SOURCE: The St. Petersburg Times
DATE: Issue #1086 (52), Tuesday, July 12, 2005
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TITLE: St. Petersburg Offers Condolences to London
AUTHOR: By Irina Titova
PUBLISHER: Staff Writer
TEXT: Dozens of St. Petersburg residents left their condolences for the victims of Thursday’s terrorist attacks in London at the British Consulate General on Monday.
“In the name of all St. Petersburg residents I express our deepest sympathy to the people and government of Great Britain in connection with the death of dozens of people in terrifying terrorist acts in London,” Governor Valentina Matviyenko wrote in the condolence book.
“The whole world was shocked  by the tragedy in Great Britain,” she said.
George Edgar, British Consul General to St. Petersburg, said Monday he and his colleagues were struck by the warmth of the city residents whose reaction to the tragedy in London was “strong and immediate.”
“We received lots of calls, condolences,” he said. “At the weekend when the consulate was closed people laid flowers outside the consulate building.  We were very touched.”
The attacks by the “terrorists achieved the opposite effect to what they wanted,” he said. “Britain will not be defeated by terrorists.”
Vanessa, 17, a St. Petersburg school graduate, said she was shocked by the terrorist attacks in London.
“I think it was terrible. And it was terrible not only for the city of London or Great Britain but also for us because all those terrorist acts kill people, and Russia unfortunately knows too well about what terrorism is,” she said.
Alexander Zhukov, 19, a student, said in order to fight terrorism people “should be more attentive and pay attention to unattended packages, especially on transport.”
“Nowadays everyone should be more careful to protect himself and others,” he said.
“We should join forces to fight terrorism,” tourism expert Vladimir Skorovarov, 52, said. “Otherwise we won’t be able to defeat it.” 
Mike Walsh, team leader of Black and Veatch engineering company, a Briton working in St. Petersburg, said he was “absolutely shocked” by the terrorist attacks in London.
However, although people were scared, they “would still strongly resist terrorism,” he added.
Another Briton, Yuriy Humber, business editor of The St. Petersburg Times, said that after the attacks he called relatives in London.  So did many other people, both British and Russian, as they heard about the tragedy.
“Such situations unite people, who also immediately begin to call each other even after long silence,” Humber said.  
“Even though I live away from London my friends from all over the world contacted me to express their sympathy.”
Meanwhile, British Airways offered passengers whose plans were curtailed by the terrorist attacks in London an opportunity to change their tickets from or to any London airport from July 7 to July 15 to tickets of the same class for other dates without penalty.
The offer applies to passengers of British Airways and its daughter companies, British Airways said Monday.  Passengers can change their tickets provided there are vacant seats.

TITLE: Kasyanov Under Scrutiny
AUTHOR: By Oksana Yablokova and Carl Schreck
PUBLISHER: Staff Writer
TEXT: The Prosecutor General’s Office said Monday that it was investigating whether Mikhail Kasyanov broke the law when he obtained a government-owned cottage shortly before being fired as prime minister in early 2004.
Kasyanov denied any wrongdoing. 
Political analysts said the case appeared to be a Kremlin-orchestrated attempt to derail Kasyanov’s possible presidential ambitions by tainting him with allegations of corruption. 
Prosecutors said they opened a criminal investigation into possible charges of fraud and abuse of office in response to a complaint from Alexander Khinshtein, a State Duma deputy and muckraking reporter who has written exposÎs based on information from his vast connections inside the law enforcement and intelligence community.
“The case was opened on July 1 and is based on an inquiry by Khinshtein. A check into whether Kasyanov purchased the property illegally is under way,” a Prosecutor General’s Office spokeswoman, who declined to give her name, said by telephone.
Khinshtein wrote last Monday in Moskovsky Komsomolets that Kasyanov, knowing he was on his way out as prime minister, used three fly-by-night companies and a rigged auction to obtain a government-owned cottage at a knockdown price in the elite Troitse-Lykovo gated community in western Moscow. 
He also suggested that Kasyanov might have helped “a very well-known oligarch” secure a cottage there.
In an interview with Komsomolskaya Pravda three days later, Khinshtein identified the oligarch as Alfa Group head Mikhail Fridman.
Nobel Prize-winning author Alexander Solzhenitsyn also lives in the gated community.
Kasyanov, who is on vacation, said through his spokeswoman that the claims were groundless.
“In all of my years in government service, I never founded any commercial organizations and never owned any shares or stakes in any company,” he said, according to spokeswoman Tatyana Razbash. 
“As for commercial activities after leaving government service, they have been and are being conducted in strict accordance with the law,” he said.
Kasyanov also reiterated his recent criticism of the Kremlin, saying he believed Russia was on the wrong political course and that the country’s future is in danger. Razbash said Kasyanov would return to Moscow on July 25, and declined to give his whereabouts, saying only that he was out of the country.
Alfa Group officials could not be reached for comment late Monday.
President Vladimir Putin fired Kasyanov in February 2004 in what was widely seen as part of an attempt to wrestle power away from some of the country’s wealthiest businessmen. Kasyanov, a liberal reformer, had a reputation of being the oligarchs’ pointman in government, and he had denounced the politically tinged case against Yukos billionaire Mikhail Khodorkovsky, who was arrested in October 2003. The criminal investigation into Khodorkovsky, incidentally, also began with a complaint from a Duma deputy.
Kasyanov signaled in February this year that he might run for president in 2008, when Putin’s second term ends.
Political analysts expressed doubt that the investigation would end up in court and said it appeared to be a case of selective prosecution. 
“The real goal … is to prove that Kasyanov was involved in corruption and by doing so discredit him in the country and, more importantly, in the eyes of public opinion in the West,” said Sergei Markov, a Kremlin-connected political analyst.
“The case is unlikely to reach court, but the investigation, which could do massive damage to his political career, might drag on for months or years,” Markov said.
He said the claims might be true but that “similar charges could be pressed against dozens of other current and former senior officials — as well as against representatives of big businesses — but they aren’t.” 
A conviction on charges of fraud and abuse of office could carry up to five years in prison.
Nikolai Petrov, a political analyst with Carnegie Moscow Center, said the investigation showed the Kremlin was getting serious about the 2008 election.
“The move against Kasyanov indicates that Kremlin discussions and arguments about the possible scenarios for 2008 have reached a critical point and entered the action phase,” Petrov said.
He said, however, that the Kremlin was probably just baring its teeth. “As a former prime minister, Kasyanov has enough information and resources to strike back. The question is whether he would want to,” he said.
Furthermore, Petrov said, the Kremlin has a limited hand to play with because other than the new investigation, the only other claims of possible wrongdoing stem from Kasyanov’s days in the Finance Ministry in the 1990s.
“Accusing him of corruption now would mean that the Kremlin would have to share responsibility for his sins and embarrass itself by admitting that it hired a man with such a reputation as prime minister in 2000 and then kept him in the post for four years,” Petrov said.
Other than Putin, Kasyanov is the best known politician in the West due to his years as prime minister and a stint before that as Russia’s chief debt negotiator, said Alexei Makarkin, a political analyst with the Center for Political Technologies.
“This criminal case spells out the negative sides of Kasyanov’s image, including his alleged involvement in corruption and close links to the oligarchs,” Makarkin said.
He said Kasyanov was better placed than any other liberal politician to become a strong oppositional presidential candidate. 
“Kasyanov left a good impression because he left his post quietly, and his Cabinet, which tended to err on the side of caution, was more popular than the current one led by Mikhail Fadkov,” he said.
Khinshtein, a United Russia deputy, denied Monday that his complaint against Kasyanov was politically motivated.
Signs that Kasyanov might be targeted surfaced in recent months when the Federal Security Service opened investigations into two of his associates: Sergei Kolotukhin, the former head of the Finance Ministry’s foreign debt department, and Denis Mikhailov, the deputy head of the Finance Ministry’s department for international financial relations, state debt and state financial assets.

TITLE: Next G8 To Be Held in City, Focus on Energy
AUTHOR: By Judith Ingram
PUBLISHER: The Associated Press
TEXT: GLENEAGLES, Scotland — President Vladimir Putin said Friday that the Group of Eight would concentrate on energy policy, declining population rates in Europe, the most serious infectious diseases and education when Russia took over the presidency next year. 
Putin said that of all the G8 countries, only the United States’ population was growing, and that was due to migration. 
He said that his G8 colleagues had pledged their help to develop policies that would positively affect Russia’s drastic demographic slide. Russia’s population — the largest in Europe — has been declining steadily since the 1991 breakup of the Soviet Union, with increased poverty, alcoholism, emigration and degradation of the health care system blamed for reducing birth rates and life expectancy. 
He also said that the G8 would follow up on the current priorities of sending aid to developing countries and overcoming poverty, and would focus attention on the former Soviet republics of Central Asia, some of which are severely impoverished. 
Next year’s summit will be held in St. Petersburg, Putin said. The city threw a large international gala for its 300th anniversary in 2003, and Putin said that no additional facilities would have to be built — creating savings. 
 
“Even in the Kremlin we don’t have the infrastructure for such events,” he told reporters at a briefing at the luxurious Gleneagles resort following the conclusion of the G8 summit. 
St. Petersburg is Putin’s hometown, and he has increasingly frequently hosted world leaders there. 
Giving Russia the G8 presidency  cements the country’s place among the world’s economic powers while throwing a spotlight on all the reasons its place at the table has always been tenuous.
The Group of Seven richest industrial countries reached out to Russia in 1991, inviting then-Soviet President Mikhail Gorbachev in a bid to encourage Moscow to keep its huge post-Soviet nuclear arsenal safe. In 1992, President Boris Yeltsin was invited to take part in summit meetings as a gesture of support for his country’s fledgling democracy.
Ten years later, Russia was brought into the exclusive club — excepting participation in some economic discussions — confirming Moscow’s insistence that in spite of the disintegration of the Soviet Union, its economic slide and military decline, its influence in the world was undiminished.
Yet Russia’s status has always been different from that of the other members — the United States, Britain, Canada, France, Germany, Japan and Italy — which teamed up three decades ago to shape joint strategies on the challenges of the day.
Only recently, it was a net recipient, rather than donor, of international aid; about one-fifth of the population lives under the officially recognized poverty line. Its economy is currently ranked 16th in the world, and it continues to suffer from substantial state economic intervention.
Then there is the persistent Western criticism of Russia’s record on democracy under Putin.
Giving Moscow the presidency “is a profound gesture of hypocrisy because the G8 is made up of countries which are major industrial countries and political democracies,’’ U.S. Representative Tom Lantos, a Californian Democrat who has co-sponsored legislation calling for Russia’s suspension from the club, said in a telephone interview from Washington. “The notion that Russia should be a member of this organization is absurd.’’
Under Putin, Russia has seen media freedoms squeezed, voters’ rights to elect regional leaders eliminated, and opposition parties shrunken in the face of the overwhelmingly dominant pro-Kremlin party. Weak observation of the rule of law and conflicting signals — with appeals to business executives to sink their money into Russia even as the state carved up the Yukos oil company, the country’s erstwhile No. 1 producer — have kept many investors wary.
During its presidency, “to some extent ... they will be on probation,’’ said Chris Weafer, chief strategist at Alfa Bank in Moscow.
Part of Russia’s cachet is its access to problem nations such as North Korea, Iran and Syria, where other G8 members have limited sway, analysts say, and his partners hold out hope that Putin could parlay that into a mediating role. Putin played up that role in 2000 by arriving at his first G8 meeting, in Okinawa, Japan, fresh from a visit to Pyongyang.
Putin said Friday he had promised the other G8 leaders that Russia would increase its oil exports.
“Russia is constantly increasing the supply to world markets,” he said at a briefing following the conclusion of the Gleneagles summit. At present, Russia produces about 470 million metric tons, of which 230 million tons are exported. Putin said this figure would rise to between 250 million and 270 million tons. “We will increase our supply of crude and work to develop nuclear energy,” he said. 
He gave no timeline for the increase, but described a series of projects under way to augment Russia’s energy transport capacity — its perpetual Achilles heel. Russia’s capacity to export its abundant oil and natural gas supplies has been hobbled by its limited and obsolete pipeline system. To boost that capacity, it will have to invest in infrastructure upgrades, in particular in the area of liquefied gas transportation and completion of oil pipelines to terminals where large tankers could be accommodated. 
Putin said he had promised his fellow G8 leaders that Moscow would do its utmost to provide enough transportation infrastructure to supply energy to its partners, both pipelines and railways. 
Putin described the plans for constructing a pipeline to Russia’s Far East, which would reach both China and the Pacific Coast for shipment onward to Japan, and from Siberia to the White Sea to supply a sufficient amount of Russian crude to the North American market. He said China would be supplied with about 20 million tons of oil per year, and Japan — which would be supplied by rail for part of the stretch — with about 10 million tons. 
Putin said Russia would increase its gas production by 40 billion cubic meters by 2010 — a 6.5 percent boost.

TITLE: New MN Director Tapped
AUTHOR: By Anatoly Medetsky
PUBLISHER: Staff Writer
TEXT: MOSCOW — Sergei Gryzunov, a former senior government press official and vice president of the Russian Association of Independent Publishers, was on Monday appointed general director of liberal weekly Moskovskiye Novosti.
Gryzunov, 55, was introduced to the staff by Ukrainian business tycoon Vadim Rabinovich, whose company Media International Group bought MN from Yukos tycoon Leonid Nevzlin on July 3.
Gryzunov said his immediate task was to reassure staff that the new owner was interested in developing the newspaper and would maintain its liberal stance. 
Rabinovich said he would announce the paper’s new editor next Monday.
As general director, Gryzunov said he would oversee the newspaper’s business operations, while Media International Group would provide MN with newswires and access to its correspondent network and photo archives.
But Gryzunov, who worked as a newswire reporter for more than 20 years, said he would also participate in shaping up the newspaper’s editorial policy. “The bulk of responsibility here will lie with the editor, but my professional record and life experience will allow me to visit editorial meetings and offer advice,” he said. 
Gryzunov was a vice president at the MN Publishing House from 2001 to 2003.
His most recent appointment was as vice president of the Russian Association of Independent Publishers in 2004, according to his resume provided by MN. In 2003, he was a public relations manager at the Novolipetsk Metallurgical Plant.
Gryzunov served as deputy chairman and chairman of the government press committee between 1994 and 1996, before being employed as vice president for public relations by California-based ICN Pharmaceuticals Inc. 
He also worked as correspondent and director for the Yugoslavia news bureau of the APN news agency, now known as RIA-Novosti, from 1971 to 1994.
MN descended into crisis in March after the previous editor and general director, Yevgeny Kiselyov, fired several senior journalists. Kiselyov quit when the newspaper changed hands.

TITLE: Police Seize Chagall Painting
PUBLISHER: The St. Petersburg Times
TEXT: St. Petersburg criminal police have found a picture by Russian master and one of the 20th century ’s most influential artists Marc Chagall, which was stolen several years ago and was being prepared to be smuggled out of the country.
Chagall’s picture, “Khasid,” was stolen in 2001 from a private collection, the city’s criminal police told Interfax on Monday.
Experts value the painting at more than $1 million.
Police seized it during a raid on one of the city’s expensive restaurants, where the picture was being handed to potential smugglers who intended to take the picture abroad.
“This piece of art has come through a long chain of mediators, from second-hand dealers to rather important people from Moscow’s Rublyovskoye Shosse [known for its rich residents], who owned the picture for a while,” the antique department of St. Petersburg police said.
The investigation is continuing.
The State Russian Museum two weeks ago unveiled the largest exhibition of Chagall’s works mounted in Russia.

TITLE: 20 Die in Suspected Arson in Ukhta
PUBLISHER: The Associated Press
TEXT: MOSCOW — A store fire in the northern city of Ukhta killed 20 people and injured another 17 Monday, emergency officials said.
Rossiya state television reported that women and children were among the victims. Thirty people were evacuated safely from the building, Emergency Situations Ministry spokeswoman Irina Andriyanova said. 	
The local prosecutor’s office said that the fire appeared to have broken out after a container of inflammable substance was thrown into the store and could be the result of a business conflict, Interfax reported. Two youths were being sought, officials said.
The second floor collapsed and the building burned for several hours.

TITLE: Bullets in Deputy’s Luggage Spur Probe
AUTHOR: By Vladimir Kovalev
PUBLISHER: Staff Writer
TEXT: The St. Petersburg Prosecutor’s Office has initiated a criminal case in relation to an attempt to transport weapons allegedly committed by Viktor Pleskachevsky, a St. Petersburg State Duma deputy in the pro-Kremlin United Russia party who heads the Duma property committee, the media reported last week.
Customs officials found several gun bullets and part of a rocket shell in the deputy’s luggage before he boarded a flight at Pulkovo airport, the Agency for Journalistic Investigations reported last week.
“At 8:30 a.m. on May 27 ammunition was found during a search of luggage belonging to Viktor Pleskachevsky,” the deputy’s press-service said in an official statement at the end of May.
The deputy had been due to fly from St. Petersburg to Moscow. He was stopped at a security checkpoint on his way to the plane.
“Viktor Pleskachevsky declined to use his immunity as a deputy and gave all the necessary testimony during the examination and has insisted that the responsible law enforcement structures immediately search his apartment, which has been under renovation for a long time,” the deputy’s press-service statement said.
Pleskachevsky has denied any wrongdoing, saying the ammunition did not belong to him and was planted in his bags.
“This has been done to order,” Pleskachevsky said Friday at a briefing in St. Petersburg. “As a result of the investigation there was not a single fingerprint found on that ammunition that could have been mine or my son’s. Therefore there is no reason to accuse me of transporting weapons.” 
“They searched my entire apartment in St. Petersburg and talked to just about everyone except my dog,” he said.
Kremlin controlled television station Channel 1 reported on May 27 that most of the deputy’s State Duma colleagues said it made no sense for Pleskachevsky to undertake the risk of carrying weapons on to a plane to deliver them from St. Petersburg to Moscow. 
He could have easily used his parliamentary car if he wanted to do that; the car has Duma license plates that tell law enforcers that the vehicle belongs to a deputy with immunity.
“According to the status of a deputy of the Duma, a parliamentarian can face prosecution only if the parliament has agreed and approved this by voting. It has to be quite a serious crime, like murder, before immunity will be lifted,” Yury Vdovin, co-head of the city branch of human rights organization Citizen’s Watch, said Monday in a telephone interview.
“I don’t believe all these tales about bullets,” he said. “It sounds as if it was done on the order of somebody because these bullets have a habit of falling into people’s pockets from the hands of the people who search them,” he added.
At the moment Pleskachevsky is mentioned in the criminal case as a witness, but according to Vyacheslav Zakharenkov, head of the Russian transportation police, the case has been handed over to the prosecutor’s office, which will determine if the deputy will be held responsible for carrying the ammunition.
Earlier in June, the city prosecutor’s office denied that the criminal case had been handed over to their investigators, but on Monday the law enforcement body confirmed that the investigation is under way.
“He [Pleskachevsky] is not mentioned in the case as a person charged with something. The case is in the course of investigation and will last for two months, according to the law, but could be extended if necessary,” Yelena Ordynskaya, the spokeswoman for the city prosecutor’s office said Monday in a telephone interview .
Ordynskaya would not comment on the grounds for the case being opened.
“This is not my business; it’s for investigators,” she said.

TITLE: Call to Restore Ivangorod Fort
PUBLISHER: The St. Petersburg Times
TEXT: The Ivangorod fortress on the border between Russia and Estonia should be restored for political reasons, Interfax quoted Culture and Press Minister Alexander Sokolov as saying Saturday.
The fortress on the edge of the Leningrad Oblast is an ancient Russian outpost to the west, he added.
“We should push hard so that the work resumes,” he said.
Sokolov had inspected the fortress Friday in connection with the opening of a memorial to 19th century industrialist and patron of the arts Baron Alexander Stieglitz, who was from Ivangorod. 
Seventy percent of the fortress is in ruins and little restoration has been performed in recent decades. “I would emphasize the political nature of this problem, because this is now the border; across the river is the Narva castle, which our Soviet restorers did up well, while on the opposite bank our fortress stands in a dreadful condition, like a reproach. Therefore, I think that the work should continue,” he said.

TITLE: IN BRIEF
TEXT: Starovoitova Appeals
ST. PETERSBURG (SPT) — The lawyers for two of those convicted of murdering State Duma Deputy Galina Starovoitova in 1988 have appealed to the Supreme Court, Interfax reported Monday.
Valery Sandalnev, the lawyer of Yury Kolchin, who was sentenced to 20 years in jail for organizing the assassination, listed three breaches committed during the investigation which he believed could lead to the verdict being changed and a retrial ordered, the report said.
Sandalnev said that Kolchin had been convicted of committing the murder because of Starovoitova’s political activities, whereas the defense did not consider that proven. The criminal case had been made under the wrong category, preventing defense materials from being used, he added. 
Finally, he said a jury trial had been refused because that had not been allowed at the end of 2003, whereas in fact the trial started in 2004 when juries were legal. 
This had resulted in his clients being deprived of their rights, the report quoted Sandalnev as saying.
The lawyer for Vitaly Akishin, who was sentenced to 23 years in jail for executing the deputy, also appealed for the verdict to be changed.

Murder Trial Begins
ST. PETERSBURG (SPT) — The city court on Friday began the trial of those accused of killing Khursheda Sultanova,  a nine-year-old Tajik girl allegedly killed by skinheads in downtown St. Petersburg in February last year, Interfax reported Friday.
Eight suspects are on trial, seven of whom are charged with attacking the girl’s family. One is accused of killing her.
The attack took place in a yard on Boitsova Pereulok near Sennaya Ploshchad, when a group of people started beating up the family members, who were on their way back from the Yusupov Garden. 
As a result of the attack, a father and his son were delivered to the hospital with different injuries and the girl was killed.

Trial Over Finn Slaying
ST. PETERSBURG (SPT) — A session of the trial into the murder of Finnish citizen Paukku Heikki Sakari was held in the settlement of Lyubitno in the Novgorod region on Monday, Interfax reported, citing the regional prosecutor’s office.
On trial is Mikhail Timofeyev, 25, a native of St. Petersburg who lives and studies in Lyubitno. He is charged with murdering for financial gain and robbery. The case has been investigated by the Novgorod prosecutor’s office and the criminal police. The Finnish consulate general in St. Petersburg has been kept informed of progress.
The body of Sakari, 60, who worked for timber transport firm Baltprom, was found in his Ulitsa Gagarina apartment in February.
The investigation alleges that Timofeyev burgled Sakari’s apartment and killed the owner after he unexpectedly appeared, fled with valuables and hid in the forest, the report said. 
Investigators also allege that Timofeyev took part in a series of burglaries from Dec.4 2004 to Jan. 30 and that he made a homemade gun and kept it.

1 Dead in Payroll Heist
ST. PETERSBURG (SPT) — A security guard was killed and another injured during an armed robbery of a payroll delivery in which 10 million rubles ($345,000) was stolen Friday, Interfax reported, quoting the city police.
“At about 4:30 p.m. on Friday criminals  have started shooting at two money collectors who had been delivering money from a bank located on Shosse Revolutsii. As a result, one money collector was killed on the spot and another was injured,” Interfax cited the police as saying.
Besides the haul of cash from Baltinvestbank, the criminals stole the guards’ weapons — a machinegun and a gun, the report said.

Smena Carriage Fire
ST. PETERSBURG (SPT) — A fire broke out in a carriage of the Smena train traveling from Moscow to St. Petersburg on Monday morning, NTV television reported on its web site Monday.
The fire started at about 3 a.m. when the train was passsing through the town of Vishny Volochyok. The passengers smelled the smoke, but when they left their compartments they could not see anything because of it.
It was later found that a fire had broken out in a service part of the carriage. The train was later stopped and the car was transported to an emergency railway track with no passengers injured, the report said.
Charitable Baron Hailed
n ST. PETERSBURG (SPT) — The charitable activities of 19th century industrialist Russian Baron Alexander Stieglitz could be an example for the modern business community and should be used as one of the grounds for the draft law on charity, Interfax quoted Culture and Press Minister Alexander Sokolov as saying Friday.
“It is very important to use specific examples to show how things were done 100 years ago,” Sokolov said at a Friday ceremony in memory of the baron’s good deeds. “We have very long traditions of charity, which had spiritual grounds, but not financial ones.”

Judge Attacked
ST. PETERSBURG (SPT) —Alexandra Strebkova, a presiding  judge of the Vsevolozhsk District court, was attacked at the weekend, Interfax reported Monday, quoting the city police.
Unidentified intruders broke into Strebkova’s apartment in the Primorsky District of St. Petersburg and stabbed her several times, after which they stole her belongings.
The judge was delivered to the hospital for surgery, after which her life was out of danger, the report said.

Shankar’s Sitars Broken
ST. PETERSBURG (SPT) — Sitar virtuoso Ravi Shankar, due to make a rare concert appearance in St. Petersburg on Wednesday, decided the show must go on in France on Sunday despite two of his instruments being broken during a flight from Lebanon.
New instruments arrived from India ready for the concert in Arles, in the south of France, Reuters reported.
“His instrument-maker arrived from India with two sitars, therefore he will be able to give his concert this evening with his daughter,” said Corrine Falaschi, head of communications at the World Music festival in Arles.
“I feel like I have lost two relatives,” California-based Shankar, 85, said of the broken sitars. His family blamed French flag carrier Air France.
An Air France spokesman was quoted by Reuters as saying Sunday that “the company is seeking an evaluation of the damage and the harm done.”
Shankar is scheduled to perform with daughter Anoushka at the Oktyabrsky Concert Hall on Wednesday.

TITLE: New Rodina Faction Approved
AUTHOR: By Oksana Yablokova
PUBLISHER: Staff Writer
TEXT: MOSCOW — The State Duma on Friday approved the creation of a new rival nationalist faction, meaning that when the chamber reconvenes in September it will have five factions rather than four, and two of them will be called Rodina.
In its final session before the summer break, the Duma voted 340 to 26 to register Sergei Baburin’s faction of nine deputies under the name Rodina: People’s Will — Socialist United Party of Russia. The name includes the names of two of the three parties that formed the Rodina bloc after the 2003 elections.
Duma Speaker Boris Gryzlov said that neither the law nor the Duma’s procedures had spelled out in detail how such conflicts should be resolved.
“We have been engaged in intensive consultations to resolve this legal collision that occurred for the first time in the history of four parliaments,” said Oleg Kovalyov, the chairman of the Duma Management Committee.
Baburin, who was ousted earlier this month from Dmitry Rogozin’s Rodina faction, said he expected more deputies to join him. “The right thing has been done and has been done efficiently,” Baburin told reporters Friday.
Rogozin called the registration illegal and said he would sue the Duma.
“The Duma’s procedures are not some underpants that can be washed all the time and remodeled depending on fashion,” Rogozin told reporters. He called for Baburin and his supporters to wear ribbons to distinguish them from his own Rodina faction.
“It was not us who wrote and staged this vaudeville, but we had to resolve it somehow,” said Oleg Morozov, a senior United Russia deputy.
After Baburin was ousted from the Rodina faction, eight of his supporters also quit the faction and joined Baburin in requesting the Duma to register a new faction. The Management Committee said it had registered the new faction last Tuesday, but on Wednesday, Gryzlov said the registration was premature.
On Thursday, the Duma Council met twice and decided to put the issue to a full Duma vote Friday.
Vladimir Pribylovsky, head of the Panorama think tank, said the split would complicate Rogozin’s efforts in fighting elections to regional legislatures. “This is an obvious defeat for Rogozin’s Rodina, but it is not fatal,” he said. 

o  On Friday, the Duma passed dozens of other bills in a flurry, including an amendment postponing the introduction of self-rule in local government from January 2006 to January 2009. 
It also passed a bill protecting business competition, and voted to release independent deputy Mikhail Zadornov from his duties. A member of the liberal Yabloko party and a former finance minister, Zadornov had submitted his resignation to take up a job as president of Guta Bank.

TITLE: U.S. Charges in Adoption Death
PUBLISHER: The Associated Press
TEXT: MOSCOW — An adoptive U.S. mother has been charged with second-degree murder in the beating death of a 2-year-old girl.
Peggy Sue Hilt, 33, of Wake Forest, North Carolina, was arrested and charged in her daughter Nina’s death in Virginia, where she was visiting relatives.
Hilt called emergency services July 2 to say the girl had stopped breathing. An autopsy showed Nina died from one or more blows to the abdominal area, police said. A court hearing is scheduled for Aug. 2.
In Moscow, prosecutors said Saturday that they would investigate the legality of Nina’s adoption from Irkutsk and see whether the follow-up in the United States complied with Russian law. 
Earlier this year, an Illinois woman was sentenced to 12 years in prison for the death of her 6-year-old son, who died weeks after she and her husband adopted the boy from Russia.

TITLE: Journalists’ Families Say Killers Go Free
AUTHOR: By Carl Schreck
PUBLISHER: Staff Writer
TEXT: MOSCOW — Relatives and colleagues of journalists slain in Russia say that law enforcement authorities are stonewalling investigations into the murders, creating what press freedom advocates say is a situation in which journalists can be killed without repercussions.
“Unfortunately, the message now is that you can kill a journalist in Russia and probably get away with it,” said Ann Cooper, executive director of the New York-based Committee to Protect Journalists. 
More than 20 family members and colleagues of 11 journalists slain in the last five years were in Moscow on Thursday for a conference with CPJ representatives, press freedom advocates and lawyers.
The CPJ-organized gathering at the Budapest Hotel was aimed at addressing the government’s failure to adequately investigate the murders of journalists and at discussing future efforts by the victims’ survivors and colleagues to press officials for the crimes to be solved.
The conference, which was closed to journalists to allow for a more open discussion, gave participants a chance to speak about the current legal statuses of the respective cases and how the investigations have been conducted, Cooper said Thursday afternoon.
“What we’re hearing repeatedly is that families and colleagues are often left in the dark after the murders,” she said. “They can’t get any information, and when they try, officials either refuse to talk to them or don’t tell them anything.”
CPJ has named Russia fifth among the “most murderous countries” for journalists, behind Bangladesh, Colombia, Iraq and Philippines.
At a meeting of the conference participants Wednesday evening, Zabalu Tepsurgayev, brother of Chechen freelance cameraman Adam Tepsurgayev, who was shot dead in Chechnya in September 2000, said he hoped the conference could be a building block for future cooperation among the victims’ survivors.
“Everybody here has lost someone close, and if we unite, maybe we can act together,” Tepsurgayev said. “Maybe the government will actually take measures to solve the crimes or at the very least show that they’re trying to do something.”
Adam Tepsurgayev bled to death on Nov. 21, 2002, in the Chechen town of Alkhan-Kala after gunmen burst into a neighbor’s house in which he was watching television and shot him in the thigh and groin, Zabalu Tepsurgayev said.
Adam Tepsurgayev had worked periodically for Reuters and had shot footage from the front lines of the first Chechen war. He had also provided video footage of Chechen warlord Shamil Basayev having a leg amputated, his brother said.
Grigory Bochkaryov, a former colleague of Rostov-on-Don journalist Natalya Skryl, who was killed in March 2002, said investigators in the Rostov region town had not even done the “bare minimum” to solve the murder of the journalist, who had been investigating an ongoing struggle for control of Tagmet, a local metallurgical plant, at the time of her death.
Skryl, a 29-year-old business reporter for the newspaper Nashe Vremya, was attacked outside her home on March 9, 2002, and beaten to death with a blunt object.
“There are no suspects and no versions. They didn’t even find a homeless man to take the rap,” Bochkaryov said. “They say the investigation is on hold, but there is no such status under Russian law. Either the case is ongoing or it’s closed.”
The family of Paul Klebnikov, the editor of Forbes’ Russian edition who was shot outside his office July 9 of last year in an apparent contract hit, was represented at the conference by Klebnikov’s uncle, Arkady Nebolsin.
Cooper said requests had been made for meetings with representatives of the Prosecutor General’s Office and the human rights ombudsman, but that there was no confirmation from either as of Thursday afternoon.
Nikolai Petrov, an analyst with the Carnegie Moscow Center, said cooperation between families and colleagues of slain journalists could be a “relatively effective” tool to press the government to solve such murders.
“If they succeed in getting meetings with top officials, it’s possible that someone could offer real assistance,” Petrov said. “And if they work together, they can learn better how to pressure authorities and help one another.”

TITLE: Scientist Signs Up for Space Shot
AUTHOR: By Mike Eckel
PUBLISHER: The Associated Press
TEXT: MOSCOW — Russia’s space agency has signed a deal that would make a U.S. millionaire scientist only the third tourist to visit the international space station, a spokesman said Wednesday. 
The scientist, Gregory Olsen, could fly to the orbiting station as early as October, when the next Soyuz mission is scheduled to bring supplies and a new crew to the station, Vyacheslav Davidenko, a spokesman for the Russian agency, said Wednesday. 
Olsen, the 60-year-old founder of a New Jersey-based infrared-camera maker, resumed training in May at a site just outside Moscow for the flight on a Russian-built Soyuz spaceship. He confirmed Wednesday that the contract had been signed. 
“I’m feeling great and hopeful that I will launch this fall,” Olsen wrote in an e-mail exchange. “Training has been very intense, but enjoyable.” 
The cost of the flight is $20 million, according to Eric Anderson, president and CEO of Space Adventures of Arlington, Virginia, the company that signed the deal with Russia. 
According to Olsen, the crew for his flight has not been officially announced, but he has worked with two other crew members in the Soyuz simulator over the past week. Part of that training, at the Yury Gagarin Cosmonaut Training Center in Star City near Moscow, included donning a pressurized space suit. Olsen also said he runs almost every morning. 
“This training has given me tremendous admiration for cosmonauts and astronauts who have spent years doing this and know so much more than I,” Olsen wrote. 
Olsen works out regularly with a trainer, is an avid ballroom dancer and otherwise stays physically active. 
His trip, originally scheduled for this April, had been on hold last summer because doctors in Russia found an undisclosed health problem during a physical exam. 
That ailment was never revealed, but this past May the Russian space program gave Olsen medical clearance. Marshall Cohen, president and co-founder of Olsen’s company, Sensors Unlimited Inc., outside Princeton, New Jersey, said in May that Olsen’s U.S. doctors reported that he had no health problems. 
Olsen, who holds advanced degrees in physics and materials science, has said he plans to bring along several of his company’s state-of-the-art infrared cameras to do science experiments. 
He previously said he hopes his experiments will prove the value of the cameras in gathering data in space and will help scientists studying distant stars, chemical reactions such as ozone formation in the atmosphere and the health of agricultural crops. 
The orbiting station’s current inhabitants — Russian cosmonaut Sergei Krikalev and U.S. astronaut John Phillips — arrived there in April on a six-month mission. 
Space Adventures, the company that arranged the deal, has arranged trips for the only two other people that have traveled to the orbiting station as tourists — American Dennis Tito and South African Mark Shuttleworth. 

Associated Press writer Linda A. Johnson in Trenton, New Jersey, contributed to this report.

TITLE: Moscow Blasts Kwasniewski For Stance on Baltic Borders
PUBLISHER: The Associated Press
TEXT: MOSCOW — Moscow lashed out at Polish President Aleksander Kwasniewski on Wednesday over his support for the two Baltic countries in their disputes with Russia over border treaties. 
In a stinging statement, the Russian Foreign Ministry said it had been “astonished” by Kwasniewski’s intervention, accusing him of supporting potential territorial claims against Russia by Estonia. 
After meeting with Estonian President Arnold Ruutel in Tallinn last week, Kwasniewski called on the EU to back Estonia and Latvia in the dispute. 
Russia recently withdrew from signing border treaties with Latvia and Estonia, both members of the EU and NATO, after lawmakers in the two countries insisted on attaching unilateral declarations to the treaties indirectly mentioning the nearly five-decade Soviet occupation of the region that ended in 1991. 
Moscow said the declarations were an attempt by Estonia and Latvia to leave the door open to demands for future compensation from Russia for injustices committed by the Soviets. 
“In Moscow, of course, we are aware of Poland’s active role in the post-Soviet space,” the foreign ministry noted frostily, in an apparent reference to Warsaw’s intervention in the Ukrainian presidential election crisis last year.  “But Russia, in its relations with its neighbors, including Estonia, does not require intermediaries, including Warsaw,” it said. 
Ties between Poland and Russia have been strained in recent months. 
Formerly Communist Poland joined the European Union last year and has been one of the strongest supporters of Ukraine’s EU membership hopes. 
Many Poles were angered by Russian President Vladimir Putin’s failure to mention Poland’s role in defeating Nazi Germany during the 60th anniversary of World War II.

TITLE: Dagestan Law Enforcers Kill Radical Islamic Rebel
AUTHOR: By Simon Saradzhyan
PUBLISHER: Staff Writer
TEXT: MOSCOW — Law enforcement agencies in Dagestan on Wednesday said they had killed Rasul Makasharipov, leader of a radical Islamic rebel group whose members have been accused of killing dozens of policemen and security officers in the republic.
Makasharipov and Shamil Kebedov, a suspected member of his Jenet organization, were staying in a house in the Dagestani capital, Makhachkala, when commandos stormed the building early Wednesday, security forces said.
Both men were killed during the operation, Deputy Interior Minister Andrei Novikov told reporters in Makhachkala. Makasharipov’s fingerprints matched those in his police files and his relatives identified his body, police said. Kebedov was suspected of taking part in attacks on policemen, a local police source told Interfax on customary condition of anonymity. Makasharipov committed suicide by detonating a grenade, the source said.
The killing of Makasharipov came a few days after several senior police officials were fired over the rebels’ continuing insurgency and represents a major PR coup for Dagestani security forces. Police and security forces had been searching for Makasharipov, a former interpreter for Chechen warlord Shamil Basayev, since 2002. Members of his organization, Jenet, are accused of having killed more than 50 policemen and security officers in Dagestan, Channel One television reported Wednesday.
Police had twice previously claimed to have Makasharipov trapped — the first time in a tent camp outside Makhachkala, and the second time in an apartment in the city. Both times he managed to escape, killing policemen after fierce clashes.
Makasharipov also helped found a rebel group called Shariah Jamaat, Arabic for “Community of Justice,” Novikov said Wednesday. 
The group has claimed responsibility for the killing of 10 Interior Ministry troops in a Makhachkala bombing on July 1, as well as for the killing of Dagestan’s deputy interior minister, Magomed Omarov, and information minister, Zagir Orukhov, earlier this year.

TITLE: Barents Sea Hailed As Key Source Of Energy
AUTHOR: By John Acher
PUBLISHER: Reuters
TEXT: KIRKENES, Norway — The Barents Sea in the Arctic may become a crucial new source of oil and gas for energy-hungry European and world markets, Norwegian and Russian energy officials and industry leaders said Thursday. 
The Barents Sea, which stretches from the north Atlantic across the northernmost parts of Norway and far into northwestern Russia, is a vast but still little explored area believed to hold huge amounts of oil and gas. 
“To cover the increased need for petroleum, we need to look further than the Middle East,” Norway’s Oil and Energy Minister Thorhild Widvey told a conference on Arctic energy attended by Russian, U.S., European Commission and Norwegian officials. 
“I believe that the Barents Sea can represent a new petroleum province for Europe,” said Widvey, who has supported Norwegian companies’ drive into Norway’s part of the Barents Sea and their efforts to enter the Russian sector. 
Norway is the world’s third biggest exporter of oil after Saudi Arabia and Russia, and Europe’s second biggest gas producer after the U.K. 
Widvey convened the conference in the small Norwegian town of Kirkenes, near the Russian border on the shores of the Barents, in hope of boosting Russian-Norwegian cooperation in developing the region’s petroleum resources. 
Russian energy and industry ministry official Dmitry Sukhoparov said Russia could provide new supplies to world markets by developing offshore oil and gas, including resources in the Arctic. 
Up to now Russia’s main focus has been onshore. 
“This is important not only for our country but for all countries in the world because it can make possible more exports of oil and gas,” Sukhoparov said at the conference. 
Western oil and gas groups are hungrily eyeing those resources, including the giant Shtokman gas field in the Barents Sea, and hope to participate in developing them. 
Sukhoparov said that the prospect of exporting Russian liquefied natural gas to the United States had “become more concrete” with the progress made in planning the Shtokman field, which Gazprom has said could begin producing by 2010-12. 
Norwegian oil and gas companies Statoil and Norsk Hydro are among the keenest to get into Shtokman project, run by Gazprom and which is believed to hold resources about equal to the known gas resources of Norway. 
For them, joining Shtokman could mean a leap in reserves. 
Statoil is developing the Snoehvit gas field in the Norwegian sector of the Barents Sea for exports of liquefied natural gas and a late 2006 start-up. 
“The solutions we have developed for this field can be transferred directly to such discoveries as Shtokman in the Russian sector,” Statoil Chief Executive Helge Lund said at the conference. 
“Within 15 to 20 years, I see the Barents Sea as a substantial producer of oil and gas in both the Norwegian and Russian sectors,” Lund said. 
What Russia needs for Shtokman gas is technology and access to markets, and Statoil can provide both, Lund said. 
U.S. Undersecretary of Energy David Garman said the U.S. interest was to ensure that oil and gas reaches the market. “The important thing is to cooperate on getting the oil and gas into the market, and the market will resolve the question of where the product goes,” he said.

TITLE: Deputies Can’t Wait for Summer Vacation
AUTHOR: By Francesca Mereu
PUBLISHER: Staff Writer
TEXT: MOSCOW — State Duma deputies are eagerly anticipating their summer vacation, which started Saturday, to plant vegetables at their dachas, go hunting and fishing, drink fresh milk and lard-laced vodka or even fly to Libya to meet with Libyan President Moammar Gadhafi.
Deputies said the nearly two-month break was well deserved after what they called a hectic spring session, in which they faced nationwide protests over social reforms and passed controversial bills to drastically change the electoral system.
Nikolai Kharitonov, 56, a former Communist presidential candidate and onetime collective farm director, is planning to head with his wife to his hometown near Novosibirsk.
“I’m planning to work the land. I have a lot of black currant and raspberry bushes to take care of,” Kharitonov said. “The grass needs to be cut and the cucumbers watered. I’m always very busy when I’m in the country.”
At the end of August, when duck-hunting season begins, Kharitonov will test his shooting skills. He said animal rights activists had nothing to worry about because his aim was perfect and he would not kill “more than three to four ducks.”
“It is not important how many you kill. The process is what I like,” Kharitonov said.
Between gardening and hunting, Kharitonov hopes to spend a lot of time with his four daughters, two granddaughters and grandson.
Fellow Communist Deputy Sergei Reshulsky, 53, intends to unwind at his dacha outside Moscow instead of traveling to his dacha in Siberia.
“I love working in my garden, where I grow tomatoes, cucumbers, eggplants, peppers and a lot of different berries. This is how I’m planning to spend my summer vacation,” he said.
Reshulsky also wants to spend a lot of time with his wife, son and daughter and to baby-sit his two grandchildren.
Alexander Kurdyumov, 37, of the ultranationalist Liberal Democratic Party, or LDPR, will go with his wife and two daughters to his native Nizhegorodsk region, where his parents live.
“The flora and fauna are just wonderful over there. My plans are to go by yacht to an island in the Volga and live there without a telephone,” he said. “I’m going to fish and sing songs in front of a bonfire. I really like the feeling of being surrounded by nature, with the mosquitoes and everything.”
Kurdyumov said he also would drink a lot of fresh milk and down shots of a special homemade vodka containing lard and garlic.
Unfortunately, he said, he would be able to spend only about a week in the wild because LDPR deputies “work more than the others.” “I might also find a couple of days to spend in Sochi, but I’m not sure yet,” he said.
After ousting Duma Deputy Speaker Sergei Baburin from his nationalist Rodina faction on accusations of inciting a split, Rodina leader Dmitry Rogozin, 42, is looking forward to devoting the first part of his summer vacation to his new grandson, spokesman Sergei Butin said. Rogozin will spend a couple weeks with his wife and grandson at a government dacha near Moscow and then go with his wife to Onega Lake in northern Russia. “The sun is too hot in Europe this year — look at those people who died in Italy because of the heat,” Butin said. “So Rogozin decided to stay in Russia and go to the north.”
While many deputies want some time for themselves, United Russia Deputy Gennady Gudkov, 48, and independent Deputy Sergei Popov, 57, will be working for at least a few weeks of their vacations. Gudkov said he had to finish “things left undone during the spring session,” while Popov said he would fly to Libya to meet with Gadhafi and discuss his “Green Book.” Gadhafi penned “The Green Book,” a treatise on Islamic socialism as an alternative to capitalism and communism, during the 1970s.
But Gudkov and Popov said they would find a few days to rest. Gudkov is thinking about going to Greece, Bulgaria or Sochi. “My wife and I still don’t know where. We might end up resting somewhere outside Moscow,” he said. “The most important thing for me is to get some sleep. You never have time to sleep when you work in the Duma.”
Gudkov has two sons and a 6-year-old granddaughter.
Popov said he and his wife would spend some time in a Moscow region sanatorium, where he will try “to forget politics for a few days.”
Popov and his wife have no children.
The Duma reconvenes for its fall session Sept. 5.

TITLE: Ex-Inmate Tells of Life With Tycoon
AUTHOR: By Anatoly Medetsky
PUBLISHER: Staff Writer
TEXT: A former inmate who said he shared a cell with Mikhail Khodorkovsky said the Yukos billionaire threw away his laundry rather than having it washed by prison staff, bought food for the other two inmates in his cell and was very sociable.
The Federal Prison Service could not immediately confirm Thursday that the former inmate, Pyotr Shchedrov, and Khodorkovsky had shared a cell, and Khodorkovsky’s lawyer Anton Drel said his client did not recall Shchedrov because he had shared his cell with many prisoners during his 20 months in custody.
Shchedrov told Ekho Moskvy radio on Thursday that he had spent time in Khodorkovsky’s cell at the Matrosskaya Tishina prison from late June to mid-September of last year. 
Shchedrov said Khodorkovsky threw away his bed sheets and a tracksuit that he wore in the cell instead of having them washed every week. 
“The prison laundry doesn’t do its job very well. Mikhail Borisovich wasn’t used to things like that,” Shchedrov told the Sobesednik newspaper in an interview published on Tuesday. 
Shchedrov said prison officials barred Khodorkovsky from receiving weekly packages of clothing, citing rules that allow clothing packages only twice per year. But Khodorkovsky continued to receive news sets of sheets every week, he said. 
“His blanket covers and sheets were wonderful — only of the highest quality. Most often they were cherry red or dark blue,” he told Sobesednik. “He threw them out after a week.”
Khodorkovsky ignored prison food, preferring the bananas, apples and oranges that his family brought him twice per week, Shchedrov said. Khodorkovsky usually ate meat once per week, he said.
Khodorkovsky offered to pay for food that his cellmates bought in the prison store and for their workouts in the prison’s gym. 
He liked to talk and laughed a lot, making him a good neighbor, Shchedrov said.
“It was nice to be there with an educated person and always have something to talk about,” he told Ekho Moskvy. 
“We talked about literature, the arts, philosophy, religion and politics.”
While he was sociable, Khodorkovsky also kept his distance, refusing favors from other prisoners, he said.
He said Khodorkovsky loved fantasy books but also read detective novels by the popular author Boris Akunin.
Drel said he did not know whether Shchedrov’s account was accurate. “I have not discussed this issue with Khodorkovsky,” he said.
Ekho Moskvy said Shchedrov held two higher education degrees and had been convicted four times.
Shchedrov said he was in Matrosskaya Tishina while facing swindling charges. 
He was convicted, handed a suspended sentence and released in January, Sobesednik reported.
Khodorkovsky remains in the prison as he appeals a May conviction on fraud and tax evasion charges. 
The case is widely seen as the Kremlin’s punishment for his political and business ambitions.

TITLE: Italians Take Adopted Son To Italy
AUTHOR: By Antonio Lupher
PUBLISHER: Special to The St. Petersburg Times
TEXT: MOSCOW — An Italian couple flew home with their newly adopted son late Wednesday after prosecutors determined they had not abused the boy on a Barnaul-Moscow flight in early June.
Sheremetyevo Airport police had briefly detained the adoptive parents, Giovanni Fiori and Giovanna Pintus of Sassari, Italy, after a flight attendant accused them of physically abusing Kirill Pushkin, 7, who lived at an orphanage in Barnaul, in the Altai region.
“An investigation opened to examine the child abuse allegations was closed due to a lack of evidence,” Sheremetyevo police spokeswoman Tatyana Bondareva said Thursday. “Witness testimonies and the findings of experts led prosecutors to determine that the accusations were groundless,” she said.
The couple’s lawyer, Sergei Kadyrov, said doctors “found only a single scratch, which was at least 10 days old and which Kirill got after falling when riding his bike in the Barnaul orphanage playground.”
Kadyrov said that the mother told a court hearing that the boy had become agitated on the flight and ran around the cabin because he was tired and afraid of flying.
“Pintus sat the boy in his seat and calmed him down. He eventually fell asleep and remained calm for the rest of the flight,” he said. “All the other witnesses — including fellow flight attendants, mechanics and a co-pilot — corroborated this.” 
He said the boy was reunited with his parents last weekend and the three flew to Italy on Wednesday night.
In early June, police took a newly adopted boy away from a U.S. couple after a woman complained that she had seen them physically abuse him in a Moscow hotel cafe. Prosecutors determined about two weeks later that the claim was without merit and returned the boy to the parents.

TITLE: Regaining Former ‘Glories’?
AUTHOR: By Alex Fak
PUBLISHER: Staff Writer
TEXT: MOSCOW — Within the next two years, Russia’s annual economic output will finally reach the level of 1990, Finance Minister Alexei Kudrin told the Federation Council on Monday.
But experts voiced doubts about the relevance of Kudrin’s forecast, saying that Soviet-era statistics were hardly comparable with current economic figures because the Soviet economy did not function on market principles. 
“In 2007, we will pass the 1990 level and overcome the collapse of the ‘90s,” Kudrin told the upper house of parliament during a discussion of the 2006 budget, Interfax reported. 
Over the past five years, Russia’s economy has grown at the fastest rate since the early 1970s, Kudrin said. Officials say that the gross domestic product rose by 7.1 percent in 2004, reaching 16.78 trillion rubles ($580 billion). It is expected to grow by 5.8 percent this year.
Speaking to reporters during the Group of Eight summit in Gleneagles, Scotland, on Friday, President Vladimir Putin reiterated his plan of doubling the size of the country’s economy within a decade — a target many analysts say would be impossible to achieve.
Debates still rage over whether Russia’s economy is more productive today than it was before the Soviet Union collapsed. 
“It is not possible to compare the Russian economy in 2005 to that of 1990,” said Yevgeny Nadorshin, chief economist at Trust investment bank. “You cannot compare things which exist now to those that did not exist back then.”
After the fall of the Soviet Union in 1991, Russia’s industrial output nosedived. Many companies that were used to churning out sub-quality goods became uncompetitive and were forced to shut down.
After a long stretch of economic decline, the country’s economic output began growing only in 1999. In 2003, the domestic product, in dollar terms, was almost 28 percent higher than in 1995, Nadorshin said.
In contrast to market economies, where prices are determined by supply and demand, in the Soviet Union prices were artificially set by bureaucrats.
One way to put economic output into historical perspective is to compare the volumes of goods, not prices, said Irina Masakova, director of national accounting at the State Statistics Service.
But this method has pitfalls, Masakova said. 
For example, the quality of a Lada car produced this year is much higher than that assembled a decade ago, she said.
Moreover, many of the goods and services the economy churns out today, such as computers, cell phones and casinos, barely existed back in 1990, Nadorshin said.

TITLE: Japan to Offer Loans, Tips for Russian IT
AUTHOR: Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: Hoping to realize the potential of its much talked-about domestic Information Technology industry, Russia has turned to a country, that practically re-invented itself through a hi-tech revolution.
Members of Russia’s IT sector met their Japanese counterparts at a forum on Monday to discuss ways of setting up financial and information exchange between the two superpowers.
Both sides promised that the end result will be more than words at this week’s Japanese-Russian Informational technologies strategy forum, held at the Konstantinovsky Palace, on the outskirts of the city.
“There are a lot of unsolved questions between our countries, but our businesses are involved in active interaction. A direct opinion exchange and discussion during this conference will lead to the carrying out of projects,” Ryoki Sugita, president of Japan’s top financial daily Nihon Keizai, and head of the Japanese delegation, said at the forum.
The conference coincides with the 150th anniversary of Russia-Japan diplomatic relations. A 100-strong Japanese delegation arrived in St. Petersburg to discuss three main issues: educational, intergovernmental and business relations between the two countries.
At the top of the agenda stood Russia’s abundance of well-qualified staff, who are not always well employed.
Annually 230,000 technical specialists graduate from Russian universities — a core of people that has “no less potential than the Indian or Chinese specialists,” said Iwata Satoshi, Japanese deputy director of the commerce and information policy department.
Despite having “an abundance in human resources,” Russia’s IT remains weaker than its global competitors, said Victor Naumov, head of intellectual property and informational technology protection at DLA Piper Rudnick Gray Cary.
“High technologies cooperation will be advantageous for Russia. … International projects can employ those idle resources,” Naumov said Monday in a telephone interview.
On the back of a surging IT industry, Japan managed to recover after its economic depression of the ’90s, and now the sector accounts for 12.7 percent of the country’s economy, Hiroshi Matsui, the Japanese deputy minister for internal affairs and communications, said at the forum.
The Japanese experience may prove useful for Russia.
“Russian-Japanese cooperation has become more definite in the last two years. Japanese companies are interested in Russian IT firms and services, especially in software outsourcing,” said Julia Rovinskaya, spokeswoman for Auriga, a Russian software developer.
“Already several Japanese delegations have visited Moscow and St. Petersburg software companies to establish business relations,” she said.
Among the results of this successful cooperation, Rovinskaya named projects involving CRM (customer relations management system) and Internet technologies. To that Naumov adds software design, applied and innovative research and other fields of intellectual interaction.
Far from being simply a client of Russian IT firms, the Japanese are an active exporter of their hi-tech products to Russia. Last year Japanese exports to Russia rose by 50 percent.
“We run technology exchange projects with several Japanese companies. We have a license from the largest Japanese cellphone operator NTT DoCoMo to launch i-mode [mobile content] services,” said Pavel Nefyodov, public relations director at MTS in Moscow. The i-mode service will be introduced by September in Moscow and St. Petersburg, he said.
Part of Japan’s success in boosting its exports has come from the willingness of Japanese banks to offer Russian companies attractive loan packages that stimulate spending on Japanese software and equipment. JBIC (Japanese Bank for International Cooperation) was established for just this purpose. It also lends money to Japanese companies to support their international activity.
Long-distance operator Rostelecom became last year the first Russian company to receive a direct loan from JBIC, without needing guarantees from the Russian government and banks. The $2.7-million loan was used by the state-owned firm to buy modern telecom equipment for Rostelecom Surgut-Tyumen from Japanese hi-tech giant NEC.
The company is currently preparing to apply for a second loan agreement with JBIC, Rostelecom’s press service confirmed Monday. It would not give any further details.
The managing director of JBIC, Koji Tahami, said at the forum that the loan may total as much as $9 million, to be spent on a fiber-optic network project. Tahami said that Rostelecom could be considered for a loan because of the company’s financial transparency, confirmed by Standard & Poor’s credit rating.
Lack of transparency among many Russian companies restricted other loan possibilities, he said.
Company loan schemes, little practiced by the domestic banks, met with vivid interest from the Russian members of the forum.
St. Petersburg governor Valentina Matviyenko expressed hope that this week’s forum will contribute to Japanese participation in infrastructure development projects, with electricity supply and transport systems among them.
“To become an innovation center is our target,” Matviyenko said. “St. Petersburg is the most favorable place for Japanese companies to enter the Russian market,” she said.
The city already enjoys a strong IT community, with multinationals such as Intel, Motorola and LG Electronics working alongside domestic firms.
“The growth rate of the Russian IT sector exceeds that of the world’s average. It gives us hope for successful, international development,” Vladimir Matyukhin, head of innovation technologies federal agency, said at the forum.

TITLE: IN BRIEF
TEXT: DC to Join Toyota
ST. PETERSBURG (SPT) — DaimlerChrysler will open its Russian plant in the Shushary area, on the outskirts of St. Petersburg, NTV news reported Monday without stating a source.
As formerly reported, the plant will assembly Mercedes and Chrysler cars and will open by 2007.
The U.S.-German automaker has enjoyed booming sales in Russia this year. DaimlerChrysler’s sales through its of¸cial Russian dealers rose by 24 percent compared to the same period last year and totaled 3,494 cars, Interfax reported Monday.
Mercedes sales totaled 2,059 cars, 119 vehicles more than last year. The sale plan for 2005 is set at 5,000 Mercedes models. The recent sales growth was caused by the delivery into dealerships of new C-class and E-class engine cars, the company said.
M-class will be introduced by August, S-class by September, the automaker said.

Retailer Expansion
ST. PETERSBURG (SPT) — Retail chain Perekryostok will invest $231 million into an aggressive regional expansion in 2005, the company said Monday in a statement.
The chain currently consists of 102 shops. It will expand to 122 shops by the end of the year. According to the expansion plan, the company will operate 399 shops by 2010, Interfax news agency reported.
The company Trading House Perekrestok was registered in 1995. Until now the chain was located mostly in Moscow (65 shops) and St. Petersburg (5 shops). In April 2005 the company entered the Ukrainian market and is eager to expand in the Russian regions and the CIS.
The retailer’s sales volume rose from $453 million in 2003 to $766 million in 2004. Forecasts for 2005 are set at $1 billion, the news agency said.

Ford 1H Sales
ST. PETERSBURG (SPT) — Ford Motors’ sales figures for the first half-year reached nearly 20,000 cars, the company said Monday in a statement.
Through the dealerships, Ford sold 19,683 cars from January to June this year. The outright leader in the sales was the first Focus model, which sold 10,977 cars, followed by second-best seller Mondeo with 1,878 cars.
Despite the recent launch, the Ford Focus II already boasts 1,456 vehicles sold, the statement said.
Ford sells through 104 official dealerships in Russia.

Gazprom Eyes Sibneft
n MOSCOW (Reuters) — Gas monopoly Gazprom is looking to buy oil firm Sibneft from core shareholders led by Roman Abramovich at a 15 percent discount, Vedomosti business daily reported Monday. 

Local Plant Modernized
ST. PETERSBURG (SPT) — The largest machinery plant in the Northwest region, the Kirovsky factory, invested 178 million rubles ($6.1 million) in development for the first quarter of 2005, Interfax reported.
Investment was divided between repair works (81 million rubles), capital construction (61 million rubles), and equipment buying (36 million rubles).
Kirovsky is a joint stock company. It owns 100 percent shares in 15 subsidiary companies.

TITLE: SPIBA White Nights Business Trip to Estonia
TEXT: Members of St. Petersburg International Business Association for North-Western Russia (SPIBA) were on a “SPIBA White Nights” business trip to Estonia from June 16 to 19, 2005. 
The participants met with key officials from Tallinn’s and Narva’s City Governments, Tallinn City Council, Governor of Ida-Viru County (Ago Silde), representatives of Estonian Chamber of Commerce and Industry.
SPIBA delegation visited the port of SillamÊe, industrial parks Nakro near Narva city and TÊnassilma and Jßri near Tallinn. We enjoyed site visits to 
AEROC factory, Narva fortress and presentations of Narva city, Ida-Viru county, bank SEB Eesti Æhispank. City tour around Tallinn guided by one of the Tallinn’s best guides, which included the most interesting parts of the modern and old city, impressed even those people who have been travelling to Tallinn almost once a week. A feature of the event was an extremely exciting trip on a steam boat around the Gulf of Finland.
What the participants of the trip to Estonia say:
Christian Courbois, General Director, WESTPOST: “Our Estonian hosts received us very well. Everything worked like clock-work. SPIBA members who did not take advantage of this trip really missed out.”
Anna Gurevich, General Director, Knowledge and Skills: “I would like to thank SPIBA for this trip twice. First, as the director of a company I appreciate the perfect organization of this event, which I consider as a good example of how to organize trips, meetings and presentations. This is a lesson I learnt, which will help me develop my business. Secondly, as a psychologist and trainer I thank the organizers for the opportunity to get acquainted with success stories of building relations between business and authorities and with solutions of overcoming cross cultural barriers, which was one of the main issues of my dissertation”.
Natalya Loseva, Client Executive, SEB Russian Leasing: “It was very useful to see how people develop business in various sectors, how production companies work, which helped me understand better their business”.
Sergei Vasiliev, Deputy Chief, Customs Attorney Agency: “The major impression from the business trip comes from communications with Estonian prominent officials and heads of large companies, which proved that they are much more open-minded, open for communication and ready to a direct dialog than their Russian colleagues, which is their (Estonians’) competitive advantage. Site visits to large Estonian enterprises showed that the key aspect of their business success is a practical approach to their business development, which is aimed at making profit, dynamic development of companies, and attraction of investments.”
Irina Galieva, PR Manager, JT International: “For me as a member of the SPIBA Promotions Committee, it was especially interesting to visit our neighbors in Estonia to witness the business environment and the opportunities that this part of the world can offer to successfully deliver outstanding business results. For example, JTI reached significant market share and volume growth, nearly doubling in 2004 its market share in Estonia. And as a representative of a global company, I appreciated the chance to visit Estonia, which as a market is one of 8 business regions served from St. Petersburg, chosen by JTI as one of its 3 hubs for JTI’s International Business Support Centers, working across borders – functional, geographical and cultural.”
To view SPIBA White Nights Business Trip photo report please see: http://www.spiba.spb.ru/estonia2005.shtml

TITLE: Ust-Luga Dives Out of Mire to Plan Success
AUTHOR: By Vladimir Kovalev
PUBLISHER: Staff Writer
TEXT: After years of stagnation due to an absence of ¸nancing, the project to build a new cargo port in Ust-Luga, 150 km west of St. Petersburg, has come back to life, and is now in full swing. The ¸rst coal terminal with a 4-million ton annual capacity is scheduled to start operations later this year.
Registered at the beginning of the ’90s by a group of entrepreneurs, headed by St. Petersburg-based businessman Ilya Baskin, the Ust-Luga joint venture stalled soon after. Not until 2000 did any sign of construction take place.
By this June, with assistance from the federal reserves, the company completed the building of transport infrastructure, including a railway link to connect the territory of the future port with the St. Petersburg-Tallinn rail route, and power generating facilities that will guarantee a stable functioning of the harbor.
The current transportation infrastructure allows the port to service 1.3 million tons of cargo a year and is expected to reach 10 million tons annually within the next few years, according to the company in charge of the port’s construction, which takes its name from the Northwestern town Ust-Luga.
By 2010 to 2012, when construction is scheduled to ¸nish, the port will be able to service 35 million tons of cargo a year.
“The history of the project to build the coal terminal is quite complex, because, at ¸rst, a wish to build the terminal was expressed by the Sokolovskaya coal mining deposit,” Vladimir Semyonov, head of Ust-Luga’s analytical department, said last week in an interview.
“The total cost of the ¸rst stage of the project was about 4.9 billion rubles ($175 million), the kind of money that [Sokolovskaya] appeared not to have,” he said.
Real development started in 2000, when Kuzbasugol, a company lobbied by the Kemerovo region’s governor Aman Tuleyev, declared its interest in the project. Kuzbasugol soon started investing real resources in the construction.
“By that time the state had already spent quite a lot of money on preparing territories for the port. The federal budget keeps ¸nancing the construction quite actively to this day,” Semyonov said. “In 2004 there were 900 million rubles ($31.3 million) transferred to the port and another 900 million will be spent by the state this year — if not more.”
Coal delivered to the Ust-Luga port from Kemerovo region will be exported to neighboring Finland, Semyonov said.

MISSING MILLIONS
While working on the port’s construction, the company Ust-Luga came under close scrutiny by the St. Petersburg prosecutor’s of¸ce. The office went as far as initiating a criminal case that aimed to ¸nd a missing 75 billion rubles that were invested in the project by the company’s shareholders. The sum, gathered before the 1998 financial crisis, had a value of $12.5 million at the time.
The fate of the investments is still unknown.
“The thing is, the current management has no relation to this problem. This was a deal that was done by the previous management that left the company quite a while ago, without any record of that sum,” Semyonov said.
At the end of June, Ust-Luga the company released its ¸nancial results for 2004. The results showed net pro¸ts of 1.031 million rubles ($35,900), about 300,000 rubles more than in 2003. The board of directors decided not to pay dividends to its shareholders, as it did not in 2004, transferring the money instead to further port development and charity programs, according to the company’s press-services.
By the end of 2006, the port will launch a new ferry line to the German port of Mugran, which was used in the Soviet times to deliver military loads to East Germany. Since the Soviet troops left Germany in 1991, the port has stood idle, but German management grew very interested in cooperating with Ust-Luga to resume operations, Semyonov said.
“The berth of their railway track is the same as in Russia, because this port in East Germany was used to deliver military equipment to mainland Eastern Europe. Now it could be used to deliver commercial loads,” he said.
“And what is also important, we could get a direct connection to Kaliningrad, after [Ust-Luga’s] ferry terminal is completed in November 2006, or by the ¸rst half of 2007,” Semyonov said.
When complete in 2012, the Ust-Luga port will boast 11 terminals in total. Besides the coal terminal the port will include terminals for timber, mineral fertilizers, an oil terminal, a terminal for roll-on/roll-off ferries and cargo cars, as well as a terminal for the so-called general cargo.
When asked if the port would be used to import into Russia nuclear waste from Western Europe, Semyonov abstained from detailed comments.
“There are no such plans to build anything of this nature so far. Though if the nation ordered, we would build it,” he said.

PORT COMPETITION
To a certain extent, the port has a chance to become a sensible player on the regional market of cargo transportation, even considering that just 70 kilometers to the west of Ust-Luga, in the Estonian town of Sillamae, a similar facility is being built — and financed by Russian businesses.
Sergei Ashchekulov, an independent analyst, says that Ust-Luga has a number of advantages for attracting cargo business. He lists the federal support of the Russian government and the fact that pre-carriage is provided by one company, the Russian Railways, which minimizes miscoordination of cargo while it is being delivered to port.
“[On the down side,] the project has existed since 1992 and so far not much has been built. It is likely that a big portion of initial investments veered in an unknown direction, a situation that’s similar to what happened to the high speed railway project,” Ashchekulov said last week in an interview.
“Ust-Luga does not have a developed infrastructure network. There’s an absence of local population, which is necessary for the credible functioning of a port. [Also] according to uncon¸rmed information, the port has problems with maintaining the necessary depth for its shipping channels because of dif¸cult natural conditions,” he said.
Ashchekulov believes that the high spending on the port will likely be passed onto the clients, lessening the port’s competitiveness.
The analyst pointed out that the port in Sillamae has clear advantages such as business transparency, cheap loans, political protection from attacks on business by the Russian government, but also disadvantages such as a dependence on the tariff policy of the Russian Railways.
“The competition will be mainly determined by the tariff policy of the Russian Railways. However, if the lobbying of the Russian port, by introducing forbidding tariffs to export cargo, will be too strong, this could bring serious political complications for Russia on the eve of its entering the WTO,” the analyst said.

TITLE: Google Wins Suit Against City Man
PUBLISHER: Combined Reports
TEXT: Google, the most-used Internet search engine, won an arbitration ruling against a St. Petersburg man who registered web domain names, including www.googkle.com and www.gooigle.com, which contained links to sites unrelated to Google.
The National Arbitration Forum, a legal alternate to litigating in court, sided with a Google complaint alleging that Sergey Gridasov had engaged in “typosquatting” by operating web sites that relied on typographical errors to exploit the global online search engine’s popularity.
The copycat web sites used Google’s trademark in bad faith, as Gridasov’s “confusingly similar” web addresses allowed computer viruses and other malicious software to be unleashed on unsuspecting visitors, the forum said. 
Ownership of the addresses, which also included www.ghoogle.com and www.gfoogle.com, are being transferred to Google, said Kimberly Johnson, a spokeswoman for the arbitration forum.
Gridasov, a 25-year-old resident of St. Petersburg, said in an e-mail that he was directing visitors to the sites to download a program called Toolbarpartner.com and was being paid for each 1,000 copies of the program installed.
Google registered its domain name in 1999. Gridasov registered his web sites in December 2000 and January 2001, according to Google’s complaint.
In a decision made last week, arbitrator Paul Dorf endorsed Google’s contention that the misspelt addresses were part of a plot to infect computers with programs known as “malware” that can lead to recurring system crashes, wipe out valuable data or provide a window into highly sensitive information.
Mr Gridasov did not respond to Google’s complaint, ¸led on May 11, meaning the arbitrator could accept all reasonable allegations as true. The Associated Press sent an e-mail Friday to the address he listed when he registered his web sites. The response, which was not signed by Mr Gridasov, acknowledged the misspelt names were adopted to attract more visitors, but said there had not been any complaints until the sites began posting code from another company, which had said it would not cause any trouble.
F-Secure, a Finnish company specializing in identifying malware, identi¸ed googkle.com as a troublemaker in an advisory posted on April 26, nearly three weeks before Google ¸led its complaint.
Trying to piggyback on the popularity of a heavily traf¸cked web site isn’t new. For instance, the address Whitehouse.com used to display ads for pornography was a surprise for web surfers looking for Whitehouse. gov, the U.S. president’s of¸cial online channel. Whitehouse.com now operates as a private website that sells access to public records.

(Bloomberg, The Associated Press)

TITLE: Finns Stop Russian Permits
PUBLISHER: The St. Petersburg Times
TEXT: Over 100 Russian cargo transportation companies have stopped their international operations in Finland this month after the Finnish center for cargo vehicles stopped issuing permits to non EU-registered companies, Kommersant reported Saturday.
The permits are needed for freight transport to use the roads of the European Union.
The refusal from the Finns came as an answer to a move by the Russian governmental center for international cargo transportation, which at the end of May asked all companies, including foreign operators, to reapply for their Russian transportation license.
The Russian authorities blamed a “lost database” for the disruption.
After the “loss,” the work of the governmental center was practically paralyzed, according to the Russian Association of International Cargo Transportation Companies.
“The lack of a mechanism that could confirm the facts of the application [for a transportation license], no deadline for when the licenses will be issued or bills through which to provide payment [for the application],” left about 300 Russian and foreign companies in the lurch, Kommersant reported.
To compensate, the Finns reacted in the ¸rst half of June, by extending the period for approval of permit applications from Russian cargo companies from 15 days to 30 days. It then stopped issuing them altogether from June 27.
The Finnish transportation ministry was scheduled to examine the question again during a meeting on Monday. No further progress or information on the situation were achieved by the end of the same day.

TITLE: IN BRIEF
TEXT: Poles Anti Baltic Pipe
GDANSK, Poland (Reuters) — Poland believes the project to build an undersea gas pipeline to carry Russian gas to Germany is unprofitable and wants the European Commission to consider alternative routes, ministers said on Saturday. 
Polish officials were outraged over fellow European Union member Germany’s agreement with Russia to build the pipeline under the Baltic sea, effectively bypassing Poland and other EU newcomers. 
With backing from Berlin and Moscow, Germany’s BASF and gas giant Gazprom agreed to invest in the undersea route — an alternative to expanding a recently built pipeline already running through Poland. 
“We cannot hold it against anybody that there are plans for the undersea pipeline. But we should use our position in the EU to support alternative projects,” Prime Minister Marek Belka told reporters. 
Polish officials have voiced fears that after building another pipeline to Germany, Gazprom could effectively “cork” the Yamal transit link, which now supplies both Poland and its western neighbors. 
“Unless the [undersea pipeline] is co-financed from EU coffers, we think it is an unprofitable and economically unjustified project. There are better routes and we want to prove that,” said Economy Minister Jacek Piechota.

Baltika Floods Caucasus
MOSCOW (Reuters) — St. Petersburg-based Baltika brewery said Monday it had resumed exports to the Caucasian states of Georgia and Armenia after nearly a year’s break.
Last July, Georgia jailed the head of Baltika’s local distributor for three months on accusations that the company had not paid excise charges. Baltika denied this. 
Armenian exports also suffered because Baltika, the country’s biggest beer producer, delivers beer there via Georgia. 
Baltika, jointly owned by Scottish & Newcastle and Carlsberg, said in a statement it had resumed exports this June and had so far delivered over 25,000 decaliters of beer to Georgia and over 5,000 decaliters to Armenia.
The statement said Baltika plans to export over 100,000 decaliters of beer to Georgia before the end of 2005 and take about 4 percent of the country’s market.

TITLE: IN BRIEF
TEXT: Russia Repays Debt
MOSCOW (Bloomberg) — Russia spent 430 billion rubles ($15 billion) of its so-called stabilization fund, created to store windfall oil revenue, to pay debt to the Paris Club of creditor nations early, Interfax said, citing the Finance Ministry.
The fund declined to 617.9 billion rubles at the end of June as Russia began paying off the debt ahead of schedule.
Russia’s government in May agreed to repay about $15 billion in debt early.

Rosneft Eyes Yukos Fields
MOSCOW (Bloomberg) — Rosneft may take over east Siberian fields belonging to a Yukos unit because Yukos can’t afford to develop them, Vedomosti said, citing the Economic Development and Trade Minister German Gref. 
The fields, which belong to Yukos’ East Siberian Oil, hold 100 million tons of proven oil reserves, the paper said. At a meeting in Krasnoyarsk, Gref urged Rosneft CEO Sergey Bogdanchikov to invest in the east Siberian fields after a deputy governor of the Siberian region said Yukos wasn’t able to pay salaries, the daily said.

Iran Explores Caspian 
TEHRAN, Iran (Bloomberg) — Iran will next week begin oil exploration operations in the Caspian Sea, the Iran Daily reported, citing an oil official from the country. 
Tender documents for the exploration project will be prepared within a month, Hassan Mohammadi-Moqaddam, managing director of the Oil Exploration Operations Co. (OEOC), told the daily. It will take Iran about two years to produce oil from the Caspian Sea, the Iran Daily reported. 
Magnitogorsk Payout
YEKATERINBURG (Reuters) — The board of steelmaker MMK is proposing that the company pay its first interim dividend, it said Monday.
“The board of directors will issue its recommendation on the size of the dividend on July 15,” MMK spokeswoman Yelena Azovtseva said. The board converged at the end of last week.
The steel giant, which has traditionally skipped interim dividends, will decide on whether to pay for the first half of 2005 at an extraordinary shareholders’ meeting on Aug. 30.

Volgotanker Loses 
MOSCOW (SPT) — Samara region’s arbitration court last week rejected Volgotanker’s appeal of a 2001 back tax bill totaling more than $20 million, Interfax reported Monday, citing an anonymous source in the Samara tax service. The region’s tax authorities are preparing a new bill for 2002 and may also claim payments for 2003 after they finish that year’s audit, the source told the news agency. Total tax claims against Russia’s largest oil shipper in barges may eventually top 1 billion rubles ($35 million), the source said.

Evraz Eyes Czech Plant
PRAGUE (Reuters) — The Czech government is likely to sell steel maker Vitkovice Steel to Evrazholding despite a last minute attempt from Mittal Steel to outbid its rival, government officials said Monday.
Mittal Steel on Monday launched a counter bid for Vitkovice Steel, one of Europe’s biggest producers of heavy plates.
Mittal said in a statement it was ready to pay 9 billion crowns ($355 million), two billion crowns more than Evraz, which won a government tender last month. The government will discuss the sale Wednesday.

VTB Mulls Shares Sale
MOSCOW (Bloomberg) — Vneshtorgbank, Russia’s No. 2 bank, may sell shares to the public as soon as next year, Chief Executive Andrei Kostin said.
The government probably will sell “a substantial” part of its 100 percent stake in the bank within five years, Kostin said Monday. 
The bank expects to start by selling shares in New York or London and may be able to start the initial public offering process as early as next year, he said.

New Transaero Flights
MOSCOW (SPT) — Transaero airline on Sunday began operating flights on a Boeing 747, the first such passenger airplane to be operated by a Russian carrier.
The 468-seater jet is the first out of the four the airline is due to receive this year, formerly operated by Virgin Atlantic, it said in a statement Monday. Transaero will lease four Boeing 747s for five years, the company said. 
The new aircraft will fly to Israel and popular vacation spots in Spain, Croatia, Tunis as well as to cities in South East Asia and Latin America.

Hyundai Sales Double
MOSCOW (SPT) — South Korea’s Hyundai more than doubled sales of its imported cars in the first half of 2005, the automaker’s official dealer, Karnet-2000, said Monday. The dealer sold 19,805 cars in the first six months, compared to 9, 776 vehicles sold in the same period last year. The compact Getz model, which sold 7,672 cars, was the carmaker’s most popular import.

TITLE: Experts: City’s Hotel Construction Misses the Mark
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: Up to 22 new hotels will open in St. Petersburg this year, according to official statistics.
The news is unlikely to gladden the casual tourist or the budget traveler, however, as analysts say that, lured by the larger profits in the higher segments, developers have once more ignored 2- and 3-star accommodation projects.
Moreover, of the planned 22 hotels in 2005 and 24 hotels in 2005 that are registered with the city’s investment and strategic development committee, some will never reach fruition, analysts said. Hotel construction retains its reputation as an ego-investment, sometimes used for money-laundering, and often without any business strategy behind it.

TOUGH AT THE TOP
St. Petersburg has 5 hotel rooms for every 1,000 citizens, half of Moscow’s ratio and well below the European average of 14 rooms, according to real estate agency Becar’s report last year.
About 140 hotels, hostels and sanatoriums operate in the city, providing a maximum 33,500 guests with 17,000 rooms at any one time, the report said.
While 37 percent of the accommodation falls into the middle segment, St. Petersburg’s 5-star hotels account for at least a 12 percent market share. In effect, the proportions show that there is one 5-star bed for every 3 middle-segment beds and 2.6 economy-class beds in the city.
“In the upper-tier of the market we will get an additional 1,000 new rooms this year. So the situation will be more difficult and challenging for everyone,” said Edgard Pauly, general manager of the 4-star Novotel St. Petersburg that will open this year.
Novotel, run by the French hotel chain Accor, will be just one of five large 4-star additions to St. Petersburg’s hotel scene this year. The others are Russian-managed The Ambassador, managed by Hotels Petersburg, The Admiral hotel, Kempinski Group’s Moika 22, and the recently opened Petropalas.
Accor also plans to open its 5-star Sofitel in the city, as well as two 3-star Ibis brand hotels within two years.
“Competition in the segment of 5-star hotels is getting stronger especially in low season. Due to the lack of demand during winter 5-star hotels are not only competing with each other but also with 4 stars hotels,” said Julia Pashkovskaya, executive assistant manager of Hotel Moika 22 Kempinski.
A city’s cultural and economic forums, international conferences and sporting events can often help to stimulate the winter’s occupancy rates, but the problem is that the hotels can’t stimulate such events.

COUNTING STARS
Pyotr Medvedev, partner at Ernst & Young in Moscow, says that the developers persistence in building mainly 4-star and 5-star hotels reflects a situation happening all over Russia, not a local trend. The hotel market is often agitated by rumors of industrial groups planning to develop 2-star and 3-star hotel chains, but when considering costs and profits, investors choose 4-star and 5-star hotels, Medvedev said.
Media reported that Basel (Basic Element) would invest in such a hotel chain, and later Russkoye Zoloto (Russian Gold) and Holiday Inn declared a 10 middle-class hotel project. Nothing has come of either, Medvedev says. 
The prices of construction certainly play a role in deciding which segment to aim at. In a 5-star hotel, the cost of construction is between $150,000 and $200,000 per room, in a 2-star hotel — $50,000.
Nevertheless “with long-term land rent at about $15 million and high connection costs it’s better to build an expensive hotel since 2-star and 3-star hotels have lower profitability,” Medvedev said.
Hotel operators don’t declare the figures, but the profitability of a 4-star hotel starts at 12 percent, Medvedev said. The return on investment may take 7 years to 10 years, and the higher the class, the lesser the period.

OCCUPATION THERAPY
The higher the hotel’s star rating, the larger its occupancy, analysts say. The average occupancy of a 5-star hotel in St. Petersburg is close to the European maximum, between 60 and 70 percent. During the summer, that can rise to 95 percent.
Becar rates that 5-star Radisson SAS Royal enjoyed 75 percent occupancy during the first year after opening in 2001, although the realtor’s experts say this was largely helped by the hotel’s strategy of discounting heavily.
In comparison, the middle segment enjoys a very varied occupancy rate, between 30 percent and 80 percent, which largely depends on service quality.
Nikita Savoyarov, head of tourism consultancy ET Consult, says the hotel’s class is also to a large degree determined by the location, and 3-star projects usually arise when there is a lack of resources.
“Hotel projects are run by those who succeed in getting a good building site and the authorities support. If you miss the moment, it’s hard to make a deal later,” Savoyarov said.
Once that support arrives, many developers and investors become blinded by ambition, Medvedev said.
“It’s like buying Chelsea. Owning a luxurious 5-star hotel you become a respectable businessman almost at once,” Medvedev said. It’s not surprising that such owners tend to over-invest, often with marketing and financial planning left as the last concern, he said.
Savoyarov sees the problem with the development of St. Petersburg’s hotel scene as still mainly residing in the cost of a room, which may damage the city’s tourism sector for the future.
“The problem is not the number of hotels but their prices,” Savoyarov said. “With the current price strategy, hotels will have free rooms already in July. If in St. Petersburg rooms start at $80, in Berlin, Paris or Rome you can find one for 40 euros in any season,” he said.

TITLE: Mobile Networks Seek Extras
AUTHOR: By Ilya Shatilin
PUBLISHER: Special to The St. Petersburg Times
TEXT: Each month, Russians seem to spend less and less on mobile phones. With profit from each mobile phone subscription steadily declining, operators are pulling out all the stops to keep their subscribers engaged, entertained, and glued to their handsets.
The rapid growth in the number of subscribers to cellphone services — up by 4.4 million people last month — has inevitably led to a reduction of the ARPU, or average revenue per user.
Last year, ARPU for the big three mobile operators, MTS, VimpelCom, and MegaFon fell again to $11.80 per month — now 22 percent less than in 2003, and a third of what Western cellphone networks rake in.
This year iKS-Consulting predicts that sum to fall further, hovering on $10.
The drop in voice call profits due to tighter competition on tariffs has sparked a creative frenzy among the networks desperate to raise incomes in other ways. Income from additional services has been rising from 8 percent of the total revenue in 2003, to 12 percent last year. 
Percentages aside, these services earned a total of $1 billion in 2004 and are expected to earn 70 percent more this year, which would firmly secure the sector at $1.6 billion.
Value-added services, or VAS, account for 15.5 percent of the ARPU. The most popular such service is without a doubt the short message service, or SMS, which accounts for 52 percent of all incomes. Last year SMS earned, according to different estimates, between $250 million and $450 million.
However, a further $150 million to $200 million of operators’ income came from mobile content. This content is also based on SMS technology — it provides melodies, pictures, games, personals, jokes, participation in TV quizzes and so on. So about a third of all income from SMS services was due to content, which is about 5 percentage points more than its worth in 2003.
In third place for things to do with your mobile phone was access to the Internet and the transmission of MMS picture messaging. That accounted for 14 percent of income. Russia has 6 million GPRS users.

CONTENT TO PROFIT
If before mobile networks saw content providers as their insignificant vassals, companies that relied on the operators for their livelihood but which were in a sense providing “extra,” not vital, services for cellphone users, the current   drop in incomes has led to a rethink.
Seeing the rising significance content has on pushing the market further, and in bringing in the profits that voice calls are no longer delivering at previous levels, the operators have agreed to ease the contract conditions for content providers by taking a smaller cut of the “vassals”’ profit.
If until recently the markup in Russia was 50 percent compared to 10 percent to 25 percent in the West, then today the share of content providers is growing in direct proportion to the volume of services sold. In addition, the process of obtaining a line through which to run the service has been simplified. One contract with the network will allow a content provider to gain automatic access to subscribers across Russia; previously a content provider needed a separate contract with each regional office of a mobile network.
All this significantly simplifies entry onto the market for new players, and together with the expected growth of the market in 2005 by 100 percent, opens great opportunities for them.
At the same time, the greatest opportunities will go to those players who offer the maximum specter of services — for instance, Moscow’s ProfitMobile or St. Petersburg’s Artfon, which offer entertainment- and business-orientated services. The developing sector calls for more than a little experimentation.

TITLE: Investigation: Afterlives Of the Stolen Handsets
AUTHOR: By Ilya Shatilin
PUBLISHER: Special to The St. Petersburg Times
TEXT: Once upon a time, thieves and robbers of all types specialized in stealing purses. However, not all purses are the same — some contain almost no money, and in others they find plastic bank cards that are of absolutely no use to the “amateur” pickpocket. 
Today things are different:  nearly everyone has a mobile phone, and by stealing them, thieves earn between  $20 and $100 a piece.
Having stolen the phone, the thief either takes it to a secondhand dealer so as to get rid of his booty quickly and not be caught red-handed, or to shops that buy stolen goods. Most of these are found in the area around Sennaya Ploshchad and also at the city’s radiomarket (an electric goods bazaar). At such places there are two chains of shops that even focus on this manner of bringing in the supplies.
To check out the facts, our correspondent went along to the shops. The reporter offered to sell a mobile phone without any instructions, charger, box or anything like a receipt. Without being asked any questions or any demands being made regarding his identity, the reporter was offered an amount that is about half the market price for the particular phone.
After the shops buy a phone from someone, they usually try to match it with a charger and sometimes even instructions, and then put it in the shop window for sale.
Once, when MegaFon had a monopoly on the city market, MegaFon kept a blacklist of stolen phones. The serial numbers on their list could be blocked or tracked down. Therefore thieves and dealers had to go with their stolen wares to specialists, who would change the serial numbers and unblock the numbers — a service that cost $5 to $20.
However, when MTS arrived on the market, the Moscow-based firm could not be bothered to deal with blacklists. Without support, MegaFon too had to abandon its blacklisting, since in effect, a thief could simply switch the mobile handset to a new operator. Sorry, this phone has been “found.”
What is to be done? To prosecute, thieves have to be caught red-handed. The shops that sell stolen phones are almost impossible to catch out. After all, “stolen” and “found” are quite different matters in the eyes of the law.
What’s even more bizarre is that there have been instances when a person has bought back their own, previously stolen phone from a trader. As a rule, however, such instances are solved by paying a policeman a bribe, or sometimes with a “refund” plus the phone handset in exchange for a promise that they will not inform the police.
For every stolen handset they sell, traders make a profit of 100 percent to 120 percent and, according to various estimates, this segment accounts for 20 percent of the St. Petersburg market for telephone handsets. And as long as many people prefer to save money, choosing to ignore where the handset came from, that figure is unlikely to decrease.

TITLE: Investors Scared of Fool’s Gold in Oblast
AUTHOR: By Natalie Neverovskaya
TEXT: Investors finally have regional legislature from the Leningrad Oblast authorities to back their businesses: Since the start of June, all enterprises that have a contract with the region are able to enjoy a lower profits tax of 13 percent. The worry many still have, however, centers on the permanence of the backing. Will the tax breaks turn out to be a government favor or a contractual agreement?
To judge the security of the current situation, it’s best to look at the history of tax benefits for investors in the Oblast.

THE INVESTMENT STORY
The Leningrad Oblast has always put great emphasis on making this region more attractive for potential investors. To maintain a favorable investment climate in the Oblast, the region implemented additional tax privileges for taxes payable to the local budget, something that the legislative arrangement with the federal government allowed. 
As far as 1997, the Oblast authorities adopted a law on investments activity in the Leningrad Oblast, thereby imposing essential tax breaks for major investors with regards to property tax, road users tax and partly profit tax. The investor deal did not go unnoticed. Ford Motors, Caterpillar, and Kraft Foods were one of the first to start their business in the region.
After the federal Tax Code came into force in 1999, certain provisions of the law on Investment activity in the Leningrad Oblast, which referred to tax benefits, were considered unlawful. In sum, the federal governing body said that tax breaks and other benefits could only be given by the Tax Code, and hence remained in federal hands.
How legal were the tax breaks given by the regional authorities? In fact, the Oblast’s legislative committee supported a beneficial tax regime by subventions. And this contradiction in the federal and regional laws was not to be the last.
The task of judging between the two contrasting legal positions fell to the Prosecutor’s Office, which is the supervising organ for comparing the correspondence of local legislation to federal legislation. The Prosecutor’s Office appealed and brought the claims against the Leningrad Oblast to the Court — several times. 
What the Prosecutor’s Office appealed against was the term “discounted profit” that the Oblast had used in its law on governmental support of investment activity in the Leningrad Oblast. The term referred to the income received by the company as a result of the investment project in addition to the ordinary income of the company. The federal supervising body discovered that the term “discounted profit” was not prescribed by the Tax Code.
The Oblast’s benefits to investors became invalid and all investors who were implementing tax privileges in their corporate tax system faced a very nasty situation: all the taxes unpaid due to benefits — allowed by regional law — were supposed to be paid retrospectively. In a flash, the federal tax inspections were knocking on the door, ready to collect.
Understandably, after constructing factories and managing successful operations on the territory of the Leningrad Oblast for several years, packing bags and moving on to another region was not an option. Neither did the Leningrad Oblast want to lose potential investors. Thus came the regional fight-back.
The result of the legal feud was a law on the tax rates of company profits for investors exercising their investment activity on the territory of the Leningrad Oblast, which was amended this summer to allow the reduced rate of profits tax to stand at 13 percent. The amendment was intended to bridge the gap between the investors, the regional and the federal government.

PARADISE LOST
The situation may have lost its critical status, but also it has lost trust from businesses. Investors see the situation as risky, since if this latest tax legislation has retrospective force, the companies may face even bigger problems in the future.
Those “situation-saving” amendments to the Leningrad Oblast legislation too have retrospective force. Investors are uncertain whether the Prosecutor’s Office will not consider the retrospective action of the amendments, just as it did to the law. Also, the amendments are applicable only to tax relations that started from January 1, 2004.
When new businesses arrive, they naturally look for attractive features, such as tax breaks, that local authorities can offer. The current tussle between federal and regional powers has made many investors careful, wanting the lure of tax breaks to be not just a favor, but a contractual term of the investment agreement signed with the regional government.
And naturally, the investor expects the terms of the investment agreement to remain in force for the whole period of the contract. The Oblast’s ability to deliver on that will surely show the mettle of the region’s investment climate.

Natalie Neverovskaya is a partner and a tax advisor at Hedman Osborne Clarke law firm in St. Petersburg. She contributed this comment to The St. Petersburg Times.

TITLE: A Promising Direction for G8
AUTHOR: By Rose Gottemoeller
TEXT: At the close of the Gleneagles Summit this week, Russia will take over leadership of the Group of Eight, the “super club” of countries that in theory are driving the world economy and political system. Even prior to Moscow’s ascension, that notion had been coming in for increasing derision. What about India and China? commentators have been asking. And why should Canada, hardly an international powerhouse, get a seat at the table? 
These critical comments have only grown louder at the fact that Moscow will be in the lead for 2006. Russia has been sliding backward in economic reform and democratic development. Its president is consolidating power, its security services are in the ascendant, and its own businessmen are afraid to invest in its future. How can Russia, in these circumstances, lead the G8 through a successful year? Is it not even possible that Russia’s leadership of the group will undermine the G8 so that its future will be doomed?
Russia, it must be noted, is not responsible for all of the G8’s problems. Trans-Atlantic tension was the serious disease two years ago, and today quarrels among European Union leaders over their abortive attempts to adopt a constitution and a budget are causing the biggest problems. Under these circumstances, the G8 will unlikely have the necessary cohesion and leadership to change. But that is no reason to shut down the group or to forget about its original goal: to provide top-level, focused and committed leadership to resolve issues that threaten the world’s progress and security.
So, given Russia’s own serious limitations, what can the Kremlin do in the coming year to ensure that the G8 agenda is advanced? We can forget about economic and democratic progress. Russia simply has neither the authority and legitimacy to lead in these areas, nor the international experience, nor the desire. Security is another matter, however, particularly in the urgent fight against nuclear terrorism.
Since the break-up of the Soviet Union in 1991, Russia has confronted the threat that the vast Soviet nuclear arsenal — tens of thousands of warheads and over 1,000 tons of fissile material — would fall prey to terrorists or rogue leaders intent on acquiring the illicit means to attack countries that they consider to be their enemies. The G8 recognized this threat in 2002 when it formed the Global Partnership Against the Spread of Weapons and Materials of Mass Destruction. Russia was its first focus and, at the same time, a founding member.
Over the past three years, Russia has opened its doors to the Global Partnership, making it possible to accelerate the destruction of nuclear attack submarines, speed up the protection of nuclear warheads and materials, and ensure that the Soviet stockpiles of chemical weapons are at last being destroyed.
Beyond the Global Partnership, Russia has taken a surprising international lead on several issues of nuclear security and nonproliferation. For example, the fuel deal that the Federal Atomic Energy Agency has worked out with Iran’s Atomic Energy Agency is a first step toward efforts to develop an international system of guaranteed nuclear fuel services. U.S. President George W. Bush argued in an important speech in February 2004 that most countries developing nuclear power should depend on internationally guaranteed supplies of fuel rather than developing their own means. 
This is precisely the concern that the international community has had about Iran’s efforts to develop fuel enrichment facilities, which has led to serious disagreement with the Tehran government and to threats to refer it to the UN Security Council. Amid this controversy, Russia had established a fuel services deal with Iran, essentially a pilot project for the very international system that Bush proposed. 
Another example is the return of highly enriched uranium to safekeeping. During the Cold War, the Soviet Union and United States competed to establish research reactors in countries around the world, supplying them with highly enriched uranium fuel, or HEU, that could be used in experiments or to produce medical isotopes — at the time, very worthy peaceful uses of the atom. In the ensuing years, however, many of these research reactors have become isolated in unstable states or, in some cases, have ended up in conflict zones, where their HEU — the most convenient material for an amateur bomb-maker — could fall into the hands of a nuclear terrorist.
Russia and the United States have begun in recent years to redress this dangerous Cold War legacy. Over the past few years, Russia was instrumental in removing nuclear material from the Vinca reactor site in the former Yugoslavia, and from Latvia and Romania. Moscow is currently working with Uzbekistan, the site of recent unrest, to remove HEU from the research reactor in Tashkent. 
In each of these cases, Russia has been an important international leader. And so it could be for the G8. If Russia chooses to use its G8 leadership to advance the fight against nuclear terrorism and proliferation, then some important progress can be achieved in the coming year. For one thing, Russia should be able to clear away some of the bureaucratic brushwork that continues to plague implementation of the programs. More importantly, however, it will be able to set the pace and direction of the programs for years to come. Some important goals should be accelerating the pace of HEU “clean-out” from research reactors in vulnerable sites throughout the world. The current 10-year deadline could be cut to four if the Russians pushed for it. This would speed the efforts to keep easy bomb-making material out of the hands of terrorists. Next, it is crucial to establish a model for an international fuel-services program, drawing on the experience of Russia’s “pilot project” with Iran. This should include mechanisms for incorporating other international fuel providers into the equation, as well as providing critical assurances, in the form of transparency and other safeguards, to the international community. Finally, the G8 members could develop a clear agenda for action if the six-party talks ever “get to yes” with North Korea. Russia was involved in the early stages of the North Korean program and trained North Korean scientists. Thus it is well-positioned to think in advance about how to work with North Korea on shutting down its nuclear program, decommissioning its sites and engaging its nuclear scientists. 
The G8 has many problems to deal with, including questions about its membership and legitimacy at a time when the world is a much different place than when it was created. The G8’s problems, however, do not doom Russia to a failed leadership year any more than do Russia’s failings as a modern state. If the Kremlin adopts an agenda of critical interest to the whole international community — nuclear security and the fight against nuclear terrorism —it has a strong potential to succeed. 

Rose Gottemoeller is a senior associate of the Carnegie Endowment for International Peace. In 1999-2000, she was the U.S. deputy undersecretary of energy responsible for nonproliferation cooperation with Russia.

TITLE: Solidarity Can Fight Terror, Secrecy Can’t
TEXT: In his response to the London bombings, President Vladimir Putin strongly urged G8 leaders “not to allow terrorists to creep through the crevices between us and breach our common struggle.”
A common struggle against terrorism, however, implies more than unity between leaders; it means that governments must work together with the ordinary citizens that most often bear the brunt of such attacks.
The British authorities have appeared to understand this well.
Prime Minister Tony Blair broke off immediately from his G8 talks to share his honest, emotional reaction to the bombings and flew back to London to show his support.
The London police and emergency services worked with courage, openness and sensitivity to rescue the injured and start the painstaking forensic and detective work to catch those responsible. What they learned, they told the public. What they didn’t know, they didn’t speculate on.
London’s mayor, Ken Livingstone, who the day before had been celebrating the city’s successful 2012 Olympics bid that had stressed the city’s ethnic and cultural diversity, eloquently summed up feelings of solidarity felt by Londoners.
“This was not an attack against the mighty or the powerful,” he said. “It is not aimed at presidents or prime ministers; it was aimed at ordinary, working-class Londoners, black and white, Muslim and Christian, Hindu and Jew, young and old. It was an indiscriminate attempt to slaughter, irrespective of any considerations for age, for class, for religion.”
Blair also made a point of stressing that Islam was not to blame.
And the reaction of ordinary Londoners, like the reaction of New Yorkers immediately after 9/11, was also one of solidarity and tolerance.
Russia’s approach to terrorist attacks may be different because of the intensity of the conflict in the North Caucasus over the past decade. But that doesn’t fully explain the Russian authorities’ lack of openness in response to terrorist attacks, when few facts are shared with an alarmed public, or even in some cases with elected officials.
Since the Beslan attack, for example, the quest of relatives for the truth has been so difficult that during the ongoing trial of Nur-Pashi Kulayev, accused of participating in the attack, desperate relatives have begged him to reveal what really happened, doubting the state’s version of events. 
This kind of distrust and division aids the terrorists’ cause far more than any international disunity.
While Londoners may be divided about Blair’s policy of fighting alongside U.S. troops in Iraq, they have showed their unity with him in his determination not to let terrorists sow divisions in society. It is an example much to be admired.

TITLE: Hatching Terrorists
AUTHOR: By David Gardner
TEXT: The cataclysmic attacks on New York and Washington on Sept. 11, 2001, created a small but influential industry, arguing through and on behalf of the administration of U.S. President George W. Bush that the Islamist perpetrators of that atrocity “hate us for our freedoms.” That they loathe us for our values, for what we are and think rather than anything we do. 
If only that were true. What we face, instead, is a war of ideas within the Muslim and Arab world. In that light, this is a delusionary proposition, which conveniently absolves us from having to re-examine critically our policies toward this world. 
Although we do not know for sure who carried out Thursday’s vicious attacks on London, it was very likely part of the loose and protean franchise of fanatics inspired by Sept. 11, 2001, and its architects, Osama bin Laden and al-Qaida. But we cannot wait for the precise answer. We need now to engage fiercely with the substance of the problems that are proliferating jihadi terrorism. We need to find ways of isolating this minority before they make any further inroads into the Muslim mainstream. 
The most important thing to recognize is how the great democratic wave that freed East and Central Europe, Latin America and swaths of sub-Saharan Africa over the past two decades ran into the sands of the Middle East, leaving the Arabs marooned in tyranny. That was in no small part because the United States and its main allies shored up local despots in the interests of stability and cheap oil. 
These tyrants laid waste to the entire spectrum of political expression in their countries, leaving their adversaries no alternative but to fall back on the mosque. That, in turn, suited their purposes, enabling them to blackmail their Western patrons: Back us, or deal with the mullahs. There is probably no greater single source of rage in the Arab world than this collusion in tyranny and repression — not even the Israel-Palestine conflict, which, furthermore, is manipulated by Arab rulers as an alibi for maintaining their national security states on a spurious war footing. 
The overwhelming majority of Muslims do not hate us for our freedoms. They do, however, despise these policies and some of the more frustrated among them are thereby prey to the siren songs of the jihadis. 
Validation of this analysis came last September from the Defense Science Board, or DSB, a federal advisory committee to the U.S. defense secretary. The polls the DSB looked at are chilling. People in Egypt and Saudi Arabia, for example, Washington’s main Arab allies, gave a 98 and 94 percent “unfavorable” rating to the United States and its policies. But at the same time, the DSB study found that majorities or pluralities in the Arab countries do support values such as freedom and democracy, embrace Western science and education, and like U.S. products and movies. “In other words, they do not hate us for our values, but because of our policies,” the DSB says, before demonstrating how hatred of the policies has begun to tarnish the appeal of the values. 
Compounding this disenchantment, a great many Arabs are skeptical about American intentions. For the most part, Arabs plausibly believe it was Osama bin Laden who smashed the status quo, not Bush. Why? Because the Sept. 11 attacks made it impossible for the West and its Arab despot clients to continue to ignore a political set-up that incubated blind rage against them. The subsequent decision to invade Iraq further undermined the status quo, but in ways it is not obvious the Bush administration had thought through. 
This January’s elections in Iraq saw a remark-able display of heroism by its people that struck a deep chord in Arab countries. Yet however much the triumphalists in Washington claim this as vindication for their bungled strategy, these elections took place at the insistence of Grand Ayatollah Ali al-Sistani, who vetoed three schemes by the U.S.-led occupation authorities to shelve or dilute them. By that time, moreover, Iraq had started on the road to a sectarian war that may end by sucking in its neighbors: with Shia Iran on one side and Sunni rulers terrified by the empowerment of Iraq’s Shia majority on the other. 
The policies of the United States and its allies often seem contradictory at a time when great clarity is needed. Bush rightly attacked the “cultural condescension” that suggests Arabs and Muslims are unsuited to democracy nearly two years ago in a speech to the National Endowment for Democracy. More recently in Cairo, Condoleezza Rice, U.S. secretary of state, announced that after 60 years of backing stability at the expense of democracy and getting neither, the United States has learned its lesson. But has it? 
The answer is vital, because the jihadis need the story of the last 60 years to continue. They need the United States to keep shoring up tyranny and defending the status quo. Of course, democracy alone will not resolve the problems of the Middle East. It will, moreover, often be antithetical to short-term stability, since it is Islamist movements that are emerging as the region’s center of political gravity. But if the West continues to collude with local despots in denying their peoples freedom, we will lose that war of ideas. The jihadis will enter the Muslim mainstream and continue their tactics of immolation. The shared values of Islam and the West will wither. 

David Gardner is a columnist for the Financial Times, where this comment first appeared.

TITLE: Concessions Law Has Huge Significance
AUTHOR: By Vladimir Gryaznevich
TEXT: The State Duma on Wednesday passed in its third an final reading the law on concessions. In terms of its significance for the economy of our country this is a revolutionary event because the introduction into practice of a concessions mechanism will provide the impulse for a great number of important reforms and projects in widely different spheres of the economy — in the communal housing services sector, in transport and in energy — everywhere that needs to attract large sums of private investment in state property that cannot be privatized: airport runways, river and sea ports, highways and railroads, strategically important energy transportation systems, including communal heating, sewerage and electrical power networks, and so on.
At the federal and the St. Petersburg level plans have long been ready for a series of projects that could not be launched without the passing of the law on concessions because only a concessionary mechanism allows these projects to be realized profitably for both sides — business and the state. Without attracting private investment and, most importantly, private management companies, it will not be possible to realize these projects. The government has neither the required amount of funds nor the ability to manage property effectively. The existing private-state partnerships, meanwhile, have not allowed these projects to be realized. The main obstacle was that not one of them guaranteed a return on investments to the private company or person, after they poured their own means into state property. A concession mechanism, on the other hand, can do exactly that. What’s more, such a mechanism relieves the investor of other problems connected with investing in state property.
Every year about $80 billion is poured into the world economy on the strength of concession agreements. The greatest significance of the scheme touches huge infrastructure projects. It is understandable that for Russia, with its extensive and extremely neglected infrastructure, the concession mechanism is important as it is for no other country. Arkady Dvorkovich, head of President Vladimir Putin’s expert council, said concessions are one of the main instruments for attracting private capital to infrastructure projects on a national scale. 
I will present only one example of such a project. There have long been plans to organize an East-West transport corridor, employing the Trans-siberian railroad as an alternative to the sea route between Asia and Europe. The advantages for freight transport passing through Russia are enormous. Suffice to say that the sea route between Europe and Asia, the most rapidly developing region of the world, takes 28 to 32 days, while transiting Russia would take just12 days, or 2 1/2 times faster. That would give our country the potential to attract multibillion-dollar freight flows. 
Valery Draganov, the current head of the Duma committee on economic policy, entrepreneurship and tourism, reckons that the passing of the law on concessions will allow Russia to attract $2.5 billion to $3 billion a year. By the way, there are enormous infrastructure projects that could utilize concession mechanisms in St. Petersburg. One example is the construction of the Western High-Speed Diamater. It was notable that St. Petersburg Vice Governor Yury Molchanov on Wednesday, right after the Duma vote, rushed to Moscow. As informed sources say — to agree on the use of concessions to realize that project.
The passing of the law — there is no doubt that the Federation Council will approve and that Putin will soon sign it — gives the green light to a whole range of different important projects in St. Petersburg. There will be problems implementing the law, however. Tomchin says it is well written and the text corresponds to laws on concessions in other countries. But a similar law will have to be passed in St. Petersburg.

Vladimir Gryaznevich is a political analyst with Expert Severo-Zapad magazine. His comment was first broadcast on Ekho Moskvy in St. Petersburg on Friday.

TITLE: Dark Waters
AUTHOR: By Chris Floyd
TEXT: On July 1, the former physician of ex-President George H. W. Bush wrote a guest column for The Washington Post. Two days later, the attorney general appointed by current President George W. Bush made a surprise visit to Baghdad. These seemingly unrelated events are not only inextricably linked; together they form a portrait of a nation gone wretchedly astray, hurtling into a moral void from which there may be no return.
There was nothing unusual about the physician, Dr. Burton Lee III, doing a piece for the Post, of course; the paper is the house organ of the U.S. political elite, and a whole troop of loyal Bush Family retainers make regular appearances in its editorial pages, lauding the son who has now ascended the throne. What is remarkable is that Lee came not to praise the younger Bush, but to bury him — with hard truths about the torture regime he has installed in his “terror war” gulag. 
 Lee, a former military doctor, denounced Bush’s use of military medical personnel to help “set the conditions for interrogation”: withholding treatment from tortured prisoners, breaking medical confidence to tell interrogators of prisoners’ physical and psychological weak spots, and other heinous practices approved by the White House and codified in Pentagon directives for military medical staff.
The good doctor is right to be shocked: The shadow of Josef Mengele hovers over these deliberate perversions of medical ethics. Yet Bush has not only countenanced these crimes against humanity — he has commanded that medical personnel commit them. This level of open, legalized barbarity has not been seen in the U.S. government since the days of slavery and the Indian wars.
Lee also shredded the big lie that the noble “terror war” had only been temporarily tainted by a few “bad apples,” now removed from the wholesome barrel. In denouncing the “systematic, government-sanctioned torture and excessive abuse of prisoners in the war on terror,” Lee noted the true extent of the criminality — and those who bear the ultimate responsibility for it. He wrote:
“The widespread reports of torture and ill-treatment — frequently based on military and government documents — defy the claim that this abusive behavior is limited to a few noncommissioned officers at Abu Ghraib or isolated incidents at Guantanamo Bay. When it comes to torture, the military’s traditional leadership and discipline have been severely compromised up and down the chain of command. Why? I fear it is because the military has bowed to errant civilian leadership.”
Here Lee cited the literally thousands of pages of evidence produced by the Army’s own investigators detailing systematic torture and murder throughout Bush’s world-engulfing gulag. In a separate interview that followed his column, Lee pointed readers to the new report by Physicians for Human Rights, or PHR, titled “Break Them Down: The Systematic Use of Psychological Torture by U.S. Forces.” As Lee explained, psychological torture can be even more damaging and long-lasting than a bout of physical abuse — something he learned firsthand from treating the victims of French torture in Algeria. 
The graphic horrors of physical torture, captured in the infamous pictures from Abu Ghraib, have understandably garnered most of the attention in the media’s occasional glances at Bush’s concentration camps. And here, under pressure, the White House has reluctantly made a few cosmetic changes, limiting to some extent the knuckle-work that interrogators can use — although PHR notes that many of these ballyhooed “reforms” have never been implemented. In any case, these restrictions can be suspended in cases of “military necessity,” as Pentagon chief Donald Rumsfeld always notes carefully in his instructions to the cadres. And of course, none of the published restrictions on military interrogators apply in the super-secret CIA quadrants of the gulag, as Attorney General Alberto Gonzales informed Congress this year.
But while eighty-sixing the brass knucks — in mixed company, at least — Bush and Rumsfeld have continued to implement a range of mind-breaking psychological tortures, the official documents show. These are practices that PHR notes are “immoral and ... illegal under the Geneva Conventions, ... [U.S.] domestic law and the Uniform Code of Military Justice.” These codified crimes are spread across the gulag’s 42 prisons, where some 11,000 men are now caged — many of them innocent of any wrongdoing, all of them held without charges in an endless legal limbo. 
This nightmare machinery was set in motion by Gonzales, who, at Bush’s order, led the White House legal team in drawing up official memos justifying the use of torture to the very point of death, and declaring that Bush was not bound by any laws in his role as “commander-in-chief.” This monstrous perversion of justice was a virtual coup d’etat, establishing the president as a military autocrat and fostering an atmosphere of lawlessness and brutality “up and down the chain of command.”
After Lee’s article appeared, Gonzales was suddenly sent to Baghdad, The Associated Press reports: a headline-grabbing diversion that not only obscured Lee’s hard truths but also buried the Observer’s breaking stories about the torture and murder being dealt out by Bush’s disciples in the new Iraqi government. There, Gonzales — the ghostwriter of Bush’s torture opus — simply erased the mountains of evidence cited by Lee and PHR, reducing the ongoing, worldwide atrocity to a single aberrant episode: “From the best we can tell, it really related to the actions of the night shift at one cell block at Abu Ghraib.”
This breathtaking lie, regurgitated in the face of undisputed fact, shows how far the Bush gang has fallen into the void of radical evil. Lost to honor, law and truth, unmoored from reality, they are sailing into madness — with no end yet in sight.

For annotational references, see Opinion at www.sptimesrussia.com

TITLE: Montoya Cruises At Silverstone
PUBLISHER: The Associated Press
TEXT: SILVERSTONE, England — Juan Pablo Montoya of McLaren-Mercedes won Sunday’s British Grand Prix, his first victory of the season and the fifth of his career.
Season points-leader Fernando Alonso of Renault was second and McLaren’s Kimi Raikkonen took third.
The Colombian, starting from third on the grid, swept into the lead just seconds into the race as he passed pole-sitter Alonso on the first series of turns. The victory helped improve a poor season for the former Indy 500 champion.
Montoya missed two races early in the year with an injured shoulder and had not reached the podium this season, his first with McLaren.
“I think the race was won on the first turn,” Montoya said. “From there on, it was a matter of the strategy and question of how hard you can push. “It’s been such a frustrating season that when I crossed the line I was excited.”
Giancarlo Fisichella of Renault was fourth and Jenson Button of Britain and BAR-Honda was fifth. Button, who has yet to win an F1 race in five seasons, was trying to become the first British winner at Silverstone since David Coulthard in 2000.
Alonso stayed atop the standings with 77 points through 11 races. Raikkonen stayed in second place with 51 points, and Michael Schumacher, who finished sixth, stayed third with 43.
Montoya improved to 26 points with the next race coming in two weeks at Hockenheim, Germany.
“It’s a little bit frustrating with the start, obviously, because we lost place,” Alonso said. “It should be easy to keep the pole position. It was really frustrating.”
Montoya led nearly the entire race. It was his first victory since winning the last race of the 2004 season in Brazil. The McLaren cars — with Raikkonen finishing third — had the best speed, which was evident from the first seconds when Montoya passed Alonso on the opening lap.
Raikkonen was the second-quickest in qualifying but was penalized 10 places on the starting grid after he blew an engine in practice. The same thing happened a week ago in the French Grand Prix. After qualifying third, he started 13th after an engine penalty but still finished distant second to Alonso. 
It was another disappointing weekend for Ferrari. Seven-time series champion Schumacher finished just second ahead of seventh-place teammate Rubens Barrichello. They finished on the same lap as the winner but were 75 seconds behind.
Fans at the 100,000 sellout paused for a moment’s silence before the race, a tribute to about 50 people killed in terrorist bombings Thursday in London.

TITLE: Armstrong Happy To Concede Yellow Jersey
PUBLISHER: The Associated Press
TEXT: MULHOUSE, France — Lance Armstrong surrendered the overall lead in the Tour de France to take some pressure off his team. 
The six-time defending champion fully intends to wear the yellow jersey again soon. 
Germany’s Jens Voigt — not a contender to win in Paris — took the jersey by finishing three minutes ahead of Armstrong in the ninth stage Sunday. 
“I felt like [Sunday] might be the day when the jersey would be given away, and it turned out it was,” Armstrong said. “We don’t need the yellow jersey. We don’t need to keep it in the Alps, we need to have it at the end.”
Denmark’s Mickael Rasmussen won the stage with a gutsy solo ride. He was first over the six climbs, covering the 106.3-mile route from Gerardmer to Mulhouse in eastern France in 4 hours, 8 minutes, 20 seconds. 
Voigt finished 3:04 later, just behind France’s Christophe Moreau. Armstrong, who had worn yellow for five days, finished in 28th place, crossing the line comfortably in a pack with his main rivals. 
On the first of three punishing Alpine stages starting Tuesday, Armstrong will let Voigt’s team do the defending while he picks off riders he considers more dangerous rivals. 
“Let’s see how the race unfolds,” Armstrong said. “The first priority is that the guys feel better and get their confidence back.”
Wednesday’s stage is one of the hardest this year, with three ascents in quick succession peaking with the monstrous Col du Galibier, the Tour’s highest point at 8,677 feet. 
The good news for Armstrong is that his Discovery Channel teammates appeared to have recovered quickly from their collapse on a climb Saturday, when all eight abandoned him, unable to match the quick uphill pace. That left Armstrong alone to fend off his rivals. 
“We were better,” Armstrong said. “That’s good going into the rest day: regroup and get ready for the big climbs.” 
Rivals said Discovery’s blowout probably was nothing more than a temporary bout of fatigue after a fast first week of racing, and Armstrong remains the man to beat. 
“Don’t sell the bear’s skin before you’ve killed the bear,” Moreau said. 
“That won’t happen again,” U.S. rider Bobby Julich of Team CSC said. “You can maybe disappoint Lance once, but it’s better not to disappoint him twice.” 
Discovery rode hard Sunday at the front of the main pack, strategically allowing Rasmussen and then Voigt and Moreau to pedal off ahead, confident they cannot challenge Armstrong for the overall Tour title.