SOURCE: The St. Petersburg Times
DATE: Issue #1096 (62), Tuesday, August 16, 2005
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TITLE: German’s 60-year Forced Odyssey East About to End
AUTHOR: By Cornelia Riedel
PUBLISHER: Special to The St. Petersburg Times
TEXT: NAKHODKA, Far East — When Ursula Rossmeisel offers tea, her German sounds a little as if it is from another time. In her room, which serves as a bedroom, livingroom, playroom and workroom in one, there is just enough space for a bed, a small table and a wardrobe. On the bed are a pile of cushions and soft toys belonging to her granddaughter Anastasia, seven, with whom the pensioner shares her 14-square-meter room. 
The room is in a communal apartment in the port of Nakhodka on the Pacific coast. Here, 130 kilometers beyond Vladivostok, the railway stations have ceased to have names, and are known only by their kilometer number. The world seems to end here. It takes nine hours to fly to Moscow. But 60 years separate Rossmeisel from her last residence in Germany, the small Baltic Sea island of Hiddensee. 
She pours the tea. “Please, don’t hold back,” she says, inviting her German guest to enjoy the meal. She busily spreads a tablecloth in the room, in which there is barely enough room to turn around. The 75-year-old is a German who last saw her homeland in 1946. She was born in Swinemuende, today the Polish city of Swinoujscie, in 1931. Her parents died when she was young and Rossmeisel experienced the end of World War II with three brothers and her grandmother on Hiddensee. She went begging to help the family to survive. When Soviet troops captured the island, the by then 14-year-old Rossmeisel went to the mainland port of Stralsund to work in tidying up the ruins left by the fighting.
When she speaks of Germany, Rossmeisels’ eyes fill with tears. “On the Luenebuerger Heath ... ,” she says quietly. 
Anastasia looks curiously at the strangers whose language she does not understand. Her two siblings live in a children’s home because Rossmeisel  lacks space.
Rossmeisel pours more tea. She remembers the days after the war that would change her life: “I cleaned bricks and with the money I made I went to my grandmother’s home every weekend,” she says. Sometimes she struggles to recall the appropriate German word. 
At some point when she was in the city of Rostock, she was rounded up by a Soviet patrol. “Together with other girls, I had to clean, cook and wash laundry at the Soviet headquarters.”
By now 16, she was detained together with Russian, Lithuanian and other German girls. “If we didn’t do as the Russians wanted, we were beaten, tortured and punished with starvation,” she said, describing the start of her matyrdom. Her greatest tormentor was a man with the unusual family name of Alster. “He was strict and constantly angry and cruel, even to the Russian soldiers.”
One night, Rossmeisel was brought to him. 
“Why do you lie,” he asked her.
At first she had no idea what he wanted. Then he hit her with a belt and said that she wanted at all costs not to go to Russia and had therefore pretended to be an ethnic German.
“You are Maria Mironovna Makarova from Latvia, do you understand,” Alster said repeatedly.
Eventually, she could stand it no longer. “At some point I said that I was Maria Mironovna.”
Alster laughed and said, “if you had not learned, I would have beaten you to death.”
From then on Rossmeisel bore the Russian name. She was frightened and forced to work for a Russian family. When she was caught with a letter in German that she had written to her brother, she was beaten up. She has a tattoo in Cyrillic on her arm that dates to these times. “Who exactly did it and how it happened, I can no longer remember,” she says. She was taken to Russia, where only after 1956 was she again able to live under her German name and to get an identity card from the Soviet authorities.
Rossmeisel is making pelmeni, or dumplings. She shares the kitchen with the other inhabitants of the communal apartment. Whole families live here crammed into single rooms. The water is taken from the heaters because there is no other source. “You can’t live like this,” she says. “It’s terrible. Every day the neighbors are drunk. The Azeris opposite sell homemade wine and drugs and there is no peace at night.”
Her voice becomes clear and firm as she says: “I want to go to Germany, where it is a little cleaner and where I can live in order.” She wants to take one of her daughters and the granddaughter who is growing up with her. Neither speaks German. The last letter from her brother in Stralsund arrived in 1992.
When Rossmeisel talks about her life, there are a string of placenames, humiliations and forced evacuations. At the end of the 1940s she was brought from Germany to Grodno in Belarus. The next stops in her life were Riga, then Leningrad, a small place near Arkhangelsk and Karaganda in Kazakhstan. She had several lovers, but never married, because she lacked the necessary documents.
She spent most of her life in Tadjikistan, where she worked as a gardener at a convalescent home near the capital Dushanbe. She rhapsodizes about the time even today “Life was sweet then. We had a large dwelling, a good job and things were fine. There was plenty of fruit and good meals,” she says and her eyes begin to shine.
The German Embassy in Moscow issued her a passport to West Germany in1970. She shows it. Some pages are missing and some are torn. It is in the name of on Ursula Rossmeisel. 
“At that time I wanted to go back to Germany. I specially drove from Dushanbe to Moscow to get the passport. But my six children were registered with my then Tadjik partner and he did not assent to them leaving.” She decided to put her family first and not to return to her homeland. The German passport expired after five years. 
When civil unrest broke out in Tadjikistan in 1992, Rossmeisel’s odyssey sent her further east. To be a German without a passport in the Central Asian country became too dangerous. She fled to Moscow with three grandchildren, the children of her alcoholic daughter. “We went from there to Vladivostok, where one of my sons lived,” she said and the peaceful way in which she describes this consecutive forced change of home across thousands of kilometers allows one only to guess how she has coped with these breaks in her life.
Her dream in life is to return to Germany. Especially now when she is having problems getting a Russian pension: “The Russian authorities don’t want to pay me anything more without documents.” Her payout entitlement is 960 rubles ($33.50). In addition, she should get 1,500 rubles as an invalid pension. The authorities refuse to acknowledge her as a stateless person, and without this acknowledgement there is no pension.
The officials in Vladivostok have advised her to become a Russian citizen. “But I am not a Russian,” she says indignantly, “and I would like to finally go to Germany.” 
A German lecturer in Vladivostok has helped her to get a passport. Peter Schwarz, from Berlin,  helped Rossmeisel apply for one at the federal administration office in Cologne. The passport is now in Moscow and is to be delivered to Rossmeisel in October.

TITLE: Bill Plugs 3rd Term For Putin
AUTHOR: By Vladimir Kovalev And Anatoly Medetsky
PUBLISHER: Staff Writer
TEXT: St. Petersburg Legislative Assembly deputy Igor Rimmer has followed an initiative last week by legislators in the Primorye region with his own initiative to allow President Vladimir Putin to serve a third term in office.
Rimmer submitted a bill to the assembly on Friday to amend the parts of the Constitution that prohibit a third term, the city parliament’s press service reported.
A member of the pro-Kremlin United Russia faction, Rimmer proposed amending the constitution’s article No. 81 so that it would say “the same person can not occupy the position of the president of Russian Federation for more than three terms in a row.”
The article now refers to two terms.
“The implementation of the bill would allow the retention of the basic principles of civil society, [to provide] the formation of a democratic, legal and social state as well as to continue reforms,” Rimmer said in a letter explaining the document, quoted by the Legislative Assembly press service.
He sees no “real alternative to Putin in the current conditions,” he added.
Last week, Yury Sharandin, head of the Federation Council’s committee for constitutional legislation, criticized a similar proposal by legislators in the Primorye region.
“Initiatives of this kind, which have not been thought through, could lead to unnecessary political tension,” Interfax cited Sharandin as saying Wednesday.
However, Sharandin did not exclude that Putin could stay in power after 2008 if the public approved him doing so.
“The approach in Russian society is that it would be better for the country if Putin stayed in his position after 2008. If such an approach prevails, it could lead to changes in legislation and in the Constitution, which was passed by the people,” Sharandin said.
Putin has repeatedly spoken against amending the Constitution, but his most recent remarks could be interpreted as slightly more ambiguous, said Andrei Piontkovsky, an independent political analyst.
“It’s another step in Putin’s comments on the subject. This was the first time that the option was first mentioned in a positive context,” he said.
“There has been strong pressure on Putin from his entourage to run for a third term, but he has strong hesitations,” he said. “He understands the costs on an international level.”
If Putin were to run under an amended Constitution, he would risk being likened to Belarussian President Alexander Lukashenko and Uzbek President Islam Karimov, long-time leaders who have traded angry words with the West over democracy in their countries and the legitimacy of their regimes, Piontkovsky said.
Piontkovsky said the recent proposals appeared to have been orchestrated by the siloviki, a group of military and security officials who rode Putin’s coattails to power and want him to stay on.
But Dmitry Orlov, the director of the Agency for Political and Economic Communications, a think tank, said the regional legislators probably reacted to Putin’s statements in Finland on their own. “They wished to reiterate their loyalty,” he said.
Regardless of the motivation, the proposals mirror public opinion and, if they persist, they could cause the Constitution to be changed, Yury Sharandin, chairman of the Federation Council’s Committee on Constitutional Law, said last week. Sharandin cautioned, however, that allowing a president to serve multiple terms would create “unnecessary political tension,” Interfax reported.
Svetlana Orlova, a deputy speaker of the State Duma, said a third term for Putin could be put to a referendum.
“A third term for the president depends on the people’s will and judging by this will it would be possible to run a referendum,” Interfax cited Orlova as saying Friday. “If the people express their support for a third presidential term … the constitution could be amended,” she said.
Proposals to amend the constitution started coming from the regions less than a week after a press conference in Turku, Finland, where Putin suggested that he would not be against staying in the Kremlin after 2008.
“Even if I did want that,” Putin said when asked if he wanted to stay on after 2008, “the Constitution forbids it. In my view, the most important thing for Russia now is stability, which can only be achieved if we abide by the law and observe the provisions of the Constitution.”
Political analysts said the public mood is such that Putin could likely win a referendum on changing the Constitution to allow a third term.
“Different kinds of proposals about a third term will keep appearing,” Tatyana Protasenko, an analyst at the sociological department of the Academy of Sciences, said Monday in a telephone interview.
“But to me the situation resembles a vicious circle, when those in power want to retain their positions and the public cannot act responsibly because they didn’t learn to vote,” she added.
“The absence of a credible candidate for the next presidential elections has been created artificially by certain conditions set up for the parties and the political elite. Sometimes people are just afraid of getting into politics these days,” she said.
“If a referendum was announced and run in these conditions it is quite likely that people would vote in favor,” Protasenko said.

TITLE: AmCham Publishes Safety Advice on Web
AUTHOR: By Vladimir Kovalev
PUBLISHER: Staff Writer
TEXT: The St. Petersburg Chapter of the American Chamber of Commerce and the city police have posted detailed safety advice on the Internet to help foreign visitors avoid becoming victims of crime in the city.
The 2-1/2 page document describes the rights of visitors and the police and offers guidelines on how to behave in Russia. It also lists the telephone numbers of who to approach in case of a crime or an accident.
“This was an initiative of the American Chamber of Commerce committees for tourism and security, with the assistance of representatives of the 6th police department [which is responsible for foreigners],” Maria Chernobrovkina, executive director for St. Petersburg AmCham chapter said Friday in a telephone interview. “The police provided documents on which we based our recommendations. 
“The materials they brought mainly concentrated on how a policeman should behave when approaching a foreigner, so we switched the paragraphs around to make it informative for foreign visitors by placing the information about the police in the end,” she said.
“As a rule, when the tourism season starts, crime gets worse,” Chernobrovkina added. “This happens not only in St. Petersburg, but around the world. We understand that safety issues are important not only to tourists, but also for to the foreign business community. We have sent the recommendations to local businesspeople so that they could forward them to their colleagues who are planning to come to Russia.”
The safety recommendations say:
• Exchange currency only in bank exchange offices, because exchanging currency with private persons is prohibited by the active legislation.
• Do not leave your personal belongings, luggage or documents unattended (not even in the car).
• Keep your money, valuables and documents in inside pockets; it is not recommended to leave them in bags, sacks or back pockets.
• If you want to move around the city, order a taxi by telephone from your place of residence; by stopping private cars in the street tourists subject themselves to unnecessary risk.
• When making payments, don’t show all the cash you are carrying.
• If your car is stopped by a police officer, you must ask him/her to produce his/her certificate of employment, then write down the officer’s first name, patronymic and family name; the number of his/her certificate and the number of his/her breast badge (if available).
• If you need to leave your car for a long time, it’s recommended to park it in a guarded parking lot.
• Do not give a rides to strangers.
If a crime is committed against a foreigner, the chamber suggests calling several numbers, including 278–30–14 for the 6th police department.
“Usually we receive up to five phone calls a day from different police departments on behalf of foreign citizens who have been victims of various sorts of crimes. The cases are about anything that could be imagined,” a policeman on duty at the 6th department said Friday in a telephone interview.
The safety advice also describes how the police should behave toward foreigners and gives in-depth explanations of the rights of police regarding their treatment of foreign citizens.
“When addressing a foreign citizen, the police officer ought to salute him/her by putting his/her hand to the headwear, introduce him/herself, giving his/her name and position and then briefly explain the reason and purpose of his/her address. If it is the foreigner who addresses the police officer, the latter, having followed the same etiquette, must listen attentively to the statement of the foreign citizen and take relevant steps, and, if necessary, explain where to turn to for the solution of his/her problem,” the advice says.
The Russian police have officially approved the recommendations.
The full list of recommendations can be read at: www.amcham.ru/amcham-v14/page.php?pageid=905215298102273

TITLE: Russia to Drop Estonian Deal
PUBLISHER: Reuters
TEXT: MOSCOW — The government said Saturday it had approved a Foreign Ministry proposal to pull out of a border treaty with Estonia as relations with the Baltic state soured in a row over their Soviet past.
Prime Minister Mikhail Fradkov signed a decree to approve the proposal and ask President Vladimir Putin to inform Estonia about the decision, according to a copy of the document posted on the government’s web site www.government.gov.ru.
Foreign Minister Sergei Lavrov said in June that Russia was pulling out of the deal — signed on May 18 — because of objections to additions made to the agreement by Estonia’s parliament during ratification.
Those additions made indirect references to the Soviet occupation and would have made demands on Russia for land and compensation, Russian diplomats have said.
Rhetoric on both sides about the Soviet occupation, which Putin has called a liberation, has soured relations.

TITLE: Steps Taken Against Typhoid Outbreak
AUTHOR: By Irina Titova
PUBLISHER: Staff Writer
TEXT: St. Petersburg is taking preventive measures to halt an outbreak of typhoid in the city, Oleg Parkov, head of the city’s epidemiological watch at the news conference on said Thursday.
Twenty-nine cases of typhoid were registered in St. Petersburg for the first seven months of this year compared to only one case in 2004. Three people have died of typhoid this year, Parkov said.
“We have vaccinated for employees of [city water utility] Vodokanal and plan to do the same for those who work in the city’s markets and other spots that can be nodes for infection,” Interfax reported him saying. “We are also vaccinating people who were in contact with those who got sick.”
Typhoid is an infectious disease caused by a type of salmonella.  The pathogenic organism can live in the soil and water for five months but is easily killed by boiling or disinfection.
Parkov said the outbreaks were in nine city districts, including the Central, Admiralty and Nevsky districts.
Most of the sick people were homeless or illegal migrants.
“Those people belong to a risk group because they live in anti-sanitary conditions and appeal to doctors only at the very last moment,” he said.
The infections occurred not only in the city. One case came from India, one from Uzbekistan, and a sick child arrived in the city with a gypsy camp in Tajikistan, Parkov said. 
Hepatitis A is also spreading, Regnum quoted Parkov as saying.
In the first seven months of this year 2,255 cases of hepatitis A were recorded, three times more than for the same period last year.
Decreases were recorded in the number of diptheria cases, with only 11 cases recorded in the first seven months of this year,  and of tick encephalitis, with only 19 cases recorded compared to 46 cases in the same period last year.

TITLE: Nation Remembers the Kursk Disaster
AUTHOR: By Maria Danilova
PUBLISHER: The Associated Press
TEXT: MOSCOW — Sailors in dress uniforms stood rigid on a ship deck Friday as wreaths were tossed into the gray sea to honor 118 of their comrades who perished five years ago when the Kursk sank. 
Ceremonies for the tragedy’s fifth anniversary were held around the country, which just a week earlier was riveted by another submarine accident that demonstrated the Navy’s insufficient rescue capacities. 
“Where is the underwater technology that the navy authorities solemnly promised to get into shape after the Kursk?” Rossiiskaya Gazeta asked in its Friday issue. 
Flags were flown at half-mast on ships as the dead sailors’ relatives and ordinary people went to various Kursk memorials to commemorate the victims of the disaster. The wreaths were thrown carefully into the water in Vidyayevo, the Kursk’s home port. 
In the city of Kursk, home to 16 of the sailors who died on the submarine named after their hometown, a monument made of the vessel’s scrap was unveiled and blessed by an Orthodox priest in an elaborate church ceremony. Crowds of people, some of them weeping, laid flowers in front of the monument. 
The Kursk nuclear submarine was shaken by explosions and sank during naval exercises in the Barents Sea on Aug. 12, 2000. All of the 118 men on board died. 
 The incident shocked Russians not only because the Kursk was one of the navy’s most sophisticated vessels, but also because Russian equipment was unable to reach the sub and rescue anyone and because officials balked for days at foreign offers of help. 
Almost exactly five years later, Russian officials were tested by yet another submarine’s sinking, prompting questions about whether any lessons had been learned from the Kursk. 
On Aug. 5, a mini-sub with seven people on board became trapped deep under the Pacific Ocean off the Kamchatka Peninsula, and again the Navy was unable to reach it or rescue its crew. 
This time, however, Russian officials asked for foreign help, and nearly three days later a British remote-controlled vehicle cut the cables blocking the mini-sub from surfacing. All seven men on board were saved. 
The rescued crew on Friday briefly left a military hospital where they have been recovering from their ordeal to attend a service at the SS. Peter and Paul Church in Petropavlovsk-Kamchatsky. 
“We decided to visit a church to give thanks for our survival,” Vyacheslav Milashevsky, the mini-sub’s captain, said on NTV television.
Rossiiskaya Gazeta on Friday published an interview with his wife, who said she was so short of money when the accident happened that she could not feed her children and that journalists loaned her some cash. 
“Our husbands were saved by us, the wives, and by you, the press, including the foreign press,” she said. “The uproar frightened [officials].”
Speaking to reporters at a Kursk memorial ceremony in Moscow, the Navy’s chief of staff, Admiral Vladimir Masorin, said that while the Navy had bought foreign rescue gear after the Kursk catastrophe, Russian Navy personnel were not yet able to operate it. 
“No matter how many vehicles we have, there never will be enough if we can’t use them correctly,” Masorin said. 
He said that an underwater rescue craft similar to the Scorpio that Russia previously had bought from Britain was broken due to a human error and could not be used in the salvage effort. 
While the Kursk sailors’ families received financial compensation from the state, many complained that authorities failed to investigate the disaster properly and draw the necessary conclusions. 
The probe concluded that most sailors had died immediately, and that the 23 crew members who survived the explosions remained alive for no more than eight hours. But many relatives believe the sailors were alive and sending rescue signals well beyond that. 
Nadezhda Nekrasova, the mother of Kursk sailor Aleksei Nekrasov, lamented that “all opportunities to find the truth and those guilty have been exhausted in our native land,” and said the relatives have lodged an appeal with the European Court of Human Rights.

TITLE: Starovoitova Trials Resuming
AUTHOR: By Vladimir Kovalev
PUBLISHER: Staff Writer
TEXT: The St. Petersburg City Court on Monday started preliminary hearings of the trial of two suspects for their roles in the assassination of liberal State Duma deputy Galina Starovoitova in 1998.
Six others were judged for their roles at the end of June after a trial lasting almost 18 months. The person who ordered the assassination was not named in court.
The court is looking into actions allegedly committed by Pavel Stekhnovsky, who is charged with purchasing and possession of weapons and Vyacheslav Lelyavin, who is accused of installing eavesdropping equipment in the building where Starovoitova lived.
In December 2004, Stekhnovsky was extradited from Belgium where he had spent several years in hiding. Lelyavin was detained in July 2004.
Judge Galina Ponomaryova on Monday ruled that the trial can be held before a jury, which went against a request by Lelyavin’s lawyers.
“This trial will go the same way as the previous one did with the defense trying to drag out the process,” Ruslan Linkov, the deputy’s assistant who was injured in the assassination, said Monday in a telephone interview. “They have an interest in making the hearing go as long as possible because the lawyers are getting paid $200 for each day of the hearing, so their financial state directly depends on it.”
“Besides there’s the question who paid for his [Stekhnovsky’s] adventures in Belgium, which is still open,” he said.
At the end of June, Vitaly Akishin, who was convicted of executing Starovoitova, was jailed for 23 years and Yury Kolchin, who was convicted of organizing the murder, was sentenced to 20 years.
Two other suspects, Yury Ionov and Igor Krasnov were acquitted on the grounds that they did not know their actions were linked to the preparation for the assassination. Alexei Voronin and Igor Lelyavin were also released because the statute of limitations on the crimes they were charged with had expired.
The court found  that the assassination was committed by an organized group aiming to halt Starovoitova’s political and public activity.

TITLE: IN BRIEF
TEXT: Automated Registration
ST. PETERSBURG (SPT) – A project for a unified automated system of guest registration in all city hotels is ready to be implemented, Interfax reported  Saturday.
The existing paper-based system of registration makes it hard to search for where guests are and lacks the advantages of an electronic database, Interfax  quoted a report by the press service of northwest regional branch of the Russian Tourist Industry Union as saying .
Registration in small hotels is often informal without using computers, while large complexes use separate systems.

Beatings Investigated
ST. PETERSBURG (SPT) – The Baltic Navy’s prosecutor’s office has opened a criminal case over the hazing of recruits, Interfax reported Thursday. 
The investigation is based on information obtained from Soldiers’ Mothers. Prosecutors had confirmed the information and established the identity of the offender, Interfax cited prosecutor Grigory Kyleshov as saying.
During a voyage from Kronstadt to Baltiisk in the Kaliningrad region, the recruits were assaulted.
The beaten recruits  had fled their unit in Lomonosov  in April. As a result of the beatings, two older sailors were  charged  and one was jailed.

Launch Hits Bridge
ST. PETERSBURG (SPT) – A small private  launch collided with a pier of the Dvortsovy bridge  early Friday morning, Interfax reported.  
Nobody was  injured in the incident, Interfax  cited a representative of the Emergency Situations Ministry as saying.
Neither the launch nor the pier were damaged. The  cause of the accident, the latest in a series of collisions with the bridges, is being investigated.

Riga Told to Move On 
RIGA (SPT) – Latvia should stop analyzing the Soviet past and start dealing with building relations  with Russia, Interfax reported the Russian ambassador to Latvia,Viktor Kaluzhny, as saying Saturday.
“Russia has made steps to improving relations with Latvia … Russia and Latvia don’t have differences in views. It’s time to raise our heads and go forward, to think about all the residents of Latvia, regardless of nationality,” Kaluzhny said.
The Latvian government this month created a special commission to assess the damage of the Communist  era and is to determine  how many inhabitants were deported. It is due to report to the government in three months.

Huge Heroin Haul
HELSINKI (SPT) — The Finnish customs service  seized about 50 kilograms of heroin at the Vaalimaa crossing on the Russia border Wednesday, the Helsingin Sanomat reported Friday.
The drugs were hidden in a compressed air tank and in the dashboard of a truck traveling from Russia to Sweden. 
The 47-year-old Turkish driver of the vehicle was remanded in custody and initially admitted  his guilt during interrogation.
Officials believe the  heroin was for distribution in Sweden and beyond. 
 “If the purity is that of normal street heroin, it would be worth about 10 million euros ($12.3 million),” Olli-Pekka Vanhainen, of the Eastern Customs District, was quoted as saying.

TITLE: Shipbuilder Buys Rival Baltiisky
AUTHOR: By Lyuba Pronina
PUBLISHER: Staff Writer
TEXT: MOSCOW — St. Petersburg industrial conglomerate IST Group said in a statement on Friday that it had sold its 88 percent stake in shipbuilder Baltiisky Zavod to United Industrial Corp., or OPK, which owns crosstown rival Severnaya Verf.
The deal ends years of often-fierce competition and gives OPK the opportunity to create a shipbuilding powerhouse. OPK is owned by Mezhprombank, which is controlled by Federation Council member Sergei Pugachyov.
“The deal was completed last Thursday, and the money has been transferred to our accounts,” IST Group vice president Igor Tsyplakov said in a telephone interview.
Tsyplakov refused to reveal how much the deal was worth, but said it was “below $100 million.”
“We made the decision to sell [Baltiisky] because the price was attractive,” he said. “We have always said that these two plants have to be in the hands of one company, but we never said whose hands. This asset seems to be of more interest to OPK.” 
OPK board member Vladimir Zhelonkin declined to comment on Sunday.
“The two plants complement each other well; if they do it right, the new company can turn into a very attractive business with $500 million in annual sales,” said Konstantin Makiyenko, deputy head of the Center for Analysis of Strategies and Technologies, a defense think tank. “This deal puts an end to a three year circus.”
 The rivalry between Baltiisky and Severnaya goes back to 2002, when the two shipyards entered a tug of war for a $1.4 billion contract to build two destroyers for China. The conflict eased only after OPK bought up Severnaya last year.
The standoff, which scratched Russia’s reputation as a reliable arms exporter, was finally resolved in April when the companies agreed to join forces. 
Under the deal, Baltiisky Zavod, a maker of battleships for more than a century, agreed to pass over defense contracts to Severnaya and focus exclusively on building civilian vessels.
OPK is gaining a choice asset with its acquisition of Baltiisky. The company’s order book through 2008 stands at more than $600 million, including icebreakers for Russia and cargo ships for Sweden, Tsyplakov said.
More importantly, the plant is now in the running to build three frigates for the Indian navy. 
The OPK deal falls in line with government plans to combine assets in the defense industry into holdings.

TITLE: Northwest to Double GDP by 2010
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: A top federal official promised Friday that in almost all parts of the Northwest region of Russia gross domestic product will double by 2010, outperforming the country’s general development several times.
Analysts and business leaders say this may not be just pretty words.
Northwest federal region envoy Ilya Khlebanov said a briefing that the “region’s economy is developing significantly faster than that of Russia in general,” Interfax reported.
Irina Karelina, president of Leontiev Center for social and economic research sees the region’s particularly robust economic climate as realistically conducive to meet President Vladimir Putin’s target of doubling the GDP within the bounds of the region. 
“North-West Russia regions differ in economic development rates. On average, it is possible to reach the declared goal,” Karelina said.
The rates exceed Russian norms by three to four times, says Daniel Kearvell, director of St. Petersburg and North-West Russia Russo-British Chamber of Commerce.
“Despite the lack of oil and gas in the region, there are other sectors with huge potential, such as tourism, transport infrastructure, and the automotive and food and drink industries to name but a few,” Kearvell said.
As one of the main stimuli to propel St. Petersburg’s progress, experts name increasing competition and the geographical placing of the city, which often helps to attract foreign investment.
“Foreign investment plays a crucial role in developing the economy in the Northwest region of Russia, and is something that St Petersburg in particular has had much success in attracting of late,” Kearvell said.
“The construction, automotive and beer industries in particular have been performing particularly strongly in recent times, whilst investment in general in St Petersburg and northwest Russia continues to maintain a year-on-year upward curve,” he said. 
Khlebanov indicated that industrial production in the first half of the year grew by 10.5 percent compared to the same period last year. Regional production was valued at 475.3 billion rubles ($16.8 billion), of which only 87 billion rubles ($3 billion) came from mineral resources.
“Regions, dependant on one single industry, are vulnerable,” Karelina said. “The Northwest region has a more diversified economy, similar to Western Europe in structure. That provides stable development and competitiveness.”
The same optimistic forecasts do not extend to the whole of Russia, however, Kearvell notes. Reaching the president’s target of a doubling in GDP is “unlikely.”
By 2006, real growth may reach only an increase of 5.8 percent, Interfax news agency reported Monday, and the key to reform many experts see as an effective reform of the natural resource sectors.

TITLE: Russian Post Slashes Tariffs
PUBLISHER: The St. Petersburg Times
TEXT: Pochta Rossii, the Russian postal service, has considerably cut fees for international money transfers, hoping the move will help expand its share of that market sector by 800 percent in three years, the company said Monday.
Wiring a typical, small amount, such as $70, will cost half as much, while transferring more sizeable sums, $500 and above, will become almost four times as cheap, deputy general director of Pochta Rossii, Denis Chuiko, said Friday at a press briefing.
Until now, fees ate up from 9 percent to 12 percent of the amount being transferred. From this week, the system for wiring money will become more flexible, Chuiko said.
Pochta Rossii said it cut prices in order to attract new clients. The company tried a similar strategy for domestic money transfers at the end of 2003, lowering fees by 35 percent. As a result, the volume of domestic money wiring grew by 60 percent in 2004, amounting to 22 million rubles, while the company’s profits from the service increased by 30 percent, head of commercial operations at the company, Igor Mandirkin said at the briefing.
Industry experts, however, doubt whether Pochta Rossii’s strategy will be able to repeat the success of the domestic wire services on the international transfer market.
“For now we do not see the postal service as a serious competitor,” Vitaly Rubanov, development director for MoneyGarm in Russia and CIS told Vedomosti business daily on Monday. 
Nonetheless, Pochta Rossii’s new pricing levels are already lower than those charged by Western Union and MoneyGram (the latter charges a $23 commission for a $50 money transfer). 
“The postal service is moving in the right direction,” said Sergei Bludov, vice-chairman of the board at RusSlavBank, which founded money-transfer chain Kontakt, Vedomosti reported. “Pochta Rossia has colossal infrastructure, which can give it a serious advantage on the international money-transfer market,” he said.

TITLE: IN BRIEF
TEXT: KFC Drives Into Lenta
ST. PETERSBURG (SPT) – Fast food chain KFC opened Friday its first drive-thru outlet in Russia by the parking facility of Lenta supermarket, on Pulkovskoye Shosse.
“Drive-thru restaurants are very popular around the world. We hope this project will be a success and we’ll launch a few more drive-thru outlets in the coming years,” Pizz-Nord general director Vladislav Ivanov said in a statement.
Pizza-Nord financed the $1.5 million project through loans and the company’s own finance. 

Eurosib Ships to China
ST. PETERSBURG (SPT) — Eurosib SPb – Transportation Systems, the city-based transportation arms of the Eurosib Group, has signed a contract with the Autocenter Pekinsky Jeep and the Novosibirsk Motor Plant for the delivery of motor vehicles and car kits from China to Novosibirsk, the company said Monday in a statement.
“According to the contract terms, starting from September Eurosib will ship monthly 90 containers with car kits and 90 more containers with finished cars right to the customer’s door step. Before the end of the year we will have delivered 200 buses and 500 lorries and vans for our clients in Novosibirsk,”  said Eduard Konovalov, who is in charge of the Eurosib office in China.

Vena Boosts Sales
ST. PETERSBURG (SPT) — The country’s fifth-largest brewer Vena increased first-half year production and sales by 21 percent, in contrast to a 3.7 percent general increase on Russia’s beer market in the first six months, the company said in a statement.
Vena, which has a brewery in Chelyabinsk as well as in St. Petersburg, sold 199 million liters between January and June this year, a rise of 21 percent on the same period last year.
The brewer’s top brand, Nevskoye, occupied 13.4 percent of Russia’s market in the premium segment, the statement said. The best sales leap was performed by licensed beer brand Tuborg, the sales of which grew by 141 percent in the six month period, compared to the same period last year.

Buying U.K. Subs
MOSCOW (Bloomberg) — Russia will buy a Panther underwater robot similar to the one the Royal Navy used to free seven Russian crewmen after their submarine sank off the Pacific coast last week, Interfax said.
The Panther is “more modern” than the Scorpio model used to cut through cables that ensnared a Russian mini-sub Aug. 4 off the Kamchatka Peninsula, the newswire said, citing Admiral Vladimir Morosin, the Navy’s chief of staff.
The device will be located at a scientific research institute in St. Petersburg, where a team of navy divers is stationed, the newswire cited Morosin as saying.

Dockers Strike Again
n LONDON (Bloomberg) — Dock workers at St. Petersburg Sea Port are set to resume a strike on Aug. 30 because of disputes over new contracts, a local union leader said.
Workers at three of the four largest docking companies at St. Petersburg Sea Port plan to strike, Alexander Moiseyenko, the chairman of the port’s labor unions committee, said Monday.
“There is no time limit set for the strike,” he said. St. Petersburg Sea Port handled 23 percent of all cargoes, which were loaded by about 30 companies operating in the area in the first half of the year.

TITLE: City-Based Klimov Seeks Contracts at Aircraft Show
AUTHOR: By Angelina Borovikova
PUBLISHER: Special to The St. Petersburg Times
TEXT: St. Petersburg-based Klimov Factory, a once secretive, state-owned helicopter and light-aircraft engine designer and maker, is promoting its products in the hope of getting more contracts in Russia and abroad.
The factory is demonstrating its products this week (Aug. 16 to 21) at the biennial International Aviation and Space Show 2005, or MAKS according to its Russian acronym, at Zhukovsky in the Moscow region.
Klimov has participated in the show, which started in 1993, since 1997. President Vladimir Putin traditionally opens the show. Its patron is Prime Minister Mikhail Fradkov.
Ninety-five per cent of helicopters in Russia use Klimov engines. The company’s products are used in 80 countries in Asia, Africa, America and Europe.
The factory will present its innovations in the gas-turbine engine construction. The highlights of its presentation will be a demonstration of the MiG-29’s new capabilities when equipped with an RD-33 engine and the VK-800, 5th generation engine gas-generator, which will be demonstrated for the first time. Intended for light planes and helicopters, the engine is still under development.
Yulia Kuntysh, a Klimov spokes-woman, said demonstration of high technologies and the openness of Russian enterprises to joint ventures with foreign partners are the main purposes of taking part in the show.
Klimov general director Alexander Vatagin said the aviation show offers an opportunity to establish multilevel contacts, develop production cooperation and find new business partners.
There are some restrictions on meeting foreign partners because the factory’s products can be used for military purposes, making them a state secret. The factory has to get agreement from the MiG aircraft corporation, of which Klimov is a subsidiary, and the Federal Industrial Agency, to arrange negotiations concerning products intended for military purposes.
The factory runs several international programs. Long-term contracts (for more than three years) have been signed with foreign customers for a total sum of over $98 million.
In addition, Klimov is supplying 18 engines for Mi-17 helicopters that are made in Ulan-Ude. Another contract has been signed with Kamov-Holding (Spain) to supply four engines for Ka-32 helicopters. The value of these contracts is about $10 million, the company’s press release said. 
In late July the factory’s management together with Russia’s arms selling agency Rosoboronexport held negotiations with a Chinese delegation. A protocol of intentions has been signed for cooperation on designing and modernizing engines, and proposals are to be presented in September, Kuntysh said in a telephone interview.
Developing relations with China offers Klimov opportunities to cut production costs by outsourcing and promote its products abroad, a company press release said.
“Cooperation with foreign countries is aimed at effectively solving science-technical problems, which ensure the creation of modern domestic products that are competitive on the world market. Thus, our factory is solving tasks established for Russian high-tech enterprises by President Putin, including preserving the country’s scientific-technical potential and developing non-raw materials exports,” the release said.
Thirty million rubles ($1 million) of commercial products were sold to foreign customers in the first half of 2005, 23 million rubles being direct supplies, while the factory recorded a profit for the period of 63.4 million rubles, the company’s press release said. 
Though about 50 per cent of the company’s turnout is exported, management say export is not the factory’s priority, rather, it is to fulfill orders for the Defense Ministry, to meet contractual obligations and to promote the factory’s design developments.
Rosoboronexport press service said that servicing is always attractive to customers. The Klimov factory is developing a foreign network of service centers for civilian and military helicopter engines repairs.
“The main idea of developing this network is to make sure the machinery shipped abroad is used properly. This will increase the effectiveness of military-technical cooperation. And of course, the company is interested in increasing exports,” the service said.
Klimov factory will cooperate with the Novosibirsk aircraft repairs factory, which owns helicopter-repair enterprises in Latin America and the United Arab Emirates.
By the end of the year, Klimov together with Rosoboronexport, is to open a service center in India.
Kuntysh said a service center might well be developed in China as well, but this is under negotiation.
Alexander Grachyov, Klimov’s commercial director, said developing one such center would cost more than $500,000, most of which would be  funded by the factory, with the rest coming from loans, Kommersant reported in July.
“If the demand is high we’ll organize warehouses with spare engines next to the service centers,” he said. 
“The main goals of developing this service network are to increase the prestige of Russian aircraft technology, to meet consumers’ needs, to solve problems in a period convenient for the client and to ensure uninterrupted helicopter operation,” he said.
Pavel Felgenhauer, a Moscow-based independent defense expert, said military-technical cooperation with foreign countries seems to be the only way to reanimate the depressed Russian defense industry.
However, the strategy of producing for export, the Russian military industrial complex’s main priority, as was the case in 1991, is proving unsuccessful nowadays. Which direction the branch will develop further is not yet clear, he said.
The sale of leftover Soviet military wares and components is still continuing, but these reserves are not endless and the components produced today don’t have the necessary quality, he added.
“It’s become clear that Russia, unlike the Soviet Union, can’t produce everything on its own. Our defense industry should turn to construction machinery with western components and under western licenses,” Felgenhauer said in a telephone interview from Moscow
Felgenhauer said foreign companies are not interested in promoting Russian products abroad, but in selling theirs on the Russian market.
“Real cooperation with the West is virtually prohibited. Purchasing anything equipped with foreign components is not possible,” Felgenhauer added.

TITLE: Russia Defends Its Property Rights to Kalashnikov Rifles
AUTHOR: By Lyuba Pronina
PUBLISHER: Staff Writer
TEXT: MOSCOW — Russia plans to call in the support of the United Nations in its battle to regain leadership of the small arms market, a Foreign Ministry official said this month.
In a move to tackle unlicensed manufacturing of arms including its best selling Kalashnikov assault rifle, Russia wants to have its intellectual property rights on small arms recognized under a UN initiative against illicit trade in small weapons.
“We are against countries making small arms that were designed in Russia without our permission,” Pyotr Litavrin, deputy head of security and disarmament at the Foreign Ministry, told reporters.
Russia, which in Soviet times supplied its arms technology free-of-charge to countries in Eastern Europe and Asia, has lost its leadership in the small arms market over the past decade, estimated to be worth around $4 billion annually. 
Russia sells up to $60 million in small arms per year, said Marat Kenzhetayev, an expert with the Center for Arms Control think-tank. Earlier this year, Russia agreed to sell 100,000 Kalashnikovs to Venezuela for $50 million.
In its fight for UN support, Russia plans to push the issue of intellectual property rights at a conference next year on illicit small arms trading, Litavrin said. 
 The conference will review the Program of Action to Prevent, Combat and Eradicate the Illicit Trade in Small Arms and Light Weapons in All its Aspects, which the UN adopted in 2001.
Last month, when the UN met to review the progress of its implementation, Russia raised the intellectual property rights issue, Litavrin said.
“If we make pirated CDs, it is considered a crime, but when it comes to weapons, which is more serious, they turn a blind eye to it,” Litavrin said.
With unlicensed manufacturing rife in many parts of the world, Russia has quite a battle on its hands. The issue is further complicated by the lack of regulation on property rights in Soviet times.
“The Kalashnikov has flooded the entire world because even the notion of production under a license did not exist in the Soviet Union,” said Litavrin. “You can get Kalashnikovs for $100 apiece, whereas the one that we produce costs many times that amount.” 
Furthermore, manufacturers in the former Eastern Bloc made modifications to the original rifle and then assumed their own rights to the amended product, said Moscow-based independent small arms expert Maxim Pyadushkin.

TITLE: Anglo-Italian Designer Shows Flair for Hotel Business
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: A person will always create a better interior for a home or a business if he takes care of the design himself, says Adriano Leto. After all, “you are the person who will use it,” he said.
However, this may be a little simpler for Leto, who co-owns and manages the Casa Leto mini-hotel with his wife Tatyana. The hotelier couple are both qualified interior designers with experience in restoring the interior of many London churches.
Casa Leto has developed as a family business, located near St. Isaac’s Cathedral in a building that once served as the home of court composer Alfred Zimmerman.
The Anglo-Italian Leto and his Russian wife happily engage in the bustle of running the hotel, training employees and meeting the guests, since this is a hotel the style and staff of which they have molded completely by themselves.
Keeping with the city’s special atmosphere, the interior designers recreated the spirit of St. Petersburg’s history inside the hotel’s five rooms. Each room is named after a famous Italian architect: Trezzini, Rossi, Rastrelli, Quarenghi and Rinaldi, reflecting the delicate touch of each master.
“We approach it very differently from most of hotels. We designed it as a sort of place that we would like to stay in,” Leto said. “People feel the style of the city and they want to live in a place that reflects that style,” Leto said.
Casa Leto’s spacious rooms are filled with large mirrors, massive doors, antiques and heavy curtains. The decorated ceilings complete the hotel’s traditional feel.
There will always be a demand for large hotels, but in the premium-class market many think that “small is beautiful,” Leto said. He points to many large hotel chains that are looking to diversify into boutique hotels to cater for a public that wants an intimate luxury.
By the end of 2005, Casa Leto will expand to 10 rooms, by 2006 — 20 rooms. For now, Leto draws the line at that.
“I don’t make small boxes to maximize income,” Leto said. “We will add rooms, but still we will keep it small. That’s the big idea. Some economies of scale damage the quality of service,” he said.
The hotel has already attracted some attention from the foreign press. In May, The Telegraph, a U.K. daily, described Leto’s “small, centrally located hotel [as having] many of the features you’d expect from a grand hotel, combined with the intimacy of a home.”
Leto’s friend of several years, Max Wolf, a co-owner of Maxan wiper-manufacturing firm, said that the “intimacy” had much to do with the designer’s international influences.
“Casa Leto is a very customized hotel with a personal touch. It gives the impression of an Italian or German family home without destroying the interior,” Wolf said.
At the moment there are about 500 mini-hotels in the city, mostly in the middle-class segment. Compared to large hotels, mini-hotels enjoy higher occupancy rates, partly due to high demand and limited supply, Becar real estate agency said.
The 4-star Casa Leto opened in December 2004. To acquire a floor at 34 Bolshaya Morskaya, Adriano had to buy out the former residents of the place, which at the time served as a communal apartment.
The process dragged on for months and reconstruction took over a year since Leto had never run a hotel before.
Born in London, he says he had dreamed of running a hotel since he was six years old. His grandfather was an Italian ambassador and the house was always full of guests.
From an early age socializing and creating an enjoyable place for people to meet interested him. “Creating a hotel is like designing a film with a set and actors,” Leto said.
He even proposed letting out a seashore 12-room house to tenants, as the family only used it for two months of the year, but Leto’s grandfather judged the idea as crazy.
Leto’s chance to run a hotel had to wait many more years, and pass through numerous countries. Working as a photographer, then journalist, later advertiser and documentary maker for English TV, Leto lived in Africa, South America, Italy and Pakistan.
On the way, Leto picked up managerial skills while running an art restoration company and working in advertising.
The skills proved particularly useful when it came to picking staff for Casa Leto, given St. Petersburg’s notorious lack of well-trained personnel in this sector.
To choose the eight employees working at Casa Leto now, the hotelier couple went through 500 resumes and tried out 40 different people.
“We found out that people who stay with us — they are people who like others. Above all, we want human beings. We don’t want professionally trained broad smiles,” Leto said.
Many of the hotel’s employees have art degrees and unusual life experiences. Leto says this brings the hotel “dimensions,” adding that teachers, nurses and journalists often prove the most suitable as staff. Within 48 hours, Leto says he can tell if a new person will fit the hotel.
In a small hotel, the most important thing is to be flexible and ready to work in a broad set of roles, no matter how menial, he said. “I’m prepared to clean the toilet. I’m expecting everybody to do it as well,” Leto said.
Exercising a western approach to  management Leto involves employees in decision-making, encourages “initiative-based, intelligent thinking.” Unfortunately, he notes, many in Russia are not ready to work in such a challenging environment.
Just as with the picking of staff, the hotel’s owners try to select their guests. Leto says they have had few problems, but things such as smoking and loud behavior are not welcome.
Though it is a rare occurrence, Leto said the hotel reserves the right to ask guests to move out if they upset other visitors or do not respect the staff. However it happens very rarely, Adriano said.
“It’s not us being elitist. It’s not an upper-class club. It’s us trying to make sure that everybody who comes here is comfortable,” Leto said.
Wolf notes that the comfort extends not only to the visitors.
“Adriano has an ability to give investors confidence and inspire employees to work just like he works. He’s a man of his word. Combined with a great imagination that means a great deal,” Wolf said.

TITLE: IN BRIEF
TEXT: GDP Forecast Raised
MOSCOW (Bloomberg) — The government expects the economy to grow by 6.0 percent this year, Interfax reported, citing the Economic Development and Trade Minister German Gref.
Gref also said the government had earlier raised its 2005 economic growth forecast to 5.9 percent from 5.6 percent, Interfax reported. 
Russian industrial output rose 0.8 percent in July, putting the annual growth rate at 4.9 percent, Gref said.
Russia’s economy accelerated in the first half to 5.6 percent as crude oil prices rose to a record, Gref said in June. Increased manufacturing, led by machinery output, helped lift growth from 5 percent in the first quarter.

Higher 2006 Revenue
MOSCOW (Bloomberg) — Russia’s Finance Ministry submitted a draft 2006 spending plan to the government that budgets for greater revenue and spending than initially announced, Interfax reported, citing the ministry.
The draft budget plans for a surplus of 776.2 billion rubles ($27.4 billion), based on expected revenue of 5.05 trillion rubles and spending of 4.27 trillion rubles, Interfax reported.
The budget assumes annual inflation of 7 percent to 8.5 percent and an average price of $40 a barrel for Urals blend of crude oil, the country’s main export blend, Interfax said.

Gazprom Profits
MOSCOW (Reuters) — Gas monopoly Gazprom said on Monday its first half net profit to Russian Accounting Standards rose 40.7 percent to 88.45 billion rubles ($3.12 billion), boosted by higher prices. 
Sales were up 35.8 percent to 595.54 billion rubles, Gazprom said. 
Second quarter net profit fell 11.52 percent from the first quarter of 2005 due to seasonal factors as sales to Europe, the former Soviet Union and Russia fell after the end of the heating season, Gazprom said. 

Sibneft Profits Too
MOSCOW (Reuters) —Sibneft reported a net profit of 21.264 billion rubles ($749.1 million) for the first half of 2005 on Monday, up from 20.642 billion rubles in the same period of last year. 
The firm, controlled by Roman Abramovich, said in a statement that sales rose to 110.978 billion rubles in the period, up from 81.844 billion rubles in the first six months of 2004. 
Cost of sales and services rose to 61.370 billion rubles from 43.508 billion rubles. 

September Oil Exports
MOSCOW (Reuters) —Russia will cut pipeline crude oil exports from Black Sea Novorossiisk in September versus August due to planned maintenance on a pipeline, but will boost shipments from Baltic Sea Primosk. 
Traders said on Monday a very preliminary plan by pipeline monopoly Transneft showed Novorossiisk would export 3.65 million tons or 890,000 barrels per day, down from 3.89 million tons or 920,000 bpd in August. 
Primorsk will boost shipments to 4.9 million or 1.2 million bpd, up from 4.83 million tons or 1.14 million bpd in August. 

VimpelCom in Delays
MOSCOW (Bloomberg) — VimpelCom, the country’s No. 2 mobile-phone company, rescheduled an extraordinary general meeting to ensure all shareholders are able to exercise their right to vote on an acquisition in Ukraine.
The meeting, which was originally planned for later on Monday, is now scheduled for Sept. 14, Alfa Telecom, which owns more than 30 percent in VimpelCom, said in a statement Monday.
Alfa, VimpelCom’s largest owner, has pushed for the Moscow- based operator to expand into Ukraine, where subscriber growth rates are faster than at home. Those expansion plans have been blocked by Telenor, its second-largest owner.

Guatemala’s Sugar 
TAIPEI (Reuters) — Sugar exporter Guatemala hopes to make significant inroads into Russia by negotiating tariff-free sugar imports this year, industry officials said on Monday.
Guatemala, classified as the 6th biggest sugar exporter in 2004 by the International Sugar Organization, hopes to sign a deal on tariff-free exports with Russia in October, Asazgua President Armando Boesche said.

Ukraine Currency Market
KIEV (Reuters) — Ukraine’s Central Bank intervened again on the currency market it closely controls on Monday, buying dollars at 4.98 hryvnias, the same rate as Friday. 
The bank intervened four days in a row last week, in effect allowing the hryvnia to drift slowly upward after it broke through the barrier of 5 to the dollar. It bought the U.S. currency at 4.99 on Thursday and 4.98 on Friday. 
The hryvnia is at its highest level since 1999. 
For weeks, the bank tried to hold the rate at 5.01 after engineering a three percent rise in its value in a single day, undermining confidence in the market. 
VSMPO to Expand 
MOSCOW (Prime-Tass) — VSMPO-Avisma, the world’s largest titanium producer, has acquired five companies based in the country’s Perm Region, near the Ural Mountains, the company said Monday.
VSMPO-Avisma now owns 100 percent stakes in each of the five companies: Avisma-TransAvto, Avisma-Mashinostroitel, Avisma-MetrATek, Evisma-TekhnoEkspert and Avisma-Kombinat Pitaniya.
VSMPO-Avisma said that it had not held any shares in these companies before the deal.
VSMPO-Avisma was established in early 2005 as a result of the merger between Sverdlovsk Region-based Verkhnesaldinsk smelter, or VSMPO, with AVISMA Titanium-Magnesium Works.

MICEX Goes Shopping
MOSCOW (Prime-Tass) — The Moscow Interbank Currency Exchange, or MICEX, has bought a 51 percent stake in Russia’s Asian Pacific Interbank Currency Exchange, MICEX said Monday.
Under the agreement between MICEX and the shareholders of the exchange, MICEX bought 10,774 shares, which have a total face value of 2.424 million rubles ($85,653), MICEX said.
MICEX currently holds stakes in several regional exchanges in Russia.
Asian Pacific Interbank Currency Exchange, established in 1992 by regional commercial banks and registered in Vladivostok, is the leading exchange in Russia’s Far East Federal District, which is open to trades in currency, securities and other financial instruments. 
Other shareholders of the exchange include Russian minor banks and companies.

TITLE: Reform Now And Rescue Future Lives
TEXT: The latest incident with the mini-submarine trapped in the Pacific and rescued with British help should be not just an occasion to consider what lessons have been learned since the sinking of the Kursk and what still needs to be done to secure the safety of the submarine fleet. It should be an opportunity for President Vladimir Putin to spur forward the military reform that by and large still remains empty talk. 
In 1987, Mikhail Gorbachev used the scandalous landing by German pilot Mathias Rust on Red Square as a pretext to fire the entrenched Soviet top brass, including Defense Minister Sergei Sokolov. In doing so, Gorbachev also opened the military, a sacred cow of the Soviet Union, to critical public scrutiny. 
When the Kursk nuclear submarine sank in 2000, killing all 118 sailors on board, Putin missed an opportunity to bring change to the military and arguably its most closed and rigid branch, the Navy. Instead, he offered reassurances to the Navy commander, Admiral Vladimir Kuroyedov, that he would suffer no unpleasant consequences. 
Since then, Putin has replaced his defense minister, the commander of the Northern Fleet and other senior naval officers. But the personnel changes were made only much later and in such a way as to make it impossible to tell whether there was any connection to the disastrous management of the Kursk crisis.
Military funding has dramatically increased in recent years. Yet when the Priz mini-sub got stuck on Aug. 4, the military was unable to come up with the piece of equipment, costing as little as $1 million, that was needed to save the seven seamen from death and the nation from embarrassment.
Defense Minister Sergei Ivanov said Aug. 8 that Russia had robotic devices similar to the one used by the British. Well, then it is not a question of money. But he said it could not have been brought to Kamchatka in time to save the crew. Then it is clearly a question of management. 
The military needs reform, which means not just providing more money but establishing accountability. It is a daunting task, and only Putin can give the military the push it needs. 
Reform is in the military’s own interests. Because if the president continues to miss opportunities for reform — even those offered by incidents such as the trapped mini-sub, which shake the nation out of its apathy — serving in the armed forces will become increasingly less about guaranteeing Russia’s security and more about saving the lives of its men in uniform.

TITLE: Bureaucrat Express
AUTHOR: By Georgy Bovt
TEXT: People say there are only two real cities in Russia: Moscow and St. Petersburg. Some folks hold the even more radical opinion that Russia can be divided into two parts: Moscow-St. Petersburg and Everything Else. Between these two parts lies a deep rift, if not a cultural chasm.
If you look closer, however, you see that while there is no rift or chasm between Russia’s two major metropolises, there is certainly no decent transportation connecting them, either. 
Of course, there is a railway line with more than a dozen trains a day, and there are several flights that take about as long as it takes to fly from Moscow to Helsinki. There is a highway that hardly merits the name, even if we judge it by the European standards of 30 years ago.
But suddenly, an enthusiastic news report appeared on state television last week. The report showed a new luxury express train that has started running between the two cities. The train, the report exclaimed, was unique. It concluded with the words, “There is nothing resembling this train anywhere else in the world.” I have to admit, turns of phrase like this have started to worry me recently, when it seems that more and more emphasis is being placed on Russia’s uniqueness and how it does not resemble the West. Why hasn’t anyone else come up with something like this train or whatever else is supposedly unique to Russia? Maybe it’s because these things are not unique at all, but not economically or technologically viable.
 Let’s take this much-touted train, for instance, and examine it as if it were a basic business case from Macroeconomics 101.
Here are the givens. The train is made up of standard train cars based on what Pullman thought up long, long ago. Inside, there are two-room compartments with private bathrooms, foldout double beds and wireless Internet access, as well as television sets. The compartment can only be opened using a key card. The price of a compartment like this runs from around $250 to $450 one way. The journey takes the same amount of time as on other express trains. 
The first question that begs to be asked is what consumers are being targeted, taking into account that the price of a one-way ticket exceeds the average per capita income in both cities.
From an economic standpoint, the cost of a ticket on what is essentially a form of mass transit should not be equal to the monthly income of potential passengers. By comparison, a ticket on a French TGV train running from Paris to Nantes costs about 50 euros. Fifty euros is a mere fraction of the average Parisian’s monthly income. Furthermore, the train takes two hours, 15 minutes. At this speed, it would take only three hours and change to travel from Moscow to St. Petersburg. But the new train takes eight hours.
Perhaps this train is designed exclusively for businesspeople, for the kind of folks who need Internet access. But why would they need the web in the dead of night? What passengers would be so pressed for time that they would spend the entire night sending out a barrage of e-mails? In today’s business world, when people are pressed for time, they take a plane, not a luxury train — and pay a lot less, by the way.
There is one more detail unique to this Moscow-St. Petersburg train: the key card. This detail tells us that the route is on the dangerous side, to put it mildly. In other words, money and other things get stolen from compartments. How can this fact be reconciled with the high ticket price?
As a result, we end up with a strange combination of cutting-edge technology — the Internet and key cards — and early 20th-century technology. This sounds like something from a Jules Verne novel. The combination might work well in a book, but economically, it’s a complete oxymoron.
We could pursue this business case further, but it is already clear who this train is for. It’s designed for bureaucrats, the real captains of industry in the Russian economy. It is perfect for the Putin-era recruits from St. Petersburg who have migrated en masse to Moscow and often head home to visit family in St. Petersburg on the weekend. 
These people have a unique position in the new economic system, and they couldn’t care less about things like efficient time management. It’s easy to manage financial flows while riding in a two-room compartment and surfing the Internet all night. Their tickets are bought using government money. The price is irrelevant, as are the usual formulas calculating the relationship between price, supply and demand. Economic efficiency doesn’t matter, either.
It turns out there really is a chasm between Moscow and St. Petersburg. And it rides the rails.

Georgy Bovt is editor of Profil.

TITLE: New Regulations Should Save Historic Center
AUTHOR: By Vladimir Gryaznevich
TEXT: The parlous  state of historic architecture in St. Petersburg demonstrates once again the ineffectiveness of primitive bureaucratic methods used by the city government.
City Hall has no realistic possibilities to preserve the appearance of the city other than using its own efforts. The budget has long lacked the money to reconstruct dilapidated historic buildngs — there is enough only to preserve monuments. Business has been allowed to enter this sphere, but clear rules have not been established, because the government prefers its usual method of making many individual bureaucratic agreements that are intended to ensure the observation of strict instructions in a “unified preservation zone.”
But the growing demand for construction sites in the historic districts of St. Petersburg has influenced the sluggish administrative machine — and created a corrupt mechanism for the issuing of permits to build and reconstruct in the protected zone. Under this mechanism, the preservation of the historic appearance of the city has taken second place. This is not to mention that a score of staff of the Committee for the State Inspection and Protection of Historic Monuments, or KGIOP, are unable to keep track of all projects and they have no effective levers to deal with breaches. As a result, the preservation regime has effectively ceased to operate.
Mikhail Piotrovsky, director of the State Hermitage Museum, says the root of this evil is clear: “Preservation zones make no sense if rules are vague. In such preservation zones, people have built and will build without any regard for the rules and to try to do anything about that is unrealistic.”  
Vera Dementyeva, head of KGIOP, recognizes this fault: “the historic center with its important architectural ensembles is in the same preservation zone as buildings that have less merit. The result is the preservation zones do not work. ”
To address this situation, KGIOP is promoting new, detailed amended rules for use of land and construction. The draft General Plan for St. Petersburg contains a new system of preservation zones for cultural heritage properties. The thinking behind the new system is that the process of investment in real estate will become simpler and more orderly.
A key for the construction business is the question of limits that affect a property in a preservation zone. Dementyeva says that a balance was sought between the necessity for strict preservation demands on properties in the nucleus of the historic center and the opening of opportunities for investors with properties that are less important from the cultural-historical point of view – so-called “zones of restricted construction and commercial use.”
“We will not retain the unified preservation zone of 1988, as we have been accused of doing, but we will develop this and inscribe different regimes inside it,” Dementyeva said. “Beyond the limits of the actual preservation zone, other, less strict preservation mechanisms will be introduced allowing restricted construction.” This new regime is based on rules for the use of land and construction. The introduction of these rules will shorten the investment cycle and relieve developers of having to prepare a temporary construction plan — this usually takes 6 months. The rules, which have the same legal status as laws, are to be confirmed after the General Plan is passed before the end of this year. 
In this way the conditions for developers to operate in the central districts will be more transparent and predictable while the cost and time taken for preparatory planning will be reduced. This will give a new impulse to the further development of the real estate market and for the reconstruction of the historic center of the city. It is to be hoped that this time the authorities have found the right course between the preservationist “Scylla” and the profit-seeking “Charybdis.” 

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: Inflation Policy Means Budget Tight Despite Record Revenues
AUTHOR: By Mikhail Delyagin
TEXT: If you keep making the same mistake over and over, you end up running down a winding road from minor inaccuracies to total absurdity. The government’s budget policy in the first half of 2005 suggests that the guys who pull the purse strings are nearing the end of this unfortunate road.
The main aim of current budget policy remains the senseless attempt to control inflation using monetary mechanisms, including sweeping spending cuts, although non-monetary factors — chiefly the excesses of the state-owned monopolies and the increasing appetite of the top siloviki — are now largely responsible for inflation. As a result of this fear of inflation, the government is systematically underfunding most items in the federal budget during a period of record revenues.
According to official figures released by the Finance Ministry, revenues exceeded projections in the first half of 2005 by a whopping 46.1 percent, or 751.6 billion rubles ($26.37 billion). At the same time, appropriations — money that state agencies are authorized to spend — are running 0.6 percent (10.3 billion rubles or $361 million) below the levels outlined in the budget, and outlays — when the money actually leaves the treasury — are 13.4 percent (222.7 billion rubles or $7.8 billion) below projected levels. This all means that on the whole, underfunding of federal programs and agencies in the first half of the year rose by 11.5 percent (155.9 billion rubles or $5.5 billion) compared with the same period in 2004.
 As a result, while budget revenues swelled from 20.7 percent to 25.8 percent of GDP, appropriations rose from 16.8 percent to just 17.9 percent of GDP, and outlays actually fell slightly from 15.7 percent to 15.6 percent of GDP. On paper, the government’s budget policy has loosened, but in reality it has tightened and less money is actually going to state programs.
The unused balance of budget funds soared from 933.5 billion rubles to 1,604.3 billion rubles in the first half of 2005, an increase of 670.7 billion rubles ($23.5 billion). Yet the federal stabilization fund grew from 522.3 billion rubles to just 617.9 billion rubles during this period because the government drew on the fund and took 93.5 billion rubles in January to pay for the early redemption of foreign debt, followed by another 430 billion ruble payment in June.
In addition, the Finance Ministry mysteriously reduced the stabilization fund by 1.3 billion rubles ($46 million) in June, a sum it wonderfully described as “the difference between the recalculated balance and money actually transferred.” This difference is not the result of the exchange rate, which is calculated separately and which shaved 9.6 billion rubles from the budget. Until an explanation is forthcoming, it will be hard to shake the impression that the Finance Ministry somehow managed to spend 1.3 billion rubles and simply wrote it off. 
Whatever the arguments for and against the use of the stabilization fund for the renewal of Russia’s collapsing infrastructure, the above indicators are plainly beyond discussions of the pros and cons. The bigwigs at the Finance Ministry may talk about lockboxes, but in fact, they’re squandering public funds at a rate that would make Marie Antoinette blush.
What’s amazing is that even in the accounts of agencies tasked with servicing the national debt, money is just sitting there. According to the Finance Ministry, appropriations were made authorizing 111.5 billion rubles to fund 100 percent of Russia’s interest-bearing obligations, but outlays on these obligations amounted to just 91.7 percent of budget projections, or 103.3 billion rubles. As a result, 8.2 billion rubles were sitting on the books of the agencies that are supposed to service the national debt. The fate of this money is intriguing indeed.
Authorities have long had problems with implementation of the federal budget, and money for individual budget items has often been authorized unevenly. But now the Finance Ministry seems to have given up even trying to explain its funding decisions. Two budget items — “general needs of the state” and “national defense” — were overfunded by 1.4 percent (3.4 billion rubles) and 0.1 percent (0.3 billion rubles), respectively.
But everything else in the budget was underfunded. We’re not just talking about the Finance Ministry’s traditional pariahs like housing. Social spending as a whole was short-changed: Health care was underfunded by 6.8 percent, culture by 2.6 percent, social policy by 2.2 percent and education by 0.8 percent. Security and law enforcement, which were previously considered untouchable, also fell victim to the underspending spree.
In all, 212.4 billion rubles ($7.5 billion) in appropriations were left untouched at the end of the first six months of 2005. Such large-scale distortions of the budget process, which have occurred amid such deafening silence, are a cause for concern. The mistake of controlling inflation via underfunding is leading the government into an absurd position, when money is lying around unspent and transparency and efficiency are empty words.

Mikhail Delyagin, scientific director of the Institute for Globalization Studies, contributed this comment to The St. Petersburg Times.

TITLE: Mighty Mitvol and the Unlucky 13
AUTHOR: By Masha Gessen
TEXT: Mitvol is an interesting character. You have probably heard of him by now. He is a former businessman who by the age of 40-something had made enough money and accomplished enough in his chosen field of study — he is a media scholar with a doctorate in history — that he was casting about for something to do. For some reason, he decided to devote himself to civil service. Just over a year ago, he got a job in the Natural Resources Ministry, where he seems to have set himself the goal of becoming this country’s most famous environmentalist. 
Two things set him apart from most Russian bureaucrats I’ve met: He is sincere, and he is not corrupt, if only because he is rich. He has tried to fashion the image of a new kind of civil servant, a public and passionate one. 
One of Mitvol’s longest-running crusades is a drive to raze dachas built on protected land close to the reservoirs that provide Moscow’s water. He has taken journalists on tours of various reservoirs so they could enjoy the view of these illegal — and, often, outrageously opulent — structures from the water. He has brought bulldozers to some of these houses to threaten them with destruction. And this month, he finally succeeded: Bulldozers actually started on the 13 unlucky houses in a village.
 Have the people of Moscow thanked Mitvol for protecting their water? No, no, and no. 
He explained that he was in the right several times over with that village: There were several court decisions requiring that the houses be razed, and the case had dragged on for years. The houses were too close to the water, the residents lacked  construction permits, and that’s all there was to it.
For the record, I don’t think that people should build houses in the protected zones close to reservoirs. I think reservoirs should not be polluted, and I think there should be public access to the water wherever possible. But I also don’t think the unlucky houses should be demolished.
The thing that Mitvol, for all his efforts to become a new kind of official, has failed to grasp is that to be fair, things have to feel fair. The razing of the dachas does not seem fair because the lack of building permits probably means that the owners did not have enough money or know enough of the right people. We see people punished not for illegal construction but for lacking connections. It doesn’t help that Mitvol clearly has that sort of money and connections. The argument that Mitvol’s actions are based on court decisions doesn’t convince anyone, especially after the Mikhail Khodorkovsky case. 
It would look and seem fair if Mitvol managed to raze one of the palatial structures that dot the Moscow region shorelines. But I bet I know why he can’t: Despite being blatantly close to the water, these buildings have all the right paperwork.

Masha Gessen is contributing editor at Bolshoi Gorod.

TITLE: Relay Gold Seals U.S. Helsinki Triumph
AUTHOR: By Raf Cassert
PUBLISHER: The Associated Press
TEXT: HELSINKI  — The Stars and Stripes flew highest when dusk descended one last time on the world track and field championships. 
After two years of drug scandals, the United States hit back at critics with a record-breaking 14 gold medals, highlighted Sunday by a second gold for 400-meter champion Jeremy Wariner in the 1,600 relay. 
Together with 100 and 200 winner Justin Gatlin and 100 and 400 relay champion Lauryn Williams, Wariner epitomized a young and spectacularly talented U.S. squad that could dominate even beyond the 2007 world championships and 2008 Olympics. 
“The average age of the gold medalists is 23.5 so when you’re thinking about moving forward to Beijing and Osaka before that, you have to feel pretty good about that,’’ USA Track and Field executive director Craig Masback said. 
On a busy closing day, Britain and Kenya averted humiliation by winning their first gold medals. Britain’s hard-luck marathon runner Paula Radcliffe won her first major title and Benjamin Limo won the 5,000. 
Cuban Olympic champion Osleidys Menendez set a javelin world record of 235 feet, 3 inches on her first throw. 
Menendez was the third woman to win $160,000 for setting a world record and winning gold. Olimpiada Ivanova set one in the 20-kilometer walk and fellow Russian Yelena Isinbayeva added another in the pole vault. The three world records were the most at a world championships in a decade. 
The United States finished with 25 medals overall, one shy of its top mark of 26 in Tokyo 14 years ago. 
The sport as a whole and the U.S. program has been tainted by performance-enhancing substances over the past two years because of the BALCO drug laboratory scandal. The championships made a huge difference. 
“Well, obviously very gratifying and energizing to be able to focus on the athletes,’’ Masback said. 
After finishing second to Russia two years ago, this year was no contest. 
Russia got gold from its women’s 1,600 relay team, giving 400 hurdles champion Yuliya Pechonkina a second title in the championships. The Russians finished with seven golds and 20 medals overall. 
Moroccan-born Rashid Ramzi of Bahrain completed an unprecedented middle-distance double, adding the 800 meters to his 1,500 title by holding off Olympic champion Yuriy Borzakovskiy on the home stretch. 
Limo had the weight of Kenya on his shoulders but still managed to rush past Ethiopia’s Sileshi Sihine on the home straight to win Kenya’s only gold, still a huge disappointment.
“I knew the last lap would be high speed, and I still felt OK,’’ said Limo, who later said he would name his son, who was born on Monday, Helsinki. 
Radcliffe is already the world record holder in the marathon, but what she really craved was a major title. 
She led for almost the whole race before finishing well ahead of Catherine Ndereba of Kenya and Constantina Tomescu-Dita of Romania. 
“It was my plan to keep a good pace going,’’ said Radcliffe, who finished in a championship record of 2 hours, 20 minutes, 57 seconds. 
Gone were the tears and heartbreak from the Athens Olympics, where she came in as favorite only to drop out of both the marathon and 10,000. 
“A lot of things went wrong in Athens. I was a lot more confident here,’’ Radcliffe said.

TITLE: Nadal Eyes U.S. Open After Hardcourt Win in Montreal
PUBLISHER: The Associated Press
TEXT: MONTREAL — Neither Andre Agassi nor a quick hardcourt could stop Rafael Nadal. 
The 19-year-old Spainard won on a hardcourt for the first time, beating the 35-year-old Agassi 6-3, 4-6, 6-2 in the Rogers Cup final Sunday. 
The French Open champ’s left-handed shotmaking got the better of Agassi, who was missing the lines with his winners in a baseline battle interrupted 58 minutes after the first set by rain. 
It was the top-seed’s third victory in a row and his ATP-tour-leading ninth tournament win of the year. His eight previous wins, including the French Open, were on slower clay courts. 
“I don’t want to think about it because I always want to stay the same,” Nadal commented on his breakthrough season.               
“I only want to think about next week. I’m happy I’ve won a grand slam, three Masters Series and five (other) tournaments, but I can't think about that now. I’ll think about it at the end of the year.”
Nadal, who has a 16-match winning streak, won $400,000 while Agassi pocketed $200,000. 
Fourth-seeded Agassi, who was coming off a win in Los Angeles two weeks ago, ended a 10-match winning streak. 
It was the first meeting between Nadal, considered the sport’s next superstar, and Agassi, who has won 60 tournaments, including eight grand slams and three wins in the Canadian event, in his 19-year career. 
“It’s easy to see why he’s won so many matches,” said Agassi. “He’s just a great mover on the court and he gets good power from stretched positions, so you’re never sure if you have control of a point. 
“His serve was more awkward than I anticipated. If you don’t get a good return, he immediately gets on the offense. That’s the sign of a great player.”
Nadal and Agassi had some spectacular rallies, with Nadal repeatedly running down crosscourt shots that looked impossible to reach. 
Nadal had lost only one of 53 service games in the tournament going into the final, and held nine more times before Agassi broke his precisely placed serve in the final game of the second set. 
Nadal didn’t collapse, breaking a faltering Agassi for 2-1 and 4-1 leads in the final set. 
The 16-year age gap between finalists was the largest on the ATP tour since 1979, when 35-year-old Tom Okker beat 19-year-old Per Hjertquist in Tel Aviv. 
Nadal, coming off wins at Bastad and Stuttgart, has not lost since falling to Gilles Muller of France in the second round at Wimbledon. 
It was Nadal’s fourth final of the year in a Masters Series event – the nine tournaments ranked just below grand slams in prize money and importance – and his third win. 
It was the first time Agassi has lost after reaching a Masters Series final since Miami in 1998, ending an eight-match win streak. 
Nadal’s tour-leading 65 match wins this year is second best ever by a teenager to Boris Becker’s 69 in 1986. The last teenager to win the Canadian tournament was Michael Chang in 1990, when he was 18. 
Agassi’s last loss to a teenager in a final was in 1990, when he was beaten by a 19-year-old Pete Sampras. 
And Nadal has the most wins by a teenager since Agassi won 63 in 1988. His ninth tournament victory tied Mats Wilander in 1983 as the most by a player under 20. 
The win should be a major confidence-booster for Nadal going into the U.S. Open on hardcourts at the end of August. 
“It’s very important,” Nadal said. “I know I can play good on hard because I had good scores this year. 
“But I’ve got confidence now. I hope to play at the same level next week because it’s good for the confidence – for the U.S. Open especially.