SOURCE: The St. Petersburg Times
DATE: Issue #1124 (90), Tuesday, November 22, 2005
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TITLE: Duma Gives $17.4 Million To NGOs, Democracy
AUTHOR: By Francesca Mereu and Oksana Yablokova
PUBLISHER: Staff Writer
TEXT: MOSCOW — The State Duma voted Friday to allocate 500 million rubles ($17.4 million) to promote civil society in Russia and defend the rights of Russians in the Baltic countries. 
Critics said the money was likely to go only to groups that support the Kremlin and was another step in the Kremlin’s campaign to bring nongovernmental organizations under its wing. 
The new funding was seen as a response to a vote in the U.S. Congress earlier this month to allocate $4 million for the development of political parties in Russia. 
“We think that we have to finance civil society institutions not only in our country, but also abroad, in the Baltic countries,” Duma Deputy Speaker Vyacheslav Volodin of United Russia said Friday, Interfax reported.
“Look, democracy, freedom and human rights are being violated. It is necessary to develop democracy in those countries,” Volodin said.
Ironically, the measure comes as deputies prepare to address what they and the Kremlin see as undue foreign influence in Russia’s NGO community. The Duma is scheduled to consider a controversial bill on Wednesday that would forbid NGOs from accepting foreign grants for any activities deemed political and effectively prevent international nonprofit organizations from operating in Russia.
The proposed restrictions have caused concern in Russia and abroad. Members of the Public Chamber have asked the Duma to delay taking up the NGO legislation until its consequences can be fully scrutinized, and U.S. President George W. Bush raised the issue in his meeting with President Vladimir Putin on Friday.
The $17.4 million for civil society was contained in a United Russia-sponsored amendment to the 2006 budget, which the Duma passed Friday in the third of four required readings. When passed in the final reading, the budget goes to the Federation Council and then to Putin to be signed into law. 
Lev Ponomaryov, head of the For Human Rights group, said the Kremlin would likely use some of the money for projects aimed at improving its image outside Russia.
“In a way, it will be a return to the Soviet Union, with a number of pseudo-human rights groups specializing in criticism of what is going on in other countries in order to distract attention from what is going on inside Russia,” Ponomaryov said.
Vladimir Ryzhkov, an independent Duma deputy, called United Russia’s initiative ridiculous.
“Over the past five years, United Russia has been doing everything to strangle democracy in Russia by rubberstamping one anti-democratic bill after another,” he said.
“Very likely these funds will go to propagandists close to the Kremlin who will spend them on dubious PR projects, including one in the Baltics,” Ryzhkov said.
Modest Kolerov, the head of the presidential administration’s Department for Interregional and Cultural Relations with Foreign Countries and the CIS, said Friday that the state financing of Russian nongovernmental organizations was an important step toward developing democracy, since it would allow more organizations to get funding.
“Not every social organization in our country gets proper grants,” Kolerov said. “And most grants people get from the West represent politically motivated funding.”
His department, created in March to promote Russian language, education and culture abroad, is seen as a Kremlin instrument to spread Russian influence in the former Soviet bloc.
Kolerov said it was extremely important to finance NGOs in the Baltic countries, particularly Latvia, where many Russian speakers are without citizenship. 
“Those people have almost no rights. Something should be done,” he said. 
Deputy Duma Speaker Valentin Kuptsov of the Communist Party said his faction would demand thorough accounting of how the money is spent. 
Ponomaryov said he would expect the money to be distributed through the Public Chamber. “In this case the funds would likely end up with those groups that are supportive of the Kremlin’s line,” he said.
The Public Chamber, a Kremlin creation billed as a bridge between civil society and the state, is being packed mostly with people considered loyal to the Kremlin or celebrities. 
Thus it was somewhat unexpected when 21 of its members signed a letter last week asking for the first reading of the NGO bill to be delayed until the Public Chamber could review it.  The Kremlin-backed bill was put forward by all four factions in the Duma, who said they wanted to push the legislation through by the end of the year. The Public Chamber is expected to begin work early next year.
The bill would require all 450,000 NGOs registered in Russia to reregister and show that they do not use foreign grants to fund political activities. 
Ahead of his meeting with Putin in South Korea, Bush came under pressure at home to address the NGO issue.
“The impact of this measure, if it became law, should be obvious: It would roll back pluralism in Russia and curtail contact between our societies,” former Housing and Development Secretary Jack Kemp, a Republican, and former Senator John Edwards, a Democrat, wrote in a letter to Bush. The two men chair a task force on Russian-U.S. policy for the Council on Foreign Relations.
“It would mark a complete breach of the commitment to strengthen such contact that President Putin made when you and he met in Bratislava,” they said in February.
Kemp and Edwards said the campaign to restrict NGOs “raises an almost unthinkable prospect — that the president of Russia might serve as chairman of the G8 at the same time that laws come into force in his country to choke off contacts with global society.”
Bush raised the issue, but U.S. National Security Adviser Stephen Hadley declined to elaborate on the discussion.

TITLE: St. Petersburg Wins European Cup
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: A team comprising members of the city’s homeless has won a top international sports trophy, beating off seven teams to take top honors.
Local soccer players won the European Homeless Soccer Cup this week, after a triumphant 4:0 victory over Poland in the tournament’s final game on Sunday.
The local squad traveled to Gdansk last week to compete with other European homeless soccer teams for the prestigious title. 
The St. Petersburg team is assembled and managed by Put Domoi, a twice-monthly magazine and successor to the monthly Na Dne newspaper. The magazine, which has a strong emphasis on social issues and homelessness in particular, is sold by the city’s homeless who receive 50 percent of the sales.
The squad has been taking part in international soccer competitions, including three world championships, for the last three years. The European Homeless Soccer Cup is the team’s highest sports achievement to date. It finished fifth out of 27 teams during the World Cup in Gothenburg, Sweden, in 2004.
Arkady Tyurin, editor of Put Domoi, told reporters this week that locals played against teams from Germany, Holland, Denmark, the Czech Republic and other countries. 
The next Homeless World Cup will take place in Cape Town, South Africa in September 2006.
The St. Petersburg team first traveled overseas in the summer of 2003 to take part in the World Homeless Soccer Tournament in Graz, Austria, where they took 13th place out of 18 teams. Despite the discouraging result, the rookie team did manage to get noticed, and Maxim Mastitsky, the team’s player-coach, earned the title of the tournament’s most valuable player. 
The Homeless World Cup is organized by the Independent Network of Street Papers, an umbrella group covering 50 papers from 27 countries, including The Big Issue in London, Manchester, Glasgow and Melbourne, Diagonal in Buenos Aires, Hecho en Chile in Santiago and Russia’s Put Domoi in St. Petersburg. 
The purpose of these tournaments is to use the positive power of soccer to raise awareness of the issue of homelessness and poverty worldwide. Social integration programs centered around sports have been practised successfully by organizations like the English soccer street league for a number of years. 
They are also looking to break the common stereotype of homeless people as social parasites, heavily into drinking and crime, who aren’t willing to change their street life. The stigma is so strong that many homeless are often denied the opportunities or help they need to start a new life.
“These competitions have already proved to be a very efficient tool,” Tyurin said. “They stimulate people and give them new energy to try and look for a job, for training or for a rehabilitation program.” 
According to the organizers of the Russian squad, the term “homeless” is interpreted relatively broadly during the selection process, and doesn’t mean the team’s players literally live on the streets of St. Petersburg. Most of them find refuge in homeless shelters and rehabilitation centers or live with relatives and friends.
Some of the players are being treated for alcohol and drug addiction.

TITLE: IN BRIEF
TEXT: Finn Dies in Karelia
PETROZAVODSK (SPT) — A Finnish citizen died in a forest near the town of Kostomuksha in Karelia on Sunday, Interfax reported on Monday.
The Finnish worker, 44, was killed while repairing a saw. The worker was sober, and police have categorized the incident as an industrial accident.

Nochlezhka Moved Out
ST. PETERSBURG  (SPT) — The St. Petersburg charity Nochlezhka has been forced to move, cutting the number of beds it offers to the city’s homeless. The organization was forced to move following the sale of the building that housed it, and the number of beds will fall from 70 to 40, Interfax reported.
Nochlezhka was founded in 1991 and provides accommodation, food, legal and psychological help to the city’s homeless.
This year Nochlezhka has already provided assistance to 4,000 homeless people.

TITLE: Russia Bails Out Official In UN Case
PUBLISHER: The Associated Press
TEXT: UNITED NATIONS — A Russian UN official accused of money laundering was freed from jail Friday after the Russian government posted $500,000 bail. 
Vladimir Kuznetsov, who chaired the powerful UN budget oversight committee, had been in jail since Sept. 1 on an indictment charging that he conspired with a UN procurement officer to launder hundreds of thousands of dollars from foreign companies seeking contracts with the world body. 
“We can confirm that he was freed today after bail was paid,” said Maria Zakharova, press secretary at Russia’s UN Mission. “Russia paid the $500,000 bail and hopes that this will lead to the case moving forward.” 
Kuznetsov was arrested by the FBI and charged with conspiracy to launder money in an indictment that was unsealed at the U.S. District Court in New York City. He has pleaded not guilty. 
Moscow is keeping a close eye on the case and is providing him with full consular assistance, Foreign Ministry spokesman Mikhail Troyansky said. 
UN officials said the charges stemmed from an internal UN investigation into another Russian, Alexander Yakovlev, who worked in the UN procurement office.

TITLE: Singer Speaks Out Against Chechen War
AUTHOR: By Sergey Chernov
PUBLISHER: The St. Petersburg Times
TEXT: The Paris-based singer, actress and political activist Jane Birkin, who performed in the city on Saturday, took time to speak out against fascism, the war in Chechnya and the current conscription system while in the city. 
Birkin also gave support to Russian human rights groups such as the Union of Committees of Soldiers’ Mothers and Memorial.
At the Music Hall concert, the 59-year-old Birkin dedicated a poem to Timur Kacharava, the local anti-fascist activist, student and punk musician, murdered by extremists in the city center on Nov. 13. She preceded the poem with a brief speech against war and fascism.
An outspoken critic of the war in Chechnya, she voiced objections to President Vladimir Putin’s politics and her support for the human rights organizations both at the press conference and at the concert.
“If I were asked to go and sing in Chechnya, I’d go tomorrow,” said Birkin, who has given support to the Chechen children’s dance troupe Daimohk and has repeatedly voiced her opinions on the war in Chechnya in recent years.
Birkin, who was visiting St. Petersburg for the third time, but performing for the first time, said she had visited the Anna Akhmatova Museum prior to the press conference. Birkin said Akhmatova’s poetry has helped her in her political activism.
“In the poem [‘Requiem,’ 1935/40] she wrote about waiting for her son outside the prison, and she mentions a woman saying, ‘Can you describe this?,’ Anna said: ‘I can.’ I’ve used that in my political arguments,” Birkin  said. 
In the 1990s, Birkin and actor Michel Piccoli were among the first to draw the public’s attention to the ethnic cleansing being carried out by nationalist Serbs in the former Yugoslavia.
“Michel Piccoli and I were the only ones that were willing to do a [short film] … in black and white about the ethnic cleansing in the former Yugoslavia,” Birkin said. “We got in a lot of trouble in France — they said it wasn’t true, that we’d got it all mixed up, that we were naÕve. And then they found Srebrenica.
“That’s why I think that people should always talk. If you have the good luck to be well-known, then sometimes you can help a tiny bit more … Maybe like Anna Akhmatova.
Birkin met with representatives of Memorial and the Union of Committees of Soldiers’ Mothers in Moscow, where she performed on Thursday.
“She spent the whole day with us, from a meeting in the morning through the evening, including the concert,” said Valentina Melnikova, the head of the Committees of Soldiers’ Mothers Union, by phone from Moscow on Monday. Melnikova said she had been in contact with Birkin before her visit.
“[Birkin] shares our opinion that Putin’s policy in Chechnya is a crime, that the war is a crime, and she supports our attempts to organize peace talks, to start the peace process,” said Melnikova.

TITLE: Nationalists Step Forward To Make Political Claims
AUTHOR: By Nabi Abdullaev
PUBLISHER: Staff Writer
TEXT: MOSCOW — In recent weeks, Russian nationalists have been steadily encroaching on the political stage, as seen in the slogans chanted during sanctioned street marches and the spin given to news programs, movies and commercials shown on national television. 
Given the tight grip the Kremlin holds on the country’s political life, this burst of nationalism could not have occurred without at least a silent nod of official approval. 
Some say the latest upsurge of xenophobic nationalism was intentionally stimulated by the Kremlin with an eye to the 2007-08 elections. If voters are sufficiently alarmed by the fascist threat, the theory goes, they will support any Kremlin-backed candidate who they believe can curb the brown shirts. 
Others say the atmosphere of a besieged fortress instilled by the Kremlin after the velvet revolutions in Georgia and Ukraine, coupled with attempts to build patriotism by dragging out symbols of Russia’s imperial past, were enough to foster the xenophobic sentiments. 
All, including leaders of nationalist groups, agree, however, that recent events have allowed radical nationalists to see themselves as a rightful public force and to hope for future political success. 
“Our march was a decisive moment in the history of the Russian patriotic movement: It is no longer a marginal group but a popular force that everyone will have to take into account,” said Alexander Belov, leader of the Movement Against Illegal Immigration, or DPNI, which provided an umbrella for the ultranationalist groups that took part in a march to mark the new Nov. 4 holiday. 
Thousands of nationalists and unabashed skinheads paraded through the center of Moscow, giving Nazi salutes and carrying signs saying “Clean Russia of the Occupiers.” The march was authorized by city authorities.
At about the same time, TV Center, a Moscow television channel with a national outreach, began showing a provocative campaign ad for the nationalist Rodina party, one of only four parties represented in the State Duma. The ad, which featured boorish dark-skinned migrants eating watermelon and tossing the rinds on the ground, called for “clearing the city of garbage.” 
It was taken off the air after city prosecutors began investigating complaints that it incited ethnic hatred. Rogozin reportedly has vowed to bring back the ad in a different form: The neighborhood would be identified as Paris one year ago and the characters would speak French.
The recent rioting in France by dark-skinned youth of African and Arab origin has been shown extensively on state television news programs, where it has elicited excited finger-pointing by nationalist politicians and commentators who portray migrants from the Caucasus and Central Asia in Russian cities as the major threat to the Russian nation.
Also this month, state-owned Channel One has been showing an intensely promoted saga about the archetypal Russian poet Sergei Yesenin, who in the television serial is driven to his death by stereotypical Jewish ill-wishers around him, although the consensus in the literary world is that Yesenin committed suicide at a time of deep personal crisis. The serial also portrays the 1917 Revolution as being funded by “Western” money. 
If previously the nationalist card was played largely by political and public forces as part of a larger agenda, nationalism has recently become a force of its own, said Dmitry Badovsky, a political scientist with the Institute of Social Systems at Moscow State University.
Members of DPNI marched at Chistiye Prudy on Nov. 4, People’s Unity Day. The banners said “For Law and Order.””It is like toothpaste that can no longer be pushed back into the tube,” he said.
Badovsky said the Kremlin’s attempts to energize youth political activism in order to fight off a velvet revolution in Russia had brought young violent nationalists close to entering public politics.
The mood seems ripe. In a poll released last week by the independent Levada Center, half of the 1,880 respondents said they would support banning natives of the Caucasus from living in Russia. The survey did not specify whether this referred to people from the North Caucasus, which is part of Russia, or from former Soviet republics that are now independent countries. 
Slightly fewer supported a ban on Chinese (46 percent) and Vietnamese (42 percent), while about one third supported keeping out natives of Central Asia (31 percent) and Gypsies (30 percent). 
The survey, which was conducted in August, before the recent upsurge in nationalist sentiment, showed a slight increase from last year but a notable increase from three years ago. 
This year, 59 percent said they wanted the government to cut the influx of migrants, compared with 45 percent in 2002. 
The poll has a margin of error of 3 percentage points.
Belov said DPNI had worked out “a special mobilization plan” to see how many people they could assemble at short notice, but on Nov. 4 “it worked beyond our wildest expectations.” By different accounts, between 2,000 and 5,000 people joined the procession.
The official organizer of the parade, the nationalist Eurasian Youth Union, or ESM, had the Kremlin’s blessing, but it was DPNI that took advantage of the situation, Belov said.
“We did what was good for us. We marched against migrants, not against the expansion of Western influence, as ESM had planned,” he said with a note of triumph in his voice.
Valery Korovin, a senior member of ESM, said the xenophobic slogans on DPNI’s banners were approved by city authorities as the march was beginning, against the will of his organization. 
“When DPNI held out the banners with slogans against migrants, of which police were warned in advance, a deputy prefect of the city’s central district who was there told policemen, ‘Fine, let them go,’” Korovin said. “Authorities in fact legitimized the anti-migrant rhetoric.”
Permission for the march was issued by deputy prefect Sergei Vasyukov, Novaya Gazeta reported Monday, citing a city document, a copy of which the newspaper had obtained from city officials.
Korovin said the march was a shock for the Kremlin, which is why it was not shown on national news broadcasts. 
“A dozen young Nazis shouting ‘Heil!’ on camera is enough to scare the liberal public, while 5,000 people on the march is a real threat to the state,” he said.
Vladimir Pribylovsky, head of the Panorama think tank, said that by all appearances the nationalist threat had been orchestrated in the Kremlin.
“If Putin were able to run in 2008, the Kremlin would not need to use the nationalists, but to make people vote for an obscure candidate, you really need to scare them with an ugly alternative,” he said.
Badovsky and Alexei Makarkin of the Center for Political Technologies said the Kremlin would be able to keep nationalist leaders on a short leash at least until the 2008 presidential election. 
Rodina leader Dmitry Rogozin, for instance, wants to be accepted at home and abroad as a legitimate political figure and would likely be unwilling to jeopardize his standing. 
Keeping the young radical nationalists and skinheads under control would be a more difficult task. 
If nothing is done to stem the nationalist mood, we could see tens of thousands of youth marching in dozens of Russian cities next year, the analysts said.
Belov, for one, acknowledged that violent skinhead groups use his organization as an umbrella. He claimed to be able to persuade most of them not to use violence against dark-skinned migrants, but said some were beyond his influence.
Attempts to squash radical nationalists by police force would be counterproductive, the analysts and the nationalist leaders said.
Pribylovsky pointed to the crackdown on the radical National Bolshevik Party, which only gained strength after its activists were jailed after a protest action. 
“We are not against the Kremlin, and it should understand that cracking down on us will only help us organize a real right-wing opposition to the regime,” Belov said.
Badovsky said the Kremlin had driven itself against a wall in playing with the nationalists. “Nationalists are not known to be consistent partners,” he said.
He also warned that if the economy were to plunge into crisis in coming years, the radical nationalists could become a strong alternative to the current regime. 
“If this were to happen, given the multiethnic structure of the Russian Federation, there is a risk of the Balkanization of Russia,” Badovsky said.

TITLE: Transneft Leaves Kazakhs Fuming
AUTHOR: By Valeria Korchagina
PUBLISHER: Staff Writer
TEXT: The Kazakh government on Sunday slammed Russia’s national pipeline monopoly Transneft for refusing to sign an agreement to transport Kazakh oil to Lithuania, a deal the Central Asian state hoped would strengthen its position in the battle for control of the Baltic states’ sole refinery. 
KazMunaiGaz, one of the four bidders for the majority 53.7 percent stake in the Mazeikiu Nafta refinery currently owned by Yukos, was hoping to ship 7 million to 12 million tons of crude annually for the next 10 years to Lithuania. 
“In our view, Transneft’s position is not in line with open market principles and the agreement between the government of the Russian Federation and the government of Kazakhstan on the transit of oil signed June 7, 2002,” Kazakh Minister of Energy and Mineral Resources Vladimir Shkolnik told Interfax Sunday.
Transneft currently transports some 16 million to 17 million of Kazakh oil per year — none of which goes to the Baltic states — and signed a tentative agreement on Sept. 30 to increase transit volumes with an eye to starting shipments to Lithuania. But the agreement was unexpectedly scrapped last week, when Transneft president Semyon Vainshtok said that the Kazakh side “did not fulfill its obligations in [arranging] the signing of an additional protocol to an intergovernmental agreement between Russia and Kazakhstan,” Interfax reported. 
The move by Transneft comes as the Lithuanian government and Yukos are finalizing the bidders’ list for the embattled oil company’s stake in Mazeikiu. 
“The Lithuanian government has completed the collection of bids for the 53.7 percent stake in Mazeikiu Nafta. And KazMunaiGaz offered the largest sum for the stake — over $1 billion,” Shkolnik said.
Yukos chief financial officer Bruce Misamore confirmed Saturday after meeting with Lithuanian authorities that four bidders submitted offers for the refinery assets, without disclosing their names, the Baltic News Service reported. Besides KazMunaiGaz, Polish oil company PKN Orlen, TNK-BP and LUKoil have been reported to be interested. 
Misamore also said that Yukos did not exclude the possibility of selling its shares directly to the Lithuanian state — which would then sell the stake on to a strategic investor — and was waiting for the Lithuanian government’s proposal on how to proceed with the sale. 
Yukos is mulling the sale of its Mazeikiu assets, which are currently frozen by an Amsterdam court, as proceeds could help the company to pay off some of its tax debt. The Dutch court is expected to deliver a ruling on the temporary freeze, which has been placed upon request of Rosneft, on Nov. 24.
Lithuania is hoping to convince the current majority owner of Mazeikiu to sell its shares back to the state, avoiding a direct deal between Yukos and the future strategic investor. By handling the sale directly, the state would hold more sway over the terms of sale, including ensuring the future oil supply.

TITLE: MiG Exports Worth $300M
AUTHOR: By Lyuba Pronina
PUBLISHER: Staff Writer
TEXT: State-owned aircraft manufacturer MiG will export $300 million worth of fighter jets and upgrades by the end of the year, a senior official said Friday.
“We expect our exports to reach almost $300 million,” Vladimir Vypryazhkin, deputy general director for sales and marketing, said at a news conference. Vypryazhkin said that by year’s end, MiG will have delivered 20 MiG-29 SMT fighter jets and upgrades to various countries and have repaired 13 more fighters. The company this year has already delivered 19 four-seat IL-103 passenger planes to South Korea.
The 2005 deliveries put MiG on a recovery route since exports began to drop from a 2002 peak, when MiG delivered $352 million worth of jets and upgrades.
Next year should give MiG a further boost as it plans to sign contracts to sell 120 fighter jets and upgrades to five countries in Eastern Europe, the Middle East and Southeast Asia, Vypryazhkin said without elaborating. Almost 50 of those will be deliveries of new jets, he added.
Konstantin Makienko, deputy head of the Center for Analysis of Strategies and Technologies, said Vypryazhkin was most likely referring to a pending deal with Algeria for some 50 MiG-29 jets.
Vypryazhkin said he also expected next year to make headway in another set of negotiations. MiG, which last year conducted a deal with India for 16 MiG-29 naval fighters, is now looking to sign an option for 30 more of the jets.

TITLE: Falling Crude Exports Hit Baltic States, Russian Outlets Prosper
PUBLISHER: Reuters
TEXT: Falling Russian crude oil exports have hit ports in the Baltic states hardest, while Russia’s Baltic Sea outlets have continued to prosper, port data for January to October showed on Friday.
Record-high crude oil export duties encourage Russian firms to send more crude volumes for refining and to export more refined products, which are subject to lower export duties than crude oil, or to sell them at home.
Tallinn, Estonia, remained the largest outlet for Russian products, exporting 21.8 million tons of liquid cargo, or 0.4 percent more year on year. But the ports in Latvia and Lithuania have struggled to maintain crude volumes, as oil firms have rerouted oil exports toward ports within Russia. Latvia’s Ventspils port, the biggest Baltic Sea outlet for Russian crude in the 1990s, further cut crude shipments to just 244,000 million tons, or 6,000 barrels per day, from 2.1 million tons, or 50,000 bpd, in January through October 2004. 
The other two Baltic Sea ports, which have been affected by troubles at Yukos, also had to further cut oil exports.

TITLE: City Movers
AUTHOR: By Anna Shcherbakova
TEXT: To move or not to move, that is the question top-managers of state-owned companies are currently being urged to address. Fashion dictates that they must give serious thought to relocating their headquarters to St. Petersburg,  in so doing creating prosperity for the president’s home town. Shortly after being elected the governor Matvienko announced plans to dramatically increase city budget earnings. While economists at the city administration struggled to attract investment and increase gross regional product  (that, according to the president, should be doubled within 10 years), Matvienko simply asked big companies to re-register in the city and pay their taxes here. So far only Vneshtorgbank has made the move, while shipping company Sovkomflot has  promised to do so next year. National giants Transneft and Rosneft have registered their subsidiaries here. The contribution of this campaign to the budget, which grew from about 75 billion rubles ($2.6 billion) in 2003 to about 120 billion this year, is pretty low. Big taxpayers contribute only several billion to the 144 billion rubles ($5 billion) in 2006 budget plans, officials say, most of its earnings coming from taxation enterprises that have long been located here, and from residents. The city’s dynamic growth, almost twice the national rate, makes this possible. 
Nevertheless more new movers are expected and last week the big cheeses of Gasprom visited the city. Since the state gas monopoly CEO Alexei Miller was born in St.Petersburg and used to work at the Committee for External Relations together with Putin there was no problem gaining his support. Gasprom, for instance, is going to change the heating in part of the city; it will also construct a skating rink and donate 50 artificial Christmas-trees. Another gift – a new taxpayer – is under discussion. City officials are expecting a huge company, presumably Sibneft, an asset that Gasprom recently acquired. Its taxes should fund a new $200 million football stadium. There seems only one problem – there are not only St. Petersburg-born managers at Sibneft. They may disagree and say that the city doesn’t really need a new stadium, because, after all, there is no economic reason for such a move, only political. 
Moscow was always where the HQs of the biggest companies were concentrated, as well as about 80 percent of Russian wealth. Presumably the former St. Petersburg residents who are running the country are looking for fairness. It’s time for justice, and money should be spread around the country. Why don’t we start with the second capital, they might think. But unfortunately it will finish where it began. The initiative to divide wealth among the regions is fair, but the way it is implemented is absolutely artificial. 

Anna Shcherbakova is the St. Petersburg bureau chief of business daily Vedomosti.

TITLE: Russia Ponders The Paradoxes of Bounty
AUTHOR: By Andrew Kramer
TEXT: MOSCOW, Nov. 10 – A few years ago, Russia’s finance officials could only dream of the problem Aleksei L. Kudrin described recently. 
Thanks to bountiful revenue from oil exports, the Kremlin is in a position to pay $15 billion in sovereign debt ahead of schedule next year. 
“We would be ready to pay the whole sum,” Mr. Kudrin, Russia’s finance minister, explained recently to a group of investors. Other countries, however, are not permitting Russia to accelerate repayment because of other obligations tied to the debt. 
Mr. Kudrin’s comments illustrate an economic challenge – and a fierce internal debate – novel for Russia, which only seven years ago defaulted on its debt. 
As the world’s second-largest oil exporter, behind only Saudi Arabia, Russia is taking in $500 million a day from crude oil exports and the cash is gushing faster than the nation can absorb it without causing inflation. 
Russia is still a relatively poor developing country, and with obvious needs to fix decades of accumulated infrastructure problems and pull an estimated 25 million Russians out of poverty, it has no dearth of things to spend money on. 
If it does not manage smartly, however, Russia’s embarrassment of new riches can turn into a classic paradox of good times, one that economists call the Dutch disease, afflicting energy-exporting countries. 
The government is pulled in many directions. 
“My pension is tiny,” said Lina S. Martinyenko, 76, a widow selling plastic bags of pickled cabbage on a Moscow sidewalk to supplement her pension of $98 a month. “I have to pay for my apartment. Groceries are expensive. What I grow in my garden I haul out here to sell. Life is not simple for us.”
The challenge with Dutch disease - the name for what happened in the Netherlands after the discovery of North Sea gas in the 1960’s - is that as more and more oil dollars come back to Russia, they are converted to the local currency, raising the value of that currency, along with the threat of inflation. 
For Russia, the threat is that its manufacturing will decline as its goods become more expensive overseas, while imports rise as they become cheaper at home, leading to a de-industrialization of the economy. The problem is exactly the reverse of Russia’s chronic economic troubles with a weak ruble in the 1990’s. 
“It always goes badly for Russia,” Irina E. Yasina, director of the Open Russia research institute, fretted. “It’s bad when we don’t have money and bad when we do.” 
Still, Russia is better off with its current problem than it was a few years ago.
Some of the impact is already surfacing, as Russia is starting to rearm itself. For the first time in a decade, the government is buying more of Russia’s arms production for the country’s own needs rather than to resell as exports.
Spending on military hardware will rise 50 percent next year, Gen. Yuri N. Baluyevsky, the chief of the general staff, told the government newspaper Rossiskaya Gazeta in an interview published recently. The 2006 budget includes money for everything from new Sukhoi fighter jets to such prestige-enhancing items as lambskin hats for Russia’s generals, an accoutrement abandoned by Boris N. Yeltsin when he was president in leaner times, in 1993.
On Nov. 1, Russia’s Stabilization Fund reached $38 billion. It is projected to exceed $50 billion by the end of the year. Under the law that created it, the fund can be used only to pay down foreign debt or top off the state pension fund. 
The World Bank, in a report released this month, said the appreciation of the ruble had already harmed domestic production. “Many industries are struggling,” the report said. The ruble appreciated by 7.3 percent against a basket of currencies in the first nine months of this year, the bank said. 
Russia missed its 10 percent inflation target last year, registering growth in prices of 11.7 percent. This year, inflation is running about 11 percent, according to Andrei N. Illarionov, President Vladimir V. Putin’s economic adviser. High inflation threatens domestic industry and undermines gains in living standards.
Beginning in 2004, fears of inflation led Mr. Illarionov and other liberals in Russia’s government to isolate oil revenue in the Stabilization Fund, modeled on a similar fund in Norway and the Alaska Permanent Fund. The money is kept out of circulation. For a time, that settled the question of what to do with the billions of dollars. 
But Russia now intends to begin spending from its specialized oil revenue accounts through the creation of a second fund. The proposed new fund would invest in infrastructure through loan guarantees or co-financing backed by the oil tax income.
Even with inflationary constraints brought by the ruble’s floating on international markets, the Kremlin is financially stronger than at any time since a similar spike in oil prices in the early 1980’s. 
Back then, the Soviet Union threw oil revenue into the final sprint of the cold war arms race, largely ignoring the rest of the economy, and plunging into the reforms begun by Premier Mikhail S. Gorbachev only after the prices came back down. 
This time, Mr. Putin has suggested completing the Boguchansk hydroelectric dam in eastern Siberia, which was begun in Soviet times but was abandoned half finished. Russian news media floated the idea of finally completing the Baikal-Amur railway, another epic Soviet-era undertaking left unfinished.
Viktor B. Khristenko, the minister of energy and industry, is pushing a plan to use the new investment fund, expected to reach about $2.4 billion next year, to revive production of the Ruslan cargo jet, a Russian aviation behemoth able to carry 150 tons, the largest such jet in the world. 
The government Web site posted a strategy paper on “measures intended to speed up growth and improve the competitiveness of the economy.” It encouraged the creation of a government-owned venture capital fund for high- tech companies. 
For now, the money from oil-related taxes - which kick in at oil prices above $20 a barrel - has simply been stacking up in an account in the Ministry of Finance. The money has not been invested in stocks or bonds and yields no interest, although it has appreciated along with the ruble’s oil-driven rise in value against the dollar. 
In a change of policy, the Finance Ministry said last month that it would invest the funds in foreign bonds and currency under a plan developed by Russia’s Central Bank, another institution brimming with petroleum cash these days. The bank’s foreign currency and gold reserves reached $164 billion on Oct. 28. Mr. Kudrin, whose ministry wants to tame inflation and use the funds mainly to pay down sovereign debt, has his detractors. Just about everybody else in government wants to start spending, either on infrastructure, social needs or re-arming the military, an option favored by a hard-line faction in the Kremlin. 
Mr. Putin is moving cautiously. He recently urged restraint in spending, even as Russia faces many problems, and suggested continued commitment to the Stabilization Fund and large foreign debt payments even as domestic spending rises. Mr. Putin’s political image is that of the guardian of stability; roller coaster exchange rates or inflation set off by mishandling money from the oil boom would hurt him politically.
Russia could “take advantage of the foreign economic situation which today favors our country and become mired in long-term projects,” he said. But “in case the situation changes we would again have to incur debts in order to complete the projects started or cut spending sharply.” 
But then again, Mr. Putin also knows how to spend. At a Kremlin meeting with lawmakers in September, he also promised an additional $4 billion to raise doctors’ salaries and other social spending next year.

TITLE: IN BRIEF
TEXT: Carlsberg Expansion
NEW YORK (Bloomberg) — Carlsberg A/S raised its stake in Russian brewery Yarpivo through its jointly owned unit Baltic Beverages Holding, Jyllands-Posten said, citing unidentified Russian media.
Baltic Beverages Holding, or BBH, which Carlsberg owns with Scottish & Newcastle, has raised its stake in Yarpivo to 87.5 percent from 61 percent, the Danish newspaper reported Monday.
Carlsberg declined to confirm the details of the transaction, though the company now owns “more than’’ 75 percent of Yarpivo, Jyllands-Posten quoted spokesman Jens Peter Skaarup as saying. 
The Yarpivo stake is worth 1.2 billion kroner ($190 million), Russian media have estimated, according to Jyllands- Posten. That compares with an estimate by unidentified analysts of as much as 1.5 billion kroner, the newspaper said. Carlsberg declined to comment on the price, according to Jyllands-Posten.
BBH plans to merge all its Russian units in which it has “big’’ holdings into one business, Jyllands-Posten said. 

EC Diamond Denial
BRUSSELS (Bloomberg) — The European Commission said it hasn’t asked Russia’s state-owned Alrosa, the world’s second-biggest diamond producer, to stop gem sales to De Beers by the end of December 2007, denying an earlier South African newspaper report.
“It’s not true,” said Jonathan Todd, a spokesman for the European Commission, in an interview in Brussels. “We’re still looking at the agreement between Alrosa and De Beers.”
Business Day newspaper, based in Johannesburg, cited an unidentified Alrosa official as the source of its information. 
Alrosa agreed to reduce diamond sales to De Beers to an annual $275 million by 2010 from $800 million after the European Commission began investigating a possible breach of its competition laws.

Thomson Enters Russia 
MOSCOW (Bloomberg) — Thomson Financial, the data and services company owned by Canadian billionaire Kenneth Thomson, will sell its products in Russia via an alliance with Interfax Information Services Group, the country’s biggest news service.
Thomson Financial, a unit of Toronto-based Thomson Corp., will provide Russian companies and investors with its data and consulting services through an exclusive agreement with Interfax Business Service, a unit of the Russian news provider, the companies said in a joint statement released by Interfax today.

Gazprom Law Opposed
MOSCOW (Bloomberg) — The legal department of Russia’s lower house of parliament may oppose parts of a bill to remove limits on foreign ownership of shares in state-run Gazprom, Vedomosti said Monday, without saying where it got the information.
The department criticized the draft for creating the possibility that the state could lose control of Gazprom, the newspaper said. The lower house, the Duma, is scheduled to vote on the bill in the first of three required readings on Nov. 23.
Vedomosti didn’t say what, if any, influence the Duma’s legal department has over lawmakers.
Current restrictions cap total foreign ownership in Gazprom, the world’s largest natural-gas producer, at 20 percent. They also require non-residents to get permission from the market regulator to trade the shares and limit the number of exchanges where the stock may be listed. 

Imperial Energy Cash
LEEDS  (Bloomberg) — Imperial Energy Corp., an oil and gas explorer in Siberia and Kazakhstan, agreed to buy the rest of Russia’s llianceneftegaz for $2.85 million.
Imperial Energy will pay for the 9.5 percent stake in cash, the company, based in Leeds, northern England, said today in a Regulatory News Service statement.  

Retail’s October Rise 
MOSCOW (Bloomberg) — Russian retail sales rose more than twice faster in October than the previous month, as increasing prices for oil fueled spending and banks offered more loans to consumers.
Retail sales rose a monthly 3.8 percent in October, after gaining 1.7 percent in September, the Moscow-based Federal Statistics Service said in an e-mailed statement today. Sales rose an annual 12.6 percent, faster than a 12.5 percent median estimate of 10 economists surveyed by Bloomberg between Oct. 26 and Oct. 31.

EC Antitrust Approval 
BRUSSELS (Bloomberg) — Gazprom, Russia’s state-run natural-gas producer, secured European antitrust approval to buy billionaire Roman Abramovich’s Sibneft for $13.1 billion. 
The European Commission, the 25-nation European Union’s antitrust regulator in Brussels, announced the approval in a statement Monday.
The purchase will give President Vladimir Putin control of as much as 30 percent of the oil pumped in Russia after the seizure of assets from OAO Yukos Oil Co. last year.
Moscow-based Gazprom will pay $3.80 a share for the 72.7 percent stake owned by a group including Abramovich. 

Russian PPI Slowdown
MOSCOW (Bloomberg) — Russian producer price growth slowed three fold in October from September to a monthly 0.9 percent, after fuel producers agreed to government demands to keep prices stable on domestic market.
Producer prices rose a preliminary annual 17.6 percent, slowing from 18.6 percent in August, the Moscow-based Federal Statistics Service said Monday in an e-mailed statement. The increase was less than the median monthly forecast of 1.1 percent and a median yearly increase of 18.5 percent by 10 economists surveyed by Bloomberg between Oct. 26 and October 31.

Commitments To Shell 
TOKYO (Bloomberg) — Royal Dutch Shell’s venture on Sakhalin Island in Russia’s Far East has sales commitments for all the liquefied natural gas it plans to produce, Russian President Vladimir Putin told an economic forum Monday in Tokyo.
Supplies from Sakhalin will help meet growing demand for LNG in Japan and South Korea, the world’s two largest buyers, and China, which may need 30 million tons a year by 2010. With oil trading at more than $50 a barrel, utilities are switching to natural gas, which emits fewer pollutants when burned. LNG is natural gas cooled to a liquid for shipment by tanker.

Turkmen Well Closes 
NEW YORK (Bloomberg) — Burren Energy, a U.K. oil company that operates in Africa and Asia’s Caspian region, shut its exploration well in Turkmenistan after it failed to discover commercially viable oil or gas reserves.
The first of three wells planned at Nebit Dag East deposit has been drilled to the depth of 3,470 meters (2.16 miles) since mid-October, Burren said Monday in a statement distributed through the Regulatory News Service. The company plans to drill 20 wells in Turkmenistan over the next 12 months.

MTS Profits Probable
MOSCOW (Bloomberg) — Mobile TeleSystems, eastern Europe’s largest mobile-phone company, will probably report third-quarter profit rose 5.3 percent from a year ago, after the company added subscribers.The company’s profit may have climbed to $356 million from $338 million, the median estimate of ten analysts surveyed by Bloomberg News showed. Sales probably rose 29 percent to $1.41 billion from $1.09 billion.

Cementir’s Russia Plans 
ROME (Bloomberg) — Cementir SpA, an Italian cement company, is planning acquisitions in Russia and will expand its activities in the U.S. this year, Italian newspaper Corriere della Sera reported in its CorrierEconomia insert without saying where it got the information.
The company, which posted a 173 percent increase in sales in the first nine months of the year, is also aiming to double its “productive capacity” in China, the newspaper reported.
Cementir’s sales will probably reach 1 billion euros ($1.2 billion) this year, CorrierEconomia reported.
The company has invested 1 billion euros in expanding abroad in the past four years and is active in 12 countries.

TITLE: The Ambassador’s Undiplomatic Maneuver
AUTHOR: By Tina Brown
TEXT: There’s a new catchphrase in London: Are you a skier? And it has nothing to do with winter sports. It’s a quasi-acronym for: Are you spending the kids’ inheritance? In the age of celebrity culture and instant news, cash is not the only fast currency. Former pillars of the establishment are shorting their reputation, too.
Sir Christopher Meyer, who was Britain’s ambassador to the United States during the run-up to the Iraq war, has clearly decided to cash in his gravitas chips. London dinner tables have been convulsed with arguments about the propriety, or otherwise, of his publishing his surprisingly racy new memoir, “DC Confidential.”
Just when Tony Blair is trying to deal with a left-wing rebellion among Labor parliamentarians as well as a newly bullish Conservative opposition, his own ex-ambassador is all over the place dismissing the Blair Cabinet as a “crowd of pygmies” and portraying the prime minister as a pushover too dazzled by U.S. power to use Britain’s alliance as leverage to slow down the rush to war.
The book received official Foreign Office clearance, but the body’s power of censure extends only to the breach of official secrets. One aspect of the angry reception to Meyer’s memoir from critics as lofty as former Deputy Prime Minister Lord Michael Heseltine, the prominent columnist Simon Jenkins and Foreign Secretary Jack Straw is a pitfall of his own making.
The formula for a successful book launch in England begins with having it excerpted — with maximum hype and minimum balance — in the all-powerful Tory tabloid, the Daily Mail. The deal is that in return for an enormous check and massive exposure, your painstaking research can be caricatured with big sneering headlines, damning pull quotes and snarky photo captions. Bits of the social historian Hugo Vicker’s elegant, scholarly biography “Elizabeth, the Queen Mother,” for instance, appeared in the Mail under the headline “The Steel Marshmallow,” with subheads from out-of-context lines like “She even ate the Good Boy choc drops kept for the corgis” and “Her bosom acquires a dry martini flush.”
Part two of the promotional dance is to gin up protests that the excerpts misrepresent the book’s serious, substantive thrust. Meyer no doubt thought he tempered tabloid impact by simultaneous serialization in the high-minded Guardian newspaper, but even The Guardian readers check out the Mail first. And the bits the Mail wanted for its readers naturally featured the ambassador bitching about Downing Street apparatchiks excluding him from key meetings at the White House, and anecdotes about how the PM had to race back to his cabin to change when he found he was the only guest wearing jeans at a dinner U.S. President George W. Bush threw at the Crawford ranch. Or the vignette of his powerful aide Alastair Campbell standing over Blair in an airplane “gesticulating forcefully while the prime minister sat meekly in his seat like a schoolboy under his instruction.”
Should Sir Christopher wish to lodge a semi-official complaint for tonal misrepresentation, he could direct it to the chairman of the Press Complaints Commission, a voluntary body that raps the knuckles of offending newspapers. Trouble is, he is chairman of the commission. So he has had to content himself with the formulaic cover story of telling talk show hosts such as the BBC’s Sunday morning interrogator Andrew Marr that the book is fairer to Blair than the excerpts make it appear. “If you read the whole book … ,” he started to say. “I have read the whole book,” Marr jumped in. “It’s pretty rude.”
Meyer’s major argument for publishing his memoir now is the unfairness of the double standard that allows politicians to unload in real time and censures civil servants for doing the same, but the parallel is a false one. He has broken a tradition that is at the heart of the relationship between senior civil servants with long expertise in their area and their elected bosses. That tradition has enabled British governments to get along without the swarms of self-serving political appointees that afflict Washington. If civil servants can no longer be trusted to be discreet, politicians will fairly soon want to replace them with party hacks qualified only by loyalty — and Brits, too, can then look forward to a plague of Brownies doing a heck of a job.
Meyer would also have an easier time making his case if it wasn’t for the puzzling question of the book’s flip literary style, immediately announced by the buzzy inconsequentiality of its “DC Confidential” title.
A popular explanation for the tonal miscue is the intervention of his glamorous, cosmopolitan second wife, Lady Catherine, who gave a playful interview with The Telegraph claiming that her husband wrote a boring and traditional diplomatic memoir until she made him juice it up with sexy detail. From her point of view, it has worked well. A third of the more than £250,000 ($430,000) her husband landed from the serial rights has gone to the charity she chairs for missing children.
Perhaps it is a sign of how much Britain has changed that now the Meyer debate is moving on from “Should he have done the book?” to what Meyer is going to get out of this, long term.
The former Cabinet secretary Lord Butler of Brockwell has called for the removal of Meyer as head of the Press Complaints Commission for the reason that senior civil servants must abide by a “self-denying ordinance not to reveal the confidences of their political masters.” There is no denying it makes it awkward for him to adjudicate on matters of privacy, the most notorious area where the British press is a raucous serial offender. But he has a new three-year contract and can probably ride out the storm.
Then what? As the book amply demonstrates, Meyer is a man who broods darkly if he is not invited to the right dinner parties. Perhaps Meyer’s calculation is that being controversial, highly exposed and, thus, more bankable for his next book may make it worth trading away the unexciting respect retired ambassadors used to get for being solid, sound and seriously engaged with Britain’s role in the world.
Sir Christopher will have to deploy all his urbane charm to ensure that he won’t be called out of retirement and posted to the Australian outback as a contestant on the hit British TV show, “I’m a Celebrity, Get Me Out of Here!”

Tina Brown is a columnist for The Washington Post, where this comment first appeared.

TITLE: Governor Backtracks on Heritage
AUTHOR: By Vladimir Gryaznevich
TEXT: Having already devoted two columns to the the preservation of the city’s cultural heritage, I find myself having to return to the same issue a third time. Governor Valentina Matviyenko has put a draft law entitled “On the procedure for the organization and carrying out of public hearings and informing the public of the implementation of town-planning works,” before the city’s Legislative Assembly. 
Clearly, this piece of draft legislation will have a direct influence on preservation of St. Petersburg’s cultural heritage. Developers can’t obtain permission for new constructions or comprehensive renovations without the holding of public hearings on specific projects. This procedure was set out by a law backed by Matviyenko in February of 2004. Back then, the initiative was billed as an attempt to stop the developers building high rises over every scrap of land in the city center.
At these hearings, the inhabitants of neighboring buildings can draw attention to any infringement of their rights, while those campaigning to preserve the city’s cultural heritage can also put forward their point of view. In practice, the hearings allow innumerous public representatives to have their say. The municipal authorities have to note down all these points of view and present a detailed report on the hearings to the St. Petersburg Administration. There have been a number of cases where this process has led to projects being shut down — the authorities, having gauged the extent of public disapproval for the project, have sent developers back to the drawing board, and there have even been cases where the developers themselves have backed off. A headline-grabbing instance of the latter came when Vasily Sopromadze’s Corporation C attempted to put up a housing building designed by the Yuri Zemtsov architectural bureau in the Mikhailovsky Gardens, behind the Ethnographic Museum. In other cases, compromises were found, with developers coming to agreement with the local population.  
There have, of course, been abuses of the system. As this issue can involve multi-million dollar projects, ways have been found to influence the people running the hearings, slanting the process in favor of the developers. It’s perhaps worth noting that the majority of hearings have, in fact, gone in their favor. Matviyenko has now decided to get involved in the process due to this high win-rate, hence the above-mentioned draft-law.
Imagine, then, the surprise of analysts and interested parties when they read this draft law, prepared by the Construction Committee and hastily approved at a session of the local government — the proposal entirely contradicts the governor’s declared intentions. To put it bluntly, instead of perfecting the mechanism for hearings, the draft law suggests that they should be dropped as superfluous. This comes in spite of the fact that the bureaucrats at the Town-Planning and Architecture Committee, the Construction Committee and Committee for State Control of the Use and Preservation of Monuments (KGIOP) have all acknowledged the usefulness and necessity of this process. 
The proposed draft law will limit the number of participants in the “public hearings” (a term introduced by the Town-Planning Code of the Russian Federation). Thus, proprietors and tenants of properties over 100 square meters from the planned construction are no longer to be found among the “obvious interested groups.” Tenants’ associations and building cooperatives are also left on the sidelines, along with all other social organizations. Citizens are now being asked to look out for information on future building projects on the Construction Committee’s website. Why can’t information be posted on notice boards at the residences of “interested parties” one wonders?
The hearings themselves won’t be held close to the proposed construction site, as is the case now. Instead, they will be held at the premises of the City Administration’s mandated body. That means that people wishing to take part in the hearings will have to head off to the Fontanka River Embankment, to the Construction Committee itself. And another detail — the period for which documents relating to the planned construction have to be made available to the general public will be shortened from 20 to 10 days. 
One of the key strengths of the current law is the precise detailing of the volume of information that has to be provided to inhabitants prior to the holding of the hearings. But now, even this will be turned into a formality. Citizens won’t be able to receive copies of the town-planning documentation or familiarize themselves with it at the Town-Planning and Architecture Committee. The current law is valued as it ensures that this volume of information is available, and can be used at the hearings. The procedure for taking into account the opinions of citizens becomes obscure as, in effect, the formalized regulations for gathering points of view will be dropped, and the bureaucrats will no longer have to reflect the opinions of citizens in the protocols that they draw up. 
The bureaucrats are justifying this new proposal by claiming that it’s required by the new Town-Planning Code. That argument, however, doesn’t hold water. The Code merely asks that the planning documentation be discussed, rather than the plans themselves. And it certainly doesn’t require that the hearings process be turned into a farce. Smolny is trying to ram a law through the Legislative Assembly that will do away with one of the most effective instruments that the public has with which to influence the authorities. The situation provides evidence of the Administration’s inconsistency in its town-planning policies and a general decline in the quality of the management of the city.
The draft law met with a great deal of resistance in Petersburg’s Legislative Assembly, and not just from the right-wing opposition (Yabloko and the Union of Right Forces (SPS)) — even deputies from the centralist United Russia party protested. Let’s just hope that the draft law isn’t passed.

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: Body Politics
AUTHOR: By Chris Floyd
TEXT: Four years ago, President George W. Bush quietly assumed dictatorial powers with a secret executive order granting himself the right to imprison anyone on earth indefinitely, without charges or trial or indictment or evidence, simply by declaring them an “enemy combatant,” on his say-so alone. This week, the assemblage of bootlickers and bagmen that befoul the U.S. Senate voted to codify the core of this global autocracy under the pretense of curtailing it.
With great self-fluffing fanfare, the Senate passed two measures ostensibly designed to stem the flood of torture and tyranny issuing from the White House. But the twinned amendments to a military spending bill have the curious effect of canceling each other out: The anti-torture measure leaves Bush’s tyranny intact, while the anti-tyranny measure will allow torture to continue unabated. This switcheroo, we are told by one of the scam’s sponsors, “will re-establish moral high ground for the United States,” The Washington Post reports.
But what can we actually see from this lofty moral promontory? We see that all foreign captives in Bush’s worldwide gulag have now been stripped of the ancient human right of habeas corpus. They will not be allowed to challenge “any aspect of their detention” in court — until they have already been tried and convicted by a “military tribunal” constituted under rules concocted arbitrarily by Bush and his minions. Only then, after years of incarceration without rights or legal protection, will they be given access to a single federal appeals court that can review their conviction — subject to the usual “national security” restrictions on challenging evidence gathered by secret means from secret sources in secret places. Remarkably, the Supreme Court is expressly prohibited from any jurisdiction whatsoever over any aspect of gulag captivity, The Washington Post reports. And of course, Bush can simply skip the tribunal and keep anyone he pleases chained in legal limbo until they rot. Neither of the ballyhooed amendments affects this raw despotism.
Meanwhile, U.S. citizens can also be arbitrarily imprisoned indefinitely without charge or trial. But for now, any Homelanders caught in Bush’s net can at least appear briefly in court prior to their conviction, where they will enjoy a “judicial process” that Stalin or Saddam would have loved: Bush officials present the judge with a piece of paper declaring that the prisoner is one bad hombre, but all the evidence against him is classified and nobody can see it — especially the prisoner, The Washington Post reports. And that’s it. The captive is then plunged back into the gulag, to be disposed of according to Bush’s whim. Again, this medieval mechanism of tyranny was left untouched by the Senate’s actions. 
The Senate originally voted to cast Bush’s captives into outer darkness forever, without a single legal recourse. But then a few prissy hens and bleeding hearts made the usual squawk about rights and law and all that pinko jazz. So the compromise of allowing a post-conviction appeal — for people who have been arbitrarily seized and held in isolation for years without charges, who have often been tortured, humiliated and driven to madness or attempted suicide before facing a kangaroo court — was hastily cobbled together and presented to the world as a triumph of the human spirit and the American way.
Ah, but what about the anti-torture amendment, sponsored by the Republican “maverick,” Senator John McCain, and hailed by editorialists across the land as a great leap forward in the evolution of political morality? The effusions that have greeted this measure are puzzling. The measure does nothing more than restate what is already the law of the land. American forces were already forbidden from subjecting any captive “to cruel, inhuman or degrading treatment or punishment” as prohibited by the Constitution and the UN Convention Against Torture. This regurgitation of existing law is the extent of the McCain amendment, along with an adjuration to interrogators to follow written guidelines for rough stuff set down by the Pentagon.
But the partisans of atrocity in the Bush White House knew these laws when they set up the gulag’s torture regimen in 2001. They simply redefined “torture” to accommodate any brutal technique they cared to implement, then declared that the commander in chief is beyond the reach of law in wartime — and that any underlings who commit crimes at his order are likewise absolved of legal liability. This sinister sophistry is still very much in operation and remains unchallenged by the toothless amendment of the “maverick.”
The dual amendments are a cynical PR ploy: Torture will be condemned in public but quietly continued in the former KGB camps and other secret hellholes that Bush has strung across the world like a barbed-wire necklace. The Pentagon’s own lawyers certainly understand the true nature of the game. As one told The Guardian: “If detainees can’t talk to lawyers or file cases, how will anyone ever find out if they have been abused?” No one ever will, of course; that’s the point. With habeas corpus denied up front, the worst cases of torture and false imprisonment can now be buried forever in “indefinite detention”; the tribunals, with their access to appeals, will be reserved for open-and-shut showpieces.
These draconian measures reach far beyond a handful of hard-core terrorists. According to the Pentagon’s own figures, more than 21,000 innocent people have been caged without due process in Iraq alone, The Guardian reports. 
Hundreds more have been unjustly imprisoned around the world. A regime that thrives on fear requires a steady stream of “enemy combatants” to justify its unlimited “war powers.” The belly of this beast will never be full.

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

TITLE: Bush Gets Taste of Mongolian Life
AUTHOR: By Steve Holland and Caren Bohan
PUBLISHER: Reuters
TEXT: ULAN BATOR, Mongolia — U.S. President George W. Bush heard multi-toned Mongolian “throat singing” and drank mare’s milk on Monday as he ended an Asian tour inside a nomadic hut that is a symbol of the country that produced Genghis Khan. 
Bush, the first sitting U.S. president to visit Mongolia, said he felt very much at home in the vast, windblown nation on the steppes of central Asia locked between Russia and China.
“This is a beautiful land, with huge skies and vast horizons — kind of like Texas,” he said in a speech.
Wrapping up a four-nation Asia tour, Bush came to thank Mongolia for supporting the Iraq war and to hail its progress from former Soviet satellite to fledgling democracy.
And it gave him another opportunity to declare his reasons for pursuing the Iraq war amid turmoil in Washington over his policy and American doubts about whether the conflict has been worth the cost.
Bush compared Islamic radicals trying to throw America out of Iraq to communism.
“Like the ideology of communism, the ideology of Islamic radicalism is destined to fail, because the will to power is no match for the universal desire to live in freedom,” he said.
Mongolia was ruled as a one-party Soviet satellite for much of the last century.
Business aside, Bush and his wife, Laura, and Secretary of State Condoleezza Rice soaked up some of the life of the nomad, courtesy of President Nambariin Enkhbayar, who took them outside of the capital Ulan Bator along a frozen river to an arid valley where Enkhbayar lives.
They saw camels and yaks and Mongol warriors in armor and helmets, hoisting colorful battle flags and armed with swords, mounted on short, stout horses.
Dancers in elaborate dresses with massive masks on their heads performed. Others in yellow and blue robes banged a gong and played horns.
It was biting cold and the entourage went inside two round wooden structures covered by thick felt known as “gers” and used by nomadic herders because they are easily packed up and moved.
Bush and the rest of the U.S. party were served a variety of traditional food and drink. Bush had a taste of fermented mare’s milk and nibbled on some cheese curd that one participant said tasted like sour cream.
Three older women in brightly colored gowns performed traditional throat singing.
Shortly after the ceremony, it was back to Air Force One and Bush departed on the long flight back to Washington.

TITLE: Trip Fails to Advance U.S.-China Relations
AUTHOR: By Chris Buckley
PUBLISHER: Reuters
TEXT: BEIJING — President George W. Bush’s visit to Beijing, which ended on Monday, had the trappings of a whistle-stop campaign appearance intended to sell his message that the United States wants China to free up its politics and economy before the two countries can move closer. 
But the closely scripted encounter between Bush and his Chinese hosts seemed to retrace, not narrow, the differences, analysts said.
“Both sides are paying more attention to the relationship and trying to define and shape it,” said Jin Canrong, an expert on Chinese-U.S. relations at the People’s University of China in Beijing. “But without any urgent issues demanding attention, this visit was always going to be exploratory, not defining.”
Bush visited a state-controlled church on Sunday, where he renewed a call for religious freedom in China.
Later that day he lectured China’s leaders about the value of liberty and the need for China to loosen currency controls, strengthen intellectual property protection, and close its trade gap with the United States.
While China’s leaders sidestepped direct dispute with Bush on these issues, they sent their own message swaddled in diplomatic rhetoric — that China wants to protect its rising economic and political power, but not confront the United States.
Chinese President Hu Jintao repeated his refrain that China is a “peacefully developing” country whose rising wealth and influence need not threaten other countries.
Hu also promised to work toward a balanced flow of trade between the two countries, and to crack down on commercial “pirates” who illegally copy U.S. films, music, software and patented goods.
China has a massive trade surplus with the United States — in the first 10 months of this year it shipped $132.5 billion of goods to the United States, while the United States shipped $39.8 billion to China.
China’s mantra about “peaceful development” is part of an evolving “counter-containment” strategy to blunt but not confront U.S. diplomatic clout in Asia, said Evan Medeiros, a Washington-based expert on Chinese foreign policy at the Rand Corporation, a policy thinktank.
“It’s partly a reassurance strategy to help to build an environment where China’s not seen as a threat and other countries won’t work with the U.S. to try to contain China,” he said.
The two countries’ differing expectations of the relationship — Washington seeking to pressure, Beijing seeking to reassure — were echoed in the rhetoric.
Hu was non-committal on Bush’s demands for faster currency exchange rate liberalisation, which would probably make Chinese exports more expensive. They countered Bush’s human rights demands with assertions that China is already a democratic country that respects citizens’ rights.
A spokesman for China’s foreign ministry, Kong Quan, repeatedly told reporters the two countries had a “constructive partnership.”
But Bush avoided effusive terms and repeated his view that the two countries have a “complex relationship.”
Bush told reporters on Sunday the United States would continue to pressure China on trade and “consistently remind our Chinese friends that structural reform is what the United States government is talking about with China.” 
Experts said China’s leaders also believe Washington is seeking to undermine the Communist Party’s grip on power.

TITLE: IN BRIEF
TEXT: Merkel on the Move
BERLIN (Reuters) — Angela Merkel, who has vowed to make German-French relations less exclusive and improve ties with smaller European countries, will travel to Paris and Brussels on Wednesday in her first official trip as chancellor.  
According to her website, Merkel, who is due to be confirmed as German chancellor in a vote in the Bundestag, the lower house of parliament, on Tuesday, will also meet British Prime Minister Tony Blair on Thursday evening in London.
During the German election campaign, Merkel criticized outgoing Chancellor Gerhard Schroeder for forging “exclusive” ties with French President Jacques Chirac and President Vladimir Putin at the expense of relations with smaller European Union countries.

Mexicans Beatified
GUADALAJARA, Mexico — The Vatican on Sunday beatified 13 Mexicans who died during a Roman Catholic uprising in the late 1920s that was crushed by the Mexican government. 
The faithful nearly filled Guadalajara’s 60,000-seat soccer stadium, where Cardinal Jose Saraiva Martins arrived from Rome to oversee the ceremony.
Those without tickets ringed the stadium and listened from the outside, while thousands of others tuned in to radio and television broadcasts in nearby restaurants and shops.
The Portuguese-born Saraiva Martins, who heads the Vatican office overseeing the process for sainthood, called the martyrs “faithful witnesses” to the power of the church.

EU, Bosnia in Talks
BRUSSELS, Belgium (AP) — EU foreign ministers on Monday authorized the start of negotiations on an agreement to prepare Bosnia for EU membership a decade after the Balkan nation was ravaged by Europe’s worst fighting since World War II. 
The decision came on the eve of ceremonies in Washington marking the 10th anniversary of the peace agreement that ended Bosnia’s 1992-95 war. The EU said negotiations on the “stabilization and association agreement” would start Friday in Sarajevo.
“The opening of negotiations marks a historic moment in Bosnia and Herzegovina’s development,” the ministers said in a statement.

Gary Glitter Arrested
HANOI, Vietnam (AP) — Former British rock star Gary Glitter has been taken into custody in a southern Vietnamese resort city following allegations that he indulged in lewd acts with a minor, police officials confirmed Sunday. 
Immigration police officer Nguyen Van Phuc said that Glitter was stopped by officers checking his passport as he was preparing to board a flight to Bangkok from Ho Chi Minh city on Saturday.
“One of my colleagues recognized him and detained him at the immigration office,” Phuc said.

Kyrgyzstan Chaos
BISHKEK (Reuters) — Ex-Soviet Kyrgyzstan, still unstable after a coup earlier this year, could plunge into anarchy if authorities fail to tackle organized crime and chaotic protests, its top prosecutor said on Monday. 
The Central Asian nation of five million, host to a U.S. military base used to back operations in Afghanistan, has faced bloody prison riots and several parliamentary deputies have been killed since the March ouster of veteran President Askar Akayev.
Gang feuds for control of local bazaars have flared up in the south, while an angry crowd managed to seize and briefly hold the main government building in the north, a severe blow to the reputation of newly elected President Kurmanbek Bakiyev.

WWI Veteran Dies
LONDON (AP) — Alfred Anderson, the last known survivor of the 1914 “Christmas Truce” that saw British and German soldiers exchanging gifts and handshakes in no man’s land, died early Monday, his parish priest said. He was 109. His death leaves fewer than 10 veterans of World War I alive in Britain. 
Born June 25, 1896, Anderson was an 18-year-old soldier in the Black Watch regiment when British and German troops cautiously emerged from their trenches on Dec. 25, 1914. The enemies swapped cigarettes and tunic buttons, sang carols and even played soccer amid the mud and shell-holes of no man’s land.

TITLE: Bombing Remembered
PUBLISHER: The St. Petersburg Times
TEXT: A service commemorating the second anniversary of a suicide car bomb attack on the British Consulate in Istanbul, Turkey, was held at the blast site on Sunday.
A simultaneous attack the same day at the HSBC bank and two other bombings at synagogues in the city five days earlier left more than 60 people dead. 
More than 600 others were injured as trucks laden with explosives  rammed into the buildings. 
Turkish prosecutors issued charges against 69 people suspected of involvement in the four bombings, the BBC reported in February 2004.
The semi-official Anatolia press agency said life sentences were demanded for five suspects described as “leaders of the al-Qaeda cell in Turkey.”
The British consulate bomb destroyed part of the building, which  had been undergoing refurbishment. The top U.K. diplomat in the city, Consul-General Roger Short, was among those killed in the consulate attack. 
Sunday’s memorial was attended by his replacement, Consul-General Barbara Hay, formerly British Consul-General in St. Petersburg. 
A wreath carried by a consulate employee Murat Cetinkaya, who lost his sister and his brother-in-law to the bomb attack, was placed at the bomb site.

TITLE: Nuremberg Trials Mark Anniversary
AUTHOR: By David Rising
PUBLISHER: The Associated Press
TEXT: NUREMBERG, Germany — American prosecutor Whitney R. Harris gazed at the top Nazis in front of him — men like Hermann Goering, Rudolf Hess, Julius Streicher — as their war crimes trial opened 60 years ago and immediately knew his mission. 
Later he would reflect on the significance of the landmark trial at Nuremberg: the establishment of charges like “war crimes” in a new international law and the principle that individuals could be held responsible for their aggression.
On Nov. 20, 1945, the 33-year-old Harris sought justice for the 21 Nazis on trial.
“These were evil men, and what they did was our task to expose, and we did get the evidence and we were able to do so,” Harris said.
Harris, now 93, returned Sunday with three witnesses to Courtroom 600 in the Nuremberg Palace of Justice, where the trials were held, to mark the anniversary.
Arno Hamburger, 82, recalled seeing many of the defendants at the Nazis’ annual rallies in Nuremberg before he fled the country because he was Jewish.
“It was a very depressing feeling that the people in the dock considered themselves innocent and upright citizens who had only been in secondary positions,” said Hamburger, who sat in on some of the trial before joining the court as a simultaneous interpreter for follow-up trials of more than 100 Nazis over the next three years.
When it ended, however, Hamburger said his “feeling was that finally, in spite of all the atrocities, justice won over.”
Over 218 trial days, the high-ranking Nazis faced a panel of judges that represented the victorious Allies — the United States, Soviet Union, Britain and France.
The trial established the offenses of crimes against peace, waging a war of aggression, war crimes and crimes against humanity. 
Its legacy can be seen in the cases under way or being prepared against former Yugoslav President Slobodan Milosevic, deposed Iraqi dictator Saddam Hussein and the leaders of the genocide in Rwanda.
It was also a precursor to today’s international system of justice, said Johann-Georg Schaetzler, one of Hess’ defense attorneys.
“It set the precedent for the establishment of the international criminal court, which was needed,” Schaetzler, 84, said.
Prosecutors were able to rely on the Nazis’ own meticulous records for much of their case, as well as hundreds of statements — with witnesses often recounting the greatest horrors with the utmost banality, Harris recalled.
He remembered interrogating Auschwitz commandant Rudolf Hess for three days, taking a statement that would later be used to prosecute him for war crimes and send him to the gallows.
“Hess was a very unimpressive individual, he looked like a clerk at a grocery store, he didn’t look like a big Nazi or murderer or anything like that, but he was responsive to my questions,” Harris said.
“I asked Hess how many men, women and children did you murder in this camp, and he told me just like this gentleman sitting next to me, 2.5 million ... I said to him, but the conditions were terrible, how many people died of starvation or disease or reasons other than the gas chambers, and he said another half million.”

TITLE: Sharon Leaves Likud to Form New Party
AUTHOR: By Jeffrey Heller
PUBLISHER: Reuters
TEXT: JERUSALEM — Israeli Prime Minister Ariel Sharon, taking the biggest gamble of his political career, quit the ruling Likud on Monday to lead a new centrist party into early elections. 
Sharon’s dramatic move, after the right-wing Likud faction he helped found nearly 30 years ago rebelled against him over a Gaza pullout completed in September, seemed likely to reshape Israeli politics for years to come.
Victory in an election widely expected in March could free Sharon of far-right constraints in pursuing a land-for-peace agreement with the Palestinians.
But he gave no immediate sign he intended to change his tough policy toward the Palestinians while seeking to tap into mainstream support for what was the first removal of Jewish settlements from occupied land Palestinians want for state.
“I am resigning from the party and forming a new one,” Sharon wrote in a letter to Likud’s chairman, a party official said.
Several hours earlier, Sharon asked President Moshe Katsav to dissolve parliament and order a new election.
“I believe the election should be held as early as possible,” Katsav said after meeting Sharon.
Katsav said he would begin consultations immediately with political leaders on moving forward an election originally due by November 2006, and disclose his decision on Sharon’s request soon. Sharon made no comment after the meeting.
Katsav must first examine whether any legislator can muster a parliamentary majority and form a new government. But Israeli political analysts said chances were nil.
If Katsav dissolves parliament, Sharon, 77, would remain prime minister until a new one is elected.
In the West Bank city of Ramallah, Palestinian Deputy Prime Minster Nabil said the Palestinian leadership was “watching carefully the unfolding political developments [in Israel] to see its consequences on the peace process.”
Opinion polls indicate it is uncertain Sharon can turn the popularity of the pullout from Gaza — where soldiers and settlers came under daily attack in a 5-year-old Palestinian uprising — into electoral victory.
“Sharon is the only credible leader with a national base right now and that is a very powerful card Sharon has to play,” said political analyst Gerald Steinberg of Bar-Ilan University.
“On the other hand this is totally new territory and third parties have not done well in the past,” he said.
Sharon, a former general, has said he would be willing to make “painful concessions” for peace, hinting at future pullouts in the occupied West Bank. But he has refused to negotiate with the Palestinian Authority until it disarms militants.
Israel’s Haaretz newspaper reported that in a third term, Sharon — prime minister since 2001 — would seek to evacuate isolated West Bank settlements while retaining major enclaves in a peace treaty with the Palestinians.
Palestinians fear Sharon aims to set a border unilaterally along the lines of a barrier being built deep inside the West Bank. Israel says the project stops suicide bombers. Palestinians call it a land grab. 
Sharon has already begun contacting political allies to join a new party. Israeli media said 14 of Likud’s 40 lawmakers, including five cabinet ministers, have agreed to sign on. 
Likud chairman Tzachi Hanegbi said the party would choose a new leader as quickly as possible. Former Prime Minister Benjamin Netanyahu, who quit as finance minister in Sharon’s cabinet over the Gaza pullout, is a top contender. 
“The Likud will find a way to unite and regroup its forces,” Hanegbi said. 
Sharon has also been wooing veteran peacemaker and veteran coalition ally Shimon Peres, 82, whose November 10 defeat as leader of the center-left Labour party by union leader Amir Peretz triggered the political upheaval. 
Meir Ben-Shaul, a 63-year-old Jerusalem electrician who said he voted for Likud in three elections, was unimpressed by the possibility of another Sharon-Peres partnership. 
“I think Sharon’s career is over. It’s the same with Peres. They are two old people. They should go home and play with the children and grandchildren,” Ben-Shaul said.

TITLE: New Leader is Key to Israel’s Political Upheaval
AUTHOR: By Ravi Nessman
PUBLISHER: The Associated Press
TEXT: JERUSALEM — In just one week as Labor Party leader, Amir Peretz has upended Israeli politics, crushing dissent in his fractious party and forcing Prime Minister Ariel Sharon to agree to early elections. 
The rise of Peretz, a Moroccan-born Jew with only a high school education, also represented an ethnic upheaval for Labor, which has long been dominated by Jews of European descent.
Initially dismissed as a populist firebrand, Peretz stunned critics by rebranding Labor as the voice of the downtrodden and shifting Israel’s political debate from the conflict with the Palestinians onto taxes, worker rights and the wide gap between the haves and the have-nots.
Peretz, the country’s top union leader, re-energized a Labor Party that had grown increasingly weak and was in danger of disintegrating into irrelevance, Nahum Barnea, a columnist for the daily Yediot Ahronot, said Friday.
“With Amir maybe they will be buried also, but it will be a much more interesting and lively burial,” he said.
After seizing control of Labor on Nov. 9 in a surprise primary victory over 82-year-old veteran politician Shimon Peres, Peretz, 53, immediately began forcing his will on everyone from recalcitrant party leaders to the prime minister.
Labor’s Cabinet ministers whispered of a revolt when he demanded the party pull out of the coalition government and force early elections. Refusing to back down, he burst into their offices and forced them to sign undated letters of resignation, according to Israeli media reports.
Sharon also dismissed his calls for an early election, but by the time the two men met Thursday, the prime minister’s coalition was crumbling and he agreed to call a vote by the end of March, eight months ahead of schedule.
“[Peretz] is out to win and in a big way. So it was important for him to prove from the very first week that he’s the boss,” political analyst Yoel Marcus wrote in the Haaretz daily.
Labor leaders hope Peretz will appeal to disenfranchised Jews of Middle Eastern descent, who bitterly abandoned the party decades ago. But Peretz could also repel immigrants from Russia — never traditional Labor voters — who view him as a Bolshevik, look down on his Moroccan roots and fear he will be too accommodating to the Palestinians, Barnea said.
Before Peretz, political analysts were preparing obituaries for Labor, the party that led Israel for its first three decades. They contended that Labor lacked a clear message and did not present itself as a viable alternative to Sharon’s hardline Likud.
Labor remained in Sharon’s coalition though it opposed the government’s free market policies, and Sharon’s decision to pull out of the Gaza Strip unilaterally stripped Labor of part of its peace platform.
Peretz quickly reframed the political debate, taking advantage of a lull in violence after five years of Israel-Palestinian fighting to focus on social issues and accuse Sharon’s government of increasing poverty and social inequality.
He has advocated repairing Israel’s frayed social safety net, with the centerpiece of his campaign a call to raise the monthly minimum wage to $1,000 — a demand that has the support of more than 80 percent of the public, according to two polls published Friday.
His efforts appear to have worked, at least for now. A poll published Friday in Yediot Ahronot showed that in the coming election Labor would receive 28 seats in the 120-member Knesset, not enough to make Peretz prime minister but six seats more than the party now controls. The poll of 501 people had a margin of error of 4.5 percentage points.
Labor’s previous candidate for prime minister, Amram Mitzna, warns that Israeli voters might be focused on social issues now, but if there is a new wave of Palestinian bombings, security will instantly rise to the top of the agenda.
“If it will be quiet for the next two or three months OK ... but more than one election was influenced by terror attacks,” he said Friday. 
Peretz has also been working to polish his image and deflect accusations he is a radical socialist throwback who would destroy the economy. He trimmed back his trademark mustache, which was once so bushy it obscured his mouth, and courted Israeli business leaders. 
In an effort to soften his image, he recounted his poor immigrant childhood in an interview to Israel’s Channel 2 TV that was broadcast Friday. He told of being the second in command of the neighborhood children’s gang run by his older brother and of living in a cramped home with his parents, grandparents and four siblings. 
He described himself as a capitalist from his youth, when he grew and sold flowers. “My father knew that to achieve things you have to work hard,” he said. 
He probably did not help his image, however, when asked about his favorite recent movie. His answer: “The Motorcycle Diaries,” which depicted a youthful journey by leftist revolutionary Ernesto “Che” Guevara.

TITLE: Nalbandian Grabs Federer’s Masters Title
AUTHOR: By John Pye
PUBLISHER: The Associated Press
TEXT: SHANGHAI, China — Even David Nalbandian was impressed with the way he beat Roger Federer in the finals of the Masters Cup. 
Nalbandian lost the first two sets and then trailed 30-0 with Federer serving for the match in the fifth set, before ending the top-ranked player’s streak of 24 straight finals wins and handing him just his fourth loss of the year 6-7 6-7 6-2 6-2 7-6 on Sunday. 
“It’s really incredible, these kind of matches in the finals against the No. 1 of the world,” Nalbandian said. “He didn’t lose many matches during the year. So it’s really important.” 
The 23-year-old Argentine didn’t qualify automatically for the season-ending event. Ranked 12th, Nalbandian was drafted into the eight-man draw whenthird-ranked Andy Roddick pulled out with an injured back. 
He had to cancel a planned fishing trip to travel to Shanghai, where Roddick was one of five leading players who withdrew either before or right at the start of the tournament. 
After dropping the first two sets, Nalbandian won 16 of 19 games and led 4-0 in the deciding set before Federer, the two-time defending champion, mounted a comeback and was serving for the match at 6-5 (30-0). 
“The match was already in my hands. I feel I didn’t make a lot of mistakes in those moments — it was Roger coming up, playing much better,” Nalbandian said. 
“Then I was almost done, 6-5, he’s serving. I kept focused — the backhand, the return that I made in the 30-15 was very important. I think that moment was very important. 
“I broke him, but then I needed to play a tiebreak — and I lost both tiebreaks that we played before. It’s not easy to keep focused, but I made it.” 
Nalbandian earned $1.4 million for winning and improved his year-end ranking to a career-high No. 6. 
The surprising win came a week after he lost to the Swiss star in the opening round-robin match here and 20 hours after Federer routed another Argentine, Gaston Gaudio, 6-0 6-0 in the semifinals. 
Federer was on a memorable roll: 35 straight wins; the all-time best unbeaten stretch in 24 finals; and an 81-3 record in 2005 — one win short of John McEnroe’s Open era record for best winning percentage in a men’s season. 
Nalbandian wasted three set points in the second tiebreaker, and then changed his sweat-soaked black shirt for a fresh red one. That’s when things changed. 
He knew Federer wasn’t match fit after spending six weeks on the sidelines with an injured right ankle, so he developed a special game plan to keep his rival running. 
“I know that he wasn’t 100 percent, his preparation wasn’t the perfect one,” he said. “I feel in the beginning of the third when he played not so good, that I had my chance in there. I had to keep going, to keep fighting, and play the most important match of the year. I left everything on court.” 
Nalbandian didn’t mind that Federer had the Shanghai crowd right behind him, urging him on. 
“That’s normal — he’s the No. 1,” he said. 
Nalbandian didn’t expect much attention after being a late addition in the tournament. 
“I think I surprised all the world, because beating [Federer], with that record, No. 1 of the world ... it’s really incredible,” said Nalbandian 
Nalbandian said he’d learned from his lopsided loss in the 2002 Wimbledon final to Lleyton Hewitt, his biggest previous match in tennis. 
“It’s very, very important. When I played Hewitt in the Wimbledon finals, I was 20 years old, different,” he said. “I was a little bit nervous, and I couldn’t play my best. It makes me feel special to win like this. Of course, for the next time, very important matches or big moments, I will be different on court.” 
Nalbandian said he obviously had no regrets about not going fishing. 
Besides, as the translator at Nalbandian’s post-match news conference said, “he caught a big enough fish today — Roger Federer.” Federer injured his right ankle the week after ensuring the year-end No. 1 ranking with his 11th title of the year on Oct. 2 in Thailand. 
Along with Roddick, second-ranked Rafael Nadal, No. 4 Hewitt, No. 5 Andre Agassi and Australian Open champion Marat Safin also withdrew either before or right at the start of the tournament.

TITLE: Sharapova Takes 2005 Honors
PUBLISHER: Reuters
TEXT: MOSCOW — Maria Sharapova and Nikolay Davydenko have been named Russia’s best players in 2005, the country’s tennis federation announced at its annual award gala on Saturday. 
This year, Florida-based Sharapova became the first Russian woman to take the world number one spot and she also reached semi-finals at the Australian Open, Wimbledon and the U.S. Open in addition to winning three WTA singles titles. 
The 18-year-old Sharapova, who finished the year as number four in the world, pipped Yelena Dementyeva as Russia’s top female player while Ukraine-born Davydenko won the men’s award ahead of Igor Andreyev and Australian Open champion Marat Safin. 
Dementieva led Russia to their second consecutive Fed Cup title by beating France in the final at Roland Garros. 
She won both of her singles matches against Mary Pierce and Amelie Mauresmo before teaming up with Dinara Safina in the decisive doubles to clinch a thrilling 3-2 victory. 
Davydenko has had the best year of his career. 
The 24-year-old reached the semi-finals of a grand slam for the first time at Roland Garros and made the last four at the season-ending Tennis Masters Cup in Shanghai. He also led Russia to the Davis Cup semi-finals in the absence of the injured Safin. 
Andreyev won his first ATP titles this year, triumphing in Valencia, Palermo and Moscow, while Safin, troubled by a persistent knee injury, has had a largely disappointing season. 
After winning his second Australian Open title in January, Safin has played only one tournament since Wimbledon, losing in the quarter-finals of the Cincinnati Masters Series in August. 
Russia’s Fed Cup side were voted the best team for the second year in a row. 

Russian tennis player Andrei Chesnokov was shot twice on Sunday after a dispute in a Ukrainian restaurant turned violent, local media reported. 
Chesnokov, formerly the world’s No. 9 men’s tennis player, was treated in a hospital but his life was not in danger, Russian news agencies said. 
“The Russian sportsman was relaxing in a restaurant with a friend when, after a disagreement, an unknown man shot him several times with rubber bullets,” RIA Novosti news agency quoted a spokesman for the Ukrainian police as saying. 
Ukrainian officials were not immediately available for comment on the reports of the shooting, which took place in the early hours of Sunday in the central Ukrainian city of Dnipropetrovsk. 
The highlight of Chesnokov’s career was in 1989, when he reached the semi-finals of the French Open. He also won seven less well-known singles events. 
The 39-year-old retired from the professional tour in 1999, although Russian sports paper Sovietsky Sport reported he had been in Dnipropetrovsk to play in a local tournament.

TITLE: Zenit Ends ’05 With Win, But 6th Place Disappoints
PUBLISHER: Combined Reports
TEXT: A 4-2 victory over Rostov on Saturday handed FC Zenit St. Petersburg a mere consolation prize in the final match of the 2004-05 season.
Without ever topping the Premier League but giving champion CSKA and its Moscow rivals stiff resistance at the start of the season, Zenit ran out of steam in the closing stages of the competition with a run of disappointing domestic results. 
Zenit’s lackluster sixth-place finish fulfiled coach Vlastimil Petrzela’s despondent claim in May that “Zenit will never be champion” because referees appear to favor Moscow teams.
Zenit finished in fourth in 2004.
Spartak Moscow held city rival Lokomotiv to a 1-1 draw in the season’s finale to clinch second place and a spot in the Champions League qualifiers next year.
Spartak finished level on 56 points with Lokomotiv but took the runner-up spot behind CSKA because its had more wins than its rival.
The UEFA Cup winner had already sealed its second Russian title in three years with a 2-1 victory over city neighbor Dynamo Moscow in the penultimate round on Nov. 6.
CSKA beat already-relegated Alania Vladikavkaz 4-3 on Saturday to finish with 62 points.
Spartak dominated in the early stages of the heated Moscow derby, played in front of a 30,000 capacity crowd at the Lokomotiv Stadium.
Spartak captain Yegor Titov beat Lokomotiv keeper Sergei Ovchinnikov with a close-range header off a Maxim Kalinichenko cross midway through the second half to put his team ahead.Georgian fullback Malkhaz Asatiani equalised five minutes from time with a shot which took a deflection off Spartak’s defender Nemanja Vidic.
The railway side pressed forward in the closing stages but could not break down a disciplined Spartak defense.
“We deserved this,” an elated Spartak coach Alexander Starkovs told Russian television. “This draw was like a victory for us.”
It was Spartak’s best finish since 2001 when it won the  league title.

(SPT, Rueters)

TITLE: Finns In Hunt For Russian Opportunity
AUTHOR: By Angelina Davydova
PUBLISHER: Special to The St. Petersburg Times
TEXT: Finland and Russia have always been close, but a new wave of Finnish investment points to accelerated cooperation between the two countries, with St. Petersburg perfectly placed to take advantage. Compared to other foreign investors Finns say they boast special knowledge of the local market and experience of dealing with both the local business community and the city’s administration.
The concept of “Russian opportunity” can be characterized as Finland’s third pole of economic development, after the pulp and paper industry and information technology, said Jussi Hyoty, chief economist with the FIM Group at a presentation in Helsinki last week. “Russian opportunity is gathering speed, and is currently one of the strengths of the Finnish stock market”, he added.
Finland was one of the closest Western countries to the Soviet Union, both in terms of geography and economics with special trade agreements, to a large extent politically determined, focussed on export and logistics. After the fall of the Soviet Union, the sudden rupture of this trade had a negative impact on both economies. 
Over the last 10 years, however, Finland has managed to create and develop economic ties with Russia of a new kind, the importance of which continues to grow.
“At the moment there’s a strong focus on the market presence, on the brand, on knowledge of the local market which many Finnish companies have, on business relations and logistics”, said Jussi Hyoty. According to FIM group, Russia is currently Finland’s number one export market, with their volume in 2004 exceeding 4.4 billion euros. 
Operations in Russia are already quite important for a number of leading Finnish companies — for example, the Russian market makes up 17 percent of the operations of Nokian Tires (the company is the market leader in high-end winter tyres in Russia) and 15 percent of those of Finnish retailer Stockmann. 
Finnish companies are involved in a wide range of business activities — from TelisSonera, which owns 44 percent of Russia’s third largest mobile operator Megafon, to Atria, the second most important meat processor in St. Petersburg.
According to Hannu Penttila, CEO of Stockmann, “the department store has been working in Russia for 15 years. And while the country has changed its name, its political and economic system, moved its borders, experienced hyperinflation, and twice had tanks on the streets, the Stockmann stores were closed only once.” Stockmann has also sued the tax inspection authorities five times and won all of its cases, Penttila said.
At the moment the department store chain is planning to add to its outlets in St. Petersburg and Moscow, explaining its move simply by citing the profitability and growth of the Russian market. For example, the St. Petersburg outlet on Nevsky Prospect has been the most profitable unit in the entire company and prompted Stockmann to build another department store on Nevsky, on the corner with Ploschad Vosstaniya. They plan to invest 100 million euros in the 10,000 square meter outlet, which will consist of shopping center, department store, spa, gym, dining facilities and a hotel, and is set to be open by Christmas 2008. Up until now Stockmann had already invested 100 million euros into Russia.
Risto Rinne, president and CEO of Neste Oil corporation, a leading independent Northern European oil refining and marketing company, has also signaled St. Petersburg as an area of growth. The corporation is increasing its presence in the petroleum retail market in the city, Rinne said at a press conference in Porvoo last week. At the same time, Neste Oil is switching to purchases of larger shares of Russian crude oil for its oil refineries. Even though Russian crude oil contains more sulfur and requires deeper refining, its price is considerably lower than the North Sea oil which Neste used to buy before. The Finnish company is even prepared to invest 600 million euros into a new facility with which to refine Russian oil.
Another sector where Finnish companies are active in St. Petersburg is construction. According to Terho Salo, CEO of the Finnish Union of Construction Industry, 9 percent of all Finnish construction production and services are exported to Russia. For example, the value of construction projects, construction materials and construction services exported to Russia in 2003 exceeded 1.5 billion euros, According to Salo there is the opportunity to quintruple this amount by 2013.
Finnish construction companies Lemcon, SRV and YIT are all actively operating in St. Petersburg at the moment, according to Salo. YIT, for example, has been working in Russia for more than 40 years, and at the moment around 35 percent of the company YIT Construction’s turnover (or 94.3 million euros) is from work in the country. 
According to Timo Lehmus, YUT Construction senior vice-president, YIT currently occupies 5 percent of new housing construction in St. Petersburg, and aims to double this market share.
Closely linked with the developing construction market is a Finnish company KONE, the world’s fourth largest elevator and escalator company, also intending to increase its operations in Russia and St. Petersburg. Antti Herlin, CEO of KONE, speaking at a news conference in Helsinki, said that currently KONE occupies 21 percent of Russia’s import market. 
The company is concentrating on western class hotels, offices, administrative buildings and luxury residential construction. At the moment, there are approximately 440,000 KONE units in operation in Russia, with 56,000 of them in the Northwest region. 
KONE elevators are working in the Grand Hotel Europe and Konstantinovsky Palace in St. Petersburg, as well as in the Kremlin in Moscow. KONE also has a joint venture with Russia’s premier elevator company, Karacharovo Mechanical Factory.
Yet another Finnish company, KWH Pipe, is planning to launch a production line next year in Leningrad Oblast. The company is the world’s fourth largest producer of polyethylene and polymer pipes and is responsible for 80 percent of large pipe (bigger than 630 mm) imports to Russia’s Northwest. 
Pentti Moilanen, the company export director, said that for the last 10 years Russia has become the main export destination for KWH Pipe, with more than 50 percent of the company’s exports, while the annual amount of sales in St. Petersburg reaches 2000 tons per year (or four to give million euros). 
Local production is due to begin soon, and though the amount of investment has not yet been disclosed, it is estimated that such a facility might cost up to 10 million euros.
With a number of projects planned for both St. Petersburg and its region most Finnish businesses might be accused of becoming too dependent on the Russian market, but they deny this for two main reasons. 
Firstly, a degree of political and economic stability, and secondly the size of the growing Russian market and its increased spending-power. Both factors create business opportunities that are hard to ignore. 
As Risto Rinne from Neste Oil put it, “by switching to predominantly Russian oil, we do commit ourselves to certain obligations, however, these decisions can be revoked overnight and we can at any time start buying North Sea oil or Saudi oil.” For Finnish business it’s less about making commitments now, and more about making the right choice from the multiple options across the globe.

TITLE: Cautious Investors Are Missing Out On Profits
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: Russians are facing an increasing variety of investment opportunities but still the old, familiar methods are proving the most popular, despite their relatively low rates of return.  
“At the moment the choice for investors is rather wide – from direct involvement in the financial markets to trusting assets to managing companies to buy shares in investment funds. They allow the realization of practically any investment strategy,” said Sergei Mikhailov, executive director of the Industrial and Construction bank’s managing company.
The only barriers now facing investors are the natural limitations of disposable assets and time they are ready to spend on market analysis and management.
“The larger the assets are – the wider the range of available investment tools and diversified opportunities,” Mikhailov said.
“Any investor, regardless of his assets, could find an investment to outweigh inflation and in some cases make 100 percent profit,” said Alexander Korniyenko, expert at Finam investment holding.
In spite of this, deposit accounts remain the most popular investment tool in Russia with current, “at call” accounts prevailing, he said.
Interfax cited the Federal State Statistics Service as saying that by June 1 this year individual deposits in Russian banks reached 2261.6 billion rubles ($79.3 billion), a 27.6 percent increase on last year’s figures.
Yet according to Finam, interest rates in Russian banks rarely exceed 13 percent while their real profitability, because of inflation, is negative.
Official statistics show that in the first half of this year the rate of inflation in Russia was eight percent.
“Low interest rates in Russian banks result from the falling cost of money on western financial markets. It causes a decrease in the cost of the borrowed resources and interest rates inside the country,” Mikhailov explained.
Even though interest does not exceed inflation, “many people prefer a small and guaranteed profit instead of nothing at all,” he said.
The popularity of deposits is also explained by a lack of information about other investment opportunities, distrust of investment funds and other financial institutions, and the recent introduction of state-insured bank accounts, Mikhailov said.
Alexei Astapov, deputy-chairman of Arsagera investment and managing company, suggested that since Soviet times people are familiar with deposits, which guarantee a definite investment period and stable profitability.
“Investors can be sure that they will earn profits regardless of external factors. Force-majeur situations cannot be excluded completely but they are not frequent and bank insurance minimizes the damage,” Korniyenko said.
Banks also benefit from wider distribution through regional offices, he said.
As for more profitable investment tools, like securities, people lack knowledge about fund market mechanisms, opportunities and risks, Astapov said, adding that an unknown variant always seems risky.
However, recent alternatives, such as buying securities and participating in investment projects, have gained more interest from investors, Korniyenko noted, “though it takes time to inform people.”
“Shares are potentially the most profitable but most risky form of investment while real estate and precious metals are the most conservative and the least profitable. Each investor should choose his individual ratio of risk to profitability depending on his purposes, investment period, and the possible damage to his well-being which could result from financial losses,” Mikhailov said.
Sophisticated investment tools are rarely part of a private investor’s plans. According to Arsagera, only one percent of bank clients in Russia make use of professional asset management, compared to 61 percent in the United States.
Last year assets under the management of managing companies in Russia almost doubled but are nevertheless estimated at just 23,684 billion rubles ($831 billion) as of September 30, 2005. The profitability of private investments depends on the volume of assets.
 “A more or less diversified portfolio could be created with assets over $100,000,” Korniyenko said. 
“Profitability could be both positive and negative. But as a rule, it exceeds inflation, being between 15 percent and 25 percent,” he said.
Beside higher profitability, the opportunity to change strategy according to market conditions is the main advantage of such investments, he said.
However expansion of asset management services is slow since banks are not oriented on selling such services and the best fund market specialists work in investment companies, not in banks, Korniyenko said.
According to polls, investment in real estate interests a wide range of people but less than 15 percent of new flats are bought for investment purposes.
“Most people lack the necessary funds to acquire a whole piece of real estate, like a flat,” Astapov said, suggesting Real Estate Investment Trusts as the most reasonable solution.
Investment funds and trusts are not limited to investment in real estate. “Most of a small investor’s needs are satisfied by investment funds, which provide an opening to markets demanding large investment, and significantly decrease risks,” Mikhailov said.
According to him, statistics prove that investment funds provide higher profitability than more conservative tools but, beside the lack of information, the complicated system of trading shares, as well as unpredictable profitability, prevent investment funds from expanding.
State control over managing companies exercised by the Federal Service for Financial Markets and specialized depositaries, as well as multiple levels of security should improve the situation, he said.
“An investment fund is the simplest alternative available for the majority of Russians. The minimum investment is 1,000 rubles while profitability is quite high,” agreed Korniyenko , predicting their expansion in the future.

TITLE: Deposits, Rubles Or Coins?
AUTHOR: By Igor Yegorov
TEXT: The majority of the population neither has the time nor knowledge to look into the alternative ways of investing their savings – hence the continuing popularity of bank deposits. Alternative vehicles such as mutual funds and stocks have been compromised in the opinion of the Russian population (due to the well known MMM affair as well as many others), whereas commercial banks have also lost a lot of trust during the 1998  crisis. 
Some paths for investment (such as utilizing financial instruments to make portfolio investments in real estate) are not well suited to small investors, and are still not very well developed. So, in the situation of discredited or underdeveloped alternatives, and also because of a certain inertia in the minds of the common people, the largest share of retail savings is currently accumulated by the regional banks of Sberbank of Russia. 
Nevertheless, I think that the local subsidiaries of foreign banks will also be well positioned to get a bigger share of that market in the future. The conglomerate of banks that is called by a collective name of Sberbank is a monopoly-like structure that aims to preserve the semblance that deposits placed with it are backed by the state and by their “conservative” banking practice.
In fact, it is a rather magical structure: regional banks of the Savings Bank of Russian Federation do not seem to have any association with it, because they are 60.57 percent owned by the Central Bank of Russia, whereas other shareholders are not disclosed. The name of the bank in St. Petersburg is “Joint-stock Commercial Savings Bank of the Russian Federation - Northwest Regional Bank”, and its major shareholder is the Central Bank of Russia. So, regional banks have their own balance sheets and their own financial policies that have little connection to the Savings Bank of the Russian Federation. 
In essence, what people in Russia are still calling Sberbank, is in reality a number of independent regional banks associated through a common majority shareholder (the Central Bank of Russia), and through a common word in their names - Sberbank. According to the Russian civil code, shareholders cannot be held accountable for the liabilities of their subsidiaries (beyond their investment in the equity capital), unless it is proven that shareholders have intentionally caused the losses of their subsidiaries. I think that from the ethical standpoint, the behavior of Sberbank-like regional banks is incorrect, because, as a matter of fact, they present themselves as a single state bank, when in reality they are independent banks. Playing on Sberbank’s reputation with the public, which does not understand the implications of the bank’s current organizational and legal structure, they attract the savings of Russian people at low rates. These low rates are explained by the psychological and historical perception of Sberbank as a huge state-owned bank that will not be allowed to fail - thus, the risk premium is non-existent. However, this ethically contestable conduct gives regional Russian elites a unique chance to attract the vast resources of a misinformed population at practically no cost (below the rate of inflation).
This process is also helped by the active propaganda of allegedly low inflation that is for some reason destined to fall in the future, as well as the idea that Sberbank-like banks are intrinsically safe. For example, the web site of the “Joint-stock Commercial Savings Bank of the Russian Federation – Northwest Regional Bank” (note: no affiliation to “Joint-stock Commercial Savings Bank of the Russian Federation”) says that it has more than 150 years of history (officially, in fact, it dates from 1991, and was “reorganized” in 2001), which was mysteriously uninterrupted over the past 85 years. So, in short, the answer to the question of why the population still holds money in bank deposits is long-standing habit and mass lack of awareness. Using the terminology of the web site of the Northwest Bank of Sberbank (which states that the “Savings bank was formally preserved in 1918”, although all savings in it – the history on the web site continues - were either lost due to inflation, or expropriated), in 83 years, after reorganization, we can see that the name of Sberbank was formally preserved.
As far the ruble is concerned, ideally such a calculation unit  should  not be used when accounting profits. Unfortunately for the country, the ruble is not backed by either a diversified economy, or by the country’s national wealth, nor by a well thought-out long-term economic and monetary policy.  If rubles were indeed backed by Russia’s wealth (including natural resources), the ruble could have been a rather popular international currency, like the CAD, AUD or NOK. 
Now, take a ruble note and attentively look at it. Try to find where it says that the ruble is the official tender for all debts, private and public, on the territory of the Russian Federation; or that it is backed by Russian assets (Soviet money said that). If you can’t find that, then it is reasonable to conclude that ruble is merely a calculation unit, not even a bank note or a treasury note, but merely a “Card of the Bank of Russia”. I have not heard of such a financial instrument. So, investments through alternative instruments are additionally impeded by the fact that Russia simply seems to lack a credible national currency that could be regarded as a store of value. Hence, no serious investors are taking big stakes in this game. 
 Exchange rate stability of the ruble in the medium-term is to a large extent (although not entirely) predicated by the extent to which it is backed with USD reserves of the Central Bank of Russia (I am not saying gold-currency reserves, because the share of U.S. dollars in the reserves still prevails, while the share of gold is minimal), and by fluctuations of world commodity prices. So, what are the  Central Bank of Russia’s U.S. dollar reserves? Since 1971, U.S. dollar denominated currency reserves are not convertible into gold. They are simply electronic dollar credits invested mainly in claims to the U.S. Government (U.S. Treasuries). So, the backing of the ruble strongly depends on U.S. fiscal and monetary policies. How many people in Russia understand this link and the complex policies in the United States? Or, how many people in Russia understand the underlying reasons for fluctuations of world commodity prices?  One can have an independent judgement on these issues only if one has a fundamental knowledge of economic and, desirably, certain humanitarian disciplines.  The opinion among some economists in Russia and abroad is that investments in commodities (either directly into physical assets  or indirectly through financial instruments), including gold and silver, depending on the investor’s level of conservatism and preferred leverage, are a viable alternative to investments in speculative financial paper or overvalued real estate. Due to the underdeveloped state of Russia’s financial market and fragmented investment opportunities, the simplest method for citizens of the country to invest in liquid commodities is through the purchase of the so called investment coins (for example, zolotoy chervonets) that are VAT exempt. In current global macroeconomic conditions, given the right strategy, investments into such assets can become a very rewarding alternative, while for common Russians this could be a very good way to secure long-term preservation of their family’s hard-earned capital.

Igor Yegorov is St. Petersburg office director at the U.S-Russia Center for Entrepreneurship (CFE)

TITLE: PPPs To Fulfil Promise
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: Public Private Partnerships (PPP) are set to overcome current difficulties in legislation and become one of the most popular ways of funding investments in infrastructure, a new report, ‘Delivering the PPP Promise,’ claims.  
The report, published by PricewaterhouseCoopers on November 14, suggests that such partnerships will expand out of their currently limited realms of application and grow substantially in Europe and Russia over the coming years.
According to PwC, in 2004 and 2005 over 200 PPP deals worth approximately $52 billion were closed in the world. Of these 152 projects, with a value of $26 billion, were in Europe, where the value of projects doubled over the past year to 54 billion euros, according to another report on the state of European PPP markets, released by DLA Piper on November 15.
“It is remarkable how quickly PPPs in the sphere of healthcare have come into practice in European countries. Nevertheless road programs remain the most popular form of PPP with about 60 percent of the whole market by value,” said Olga Litvinova, manager and partner at DLA Piper in St. Petersburg.
Russia conforms to this general trend. Several PPPs have already been realized in the areas of water supply and port terminal building, with others in the pipeline, such as a toll road between Moscow and St. Petersburg, and a number of regional road projects, Litvinova said.
When compared to the European market, however, Russian PPPs stand less chance of attracting private investors, consortiums or banks. 
“Legislation needs further improvement. For instance, a form for Concession Agreements has not yet been elaborated,” Litvinova said. 
“The future of PPP development in Russia is not looking as ‘brilliant’ as in Europe,” said Yelena Ryzhkova, lawyer at Pepeliaev, Goltsblat & Partners law firm in St. Petersburg.
“Trust in the state remains extremely low. Companies, as a rule, try to minimize interaction with the state and its representatives. While long term PPPs involving the city administration or huge investments into the building or reconstruction of state-owned property are unavoidable, profits are limited to gaining the future right [concession] to use that property,” she said.
According to Ryzhkova, adoption of the Federal Law on Concession Agreements, which removed many disputable items, “did not solve the main problem — distrust of the state as an equal partner during projects.”
PPPs in Russia will remain one-off events, like construction of Southeast water treatment facilities and a number of transport projects in St. Petersburg, she said.
Another expert was more positive about PPPs in Russia. 
“After approval of the Federal Law on Concession Agreements, the Russian market now offers a regulated framework in which PPPs can develop,” said Steven Berger, transactions group leader at PricewaterhouseCoopers Russia.
“Russia has shown its backing for the PPP concept. Private sector appetite for long term contracts with Public Administrations, together with the availability of longer tenor financing from a stronger financial system, should produce a growing number of PPPs in the Russian Federation,” he said.
The law on Concession Agreements, debated in the State Duma since 1995, and adopted on July 21 2005, stipulates that concession agreements are signed in accordance with the standard concession agreements in regards to particular real estate objects to be approved by the Russian government.
Similar laws may soon be adopted at the level of subjects of the Russian Federation, Litvinova said.
Among the handicaps to PPP expansion in Russia, Litvinova listed the lack of practical experience in the sphere and unresolved tax issues as regards concessions, which might eventually hit the investor with an unpleasant surprise.
At the same time there are hotter markets in countries with lower risks and more stable legislation, as well as the emerging market of the United States, which up until now has not showed much interest in the idea of PPPs, she said.
It may soon be a sellers’ market with governments having to compete for the attention of quality providers and funding, the DLA Piper report concluded.
“It will be very hard to compete for either long-term financing or the specialist know-how of strategic investors, and this can only be overcome through tremendous support, including governmental promotion on federal — and where necessary — regional levels,” Litvinova said.
“Implementing a single complex of expensive projects is likely to throw up certain difficulties. However, projects whose general scheme could be copied, “package” projects, have every chance of fulfilment provided there is enough administrative support,” she said.
Many countries initially develop PPPs in the transport sector and, once the economic benefits and public sector competence have been established, they will later extend their use to other sectors, such as education, health, energy, water and waste treatment, the PwC report said.
In Russia, transport and municipal services are also among the most promising sectors for PPP development at present.
 “The transport infrastructure needs large investments, with roads on top of the agenda and PPPs provide the ideal framework to allow fast improvement while minimizing the short-term fiscal impact.”
“Municipal services, such as water distribution, have been neglected lately due to a lack of funds and private sector experience will improve quality of the service by way of new investments and increased efficiency,” Berger said.
As for social infrastructure, despite regular comments about involving the private sector to build and operate sport facilities, prisons and schools, no PPP has yet been signed, the PwC expert said.
In the UK, Spain, Italy and Germany social infrastructure became the main area of PPP growth. Russia should follow, he said.

TITLE: Investors Target Petersburg
TEXT: Strategic investment projects 
in St. Petersburg:
• Shanghai Industrial and Investment Company will invest $1.25 billion into construction of a 180 hectares multifunctional Baltic Pearl complex on the coast of the Gulf of Finland, which will comprise of residential and office real estate, shopping centers and hotels providing living space for 35,000 people. The project was started this year and will be completed by 2010.
• Federal authorities will invest about $2 billion into the construction of a high-speed diameter, which should be fully completed by 2011. Local authorities are calling for private investor participation in the project offering concession agreements.
• The federal authorities and Morskoi Fasad (Sea Facade) firm will invest $310 million into construction of a sea passenger port at the Vasilievsky island to serve 1.2 passengers annually. The port will be completed by 2009.
• Local authorities declared investment tender for a $300 million project to construct a multifunctional residential and business complex and restore historical architectural monuments at New Holland island. The investor is not defined yet. Construction should take seven years.
• Toyota Motor Co. will invest $250 million into the construction of a 220 hectares plant, which will produce 50,000 cars a year and employ 500 workers. Construction will be finished by the end of 2007.
• Federal authorities will invest $200 million into construction of a second stage for the Mariinsky State Academic Theater, which will be completed by the middle of 2009.
• Gazprom gas company and its subsidiary Lentransgaz will invest about $80 million into construction of a new football stadium for 50,000 spectators. The project will be completed by 2007.

The largest investment projects 
in St. Petersburg also include:
• Russkii Standart Vodka alcohol company will invest $25 million into the construction of a local plant, which will be opened by 2006 offering 300 work places and providing $1 million in annual tax payments to the local budget.
• Elcoteq will invest 100 million euros into the construction of a plant to produce telecom equipment. The plant, which will provide 1,200 work places and $1.74 million in annual tax payments to the local budget, will be opened by the end of this year.
• Pepsi Bottling Group will invest $20 million to $25 million into construction of a production and warehouse complex, which will start operating this year offering 30 new work places and $696,000 in annual tax payments to the local budget.
• Izhorski Trubny Zavod piper plant will invest $576 million into construction of a plant. The plant will open in the middle of next year employing 500 workers.
• Bosch und Siemens Hausgerate will invest 50 million euros into construction of a local plant to produce refridgerators. The plant will start operating by 2007 providing 500 work places.
• Knauf will invest 60 million euros into construction of a plaster plant creating 200 work places. The plant starts operating at the end of 2007.
• Alcan Packaging St. Petersburg will invest $30 million into construction of a printing and packaging plant for tobacco products. It will be opened by the middle of next year providing 120 work places.
• “S.M. Kirov yarn and sewing plant” will invest over 100 million euros into construction of a new industrial complex. Construction will start by the end of next year.

TITLE: Credit Cards Still Inspire Mistrust
AUTHOR: By Yevgenya Ivanova
PUBLISHER: Staff Writer
TEXT: Credit cards may soon drive out shops’ express-loans as the loan-product of choice but only if banks can reassure clients about the advantages of the new concept, thereby capitalising on Russia’s booming retail market.
According to statistics from Comcon, a St. Petersburg media & market research center, the number of credit cards users at present amounts to only five percent of all users of bank cards in the country or around one percent of Russian adults.
Still, market insiders believe that a bank card which bears a pre-approved overdraft limit (a credit card) has a bright future in Russia.
It has been estimated by St. Petersburg-based Industry and Construction Bank that the Russian market made as much progresss over the past two years as financially developed countries make within five to ten years.
Foreign banks in Russia have also noticed the trend. 
“Credit card business might soon be perceived as an equal competitor to express-credit business in retail chains where customers take out on-the-spot loans of up to $3000,” said Alexander Koloshenko, the head of retail banking department in Raiffeisenbank.
 “We see a wider use of credit cards especially after introduction of grace days [a period of so-called ‘free’ credit, when the bank doesn’t charge for its credit service],” said Will Keliehor, the head of credit cards at Citibank.
This service has become possible after legislative changes were made to the tax code, says Keliehor.
Relatively low rates and convenience for the consumers can make credit cards a favorite in the fight for clients, said Olga Zinkevich, the deputy director of retail and plastic cards department of Industry and Construction Bank.
“A distinctive feature [on the Russian retail market] is the constant development of banks’ product lines. Of most relevance at present are credit cards with renewable overdraft limit facilities,” said Zinkevich.
Regardless of the many benefits that credit cards may bring to consumers, financial institutions and the economy in general, some experts argue that the market for the product, that allows one to virtually ‘get into customers’ wallets,’ doesn’t exist in Russia yet.
“It was interesting to watch how new players have arrived on the market over the past year. The limited success of their major projects suggests that the credit card as a tool to access money is not in great demand in Russia. There’s no real, functioning market in this segment,” says Koloshenko of Raiffeisenbank. 
Very often potential consumers, especially provincial ones, are very badly informed about the essence of this type of banking, Zinkevich says.
According to Pavel Izyumov, first deputy director of North-Western branch of Rosbank there is no lack of ATMs across Russia and card acceptance is increasing, but some insiders say that loans through bank cards are mainly applicable to the areas with developed bank networks. 
Consumers outside Moscow and St. Petersburg, where the majority of banks issuing credit cards are situated, are currently deprived of a wide choice of bank products (especially credit cards), says Zinkevich.
But the main problem, according to Zinkevich, in the advancement of credit cards in Russia is the very cautious attitude of its people to anything new, as she puts it, “a noticable mistrust towards new loan products”.

TITLE: IN BRIEF
TEXT: Petersburg Paint Sale
Finnish concern Tikkurila, part of the Kemira chemical group, is set to acquire a St. Petersburg-based paint-producer Kraski Teks (Paints Teks) by January, 2006, Interfax reported on Monday. 
According to Tikkurila information, the Finnish company will buy Kraski Teks for $40 million, which is part of the concern development strategy to strengthen its position on the Russian market of paints and enamels. 
At present Kraski Teks consists of  two companies, one of which produces paints, enamels and polishes, while the other specializes in wholesale trade of construction materials. The group earned $70 million in revenues last year. Up until now, Tikkurila concern operated in Russia through a subsidiary company Tikkurila Coatings and a joint Finnish-Russian venture Finncolor.

Metal-Based Intention
Finnish concern Ruukki will sign a memorandum of intentions with the St. Petersburg city administration on Tuesday, Interfax reported on Monday.  According to this memorandum, the concern is due to build a production facility in St. Petersburg, investing around 40 million euros into the project and providing approximately 800 job places. 
The plant will manufacture metal-based systems and will become one of the largest and most modern facilities in the St. Petersburg area.
Ruukki, the leading company in Scandinavia in metallurgy, supplies metal based components, systems and turnkey deliveries to the construction and mechanical engineering industries. The company has a wide selection of metal products and services and has operations in 23 countries, employing 12,000 people. In 2004 Ruukki had a turnover of 3,6 billion euros, 28 percent of which originated in Finland, 31 percent in Scandinavia, and 9 percent in Central Europe.

TITLE: Banks Equipped To Join WTO
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: National banks and insurance firms were the first to make a fuss about the prospect of foreign multinationals freely entering the local market. The Russian government showed its support, keeping to a protectionist stance while negotiating for compromises to make a free market safer for local companies. Ultimately the only way these fears can be seriously addressed is by postponing WTO membership but does Russia have time?
 “WTO demands that Russia let foreign financial firms open up directly held branches in the country are inadmissible for us,” finance minister Alexei Kudrin said last month to RIA Novosti news agency.
Current legislation only allows subsidiaries of foreign banks under the supervision of the Central Bank of Russia. Local branches of foreign insurance companies are also prohibited by law, and foreign capital in Russian insurance firms is limited to 25 percent.
The “financial market should become more open. But there are serious concerns that if these barriers were to be removed, it would be hard for Russian financial institutions to operate due to their underdeveloped technologies and insufficient experience,” said Vadim Sorokin, partner at Deloitte.
The most lucrative markets like private banking and investment banking would be among the first targets for foreign companies, he said.
“Free trade is one of the most disputable issues in trade theory,” said Max Gutbrod, partner at Baker & McKenzie in Russia.
“It is hard to predict and estimate all the effects which would result from Russia entering the WTO. The only thing we can say for sure is that the country will get an open market, more stability and transparency of legislation, and higher trade turnover. After joining the WTO the country could not change legislation arbitrarily,” Gutbrod said.
Deloitte’s Sorokin indicated that export-focused companies in the spheres of metallurgy, industrial construction and some other industries will clearly benefit from entering the WTO.
“So far those companies have faced resistance from foreign competitors in the form of price-restricting agreements. Entering the WTO would remove those hurdles,” Sorokin said.
However, faced with stronger competition, national financial institutions will hardly benefit. “They will get access to Western markets, but I really doubt if Russian banks could successfully operate abroad, for example in the United States,” Sorokin said.
The call of national banks and insurance companies for state protection against a free market is natural since Russian companies often find themselves at a disadvantage compared to their European rivals. If the profitability of eurobonds issued by Russian firms decreases, their sources of refinancing will be undermined and limited compared with the vast opportunities that foreign companies enjoy, Gutbrod said.
Another expert was more positive about entering the WTO. 
“In the long run the rationality of this step is beyond doubt,” said Nina Oding, head of research at the Leontief center for social and economic research. 
Joining the WTO will “provide better and non-discriminating conditions to realize Russian goods and services in foreign markets and increase the access of national products to international markets, improving the structure of Russian exports in particular,” Oding said.
In the short term local business would not face any significant changes since other factors have stronger effects.
The past year has seen extremely healthy growth in foreign investment in St. Petersburg and Northwest Russia. The maturing of the Russian market will continue with or without Russia’s accession to the WTO, which would only speed up the process, said Daniel Kearvell, director of the St. Petersburg and Northwest Russia branch of the Russo-British Chamber of Commerce.
“General economic growth and reforms to the banking sector are of higher importance. The activities of both Russian and foreign companies depend more on the country’s domestic economic policy and less on whether or not it joins the WTO,” Oding said.
She also indicated that foreign companies interested in the Russian market already operate here. They would not increase competition significantly since local and foreign banks work in different segments, with the latter serving foreign companies operating in Russia.
“WTO accession can only be a positive development for the Russian economy as a whole, and in particular the banking and insurance sectors,” Kearvell said.
“Accession will significantly increase exposure and access to additional sources of capital and finance, which will in turn allow for the further introduction of new technology and equipment, not to mention the diminishing of many trade barriers,” he said.
These are positive changes since many Russian banks are actively looking for foreign partners, expanding abroad, or planning IPOs like Vneshtorgbank, Kearvell continued.
Although “many of the smaller banks are likely to be swallowed by bigger organizations as the industry continues to streamline and restructure, this sector is one that is well equipped to deal with accession-related challenges,” he explained.

TITLE: Technology Needs Time
AUTHOR: Kristina Sinicina
PUBLISHER: Special to The St. Petersburg Times
TEXT: Look up “Banking Technologies” on the internet. They are defined as a totality of different telecommunication and information technologies, computer networks, programs, products, and models of risk management. Ordinary people tend to have other associations. Some immediately picture advertisements of credit cards, some think of cash machines, and others imagine the recent “technological” crimes committed over the internet and given full coverage in the media. 
Over the last few years the market for banking technologies has seen massive growth, and in its most familiar form means bank cards, or credit cards. Even in a relatively poor country like Russia employees can receive a credit card through their job. 
The number of ATMs has seen a corresponding growth. Only several years ago locals and tourists alike spent hours looking for an ATM, but now they are everywhere on view.
“ICBank’s volume of card transactions increased 42 percent this year compared to 2004, with the issue of bank cards increasing by 30 percent,” said the head of Banking Technologies and Services Development of ICB Mikhail Levchenko. 
Speaking about the future, he said that the bank planned to finish a new system guaranteeing the performance and reliability of its card services. 
Nevertheless, despite the large increase in card use, it is worth mentioning the large proportion of the population who still don’t trust cards. This can be explained by historical and economic factors, and in particular fear of theft. 
Thieves already use advanced technologies such as hi-tech hardware and software complexes based on digital video to disarm cash dispensers. 
Besides programs that read a signal from the keyboard and thus extract passwords (“ keystroke logging”) there have appeared programs that can trace movements of the cursor operated by the mouse (“screen scraping”). It is the thief’s response to banking innovation.
It is no wonder that the consumer’s confidence in handling new technology takes time to develop. The director of CIT Finance Bank Mikhail Belaev is sure that all bank clients first of all show interest in new services, and then in new technologies, though services actively developing at present (consumer credit, credit cards, investment products) are not directly connected with new technologies. 
At the same time, hi-tech services such as Internet-trading, despite 50 percent growth in client numbers, remains underdeveloped. 
“Internet-trading as an investment product for private individuals — share funds in CIT Finance — has about 14,000 accounts but clients still don’t have the opportunity to buy and sell shares over the Internet directly through operating companies,” said Belaev.
Therefore technologies exist only to inform clients about accounts or investment portfolios through the Internet, e-mail or SMS.