather dangerous for Russia, as other CIS countries are beginning to be seen as more open for &quot;business without borders.&quot;
 &quot;Ukraine definitely competes with Russia for the investment dollars, and not just for foreign investors but for Russian businesses too. A lot of capital flight is ending up in Ukraine,&quot; Weafer said.
 Capital flight from the country reached $9.5 billion last year, and is predicted to hit $14 billion over the next two years, Central Bank deputy chairman Alexei Ulyukayev said last week. In main that money is being squeezed out of the core strategic Russian industries, particularly those that the government itself now seems to be targeting, Weafer said. 
 &quot;Seemingly abandoning its plan to foster small and medium-sized business through large tax gains from the energy sector, the government has instead focused on selecting certain &quot;champion&quot; industry sectors that it could support and control such as the National Aircraft Association, the defense [industry], pulp and paper,&quot; Weafer said.
 That leads to a lack of progress in the country's manufacturing-industrial development, which is the heart of the economy - &quot;Russia's main problem [today]&quot; Weafer said.
 For foreign investors the government's choice of strategic sectors to exercise business control does not, however, read as a negative trend. &quot;Most countries have certain strategic sectors to which foreign investors have little access,&quot; said Andrew Somers, president of the American Chamber of Commerce in Russia.
 &quot;Making them off limits does not discourage business, as long as the limitations are clear,&quot; he said. The exercise of setting up a concrete set of game rules, if successfully performed by the government, would encourage foreign business, he said.
 As an example, Somers named the upcoming decision by the government on foreign participation in mining projects.
 Earlier this year, the government pulled TNK-BP's bid for a mining field in Sakhalin after a successful initial registration. &quot;I'm hopeful that the subsoil law will come out with some clarification of how licenses are appointed, issued, and what accountability there is,&quot; Somers said, stressing that the latter is a particularly important factor for foreign investments in the energy sector.
 &quot;Russia is still trying to work out what their strategy [on natural resources] is and how to use it as a foreign tool. It's not just business, it's a foreign policy also,&quot; he said.
 
 <strong>
HEADING NORTHWEST
 </strong>The investment story reads much more positively in the non-strategic sectors, businesses and analysts say. Despite the Yukos aftertaste, Russia, and particularly its Northwest region, has tailored its opportunities well to attract foreign investments.
 
&quot;Those companies already operating in Russia have experienced significant growth in the last couple of years, and the market is expanding,&quot; said Olga Litvinova, St. Petersburg office managing partner for Ernst &amp; Young and EY Law.
 Attracting investors to Russia, and the Northwest region in particular, are the size of the market and the cheap operating costs, supported by top investment grades issued by rating agencies such as Fitch and Moody's, she said.
 Business has been booming especially in sectors such as consumer goods, real estate, retail and light industry sectors, where government interference has been minor.
 In a series of major foreign investment deals last year, soft drinks giant Coca-Cola purchased regional juice-maker Multon, ketchup king Heinz entered into a joint venture with St. Petersburg-based condiments producer Petrosoyuz, while Swedish furniture major Ikea continued its mega-stores' expansion into the regions.
 For such companies, outside of the &quot;champion&quot; industry ring fence, the main issues are the legislative contradictions and the complexity of administrative reporting, said Maxim Kalinin, partner at law firm Baker &amp; McKenzie.
 In addition, on a regional level, businesses have the power to negotiate the regulatory environment imposed on them, he said.
 &quot;The government can be lobbied either directly or through business associations in an effort to find compromises that serve the interests of both the state and businesses,&quot; he said.
 As an example Kalinin cited the recent controversy over concessions offered to investors by the Leningrad Oblast regional government.
 &quot;Even though the Supreme Court ruled March 2 that the concessions offered by the Oblast government did not conform to federal laws, the Oblast government, assisted by the local Amcham chapter had reacted quickly to make the necessary amendments,&quot; he said. <i>(See Legally Speaking column, page iv for further details.)</i>
 Litvinova said easing unnecessary administrative burdens has also allowed St. Petersburg to become the main destination for almost all large investments in the Northwest region in the last six months.
 Among the city's largest deals has been the recent multi-million dollar contract with car manufacturer Toyota, which will lay the foundation stone of its factory in Shushari on Tuesday.
 &quot;The city's success in winning the Toyota contract, despite strong competition in the region and beyond, was not due to incentives, which are fewer than in other regions, but to the assistance from the city government through the approval process,&quot; Litvinova said.

TITLE: Investors
 Feel 'Blind' Post Yukos
PUBLISHER: Staff Writer
TEXT: Although the word Yukos seems to have ingrained itself into the consciousness of most businesses eyeing Russia, the main effect that the court case had was not the dismantling of Yukos itself, but the regulatory issues unearthed in the process. 
 
Now, despite a largely positive outlook on investment, the government's tightening control over strategic sectors of the economy has investors united in demanding one thing - a clear set of game rules. 
 Analysts say that profits to be gained in Russia's natural resources mining sector and consumer markets compensate for the risks and the disadvantages of working in the country's unstable transitional economy, but the government needs to outline its role in business development in order to see long-term growth. 
 &quot;The uncontrolled meddling in business by state bureaucrats [in the Yukos case] broadened into much bigger investor concerns over the government's role in the economy,&quot; said Chris Weafer, chief analyst at Alfa Bank.
 That bodes rather dangerous for Russia, as other CIS countries are beginning to be seen as more open for &quot;business without borders.&quot;
 &quot;Ukraine definitely competes with Russia for the investment dollars, and not just for foreign investors but for Russian businesses too. A lot of capital flight is ending up in Ukraine,&quot; Weafer said.
 Capital flight from the country reached $9.5 billion last year, and is predicted to hit $14 billion over the next two years, Central Bank deputy chairman Alexei Ulyukayev said last week. In main that money is being squeezed out of the core strategic Russian industries, particularly those that the government itself now seems to be targeting, Weafer said. 
 &quot;Seemingly abandoning its plan to foster small and medium-sized business through large tax gains from the energy sector, the government has instead focused on selecting certain &quot;champion&quot; industry sectors that it could support and control such as the National Aircraft Association, the defense [industry], pulp and paper,&quot; Weafer said.
 That leads to a lack of progress in the country's manufacturing-industrial development, which is the heart of the economy - &quot;Russia's main problem [today]&quot; Weafer said.
 For foreign investors the government's choice of strategic sectors to exercise business control does not, however, read as a negative trend. &quot;Most countries have certain strategic sectors to which foreign investors have little access,&quot; said Andrew Somers, president of the American Chamber of Commerce in Russia.
 &quot;Making them off limits does not discourage business, as long as the limitations are clear,&quot; he said. The exercise of setting up a concrete set of game rules, if successfully performed by the government, would encourage foreign business, he said.
 As an example, Somers named the upcoming decision by the government on foreign participation in mining projects.
 Earlier this year, the government pulled TNK-BP's bid for a mining field in Sakhalin after a successful initial registration. &quot;I'm hopeful that the subsoil law will come out with some clarification of how licenses are appointed, issued, and what accountability there is,&quot; Somers said, stressing that the latter is a particularly important factor for foreign investments in the energy sector.
 &quot;Russia is still trying to work out what their strategy [on natural resources] is and how to use it as a foreign tool. It's not just business, it's a foreign policy also,&quot; he said.
 
 <strong>
HEADING NORTHWEST
 </strong>The investment story reads much more positively in the non-strategic sectors, businesses and analysts say. Despite the Yukos aftertaste, Russia, and particularly its Northwest region, has tailored its opportunities well to attract foreign investments.
 
&quot;Those companies already operating in Russia have experienced significant growth in the last couple of years, and the market is expanding,&quot; said Olga Litvinova, St. Petersburg office managing partner for Ernst &amp; Young and EY Law.
 Attracting investors to Russia, and the Northwest region in particular, are the size of the market and the cheap operating costs, supported by top investment grades issued by rating agencies such as Fitch and Moody's, she said.
 Business has been booming especially in sectors such as consumer goods, real estate, retail and light industry sectors, where government interference has been minor.
 In a series of major foreign investment deals last year, soft drinks giant Coca-Cola purchased regional juice-maker Multon, ketchup king Heinz entered into a joint venture with St. Petersburg-based condiments producer Petrosoyuz, while Swedish furniture major Ikea continued its mega-stores' expansion into the regions.
 For such companies, outside of the &quot;champion&quot; industry ring fence, the main issues are the legislative contradictions and the complexity of administrative reporting, said Maxim Kalinin, partner at law firm Baker &amp; McKenzie.
 In addition, on a regional level, businesses have the power to negotiate the regulatory environment imposed on them, he said.
 &quot;The government can be lobbied either directly or through business associations in an effort to find compromises that serve the interests of both the state and businesses,&quot; he said.
 As an example Kalinin cited the recent controversy over concessions offered to investors by the Leningrad Oblast regional government.
 &quot;Even though the Supreme Court ruled March 2 that the concessions offered by the Oblast government did not conform to federal laws, the Oblast government, assisted by the local Amcham chapter had reacted quickly to make the necessary amendments,&quot; he said. <i>(See Legally Speaking column, page iv for further details.)</i>
 Litvinova said easing unnecessary administrative burdens has also allowed St. Petersburg to become the main destination for almost all large investments in the Northwest region in the last six months.
 Among the city's largest deals has been the recent multi-million dollar contract with car manufacturer Toyota, which will lay the foundation stone of its factory in Shushari on Tuesday.
 &quot;The city's success in winning the Toyota contract, despite strong competition in the region and beyond, was not due to incentives, which are fewer than in other regions, but to the assistance from the city government through the approval process,&quot; Litvinova said.

TITLE: My Chinese Friend, Investor
PUBLISHER: Staff Writer
TEXT: To add to the $1.25 billion Baltic Pearl investment project, the biggest foreign investment in St. Petersburg, China has recently delighted the city in a string of new projects that could make the eastern neighbor Russia's new best investor-friend.
 
Chinese telco giant Huawei Technologies announced Thursday that it would invest $3 million into the development of St. Petersburg's telecommunications infrastructure.
 The agreement on the project was signed between the city administration and Huawei's officials at the second Russia-China Investment Forum held in St. Petersburg last week.
 At Thursday's meeting of St. Petersburg governor Valentina Matviyenko with the deputy head of China's State Council, Zeng Peiyan, she also suggested Chinese investors could participate in the tenders for construction of the Western Speed Diameter highway development and the first toll tunnel under the Neva River.
 &quot;The highway project will be run as a state and private partnership. This fall we'll announce the tender and if Chinese companies get interested in the project, they can easily apply for this,&quot; Matviyenko said, Interfax reported.
 The turning point in Russia-China relations has been the vast residential housing and infrastructure project the Baltic Pearl project. Backed by $30 million from Shanghai investors, the 200 hectare project will build 2 million square meters of residential and commercial real estate in a swampy southwestern district of St. Petersburg.
 The importance of the Baltic Pearl deal was marked by both Russian and Chinese officials at the forum.
 Russian Economic Development and Trade Minister German Gref said the project marks &quot;the transition from trade collaboration to investment collaboration between Russia and China,&quot; bringing about &quot;a quality shift&quot; in the country's relations.
 For China, the project meant more than a profitable venture. It was intended to show the world that Chinese firms can build world-class residential districts, said the city's Agency of Strategic Investment (ASI), which is involved in attracting major investors to St. Petersburg and which participates in the Baltic Pearl project.
 Yekaterina Farukshina, assistant to the general director of ASI, said St. Petersburg would benefit significantly from the project.
 First of all, the city will have a new residential area on the spot of currently unused land. Secondly, the contract implies that China will build the district's social infrastructure - such as schools and medical clinics, as well as roads - for free, Farukshina said.
 Glen Kolleeny, partner at Salans law firm, which takes care of the Baltic Pearl project, said China has a lot of experience in construction of large residential districts and it does them well.
 &quot;This is indeed a significant project - in fact the biggest real estate investment project in Russia,&quot; Kolleeny said.
 Andrei Korotkov, head of project management department at the city's economic development, trade and industry committee, said the project will greatly benefit the city's budget and create jobs, still further boosting the city's investment climate.
 In 2004 direct foreign investment in St. Petersburg increased by about 40 percent from $650 million in 2003 to $985 million in 2004. Meanwhile, indirect investment totaled $4,5 billion in 2004, Korotkov said.
 He said such a positive tendency was conditioned both by the convenient geographic location of the city and through well-directed work of the city administration, which has tried to promote an open approach to business, stimulating profitable investor conditions.
 Farukshina said the Baltic Pearl could serve as a positive push for other investors to believe in the success of big investment projects in the city.
 Kolleeny disagreed, saying foreign investors would be more attracted just by St. Petersburg's investment opportunities rather than because of one example, such as the Baltic Pearl.
 &quot;[At the end of the day] it doesn't matter where the investment comes from, it's important to have them in the city,&quot; Korotkov said.

TITLE: My Chinese Friend, Investor
PUBLISHER: Staff Writer
TEXT: To add to the $1.25 billion Baltic Pearl investment project, the biggest foreign investment in St. Petersburg, China has recently delighted the city in a string of new projects that could make the eastern neighbor Russia's new best investor-friend.
 
Chinese telco giant Huawei Technologies announced Thursday that it would invest $3 million into the development of St. Petersburg's telecommunications infrastructure.
 The agreement on the project was signed between the city administration and Huawei's officials at the second Russia-China Investment Forum held in St. Petersburg last week.
 At Thursday's meeting of St. Petersburg governor Valentina Matviyenko with the deputy head of China's State Council, Zeng Peiyan, she also suggested Chinese investors could participate in the tenders for construction of the Western Speed Diameter highway development and the first toll tunnel under the Neva River.
 &quot;The highway project will be run as a state and private partnership. This fall we'll announce the tender and if Chinese companies get interested in the project, they can easily apply for this,&quot; Matviyenko said, Interfax reported.
 The turning point in Russia-China relations has been the vast residential housing and infrastructure project the Baltic Pearl project. Backed by $30 million from Shanghai investors, the 200 hectare project will build 2 million square meters of residential and commercial real estate in a swampy southwestern district of St. Petersburg.
 The importance of the Baltic Pearl deal was marked by both Russian and Chinese officials at the forum.
 Russian Economic Development and Trade Minister German Gref said the project marks &quot;the transition from trade collaboration to investment collaboration between Russia and China,&quot; bringing about &quot;a quality shift&quot; in the country's relations.
 For China, the project meant more than a profitable venture. It was intended to show the world that Chinese firms can build world-class residential districts, said the city's Agency of Strategic Investment (ASI), which is involved in attracting major investors to St. Petersburg and which participates in the Baltic Pearl project.
 Yekaterina Farukshina, assistant to the general director of ASI, said St. Petersburg would benefit significantly from the project.
 First of all, the city will have a new residential area on the spot of currently unused land. Secondly, the contract implies that China will build the district's social infrastructure - such as schools and medical clinics, as well as roads - for free, Farukshina said.
 Glen Kolleeny, partner at Salans law firm, which takes care of the Baltic Pearl project, said China has a lot of experience in construction of large residential districts and it does them well.
 &quot;This is indeed a significant project - in fact the biggest real estate investment project in Russia,&quot; Kolleeny said.
 Andrei Korotkov, head of project management department at the city's economic development, trade and industry committee, said the project will greatly benefit the city's budget and create jobs, still further boosting the city's investment climate.
 In 2004 direct foreign investment in St. Petersburg increased by about 40 percent from $650 million in 2003 to $985 million in 2004. Meanwhile, indirect investment totaled $4,5 billion in 2004, Korotkov said.
 He said such a positive tendency was conditioned both by the convenient geographic location of the city and through well-directed work of the city administration, which has tried to promote an open approach to business, stimulating profitable investor conditions.
 Farukshina said the Baltic Pearl could serve as a positive push for other investors to believe in the success of big investment projects in the city.
 Kolleeny disagreed, saying foreign investors would be more attracted just by St. Petersburg's investment opportunities rather than because of one example, such as the Baltic Pearl.
 &quot;[At the end of the day] it doesn't matter where the investment comes from, it's important to have them in the city,&quot; Korotkov said.

TITLE: Automakers Pick St. Petersburg As Russia's Car-Capital
PUBLISHER: Special to The St. Petersburg Times
TEXT: St. Petersburg has become a magnet for foreign carmakers eager to set up shop in Russia, and has every chance of turning into the country's automobile production center in the near future.
 
The first to join the Ford factory that has operated in the city's suburbs for over three years, will be Toyota, whose assembly plant begins construction in Shushari this week. Toyota hopes to start production there by 2007.
 As if following a trend, American-German concern DaimlerChrysler, the world's fifth-largest automaker, ventured last month to negotiate with the St. Petersburg government about building a Mercedes production plant. Not pausing for breath, DailmlerChrysler say they want to start production this year.
 
 <strong>
FOCUS ON RUSSIA
 </strong>When Ford cut the ribbon to the entrance of its factory in Vsevolzhsk in the Leningrad Oblast in July 2002, few were certain the enterprise would get back its $150 million investment. Would Russian consumers trust a Ford Focus produced in a Russian factory to match the quality of those made in the U.S. or Europe?
 
A much-quoted thorn in Ford's works then was the issue of using locally produced car parts. Under the terms of the investor agreement signed by Ford Motor Co. and the Leningrad Oblast government, the company undertook to have 50 percent of its autos locally produced.
 Today, Ford's figures in Russia speak for themselves. Several months ago the 50,000th Ford rolled off the production line. In 2003 and 2004 Ford Focus was the most sold vehicle in Russia. And in May the factory began producing a second-generation Focus, with plans to release 32,000 vehicles this year. In addition, the new Ford will retail for $1,000 less than its predecessor.
 It must be said, the factory has not yet resolved the problem of obtaining supplies locally. Windscreens, rubber mats, seats, sprinklers, internal door panels and so on are made in Russia. However, these items have little effect on the overall price of the car. By 2007, the percentage of locally made parts will have reached the 50 percent level. Analysts say the only way to do this is if the motors or the chassis are made in Russia.
 Scania-Peter, a small factory that produces buses is also located in St. Petersburg. It does not have the expected assembly line; modules are assembled like Lego blocks and only then connected to each other. In a huge conveyer the roofs, sides, motor well and the rear seat are assembled. After that the body is placed on a chassis produced in Sweden (most of the parts are obtained from Europe), and the bus is almost ready.
 Only 70 people work at the enterprise, which puts out about 100 buses a year. The volume is tiny, but enough to service the city's needs for a modern and comfortable form of public transport.
 
 <strong>
LAND OF RISING CAMRY
 </strong>On April 2, the world's No. 2 automaker Toyota Motor Corp. signed an agreement stating its intention of building a factory in St. Petersburg with Economic Development and Trade Minister German Gref and city governor Valentina Matviyenko. The decision came at the end of a long research process, during which the Japanese considered many sights in Moscow, Nizhny Novgorod and St. Petersburg, among others.
 
In terms of space for future expansion, Toyota's project promises to be on a much larger scale than the one Ford currently runs. The Japanese automaker has acquired a 220-hectare site in the south of St. Petersburg and plans to invest $150 million in its factory. By comparison, Ford occupies just 26 hectares.
 Tokuichi Uranishi, president of Toyota Motor Europe, said the site could be used to build factories for auto parts suppliers. Analysts say that this is standard practice for the Japanese company, which prefers not to have to build large warehouses. Instead, parts are delivered to its production line in accordance with demand. Having suppliers located nearby also reduces expenses for deliveries.
 The production capacity of Toyota's factory allows for 200,000 vehicles a year. However, the Japanese will not hurry to reach the maximum output. At first, the factory will produce only 20,000 autos a year. Uranishi promised that after two or three years output will rise to 50,000 per year. &quot;It's possible that other Toyota models will be produced,&quot; he said.
 The Japanese surprised the Russians slightly when they declared that initially the plant will produce only the business-class Camry, not, say, the mass-market model Corolla. But Toyota's plan was quickly understood: the automaking giant perceives its St. Petersburg factory as an outpost for a battle on the European market.
 This interpretation is also backed by statistics. While Camry was the best-selling auto in the U.S. market for the last six years - 426,990 units were sold, in Europe only 13,265 were sold in 2004.
 With the help of the St. Petersburg factory, Toyota will be able to offer its full range of models in Europe assembled locally. The company's smallest model, Aygo, is made in the Czech republic, the Yaris (class B) produced in France, Corolla (class C) in Turkey, and Avansis (class D) in Britain.
 In this way, the Russian Camry will be the brand leader in Toyota's European stable and will become competitive with more expensive autos in this class. These include the Audi A6 and the Mercedes E-class saloons.
 In terms of a price drop, the Russian made Camry may take some time to appease. Camry currently retails for $29,000 to $39,000. If Toyota succeeds in finding Russian suppliers, then the cost could fall significantly, but this is unlikely to happen soon. The Japanese are celebrated for demanding high quality production and Russia, as is well known, has a problem with that.
 Foreign part suppliers are not rushing to Russia yet. According to Ernst &amp; Young, only four large international auto parts suppliers produce in Russia: Bosch, Delphi, Lear and Tenneco.
 
 <strong>
A-CLASS ABOVE
 </strong>Toyota's example appears to have been infectious. DaimlerChrysler's plans to build a factory in Russia became known this spring. The company has refused to reveal details, but it is already known that the most likely place for its factory is St. Petersburg.
 
DaimlerChrysler has held talks and reviewed several sites in Russia including a space in Tatarstan. However, at a meeting earlier this month with President Vladimir Putin, the company's representative Yurgen Schremp said that he hoped &quot;the first [Russian] Mercedes will come off the conveyer this fall ... in St. Petersburg,&quot; business daily Vedomosti reported.
 Certain figures about the automakers plans have emerged. DaimlerChrysler is considering building a $100 million to $300 million factory to produce Mercedes autos. The starting capacity will be 25,000 autos a year.
 In an interview with Vedomosti, Klaus Mangold, an adviser to the president of DaimlerChrysler, said that initial production will involve the assembly of imported parts. With time, the factory will expand to include a paint shop and other production infrastructure.
 It is not yet known if DaimlerChrysler will bring any of its suppliers with it. It has been estimated that the factory will have to produce no less than 100,000 autos a year to be profitable.
 Which models will be produced at the factory remains a secret. But it is known that Russians would like to see Mercedes C- and E-class on the production line. However, as in Toyota's case, the wishes of Russian consumers and foreign producers may not coincide.
 <strong>
WHY ST. PETERSBURG?
 </strong>Firstly, St. Petersburg is ideally located in terms of transportation infrastructure. Parts can be imported through the seaport or by rail. And this is rather important for producers because in the early stages they plan to bring in parts from their bases in Europe.
 
In terms of proximity to markets, St. Petersburg loses out in part to Moscow, since the capital accounts for the biggest market demand, especially in the higher price ranges.
 Secondly, an important factor in selecting St. Petersburg is its proximity to EU borders. The only city more favorably positioned in this regard is Kaliningrad.
 Thirdly, and perhaps most importantly, is the good investment climate (not the capricious St. Petersburg weather). A key argument for investors may be the flexible tax payment system developed by the city government. Those who invest at least 300 million rubles ($10.7 million) in the city economy receive a discount on the profit tax of 4 percent. Property tax is cut 1.1 percent for those who invest 150 million rubles and more.
 And lastly, St. Petersburg's City Hall has devised a program that provides more favorable terms for companies deemed to be the city's &quot;strategic partners.&quot; Companies, or individuals, qualify for this status if they are willing to invest $100 million in the city economy.
 Such investors and their projects will receive special consideration from City Hall, which essentially means a reduction in investment risk.

TITLE: Automakers Pick St. Petersburg As Russia's Car-Capital
PUBLISHER: Special to The St. Petersburg Times
TEXT: St. Petersburg has become a magnet for foreign carmakers eager to set up shop in Russia, and has every chance of turning into the country's automobile production center in the near future.
 
The first to join the Ford factory that has operated in the city's suburbs for over three years, will be Toyota, whose assembly plant begins construction in Shushari this week. Toyota hopes to start production there by 2007.
 As if following a trend, American-German concern DaimlerChrysler, the world's fifth-largest automaker, ventured last month to negotiate with the St. Petersburg government about building a Mercedes production plant. Not pausing for breath, DailmlerChrysler say they want to start production this year.
 
 <strong>
FOCUS ON RUSSIA
 </strong>When Ford cut the ribbon to the entrance of its factory in Vsevolzhsk in the Leningrad Oblast in July 2002, few were certain the enterprise would get back its $150 million investment. Would Russian consumers trust a Ford Focus produced in a Russian factory to match the quality of those made in the U.S. or Europe?
 
A much-quoted thorn in Ford's works then was the issue of using locally produced car parts. Under the terms of the investor agreement signed by Ford Motor Co. and the Leningrad Oblast government, the company undertook to have 50 percent of its autos locally produced.
 Today, Ford's figures in Russia speak for themselves. Several months ago the 50,000th Ford rolled off the production line. In 2003 and 2004 Ford Focus was the most sold vehicle in Russia. And in May the factory began producing a second-generation Focus, with plans to release 32,000 vehicles this year. In addition, the new Ford will retail for $1,000 less than its predecessor.
 It must be said, the factory has not yet resolved the problem of obtaining supplies locally. Windscreens, rubber mats, seats, sprinklers, internal door panels and so on are made in Russia. However, these items have little effect on the overall price of the car. By 2007, the percentage of locally made parts will have reached the 50 percent level. Analysts say the only way to do this is if the motors or the chassis are made in Russia.
 Scania-Peter, a small factory that produces buses is also located in St. Petersburg. It does not have the expected assembly line; modules are assembled like Lego blocks and only then connected to each other. In a huge conveyer the roofs, sides, motor well and the rear seat are assembled. After that the body is placed on a chassis produced in Sweden (most of the parts are obtained from Europe), and the bus is almost ready.
 Only 70 people work at the enterprise, which puts out about 100 buses a year. The volume is tiny, but enough to service the city's needs for a modern and comfortable form of public transport.
 
 <strong>
LAND OF RISING CAMRY
 </strong>On April 2, the world's No. 2 automaker Toyota Motor Corp. signed an agreement stating its intention of building a factory in St. Petersburg with Economic Development and Trade Minister German Gref and city governor Valentina Matviyenko. The decision came at the end of a long research process, during which the Japanese considered many sights in Moscow, Nizhny Novgorod and St. Petersburg, among others.
 
In terms of space for future expansion, Toyota's project promises to be on a much larger scale than the one Ford currently runs. The Japanese automaker has acquired a 220-hectare site in the south of St. Petersburg and plans to invest $150 million in its factory. By comparison, Ford occupies just 26 hectares.
 Tokuichi Uranishi, president of Toyota Motor Europe, said the site could be used to build factories for auto parts suppliers. Analysts say that this is standard practice for the Japanese company, which prefers not to have to build large warehouses. Instead, parts are delivered to its production line in accordance with demand. Having suppliers located nearby also reduces expenses for deliveries.
 The production capacity of Toyota's factory allows for 200,000 vehicles a year. However, the Japanese will not hurry to reach the maximum output. At first, the factory will produce only 20,000 autos a year. Uranishi promised that after two or three years output will rise to 50,000 per year. &quot;It's possible that other Toyota models will be produced,&quot; he said.
 The Japanese surprised the Russians slightly when they declared that initially the plant will produce only the business-class Camry, not, say, the mass-market model Corolla. But Toyota's plan was quickly understood: the automaking giant perceives its St. Petersburg factory as an outpost for a battle on the European market.
 This interpretation is also backed by statistics. While Camry was the best-selling auto in the U.S. market for the last six years - 426,990 units were sold, in Europe only 13,265 were sold in 2004.
 With the help of the St. Petersburg factory, Toyota will be able to offer its full range of models in Europe assembled locally. The company's smallest model, Aygo, is made in the Czech republic, the Yaris (class B) produced in France, Corolla (class C) in Turkey, and Avansis (class D) in Britain.
 In this way, the Russian Camry will be the brand leader in Toyota's European stable and will become competitive with more expensive autos in this class. These include the Audi A6 and the Mercedes E-class saloons.
 In terms of a price drop, the Russian made Camry may take some time to appease. Camry currently retails for $29,000 to $39,000. If Toyota succeeds in finding Russian suppliers, then the cost could fall significantly, but this is unlikely to happen soon. The Japanese are celebrated for demanding high quality production and Russia, as is well known, has a problem with that.
 Foreign part suppliers are not rushing to Russia yet. According to Ernst &amp; Young, only four large international auto parts suppliers produce in Russia: Bosch, Delphi, Lear and Tenneco.
 
 <strong>
A-CLASS ABOVE
 </strong>Toyota's example appears to have been infectious. DaimlerChrysler's plans to build a factory in Russia became known this spring. The company has refused to reveal details, but it is already known that the most likely place for its factory is St. Petersburg.
 
DaimlerChrysler has held talks and reviewed several sites in Russia including a space in Tatarstan. However, at a meeting earlier this month with President Vladimir Putin, the company's representative Yurgen Schremp said that he hoped &quot;the first [Russian] Mercedes will come off the conveyer this fall ... in St. Petersburg,&quot; business daily Vedomosti reported.
 Certain figures about the automakers plans have emerged. DaimlerChrysler is considering building a $100 million to $300 million factory to produce Mercedes autos. The starting capacity will be 25,000 autos a year.
 In an interview with Vedomosti, Klaus Mangold, an adviser to the president of DaimlerChrysler, said that initial production will involve the assembly of imported parts. With time, the factory will expand to include a paint shop and other production infrastructure.
 It is not yet known if DaimlerChrysler will bring any of its suppliers with it. It has been estimated that the factory will have to produce no less than 100,000 autos a year to be profitable.
 Which models will be produced at the factory remains a secret. But it is known that Russians would like to see Mercedes C- and E-class on the production line. However, as in Toyota's case, the wishes of Russian consumers and foreign producers may not coincide.
 <strong>
WHY ST. PETERSBURG?
 </strong>Firstly, St. Petersburg is ideally located in terms of transportation infrastructure. Parts can be imported through the seaport or by rail. And this is rather important for producers because in the early stages they plan to bring in parts from their bases in Europe.
 
In terms of proximity to markets, St. Petersburg loses out in part to Moscow, since the capital accounts for the biggest market demand, especially in the higher price ranges.
 Secondly, an important factor in selecting St. Petersburg is its proximity to EU borders. The only city more favorably positioned in this regard is Kaliningrad.
 Thirdly, and perhaps most importantly, is the good investment climate (not the capricious St. Petersburg weather). A key argument for investors may be the flexible tax payment system developed by the city government. Those who invest at least 300 million rubles ($10.7 million) in the city economy receive a discount on the profit tax of 4 percent. Property tax is cut 1.1 percent for those who invest 150 million rubles and more.
 And lastly, St. Petersburg's City Hall has devised a program that provides more favorable terms for companies deemed to be the city's &quot;strategic partners.&quot; Companies, or individuals, qualify for this status if they are willing to invest $100 million in the city economy.
 Such investors and their projects will receive special consideration from City Hall, which essentially means a reduction in investment risk.

TITLE: Commercial Property Shines in Prospects
PUBLISHER: Special to The St. Petersburg Times
TEXT: The energy sector may continue to be the most robust component of the economy, but Russian real estate is emerging as an attractive, albeit still volatile, investment option.
 
Currently healthy macroeconomic growth and stability, a sure incentive for real estate investments, still vie with a complex legal system and questions over the country's political direction. To ensure faster and more positive property development, industry analysts say Russia must first overcome the challenge of creating an effective legal base for property rights, lending activity and private land ownership.
 According to Colliers International Russia 2005 Real Estate Review, the inflow of foreign investments into the non-financial sector reached $29.1 billion last year, the highest since 1995. Jones Lang LaSalle's commercial real estate investment outlook for 2005 anticipates &quot;the first substantial signs of investment markets developing in Russia.&quot; 
 &quot;The commercial real estate investment market is upbeat,&quot; said Marina Kharitidi, tax manager for PricewaterhouseCoopers. &quot;We see a lot of interest and competition for projects available for sale.&quot;
 &quot;Potential foreign investors have moved from a stage of 'acquaintance' [with the market] to searching for properties available for sale and undertaking due diligence projects.&quot;
 Although Moscow has attracted the bulk of foreign interest, St. Petersburg is increasingly drawing more attention. Such regional centers as Novosibirsk, Omsk and Khanty-Mansiisk are also experiencing a brisk expansion of their property market and a growth in rental rates.
 St. Petersburg projects range from the massive $1.2 billion Baltic Pearl residential district, financed by China's Shanghai Industrial-Investment Corporation, to the launch of a joint $15 million investment scheme by a Norwegian hotel chain Wenaas Hotels, which is backing the construction of a site on Ploshchad Vosstaniya.
 In addition, a number of major national corporations plan to move their headquarters from Moscow to St. Petersburg. Vneshtorgbank announced their intention to relocate last fall and Transneft has followed suit. Large companies would require substantial amounts of office space, driving up prices on the St. Petersburg market.
 A possible transfer of some administrative government functions to the northern capital would only boost the demand for commercial real estate.
 However, since the Russian property market is still developing, foreign investors have not yet entered in any substantial numbers. &quot;Current investment climate is mostly heated by local players with money coming from natural resources, and insurance or pension funds,&quot; said Maksim Kunin, head of real estate at Fleming Family and Partners (FF&amp;P).
 &quot;That is why foreign investments play a secondary role in the real estate market. In practice, virtually nothing like a real estate investment market exists; there are very few investment products and qualified market players.&quot;
 The sluggish growth of institutional investments in commercial real estate, which is more concerned with stable earnings over the long-term, points to persistent structural problems.
 Speaking at the second Russian-Chinese Investment Forum in St. Petersburg last Thursday, minister for trade and economic development German Gref confessed that the main obstacles that thwart foreign investors include problems of establishing legal rights and ownership.
 Kunin agrees. &quot;One of the most commonly mentioned issues is the absence of land ownership in Moscow and St. Petersburg, complications with freehold ownership and other issues,&quot; he said.
 &quot;The other obstacles are a lack of investment product and experienced market players; complicated legal and tax issues; common difficulties with obtaining permissions and registration of documents; undeveloped debt financing market, market non-transparency, high investment risks and political instability,&quot; Kunin said.
 Industry insiders say that complications with ownership rights necessitate strong local partnerships and subtle cooperation with authorities. Non-transparent market conditions, favoritism, and corruption tend to accompany most construction and investment ventures.
 Glenn Kolleeny, managing partner at Salans, said that despite the legislative practice of acquiring development rights by means of tender, &quot;a large percentage of land plots continue to be granted for development without tender and often on the basis of influence with the local governments.&quot;
 &quot;The main difficulty for development is finding and acquiring rights to a suitable site,&quot; Kharitidi added. &quot;Foreign investors often have to attract local partners in order to gain access to plots.&quot;
 &quot;In certain cases, especially with warehouse construction projects infrastructure is a problem,&quot; she said.
 Maksim Kunin of FF&amp;P is of two minds about the prospects for real estate investment. The great potential in the future is still weighed down by basic concerns over profitability.
 &quot;I'm afraid that foreign investors are not eager to participate in the Russian real estate,&quot; he said. &quot;Today the real estate market yield comes to 9 percent which is low compared to Central Europe.&quot;
 The risks of investing into real estate are greatest during the initial stages of planning, prior to securing the necessary permits, and in the course of construction, when the variables includes shifting operational expenses and questions over the marketability of a finished property. The high risk premium during this time segment is offset by 20 percent to 40 percent of yearly rates of return.
 The safer but less lucrative alternative is investment into existing or recently built properties. It assures more consistent yields but decreased profit margins. This stable income-generating option appeals especially to banks, pension funds, insurance companies, and other types of institutional investors.
 Recent years have seen the first signs of emerging institutional investment into Russia. Several major deals were completed in Moscow in the past year, including Fleming, Family &amp; Partners' purchase of an office and retail complex and Switzerland's Eastern Property Holdings acquisition of the Berlin House mixed-use center.
 Kolleeny suggests that the country's political climate is perhaps the decisive issue for conservative investors. He notes that the drawn-out Yukos case may have had a chilling effect on the market.
 &quot;I believe that institutional investors will continue to invest in Russia in the real estate and non-real estate sectors,&quot; he said. &quot;The key issue is political risk.&quot;
 &quot;Russia continues to be perceived as a country with high political risk,&quot; he added. &quot;This has led to an increase in capital flight, to depression of the stock market and undoubtedly to a reduction in direct investment, although this is harder to measure.&quot;
 In addition, the shortcomings of the local real estate market, such as the lack of premium class office space, may also account for the slow rate of institutional investment. 
 &quot;Such investors normally look for class A office buildings, possibly high quality warehouses,&quot; said Kharitidi. &quot;There are not many such buildings for sale.&quot;
 &quot;Where such objects are for sale, such investors would normally lose competition to local investors as they would normally require more extensive due diligence and higher premium for risk.&quot;
 In the end, nothing substitutes for practical knowledge of the market, in addition to the presence and proven expertise of trusted local partners. The key element of a successful investment strategy in Russia's real estate is a confident approach combined with a realistic and informed outlook.
 &quot;Investors can avoid pitfalls by relying on experienced legal, construction and other consultants,&quot; Kolleeny said.

TITLE: Commercial Property Shines in Prospects
PUBLISHER: Special to The St. Petersburg Times
TEXT: The energy sector may continue to be the most robust component of the economy, but Russian real estate is emerging as an attractive, albeit still volatile, investment option.
 
Currently healthy macroeconomic growth and stability, a sure incentive for real estate investments, still vie with a complex legal system and questions over the country's political direction. To ensure faster and more positive property development, industry analysts say Russia must first overcome the challenge of creating an effective legal base for property rights, lending activity and private land ownership.
 According to Colliers International Russia 2005 Real Estate Review, the inflow of foreign investments into the non-financial sector reached $29.1 billion last year, the highest since 1995. Jones Lang LaSalle's commercial real estate investment outlook for 2005 anticipates &quot;the first substantial signs of investment markets developing in Russia.&quot; 
 &quot;The commercial real estate investment market is upbeat,&quot; said Marina Kharitidi, tax manager for PricewaterhouseCoopers. &quot;We see a lot of interest and competition for projects available for sale.&quot;
 &quot;Potential foreign investors have moved from a stage of 'acquaintance' [with the market] to searching for properties available for sale and undertaking due diligence projects.&quot;
 Although Moscow has attracted the bulk of foreign interest, St. Petersburg is increasingly drawing more attention. Such regional centers as Novosibirsk, Omsk and Khanty-Mansiisk are also experiencing a brisk expansion of their property market and a growth in rental rates.
 St. Petersburg projects range from the massive $1.2 billion Baltic Pearl residential district, financed by China's Shanghai Industrial-Investment Corporation, to the launch of a joint $15 million investment scheme by a Norwegian hotel chain Wenaas Hotels, which is backing the construction of a site on Ploshchad Vosstaniya.
 In addition, a number of major national corporations plan to move their headquarters from Moscow to St. Petersburg. Vneshtorgbank announced their intention to relocate last fall and Transneft has followed suit. Large companies would require substantial amounts of office space, driving up prices on the St. Petersburg market.
 A possible transfer of some administrative government functions to the northern capital would only boost the demand for commercial real estate.
 However, since the Russian property market is still developing, foreign investors have not yet entered in any substantial numbers. &quot;Current investment climate is mostly heated by local players with money coming from natural resources, and insurance or pension funds,&quot; said Maksim Kunin, head of real estate at Fleming Family and Partners (FF&amp;P).
 &quot;That is why foreign investments play a secondary role in the real estate market. In practice, virtually nothing like a real estate investment market exists; there are very few investment products and qualified market players.&quot;
 The sluggish growth of institutional investments in commercial real estate, which is more concerned with stable earnings over the long-term, points to persistent structural problems.
 Speaking at the second Russian-Chinese Investment Forum in St. Petersburg last Thursday, minister for trade and economic development German Gref confessed that the main obstacles that thwart foreign investors include problems of establishing legal rights and ownership.
 Kunin agrees. &quot;One of the most commonly mentioned issues is the absence of land ownership in Moscow and St. Petersburg, complications with freehold ownership and other issues,&quot; he said.
 &quot;The other obstacles are a lack of investment product and experienced market players; complicated legal and tax issues; common difficulties with obtaining permissions and registration of documents; undeveloped debt financing market, market non-transparency, high investment risks and political instability,&quot; Kunin said.
 Industry insiders say that complications with ownership rights necessitate strong local partnerships and subtle cooperation with authorities. Non-transparent market conditions, favoritism, and corruption tend to accompany most construction and investment ventures.
 Glenn Kolleeny, managing partner at Salans, said that despite the legislative practice of acquiring development rights by means of tender, &quot;a large percentage of land plots continue to be granted for development without tender and often on the basis of influence with the local governments.&quot;
 &quot;The main difficulty for development is finding and acquiring rights to a suitable site,&quot; Kharitidi added. &quot;Foreign investors often have to attract local partners in order to gain access to plots.&quot;
 &quot;In certain cases, especially with warehouse construction projects infrastructure is a problem,&quot; she said.
 Maksim Kunin of FF&amp;P is of two minds about the prospects for real estate investment. The great potential in the future is still weighed down by basic concerns over profitability.
 &quot;I'm afraid that foreign investors are not eager to participate in the Russian real estate,&quot; he said. &quot;Today the real estate market yield comes to 9 percent which is low compared to Central Europe.&quot;
 The risks of investing into real estate are greatest during the initial stages of planning, prior to securing the necessary permits, and in the course of construction, when the variables includes shifting operational expenses and questions over the marketability of a finished property. The high risk premium during this time segment is offset by 20 percent to 40 percent of yearly rates of return.
 The safer but less lucrative alternative is investment into existing or recently built properties. It assures more consistent yields but decreased profit margins. This stable income-generating option appeals especially to banks, pension funds, insurance companies, and other types of institutional investors.
 Recent years have seen the first signs of emerging institutional investment into Russia. Several major deals were completed in Moscow in the past year, including Fleming, Family &amp; Partners' purchase of an office and retail complex and Switzerland's Eastern Property Holdings acquisition of the Berlin House mixed-use center.
 Kolleeny suggests that the country's political climate is perhaps the decisive issue for conservative investors. He notes that the drawn-out Yukos case may have had a chilling effect on the market.
 &quot;I believe that institutional investors will continue to invest in Russia in the real estate and non-real estate sectors,&quot; he said. &quot;The key issue is political risk.&quot;
 &quot;Russia continues to be perceived as a country with high political risk,&quot; he added. &quot;This has led to an increase in capital flight, to depression of the stock market and undoubtedly to a reduction in direct investment, although this is harder to measure.&quot;
 In addition, the shortcomings of the local real estate market, such as the lack of premium class office space, may also account for the slow rate of institutional investment. 
 &quot;Such investors normally look for class A office buildings, possibly high quality warehouses,&quot; said Kharitidi. &quot;There are not many such buildings for sale.&quot;
 &quot;Where such objects are for sale, such investors would normally lose competition to local investors as they would normally require more extensive due diligence and higher premium for risk.&quot;
 In the end, nothing substitutes for practical knowledge of the market, in addition to the presence and proven expertise of trusted local partners. The key element of a successful investment strategy in Russia's real estate is a confident approach combined with a realistic and informed outlook.
 &quot;Investors can avoid pitfalls by relying on experienced legal, construction and other consultants,&quot; Kolleeny said.

TITLE: Supreme Court Annuls Regional Tax Concessions
TEXT: In March 2005, Russia's Supreme Court has ruled on the legitimacy of profits' tax concession that the Leningrad Oblast has provided for companies making qualifying investments in the region. The Court has upheld the previously issued decision of the regional court that invalidated the investment law the Oblast used to grant tax concessions.
 
The story goes back to the late nineties when the government of the Leningrad Oblast succeeded in attracting a number of significant investment projects by introducing substantial profits and property tax allowances within the portion of the tax payable to the Oblast budget.
 The investors were allowed to be exempt from paying tax on profits and property that specifically related to investment within the region. The exemption was valid while companies were still collecting the returns on investments, plus an additional two years term. 
 The way such allowances were used changed in 2002, when the profits tax chapter of the Tax Code came into effect. The federal legislation limited the tax concessions regional authorities were allowed to provide on profits tax to 4 percent maximum, rather than the overall regional portion of the tax, which, historically, has been higher.
 The law introducing the new profits tax chapter contained an overarching provision stating that the previous concessions could remain in force until the end of the payback period, as calculated under the respective investment agreements with the authorities.
 The Oblast government reacted by amending its investment legislation in July 2003. The profits tax exemption in its old form was abolished, and a reduced profits tax rate was introduced for qualifying investments.
 The &quot;tennis&quot; game between the federal and regional authorities continued. In December 2003, Russia adopted a bill imposing limitations on the term of application of the old investment tax concessions by limiting the life of the overarching provision to January 1, 2004. This limitation was later used by the state prosecutor to initiate a case against regional investment legislation by claiming that it did not comply with the federal law.
 
 <strong>
BACK TAX CLAIMS
 </strong>It is now clear that many taxpayers will be affected by this verdict. It is not only those companies, which have applied for concessions and invested in the economy of the Leningrad Oblast at the end of the '90s, that will have to reinstate their tax liabilities for 2004 and, furthermore, pay interest because of the &quot;late&quot; payments of the tax.
 
In our opinion, it is very unlikely that the tax authorities will not demand these payments from the taxpayers. Investors, which are currently carrying out their projects in the Leningrad Oblast, and which have counted on the concessions, will clearly also be affected.
 The stance the Supreme Court has taken will disrupt the investment strategy of the Leningrad Oblast, as the decision of the court may not be overruled by a mere reintroduction of the abolished provisions. It is difficult to predict what actions the oblast authorities will undertake to try to minimize the negative affect of the federal decision, if any.
 The court decision may also affect the investment climate in other regions of the country, which may be required to scrutinize and amend their own tax incentives similar to that of the Leningrad Oblast. Although, a 4 percent profits tax reduction seems not to be a big deal in terms of tax savings, it is actually the trust in the stability of the tax framework that is at stake.
 
 <strong>
A TAX BREAK MYTH
 </strong>This scenario seems to support the view of many tax professionals that in Russia, investment decisions cannot be based on the availability of tax allowances or concessions. If a businessman is lucky, he may benefit from some of them temporarily and not be penalized, but this will not necessarily be the case.
 
Unfortunately, the effect of the court's ruling spreads further, as it adds disruption and uncertainty to an environment in which tax risks, particularly those relating to tax administration, have again taken center stage in the business world.
 
 <i>Boris Brouk is a senior consultant at Deloitte in Saint-Petersburg.
 </i>

TITLE: Supreme Court Annuls Regional Tax Concessions
TEXT: In March 2005, Russia's Supreme Court has ruled on the legitimacy of profits' tax concession that the Leningrad Oblast has provided for companies making qualifying investments in the region. The Court has upheld the previously issued decision of the regional court that invalidated the investment law the Oblast used to grant tax concessions.
 
The story goes back to the late nineties when the government of the Leningrad Oblast succeeded in attracting a number of significant investment projects by introducing substantial profits and property tax allowances within the portion of the tax payable to the Oblast budget.
 The investors were allowed to be exempt from paying tax on profits and property that specifically related to investment within the region. The exemption was valid while companies were still collecting the returns on investments, plus an additional two years term. 
 The way such allowances were used changed in 2002, when the profits tax chapter of the Tax Code came into effect. The federal legislation limited the tax concessions regional authorities were allowed to provide on profits tax to 4 percent maximum, rather than the overall regional portion of the tax, which, historically, has been higher.
 The law introducing the new profits tax chapter contained an overarching provision stating that the previous concessions could remain in force until the end of the payback period, as calculated under the respective investment agreements with the authorities.
 The Oblast government reacted by amending its investment legislation in July 2003. The profits tax exemption in its old form was abolished, and a reduced profits tax rate was introduced for qualifying investments.
 The &quot;tennis&quot; game between the federal and regional authorities continued. In December 2003, Russia adopted a bill imposing limitations on the term of application of the old investment tax concessions by limiting the life of the overarching provision to January 1, 2004. This limitation was later used by the state prosecutor to initiate a case against regional investment legislation by claiming that it did not comply with the federal law.
 
 <strong>
BACK TAX CLAIMS
 </strong>It is now clear that many taxpayers will be affected by this verdict. It is not only those companies, which have applied for concessions and invested in the economy of the Leningrad Oblast at the end of the '90s, that will have to reinstate their tax liabilities for 2004 and, furthermore, pay interest because of the &quot;late&quot; payments of the tax.
 
In our opinion, it is very unlikely that the tax authorities will not demand these payments from the taxpayers. Investors, which are currently carrying out their projects in the Leningrad Oblast, and which have counted on the concessions, will clearly also be affected.
 The stance the Supreme Court has taken will disrupt the investment strategy of the Leningrad Oblast, as the decision of the court may not be overruled by a mere reintroduction of the abolished provisions. It is difficult to predict what actions the oblast authorities will undertake to try to minimize the negative affect of the federal decision, if any.
 The court decision may also affect the investment climate in other regions of the country, which may be required to scrutinize and amend their own tax incentives similar to that of the Leningrad Oblast. Although, a 4 percent profits tax reduction seems not to be a big deal in terms of tax savings, it is actually the trust in the stability of the tax framework that is at stake.
 
 <strong>
A TAX BREAK MYTH
 </strong>This scenario seems to support the view of many tax professionals that in Russia, investment decisions cannot be based on the availability of tax allowances or concessions. If a businessman is lucky, he may benefit from some of them temporarily and not be penalized, but this will not necessarily be the case.
 
Unfortunately, the effect of the court's ruling spreads further, as it adds disruption and uncertainty to an environment in which tax risks, particularly those relating to tax administration, have again taken center stage in the business world.
 
 <i>Boris Brouk is a senior consultant at Deloitte in Saint-Petersburg.
 </i>

TITLE: The Normal Dilemma of Press Freedom
TEXT: Last year I lived in Riga, Latvia. Now I live in Ulan Ude, Russia. In many ways, these two places could hardly be more different, yet until relatively recently they were part of the same country. They were linked together as parts of the same centrally controlled political and economic system. Despite this recent shared experience, these two countries have little in common today. One area in which Latvia and Russia have strongly diverged is the press. Neither country had an especially rich and deep experience with press freedom, but one has steered a course toward Western conventions and democratic traditions, while the other has veered back and forth in search of the ever-elusive third way. 
 
By way of comparison, Reporters Without Borders ranks Latvia 10th in the world for press freedom and Russia 140th, but perhaps it is more interesting to ask why such a situation has arisen. Latvia's experience with a truly free press before the collapse of the Soviet Union surpasses Russia's only in the period of independence between the world wars and even then only really before Latvian Prime Minister Karlis Ulmanis established non-parliamentary authoritarian rule in 1934. In the post war Soviet years, journalism and the accompanying censorship were duplicated to a remarkable degree from the Baltic to the Pacific.
 It is not necessary to repeat here all of the often-told tales of abuses against the press in Russia. Stories of slanted election coverage, the 11 journalists killed since Putin came to power, attacks on journalists from Samara to Mari El, blank pages in Kommersant, and the loss of independence at NTV and now perhaps Izvestia are well worn, and the Russian press itself does an admirable job of chronicling them. 
 Furthermore, it is not the case that there is no press freedom in Russia today. There are wide differences between print and broadcast media, to say nothing of the Internet. The situation is generally more complex than is often asserted. Black-and-white statements by Western government officials can also often seem politically self-serving, as well as not particularly informative or enlightening.
 But why the divergence on the issue of press freedom in Latvia and Russia? The cultural, political, historical and economic experience of these two countries - especially in the last 15 years - is so different that it may seem the question is not worth asking, but it is. Exploring it will help us better understand how the press works in both countries.
 U.S.-based sociologist Daina Stukuls Eglitis offers a tempting tool to use in thinking about this issue. She uses the concept of &quot;normality&quot; to guide her exploration of post-Soviet transition and argues that what is often called the Singing Revolution in Latvia was not a revolution in the traditional sense. There was no specific ideological model for building a new society on the ashes of the old. There were just vague calls for democracy, civil society, free markets and &quot;normality.&quot; The Soviet system was seen as unnatural, artificial and abnormal. People felt it had retarded and deformed Latvia's development, which otherwise might have looked something like that of Finland.
 After the Soviet period, Latvians were no longer in the mood for grand experiments. There were no utopian dreams, but rather a desire for what was proven to work - work imperfectly, perhaps, but work normally. What was normal was conceived of in two important ways: what existed in the contemporary West and what existed in Latvia's past, especially the interwar period of independence. These conflicting definitions caused political competition in Latvia, but regarding the media, they overlap, and an unfettered press has been a strong constant in the post-Soviet period.
 The turning point in the history of the Latvian press came with the launch of the newspaper &quot;Diena&quot; in November 1990. From the start, this paper championed press freedom and Western conventions of journalism. It created a staff made up almost entirely of inexperienced journalists so as to ensure that the old habits of Soviet journalism would not continue. It quickly became the most popular newspaper in the country, and remains so today. Apparently, such conventions were and are accepted by a wide readership as normal and believed to befit Latvian society.
 Latvia's press is affected by politics as much as any other, and foreign policy also plays a role. Since restoring independence, Latvia has worked hard to integrate with Western institutions and last year joined the European Union and NATO. Integrating with the West and joining such institutions carries with it an expectation of adopting Western conventions and practices, including those regarding freedom of speech and the press.
 Latvians may feel that press freedom is part of being normal, but what is normal for Russia? Russia has no need or desire to join the EU or NATO. Because Russia was the dominant actor in and the chief inheritor of the Soviet Union, it is harder for the socialist experiment to be seen popularly as a historical aberration. Many people here do not see the Soviet period as a bolt of lightning that knocked Russia off course. Today, a strong nostalgia for the Soviet Union exists in Russia, even in national republics such as Buryatia. This fervor reached its peak on Victory Day, when special scorn was reserved for the Baltic states and especially Latvian President Vaira Vaike-Freiberga.
 Ask any of the many people who support - or at least do not oppose - the Kremlin's recent reforms, which increasingly centralize power, and you will get a response that addresses &quot;normality.&quot; &quot;A strong state with centralized power is the traditional Russian way&quot; is a common answer. Russians are indeed concerned about particular issues related to the media. For instance, violence on television is a matter of concern for the general populace and the government, and not long ago Prime Minister Mikhail Fradkov implored the media to help boost patriotism. But freedom of the press has not been a hot-button issue for most people. 
 A question recently put to a local scholar and political activist on television here in Buryatia underlines this crucial point. The reporter asked, &quot;Why should scholars, such as yourself, get involved in politics?&quot; It makes one want to ask: Why shouldn't they? Why would a scholar's exercise of free speech be different from anyone else's? Why isn't public debate, especially in the news media, perceived as something normal?
 In some sense, every society gets the press it deserves. Power exists by the acquiescence of the people, such acquiescence can be revoked, and thus every political system is subject to change. The same process may change the press. President Vladimir Putin's call for greater political pluralism on state television in his recent state of the nation address is perhaps a sign of this. It is a small bow to fairly mild pressure and suggests greater possibilities to the optimistically inclined. Normal is normal, but it may always be redefined and is always subject to debate. 
 
 <i>Janis Cakars is a Ph.D. candidate in mass communications at Indiana University. </i>

TITLE: The Normal Dilemma of Press Freedom
TEXT: Last year I lived in Riga, Latvia. Now I live in Ulan Ude, Russia. In many ways, these two places could hardly be more different, yet until relatively recently they were part of the same country. They were linked together as parts of the same centrally controlled political and economic system. Despite this recent shared experience, these two countries have little in common today. One area in which Latvia and Russia have strongly diverged is the press. Neither country had an especially rich and deep experience with press freedom, but one has steered a course toward Western conventions and democratic traditions, while the other has veered back and forth in search of the ever-elusive third way. 
 
By way of comparison, Reporters Without Borders ranks Latvia 10th in the world for press freedom and Russia 140th, but perhaps it is more interesting to ask why such a situation has arisen. Latvia's experience with a truly free press before the collapse of the Soviet Union surpasses Russia's only in the period of independence between the world wars and even then only really before Latvian Prime Minister Karlis Ulmanis established non-parliamentary authoritarian rule in 1934. In the post war Soviet years, journalism and the accompanying censorship were duplicated to a remarkable degree from the Baltic to the Pacific.
 It is not necessary to repeat here all of the often-told tales of abuses against the press in Russia. Stories of slanted election coverage, the 11 journalists killed since Putin came to power, attacks on journalists from Samara to Mari El, blank pages in Kommersant, and the loss of independence at NTV and now perhaps Izvestia are well worn, and the Russian press itself does an admirable job of chronicling them. 
 Furthermore, it is not the case that there is no press freedom in Russia today. There are wide differences between print and broadcast media, to say nothing of the Internet. The situation is generally more complex than is often asserted. Black-and-white statements by Western government officials can also often seem politically self-serving, as well as not particularly informative or enlightening.
 But why the divergence on the issue of press freedom in Latvia and Russia? The cultural, political, historical and economic experience of these two countries - especially in the last 15 years - is so different that it may seem the question is not worth asking, but it is. Exploring it will help us better understand how the press works in both countries.
 U.S.-based sociologist Daina Stukuls Eglitis offers a tempting tool to use in thinking about this issue. She uses the concept of &quot;normality&quot; to guide her exploration of post-Soviet transition and argues that what is often called the Singing Revolution in Latvia was not a revolution in the traditional sense. There was no specific ideological model for building a new society on the ashes of the old. There were just vague calls for democracy, civil society, free markets and &quot;normality.&quot; The Soviet system was seen as unnatural, artificial and abnormal. People felt it had retarded and deformed Latvia's development, which otherwise might have looked something like that of Finland.
 After the Soviet period, Latvians were no longer in the mood for grand experiments. There were no utopian dreams, but rather a desire for what was proven to work - work imperfectly, perhaps, but work normally. What was normal was conceived of in two important ways: what existed in the contemporary West and what existed in Latvia's past, especially the interwar period of independence. These conflicting definitions caused political competition in Latvia, but regarding the media, they overlap, and an unfettered press has been a strong constant in the post-Soviet period.
 The turning point in the history of the Latvian press came with the launch of the newspaper &quot;Diena&quot; in November 1990. From the start, this paper championed press freedom and Western conventions of journalism. It created a staff made up almost entirely of inexperienced journalists so as to ensure that the old habits of Soviet journalism would not continue. It quickly became the most popular newspaper in the country, and remains so today. Apparently, such conventions were and are accepted by a wide readership as normal and believed to befit Latvian society.
 Latvia's press is affected by politics as much as any other, and foreign policy also plays a role. Since restoring independence, Latvia has worked hard to integrate with Western institutions and last year joined the European Union and NATO. Integrating with the West and joining such institutions carries with it an expectation of adopting Western conventions and practices, including those regarding freedom of speech and the press.
 Latvians may feel that press freedom is part of being normal, but what is normal for Russia? Russia has no need or desire to join the EU or NATO. Because Russia was the dominant actor in and the chief inheritor of the Soviet Union, it is harder for the socialist experiment to be seen popularly as a historical aberration. Many people here do not see the Soviet period as a bolt of lightning that knocked Russia off course. Today, a strong nostalgia for the Soviet Union exists in Russia, even in national republics such as Buryatia. This fervor reached its peak on Victory Day, when special scorn was reserved for the Baltic states and especially Latvian President Vaira Vaike-Freiberga.
 Ask any of the many people who support - or at least do not oppose - the Kremlin's recent reforms, which increasingly centralize power, and you will get a response that addresses &quot;normality.&quot; &quot;A strong state with centralized power is the traditional Russian way&quot; is a common answer. Russians are indeed concerned about particular issues related to the media. For instance, violence on television is a matter of concern for the general populace and the government, and not long ago Prime Minister Mikhail Fradkov implored the media to help boost patriotism. But freedom of the press has not been a hot-button issue for most people. 
 A question recently put to a local scholar and political activist on television here in Buryatia underlines this crucial point. The reporter asked, &quot;Why should scholars, such as yourself, get involved in politics?&quot; It makes one want to ask: Why shouldn't they? Why would a scholar's exercise of free speech be different from anyone else's? Why isn't public debate, especially in the news media, perceived as something normal?
 In some sense, every society gets the press it deserves. Power exists by the acquiescence of the people, such acquiescence can be revoked, and thus every political system is subject to change. The same process may change the press. President Vladimir Putin's call for greater political pluralism on state television in his recent state of the nation address is perhaps a sign of this. It is a small bow to fairly mild pressure and suggests greater possibilities to the optimistically inclined. Normal is normal, but it may always be redefined and is always subject to debate. 
 
 <i>Janis Cakars is a Ph.D. candidate in mass communications at Indiana University. </i>

TITLE: Good Intentions Gone Wrong Pose Risks to Housing Reform
TEXT: The purpose of the reform of communal housing services is to introduce market forces to the sector, which will undoubtedly lead to an improvement in the quality of the services. 
 
As regards water, heating and electricity, these are special cases because each are supplied by monopolies, but other services such as cleaning, plumbing, and electrician services are actively undergoing reform.
 Before any shift to a market can occur, existing links between houses and the administration should be transferred to specific service organizations. As in every market, the consumer - in this case of housing services - should be able to choose which seller/provider they turn to. And for that to work, there must be many providers from which to make a choice. At least formally, the city has no problem with this - it is home to about 90 such companies. 
 City Hall's housing committee is energetically conducting tenders among the property management companies to service state-owned residential buildings. The tenders started in May and are ongoing. In this way, the administration's links to the buildings are being replaced by market-based links. The tenders represent an act of choice. The winners will be those who make the best offers. The main criteria in choosing a winner is how much they are prepared to invest in the housing stock to modernize it. In this way, the reformers resolve two tasks at once - make service providers compete with one another and attract finances to deal with the neglect of residential buildings over many years, as a result of which many stand on the verge of collapse.
 Everything would be wonderful, if it were not for one circumstance. According to the Housing Code, property management companies should be selected not by bureaucrats, but by residents - or more accurately, the owners of the apartments - either at a meeting of residents or through the creation of a condominium. What has happened instead, however, is that the housing committee, without waiting for apartment owners to declare their choice, has gone ahead and declared the tender winners itself.
 Yunis Lukmanov, head of the housing committee, justifies these actions, which in terms of the law are dubious, by citing article 161 of the Housing Code. It says that municipal bodies, in this case City Hall, have the right to select the managers of residential properties by tender if the property owners have not made their own choice in the course of a year.
 The bureaucrats say: &quot;See, between May 2004 and May 2005 residents didn't choose. This means we have the right to do it.&quot; But there is good reason to say they are wrong: in May 2004 residents simply did not have the right to choose a property manager because that became possible only on March 1, when the new Housing Code came into force. And in article 18 of the law on the introduction of the code, it says directly that the above-mentioned one-year term started on March 1. Hence, the authorities could start holding tenders only after March 1, 2006. Any tenders held before then could be challenged in court.
 All this casuistry is, unfortunately, rather important because the undeniably good intentions of the reformers, realized by illegal methods, could lead to very unpleasant results. This is because the conditions of the tenders favor companies that offer to invest the largest sums. But under the law, residents who have been provided with a victorious property management company can at any moment call a meeting or form a condominium, reject the services of the company and select another one. This would mean that the first company has invested in the property, but before it had a chance to recover its expenses, it was &quot;dumped.&quot;
 The housing committee insists that the companies are aware of the risks they are running. Both the committee and the companies hope that residents won't revolt against the companies that have been selected for them. Recognizing the risk, the companies will strive to do their work well so that residents do not reject them. There is some reason to believe that this will work. But civilized reforms are not conducted in this way. It's not necessary to create problems where there aren't any.
 
 <i>Vladimir Gryaznevich is a political analyst with Expert Severo-Zapad magazine. His comment was first broadcast on Ekho Moskvy in St. Petersburg on Friday. </i>

TITLE: Good Intentions Gone Wrong Pose Risks to Housing Reform
TEXT: The purpose of the reform of communal housing services is to introduce market forces to the sector, which will undoubtedly lead to an improvement in the quality of the services. 
 
As regards water, heating and electricity, these are special cases because each are supplied by monopolies, but other services such as cleaning, plumbing, and electrician services are actively undergoing reform.
 Before any shift to a market can occur, existing links between houses and the administration should be transferred to specific service organizations. As in every market, the consumer - in this case of housing services - should be able to choose which seller/provider they turn to. And for that to work, there must be many providers from which to make a choice. At least formally, the city has no problem with this - it is home to about 90 such companies. 
 City Hall's housing committee is energetically conducting tenders among the property management companies to service state-owned residential buildings. The tenders started in May and are ongoing. In this way, the administration's links to the buildings are being replaced by market-based links. The tenders represent an act of choice. The winners will be those who make the best offers. The main criteria in choosing a winner is how much they are prepared to invest in the housing stock to modernize it. In this way, the reformers resolve two tasks at once - make service providers compete with one another and attract finances to deal with the neglect of residential buildings over many years, as a result of which many stand on the verge of collapse.
 Everything would be wonderful, if it were not for one circumstance. According to the Housing Code, property management companies should be selected not by bureaucrats, but by residents - or more accurately, the owners of the apartments - either at a meeting of residents or through the creation of a condominium. What has happened instead, however, is that the housing committee, without waiting for apartment owners to declare their choice, has gone ahead and declared the tender winners itself.
 Yunis Lukmanov, head of the housing committee, justifies these actions, which in terms of the law are dubious, by citing article 161 of the Housing Code. It says that municipal bodies, in this case City Hall, have the right to select the managers of residential properties by tender if the property owners have not made their own choice in the course of a year.
 The bureaucrats say: &quot;See, between May 2004 and May 2005 residents didn't choose. This means we have the right to do it.&quot; But there is good reason to say they are wrong: in May 2004 residents simply did not have the right to choose a property manager because that became possible only on March 1, when the new Housing Code came into force. And in article 18 of the law on the introduction of the code, it says directly that the above-mentioned one-year term started on March 1. Hence, the authorities could start holding tenders only after March 1, 2006. Any tenders held before then could be challenged in court.
 All this casuistry is, unfortunately, rather important because the undeniably good intentions of the reformers, realized by illegal methods, could lead to very unpleasant results. This is because the conditions of the tenders favor companies that offer to invest the largest sums. But under the law, residents who have been provided with a victorious property management company can at any moment call a meeting or form a condominium, reject the services of the company and select another one. This would mean that the first company has invested in the property, but before it had a chance to recover its expenses, it was &quot;dumped.&quot;
 The housing committee insists that the companies are aware of the risks they are running. Both the committee and the companies hope that residents won't revolt against the companies that have been selected for them. Recognizing the risk, the companies will strive to do their work well so that residents do not reject them. There is some reason to believe that this will work. But civilized reforms are not conducted in this way. It's not necessary to create problems where there aren't any.
 
 <i>Vladimir Gryaznevich is a political analyst with Expert Severo-Zapad magazine. His comment was first broadcast on Ekho Moskvy in St. Petersburg on Friday. </i>

TITLE: Blood Group 

TEXT: The history of politics is the history of factions jostling for power, by methods seldom peaceful and rarely, if ever, honest. War is by far the preferred means of obtaining and augmenting domination of the political landscape and the enrichment of the ruling clique.
 
Sometimes this means violent civil strife within the state itself. At other times, the political tool of war is directed outwards, at some demonized enemy who poses a &quot;threat,&quot; which is almost always exaggerated or illusory to national survival. Without fail, the warmongering faction's political opponents are identified with the enemy, either as direct agents or, more often, as unpatriotic abettors whose criticism of the rulers gives &quot;aid and comfort&quot; to the foe.
 Blood is an excellent sealant for factional unity. Once lives have been taken in pursuit of the faction's interests, which are invariably dressed up in the rhetoric of moral purpose, it becomes much harder for the faction's members to question or quit the cause. To do so means confessing not just to error but to complicity in murder. Few are those who can face such a stark unmasking. Self-deception is vital coin in the economy of factional partisanship.
 Of course, some factions are more venal, more violent and more ambitious than others. Many factions are content with a mere piece of the action, a cut of the spoils. Although occasionally they might win through to the top rank of power, they don't seek to eliminate all their rivals and establish permanent rule. But history provides many examples of ruthless factions whose thirst for control is unlimited. They seek and will accept no less than a profound transformation of state and society into the image of the faction itself, using any method to achieve this goal. They will begin with peaceful means but will not balk at bloodshed if required. And of course, to impose a narrow partisan vision on an entire society inevitably requires mass bloodletting in the end.
 By no means are such towering ambitions always unsuccessful. This is one of the great unspoken truths of history: In many different places and times, empires, caliphates, dynasties and other systems of factional dominion have been established through enormous evil - and then persisted in power for centuries, lauded as honorable, legitimate governments. In time, their domination comes to be seen as a fact of nature, the way things are. There is no other way to think, to operate, to exist outside the parameters imposed by the ruling worldview.
 Western civilization is founded upon this kind of enduring factional triumph. Octavian, the teenage adventurer adopted by his distant kinsman Julius Caesar, parlayed the chaos of Rome's partisan strife into supreme power, using corruption, deceit, betrayal, murder, civil war and foreign conquest as his political instruments. With a bloody single-mindedness and a scope that would not be seen in Europe again until the 20th century, he subsumed the entire state into his faction, merging and equating the two, leaving nothing outside the new reality created by his violent success. 
 There was no ideological, moral or even genuine political content at the heart of his faction. Its only goal was power, Octavian's personal power, from which his adherents hoped to obtain offices, land, loot and prestige - or protection from the ravages of other factions. Only later, on the razed ground of total victory, was this remorseless, murderous game mythologized into a selfless crusade for national security, for order, liberty, prosperity and, yes, for &quot;family values.&quot; Only then, when the dead lay rotting by the hundreds of thousands, was the young man accorded the lofty title that carried him into history as a beacon of civilization: Augustus. The system he established so brutally was maintained - with equal brutality for all who opposed it - for more than 1,400 years.
 At first glance, it might seem absurd to compare this grand figure of world history to the gang of apish, third-rate poltroons now camped out along the Potomac. But although Octavian's faction contained a handful of remarkably able figures, for the most part it was a collection of schemers, time-servers, cynical money-men, stunted ideologues, bootlickers, propagandists and thugs. Through bribes, threats and the reflected glory of Caesar's name, Octavian was able to augment his tawdry crew with the fearsome military power of many legions. Armed might - and the willingness to use it without remorse or moral compunction - is always the decisive factor in politics.
 The brutal system of torture, corruption, lawlessness and war established in Washington by the faction of President George W. Bush is now backed by the greatest military power in history, able to wipe whole nations from the face of the earth in minutes. With the illegal invasion of Iraq and the illegal imprisonment of thousands of people in its global gulag, this faction has shown its willingness to use military force without remorse or moral compunction in pursuit of its openly-stated totalitarian vision: &quot;full-spectrum dominance&quot; over geopolitical affairs coupled with a radical &quot;transformation&quot; of domestic government into a centralized, militarized &quot;instrument of national power&quot; that breaks down &quot;the old, rigid divisions between war, peace, diplomacy, conflict and reconstruction,&quot; as Pentagon chief Donald Rumsfeld outlined last month. This &quot;instrument&quot; is designed not for the people's benefit but to provide &quot;maximum flexibility&quot; for the commander-in-chief - whose powers are not subject to U.S. or international law, says Bush's legal team.
 Is such a faction, so steeped in blood and lies, so ravenous for domination, ever likely to resign its power voluntarily through free, unfixed elections? Or will it not seek to extend its rule, by any means necessary, into the years and centuries beyond?
 
 <i>For annotational references, see Opinion at www.sptimesrussia.com</i>


TITLE: Blood Group 

TEXT: The history of politics is the history of factions jostling for power, by methods seldom peaceful and rarely, if ever, honest. War is by far the preferred means of obtaining and augmenting domination of the political landscape and the enrichment of the ruling clique.
 
Sometimes this means violent civil strife within the state itself. At other times, the political tool of war is directed outwards, at some demonized enemy who poses a &quot;threat,&quot; which is almost always exaggerated or illusory to national survival. Without fail, the warmongering faction's political opponents are identified with the enemy, either as direct agents or, more often, as unpatriotic abettors whose criticism of the rulers gives &quot;aid and comfort&quot; to the foe.
 Blood is an excellent sealant for factional unity. Once lives have been taken in pursuit of the faction's interests, which are invariably dressed up in the rhetoric of moral purpose, it becomes much harder for the faction's members to question or quit the cause. To do so means confessing not just to error but to complicity in murder. Few are those who can face such a stark unmasking. Self-deception is vital coin in the economy of factional partisanship.
 Of course, some factions are more venal, more violent and more ambitious than others. Many factions are content with a mere piece of the action, a cut of the spoils. Although occasionally they might win through to the top rank of power, they don't seek to eliminate all their rivals and establish permanent rule. But history provides many examples of ruthless factions whose thirst for control is unlimited. They seek and will accept no less than a profound transformation of state and society into the image of the faction itself, using any method to achieve this goal. They will begin with peaceful means but will not balk at bloodshed if required. And of course, to impose a narrow partisan vision on an entire society inevitably requires mass bloodletting in the end.
 By no means are such towering ambitions always unsuccessful. This is one of the great unspoken truths of history: In many different places and times, empires, caliphates, dynasties and other systems of factional dominion have been established through enormous evil - and then persisted in power for centuries, lauded as honorable, legitimate governments. In time, their domination comes to be seen as a fact of nature, the way things are. There is no other way to think, to operate, to exist outside the parameters imposed by the ruling worldview.
 Western civilization is founded upon this kind of enduring factional triumph. Octavian, the teenage adventurer adopted by his distant kinsman Julius Caesar, parlayed the chaos of Rome's partisan strife into supreme power, using corruption, deceit, betrayal, murder, civil war and foreign conquest as his political instruments. With a bloody single-mindedness and a scope that would not be seen in Europe again until the 20th century, he subsumed the entire state into his faction, merging and equating the two, leaving nothing outside the new reality created by his violent success. 
 There was no ideological, moral or even genuine political content at the heart of his faction. Its only goal was power, Octavian's personal power, from which his adherents hoped to obtain offices, land, loot and prestige - or protection from the ravages of other factions. Only later, on the razed ground of total victory, was this remorseless, murderous game mythologized into a selfless crusade for national security, for order, liberty, prosperity and, yes, for &quot;family values.&quot; Only then, when the dead lay rotting by the hundreds of thousands, was the young man accorded the lofty title that carried him into history as a beacon of civilization: Augustus. The system he established so brutally was maintained - with equal brutality for all who opposed it - for more than 1,400 years.
 At first glance, it might seem absurd to compare this grand figure of world history to the gang of apish, third-rate poltroons now camped out along the Potomac. But although Octavian's faction contained a handful of remarkably able figures, for the most part it was a collection of schemers, time-servers, cynical money-men, stunted ideologues, bootlickers, propagandists and thugs. Through bribes, threats and the reflected glory of Caesar's name, Octavian was able to augment his tawdry crew with the fearsome military power of many legions. Armed might - and the willingness to use it without remorse or moral compunction - is always the decisive factor in politics.
 The brutal system of torture, corruption, lawlessness and war established in Washington by the faction of President George W. Bush is now backed by the greatest military power in history, able to wipe whole nations from the face of the earth in minutes. With the illegal invasion of Iraq and the illegal imprisonment of thousands of people in its global gulag, this faction has shown its willingness to use military force without remorse or moral compunction in pursuit of its openly-stated totalitarian vision: &quot;full-spectrum dominance&quot; over geopolitical affairs coupled with a radical &quot;transformation&quot; of domestic government into a centralized, militarized &quot;instrument of national power&quot; that breaks down &quot;the old, rigid divisions between war, peace, diplomacy, conflict and reconstruction,&quot; as Pentagon chief Donald Rumsfeld outlined last month. This &quot;instrument&quot; is designed not for the people's benefit but to provide &quot;maximum flexibility&quot; for the commander-in-chief - whose powers are not subject to U.S. or international law, says Bush's legal team.
 Is such a faction, so steeped in blood and lies, so ravenous for domination, ever likely to resign its power voluntarily through free, unfixed elections? Or will it not seek to extend its rule, by any means necessary, into the years and centuries beyond?
 
 <i>For annotational references, see Opinion at www.sptimesrussia.com</i>


TITLE: Pro-Syrian Groups Win Election
PUBLISHER: The Associated Press
TEXT: SOUK EL-GHARB, Lebanon - Anti-Syrian candidates apparently suffered major losses in a third round of elections Sunday to fill nearly half the seats in parliament, a senior opposition leader conceded after a campaign that led to some surprising alliances. 
 
Walid Jumblatt said former army commander Michel Aoun, who broke opposition ranks and joined pro-Syrian groups on an anti-corruption slate, was winning in contested constituencies.
 Aoun's success could hurt the opposition's drive to gain a majority in the 128-seat legislature and leave him a key player in the fight over Syrian control. An empowered Aoun could put the brakes on the opposition's campaign to remove the pro-Syrian President Emile Lahoud.
 Preliminary results and campaign estimates showed Aoun and his allies leading in several districts in Mount Lebanon and in the eastern Bekaa Valley. In some areas, his allies were already celebrating with fireworks. Official results were expected Monday.
 Jumblatt accused Aoun, who returned from 14 years' exile in May, of being brought in by Damascus to undermine the opposition.
 &quot;Michel Aoun is a small [Syrian] tool,&quot; he told Lebanese Broadcasting Corp television. &quot;True, he succeeded. I concede that.&quot;
 Aoun says his feud with Syria is over now that Damascus has withdrawn its army from the country and he campaigned on a platform to fight the corruption he blames for Lebanon's economic ills, including a national debt of over $30 billion.
 The Christian leader said he was willing to talk with other factions in the new parliament and the priorities of his Free Patriotic Movement would be to work for a new election law, shorten the mandate of parliament's four-year term, and demand the government carry out a financial audit.
 Anti-Syrian forces need at least 45 more seats to win a firm grasp on Parliament and wean it off Damascus' control. The four-stage elections end next Sunday, when voters cast their ballots in northern Lebanon.
 The withdrawal of Syria's army from Lebanon in April, and subsequent jockeying for power, fractured some of the longstanding pro- and anti-Syrian political alliances.
 Aoun, who fought and lost a war against Syria in 1989, broke with the opposition after his return from exile, pitting himself against Jumblatt.
 Jumblatt was allied with Saad Hariri, son of slain former Premier Rafik Hariri, who led a ticket to sweep the Beirut elections. But the Druse leader also has forged ties with right-wing Christian politicians and the pro-Syrian militant group Hezbollah in the effort to defeat Aoun's slate.
 Turnout among the 1.2 million eligible voters was high Sunday. No official figures were available, but media estimated it was about 54 percent in Mount Lebanon and 49 percent in the Bekaa Valley. By contrast, turnout was 27 percent in the May 29 voting in Beirut that kicked off the staggered voting.
 Many city dwellers drove to their hometowns in Mount Lebanon, the country's most populous province, and the eastern Bekaa Valley to cast their ballots. They brought along their children, party flags and pictures of favored candidates, Christians and Muslims mingled in a festive atmosphere.
 The vote, the first since Syrian forces withdrew from Lebanon after 29 years, was largely peaceful despite some minor scuffles.
 The government sent army and police reinforcements to Mount Lebanon, the historic heart of the country, after political tensions sparked violence last week.
 In Souk el-Gharb, where Christian forces fought bloody battles with the Druse in the 1980s, residents were delighted by the peaceful competition.
 &quot;For me, ballot box battles are for sure much better than gunbattles,&quot; said Shahine Salibi, a 65-year-old Christian grocer. 
 &quot;We want change and we want people who will fight corruption,&quot; he said, adding that he voted for a ticket backed by Aoun. 
 Some 100 candidates competed in Mount Lebanon for 35 seats, allocated to different sects according to Lebanon's power-sharing political system. In the eastern Bekaa Valley near the Syrian border, 119 people were running for 23 seats. 
 Aoun was among the first to vote, arriving under heavy guard at a polling station in his hometown of Haret Hreik, a Shiite southern suburb of Beirut and Hezbollah stronghold. Dozens of supporters broke into cheers and applause. 
 Although former enemies banded together in electoral alliances, bitter reminders of the 1975-1990 civil war remained. In the village of Kfar Matta, where Christian militiamen killed 107 Druse in 1983 before they were driven out of the area, Druse inhabitants cast their ballots while displaced Christians voted at makeshift polling stations on another mountain ridge to avoid friction. 
 &quot;This is a sad day. It's humiliating to have to vote here, but what can I do? One has to keep hope alive,&quot; Michel Haddad said after casting his ballot in Mechref, nine miles away. &quot;Our leaders have reconciled, but we're still unable to go to our village.&quot; 
 


TITLE: Pro-Syrian Groups Win Election
PUBLISHER: The Associated Press
TEXT: SOUK EL-GHARB, Lebanon - Anti-Syrian candidates apparently suffered major losses in a third round of elections Sunday to fill nearly half the seats in parliament, a senior opposition leader conceded after a campaign that led to some surprising alliances. 
 
Walid Jumblatt said former army commander Michel Aoun, who broke opposition ranks and joined pro-Syrian groups on an anti-corruption slate, was winning in contested constituencies.
 Aoun's success could hurt the opposition's drive to gain a majority in the 128-seat legislature and leave him a key player in the fight over Syrian control. An empowered Aoun could put the brakes on the opposition's campaign to remove the pro-Syrian President Emile Lahoud.
 Preliminary results and campaign estimates showed Aoun and his allies leading in several districts in Mount Lebanon and in the eastern Bekaa Valley. In some areas, his allies were already celebrating with fireworks. Official results were expected Monday.
 Jumblatt accused Aoun, who returned from 14 years' exile in May, of being brought in by Damascus to undermine the opposition.
 &quot;Michel Aoun is a small [Syrian] tool,&quot; he told Lebanese Broadcasting Corp television. &quot;True, he succeeded. I concede that.&quot;
 Aoun says his feud with Syria is over now that Damascus has withdrawn its army from the country and he campaigned on a platform to fight the corruption he blames for Lebanon's economic ills, including a national debt of over $30 billion.
 The Christian leader said he was willing to talk with other factions in the new parliament and the priorities of his Free Patriotic Movement would be to work for a new election law, shorten the mandate of parliament's four-year term, and demand the government carry out a financial audit.
 Anti-Syrian forces need at least 45 more seats to win a firm grasp on Parliament and wean it off Damascus' control. The four-stage elections end next Sunday, when voters cast their ballots in northern Lebanon.
 The withdrawal of Syria's army from Lebanon in April, and subsequent jockeying for power, fractured some of the longstanding pro- and anti-Syrian political alliances.
 Aoun, who fought and lost a war against Syria in 1989, broke with the opposition after his return from exile, pitting himself against Jumblatt.
 Jumblatt was allied with Saad Hariri, son of slain former Premier Rafik Hariri, who led a ticket to sweep the Beirut elections. But the Druse leader also has forged ties with right-wing Christian politicians and the pro-Syrian militant group Hezbollah in the effort to defeat Aoun's slate.
 Turnout among the 1.2 million eligible voters was high Sunday. No official figures were available, but media estimated it was about 54 percent in Mount Lebanon and 49 percent in the Bekaa Valley. By contrast, turnout was 27 percent in the May 29 voting in Beirut that kicked off the staggered voting.
 Many city dwellers drove to their hometowns in Mount Lebanon, the country's most populous province, and the eastern Bekaa Valley to cast their ballots. They brought along their children, party flags and pictures of favored candidates, Christians and Muslims mingled in a festive atmosphere.
 The vote, the first since Syrian forces withdrew from Lebanon after 29 years, was largely peaceful despite some minor scuffles.
 The government sent army and police reinforcements to Mount Lebanon, the historic heart of the country, after political tensions sparked violence last week.
 In Souk el-Gharb, where Christian forces fought bloody battles with the Druse in the 1980s, residents were delighted by the peaceful competition.
 &quot;For me, ballot box battles are for sure much better than gunbattles,&quot; said Shahine Salibi, a 65-year-old Christian grocer. 
 &quot;We want change and we want people who will fight corruption,&quot; he said, adding that he voted for a ticket backed by Aoun. 
 Some 100 candidates competed in Mount Lebanon for 35 seats, allocated to different sects according to Lebanon's power-sharing political system. In the eastern Bekaa Valley near the Syrian border, 119 people were running for 23 seats. 
 Aoun was among the first to vote, arriving under heavy guard at a polling station in his hometown of Haret Hreik, a Shiite southern suburb of Beirut and Hezbollah stronghold. Dozens of supporters broke into cheers and applause. 
 Although former enemies banded together in electoral alliances, bitter reminders of the 1975-1990 civil war remained. In the village of Kfar Matta, where Christian militiamen killed 107 Druse in 1983 before they were driven out of the area, Druse inhabitants cast their ballots while displaced Christians voted at makeshift polling stations on another mountain ridge to avoid friction. 
 &quot;This is a sad day. It's humiliating to have to vote here, but what can I do? One has to keep hope alive,&quot; Michel Haddad said after casting his ballot in Mechref, nine miles away. &quot;Our leaders have reconciled, but we're still unable to go to our village.&quot; 
 


TITLE: Former Deserter Travels 
 To U.S. To Visit Mother
PUBLISHER: The Associated Press
TEXT: TOKYO - Charles Jenkins, a U.S. soldier who deserted his Army unit 40 years ago and fled to North Korea, and his Japanese wife left their home in northern Japan on Monday for his first visit to the United States since he turned himself in late last year. 
 
Jenkins was scheduled to fly to Washington D.C. on Tuesday after spending a night in Tokyo. He has said he has no plans to move to the United States, but has repeatedly said he wants to see his 91-year-old mother, who lives in a nursing home in Roanoke Rapids, North Carolina. 
 He was expected to stay in the United States for about a week.
 Jenkins, 65, served 25 days in a U.S. military jail in Japan last year after a court-martial. 
 He came to Japan in July to be with his Japanese wife, Hitomi Soga, who was kidnapped by North Korean agents in 1978 but allowed to return home in 2002.
 The couple, who met in North Korea, have two daughters. The daughters were also expected to travel with Jenkins on Tuesday.
 Jenkins' plight became a national issue in Japan because Soga was one of at least a dozen Japanese kidnapped and taken to the North to serve as teachers for its spies. 
 Her mother, who also disappeared the night she was kidnapped, has never been found.
 After a flurry of diplomatic negotiations spearheaded by Japanese Prime Minister Junichiro Koizumi, the North allowed her and four other abductees to come home two years ago, but Jenkins and their daughters Mika, now 21, and Brinda, 19, stayed in North Korea. Koizumi made a personal appeal during a summit in Pyongyang, and Jenkins and his daughters came in July to Japan, where he surrendered to U.S. military authorities.

TITLE: Former Deserter Travels 
 To U.S. To Visit Mother
PUBLISHER: The Associated Press
TEXT: TOKYO - Charles Jenkins, a U.S. soldier who deserted his Army unit 40 years ago and fled to North Korea, and his Japanese wife left their home in northern Japan on Monday for his first visit to the United States since he turned himself in late last year. 
 
Jenkins was scheduled to fly to Washington D.C. on Tuesday after spending a night in Tokyo. He has said he has no plans to move to the United States, but has repeatedly said he wants to see his 91-year-old mother, who lives in a nursing home in Roanoke Rapids, North Carolina. 
 He was expected to stay in the United States for about a week.
 Jenkins, 65, served 25 days in a U.S. military jail in Japan last year after a court-martial. 
 He came to Japan in July to be with his Japanese wife, Hitomi Soga, who was kidnapped by North Korean agents in 1978 but allowed to return home in 2002.
 The couple, who met in North Korea, have two daughters. The daughters were also expected to travel with Jenkins on Tuesday.
 Jenkins' plight became a national issue in Japan because Soga was one of at least a dozen Japanese kidnapped and taken to the North to serve as teachers for its spies. 
 Her mother, who also disappeared the night she was kidnapped, has never been found.
 After a flurry of diplomatic negotiations spearheaded by Japanese Prime Minister Junichiro Koizumi, the North allowed her and four other abductees to come home two years ago, but Jenkins and their daughters Mika, now 21, and Brinda, 19, stayed in North Korea. Koizumi made a personal appeal during a summit in Pyongyang, and Jenkins and his daughters came in July to Japan, where he surrendered to U.S. military authorities.

TITLE: Pink Floyd Rejoin for Concert
PUBLISHER: The Associated Press
TEXT: LONDON - Organizers of the London Live 8 concert said Sunday that the British rock band Pink Floyd would perform with its classic lineup at the July event for the first time in more than two decades. 
 
Guitarist David Gilmour, drummer Nick Mason, bass player Roger Waters and keyboard player Richard Wright have not performed on stage together since 1981.
 The group, which achieved major success with their 1973 album &quot;Dark Side Of The Moon,&quot; will join musical acts including Elton John, Madonna, Paul McCartney and Coldplay at the anti-poverty concert in Hyde Park on July 2.
 &quot;Like most people, I want to do everything I can to persuade the G-8 leaders to make huge commitments to the relief of poverty and increased aid to the third world,&quot; Gilmour said.
 &quot;It's crazy that America gives such a paltry percentage of its GNP to the starving nations.&quot;
 Waters, the group's founder, split with the rest of the band after a falling-out in the 1980s.
 &quot;Any squabbles Roger and the band have had in the past are so petty in this context, and if re-forming for this concert will help focus attention then it's going to be worthwhile,&quot; Gilmour said.

TITLE: Pink Floyd Rejoin for Concert
PUBLISHER: The Associated Press
TEXT: LONDON - Organizers of the London Live 8 concert said Sunday that the British rock band Pink Floyd would perform with its classic lineup at the July event for the first time in more than two decades. 
 
Guitarist David Gilmour, drummer Nick Mason, bass player Roger Waters and keyboard player Richard Wright have not performed on stage together since 1981.
 The group, which achieved major success with their 1973 album &quot;Dark Side Of The Moon,&quot; will join musical acts including Elton John, Madonna, Paul McCartney and Coldplay at the anti-poverty concert in Hyde Park on July 2.
 &quot;Like most people, I want to do everything I can to persuade the G-8 leaders to make huge commitments to the relief of poverty and increased aid to the third world,&quot; Gilmour said.
 &quot;It's crazy that America gives such a paltry percentage of its GNP to the starving nations.&quot;
 Waters, the group's founder, split with the rest of the band after a falling-out in the 1980s.
 &quot;Any squabbles Roger and the band have had in the past are so petty in this context, and if re-forming for this concert will help focus attention then it's going to be worthwhile,&quot; Gilmour said.

TITLE: IAEA To Mull Iran
PUBLISHER: The Associated Press
TEXT: VIENNA, Austria - Key members of the UN nuclear watchdog agency met Monday to endorse the head of the organization for a third term and hear a report mildly critical of Iran for not fully cooperating with a probe of its nuclear activities. 
 
Mohamed ElBaradei faced no opposition to his re-election after the United States dropped its objections last week. Bush administration hawks had accused ElBaradei of being too easy on Tehran and of trying to obstruct America's invasion of Iraq by questioning U.S intelligence that asserted Saddam Hussein had a nuclear arms program. 
 A diplomat accredited to the agency said chief U.S. delegate Jackie Sanders was expected to join representatives of other nations in backing ElBaradei at Monday's closed morning session. 
 On Iran, other diplomats said the Islamic republic will also come in for some praise, with a senior IAEA official planning to tell the agency's board that Iran has kept its promise of freezing a key program that could be used to make nuclear arms. 
 Speaking on the eve of the 35-nation IAEA board meeting, the diplomats described the report on Iran - likely to be delivered Tuesday or Wednesday by IAEA Deputy Director General Pierre Goldschmidt - as relatively mild compared with previous summaries since that nation's nuclear program became a matter of international concern three years ago. 
 Tehran has been under agency review since revelations in 2003 of nearly two decades of secret nuclear activities, including work on enriching uranium - a technology that can make weapons-grade material for nuclear warheads. Iran insists it wants to enrich only to generate nuclear power, but froze that program and linked activities late last year as it focused on talks with France, Britain and Germany meant to reduce concerns about Tehran's nuclear ambitions. 
 The report is confidential until delivery.


TITLE: IAEA To Mull Iran
PUBLISHER: The Associated Press
TEXT: VIENNA, Austria - Key members of the UN nuclear watchdog agency met Monday to endorse the head of the organization for a third term and hear a report mildly critical of Iran for not fully cooperating with a probe of its nuclear activities. 
 
Mohamed ElBaradei faced no opposition to his re-election after the United States dropped its objections last week. Bush administration hawks had accused ElBaradei of being too easy on Tehran and of trying to obstruct America's invasion of Iraq by questioning U.S intelligence that asserted Saddam Hussein had a nuclear arms program. 
 A diplomat accredited to the agency said chief U.S. delegate Jackie Sanders was expected to join representatives of other nations in backing ElBaradei at Monday's closed morning session. 
 On Iran, other diplomats said the Islamic republic will also come in for some praise, with a senior IAEA official planning to tell the agency's board that Iran has kept its promise of freezing a key program that could be used to make nuclear arms. 
 Speaking on the eve of the 35-nation IAEA board meeting, the diplomats described the report on Iran - likely to be delivered Tuesday or Wednesday by IAEA Deputy Director General Pierre Goldschmidt - as relatively mild compared with previous summaries since that nation's nuclear program became a matter of international concern three years ago. 
 Tehran has been under agency review since revelations in 2003 of nearly two decades of secret nuclear activities, including work on enriching uranium - a technology that can make weapons-grade material for nuclear warheads. Iran insists it wants to enrich only to generate nuclear power, but froze that program and linked activities late last year as it focused on talks with France, Britain and Germany meant to reduce concerns about Tehran's nuclear ambitions. 
 The report is confidential until delivery.


TITLE: French and Italian Women
 Hostages Back in Homelands
PUBLISHER: Combined Reports
TEXT: PARIS/ ROME - Two former hostages, a French woman journalist held hostage in Iraq for five months and an Italian aid worker who was held for three weeks in Afghanistan, arrived back in their homelands at the weekend.
 
Frenchwoman Florence Aubenas, 44, was freed with her driver, Hussein Hanun al-Saadi, on Saturday.
 &quot;I feel good,&quot; a smiling Aubenas said at the Villacoublay airport outside Paris, where she was greeted by President Jacques Chirac, her friends and family.
 &quot;These were harsh conditions,&quot; she said of her captivity, adding that her kidnappers had allowed her to lift her blindfold at one point to watch a French television program which broadcast a message of support for her.
 &quot;You're so happy when you see that,&quot; she said, visibly moved, referring to rallies and concerts held in her support.
 Chirac announced the release of Aubenas, a reporter for the French daily Liberation, and her driver in a televised address.
 They were snatched after leaving their Baghdad hotel on Jan. 5. Little had been known about their fate since then, or the circumstances surrounding their release.
 &quot;No ransom was paid,&quot; government spokesman Jean-Francois Cope told Europe 1 radio.
 Meanwhile, Afghan police have arrested eight people suspected of involvement in the kidnapping of an Italian aid worker, who was freed after three weeks in captivity, the interior minister said Saturday.
 Ali Ahmad Jalali said the eight have been detained separately since May 16, when Clementina Cantoni, 32, was abducted at gunpoint in the heart of the Afghan capital, Kabul. She was freed Thursday and flew home Friday.
 On Saturday, Cantoni said she planned to return to Afghanistan at some point.
 &quot;I will go back to Afghanistan, perhaps in a year or two, to see my friends, but not in the near future,&quot; Cantoni said at a news conference in Milan, Italy.
 She added that the situation in Afghanistan remained &quot;unstable and of high risk, not only for international aid workers, but also, and especially, for the Afghans.&quot;
 Italian papers have reported that Cantoni's freedom was secured thanks to the release of the mother of the leader of the kidnappers.
 Jalali acknowledged the mother of one kidnapper was released, but he said it was not part of a deal. He said the mother had been detained on suspicion of involvement in an earlier kidnapping of the son of an Afghan businessman, but she was not charged.

TITLE: French and Italian Women
 Hostages Back in Homelands
PUBLISHER: Combined Reports
TEXT: PARIS/ ROME - Two former hostages, a French woman journalist held hostage in Iraq for five months and an Italian aid worker who was held for three weeks in Afghanistan, arrived back in their homelands at the weekend.
 
Frenchwoman Florence Aubenas, 44, was freed with her driver, Hussein Hanun al-Saadi, on Saturday.
 &quot;I feel good,&quot; a smiling Aubenas said at the Villacoublay airport outside Paris, where she was greeted by President Jacques Chirac, her friends and family.
 &quot;These were harsh conditions,&quot; she said of her captivity, adding that her kidnappers had allowed her to lift her blindfold at one point to watch a French television program which broadcast a message of support for her.
 &quot;You're so happy when you see that,&quot; she said, visibly moved, referring to rallies and concerts held in her support.
 Chirac announced the release of Aubenas, a reporter for the French daily Liberation, and her driver in a televised address.
 They were snatched after leaving their Baghdad hotel on Jan. 5. Little had been known about their fate since then, or the circumstances surrounding their release.
 &quot;No ransom was paid,&quot; government spokesman Jean-Francois Cope told Europe 1 radio.
 Meanwhile, Afghan police have arrested eight people suspected of involvement in the kidnapping of an Italian aid worker, who was freed after three weeks in captivity, the interior minister said Saturday.
 Ali Ahmad Jalali said the eight have been detained separately since May 16, when Clementina Cantoni, 32, was abducted at gunpoint in the heart of the Afghan capital, Kabul. She was freed Thursday and flew home Friday.
 On Saturday, Cantoni said she planned to return to Afghanistan at some point.
 &quot;I will go back to Afghanistan, perhaps in a year or two, to see my friends, but not in the near future,&quot; Cantoni said at a news conference in Milan, Italy.
 She added that the situation in Afghanistan remained &quot;unstable and of high risk, not only for international aid workers, but also, and especially, for the Afghans.&quot;
 Italian papers have reported that Cantoni's freedom was secured thanks to the release of the mother of the leader of the kidnappers.
 Jalali acknowledged the mother of one kidnapper was released, but he said it was not part of a deal. He said the mother had been detained on suspicion of involvement in an earlier kidnapping of the son of an Afghan businessman, but she was not charged.

TITLE: Few Vote In
 Italy's Poll On Fertility
PUBLISHER: The Associated Press
TEXT: ROME - Turnout was low Sunday in the first day of a contentious referendum vote on whether to scrap some of Europe's toughest restrictions on assisted fertility, including bans on sperm and egg donation. 
 
Italian cardinals and bishops - endorsed by Pope Benedict XVI - urged citizens to boycott the two-day referendum, hoping the ballot initiatives would fall short of the required quorum to be valid, and the vote was widely seen as a test of the Roman Catholic Church's influence in this overwhelmingly Catholic nation. To be valid, the referendums must be voted on by at least 50 percent-plus one of the electorate.
 By the end of the first day of voting, turnout was at 18.7 percent, according to the Interior Ministry. Some referendum advocates had earlier estimated that turnout would have to be nearly double on the first day that to succeed by the end of the two-day vote.
 The German-born pope has contended that the efforts to overturn parts of the law regulating assisted fertility methods posed threats to life and the family. Italian politicians were split, with parties generally telling their voters to decide according to their conscience.
 Widespread abstention would doom the efforts to throw out several provisions of the tough law, including one that prohibits egg or sperm donation from outside the couple and another banning scientific research using human embryos.
 A recent Associated Press-Ipsos poll found that nearly two-thirds of Italians think religious leaders should not try to influence government decisions. And in random interviews, many denounced the Vatican's appeal as invasive.
 Deputy Premier Gianfranco Fini said he would vote &quot;yes&quot; on some issues but would oppose a proposal that would allow egg and sperm donation from outside the couple.
 Premier Silvio Berlusconi did not say if or how he would vote. President Carlo Azeglio Ciampi was among the early voters, but did not say how he cast his ballot.
 Roman Catholic teaching is opposed to assisted procreation and scientific research on human embryonic stem cells, and the Vatican wants to maintain the restrictions of the current law.
 Cardinal Camillo Ruini, the pope's vicar for Rome and president of the Italian bishops' conference, reiterated his appeal this week, saying that the Vatican is looking to &quot;enlighten consciences&quot; and defend life.
 Opponents of the legislation say the law is too restrictive and prevents research to treat diseases. 


TITLE: Few Vote In
 Italy's Poll On Fertility
PUBLISHER: The Associated Press
TEXT: ROME - Turnout was low Sunday in the first day of a contentious referendum vote on whether to scrap some of Europe's toughest restrictions on assisted fertility, including bans on sperm and egg donation. 
 
Italian cardinals and bishops - endorsed by Pope Benedict XVI - urged citizens to boycott the two-day referendum, hoping the ballot initiatives would fall short of the required quorum to be valid, and the vote was widely seen as a test of the Roman Catholic Church's influence in this overwhelmingly Catholic nation. To be valid, the referendums must be voted on by at least 50 percent-plus one of the electorate.
 By the end of the first day of voting, turnout was at 18.7 percent, according to the Interior Ministry. Some referendum advocates had earlier estimated that turnout would have to be nearly double on the first day that to succeed by the end of the two-day vote.
 The German-born pope has contended that the efforts to overturn parts of the law regulating assisted fertility methods posed threats to life and the family. Italian politicians were split, with parties generally telling their voters to decide according to their conscience.
 Widespread abstention would doom the efforts to throw out several provisions of the tough law, including one that prohibits egg or sperm donation from outside the couple and another banning scientific research using human embryos.
 A recent Associated Press-Ipsos poll found that nearly two-thirds of Italians think religious leaders should not try to influence government decisions. And in random interviews, many denounced the Vatican's appeal as invasive.
 Deputy Premier Gianfranco Fini said he would vote &quot;yes&quot; on some issues but would oppose a proposal that would allow egg and sperm donation from outside the couple.
 Premier Silvio Berlusconi did not say if or how he would vote. President Carlo Azeglio Ciampi was among the early voters, but did not say how he cast his ballot.
 Roman Catholic teaching is opposed to assisted procreation and scientific research on human embryonic stem cells, and the Vatican wants to maintain the restrictions of the current law.
 Cardinal Camillo Ruini, the pope's vicar for Rome and president of the Italian bishops' conference, reiterated his appeal this week, saying that the Vatican is looking to &quot;enlighten consciences&quot; and defend life.
 Opponents of the legislation say the law is too restrictive and prevents research to treat diseases. 


TITLE: Federer Defeats Safin, Eyes Wimbledon
PUBLISHER: Combined Reports
TEXT: HALLE, Germany/LONDON - World No. 1 Roger Federer warmed up for Wimbledon with a 6-4 6-7 6-4 victory over Australian Open champion Marat Safin to win his third consecutive Halle Open title on Sunday.
 
The 23-year-old Swiss, who is also going for a third successive title at the All England Club starting June 20, produced another masterly performance on grass, his finesse and consistency proving too much for the powerful but erratic Russian.
 &quot;It was a good performance all week long so it's exactly the way I want to feel heading into Wimbledon,&quot; Federer said at a news conference after securing his 29th career title.
 The four-time Grand Slam winner has not lost in 20 finals since 2003 and extended his three-year winning streak on grass to 29. 
 &quot;I'm very happy because today was difficult,&quot; Federer said. &quot;Marat returns well and serves well on any surface so the points are quick and that's why he's so dangerous.&quot;
 Second seed Safin had beaten Federer in their last meeting, saving a match point in a five-set thriller in this year's Australian Open semi-finals. They had never met on grass.
 The burly Muscovite, who has been complaining of a troublesome left knee since the Indian Wells Pacific Life Open in March, was upset by controversial line calls during the match but showed grit to take the second set tiebreak 8-6.
 Federer broke in the third game of the third set, however, and that was enough to give him victory in a high-tempo match which thrilled the spectators packed into the 12,500-seater Gerry Weber stadium.
 &quot;We were both playing really well, and just one or two mistakes and that's it: the match is gone,&quot; Safin said.
 &quot;But I played really well and I'm satisfied that I came so close to winning the match,&quot; he added.
 Safin said he was going to try to play Wimbledon depsite the knee problem and was heading to Italy from Halle to consult a doctor in Milan on Monday.
 &quot;It's not going to get any worse. It's going to stay like this for a very long time,&quot; Safin said. &quot;The problem is how to get rid of the inflammation. There are some movements that are really bothering me.&quot;
 The two players met again in the doubles final later on Sunday with Federer, partnering fellow countryman Yves Allegro, defeating Safin and Sweden's Joachim Johansson 7-5 6-7 6-3. 
 Meanwhile, Andy Roddick won his third consecutive title at Queen's on Sunday, defeating 6-foot-10 Ivo Karlovic 7-6 (7), 7-6 (4) to join Lleyton Hewitt and John McEnroe as the only players to win this Wimbledon tuneup three straight times. 
 Roddick reached the Wimbledon final last season and the semifinal two years ago, losing both times to Roger Federer.
 On an overcast, breezy day, Roddick recorded his 15th straight victory at Queen's. Karlovic, a Croat who relies on a powerful serve, was playing in his first ATP final.
 &quot;I absolutely love playing here at the Queen's Club,&quot; Roddick said. &quot;It's such a beautiful place and I'm kind of building a history here.&quot;
 And Russian Maria Sharapova fired a warning to her Wimbledon rivals on Sunday, out-gunning Jelena Jankovic 6-2 4-6 6-1 to win the DFS Classic for the second year running.
 It was at this sedate setting in England's second city last year that she began a journey that culminated in her fairytale crowning as champion at the grasscourt grand slam.
 The fact that she has repeated the first half of that double despite suffering from a cold and aching limbs augurs well for her return to the All England Club.
 As against Australia's Samantha Stosur and Eleni Daniilidou of Greece in previous rounds, however, she found the extra gears when she needed and never looked in danger of losing.
 
 <i>(Reuters, AP) </i>

TITLE: Federer Defeats Safin, Eyes Wimbledon
PUBLISHER: Combined Reports
TEXT: HALLE, Germany/LONDON - World No. 1 Roger Federer warmed up for Wimbledon with a 6-4 6-7 6-4 victory over Australian Open champion Marat Safin to win his third consecutive Halle Open title on Sunday.
 
The 23-year-old Swiss, who is also going for a third successive title at the All England Club starting June 20, produced another masterly performance on grass, his finesse and consistency proving too much for the powerful but erratic Russian.
 &quot;It was a good performance all week long so it's exactly the way I want to feel heading into Wimbledon,&quot; Federer said at a news conference after securing his 29th career title.
 The four-time Grand Slam winner has not lost in 20 finals since 2003 and extended his three-year winning streak on grass to 29. 
 &quot;I'm very happy because today was difficult,&quot; Federer said. &quot;Marat returns well and serves well on any surface so the points are quick and that's why he's so dangerous.&quot;
 Second seed Safin had beaten Federer in their last meeting, saving a match point in a five-set thriller in this year's Australian Open semi-finals. They had never met on grass.
 The burly Muscovite, who has been complaining of a troublesome left knee since the Indian Wells Pacific Life Open in March, was upset by controversial line calls during the match but showed grit to take the second set tiebreak 8-6.
 Federer broke in the third game of the third set, however, and that was enough to give him victory in a high-tempo match which thrilled the spectators packed into the 12,500-seater Gerry Weber stadium.
 &quot;We were both playing really well, and just one or two mistakes and that's it: the match is gone,&quot; Safin said.
 &quot;But I played really well and I'm satisfied that I came so close to winning the match,&quot; he added.
 Safin said he was going to try to play Wimbledon depsite the knee problem and was heading to Italy from Halle to consult a doctor in Milan on Monday.
 &quot;It's not going to get any worse. It's going to stay like this for a very long time,&quot; Safin said. &quot;The problem is how to get rid of the inflammation. There are some movements that are really bothering me.&quot;
 The two players met again in the doubles final later on Sunday with Federer, partnering fellow countryman Yves Allegro, defeating Safin and Sweden's Joachim Johansson 7-5 6-7 6-3. 
 Meanwhile, Andy Roddick won his third consecutive title at Queen's on Sunday, defeating 6-foot-10 Ivo Karlovic 7-6 (7), 7-6 (4) to join Lleyton Hewitt and John McEnroe as the only players to win this Wimbledon tuneup three straight times. 
 Roddick reached the Wimbledon final last season and the semifinal two years ago, losing both times to Roger Federer.
 On an overcast, breezy day, Roddick recorded his 15th straight victory at Queen's. Karlovic, a Croat who relies on a powerful serve, was playing in his first ATP final.
 &quot;I absolutely love playing here at the Queen's Club,&quot; Roddick said. &quot;It's such a beautiful place and I'm kind of building a history here.&quot;
 And Russian Maria Sharapova fired a warning to her Wimbledon rivals on Sunday, out-gunning Jelena Jankovic 6-2 4-6 6-1 to win the DFS Classic for the second year running.
 It was at this sedate setting in England's second city last year that she began a journey that culminated in her fairytale crowning as champion at the grasscourt grand slam.
 The fact that she has repeated the first half of that double despite suffering from a cold and aching limbs augurs well for her return to the All England Club.
 As against Australia's Samantha Stosur and Eleni Daniilidou of Greece in previous rounds, however, she found the extra gears when she needed and never looked in danger of losing.
 
 <i>(Reuters, AP) </i>

TITLE: Raikkonen
 Nurses Way
 To Win 
 In Canada
PUBLISHER: The Associated Press
TEXT: MONTREAL - Kimi Raikkonen and Juan Pablo Montoya were heading toward a 1-2 finish in the Canadian Grand Prix in what was shaping up as a dominating day for McLaren-Mercedes. 
 
Then a tactical error by the team led to Montoya's disqualification and Raikkonen experienced sudden mechanical trouble.
 The day was salvaged when Raikkonen nursed his car home for his third victory of the Formula 1 season Sunday, ending Michael Schumacher's dominance in Canada. Raikkonen also narrowed the gap to 22 points on world championship points leader Fernando Alonso, who failed to finish for the first time this season.
 In his last outing, Raikkonen was leading the European Grand Prix until his tire exploded on the final lap. This time he had to overcome failing steering in the closing laps to hold off Schumacher, who has a record seven wins on the Circuit Gilles Villeneuve, including three in a row.
 &quot;I might have been a little bit lucky to win today, but it doesn't matter because we were unlucky in the last race,&quot; Raikkonen said. &quot;I thought that we had a fast car, then I had some trouble with the steering. I asked the team `What is going on?' and they said they could see the problem. Then they asked me to look after the car a little bit.&quot;
 Raikkonen bobbled in a turn on the final lap, but it wasn't enough for Schumacher to close the gap in his Ferrari. The seven-time world champion is still seeking his first victory of the season, but was pleased with his runner-up effort.
 &quot;There was not much that I could do, and there was no reason to make some crazy things,&quot; Schumacher said.
 On a humid, 30-degree Celsius day, the race began with a spectacular start. Giancarlo Fisichella and Alonso both used gutsy moves to get around pole-sitter Jenson Button and Schumacher and put their Renaults at first and second. But both left the race, Fisichella with mechanical failure, and Alonso after an accident.
 &quot;This is a very disappointing day because the weekend had been almost perfect,&quot; said Alonso, who has a series-best four victories this season.
 Button also went out after an accident, setting the stage for the McLaren miscues.
 With the field under caution to clean up debris, Raikkonen's team called him in to pit. Montoya's team failed to do so, and he had to surrender the lead on the next lap when he went in to have his car serviced. But Montoya passed a red stop light as he exited pit road, and the stewards disqualified him.
 McLaren boss Ron Dennis said the team took responsibility for failing to bring Montoya in with Raikkonen, but the driver erred in misreading the pit signs. 
 Dennis said the team tried in vain to punish itself with a drive-thru penalty or placing Montoya at the back of the grid, but the stewards ignored the pleas.


TITLE: Raikkonen
 Nurses Way
 To Win 
 In Canada
PUBLISHER: The Associated Press
TEXT: MONTREAL - Kimi Raikkonen and Juan Pablo Montoya were heading toward a 1-2 finish in the Canadian Grand Prix in what was shaping up as a dominating day for McLaren-Mercedes. 
 
Then a tactical error by the team led to Montoya's disqualification and Raikkonen experienced sudden mechanical trouble.
 The day was salvaged when Raikkonen nursed his car home for his third victory of the Formula 1 season Sunday, ending Michael Schumacher's dominance in Canada. Raikkonen also narrowed the gap to 22 points on world championship points leader Fernando Alonso, who failed to finish for the first time this season.
 In his last outing, Raikkonen was leading the European Grand Prix until his tire exploded on the final lap. This time he had to overcome failing steering in the closing laps to hold off Schumacher, who has a record seven wins on the Circuit Gilles Villeneuve, including three in a row.
 &quot;I might have been a little bit lucky to win today, but it doesn't matter because we were unlucky in the last race,&quot; Raikkonen said. &quot;I thought that we had a fast car, then I had some trouble with the steering. I asked the team `What is going on?' and they said they could see the problem. Then they asked me to look after the car a little bit.&quot;
 Raikkonen bobbled in a turn on the final lap, but it wasn't enough for Schumacher to close the gap in his Ferrari. The seven-time world champion is still seeking his first victory of the season, but was pleased with his runner-up effort.
 &quot;There was not much that I could do, and there was no reason to make some crazy things,&quot; Schumacher said.
 On a humid, 30-degree Celsius day, the race began with a spectacular start. Giancarlo Fisichella and Alonso both used gutsy moves to get around pole-sitter Jenson Button and Schumacher and put their Renaults at first and second. But both left the race, Fisichella with mechanical failure, and Alonso after an accident.
 &quot;This is a very disappointing day because the weekend had been almost perfect,&quot; said Alonso, who has a series-best four victories this season.
 Button also went out after an accident, setting the stage for the McLaren miscues.
 With the field under caution to clean up debris, Raikkonen's team called him in to pit. Montoya's team failed to do so, and he had to surrender the lead on the next lap when he went in to have his car serviced. But Montoya passed a red stop light as he exited pit road, and the stewards disqualified him.
 McLaren boss Ron Dennis said the team took responsibility for failing to bring Montoya in with Raikkonen, but the driver erred in misreading the pit signs. 
 Dennis said the team tried in vain to punish itself with a drive-thru penalty or placing Montoya at the back of the grid, but the stewards ignored the pleas.


TITLE: SPORTS WATCH
TEXT: NHL Talks Proceed
 </b>

NEW YORK (AP) - The NHL and the players' association concluded 26 hours of small-group meetings on Friday and were to meet again Monday in Toronto. 
 The two sides met over four days in New York, marking the sixth straight week of discussions.
 "There was healthy dialogue and progress continued to be made on many operational issues relating to a new collective bargaining agreement," league vice president Bill Daly said Friday in a statement. "We will resume meeting early next week."
 Last week, the sides held 34 hours of talks over three days in Toronto. Those talks were called productive, and the hope is that momentum will continue to build toward an agreement that would end the lockout that started last September and wiped out the entire 2004-05 NHL season.
 "We spent the last four days in small group meetings continuing to review and negotiate various systemic and economic issues," players' association senior director Ted Saskin said in a statement. "The two sides will resume small group discussions on Monday in Toronto."
 
 
<b>NY Woos Olympics
 </b>

NEW YORK (AP) - In a last-ditch effort to land the 2012 Olympics, the city will substitute a planned baseball stadium for the football stadium rejected by state leaders earlier this month, Mayor Michael Bloomberg said Sunday. 
 Bloomberg said the new stadium would be built on land owned by the city next to Shea Stadium in Queens and would be used by the New York Mets. He said he was committed to fighting for the 2012 Summer Games despite the recent setback.
 "New Yorkers aren't quitters," he said. "We just don't walk away from our future."

TITLE: SPORTS WATCH
TEXT: <b>NHL Talks Proceed
 </b>

NEW YORK (AP) - The NHL and the players' association concluded 26 hours of small-group meetings on Friday and were to meet again Monday in Toronto. 
 The two sides met over four days in New York, marking the sixth straight week of discussions.
 "There was healthy dialogue and progress continued to be made on many operational issues relating to a new collective bargaining agreement," league vice president Bill Daly said Friday in a statement. "We will resume meeting early next week."
 Last week, the sides held 34 hours of talks over three days in Toronto. Those talks were called productive, and the hope is that momentum will continue to build toward an agreement that would end the lockout that started last September and wiped out the entire 2004-05 NHL season.
 "We spent the last four days in small group meetings continuing to review and negotiate various systemic and economic issues," players' association senior director Ted Saskin said in a statement. "The two sides will resume small group discussions on Monday in Toronto."
 
 
<b>NY Woos Olympics
 </b>

NEW YORK (AP) - In a last-ditch effort to land the 2012 Olympics, the city will substitute a planned baseball stadium for the football stadium rejected by state leaders earlier this month, Mayor Michael Bloomberg said Sunday. 
 Bloomberg said the new stadium would be built on land owned by the city next to Shea Stadium in Queens and would be used by the New York Mets. He said he was committed to fighting for the 2012 Summer Games despite the recent setback.
 "New Yorkers aren't quitters," he said. "We just don't walk away from our future."
 



TITLE: Russia Wins Gymnastics Title
PUBLISHER: The Associated Press
TEXT: MOSCOW - Olympic silver medallist Irina Chachina led the Russian team to its fourth consecutive continental all-around title Saturday at the European rhythmic gymnastics championships. 
 
The Russian team of Chachina, Olga Kapranova and Vera Sesina scored a total of 133.625 points. 
 Ukraine was second with 126.5, followed by Belarus, 3.9 points behind. 
 Chachina scored 16.975 points in the ball and 16.925 in the ribbon exercises. Her lowest mark of 16.650 came in the clubs, where she had a visible mistake. 
 &quot;Sports is unpredictable. I was behind music and simply skipped one element - to press the club between my head and a shoulder - which cost me two-tenths of a point,&quot; Chachina said.

TITLE: Russia Wins Gymnastics Title
PUBLISHER: The Associated Press
TEXT: MOSCOW - Olympic silver medallist Irina Chachina led the Russian team to its fourth consecutive continental all-around title Saturday at the European rhythmic gymnastics championships. 
 
The Russian team of Chachina, Olga Kapranova and Vera Sesina scored a total of 133.625 points. 
 Ukraine was second with 126.5, followed by Belarus, 3.9 points behind. 
 Chachina scored 16.975 points in the ball and 16.925 in the ribbon exercises. Her lowest mark of 16.650 came in the clubs, where she had a visible mistake. 
 &quot;Sports is unpredictable. I was behind music and simply skipped one element - to press the club between my head and a shoulder - which cost me two-tenths of a point,&quot; Chachina said.