SOURCE: The St. Petersburg Times
DATE: Issue #1135 (1), Tuesday, January 10, 2006
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TITLE: City To Test New Bird Flu Vaccine
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: While the wave of bird flu sweeping through Asia moved closer to Europe, claiming a third life in Turkey in January, medical experts from St. Petersburg’s Influenza Research Institute of the Russian Academy for Medical Science are about to begin testing their newly developed vaccine against the virus on humans later this month.
An eleven-year-old girl died in eastern Turkey on Jan. 6 of what has been confirmed as the deadly H5N1 strain of bird flu. Turkey’s Agriculture Ministry issued a statement on the same day claiming that the country has been cleared of bird flu after introducing quarantine and killing more than 10,000 birds at the site where the virus was initially discovered at a farm near Manyas, south of the Marmara Sea. 
“A report declaring the termination of the epidemic was sent to the World Organization for Animal Health on Dec. 8,” the ministry statement said. “After carrying out a series of clinical and laboratory tests, no more traces of the disease have been detected.” 
In the meantime, the first St. Petersburg volunteers will begin taking part in the trials of the new vaccine at the end of January, when the first million doses of the vaccine arrive from Ufa, where it is being produced by a pharmaceutical company affiliated with the St. Petersburg Institute.
Work on the vaccine began in May, and was completed in October, the institute’s director Oleg Kiselyov said at a news conference at the Regional Press Institute at the end of December. The trials had been scheduled to start at the beginning of December but were postponed due to technical delays and the late delivery of the vaccine from Ufa.
If tests on humans prove successful, serial production of the medicine will begin in March before birds begin migrating in the spring. 
Yelena Doroshenko, a senior researcher with the institute, said volunteers haven’t yet been selected. “The list will be finalized just before the start of the trials,” she said.
The Institute has assured those taking part in the experiments that they are not life-threatening with, at worst, a limited chance that volunteers may develop a moderate fever.
“In the worst scenario, the fever may reach up to 38 degrees Celsius [one degree above normal],” Kiselyov said. “However, if just 3.5 percent of the volunteers develop such a fever, the experiment will be stopped.” 
Each volunteer will be paid 200 euros ($241) for taking part in the testing, Kiselyov said. The volunteers are aged between 25 and 28 years old, and come from local medical academies. Some of the institute’s medical personnel are also considering taking part. During the trial, approved by the Russian government, the participants will be housed at the institute’s clinic to be observed by epidemiologists around the clock. 
Kiselyov described the clinic’s conditions as “decent.” “The food is good, and the wards have been recently renovated in keeping with European standards,” he said. 
At a news conference in Moscow in December, Sergei Dankvert, head of the Russian Agriculture Monitoring Agency, said that the chances of a human catching bird flu in Russia are “less than minimal.” 
“Hundreds of thousands of Russians have been in contact with infected poultry since the epidemic hit the country in June, but nobody picked up the virus,” Dankvert told reporters. “Even in the unlikely case of a single person being in contact with hundreds of thousands of infected poultry in an enclosed space, the chances would slightly exceed one case per million.” 
The domestic poultry population in Russia is about 1 billion birds. Bird flu will be discussed at the forthcoming G-8 summit of industrialized nations in St. Petersburg next summer, according to Russian news agencies. 
The Center For Strategic Research of the Presidential Administration in Moscow declared the issue a priority in the discussions. If the St. Petersburg vaccine proves effective, it will be used to vaccinate the staff of poultry farms, customs officers in the Far East and doctors who may be exposed to the illness.

TITLE: Swiss High Court Delays Yukos Investigation
AUTHOR: By Balz Bruppacher
PUBLISHER: The Associated Press
TEXT: BERN, Switzerland — The Swiss supreme court said Monday it has blocked the transfer of bank documents to Russia for its investigation into the shattered Yukos oil company because Moscow has provided insufficient evidence of wrongdoing. 
The Swiss Federal Tribunal said repeated attempts by Russia to meet Swiss standards for judicial assistance so far had been inadequate. Unless Swiss federal prosecutors can obtain more information from Russia, some 80 binders containing information on companies and banks connected to Yukos assets cannot be handed over, the court said. 
“Switzerland would not agree to collaborate with what looks more like a never-ending search for evidence,” the tribunal ruled in temporarily blocking Russia’s 20th-odd request to receive confidential information connected to the former oil giant. 
Tens of millions of dollars tied to Yukos are still frozen in Swiss bank accounts by the legal action. 
Yukos, which was once Russia’s largest oil producer, is now fighting to stay afloat while its assets remain blocked amid ongoing efforts by Russian tax authorities to claim billions in back taxes. 
The company’s most lucrative fields were sold to a Russian state company in December against some $28 billion in back taxes. Its founder, Mikhail Khodorkovsky, is serving an eight-year sentence in a Siberian prison colony after being convicted on tax evasion and fraud charges. 
Observers say the legal campaign was Kremlin punishment for Khodorkovsky’s funding opposition parties and a drive to recapture state influence in the strategic oil sector. 
The court, based in Lausanne, Switzerland, said in partially upholding an appeal registered by a group of unidentified Swiss-based companies that the case was of “a clearly special context” and “of great complexity.” It pointed to a number of faults and gaps in the request from Russian authorities for judicial assistance in ordering a stay on the transfer of the documents. 
The tribunal also said a report by the Strasbourg, France-based Council of Europe on the motives and procedures for Russia’s arrest of Khodorkovsky and other leading Yukos executives must also be taken into account. Last year, the continent’s top rights watchdog slammed Russia over the arrests, calling them an attempt to silence opposition in the country. 
It said Russia must provide translated copies of court proceedings concerning Khodorkovsky as well as his jailed colleague Platon Lebedev before it can allow the transfer of the documents. 
Switzerland’s involvement in Russian investigations dates back to March 2004, when police carried out simultaneous raids on companies across the country — searching homes, seizing documents and interrogating individuals in Zurich and Geneva, as well as in two central Swiss cantons. 
Prosecutors provided Russia with information on $5 billion in Yukos-linked shares and cash that was subsequently frozen in Switzerland — the largest ever freeze in Switzerland. Russian officials alleged the money came from illegal fertilizer, oil and oil products deals, but Yukos’ Swiss lawyers claimed the money was earned from legitimate transactions. 
In June 2004, Switzerland’s supreme court ordered the release of most of the assets, ruling that the prosecutor’s office had acted on insufficient evidence from Russian authorities. 
According to Group Menatep Ltd., once Yukos’ largest shareholder, some $125 million in company assets remains frozen in Switzerland. The court on Monday refused to release those funds, which it indicated to be at least $48 million.

TITLE: Lithuania Debates on Energy
AUTHOR: By Darius James Ross
PUBLISHER: Reuters
TEXT: VILNIUS — Lithuania’s government said on Monday it must decide soon on extending the Baltic’s state’s nuclear capacity by building a new nuclear power station. 
Economy Minister Kestutis Dauksys told a news conference Lithuania was closely examining another power station, in addition to the existing Ignalina nuclear power plant which had been previously earmarked for closure. 
“In 2006 it is essential that a decision be made about building a new nuclear power station,” Dauksys said. 
He said the normal cost for such a new station was about $3.62 billion, but added that a precise estimate was premature at this stage. 
He did not say how the station would be funded, but added that the Lithuanian government was keen on retaining a minimum 34 percent stake in the new power plant. 
Last week the government said in a statement that it was considering extending the life of its Soviet-era Ignalina nuclear power plant despite a promise to shut it down by 2009. 
Dauksys told the news conference on Monday his government wanted to “negotiate with the European Commission about extending the operation of the Ignalina nuclear power plant.”  Lithuania closed the first of two units of the Ignalina power plant at the start of 2005, as part of its EU joining deal, and has promised a complete shut-down by 2009. 
But talks to build a power bridge with Poland have failed, meaning the small Baltic country of 3.4 million — which has almost no natural resources — could be cut off from Western Europe, the government said last week in a statement after a high-level meeting with energy experts. 
“During the meeting it was noted that it has been in no way possible to agree with Poland on an electricity bridge,” Prime Minister Algirdas Brazauskas was quoted as saying in a statement issued by his office. 
“Therefore, after the closure of Ignalina AE, Lithuania would be isolated from the European Union’s electricity grid. Therefore ... this raises the possibility of extending the operation of Ignalina AE,” Brazauskas added. 
Proponents of keeping the plant operating have said that significant upgrades to the Chernobyl-style plant over the last decade, along with strict operating standards, mean it poses no safety threat. 
Brazauskas said a new nuclear facility could be built if Baltic neighbors Latvia and Estonia bound themselves to take part in the project. If Ignalina were closed, Lithuania would be left with only fossil fuel fired plants.

TITLE: City Counts Festive Cost
PUBLISHER: The St. Petersburg Times
TEXT: Twenty-two people died in road accidents between Dec. 30 and Jan.4, with a total of 26 major road accidents during that period news agency RIA-Novosti reported, as the city counted the damage of the long New Year holidays. 
Nine people were also reported as having been injured by malfunctioning or misused fireworks, according to a report in local online newspaper Fontanka.ru. 
These figures illustrate a marked decline over previous years when dozens were hospitalized with severe burns or even body parts blown off during New Year pyrotechnics. Just before the New Year, the city police said they confiscated five tons of unlicensed, low quality fireworks, electric fairy lights and other pyrotechnical materials from local traders.
Three people, including two boys, aged 6 and 7, suffocated in a fire in a hostel of the Vozrozhdenie factory on Bolsheokhtinsky Prospekt on Jan. 6.
Over 200 people sustained injuries slipping on ice and were treated in local hospitals, newspapers reported, citing the city’s Medical press-center.
But doctors from the local ambulance service say the festivities have been calmer than in years gone by. “In comparison with the previous year, the numbers of people calling the ambulance services has declined dramatically,” Fontanka.ru quotes an official with the Medical press center as commenting. “It shows that our people are learning how to celebrate.”

TITLE: Berlin Takes Tough Line On Russia
PUBLISHER: The Associated Press
TEXT: BERLIN — German Chancellor Angela Merkel expressed concern over the development of democracy in Russia in an interview released Saturday, taking a cooler stance toward Moscow than her predecessor. 
Merkel’s comments come in the wake of the gas dispute between Russia and Ukraine, which saw a brief drop in natural gas deliveries to Germany, and a week before she is to pay her first visit to President Vladimir Putin since taking office on Nov. 22. 
“We can’t ... transfer our idea of democracy” to Russia, Merkel told Der Spiegel weekly in an early release of its Monday edition. “At the same time, I confess there are developments that I view as cause for concern, for example the new law against non-governmental organizations.” 
Her remarks show she is pursuing a different tack in German-Russian relations than her predecessor, Gerhard Schroeder, who enjoyed a close friendship with Putin. Schroeder was often criticized at home for not using his position to help bring about more positive democratic change in Russia. 
In December, the Russian state-owned gas company OAO Gazprom named Schroeder chairman of a $5 billion Russian-controlled venture to build a gas pipeline under the Baltic Sea. 
Asked by Spiegel if she would use the word “friendship” to describe relations between Russia and Germany, Merkel underlined her government’s more distant stance toward Moscow. 
“I think the notion of a strategic partnership is more appropriate,” Merkel said. “I think that we don’t yet share as many values with Russia as we do with America.” 
At the same time, Merkel said, Germany “needs good, stable relations with Russia” to ensure the continued flow of natural gas. Germany currently receives 30 percent of its natural gas from Russia. 
Merkel is scheduled to travel to Moscow on Jan. 16 for a meeting with Putin.

TITLE: Crisis Over Gas Fuels Ukrainian Patriots
AUTHOR: By Mara Bellaby
PUBLISHER: The Associated Press
TEXT: KIEV, Ukraine — The anonymous text messages zipped across Ukraine’s cell phone networks, calling for a boycott of all things Russian. 
“Remember the Great Famine, Stalin terror ... If you are a Ukrainian, forward this to friends.” 
During last week’s gas dispute, Russia’s threats to leave this nation of 47 million shivering through a cold winter triggered an outpouring of anti-Russian sentiment and patriotism, from which President Viktor Yushchenko will likely benefit in March’s parliamentary elections. 
“Ukrainians saw the face of the enemy and Russia did everything it could to make that face terrifying,” said Ivan Poltavets, the head of Kiev’s Institute of Economic Research. “But Ukrainians didn’t get scared, instead they closed ranks around the idea of sovereignty and democracy.” 
Yushchenko, whose popularity has plummeted since his 2004 rise to power in the so-called Orange Revolution, desperately needed the boost. Some polls had shown his bloc coming in well behind the Kremlin-backed party that opposed the revolution — a weak showing that could seriously handicap his remaining four years in office. 
But the complicated agreement that ended the pricing dispute left Kiev paying nearly twice as much, which will hit Ukraine’s struggling economy and, eventually, people’s wallets. Also, since Ukraine’s bare-knuckle politics moves at a quick pace, it’s unclear how long Yushchenko will be able to use the anti-Russian sentiment against opponents who favor closer ties to the Kremlin. 
“From a political perspective, it would have been smart to drag things out a bit,” said Ivan Lozowy, president of the Kiev-based Institute of Statehood and Democracy. “I had never seen anything like this ... it was clearly heading toward a huge disaster for Russia, the anger was ballooning and the European Union and the United States were weighing in and not on Russia’s side. But it was settled relatively quickly.” 
Russia was demanding Ukraine pay more than quadruple the 2005 price for its gas, an increase Moscow said reflected a shift to market-oriented relations in gas trade between the former Soviet republics. But analysts said Moscow was punishing Ukraine for the election of the Western-oriented Yushchenko, and Western governments including the United States shared their suspicions that Russian was motivated by politics. 
Under the final deal, Ukraine must pay $95 for 1,000 cubic meters of gas from Russia and Central Asia, almost double what it had been paying. At the same time, Russia’s state-controlled gas monopoly will sell gas meant for Ukraine to a middleman company at the $230 it had demanded — an arrangement that allows Russia to say it is getting what it wanted while shielding Ukraine from such a massive increase. 
As Russia restricted the flow of gas last week, posters, text messages and e-mail chain letters appeared in Kiev, recalling Russia’s czarist and Soviet misdeeds and encouraging a boycott of Russian goods. Television news programs urged Ukrainians to hang tough and make sacrifices, and talk shows featured Russia’s most jingoistic politicians referring to Ukrainians as “khokhly,” an abusive word that roughly means “bumpkins.” 
The standoff hardened Ukrainians. 
“Russia now understands that to bring Ukraine to her knees isn’t so easy,” said Oleksandr Rudakov, 45, a Kiev engineer. “Ukraine is ready to suffer a bit in the short-term if this will safeguard her independence and sovereignty.” 
Prime Minister Yuriy Yekhanurov pledged that the population would not be hit with higher prices during the year’s first quarter — which will get the country out of the freezing winter months and through the parliamentary elections. 
Ultimately, though, hurt is inevitable. Former Prime Minister Yulia Tymoshenko, who opposed the deal, said it could cost the country $4.5 billion this year — 16 percent of the national budget. 
Yushchenko’s main political opponent, Viktor Yanukovych, stayed mum throughout the dispute — a silence that analysts said was a telling indicator of his weak position trying to balance the defense of Ukraine’s interests without offending his one-time political patron, Russia. 
In a brief statement, he called the deal a “Pyrrhic victory” and warned it could have a catastrophic effect on Ukrainian industry, particularly the energy-inefficient chemical and steel sectors, which together account for 30 percent of the country’s GDP and 45 percent of its export earnings. 
“Pay attention to the key word there, which is victory, even Yanukovych had to admit that,” said Vadim Karasyov, head of the Institute of Global Strategies, who saw the crisis as a clear win for Yushchenko. “The opposition found themselves in a corner; they are still Ukrainians.” 
Mykhaylo Pohrebinsky, a Kiev-based analyst with ties to the opposition, predicted that the crisis “will even further divide Ukraine into two halves — the pro-European West and the pro-Russian East.” The Russian-speaking East will blame the conflict on Yushchenko’s Orange Revolution team, which has sought to lessen Moscow’s influence, he said. 
“Russia wasn’t fighting against the Ukrainian people but against the Orange hoard that sits in government,” said Olga Serdechnaya, 40, a government worker in the eastern city of Donetsk. “I’m not happy about the situation, but I understand Russia’s motives.”

TITLE: China Adds Eco-Pollution to Potent List of Exports
PUBLISHER: Reuters
TEXT: BEIJING — China’s environmental woes spilt visibly over its borders as a toxic slick flowed into Russia in December, but exports of pollution are becoming as common as sales of cheap T-shirts for the economic powerhouse. 
The country’s leaders are only starting to grapple with the political fall-out at home after years of pursuing economic expansion at almost any price. 
Dirty or scarce water, choking air and toxic factory effluent are some of the common problems fouling China’s environment and its neighbors’. 
Yet the international impact of China’s problems have barely registered as cause for concern for Beijing’s leadership. It took days for China to notify Russia that an explosion at a petrochemical plant sent 100 tons of benzene compounds pouring down a tributary to the Amur. 
Smog carried over the Pacific to the west coast of the United States, acid rain in South Korea and Japan, and destruction of forests as far away as Africa. These are among other unwelcome exports that experts say might cloud China’s hopes of being seen as a responsible global power. 
“At the moment, China’s top leaders have not realised how important, in terms of international relations, environmental conflicts can be,” said Ma Zhong, vice-dean of the School of Environment and Natural Resources, at Renmin University. 
“They are more concerned about economic and social relationships.” 
For China’s neighbors, the three are inextricably linked. 
Nearly half the world’s population lives in river basins which have their source in China, according to Leo Horn, an adviser to Britain’s Department for International Development. 
Among them are some of Asia’s great rivers, such as the Mekong and the Indus. Although these have so far escaped the worst of the pollution plaguing domestic waterways like the Yangtze, Beijing has already been feuding with its neighbors for years over plans for dams. Worse might follow. 
“These are not the most polluted in the country ... but the sheer scale of our economic expansion means that in remote areas, activities will increase and problems will get worse,” said Ma Jun, author of the book “China’s Water Crisis”. 
China’s reluctance to sacrifice growth for a cleaner environment causes problems even further away — some of the industrial smog that shrouds its cities drifts over to dirty air along the west coasts of the Americas, scientists say. 
But old attitudes that resources are for fuelling growth, and environmentalism is a bourgeoisie indulgence, are changing. 
Top leaders recently pledged to tackle the country’s “grim” environmental situation, put energy efficiency in their economic blueprint for the next five years and weigh the financial cost of pollution. 
But for some countries, their problems began when China moved to address devastation at home. 
Beijing brought in a ban on most logging in the late 1990s, after deforestation was identified as a key factor behind large-scale floods that affected around one-fifth of the population and cost billions of dollars. 
It closed off its own forests at a time of growing appetites for wooden products among the newly affluent and an expansion of furniture exports. 
The combination sent Chinese firms over the border into Myanmar (formerly known as Burma) while buyers headed as far afield as Liberia and Indonesia. 
“China has increased domestic use, increased exports and has few trees it can legally cut — you can do the math yourself,” said Susanne Kempel, campaigner with British NGO Global Witness. 
“It is essentially exporting its problems of deforestation to countries that often have less control or are politically unstable.” 
Around a million cubic meters of wood crossed the border illegally last year from areas of northern Myanmar identified as one of the most diverse ecosystems in the world, she says. 
Even when China is not directly harvesting other nations’ resources, its companies, scouring the globe for energy and minerals, can wreak havoc with badly managed mines or drilling. 
“There is a lack of systematic consideration of environmental issues in China’s trade and investment decisions,” said Beijing-based Horn. 
But China should not take all the blame for pollution caused by a high level of manufacturing within its borders since many products are destined for Western markets, say environmentalists who hope consumer pressure could force firms to clean up. 
“China is now the workshop of the world, and while Westerners enjoy cheap commodities ... we are dumping all the waste in our own backyard, our own rivers,” said Ma. 
“Consumers have a responsibility in this,” he adds.

TITLE: Volkswagen Plans Russian Plant
TEXT: DETROIT (Bloomberg) — Volkswagen AG, Europe’s largest carmaker, plans to build a manufacturing plant in Russia to capitalize on the country’s growing automobile market.
The carmaker will begin construction this year and may produce as many as 300,000 cars annually at the facility within five years, Chief Executive Bernd Pischetsrieder said today in an interview with reporters at the North American International Auto Show in Detroit.
Volkswagen, based in Wolfsburg, Germany, will make the Skoda Octavia at the plant near Moscow for both the domestic and export market, he said. Volkswagen is seeking to increase its share of the Russian market to about 10 percent from about 3 percent, Pischetsrieder said.
Carmakers are expanding in Russia as sales increase.
Automobile sales will almost double to 2.8 million vehicles a year by 2010, according to a forecast by Troika Dialog, a Moscow-based brokerage. Toyota Motor Corp., the world’s second-largest carmaker, last year said it would invest $144 million to open a factory in Russia. Renault SA, France’s second-biggest carmaker, opened a $250 million plant in Moscow last April.
Operating profit for the Volkswagen group, which includes luxury unit Audi as well as Skoda and Seat, “improved last year,’’ Pischetsrieder said, without providing details. 
The Volkswagen brand returned to profit in 2005 due to a strong fourth quarter, he said. 
The company lost 44 million euros in 2004 selling Volkswagens; the group’s operating profit was 2 billion euros.

TITLE: IT Executives Marvel At City’s Outsourcing Scope
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: High-level executives from the US and European Fortune 500 and 1000 listed companies were left marvelling at Russia’s IT outsourcing industry after being brought together with the country’s leading software outsourcers at ExecutEVE – the First Exclusive IT Outsourcing Event that took place in St. Petersburg last month.
Aimed at international executives in Russia, the event was organized by RUSSOFT, the largest association of software companies in Russia and the CIS.
“It was truly a remarkable experience that taught me a lot. I will be making my recommendations at BMC to explore more closely outsourcing and business opportunities in Russia,” said Gene Golovinsky, research and development director of BMC Software, the United States’ leading provider of enterprise management solutions.
The conference combined an educational seminar program and pre-scheduled B2B meetings, where participants discussed opportunities for further cooperation. During the networking session over 65 one-to-one business meetings took place. 
The seminar was opened by Steve Chase, President of Intel in Russia, who presented a case study on “establishing an R&D center in Russia.” Intel’s R&D center in Russia is its largest research center outside the US.
Among other contributors, Pascal Matzke, principal analyst of Forrester Research, made an analytical review of “Russia’s competitive market position compared to other offshore geographies,” while the legal aspects of software development in Russia were reviewed by Olga Mischenko, expert of DLA Piper Rudnick Gray Cary.
“I have learned a lot from the companies’ representatives, and was very impressed with their technical skill and business knowledge. I actually stayed an extra day and visited a few of the vendor offices and saw the staff in action. In two days I was able to meet with 10 vendors,” Tony Saroufim, CIO of BISYS Hedge Fund Services said at the conference.
“Three of these vendors have core expertise in the fields and the projects that we are currently implementing at BISYS. These companies could be a major source of resources for our company in the future. Doing business with these companies will be considered in our next year’s planning and budgeting process,” he said.
Global companies consider Russia as an alternative to other IT outsourcing destinations, RUSSOFT concluded in a press release.
“Russia has several widely known strengths when it comes to strategic IT sourcing and application development: elite university system, highly skilled workforce, capability to solve complex technical problems, cultural proximity to the West, etc,” the press release said.
According to IDC Services analytical agency data, in 2004 Russian IT market was estimated at $1.9 billion – a 26.3 percent increase on the 2003 figures. The agency forecasts annual market growth at 25.4 percent. By 2009 Russian IT market will grow up to $5.8 billion, IDC Services said in a report published in August 2005.

TITLE: City Tackles Labor Shortage
AUTHOR: By Yevgenia Ivanova
PUBLISHER: Staff Writer
TEXT: One of the main factors hindering St. Petersburg’s economic development, the shortage of qualified labor, is to be the subject of a new city government program, the committee for economic development, industrial policy and trade announced on its web site December 26.
“Compared to the situation two years ago, when technical retooling, provision of energy carriers, maintenance of premises and transportation were among the burning issues of the city’s industry, now it is a growing lack of qualified labor that constitutes the major problem at present,” said Vladimir Blank, the committee’s chair.
According to the statistics from the council on economic, scientific and industrial policy, an organization set up by the city government, 53 percent of the city’s enterprises named the shortage of blue-collar workers as one of the biggest factors impeding the development of the city’s industries. But according to recruiters this figure seriously underestimates the problem. 
“Every company we worked with mentioned this problem in one context or another,” said Elena Semenikhina, key account manager of a St. Petersburg-based recruitment company Alfa Personnel in the telephone interview Monday.
Semenikhina links the issue to the economic reforms known as ‘perestroika,’ in late 1980’s. Without state investment, many factories closed down, said Semenikhina. As a result certain ‘blue-collar’ professions became highly unpopular and the provision of such training collapsed, she continued.
To improve the situation, the city’s government is planning to produce a “Program of labor market development for 2006-2008,” the committee for economic development, industrial policy and trade reported on its web site.
The committee will develop a number of professional standards and criteria for the financing of the educational programs which are planned to begin in 2006 and 2007, the committee said.
“We welcome the government’s initiatives but believe that not only the state, but also the industry itself must actively develop and finance training programs,” Semenikhina said.

TITLE: Analysts Predict Fall in Inflation, Ruble Rise
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: Leading analysts are predicting inflation to fall in 2006, and also see a strengthening of the ruble against the dollar, Interfax reported at the end of December. 
Chief analyst of the UFG Yaroslav Lisovik predicted an exchange rate of 27.4 rubles to the dollar, with the euro set to rise to $1.3 by the end of 2006, expert said.
According to the UFG forecast, inflation will be between 10 percent and 11 percent. While the refinancing rate of the Central Bank will have little effect on inflation, Lisovik said that non-monetary actions taken by the government could be temporarily beneficial, though inflation will remain relatively high.
Alfa-Bank economist Natalia Orlova forecasted an exchange rate of 28.4 rubles to the dollar and $1.25 to the euro.
“At the moment price growth is slowing down. It means that high energy prices have stopped increasing internal prices. Unless there is a new surge in world energy prices, inflation is expected to be at 11 percent,” Orlova said.
Chief economist of Renaissance Capital Vladimir Pantyushin said that inflation in 2006 could be as low as 9.2 percent with $1 worth 27.7 rubles.
According to the ministry for economic development and trade, the supply of money is supposed to decrease this year with federal spending remaining at 2005 levels. 
As for another source of inflation — tariffs on natural monopolies — the government has already effectively come to an agreement with such companies, Pantyushin said.
“Over the last six years inflation has been gradually decreasing. A growth in inflation from mid 2004 till mid 2005 was an exception,” he said.
Pantyushin predicted the Urals blend price to stay between $40 and $45 per barrel, which will let the balance of trade to remain positive and allow a flow of dollar cash into the country. One euro will be worth $1.3, he said.
An economist at Troika Dialog investment company, Anton Struchenevsky, said inflation will be around 10 percent.
“Government spending will stimulate internal demand for goods and services but internal production will not grow in pace with increasing demand. This will keep inflation at a relatively high level,” Struchenevsky said.
The value of the ruble against the dollar will depend on the rate of dollar against the euro, the expert said. 
“If the last figure stays at the present level, I do not see any evidence of change in the rate of rubles to dollars,” he said.
Uralsib experts also forecasted inflation at 10 percent and an exchange rate of 27.9 rubles to one dollar.  
The value of the ruble will increase faster than official forecasts, but will be lower than in previous years, Uralsib said in its report.

TITLE: ‘Fantastic’ Russian Markets Out-Jumping Rivals
AUTHOR: By Yuriy Humber
PUBLISHER: Staff Writer
TEXT: Fantastic — that was the word dominating financiers’ reports at the end of 2005. For the first year since the 1998 meltdown, Russian indexes are out-jumping their rivals in other emerging markets.
The dollar-denominated RTS index and the ruble-priced MICEX both burst through the 1,000-point mark in the second half of 2005 to rack up more than 80 percent growth since the start of the year.
In comparison, indexes in South Korea and Turkey rose by about 50 percent, in Brazil by 30 percent — and in China, the leading market dipped nearly 9 percent.
The MSCI global equity benchmark pitches the combined performance of the RTS and the MICEX as the world’s fourth-best emerging market this year.
“We’re sitting on top right now,” said Erik DePoy, equity strategist at Alfa Bank. “For the first year ever, Russian equities are not trading at a strong discount relative to peer groups within the growth emerging markets.”
In contrast to a relative lull in trading during 2004 — as investors remained unnerved by the smashing of oil major Yukos — the economy bounced back on untapped energy this year, said Valery Petrov, vice president of the MICEX.
The dynamic growth of Russia’s major indexes — indicators of the overall direction of shares on an exchange — released “like a loaded spring,” he said, as the country’s economic potential outweighed post-Yukos jitters. 
“Investors always look not just at the current shape of things but at the potential for future returns,” Petrov said. 
Tight control over the budget, booming oil prices and President Vladimir Putin’s pledge to stop “tax terrorism” helped forge the perception that the financial climate has improved, he said.
Another factor was “big-time spin doctoring in the second half of this year to make the country attractive to investors,” said Vsevolod Malev, head of the securities department at CIT Finance, formerly known as Web-Invest. Malev mentioned the launch of the Kremlin’s English-language news channel, Russia Today, and the government’s end sprint to liberalize foreign ownership of Gazprom shares this year.
The charm seems to have worked.
The RTS and MICEX both recorded a string of highs in 2005.
The volume of trading on RTS’s classical market rose 37 percent, while average daily trading reached $44 million in the second half of 2005. The bourse’s index, which comprises 50 Russian companies with the biggest market capitalization, passed the 1,000 mark in late September and the 1,100 mark mid-December.
The MICEX crept up to the 1,000 mark earlier this month and has since hovered 15 points above that. The MICEX controls 80 percent of all domestic share trading and recorded average daily trade volumes at $3.6 billion in the first nine months of 2005, compared with $2.2 billion in 2004.
“In truth, we expected a rally, but not one this size,” Petrov said. “Whether it’s 900 points or 1,000 points does not matter. The significance is in the level of growth.”
Russia’s indexes — ranking fourth, behind Egypt, Columbia and Jordan in the MSCI emerging markets index — far surpassed Brazil, China and India, Christine Chardonnens, vice president of equity research at MSCI, said by telephone from Geneva.
The figures may be a success story for the domestic market, but most analysts agree that it is foreign cash that is fueling the success.
When Standard & Poor’s, the most conservative ratings agency, this month lifted Russia’s sovereign rating to one above the investment grade level — matching valuations set by Moody’s and Fitch Ratings earlier in the year — the country opened up to a new level of investor, with a much bigger bag of spending money.
“At a new grade level you get new investors,” Malev said. International funds that were restricted in their investments suddenly found Russia on their radar screen, he said.
“Within the Europe, Middle East and Africa region, Russia has been by far the single biggest beneficiary of fund inflows this year, with a total of $2.5 billion compared to just over $0.5 billion for Israel and about the same for South Africa,” the Cambridge, Massachusetts-based Emerging Portfolio Fund Research said in a November report.
Alfa Bank’s DePoy noted a considerable increase in interest in Russia in October, soon after the RTS crossed the psychologically important 1,000 mark and the government took concrete action on liberalizing Gazprom shares.
In turn, Russian bourses have actively sought to become user-friendly, introducing a number of measures aimed at keeping domestic investors and companies at home — and away from London and New York.
The RTS allowed anonymous bidding, put a limit of 50 on the number of companies in the index, launched futures contract trading — a move the MICEX copied last week — and capped the weighting of any one company to 15 percent.
“Interest in our stock markets is awakening,” said Andrei Kostokov, an analyst with the RTS. Deutsche Bank’s sale of 10 percent in MTS shares “within a few hours” in June this year proved that domestic bourses could support major deals, he said.
Meanwhile, the MICEX has separated its equities market from other trading floors so that it now has more flexibility and can react faster to investor needs, Petrov said.
“Our aim is to become the leading domestic bourse for Russian companies, where the greater part of their share trading takes place,” he said.
Whether either bourse succeeds in winning over Russian companies in the prestige war with London and New York will also depend on the Federal Service for Financial Markets.
In an interview with Rossiiskaya Gazeta last week, service head Oleg Vyugin said the two bourses should merge within the next two years, as the country does not need two markets.
Already, the momentum gained this year is forecast to slow in 2006. 
In a survey of seven top Moscow investment banks last week by Bloomberg, only two forecast the RTS Index to grow more than 20 percent next year, while two more believed it would not climb at all.
With most of the market already fully valued — and the biggest motivating factors such as the recent liberalization of Gazprom shares priced in — “another 82 percent in 2006 is an extreme,” said James Fenkner, managing partner of Red Star Asset Management fund, which has more than $70 million invested in CIS markets.
“This year is looking positive … but people should really thank their lucky stars for 2005.”

TITLE: Perfume Giant Seeks To Catch Up With Market
AUTHOR: By Andrei Musatov and Tatiana Makurova
PUBLISHER: Vedomosti
TEXT: One of the world’s leading international cosmetics and perfumery retailers,  Watson, will use its recent acquisition of 24 local Spectr stores to develop its perfumery business in St. Petersburg. 
According to Euromonitor 2005 research, the Russian consumer market is one of Europe’s most dynamic. In 2005 it grew by 15 percent and in the near future is supposed to double, Watson representatives said when declaring the acquisition of Spectr in October.
The Spectr retail chain is a good platform for developing business in Russia, said Anna Lo, senior PR manager at Watson. 
Spectr’s CEO, Vladimir Ilyin, said that the deal aimed at attracting financial resources and foreign managers to help expansion of the business into the regions and the rest of the CIS. Both companies refused to disclose the cost of the deal and precise plans for the future.
Anna Lo said that Watson will introduce its managers onto the board and integrate the business processes of Spectr and Watson.
So far international cosmetics and perfumery retailers have not entered the Russian market through the acquisition of local companies, rather through joint ventures or selling licenses.
In 2003 French retailer Sephora signed a franchise agreement with L’Etoile. German chain Douglas started a joint venture with the Russian company Rivoli.
Experts said that Hong Kong giant Watson would not affect the local market. In addition to financial backing the new owners of Spectr will need to gain knowledge of the local market, said Natalia Kovalenko, sales manager at Yuzhny Dvor retail chain.
“Development of the company will largely depend on managers’ experience and knowledge of the local market,” said Anna Dycheva, vice-president of Staraya Krepost analytical agency. Buying a local company is a wise decision in this regard, she said.
The company will most likely use its financial power to strengthen its position in the market segment where Spectr operated, said Viktoria Kulibanova, development manager at Astera consulting company.
Analysts are certain in the cosmetics and perfumery market each current retail format could develop for several years without facing pressure from competitors.
“Companies are not keeping up with market growth,” Dycheva said. 
This growth slowed from 20-25 percent in 2000-2004 to 15-17 percent this year, as a result of the expansion in consumer credit. Because of consumer loans customers switched to buying more expensive goods such as household appliances, real estate and cars, she said.
Compared to the European market, however, growing at only two percent to three percent a year, Russia is still a very attractive market for investors, Dycheva said.
In 2006 the Russian cosmetics and perfumery market was estimated at $6.2 billion. 
This year it is expected to rise to $7 billion. As a result of expansion in the regions and the ageing of wealthy segments of the population, intense growth will last for another five to six years, Dycheva said.

TITLE: O’Kay Reveals Company Secrets
AUTHOR: By Andrei Musatov
PUBLISHER: Vedomosti
TEXT: St. Petersburg-based retailer O’Kay will next year invest $200 million in the opening of 10 new supermarkets. So that the company can float shares on the fund market, which it plans to do within three years, its shareholders have had to disclose information about ownership. 
O’kay’s only shareholder is the Dorinda Holding company registered in Luxemburg and owned by three Russians – Boris Volchek (25 percent stake), Dmitry Troitsky (23.33 percent) and Dmitry Korzhev (23.33 percent) – and one Estonian, Hilar Teder (23.33 percent), the company said last week. The remaining five percent of shares are distributed among minor shareholders.
Troitsky and Korzhev were founders of the Russian juice producer Multon. In May this year they sold their stake in Multon to Coca-Cola for $501 million.
Volchek is supervisory board chairman at Dorinda and was not previously considered an owner of the company. Although he was not listed as one of St. Petersburg millionaires a 25 percent stake in O’Kay could secure him over $100 million, suggested Marat Ibragimov, analyst for Uralsib.
At the moment O’Kay has four supermarkets in St. Petersburg and one in Rostov-on-Don. In 2005 the company expects a turnover of $450 million. Each new supermarket, of 10,000 square meters each, could cost between $70 million and $100 million.
O’Kay CEO Igor Makarov said that the company is considering an IPO in order to attract the financial resources for development. So far O’Kay used shareholders’ resources and bank loans.
Opening 10 new supermarkets (seven in St. Petersburg and three in Toliatti, Rostov and Krasnodar) will increase chain turnover to up to $750 million, Makarov said.
By 2009 O’Kay plans to have between 15 and 20 supermarkets in St. Petersburg.
According to executive director of Torgovye Resheniya consulting company Maria Belanova, reaching a total of 12 supermarkets next year will give O’Kay presence all over St. Petersburg.
The “supermarket format suits not only cities of over one million people but also those with between 300,000 and 500,000 citizens. It enlarges the geographical area across which O’Kay can develop,” said Maxim Gasiev, director of trade real estate department at Colliers International.

TITLE: The G8 in Russia and the Call of Freedom
AUTHOR: By Fred Hiatt
TEXT: The G8 in Russia and the Call of Freedom in 2005, U.S. President President George W. Bush set before the nation the goal of “ending tyranny in our world.” In 2006, he is scheduled to attend the first meeting of Group of Eight leaders in Russia, which spent this year positioning itself as a leader of the world’s pro-tyranny camp.
At best, Bush’s attendance in St. Petersburg in July will demonstrate the complexities of claiming freedom-promotion as the central goal of foreign policy. At worst, it will be seen as proof that Bush’s commitment to liberty is highly situational.
Freedom House, a nonprofit organization that tracks trends in liberty more closely than anyone else, insists that 2005 actually was a pretty good year. There are 89 free countries, 58 partly free and 45 not free, by its tally. Trends were positive in 27 countries, negative in only nine: “The global picture thus suggests that the past year was one of the most successful for freedom since Freedom House began measuring world freedom in 1972,” the organization maintained.
Maybe so. There were obvious bright spots: elections in Liberia and Iraq, the inauguration of a democratically chosen president in Ukraine, stirrings of political change in Egypt and the Palestinian Authority.
But even those bright spots had shadows. The gainers in Arab elections were Islamist parties that may or may not be committed to the democratic process. The elected government in Ukraine faced internal and external pressures. Liberia’s president will need help from wealthier countries that she may not receive. And there seemed to be plenty of dark spots without silver linings. Bush undermined his own credibility as a champion of freedom with his refusal to abjure orture, his purchasing of positive news in Iraq and his secret detention policies. High oil prices meanwhile lubricated the foreign policies of autocrats from Venezuela to Kazakhstan, Saudi Arabia to Azerbaijan. In Africa, Uganda’s ruler, once seen as a hope of the continent, threw his likely electoral opponent in jail; and now Egypt’s craven leader has just done the same. Nigeria’s elected president was reported to be flirting with tearing up his constitution to grab a third term.
In South America, another elected president, Venezuela’s Hugo Chavez, consolidated one-party rule and moved to export his brand of populist autocracy to neighboring nations.
The Nelson Mandela of Asia, Burma’s Nobel Peace laureate Aung San Suu Kyi, finished the year as she began it, under house arrest and cut off from the world by her country’s military dictators.
North Koreans remained imprisoned inside a totalitarian nightmare, and their immediate neighbors (South Korea, China, Russia) didn’t seem to care much. The contradictions between China’s economic growth and its lack of rule of law grew more acute — but China’s new-generation leaders, who many had hoped would promote political reform and freedom of expression, squelched them instead.
Russia, a major oil exporter, found its energy revenue sufficient to prop up friendly dictators and even to buy a German ex-chancellor. President Vladimir Putin at year’s end was poised to stifle the last outpost of uncontrolled civil society, with a law regulating nongovernmental organizations.
The president and his ruling clique of former KGB agents already had brought television, provincial government, business and parliament under their control. And Putin was not only a non-democrat at home; he was an active anti-democrat in the world. He threatened to raise gas prices for Ukraine’s democrats and lower them for Belarus’s dictator. He embraced Uzbekistan’s strongman for bloodily suppressing a Tiananmen-like demonstration. He orchestrated phony elections in war-ravaged Chechnya. He saw democracy as a threat, at home and abroad.
So how does he come to be hosting the G8 — what used to be known as the club of leading industrialized democracies? Former U.S. President Bill Clinton, who pressed to expand what was then the G7 to include Boris Yeltsin’s Russia, said he offered membership so that Yeltsin “would agree to NATO expansion and the NATO-Russian partnership.” And when finance ministers objected that Russia’s shrunken economy didn’t rate inclusion, Clinton argued that “being in it would symbolize Russia’s importance to the future and strengthen Yeltsin at home.”
Whatever the merits of those arguments at the time, the tactics didn’t work. The prospect of membership in Western “clubs” isn’t inducing much cooperation, and democracy was not given a chance to gel. Russia remains “important to the future,” of course, but its economy is smaller than those of non-G8 democracies India and Brazil, and certainly smaller than China’s.
St. Petersburg is lovely in July, and a U.S. president has to maintain a relationship with Russia’s leader, come what may. Still, maybe Bush ought to think about spending his summer holiday with a host who shares his freedom agenda. There ought to be plenty of options in the Group of 89.

Fred Hiatt is a columnist for The Washington Post, where this comment first appeared.

TITLE: City Rich In Expectations, Proclamations
AUTHOR: By Anna Scherbakova
TEXT: Vacations are good though a bit boring. Such serenity comes to an end on Tuesday and no doubt I‘ll soon miss the relaxed lifestyle. But meeting friends, cooking and shopping seems a bit too quiet compared to last year’s routine. 
For the city economy 2005 was rich in loud proclamations and big expectations. Several national state-owned companies promised to move their head-offices to St. Petersburg and pay city taxes. It turned out that only one such move was credible — Vneshtorgbank (VTB) opened its office here on December 29. The day before VTB had announced its merger with the city’s largest bank, PSB. How long it takes to digest this purchase is another question. 
Last year saw the launch of three giant projects: Japanese carmaker Toyota started construction of a factory that should produce its first ‘Camrys’ by the end of 2007. Next came a pool of half-state-owned Chinese companies who received approximately 200 hectares of land for the $1 billion development of residential and commercial projects. Finally there was the mysterious Russian company called Morskoy Fasad who was authorized to build a new sea passenger terminal on Vassilyevsky Island. A new Russian tradition dictates that the owners of the company, also due to invest about $1 billion, have yet to be named. It is looking like one of them is Vitaly Yuzhilin, State Duma deputy, who sold his controlling interest in St. Petersburg Sea Port a couple of years ago to a company related to Vladimir Lisin, owner of Novolipetsky metal works (NLMK), for $140 million. Global and national players have acclimatized to the city. This is apparent not only in huge construction projects but also in the retail boom. Officials say that about 40 percent of consumer goods were sold through retail networks, which means supermarkets and hypermarkets, as well as brand name stores. According to analysts these outlets comprise about 60 percent of retail turnover, which is the highest rate in Russia’s regions. We should be thankful to Pyatorochka and other St. Petersburg-based retailers, as well as their aggressive Moscow competitors, for the comfort of shopping in such big and luminous malls. But food store performance is partly a result of the low income of the population, experts say. The average salary in St. Petersburg is about 10,000 rubles (or $350) a month. A worker in the local Ford factory gains on average one and a half times more, but remain unsatisfied. We learned in autumn that the factory’s trade union demanded wage increases of 30 percent and threatened a strike. Ford agreed to some of the union’s requests but did not raise salaries. I think the workers are asking for too much. Before Ford launched its factory not many of them had even heard of things like a regular salary, not to mention a social package.
This year will see the opportunity for other ungrateful staff to cause problems for the region’s factories — the shortage of a qualified workforce, from blue collars to top-managers, is growing. A really nervous year has passed, but the next brings new hope.
 
Anna Shcherbakova is the St. Petersburg bureau chief of business daily Vedomosti.

TITLE: IN BRIEF
TEXT: Oil Port Closure 
NOVOROSSIISK (Bloomberg) — Russia’s second-largest oil port, Novorossiisk, was closed to shipping for a fifth day Monday because of fast winds and rough seas, local ship agents said.
Northeast winds of up to 101 kilometers (63 miles) an hour closed in on the Black Sea port, causing 2.5 meter-high swells, said the agents, who didn’t want to be named. One tanker had docked at the Sheskharis oil terminal, while another 11 were waiting to berth.
Shipping operations at Novorossiisk are frequently disrupted during the colder months. Russia is the world’s second-biggest oil exporter, after Saudi Arabia.

Novolipetsk Stock
LIPETSK (Bloomberg) — Novolipetsk Iron & Steel, Russia’s No. 4 steelmaker, said UBS AG sold an additional $39.6 million of stock in the company, a month after the steelmaker raised $609 million in a London share sale.
UBS exercised an over-allotment option over 2.73 million global depositary shares, the Lipetsk, Russia-based steelmaker said Monday in a Regulatory News Service statement. The proceeds won’t go to the company, Novolipetsk said, without elaborating. 
Billionaire Vladimir Lisin, Russia’s second-richest man, after Roman Abramovich, used the share sale to cut his stake in the company.

Comstar IPO
MOSCOW (Bloomberg) — Comstar United Telesystems, the AFK Sistema unit which provides telecommunications services in Moscow and other cities, plans to sell shares in an initial public offering in the first quarter of this year.
Comstar UTS, which controls 56 percent of Moscow City Telephone, or MGTS, plans to sell new shares to fund expansion and existing stock held by current shareholders, the company said in a Business Wire statement Monday. The company will sell ordinary shares in Russia and global depositary receipts to be listed in London.
Deutsche Bank AG’s Deutsche UFG unit, Goldman Sachs Group Inc. and Renaissance Capital will manage the IPO, Comstar UTS said.

Alrosa Investment 
MOSCOW (Bloomberg) — Alrosa, Russia’s state-owned diamond monopoly, plans to invest about $3 billion to build three mines in eastern Siberia to maintain production through 2015.
Alrosa plans to build the mines in the next three years after open pit excavation became unprofitable, said Vyacheslav Shtyrov, president of the Yakutia region, which holds 82 percent of Russia’s rough diamonds.
“Almost all potential rough diamonds fields are also based” in Yakutia, Shtyrov told Russian President Vladimir Putin on Jan. 6 in remarks published on Putin’s web site.
Alrosa, based in Mirny, in eastern Siberia, is the world’s second-biggest rough diamond producer after De Beers. The Russian company plans to mine $2.1 billion of rough diamonds this year, Alrosa said Dec. 28 in statement posted on its web site.
The company plans to sell gems and cut diamonds worth $2.9 billion and expects net income of 14.9 billion rubles ($518 million) this year, the company said.
Alrosa plans to invest 2.1 billion rubles in exploration in 2006, according to the statement.

Classified’s Sale 
AMSTERDAM (Bloomberg) — Trader Classified Media NV, the publisher of classified-ad magazines including Auto Trader, plans to sell its East European Trader Media East Ltd. unit in an initial public offering in London.
Trader Classified may sell the entire division in the IPO, the Amsterdam-based company said Monday in a press release.
Trader Media East comprises Trader Classified’s central and eastern European operations, including Russia, Poland and Hungary, the company said.
Morgan Stanley will manage the IPO, with Credit Suisse First Boston, JPMorgan Chase & Co., ABN Amro Rothschild and BNP Paribas SA assisting, Trader Classified said. The IPO may take place in the first half of 2006, the company said in November.
Trader Media East had revenue of $193 million in the year to June 30. Trader Classified didn’t specify when the offering may take place or how much it aims to raise.

Kazakh Oil Boost
ASTANA (Bloomberg) — Tengizchevroil, the biggest oil company in Kazakhstan, produced 13.558 million metric tons of crude oil in 2005, exceeding its target by 0.4 percent, a company spokeswoman said.
“This is a bit less that we produced in 2004, but more than the planned number” for 2005 of 13.5 million metric tons, said Mariya Karazhigitova, a spokeswoman for the Kazakhstan-based driller 50 percent owned by Chevron Corp. of the U.S. Output in 2004 totaled about 13.7 million tons.
Tengizchevroil, which is developing the Tengiz oilfield in the former Soviet republic, expects to match its 2005 production level in 2006, and then begin to almost double its output as early as March 2007, after building a new gas processing plant and gas injection system for oil extraction.
Those facilities will cost $5.5 billion, and Tengizchevroil had spent $4.24 billion of that amount as of Jan. 1, Kasinform reported Monday.
The Tengiz oilfield, one of the world’s largest, was opened in 1979. Tengizchevroil’s other co-owners are the Kazakh state-owned company, KazMunaiGaz, with a 20 percent stake; Exxon Mobil Kazakhstan Ventures Inc., with 25 percent, and LukArco Joint venture, 5 percent, according a September company statement.

Norilsk Nickel Plans
MOSCOW(Bloomberg) — Polyus, the gold unit of Norilsk Nickel, Russia’s biggest precious metals miner, plans to spend $100 million this year on increasing production in the Yakutia region of eastern Siberia.
Yakutia, also known as Sakha republic, is planning a 50 percent rise in annual gold output to 30 metric tons by 2010, regional President Vyacheslav Shtyrov said in comments posted on Russian President Vladimir Putin’s web site. Polyus is developing three local projects, Shtyrov said, without giving details.
Polyus in July said it plans to at least quadruple output by 2012 through acquisitions in Russia and abroad. The company aims to increase annual production to between 4.5 million and 4.8 million ounces in 2012.
Polyus expects to invest $1.6 billion by 2010 to develop existing assets, and will spend $140 million on exploration and $600 million to buy new assets.

Azerbaijan Oil Loan 
BAKU (Bloomberg) — The State Oil Company of the Azerbaijan Republic said it got a $750 million syndicated loan, the first time the country has raised money in the international capital markets.
Socar, as the company is known, will use the money to repay more expensive credits from partners developing the Azeri-Chirag-Gunashli oilfields in the Caspian Sea, the Baku-based oil producer said in a press release Monday.
“The new loan is at a very competitive rate,” said Christopher Kemball, vice chairman of Hawkpoint Partners Ltd. in London, which advised Socar on the deal. 
Kemball declined to give terms of the deal in an interview.
The loan to the state-owned oil company may lead to other borrowings from the country, Kemball said. Azerbaijan hasn’t sold bonds or tapped banks for syndicated loans, according to data compiled by Bloomberg.

Bank Reserves
ST. PETERSBURG (SPT) — Monetary and gold reserves of the Russian Central Bank showed remarkable growth in 2005 increasing from $120.7 billion to $174 billion, Interfax reported on Jan. 3.
Reserves growth was 24 percent higher than in 2004 and 77 percent higher than in 2003. The $53.3 billion increase is the largest in the Central Bank’s history.

TITLE: The Dear Departed Judiciary
AUTHOR: By Masha Gessen
TEXT: It was the year the courts died. The year 2004 was the year elections died, and next year we will probably hold a wake for civil society; but 2005 was the year the judicial system gave up the ghost.
The judicial event of the year were the nine-year sentences handed down to Yukos executives Mikhail Khodorkovsky and Platon Lebedev — which were later shortened to eight years by the Supreme Court. If you spent any time in that courtroom — and over the 10 months of the trial, many journalists did — it was hard not to feel that the prosecution’s case slowly and obviously crumbled. In his closing arguments, defense attorney Genrikh Padva pointed out that the prosecution failed to provide even basic documents linking the defendants to their alleged crimes. The judges — three nearly identical, plump middle-aged women — looked bored. They probably were: Their decision was preordained. Still, many people had expected the court to choose a lighter sentence, whether in the interest of justice or of maintaining some appearance of decency.
And then, everything was possible. The next Yukos executive, the former deputy manager of Yukos-Moscow, Alexei Kurtsin, got a whopping 14 years for embezzlement. Usually, sentences this harsh are reserved for multiple murderers and similar monsters. The message was that there would no longer be any pretense that the courts do anything but the Kremlin’s bidding.
Incredible, but it wasn’t always this way. I remember in 2000-01 — that was the year television died — covering the destruction of NTV, Vladimir Gusinsky’s television channel. It took almost a year to complete the attack on a relatively small company. One of the reasons was that the courts just weren’t obedient enough. Lower-court judges kept mucking up the plan, ruling for NTV in one dispute or another, not only dragging the battle out but actually making it look like a battle. That seems so long ago now. Moscow lawyers say that even the least significant of cases is now decided on orders from above.
So what can you expect of cases that are very significant? Take, for example, the case of appointing governors instead of electing them. The Constitutional Court recently took this one on. Prior to considering the case, Chief Justice Valery Zorkin had said he believed that canceling gubernatorial elections contradicted the Constitution. 
Then he indicated that things might have changed — not the Constitution, which, as far as we know, has not changed in 12 years, but its interpretation. (Though how many ways can there be to interpret the word “elected”?) And then the court ruled that governors may indeed be appointed instead of being elected: The Constitution no longer had any objections.
The Constitutional Court used to be a wonderful place. Think what you want, but I believe a real city has to possess a few particular elements: good cafes and convenient coffee shops (check), good bookstores (check), and places where you can go see intelligent people say good things. Poetry readings and other literary evenings will do the trick — and there is plenty of that in Moscow — but for years I was also a fan of the Constitutional Court. Getting in was reasonably easy, and once there, you could observe a group of very well-educated, intelligent people discussing things that ought to matter to all of us. By the nature of their jobs, they always made reference to the Constitution, which is not a perfect document but is not half-bad as a starting point in any conversation. 
Now that conversation is over: The Constitution and its ideals have been declared infinitely mutable. So is it any wonder that immediately after rendering its decision on governors the Constitutional Court started packing its bags? It seems it will be going to the scrap heap of history — I mean, the city of St. Petersburg. It is a richly symbolic move. Russia is a country with a single center: Moscow, where all information and all power reside. Moving the Constitutional Court out of Moscow means quite literally moving it out of the loop. 
Valery Zorkin acquiesced to the move easily, perhaps indicating that, after more than a decade in the judicial limelight, he is eager to recede into the symbolic shade. That is what the Constitutional Court is doing under his leadership.
That is what the entire judicial system is doing: taking a step back into the space reserved for it in Soviet times — as a system that selectively enforces selected laws at the pleasure of the state. 
May the quest for justice rest in peace.

Masha Gessen is a contributing editor at Bolshoi Gorod.

TITLE: The Fear That Lurks in Kremlin Hearts
AUTHOR: By Yulia Latynina
TEXT: One of the curious patterns perceptible in human history is that of rulers and plots: The more a ruler fears conspiracies against him, the more likely he is to die as a result of one.
Among the emperors of Russia, there were two obvious paranoiacs: Peter III and Paul I. One was smothered with a pillow, while the other had his skull shattered by a snuff box. And yet, at the beginning of the reign of each of these tsars there was no hint of plotting, and everything was just grand.
Where am I going with this?
President Vladimir Putin enjoys the love of his people. His ratings are high, the product of Russia’s economic good fortune, which itself is due to three factors: the high price of oil, the 1998 devaluation of the ruble and the restructuring of the industrial base.
None of these factors depends on Putin, but all of them except the price of oil are irreversible. Russia under Putin is simply fated to live better than it did in 1996, and Putin’s ratings are, consequently, fated to be higher than Yeltsin’s.
In this rosy context, the regime conducts itself as though its fate were hanging by a thread.
Mikhail Kasyanov organizes a convention of the Democratic Party. This was a guy you could hardly tell apart from Putin. Why on earth did the regime have to turn this committed conformist — who after his removal as prime minister asked by way of a pension to be made Speaker of the Federation Council, mayor of Moscow or, come to that, at least chairman of the Central Bank — into an opposition figure? But of course, at Kasyanov’s convention the Federal Security Service turns up in such numbers you’d think it wasn’t Kasyanov coming to town, but Shamil Basayev.
Garry Kasparov goes to Omsk. Now Kasparov is radical-minded, but he does not yet constitute an opposition. But immediately, all the halls in Omsk turn out to be closed — for quarantine, disinfection, cleaning, annual inspection and so on. 
What about the NGO law? The campaign against human rights activists? The virtual prohibition of toothless parliamentary investigations?
The Kremlin has no reason to worry. The businessmen are quiet. The State Duma might just install him for life.
But the regime runs around in a panic unmatched since handwriting appeared on the wall at Belshazzar’s feast. Why?
People have come to power who do not know how to run either a business or a government. They have one professional skill: the elimination of enemies. If there are no enemies, they must be created. Then these people can show their beloved president that only his friends are protecting him from these enemies — whose property usually goes, in the course of the defense, to the friends. 
If these friends narrow Putin’s base in destroying the enemies, that’s no problem. At the beginning of Putin’s reign, the West, business and the people supported him. For his friends, it would be ideal if only they supported him — and let the West, business and the people be against him.
But the more the regime fears enemies, the more enemies it makes for itself. The presidents of the United States don’t suffer from paranoid delusions about their opposition — and what happens? In all of American history, there has never been a case of a retired president being sent to jail or, God forbid, being shot as an enemy of democracy.
Whereas such dictators as the Philippines’ Ferdinand Marcos, Haiti’s Francois Duvalier and Nicaragua’s Antonio Samosa could not tolerate opposition, and what happened? They were lucky not to get a snuff box upside the head.

Yulia Latynina hosts a political talk show on Ekho Moskvy radio.

TITLE: Happy New Year a Hundred Years Later
AUTHOR: By Alexei Beyer
TEXT: I wonder whether people in Moscow and St. Petersburg, who 100 years ago rang out 1905, had any idea what a momentous year they had lived through.
The armed uprising in Moscow had just been suppressed, but the year that began with the Bloody Sunday demonstration on Jan. 9 revealed the breadth and depth of popular discontent with tsarist rule. Many future Bolsheviks got their feet wet in 1905, radicalizing and becoming professional revolutionaries. The crew on the battleship Potemkin mutinied, and Leon Trotsky rose to prominence as the head of the St. Petersburg soviet. It was the year when the specter of communism, first spotted haunting Europe by Marx and Engels in 1848, began to take shape, like Lord Voldemort in the fourth Harry Potter novel.
It was also the year that Russia lost a naval war in the Far East. Colonial armies had been known to lose the occasional battle to the natives, but it was the first time since the Ottoman invasion in the 14th century that a “nonwhite” nation fought — and defeated — a European power with modern technology. The February revolution and especially the Bolshevik coup of 1917, both of which had roots in the insurrection of 1905, were to exert a major influence on Western democracies. 
After the European workers’ movement threatened to tear asunder the fabric of industrialized societies in the second half of the 19th century, the Soviet Union provided a cautionary tale to both the rich and the poor, smoothing the path to power for moderate socialist parties in the 20th century. The redistributive welfare state — which after World War II emerged in Europe and, despite loud denials, in North America as well — introduced high taxes, high wages and a social safety net for the poor, effectively putting an end to class struggle. 
It is ironic that a century later this model of social peace is rapidly breaking down. Just before Christmas, 37,000 New York transit workers walked off the job, paralyzing the metropolis. The strike lasted three days and failed utterly — smashed by draconian anti-strike laws and lack of support from other unions. But if public sector workers are clinging to decent wages and benefits, industrial unions are rapidly disappearing. Less than 8 percent of the private sector work force in the United States is unionized, down from 16.5 percent in 1983.
In the United States, blue-collar wages are falling, and in Western Europe, where workers retain high wages and cushy benefits, unemployment rates hover in the double digits. 
This problem also harks back to 1905. Technological progress, originating in Europe and countries settled by Europeans, has spread steadily in the past century. Not just Japan, but South Korea, Brazil, Mexico, the Philippines, India and China are industrializing rapidly and emerging as forces in the global market. The hundreds of millions of unemployed or underemployed workers in these countries are willing and able to produce goods and services for a subsistence wage. It certainly makes no sense to pay industrial workers in Germany or the United States $30 per hour for the same work.
The year 1905 was extremely important for Russia: It marked the lowest point in three centuries of Romanov rule, and after it passed, Russia began to recover. The first Duma was set up, and a slew of reforms were passed. Although political liberalization failed, economic reforms were spectacularly successful. To gauge the country’s economic progress after 1905, it suffices to take a walk around the older parts of Moscow and count the astonishing number of beautiful Art Nouveau and modernist apartment buildings constructed in less than a decade.
Those nine years showed that there were viable alternatives to the Bolshevik takeover. Russia could be both prosperous and modern. But it is a feat that has not been duplicated since — not even in the years of unprecedented oil-based prosperity that have marked President Vladimir Putin’s rule. 

Alexei Beyer, a former Muscovite, is a New York-based economist.

TITLE: Doctors Say Sharon-Era Likely To Be Over
AUTHOR: By Amy Teibel
PUBLISHER: The Associated Press
TEXT: JERUSALEM — Doctors started bringing Prime Minister Ariel Sharon out of an induced coma Monday to assess the damage caused by his stroke, and he immediately began breathing on his own. 
Outside experts said that while independent breathing meant Sharon had better chances for survival, it gave no indication about his other physical or mental capacities.
Doctors made the decision to lift the anesthesia after a round of consultations Monday. Hospital director Dr. Shlomo Mor-Yosef said the process of weaning Sharon from sedation could take hours or days.
“As soon as we started reducing the drugs...the prime minister started to breathe independently, although he is still hooked up to a respirator that is used as an aid,” Mor-Yosef said. He added that Sharon remains in critical condition.
Sharon suffered a severe stroke on Wednesday, two weeks after a first, mild stroke, and was rushed to Hadassah where he has undergone two surgeries to stop bleeding in his brain.
Doctors have kept him in a medically induced coma and on a respirator since Thursday to give him time to heal from the trauma of the stroke and the surgeries.
After withdrawing the sedatives, doctors were to pass their assessment of brain damage to Attorney General Meni Mazuz, who will then decide whether to declare the prime minister permanently incapacitated.
“The minute we know what damage has occurred, we will talk,” Justice Ministry spokesman Yaakov Galanti said.
Since an acting prime minister is in place, there is no urgency to such a declaration, Galanti added.
Ehud Olmert, Sharon’s deputy, has been named acting prime minister and can serve in that role for 100 days.
One of Sharon’s neurosurgeons has cautioned that it was unlikely he could function as prime minister again.
The 77-year-old Sharon, Israel’s most popular politician, was seen by many here as the best hope for resolving the Israel-Palestinian conflict. His abrupt illness and unexpected departure from the Mideast political stage has raised concern that momentum on territorial concessions, created by his recent Gaza Strip withdrawal, would stop, and that Sharon’s successor wouldn’t have the stature to forge ahead on drawing Israel’s final borders.
In the event the attorney general declares permanent incapacitation, the Cabinet would have to elect a new prime minister within 24 hours, from among the five sitting Cabinet ministers from Sharon’s Kadima Party who are also lawmakers, Galanti said.
That group includes Olmert, a potential political heir. Before his collapse, Sharon appeared headed to a landslide victory in March 28 elections at the head of the Kadima Party, which seeks further pullbacks while strengthening Israel’s hold over major settlement blocs.
Olmert told the Cabinet on Sunday that he would work to carry on Sharon’s political legacy.
Doctors not involved in Sharon’s care said that if he awakens, the extent of his responses could vary widely, from slight movements of the fingers or opening of the eyes, to a much fuller awakening. They have also cautioned that there is no guarantee that Sharon will awaken from the anesthesia.
That Sharon can breathe on his own “tells us that one part of his brain is functioning, the respiratory center,” said Dr. John Martin, a professor of cardiovascular medicine at University College in London. “It doesn’t tell us how he is thinking, it doesn’t tell us how he can speak, it doesn’t tell us how he can move his arms and legs. 
“His chances of survival are better than if the respiratory center had been damaged, but that still doesn’t mean he’s going to survive... It is still highly probable that he will die,” Martin added, noting that Sharon’s weight and age work against him. 
One of Sharon’s surgeons, Dr. Jose Cohen, said that while Sharon’s chances of survival were high, his ability to think and reason would be impaired. 
“He will not continue to be prime minister, but maybe he will be able to understand and to speak,” the Argentina-born Cohen said in comments published Sunday by The Jerusalem Post. 
Israel’s Cabinet met for its weekly gathering Sunday for the first time since Sharon’s stroke.

TITLE: IN BRIEF
TEXT: Cheney Hospitalized
WASHINGTON (Reuters) — U.S. Vice President Dick Cheney was taken to a Washington hospital early on Monday, suffering from shortness of breath, CNN reported. 
The vice president was taken to George Washington University Hospital around 3 a.m., the cable news channel reported.
Doctors administered a test that monitors the electrical activity of the heart, CNN said. The vice president was reportedly retaining fluid as a result of anti-inflammatory medication.
Last week, Cheney was walking with the help of a cane. A spokeswoman would not give specifics about the vice president’s ailing left foot but said it was a recurrence of a condition that was being treated with rest and anti-inflammatory medication. 

Black Hawk Down
BAGHDAD, Iraq (A.P.) — Eight U.S. troops and four American civilians died aboard a U.S. Army Black Hawk helicopter that crashed in northern Iraq, the military said Monday. Two attacks on Iraq’s Interior Ministry killed seven people. 
The helicopter, which crashed just before midnight Saturday, was found on Sunday. The military initially said only that there were eight passengers and four crew aboard, all believed to be American. 
The military on Monday specified that four passengers were civilians. It wasn’t yet known what caused the crash and the military said that the investigation would take some time.

Arnie’s Biking Mishap
LOS ANGELES, California (A.P.) — Governor Arnold Schwarzenegger received 15 stitches in his lip Sunday after he and his 12-year-old son were involved in a motorcycle accident near their home, his spokeswoman said. 
Schwarzenegger was riding a Harley Davidson motorcycle with his son Patrick in the sidecar when another driver backed into the street, spokeswoman Margita Thompson said in a statement.
“The governor was unable to avoid the vehicle in his path and collided with it at a low speed,” she said.
Schwarzenegger and his son were treated for cuts and bruises at St. John’s Hospital in Santa Monica and released, Thompson said. Both were wearing helmets at the time, she said. They were recovering at home Sunday night.

Iraqi Police Bombed
BAGHDAD (Reuters) — At least 14 people were killed and 20 wounded in an apparent suicide bomb attack on Iraq’s Interior Ministry on Monday as the country marked National Police Day, police said. 
Police said they believed two suicide bombers detonated explosives outside the building in eastern Baghdad. They were trying to establish how one of the bombers had managed to get through a series of checkpoints in the heavily guarded compound.
A ceremony celebrating the 84th anniversary of the formation of the Iraqi police force was taking place at the police academy next door to the ministry at the time of the blast.

Belafonte Bashes Bush
CARACAS, Venezuela (A.P.) — The American singer and activist Harry Belafonte called U.S. President George Bush “the greatest terrorist in the world” on Sunday and said millions of Americans support the socialist revolution of Venezuelan leader Hugo Chavez.

TITLE: Israel Allows Favored Candidates in Jerusalem Poll
PUBLISHER: Reuters
TEXT: JERUSALEM — Israel is allowing candidates for an upcoming Palestinian legislative election to campaign in Arab East Jerusalem as long as they do not belong to militant groups, the Israeli internal security minister said on Monday. 
But Gideon Ezra said Israel had not yet decided on whether the Jan. 25 voting will be allowed in East Jerusalem, a core demand by Palestinians who want it as capital of a future state.
Israel captured East Jerusalem in the 1967 Middle East war and annexed it as its own capital, a move not recognized abroad.
Police barred Palestinian candidates from the city when campaigning began last week, drawing a call by the United States, patron of a peace “road map,” for Israel to allow Jerusalem Palestinians access to the parliamentary ballot.
Ezra told Israel Radio that, under new orders, police would approve electioneering by “all those who favor pursuing the peace process and the road map” — if they apply in advance.
“Hamas candidates, for example, will not receive permits,” Ezra said, referring to an Islamic militant group spearheading a 5-year-old Palestinian uprising.
The decision drew protests from Palestinian President Mahmoud Abbas’ Fatah faction, which is fending off an electoral challenge from Hamas but fears charges of Israeli intercession.
“In order to have a free and fair election, either there is campaigning for all candidates, including Hamas, or there will be no campaigning,” said Hatem Abdel-Qader of Fatah.
Hamas vowed to defy the Israeli ban.
“We will carry out our electioneering campaign whether the occupation agrees or not. We have the ways and means to do so despite the Israeli decision,” Hamas spokesman Sami Abu Zuhri said.

TITLE: Boozy Lib-Dem Leader Quits
PUBLISHER: The Associated Press
TEXT: LONDON — The leader of Britain’s opposition Liberal Democrats resigned his post under pressure from the party Saturday, days after he acknowledged battling a drinking problem. 
Charles Kennedy initially resisted stepping down despite calls from nearly half of the party’s lawmakers for him to quit, saying the Liberal Democrats’ rank and file still backed him.
He changed course Saturday, saying he was resigning immediately and would not run in the leadership elections he announced Thursday.
“In all of this, the interests of our party have got to come first, that’s where my personal, my political and my constitutional duty lies,” Kennedy said in a news conference at the Liberal Democrats’ headquarters in London. Kennedy’s relaxed, amiable style and his opposition to the Iraq war had made him a popular and respected politician. The Liberal Democrats, Britain’s third largest party, were the only one of the three main parties to oppose the war, which was deeply unpopular among Britons.
But dissatisfaction with Kennedy’s leadership had been simmering for months and increased after the Conservatives boosted their fortunes by electing a charismatic young leader last month.
Kennedy, 46, acknowledged for the first time Thursday that he had sought medical help for his drinking and called a leadership election in which he initially said he planned to run.
Many of the left-leaning party’s 62 lawmakers expressed worry at the prospect of a divisive contest and urged him to step down soon and bring the party’s crisis to a quick resolution.

TITLE: Supreme Court Nominee Quizzed
PUBLISHER: The Associated Press
TEXT: WASHINGTON — After months of preparation, Samuel Alito was due to face close questioning Tuesday by senators determining his fitness to be the nation’s 110th Supreme Court justice. 
Alito, a conservative, 15-year member of the federal appeals court in Philadelphia, was chosen by President Bush on Oct. 31 to succeed retiring Justice Sandra Day O’Connor, the first woman on the high court.
O’Connor, a justice since 1981, was a decisive swing vote on abortion, the death penalty, affirmative action and other highly contentious issues.
After receiving some last-minute encouragement from Bush at a White House breakfast Monday, Alito was scheduled to head to Capitol Hill for the start of nomination hearings by the Senate Judiciary Committee.
Direct questioning of Alito was due to begin Tuesday and expected to last at least two days.
Judiciary Chairman Arlen Specter said Sunday he will wrap up the hearings this week. He has called for a committee vote Jan. 17. 
Republican leaders hope for confirmation by the full Senate on Jan. 20, but Vermont Senator Patrick Leahy, the committee’s top Democrat, would not promise the schedule would hold.
“Obviously, if [Alito] doesn’t answer the questions, then it gets out of my control. Some senator would move to hold it over. Let’s hope...that doesn’t happen,” Leahy said on Sunday.
Alito was Bush’s second choice to replace O’Connor. White House counsel Harriet Miers withdrew from consideration after conservatives questioned her qualifications.

TITLE: Giantkillers Run Amok In FA Cup
AUTHOR: By Mitch Phillips
PUBLISHER: Reuters
TEXT: LONDON — Manchester United were held to a humiliating goalless draw by minor league Burton Albion in the FA Cup third round on Sunday as Alex Ferguson’s policy of playing a weakened team backfired for the second year running. 
United, Cup winners on a record 11 occasions and runners-up last season, fielded only a handful of first team regulars and looked distinctly ordinary on a sandy, bumpy pitch against a spirited Conference side of part-timers. 
Elsewhere, Tottenham Hotspur, fourth in the Premier League, blew a 2-0 lead to lose 3-2 at second division strugglers Leicester City while fourth division Leyton Orient pulled off the shock of the round when they overcame Premier League Fulham 2-1 at Craven Cottage. Sunderland, bottom of the top flight, beat minnows Northwich Victoria 3-0. 
A year ago a weakened Manchester United were held 0-0 at home by minor league Exeter City and had to recall the big names to secure a 2-0 victory in the replay. 
This season, despite being out of Europe and with little hope of catching Chelsea in the league, Ferguson repeated his tactic with only Wes Brown, Mikael Silvestre and John O’Shea from his usual first-choice side starting the match. 
The unfamiliar lineup, with striker Ole Gunnar Solskjaer making his first start for 19 months, struggled to impose themselves on a hard-working Burton side, managed by Nigel Clough, son of the late former Nottingham Forest manager Brian. 
United did not really look dangerous until the introduction of Wayne Rooney and Cristiano Ronaldo for the last 30 minutes but their best chance came in injury time when goalkeeper Saul Deeney saved with his feet from Ritchie Jones. 
“I had nothing to do really all game which was a bit of a surprise against one of the best teams in the world,” Deeney told Sky Sports. 
Clough said: “It was a staggering performance really. In the first half it was pretty even but in the second it seemed like we were under the cosh for about three hours. 
“Now the lads have got a couple of days off to get ready for Stourbridge on Tuesday night. But I’m thrilled for them that they will get the chance to run out at Old Trafford.” 
Ferguson said: “Everybody in the country would expect us to beat them but that’s cup football. 
“We’re great at keeping teams alive. Last year we gave Exeter a big pay day, this year it’s Burton. 
“It was disappointing in many ways, but at the end of the day I’m satisfied to get the draw and we’re still in the Cup.” 
Orient led 2-0 at halftime after goals by Craig Easton and Joe Keith but had to survive a strong second-half comeback by their London rivals. 
Collins John pulled a goal back five minutes after the restart but then blew the chance to save the game when his 69th-minute penalty was well saved by Orient keeper Glyn Garner.

TITLE: Hingis Comeback Held In Check by Henin-Hardenne
AUTHOR: By John Pye
PUBLISHER: The Associated Press
TEXT: SYDNEY — Martina Hingis tried to put a positive spin on her first-round loss to Justine Henin-Hardenne in the Sydney International. 
“I chose to come to know where I’m at,” Hingis said Monday after Henin-Hardenne overpowered her in a 6-3 6-3 victory. 
“I know what I’m aiming for now... It’s good to know how I played, how the match went. She was at a different level today.” 
Hingis, a five-time Grand Slam singles winner making a comeback after sitting out three years because of foot, heel and ankle problems, won three matches last week in the Gold Coast event in her first full tournament back. 
But this was her first match against a top-10 player — and it showed. 
Hingis was broken in her opening service game and generally struggled with the pace as Henin-Hardenne attacked the slower second serves. 
Hingis, a three-time winner in Sydney and also a three-time Australian Open champion, said she could compete with most players, “but if you want to play someone like Justine, a top-10 player, it’s a different ballgame.” 
Henin-Hardenne, who finished last season ranked No. 6, broke Hingis’ serve three times in the first set and once in the second, when she won eight straight points to take a 4-2 lead. Hingis rarely ventured to the net, but the Swiss star showed glimpses of her old form with seven winning groundstrokes. 
Henin-Hardenne, the French Open champion, was playing her first match since recovering from a hamstring injury that sidelined her since October. 
“I was very focussed on me,” said Henin-Hardenne, the 2004 tournament champion. 
“The key point was to deal with the special situation — the comeback for Martina — it’s been a very special atmosphere. I was focused on what I had to do.” 
Henin-Hardenne said Hingis was in reasonable form given her time away from the game, but didn’t want to judge her performance. 
“I think the level she has right now is pretty good because she doesn’t have a lot of matches,” Henin-Hardenne said. “For sure, the game improved a lot in the last three years, so we’ll see.”