SOURCE: The St. Petersburg Times DATE: Issue #1164 (30), Tuesday, April 25, 2006 ************************************************************************** TITLE: Putin Calls For Action On AIDS PUBLISHER: The Associated Press TEXT: MOSCOW — President Vladimir Putin called on the government and society on Friday to work harder to fight the spread of HIV, saying that AIDS was affecting young Russians at a pace that threatened the nation’s well-being. Putin told federal and regional officials that experts believed the true number of people with HIV might be significantly higher than the official figure of more than 342,000, and that most of those with the virus were under 30. “This already could have a negative influence on the demographic situation, and that is particularly worrisome,” Putin said. “The situation is alarming and demands not a contemplative but an active attitude from society.” He said the fight against AIDS could be effective only if various government ministries and agencies worked together, and called for a “constant and persistent” effort to ensure that Russians, particularly in high-risk groups, are aware of the danger of HIV. “So far, there is no general strategy for such work,” he said, adding that private businesses, political parties and civic organizations should help with funding and organization. AIDS has recently spread at a devastating pace in Russia due to weak anti-drug and prevention programs, as well as growing drug use. However, Putin said a five-year anti-HIV/AIDS program that ends this year had cut the number of new HIV cases from 88,000 in 2001 to 33,000 last year. He said the government planned to spend 3.1 billion rubles ($113 million) on fighting AIDS under the aegis of the health care national project, but the time period for the outlays was unclear. Putin spoke a day after the head of the Russian Orthodox Church, Patriarch Alexy II, criticized Western-funded programs aimed at combating HIV and AIDS in a letter to the president, calling them immoral and inconsistent with Russian culture and saying they promote Western pharmaceutical companies’ contraceptives. Also last week, the Moscow City Duma urged Putin to restrict the activity of foreign NGOs involved in anti-AIDS programs, accusing them of fueling rather than helping to stem the epidemic. Putin’s figure for Russians registered as HIV-positive was slightly lower than the statistic of 355,000 given a day earlier by the head of the Federal AIDS Center, Vadim Pokrovsky. Experts believe the true number is more than 1 million. TITLE: U.S. to Investigate Gazprom’s RosUkrEnergo AUTHOR: By Catherine Belton PUBLISHER: Staff Writer TEXT: MOSCOW — The U.S. Justice Department is investigating RosUkrEnergo, the secretive gas trader that has a monopoly on billions of dollars in gas sales to Ukraine, people familiar with the situation say. The Swiss-registered company, half owned by Gazprom and half by unidentified beneficiaries, has come under growing scrutiny after it landed a lucrative role as Ukraine’s monopoly gas trader in a controversial Jan. 4 deal between Gazprom and its Ukrainian counterpart, Naftogaz Ukrainy. Former Ukrainian Prime Minister Yulia Tymoshenko has branded the deal a threat to European and Ukrainian energy security, while one of her top aides, Olexander Turchinov, has said he investigated the company for possible links with international organized crime when he headed Ukraine’s security service, the SBU, last year. One person familiar with the situation said RosUkrEnergo executives two months ago traveled to the United States, where “there was a conversation” with Justice Department officials about the group’s structure. While that source said there had been no follow-up since then, another person with knowledge of the situation said U.S. officials had recently requested information about RosUkrEnergo from the Austrian government. Austria’s Raiffeisen Bank holds the 50 percent of RosUkrEnergo not owned by Gazprom on behalf of the unknown beneficiaries. Justice Department spokesman Drew Wade said he could not “confirm or deny the existence of criminal investigations.” The Wall Street Journal reported Friday that investigations were under way. The company is expected to come under new pressure following the publication Monday of a detailed report on Ukrainian gas deals by Global Witness, a highly respected London-based nongovernmental organization that investigates corruption in the natural resources sector. A Global Witness investigation into the role of so-called blood diamonds in funding armed conflicts in Africa helped kick-start the Kimberley Process for closer monitoring of the global diamond trade, and led to the group being nominated for a Nobel Peace Prize. The report focuses on the new monopoly role taken by RosUkrEnergo and calls on Ukrainian President Viktor Yushchenko to clean up endemic corruption in the energy sector. It also urges Russia to use its presidency of the G8 this year to end the use of opaque intermediary companies in gas trading. The Gazprom-Naftogaz Ukrainy deal highlights the threat posed to European energy security by putting middlemen with a murky ownership structure in control of supplies to Ukraine via Gazprom pipelines, the report says. Europe relies on Russia for about one-quarter of its gas imports, and 80 percent of Russian exports to Europe pass through Ukraine. “Without transparency there cannot be predictability, and without predictability there cannot be security of energy supply,” says the 64-page report, a copy of which was made available to The St. Petersburg Times. European concerns about energy dependence on Russia reached new heights when Russia cut off supplies to Ukraine during a standoff over prices at the beginning of the year, which led to shortfalls to Europe. In the Jan. 4 deal, RosUkrEnergo — previously an intermediary in Turkmen-Ukrainian sales — gained a monopoly over all sales of Russian and Central Asian gas to Ukraine. Tymoshenko has criticized the deal, which almost doubled gas prices for Ukraine, as a way for Russia to win back control over the country. The Global Witness report delves into more than a decade of gas deals between Turkmenistan and Ukraine involving intermediary gas traders with unclear ownership structures. Starting with the notoriously opaque regime of Turkmen President Saparmurat Niyazov, Global Witness cites bank documents showing that the vast majority of the billions of dollars made by Turkmenistan in annual gas sales never made it to the poverty-stricken country’s budget. Instead, it says, they are kept in Frankfurt, in a Deutsche Bank foreign currency fund. Sole control of the account rests with Niyazov. From Turkmenistan, the report investigates a series of traders in Turkmen-Ukrainian gas deals starting with Respublika, a company headed in 1994 by Igor Bakai, a businessman who was later an adviser to Ukrainian President Leonid Kuchma. Respublika was followed by independent gas producer Itera, which had close ties to the Turkmen regime. Next was Eural Trans Gas, and finally RosUkrEnergo. Unclear ownership of these middlemen has led to billions of dollars in revenues being unaccounted for, the report says. RosUkrEnergo was set up in 2004 to replace its discredited predecessor Eural Trans Gas, but it has retained many of ETG’s directors, including three British citizens, Robert Shetler-Jones, David Brown and Howard Wilson, the report says. Concerns over RosUkrEnergo’s ownership structure led KPMG to resign as the trader’s auditor, Global Witness said Friday, citing a letter from KPMG to RosUkrEnergo. “The political situation in Ukraine and various allegations raised by the international press contain a risk of reputational damage to our company. ... An adequate assessment of these risks is not possible,” says the letter obtained by Global Witness, which is dated Oct. 17, 2005. ETG was founded in 2002 in a Hungarian village by Zeev Gordon, an Israeli lawyer who for more than 20 years has represented Semyon Mogilevich, a Ukrainian-born suspected organized-crime boss wanted by the FBI. Gordon told Global Witness that he had been asked to set up ETG by Ukrainian citizen Dmitry Firtash, the director of Highrock Holdings, a Cyprus-based holding company. Global Witness said Firtash was also the chairman of Nitrofert, a fertilizer plant in Estonia, which shares the same trading company as Crimean Soda Plant, which is owned by Shetler-Jones. The trading company, ACI Trading, has the same Cyprus-based nominee shareholders as a series of investment vehicles that owned ETG in 2004. The investment vehicles were directed by Shetler-Jones and Brown, the report says. When reached by telephone Friday, Shetler-Jones, who has held a position on the coordinating committee of RosUkrEnergo, refused to comment on the Global Witness and Wall Street Journal reports. Turchinov said in an interview in Kiev last month that his investigations into RosUkrEnergo and ETG had uncovered the involvement of Mogilevich, Kuchma and Firtash. Turchinov has said the investigation was closed down after Tymoshenko was fired last September and he stepped down as SBU chief. The current chief of the SBU, Igor Drizhchany, has denied there was ever any investigation into RosUkrEnergo by the SBU under Turchinov. While Yushchenko has stood by the Jan. 4 gas deal, Tymoshenko has called for it to be canceled. The rift between Yushchenko and Tymoshenko over the deal was a major campaign issue in last month’s Ukrainian parliamentary elections and is hampering attempts to build a new government coalition out of the Western-leaning parties run by the two former leaders of the Orange Revolution. Tymoshenko’s party came in second in the elections; she wants to be prime minister again. Gazprom spokesman Sergei Kupriyanov said Friday that so far there was no alternative to retaining RosUkrEnergo as the broker in the Ukrainian gas deal. He said RosUkrEnergo’s business was “transparent enough,” while Gazprom’s stake in the trader was transparent too. The ownership of the other 50 percent, he said, was a question for Ukraine. “We clearly defined our position,” he said, referring to Gazprom’s calls earlier this year for Ukrainian gas monopoly Naftogaz Ukrainy to buy the stake. Naftogaz has said, however, that it has not received any response to its proposals to buy the stake. Naftogaz president Oleksiy Ivchenko told a news conference in Kiev on Friday that his inquires into who was behind the stake had reached a dead end. “Should Ukraine seek further explanations? Yes, we have made requests to various institutions, including Gazprom, one of RosUkrEnergo’s owners,” he said, Reuters reported. When contacted by telephone Friday, Wolfgang Putschek, an executive at Raiffeisen Investment Group and a director of Centragas, the Vienna-based entity through which the unknown beneficiaries control half of RosUkrEnergo, declined to comment and referred all calls to Merlin, a London-based PR agency that represents Centragas. Michael Rommel, a director at Merlin, refused to comment Friday. TITLE: Russia to Invest Oil Wealth Abroad AUTHOR: By Gleb Bryanski PUBLISHER: Reuters TEXT: MOSCOW — Russia said on Monday it will soon invest a $61 billion oil fund in top-rated government securities, but analysts and politicians argued the country should diversify more and invest in riskier assets too. A document posted on the government’s web site said Russia would have the infrastructure in place to start investing the fund, which is gathering oil duties above a cut-off price of $27 per barrel, within the next two months. It said the fund may be invested in AAA-rated bonds issued by euro zone countries, the United States and Britain, as well as in U.S. dollars, euros and sterling. The fund was set up at the start of 2004 to cushion the budget from a slump in oil prices but has quickly outgrown its original task, becoming an important tool for mopping up excess liquidity flowing into the world’s No.2 oil exporter. Russia’s Finance Minister Alexei Kudrin told Reuters last week the fund, kept in ruble accounts at the central bank, will be de facto exchanged for part of Russia’s $212 billion gold and forex reserves, the world’s fifth largest. Economists, who see the fund as a major indicator of the Russian government’s control over budget spending and liquidity, welcomed the decision, but called on Russia to further diversify the fund’s portfolio in the future. “This is a very positive first step,” said Anton Tabakh, an analyst at AllianceBernstein in New York, which runs assets of over $600 billion and has won a mandate to manage part of Norway’s Government Pension Fund. “I hope in the future the list of assets will be widened, and there will be more diversification and more professional management.” Economists as well as some politicians in Russia argue that handing over some of the fund to asset managers to invest in riskier securities like stocks may bring higher returns, making it easier for ordinary people to understand why the fund should not be spent on immediate needs. Kudrin and his liberal allies in the government have so far resisted calls to spend the fund, but ahead of a parliamentary election in a country where the average pension is about $80 per month, the pressure is rising. Peter Westin, an analyst with Moscow’s MDM Bank, said Russia should have used the experience of Norway and Kazakhstan and chosen a third party manager for the fund. “It is vital to take the management of the fund out of the government house,” Westin said. Russia’s financial markets regulator Oleg Vyugin told reporters at the Russian Economic Forum in London the proposals to split the fund and diversify the portfolio into equities as well as bonds could take effect later. “I believe this plan will be realised also, but later on,” Vyugin said. Meanwhile, government chief of staff Mikhail Kopeikin, Kudrin’s chief opponent in the oil fund debate, told reporters in London that Russia was very close to a decision on investment in corporate stocks. “Only two months ago this proposal (to invest in shares) provoked a negative reaction. Now the central bank, the Economy Ministry and the financial markets regulator are all in favor,” Kopeikin said. Final approval of the rules, on which Prime Minister Mikhail Fradkov signed off last week, follows months of wrangling over who would control the stabilization fund and where Russia’s oil windfall would be put to work. In the end, Kudrin appears to have come out on top, defending his position that the fund should for the moment be invested conservatively in fixed-income securities and not in stocks as well. The document states that the bonds should have a top rating from at least two of the world’s leading rating agencies and a volume of no less than $1 billion, 1 billion euros or 500 million pounds in circulation. If the bonds in the stabilization fund portfolio no longer meet the initial criteria, they must be sold within one month. The nominal volume of one bond issue in the stabilization fund portfolio should not exceed 15 percent of the whole issue. The document said the Finance Ministry would manage the fund which will be placed in an interest-bearing hard currency account at Russia’s central bank. TITLE: `Reliable Partner` Meets Deutsche Bank’s Needs AUTHOR: By Yekaterina Dranitsyna PUBLISHER: Staff Writer TEXT: One of the West’s largest investment banks has entered the St. Petersburg real estate market. Local construction holding RBI and the RREEF investment fund, a subsidiary of Deutsche Bank Group, have announced a joint venture to realize development projects. The partners will invest about $500 million over the next two years. Deutsche Bank owns 75 percent of the created company, Kalister; RBI owns 25 percent. “With the exception of hotels, we will do all the different kinds of real estate projects — residential, warehouses, office and trading,” said Eduard Tiktinsky, general director of RBI. For each particular project Kalister will register a subsidiary that will acquire land plots. RBI will provide development services to those subsidiaries on a commercial basis. According to the agreement, RREEF will have priority over other investors to participate in RBI projects, which demand additional investment. With other projects RBI could finance and realize independently. Kalister will focus on mixed projects — construction of buildings that represent a combination of residential and commercial real estate. “We are looking for large land plots, mainly for industrial plants on embankments, where good business or shopping centers could be built,” Tiktinsky said. “We are not only ready to buy plants but also to realize the more complicated projects of moving them outside the city center,” he said. Tiktinsky indicated Vyborgskaya embankment as one of his company’s options. The partners will invest $85 million into construction of 25,000 square meters of residential and 15,000 square meters of office space in a building at Novgorodskaya ulitsa. The company has already bought a plot of 1.2 hectares. It is Deutsche Bank’s first investment into real estate in the country. Despite the large population of many Russian cities, RREEF would not embark on real estate projects without having found local partners, said Alister Dickson, head of the European division at RREEF. “We’re in St. Petersburg because we were fortunate enough to meet a reliable partner,” he said. Pier Cherky, managing director of RREEF, said that the fund was slow to come into the Russian market “not because it was not interesting but because real estate projects here were not suitable for us and the potential partnership was not transparent.” RBI and RREEF chose Salans, CMS Cameron McKenna and Jones Lang LaSalle as consultants for the joint venture. Within three to five years a number of international firms specializing in the Russian market will emerge, Dickson said. RREEF is planning to invest $1.5 billion into equity partnerships over the next three years, which means a total investment of about $7 billion to $8 billion. Igor Gorsky, director for development at Becar, described the appearance of a large conservative portfolio investor as a notable event for the Russian market. “This deal could convince many foreign insurance, investment and pension funds that the real estate market in St. Petersburg is profitable and transparent, that they could operate here and make a profit,” Gorsky said. He said that the profitability of the joint venture could vary between 20 percent and 25 percent, with a payback period of four to five years. Having undergone a serious array of financial and structural checks RBI has now stepped up to a higher level of development, Gorsky said. Multifunctional zoning was something he regarded as potentially rewarding. “Unlike Moscow, St. Petersburg has not been overly spoilt by investors’ attention in recent years, and thus our city has the advantage of less competition. A pioneer could ‘skim the cream’,” said Boris Yushenkov, general director of Colliers International in St. Petersburg. “Specialists think that Moscow will soon exhaust its potential for growth, while St. Petersburg has only started to realize this potential. I think Deutsche Bank will not limit itself to St. Petersburg and will soon start similar joint ventures in other regions of Russia,” Yushenkov said. TITLE: Kudrin Questions Dollar’s Role PUBLISHER: Reuters TEXT: WASHINGTON — Finance Minister Alexei Kudrin said Friday he did not view the U.S. dollar’s status as a reserve currency as absolute, given the volatility in its value over the past several years. Kudrin, in Washington for the semiannual meetings of the International Monetary Fund and World Bank, told reporters at a news briefing the dollar’s value had not been very stable in the past several years, particularly against the euro. “This causes significant changes in the international situation and that is why we do not understand the U.S. dollar at the moment as the universal or absolute reserve currency,” he said. “The international community can hardly be satisfied with this instability.” “Whether it is the U.S. dollar exchange rate or the U.S. trade balance, it definitely causes concerns with regard to the dollar’s status as a reserve currency,” Kudrin added. The euro jumped nearly half a cent against the dollar to a session high of about $1.236 after Kudrin’s comments. Turning to the issue of Russia’s proposal to repay around $12 billion of debt owed to the Paris Club of international creditors, Kudrin said he expects a decision as early as next month. Russia, which has benefited from the skyrocketing price of oil, paid back $15 billion of debt last year. But Kudrin did not comment on the $28 billion of additional debt owed to the Paris Club and a potential schedule of repayment. Also Friday in Washington, finance chiefs from the Group of Seven singled out China as a country that needs to pursue more exchange rate flexibility to help restore balance in the global economy. In a final communique and in a separate one-page annex, the G7 finance ministers and central bankers turned up the heat on Beijing to let its yuan currency rise. The G7 also welcomed a bigger role for the International Monetary Fund as a global currency watchdog at a time of heightened anxiety about a potential dollar fall. TITLE: SPIBA Annual Meeting and Awards Ceremony 2005 TEXT: Following a long-term tradition, members of the St. Petersburg International Business Association for North-Western Russia (SPIBA) held their Annual Meeting on April 19, 2006, in the restaurant Le Vernissage of the Ambassador Hotel. SPIBA friends and partners, regional and federal officials also took part in the event. Ludmila Murgulets, Chairperson of the SPIBA Executive Committee, Vice-President, Stockholm School of Economics in Russia, opened the meeting:"We can meet, we can share our experience, we can acquire new knowledge and contacts – this makes people happier." Alexander Ivannikov, Deputy Chairperson of the St. Petersburg Committee for Economic Development, Industrial Policy and Trade, greeted SPIBA members on behalf of the Committee and wished SPIBA effective work in future. He also thanked SPIBA for its active cooperation with the City Government, which is targeted at the improvement of the investment climate in St. Petersburg. The meeting featured the SPIBA Awards Ceremony 2005. We congratulate the winners! SPIBA Awards 2005 nominations and winners: THE MOST INTERESTING SPIBA GUEST-SPEAKER OF THE YEAR 2005 Winner: Natalia Evdokimova, Chairperson of the Commission for Social Affairs of the St. Petersburg Legislative Assembly. She made a very interesting presentation “Monetization as an indicator of distribution of power between the center and the regions” at the round table organized by SPIBA in partnership with the European University in St. Petersburg in April 2005. The Award was presented by Mr. Alexey Zelentsov, Regional Manager North-West Russia, Kelly Services, and by Ms. Alla Vinnik, General Director, FINTRA. Natalia Evdokimova expressed her thanks for the award. She stressed that social responsibility of business is very important, and mentioned that the St. Petersburg Legislative Assembly appreciates efforts made by the business community to improve the prosperity of the city very much. THE BEST SPIBA EVENT MODERATOR OF THE YEAR 2005 Winner: Ms. Oksana Pochtivaya, Operations Manager, ANCOR The Award was presented by Sebastian FitzLyon, member of SPIBA Executive Committee, General Director, S.Zinovieff & Co., Honorary Consul of Australia in St. Petersburg. THE MOST ACTIVE SPIBA LEGISLATION AND LOBBYING COMMITTEE MEMBER IN 2005 Winner: Elena Safonova, Tax Manager, PricewaterhouseCoopers Russia BV, St. Petersburg The Award was presented by Co-Chairpersons Legislation and Lobbing Committee: Dmitri Babiner, Senior Manager, Head of Tax Practice, St. Petersburg, Ernst & Young (CIS) BV (the winner of this award for 2004), and Elena Zaitseva, Senior Associate, DLA Piper Rudnick Gray Cary, St. Petersburg. THE MOST ACTIVE SPIBA ADVISORY BOARD MEMBER 2005 Winner: Edward Tiktinsky, General Director, RBI Group, the member of Advisory Board for SPIBA THE MOST ACTIVE SPIBA EVENTS SUPPORTER IN 2005 Winner: Baltika Breweries Dmitry Kistev, Export Sales Director of Baltika Breweries received the Award on behalf of the company. The Award was presented by: Nikolay Asayl, Deputy Chairman of the St. Petersburg Committee for Investments and Strategic Projects, and Christian Courbois, member of SPIBA Executive Committee, General Director, WESTPOST. THE MOST ACTIVE SPIBA HR COMMITTEE MEMBER 2005 Winner: Steve Derrick, Human Resources Director, International Paper OAO Svetogorsk Nelly Mescheryakova, PR & GR Director, International Paper OAO Svetogorsk, received the Award on behalf of Mr. Derrick. The Award was presented by Andrey Korzhakov, General Director, Elcoteq. Special nomination established by the SPIBA Executive Committee – FOR INPUT INTO SPIBA’S DEVELOPMENT Winner: Patrik StrÚm, Financial and Administrative Director, ZAO Kappa St. Petersburg The Award was presented by Ludmila Murgulets, Chairperson of the SPIBA Executive Committee, Vice-President, Stockholm School of Economics in Russia. The participants in the meeting emphasized that SPIBA performed an important role in the region, successfully achieving its main objectives: to lobby for the improvement of the investment climate and to provide a networking platform for the exchange of views and ideas on business matters in Northwest Russia. We would like to extend our sincere gratitude to all SPIBA members for their tremendous support and sincere dedication, which are the main secrets of SPIBA’s success. When we are together, our mission is possible. Special thanks to supporters of the SPIBA Annual Meeting and Awards Ceremony: TITLE: NGO Legislation Causes Concern Among Charities AUTHOR: By Viktoria Dijakovic PUBLISHER: Special to The St. Petersburg Times TEXT: Developments in Russian legislation on non-governmental organizations could, potentially, bring radical changes to the work of numerous non-profit organizations in the city. With numerous charity projects just beginning to establish themselves, concerns about future developments have been expressed by various institutions. On January 10, 2006, President Vladimir Putin ratified a controversial piece of legislation that places significant constraints on the freedom of both Russian and foreign non-governmental organizations. The revised legislation is solely focused on non-profit organizations, and especially on representative bodies of foreign organizations. Western states have heavily criticized this emphasis, considering it undemocratic. U.S. Secretary of State Condoleezza Rice, as quoted by the Washington Post, expressed her disapproval of the law, stating that nongovernmental organizations are important participants in a stable democratic environment and that such bodies in Russia “are simply trying to help citizens to organize themselves better, to petition their government to make changes in the policies that affect their very lives. That’s the essence of democracy.” Russian officials have described the motivation behind the law as a desire to fight terrorism and financial graft. Speaking in December, Sergei Lebedev, the head of Russia’s Foreign Intelligence Service, cited evidence that foreign spies were using Russian humanitarian organizations and NGOs as a cover. Critics of the bill and directors of various Russian NGOs, however, stated that the bill reflects the Kremlin’s fear of uprisings such as those that have occurred recently in Ukraine, Georgia and Kyrgyzstan — uprisings that many within the Kremlin believe to have been at least promoted by western states. If the law is enforced, it would entail the re-registration of all NGOs, with funding sources and specific activities to be listed. In addition, it could lead to the closure of certain organizations whose profile does not correspond to the requirements set out by the legislation. For example, as stated in the “analysis of Law No. 18-FZ” by the International Center for Not-for-Profit-Law, the new legislation would allow government officials to deny registration to an organization if the “goals and objectives … create a threat to the sovereignty, political independence, territorial integrity, national unity, unique character, cultural heritage and national interests of the Russian Federation.” In addition, Rosregistration, Russia’s registration authority, would be free to request any documents detailing the organization’s governance, including day to day policies, supervision of the organization’s management and overseeing of its finances. It will also be allowed to send a government official to all of the organization’s events, without restriction. That means that any government representative could hypothetically attend “the internal strategy sessions of a network of environmental organizations [planning] a protest against government environmental policies, interfering with the group’s ability to carry out the campaign.” Furthermore, heavy restrictions, or prohibition altogether, would be implemented on foreign nationals considered “undesirable” who wish to found, participate in or join a public association or NGO. These new requirements raise a number of issues. According to The International Center for Not-for-Profit Law, “the Russian Federation has the obligation under the European Convention on Human Rights (ECHR) Article 11 to affirmatively protect the right to association, and may only interfere with the exercise of that where ‘necessary in a democratic society’ for compelling state reasons.” Moreover, the right to form a non-profit organization to pursue common goals has been recognized under international law as protected by the right to free association. In most other countries, organizations registered as non-commercial and non-governmental have relatively extensive freedom of action. In Switzerland, for example, there is no specific law to cover the activities of NGOs and there are no specific legal requirements applicable to NGOs. The definition of a nongovernmental organization according to the Swiss legislation is “an organization which is created through an appropriate act under national private law whose aim is to serve the international community as a non-profit-making organization” and whose operational headquarters are in the same country or in another country. The United States follows similar guidelines. However, there is a specific law, the Foreign Agents Registration Act (FARA), which decrees the behavior of such bodies. An aspiring NGO is exempted from all of FARA’s strict guidelines when the purpose of the organization is private, nonpolitical, and in furtherance of bona fide religious, scholastic, academi aims or involves scientific pursuits or the fine arts. Also exempt are those whose goal is the furtherance of “bona fide trade or commerce of such foreign principals, or activities not serving predominantly a foreign interest; or in the soliciting or collecting of funds and contributions within the United States to be used only for medical aid and assistance, or for food and clothing to relieve human suffering.” The strict guidelines in Russia’s nongovernmental law are not only openly discriminatory to any foreign body or individual, but also potentially harmful for those individuals or bodies that engage in such difficult and vital tasks for the wellbeing of the Russian population, working in the fields of HIV/AIDS prevention, providing care for the homeless, fighting drug abuse and the like. Humanitarian Action is a Russian non-profit organization that tackles serious issues with street children, prostitutes and drug addicts in St. Petersburg. There are about 1 million street children in Russia, mostly inhabiting the larger cities. In 2005, 23 percent of the children treated by Humanitarian Action tested HIV-positive and of a total of 1,437 registered by the organization, only 24 could be found housing in public orphanages through St. Petersburg’s Center for the Prevention of Homelessness and Drug Abuse. The bulk of Humanitarian Action’s funds come from foreign grants and donations. The director of Humanitarian Action, Alexander Tsekhanovich, said that the new legislation might have some positive aspects, but it may have a negative effect on funding. One of the NGO’s grant donors, for example, is the Ford Foundation: a representative branch of a foreign organization that employs a number of foreigners. Steve Solnik of the Ford Foundation said that the organization will continue its activities on Russian territory for the time being, though what lies ahead is unclear. Although the original revisions to the law have been softened into its current state — in the first draft all foreign organizations were to be shut down —specific guidelines for re-registration and restrictions on their activities have yet to be determined. Solnik expressed a hope that there would be a more specific definition of future requirements. A significant proportion of NGO financing comes from grants and charity donations from abroad. The benefactors range from small foundations or humanitarian organizations up to big players such as UNICEF, UNDP, Ford Foundation, UNFPA, Elton John AIDS foundation, and Open Society Institute. While the organizations contacted said the government has not yet given any specific instructions on the interpretation, they added that their work is important for Russian society and that without foreign financial support their existence will be jeopardized. For the time being, local NGO workers are more concerned about the interpretation the new legislation will be given, rather than its specific contents. In the words of one NGO director who wished to remain nameless, “The written law is one thing, and the law used in practice is another.” TITLE: Potanin to Host Reality Show AUTHOR: By Francesca Mereu PUBLISHER: Staff Writer TEXT: MOSCOW — Taking his cue from American real estate tycoon Donald Trump, metals magnate Vladimir Potanin is set to host his own, prime-time reality show — “The Candidate.” If “You’re fired!” has become a staple of American television talk, Russians can look forward to “Vy uvoleny!” The show, which will be aired on the TNT channel, will closely mirror Trump’s “The Apprentice.” Sixteen eager, wet-behind-the-ears candidates aged 20 to 35 will compete for a top job at Potanin’s Interros. The job comes with a yearly salary of 3 million rubles, or more than $100,000, and, as in “The Apprentice,” the prestige (and, presumably, financial benefits) of being a national television celebrity. Potanin said in a statement that the ideal candidate should have “bright eyes” and a gift for business-building. “He should be able to build a team of like-minded people, and also he should be flexible but consistent in reaching his aims,” he said. But unlike Potanin’s American counterpart, who hardly needs to convince his viewing audience of the merits of capitalism, the oligarch faces something of a PR battle — created, in part, by himself. Potanin and Alexander Mitroshenkov, the show’s producer, said they hoped the new series, slated to begin running in mid-August for 14 weeks, would help change negative attitudes toward the rich. “I want people, in particular the young, to understand that success in life and in business is not manna from heaven but the result of hard work, study and self-improvement,” Potanin said. A former Soviet foreign trade official, Potanin served as deputy prime minister in the 1990s and built a media and metals empire during that time. In the mid-1990s, Potanin and a handful of other tycoons pocketed billions when they snatched up huge oil and mineral assets at a fraction of their value in the highly controversial loans-for-shares scheme that helped re-elect President Boris Yeltsin. That included the purchase of Norilsk Nickel, the world’s biggest nickel producer, for which Potanin and his partners paid several hundred million dollars and which is now worth nearly $22 billion. Unlike fellow oligarchs Boris Berezovsky, Vladimir Gusinsky and Mikhail Khodorkovsky, all of whom have fallen out of favor with the Kremlin, Potanin has been determined to toe the party line. Mikhail Leontyev, anchor of the program “Odnako,” on Channel One, said that despite widespread disdain for the oligarchs, Potanin may be able to curry favor with Russians. “People love showmen, and they forgive them even when they do something wrong,” Leontyev said. “He is a first-generation oligarch, and like all of them he shares a kind of decadent personality. This is very good for show business.” Leontyev added that, unlike Donald Trump, Potanin has a shyness problem. “He is a bit of an introvert, but I’m sure that a good psychologist can help him open up,” he said. Mitroshenkov appears to have no reservations about Potanin’s on-air persona. “He has the right charisma, loves risk and likes playing games,” the producer said in a telephone interview. “Who better than him could host such a show?” Potanin, 45, is much better known to Russians than Trump and is three times as rich as the American. According to the U.S. edition of Forbes magazine, which last month published a list of the world’s richest people, Potanin’s empire of nickel mining, banking and property holdings was worth $6.4 billion, compared with Trump’s paltry $2.6 billion. TITLE: Foreign Firms Plan To Raise Investment AUTHOR: By Anna Smolchenko PUBLISHER: Staff Writer TEXT: MOSCOW — Over 90 percent of foreign businesses plan to expand their operations and increase investment in Russia over the next three years, attracted by brisk sales and rising profits, an annual survey of foreign businesses said. But while most foreign firms are upbeat on Russia’s growth potential, they remain frustrated by a lack of government progress on issues such as corruption and excessive red tape, according to the survey of 155 current and potential investors presented Friday by the Foreign Investment Advisory Council. “It’s disappointing to see that barriers we identified in 2004 are still there,” said Herman Verstraeten, chairman for Russia and Ukraine at consumer goods giant Unilever. Those in attendance included Economic Development and Trade Minister German Gref, who — along with most of the Russian representatives — stayed for about half of the two-hour discussion, leaving foreigners to discuss issues among themselves. The first FIAC survey was released in March 2005. The council was set up by the government and foreign businesses to improve the investment climate in Russia in 1994. Asked about the main investment barriers in Russia, 84 percent of this year’s 154 respondents said their key complaint was about administrative barriers, including an excessive need for permits and too much red tape. The grouch list also included corruption (78 percent), inadequate and inconsistent legislation (71 percent), selective application of the law (67 percent) and inadequate protection against unethical business tactics (39 percent), the study said. Last year, the top obstacle to the inflow of foreign capital was corruption (71 percent), trailed by impediments like administrative barriers (66 percent) and selective application of the law (56 percent). In terms of its attractiveness, foreign firms will stick with Russia, due to the sheer size of the market and sustained growth rates. Gref welcomed the figures on planned investment, saying: “If the survey hadn’t been done by independent investors, I would have thought it had been somewhat sugarcoated.” And he stressed the government was beginning to stamp out corruption, pointing to a new law regulating state procurement that has increased the transparency of the state’s purchasing practices. The Finance Ministry will have to hold more than 100 tenders this year to comply with the law, up from 19 tenders in 2005, Gref said. Halfway through Friday’s meeting, the ranks of Russian officials dwindled, as many had to leave to attend meetings in the presidential administration, Gref’s deputy, Kirill Androsov, said. TITLE: Following Stagnation, Property Prices Start to Pick Up AUTHOR: By Andrei Musatov PUBLISHER: Vedomosti TEXT: Property prices are on the rise again. The price levels forecast for August have already been reached by April. After two years of stagnation, the city’s construction industry has noted the increase in sales with pleasure, but experts are warning buyers not to fuel the hysteria that can lead to an uncontrollable rise in prices. According to the company Peterburgskaya Nedvizhimost, at the end of the first quarter prices for new homes were rising at a speed of 3.5 percent a month — two years ago was the last time the city saw such a high rate of growth. Ilya Yeremenko, director of project development at Peterburgskaya Nedvizhimost, said that prices were rising from month to month: traditionally inert January saw a growth of 1.1 percent, while in March prices had already risen by 3.5 percent. The increases in prices forecast to come about by August or September have already been realized in the spring and it’s likely that this rate will increase still further, said Yeremenko. Over April the price of one square meter in a new residential building will rise by four to five percent, he predicted. According to estimates from the director general of the association “Building and Industrial center of the North-East,” Mikhail Viktorov, prices are rising even faster. The expert said that during the first two months of the year prices had already increased by seven to 10 percent; by the end of 2006 they will have increased by 30 to 35 percent — from $1100 per square meter to $2000 per square meter. The commercial director of the company RBI, Mikhail Voziyanov, said that his company has increased prices by 15 percent over the last month. “We are forced to increase our prices in order to maintain a steady volume of supply,” he explained. Denis Tikhonov, general director of the construction firm “M-Industria” said that the current increases are a direct consequence of processes that have taken place over the last two to three years. During this period the St. Petersburg market saw a decrease in demand for property. With both the new law ‘about participation in share building’ and the new Housing codex, the period from the summer of 2004 to October 2005 was one of market adjustment. Builders reacted to the new legislation by reducing the amount they planned to build — only 150 surveys were decreed by City Hall from January to September 2005 (during the first half of 2004 about 400 surveys were decreed). This then leads to the predominance of demand over supply, Tikhonov said. This demand has already been felt — from the fourth quarter of 2005 to February 2006 company sales rose by 86 percent. Overall this year an increase of 20 to 25 percent in sales compared to 2005 has been forecast, he said. Yeremenko mentioned several other reasons for this increase in demand, such as the development of mortgages and rising standards of living. According to data from St. Petersburg’s mortgage agency, in 2004 around 1500 mortgages were granted, in 2005 more than 4500, and during the first quarter of 2006 banks have already granted 1800. Altogether, according to a forecast by the Association of Banks of the Northwest, 7500 to 8000 loans for the purchase of flats, amounting to $270 to 285 million, will be conferred in 2006. It is difficult to establish how much of this sum is put into new property, but the director of RBI, Eduard Tiktinsky, said that about half of the clients received by their sales department apply for mortgages, and most applications end up being accepted. Oleg Barkov, who is general manager of the company Knight Frank and responsible for operations in St. Petersburg, also notes the effect of mortgages on sales. Although the conditions for taking out such loans have not become that much easier, people have got used to living on credit. And starting from the second half of 2005, developers have at last felt the effect of mortgages, said Barkov. Yeremenko fears that builders will be unable to satisfy these new levels of demand. According to Voziyanov’s estimate, a decrease in supply in 2006 could come to tens of percent. Tikhonov said that the volume of new projects proposed for completion in 2007 amounts to approximately half today’s level of demand. In three to six months, it’s possible the 2004 scenario will repeat itself, with prices rising to such an extent that demand is checked, said Yeremenko. According to Barkov, those developers able to find the financing for new projects will end up the winners. Vyacheslav Zarenkov, the president of the holding Etalon LenspetsSMU, estimates that each of the city’s top five developers increased their investment into construction by 30 to 40 percent last year. According to City Hall’s Building Committee, the city’s top five companies responsible for completed building projects in 2005 are LenspetsSMU (about 280 000 square meters); LEK (270 000 square meters); IVI-93 (80 500 square meters); Lenpromstroy (52 000 square meters); and D S K Blok (45 000 square meters). In 2005 a total of 2.27 million square meters were built. For other market players the situation is not as rosy. According to data from the Association “Soyuzpetrostroy,” the overall number of city construction firms decreased by 13 percent in 2005, with the volume of investment into fixed capital decreasing by 45 percent. The more far-sighted builders tried to avoid reducing their number of new projects, understanding that a decrease in demand was only a temporary phenomenon, said Barkov. But only big companies could afford to operate in this way. Smaller players, unable to find new plots, have been forced out of the market. TITLE: Mandatory Insurance Could Replace Construction Licenses AUTHOR: By Anastasiya Lebedev PUBLISHER: Staff Writer TEXT: Construction is booming across the country, but upcoming deregulation of the sector, combined with public attention on the industry after a series of fatal building collapses, has prompted calls for improvement. Major changes are coming on Jan. 1, when construction licensing is set to be scrapped. Ahead of this deadline, State Duma Deputy Viktor Pleskachevsky has proposed introducing mandatory liability insurance for developers as part of a larger effort to improve the regulation of the construction industry. The liability mechanisms now available in the construction industry offer inadequate protection, Pleskachevsky, the head of the Duma’s Property Committee, said at a recent round table held to present the proposal to the industry. Currently, liability insurance is optional, and civil liability is limited to the amount of a contractor’s charter capital, frequently registered to be no more than the required 10,000 rubles ($363), he said. Negligent construction companies also run the risk of losing their license, but only 103 of the industry’s more than 240,000 licenses were annulled between 2004 and 2006, Pleskachevsky said, adding that the government’s licensing agencies were simply too short-staffed to efficiently monitor builders. At present, licenses are required for construction, planning and engineering. A law eliminating construction licensing was passed in 2005. The Economic Development and Trade Ministry had argued that the licensing process offered too much opportunity for corruption. A proposed industry self-regulation law is not yet ready, however, and some industry players expect that licensing may have to be extended for another year. Highly prominent accidents such as the collapse of the Transvaal water park and the Basmanny market have played a role in focusing public attention on liability insurance for builders, said Vladimir Karyukin, deputy general director at Gefest insurance company. In both cases, the victims’ families received compensation from Moscow city authorities, which provided it as an act of good will. Karyukin said no more than 7 percent of all construction projects are insured in Russia, compared with nearly 100 percent internationally. Demand for liability insurance has been growing in the industry, but it remains unpopular outside of Moscow and St. Petersburg, insurers say. The cost, which can add from 0.5 to 2 percent onto a project’s budget, is not taken on willingly in an industry that frequently complains about other costs going up. Pleskachevsky’s proposal is to insure the liability of various professionals involved in the construction process, such as architects, designers, builders, contractors, owners, managers, maintainers and manufacturers of construction materials, covering all possible risks. Currently, the most popular types of such insurance cover the risks associated with the cost of construction, such as accidents that might lead to financial damages or injuries to third parties. Such insurance policies, however, do not last beyond the construction stage and do not insure against the risk of design flaws, which may be discovered much later, as the prosecution has alleged in the case of Transvaal. While some insurers and developers sign Western-style policies that provide coverage against all but a specific number of risks, many projects are insured by policies that specify a list of risks covered. TITLE: On the Sunny Side of the Street AUTHOR: By Niall Ferguson TEXT: I am by nature and upbringing a pessimist. As a boy in Glasgow, I was encouraged to expect the worst, on the principle that by doing so you’ll never be disappointed and sometimes you may even be pleasantly surprised. This is not the American way. Optimism is in the DNA of the U.S. Louis Armstrong epitomized the upbeat national mood in that wonderful song “On the Sunny Side of the Street”: If I never had a cent I’d be rich as Rockefeller Gold dust at my feet On the sunny side of the street Nowhere is that sunny side sunnier than in Miami. I went there last week and was dazzled. The place is more than booming. Red Ferraris and black Hummers line the boulevards of Coral Gables. The good times have returned to the Biltmore Hotel, that glorious masterpiece of Roaring ‘20s architecture. Tourism, which is Miami’s biggest business, has more than recovered from the shock of 9/11. Thanks to surging trade volume, both the port and the airport are thriving. Financial services are growing apace. Unemployment is low. Pick up the Miami Herald and you find full-page advertisements with messages such as “Create Generational Wealth Through Real Estate” and “No money? It matters not. Bad credit? No problem. No education? So what. Over 65? There’s still time to change your financial future.” The sunny side of the street indeed. Note too that Miami’s prosperity is a triumph for free migration as well as free trade and the free market. The population of Miami-Dade County is 57 percent Latino, largely though by no means exclusively Cubans. Yet the contrast with shabby, down-at-heel Havana could scarcely be more stark. However, if history is any guide, our present golden age of globalization is unlikely to endure. It could be ended by a geopolitical crisis. Or it could be ended by a gradual domestic backlash. Should Americans — and especially Miamians — be less optimistic? Conventional wisdom has it that they should. Economists want them to save more. Environmentalists want them to consume less. Well, be careful what you wish for. For roughly a decade, the global economy has been propelled forward by the insatiable consumption of U.S. households. Consumption accounts for about 70 percent of the U.S. gross domestic product, and U.S. growth has recently accounted for more than half of global growth. The appetite of Americans for imported clothing and gadgets has been one of the engines of China’s economic miracle. American consumption depends critically on American optimism. Why? Because it is only by saving literally zero percent of their incomes and borrowing to the hilt that U.S. households have been able to keep on consuming, as they say, to the max. To take a look at the finances of the typical American family is to see optimism in action. According to the 2006 Retirement Confidence Survey, six out of 10 American workers claim they are saving for their retirement. In reality, more than half have less than $50,000 set aside (excluding the value of their homes), and more than a third have less than $10,000 in savings. Similarly, most Americans say they expect to work until age 65. But in reality, the average retirement age is 62. This is what it means to walk on the sunny side of life’s street. You simply don’t contemplate the possibility that you might get made redundant, or fall sick, or get old. You hang on to that American dream that you’ll be one of the lucky few who scales the socioeconomic ladder to become “rich as Rockefeller.” The decline of the U.S. personal savings rate from about 8 percent in the 1980s to below zero percent today is in itself a remarkable phenomenon. Almost as impressive has been the sustained rise in American indebtedness. Again, this borrowing bonanza has been based on optimism. As they pile up debt, Americans reassure themselves that the other side of the balance sheet is going to justify the risk involved. Most households have one big asset — their home. Its value has risen steeply over the last decade. The assumption is that this inflation in the real estate market will continue. The world, as I’ve said, has reason to be thankful for American optimism. By the same token, however, the world has reason to dread an American mood swing. Interest rates have been rising steadily since the summer of 2004, driving up the cost of servicing credit card debt and adjustable-rate mortgages. And it’s generally assumed that the Federal Reserve will raise rates again next month. At the same time, Americans are coming to realize that energy prices are not going to go down anytime soon. A quadrupling of interest rates and a trebling of oil prices is quite a combination. “The only thing we have to fear,” declared Franklin Roosevelt during the Depression, “is fear itself.” That fear has been long absent from American life. But we should never forget what a devastating thing it can be on those rare occasions when the U.S. crosses over to the shady side of the street. Niall Ferguson is a columnist at the Los Angeles Times, where this comment first appeared. TITLE: Managing Risk: Efficiency in the Customs Service AUTHOR: By Wilhelmina Shavshina TEXT: Today Russia again sees itself as a seat of world power — the forthcoming G8 summit, to be held in St. Petersburg, might be viewed as confirmation of this standing. As part of this feeling, Russia’s international trade is at a stage of dynamic development. But this complicates the goals set for the country’s customs system in terms of making effective use of the resources of customs control. In turn this requires a radical change in the approach of customs authorities to customs control. With the goal of devising new approaches to the work of customs authorities, the Concept for the development of the customs bodies of the Russian Federation, approved by the Government of the RF on 19 December 2005, stipulates a number of measures aimed at the improvement of customs administration. Risk Management System (RMS) — The Theory. The Kyoto Convention, as a basis for Russian legislation, considers, among other things, the use of the RMS in choosing a certain form of customs control. It also mentions the application of risk analysis for the defining of goods, transport vehicles, documents and individuals subject to verification, as well as to the degree of such verification. Customs authorities, in determining their customs control strategy, should act on the basis of a risk evaluation measurement system. That is to say that an effective system of customs administration based on RMS should be put in place, so as to enable effective random customs control in the areas at highest risk of violations. Such violations are related to the repeated, large-scale evasion of customs duty, undermining the competitive ability of Russian manufacturers and affecting state interests. Such targeted control should make customs formalities as simple as possible for the bulk of goods and transport vehicles involved in foreign trade. With the slogan Customs Control as a Service, the Russian customs system should, on the basis of RMS, bring customs procedures in compliance with WTO criteria. RMS — In Practice. In practice RMS is aimed at creating a single space for the development of risk detection methods; for the determination of potential risks; for the recording of detected risks; and for the determination of the reasons and conditions governing the violation of customs rules. The use of RMS is actively illustrated in the customs system. The most prominent example is the creation of risk profiles (RP). A risk profile is the totality of data on a particular risk area (information on individuals, documents and goods). The risk indicators, i.e. the conditions necessary for the application of the risk profile in regards to the customs value of goods, for instance, are, above of all, the FTCC codes of goods, and secondly, the cost of goods per unit. At the same time, customs authorities are currently in the process of an overall analysis of the customs clearance of “deficit” goods, with the purpose of reinforcing the control of the customs value of goods. ‘Deficit goods’ (based on their value) are understood as goods, whose median value as imports into Russia is considerably lower than the median value of goods exported from partner-states into Russia. The customs authorities have been set the goal of reducing discrepancies in the median cost two per kilo and/or additional unit of measure (kilo, cubic meter) of deficit goods as imports into Russia from partner-states and as exports from partner-states to Russia. The risk profiles are meant for Internal Use Only. It is inadmissible that foreign traders should have access to such information, something justified by the state’s right to use secret mechanisms in the interests of national economic security. A considerable part of RP relates to the customs value of transported goods. One of the most effective measures of minimizing the risk of misreporting goods is through identification at customs clearance. Each risk profile indicates the volume of clearance, the degree of clearance (random weighing, recalculation of cargo package with random opening), the use of photo, video and other recording equipment as well as the frequency and periodicity of clearing cargo. Thus, in practice, risk profiles are fraught with a whole series of additional encumbrances for foreign trade activity. RMS. Minimizing the Use of Risk Profiles. The WTO’s Kyoto convention necessitates a dialogue between the customs system and business. In this way the customs administration will consider the needs of commercial and transport operators, and search and implement effective working methods, including control. It is important to note that in the sphere of customs regulation in Russia, a dialogue between business and customs authorities has always existed, though both parties were not always on an equal footing. Customs practice shows that a union of state and business is tentatively realized only when defending the domestic market from foreign competition. The customs system in dialogue with business, for all the strictness of customs administration, has always offered an alternative. It seems that today as never before it does have a normative base on which it rests. In order to avoid the application of a particular risk profile, one can, firstly, make use of special, simplified procedures (filing a periodic customs declaration, release of goods at submission of information required for identification of goods, storage of goods in own warehouses, etc.); secondly, apply to be included on a special list of companies who enjoy partial customs control; and, thirdly, a provision can be used for a special method of controlling the customs value of transported goods, spreading the risks of applying customs value control to a number of goods. This last way is the most effective for RP, as far as customs value is concerned — one does not have to continuously provide all the necessary documents and information at customs clearance. This method also allows one to forego clarification of the physical characteristics and credibility of goods and the conditions of concluding a transaction, affecting transaction price (related to RP). For example, in the event that one fails to furnish all the required information, the customs system will forward respective inquiries (including those related to assistance in obtaining required information) to the export country. This will minimize the potential discomfort experienced by a foreign counterpart when using RMS. Wilhelmina Shavshina is Senior Associate, PhD in Law, Head of Customs Practice at DLA Piper Rudnick Gray Cary in St. Petersburg. TITLE: Value of M&A Doubles in 2005 AUTHOR: By Yekaterina Dranitsyna PUBLISHER: Staff Writer TEXT: The value of merger and acquisition deals in Central and Eastern Europe more than doubled last year, according to a survey released last week by PricewaterhouseCoopers. The 1,848 publicly announced private transactions, in ten countries of the region, amounted to $91.2 billion. The average value of disclosed deals increased from $52.1 million to $71 million in 2005. “Mega deals continue to be a significant factor — 15 percent of deals were greater than $100 million, up from 11 percent in 2004,” said Steven Berger, Transactions Partner at PwC. The trend for larger deals also held true for privatisation, which represents a 25 percent share of total transactional activity in the region. Although the number of privatisations in the region decreased by 19 percent, their value was significantly higher, with an estimated market size of $22.8 billion, representing an 84 percent increase on 2004. According to PwC, the number of transactions within each industry has been consistent over the past couple of years. The most active sectors were manufacturing, financial services, energy and utilities, and food and beverages. “Structural changes — such as entrance into the WTO and changes in regulation — should increase acquisition or consolidation in a number of sectors. In the short and medium-run we believe that several sectors, including the financial sector, and commercial banks in particular, will experience a heavy increase in the volumes of cross-border and domestic deals,” Berger said. Last year the number of cross-border deals was three times higher than in 2004. Nevertheless, 56 percent of all deals were domestic transactions, driven by the Russian domestic M&A market, where this rate was 72 percent, according to PwC. Russia represented half of the total market value in the region and remained the most active market: 706 deals worth $52.5 billion. The size of the Russian M&A market grew by 73 percent in 2005. Domestic (72 percent) and inward (19 percent) transactions represent 91 percent of the total deals closed. The majority of outward deals were targeted at the Ukraine. The manufacturing, financial services and energy and utilities sectors saw most activity, the latter accounting for 42 percent of the estimated total Russian market value. The average size of private transaction in Russia was $174.5 million in 2005. Wilfried Pototschnig, Head of Mergers and Acquisitions and Private Equity Group at KPMG, said that M&A will develop quickly as a result of “large state-driven domestic deals, predominately in the energy and natural resource sectors, and the continuation of second wave M&A — basically foreign investment into a whole raft of deals related to the consumer and driven by the continuing increase of disposable income.” According to KPMG, the value of deals involving Russian outbound acquisitions totalled $8.5 billion last year, while that of foreign companies acquiring Russian businesses reached $4.3 billion. Total cross-border deal flow, both inbound and outbound, made up 32 percent of the total value. “Outward expansion by Russian corporations has become a steady trend over the past few years, with double-digit growth rates, but the segment is still heavily skewed by a small number of large deals in excess of $1 billion,” Pototschnig said. “I would not be surprised if inbound investment doubles in the coming year. There has been a growth in Russian value against a backdrop of a more stable Russian environment and lower country risk. I think the real growth in inbound investment started last year,” Pototschnig added. He indicated high M&A activity in the consumer goods and retail sector as an important characteristic of the market, which has led to the almost complete consolidation of the brewing and soft drinks sector. “The next winners in our view are retail, food processing, IT and financial services. Retail banking is booming; consumer loans and mortgages bring in the highest margins. Demand is also increasing for capital services from small and medium businesses. Foreign banks are increasingly gaining entry to the Russian market by buying customer base and retail networks through acquisitions, putting pressure on Russian majors to keep up,” Pototschnig said. TITLE: We Can’t Stay MAD Forever AUTHOR: By Kevin Ryan TEXT: In case you missed it, the era of mutually assured destruction and nuclear parity has ended, at least according to a paper published by Professors Keir Lieber of Notre Dame and Daryl Press of the University of Pennsylvania in the March/April edition of Foreign Affairs. The authors claim that modernization of U.S. nuclear weapons coupled with the degradation of Russian nukes will soon give the United States the ability to eliminate Russian (and Chinese) nuclear capabilities in a preemptive first strike. U.S. and Russian nuclear experts have roundly attacked the authors’ projection of U.S. primacy, which is based more on a simplified calculus of numbers and less on the ugliness and vagaries of war. But, their assertion that MAD is dead has been made before, and it is time we came up with a replacement. MAD has always had its drawbacks, and since the end of the Cold War defense experts have been trying to craft a successor. Former U.S. Defense Secretary William Perry proposed mutually assured security underpinned by reductions in Russian and U.S. nuclear weapons. A positive approach is important, but MAD and its successor are no longer primarily about the United States and Russia. Today there are several new nuclear powers, none of which could completely destroy another adversary, but any of which could inflict unacceptable damage. Senator Jeff Sessions, speaking during a March 29 hearing on strategic forces, pointed out that, “Today’s strategic forces must provide ... a range of capabilities to address a new global security environment where rogue states are armed with weapons of mass destruction and violent extremists have to be added to the list of strategic challenges.” It seems almost certain that more states will acquire nukes in the future. Any new deterrence construct must take these new actors into account. The Pentagon and its command responsible for nuclear weapons, the Strategic Command, are working on the problem. By 2008, the Pentagon plans to begin mixing nuclear and non-nuclear missiles on Trident submarines and deploying them to provide “prompt” global strike capabilities. The concept of Global Strike, introduced in the Defense Department’s 2001 Nuclear Posture Review and further refined in the 2006 Quadrennial Defense Review, creates a new offensive deterrent: advanced conventional weapons on formerly nuclear platforms. Less reliance on nukes means more options and better stability, right? Maybe not. How, for example, would China and Russia know for certain that a Trident missile launch is non-nuclear and not intended for them? The Defense Department’s answer is to rely on military-to-military communications for advanced warning and the ability of satellites to distinguish nuclear from non-nuclear warheads. These safeguards are still in the “power point” stage and lag dangerously behind the pace of the actual conversion of the U.S. triad. Transforming the U.S. nuclear arsenal to meet new challenges is the right thing to do, but we must maintain the transparency and predictability that MAD once provided in our use of nuclear weapons. At a minimum, the new concept should contain the following elements: • The nature (nuclear or non-nuclear) of an attack across strategic distances must be indisputably clear to all parties: attacker, attacked and third countries. Russia, for example, must know beyond any doubt whether a missile is nuclear and where it is headed. • The world must know that the United States will not use nuclear weapons first. The world’s greatest power can afford to wage wars without nuclear weapons. • A nuclear attack against the United States will be met with a commensurate response. The U.S. must define how it will do this in the case of an attack by a non-state entity. • Countries that lie along the path of intercontinental ballistic missiles must be confident that those missiles or their debris pose no threat to them. MAD can no longer provide deterrence against nuclear attack from the new threats we face. Global Strike provides better offensive deterrent capabilities, but it has a destabilizing character that must be addressed. We have two years to work out the details before the first mixed Tridents deploy. That should be enough time. Kevin Ryan, a retired brigadier general, is a senior fellow at Harvard’s Belfer Center for Science and International Affairs. He was responsible for space and nuclear policy on the Army staff from 2003 to 2005 and served as chief of staff of the U.S. Army Space and Missile Defense Command from 2000 to 2001. From 2001 to 2003, he served as U.S. defense attache to Russia. TITLE: Much More to Say AUTHOR: By Masha Gessen TEXT: Every year around this time, Muscovites come out of their hiding places and consider adventures that have grown almost unfamiliar over the cold winter: walks, sports, travel. A friend over for dinner on Tuesday night mused about taking a trip. “I was thinking about going to St. Petersburg,” she said, “but then I thought, I wouldn’t feel safe walking around there.” My friend, who has been living in Moscow for more than 20 years, hails from one of the former Soviet republics and looks the part: She is much darker than most Russians, which makes her too dark for safety. It was one of those moments when you realize that the world changed while you were in hibernation. We reminisced about a time, not long ago, when a group of us traveled around Russia leading seminars. We were two Armenians, a Tajik and a Jew, and we found our multiethnic pedagogical union slightly humorous but never dangerous. Now, my friend said, she feels uneasy outside her car. A few hours later, I learned that a young man had been murdered in Moscow. He was on his way to a punk-rock concert on Sunday evening when eight men attacked and killed him by stabbing him in the chest. Eyewitnesses described the attackers as “Nazis” and the 19-year-old victim as an anti-fascist, or “antifa,” as young people like him are known. He looked Slavic, but his clothes and the concert to which he was going apparently gave away his political views. Antifa stickers were found in his pockets. Moscow blogs and a couple of Internet forums briefly lit up with the news. TV and radio news, on the other hand, the papers and even online publications were silent. I found no mention of the murder in any media. Apparently just another murder on the outskirts of Moscow is simply not news. (I also considered the unlikely possibility that the information in the blogs and forums was a lie and there had been no murder — but a macabre hoax like that would certainly warrant a news item.) Writing in an online forum, a man who identified himself as the organizer of the concert, said, “I decided to go on with the show. ... I couldn’t cancel a concert for three visiting music groups that had spent a lot of money on traversing distances and crossing borders in order to play at this concert. I am not making excuses. I don’t care what anybody thinks. I did all I could do in that situation and went on with the concert despite police threats to shut it down, and the groups played as long as they could under the circumstances. Then I went home and broke down crying. ... I am canceling all remaining concerts planned for this year. I am broke. And please don’t write that you are terribly sorry and please don’t stir up shit about the bad fascists. I’m having a sense of deja vu. Today I saw the faces of people crying at the concert, an hour after they had been standing in the street looking at the body: These were the real feelings of people who care. As for all the articles, sites and [television or radio] programs — we saw it all after [19-year-old student anti-fascist activist] Timur [Kacharava] was killed [in St. Petersburg last November]. Nothing changed for the better, all the words of support and unity remained just words for many. To all those who were there today, thank you for your support. But please understand: I am alive, and he is dead. Thank you and goodbye. I am shutting down this topic because I have nothing more to say.” I understand this young man’s exasperation with words. But words and articles are all I have to put up in the way of resistance to the kind of desperate fear that may soon keep us from coming out of our hiding holes, even in spring. Masha Gessen is a Moscow journalist. TITLE: Russia Dominates Pig Olympics AUTHOR: Natasha Rotstein TEXT: It wasn’t exactly the Turin Games, but there was plenty of international rivalry at the third annual Pig Olympics. Out of a field of 12 pigs in the roughly 4-meter sprint, the Russians dominated, capturing first and second place, with the French taking third. The Ukrainians, Chinese, Canadians and Latvians went home without medals. With 300 people in attendance, the spectacle last Sunday was one of the main draws at ZooRussia 2006 at Crocus Expo in Moscow, which featured numerous merchants hawking organic dog food, kitty litter and poodle vests. Kostik Rystish Shvain, 2 1/2 years old, won the race. “He’s the smartest, fastest, slyest and bravest of all,” Kostik’s manager, Konstantin Petrunin, explained. Petrunin is a deputy director for Euroweg Zerno, one of the companies that sponsored pigs at the race. Euroweg Zerno, like the other sponsors, specializes in agriculture-related products. The 4-meter race was one of three events at the Olympics. The other two were a race in which the pigs pushed a football across a field, and a swimming event. Kostik’s trainer, Vladimir Nishylov, said Kostik, a dark-haired pig of Armenian extraction, had endured a rigorous daily regime of running and “football practice.” In the football-race event, Yelena Prikrastynaya, who lacks Kostik’s speed but has great technical ability, led the Russians to a 16-3 victory. Meanwhile, Deniska, also a Russian, captured first place in the swimming competition, held in a small wading pool. Nelson, from South Africa, and Yelena Prikrastnaya came in second and third, respectively. Tatyana Kolchanova, one of the organizers of the Olympics, noted that all the pigs in the competition, in fact, were Russian born and bred and had been trained at Lyhavitza, outside of Moscow. But they have sponsors from different countries. Kostik’s owners said they had no plans to slaughter him. But Kolchanova said on a more ominous note that the pigs would simply be sent to their sponsors’ home countries. TITLE: 7 Car Bombs Explode in Baghdad, 6 Dead AUTHOR: By Thomas Wagner PUBLISHER: The Associated Press TEXT: BAGHDAD, Iraq — Seven car bombs exploded across the capital Monday, killing at least six people and wounding dozens, as politicians met to try to finalize a new Cabinet. Police discovered the bodies of 20 Iraqis — apparent victims of sectarian killings the United States hopes the new government can end. Three roadside bombs, five drive-by shootings and a mortar round killed 12 Iraqis in Baghdad and elsewhere, police said. The violence underlines the challenges as prime minister-designate Jawad al-Maliki begins the tough task of assembling a Cabinet out of Iraq’s Shiite, Sunni and Kurdish parties. On Monday morning, political parties met separately in Baghdad to discuss proposed Cabinet ministers and were to meet as a group later in the day, said Kamal al-Saeidi of al-Maliki’s Dawa party. A day earlier, President Bush called al-Maliki, the Iraqi president and the parliament speaker — all named on Saturday — and urged the quick formation of a coalition government. Al-Maliki, a Shiite, has 30 days to choose a Cabinet, but the political parties are under enormous pressure — from Americans and even Shiite religious leaders — to move quickly without the often intractable haggling over ministries. U.S. Ambassador Zalmay Khalilzad, a key player in protracted political negotiations since Iraq’s Dec. 15 elections, repeated his call for the quick creation of a Cabinet of “competent” ministers — implying those chosen for their skills and not sectarian or political ties. The United States is hoping the new government will unify Iraq’s bitterly divided factions behind a program aimed at reining in both the Sunni-led insurgency and the Shiite-Sunni killings that have escalated during months without a stable government. Baghdad’s first car bomb exploded during morning rush hour on a major street near the Tigris river, close to a complex of government buildings, a hospital and a bus station. Three people were killed and 25 wounded. Two hours later, bombs hidden in two cars parked near Mustansiriya University in eastern Baghdad exploded, killing three civilians, including a 10-year-old boy, and wounding 22 people, said police Lt. Bila Ali. A car bomb also exploded near a square near a U.S. military convoy in central Baghdad, wounding at least 11 civilians, including a young girl, said police Maj. Abbas Mohammed Selman. U.S. forces closed off the area, and it was not immediately known if there were American casualties. Bombs in two cars parked about 100 yards apart then exploded one after another near Iraqi police patrols in the New Baghdad part of the capital, wounding three policemen and three civilians, said police Lt. Ali Abass. That was followed by a car bomb that targeted a police patrol in the Mansur area of Baghdad, wounding three policemen and four civilians, said police Capt. Jamil Hussein. Police in Abu Ghraib, just outside Baghdad, found a small truck containing the bodies of 15 men who had been tortured in captivity, said police Lt. Maitham Abdul Razzaq. Two other corpses were found in southwest Baghdad; one appeared to have been hanged, said police Capt. Qassim Hassan. Three bodies were found in the northern city of Mosul, including that of a university student who had been kidnapped hours earlier, police said. On Sunday, at least three U.S. soldiers and 31 Iraqis were killed, including seven who died when mortars hit just outside the heavily guarded Green Zone in Baghdad, not far from Iraq’s Defense Ministry. Sunni Arabs say Shiite militias have infiltrated the Interior Ministry — controlled by the biggest Shiite party — and used death squads to kill Sunnis following the Feb. 22 bombing of a Shiite shrine in Samarra, north of Baghdad. But the killings have gone both ways. Police said the bodies of six Shiites were found Sunday in the mainly Sunni district of Azamiyah in Baghdad, their hands and legs bound and their bodies showing signs of torture. Two more bodies were found in a mixed district south of Baghdad. The chief of the Azamiyah district council, Sheik Hassan Sabri Salman, said relatives also identified the bodies of 14 Sunnis kidnapped last week. The bodies were handcuffed with signs of torture, he said. Police did not confirm the deaths. TITLE: Prosecutors Play Purported Tape of Saddam AUTHOR: By Sinan Salaheddin PUBLISHER: The Associated Press TEXT: BAGHDAD, Iraq — Prosecutors in the trial of Saddam Hussein on Monday played an audiotape said to be a phone call between the former Iraqi leader and one of his co-defendants discussing the destruction of farmland during a crackdown against Shiites in the 1980s. In the tape, a voice purported to be that of Taha Yassin Ramadan said the leveling of farms and palm groves in the town of Dujail, carried out as retaliation for an attack on Saddam there, had been nearly completed and that the owners would be given compensation. He also talks of moving “suspect elements” out of Dujail and the nearby town of Balad and bringing in “replacements, meaning we will try to change the social reality” in the two towns. A voice said to be Saddam’s but not readily identifiable as such asked questions in the tape, which was several minutes long. Prosecutors told the court that they had obtained the tape earlier but did not say from where. Co-defendant Barzan Ibrahim disputed the tape, as well as reports by handwriting experts presented in the past three sessions. In the reports the experts concluded that signatures on documents connected to the crackdown were those of defendants. “Where are you getting these documents? Whose hands are behind them?” Ibrahim said. “Forging documents and imitating signatures is an age-old phenomenon.” After a session of about 90 minutes, chief judge Raouf Abdel-Rahman adjourned the court to May 15. The eight defendants are on trial for the deaths of 148 Shiites, the imprisonment of hundreds more and for torture and destruction of farmlands in a crackdown launched in the town of Dujail following a 1982 assassination attempt against Saddam. A report by handwriting experts read in court Monday raised questions over purported signatures by one of the defendants, Mizhar Abdullah Ruwayyid. It said the handwriting on documents — said to be letters sent by Ruwayyid to the Interior Ministry in the days after the shooting attack on Saddam informing on Dujail families involved in opposition activity — did not match samples given by Ruwayyid. There was no immediate explanation for the failed match. In an earlier session, Ruwayyid insisted the document was a fake. The five-member team of experts authenticated all the other 11 documents it had been asked to examine, including an order said to be signed by Saddam approving death sentences for 148 Shiites. In the past two sessions, reports from a team of three handwriting experts were presented authenticating those documents, but the expanded five-member team was asked to look at them a second time. The defendants have insisted their actions in the crackdown were legal because they were responding to the attack on Saddam, whose motorcade came under fire as he passed through Dujail in July 1982. The prosecution has argued that Saddam’s regime sought to punish the entire town, imprisoning hundreds — including entire families of women and children. Some Dujail women have testified in court to being tortured while in prison. The prosecution has said 148 Shiites were sentenced to death in a fake trial in which they could not present a defense. Ibrahim sharply defended the sentences against the men, who were accused of involvement in the attack on Saddam. “We didn’t kill them. The court sentenced them to death. There is a huge difference between killing and transferring the defendants to the court,” he said. “They carried out an operation, an attempt on the president’s life.” “We are not killers and you know that. We are men that built, we are men that struggled. We are patriot Iraqis who serve our people and country,” he said. The tape played in court Monday was part of the prosecution’s attempt to show that Saddam was closely involved in the crackdown in Dujail. Prosecutors said the audio was a call between Saddam and Ramadan — then a member of the Revolutionary Command Council, a top leadership body that Saddam headed. The voice purported to be Ramadan said the destruction of the farmlands around Dujail and Balad was an opportunity “to create a new city and prevent violations ... to reorganize the two cities (Dujail and Balad) to be modern.” “The suspicious elements we will move out and bring in replacements, meaning we will attempt an operation of changing society, we will greatly change the social reality,” he said. The speaker said to be Saddam responds, “Fine, good night,” ending the tape. TITLE: Comedian Gets Official Support PUBLISHER: Reuters TEXT: ALMATY — A British comedian who angered many Kazakhs with his satirical portrayal of their nation has found an unexpected ally in the Central Asian state — the president’s daughter. Officials, enraged by Sacha Baron Cohen’s depiction of Kazakhstan as a nation of drunks, racists and sexists, have threatened to sue him and banned his web site in the country. Dariga, the daughter of President Nursultan Nazarbayev, said Kazakhstan’s furious reaction to Cohen’s alter-ego Borat character hurt the nation’s image a lot more than the jokes themselves. “This Web site (www.borat.kz) damaged our image much less than its closure which was covered by all global news agencies,” Dariga said in an interview published on Friday in Kazakh newspaper Karavan. “We should not be afraid of humor and we shouldn’t try to control everything, I think,” added Dariga, an influential politician who once headed the country’s main TV channel Khabar. Cohen, as Borat, has claimed Kazakhs’ usual behavior includes shooting a dog and then having a party as well as making wine from fermented horse urine. The Borat character has appeared in Cohen’s televised “Da Ali G Show” and introduced the MTV Europe Music Awards in Lisbon in November 2005. TITLE: Talks With N. Korea Blocked AUTHOR: By Jon Herskovitz PUBLISHER: Reuters TEXT: SEOUL — North Korea agreed on Monday to work toward implementing a deal under which Pyongyang would scrap its nuclear weapons programs, but could not be induced to come back to multilateral disarmament talks. In an eight-point statement issued at the end of four-day inter-Korean talks, the two Koreas pledged to cooperate to reduce military tension and develop resources. They will also hold an economic cooperation meeting next month. Participants in the multilateral talks — the two Koreas, the United States, China, Japan and Russia — agreed last September that Pyongyang would dismantle nuclear programs in exchange for aid, security assurances and improved diplomatic ties. Their last session in November ended without progress. The nuclear talks have hit a snag over a U.S. crackdown on firms it suspects of aiding the North in illicit financial activities. “The South and the North agreed to continue to make efforts for the denuclearization of the peninsula and cooperate for a peaceful settlement of the nuclear issue by having the September 19 joint agreement implemented at an early date,” the statement said. South Korean officials said they were looking to possibly win the return of some of the more than 1,000 South Korean prisoners held in the North from the 1950-1953 Korean War and South Koreans abducted by the North after the war. The two pledged to cooperate to determine the fate of “those people who have gone missing since the end of the war” without using the explicit language of “abductees” or “prisoners of war.” The North has said it is not holding any South Koreans against their will, and in previous meetings, the two sides have also avoided using the term abductees. Seoul said during the meeting, it will consider repatriating some 30 North Koreans it has held for decades for spying in exchange for the possible return of South Korean POWs and abductees held in the North, according to South Korean media pool reports. Unification Minister Lee Jong-seok, who led the South’s delegation, had said Seoul was considering a major package of aid in order to resolve the issue of some 600 South Korean POWs and 485 civilians thought to be alive in the North. During the meeting, North Korea requested 500,000 tonnes of rice and 300,000 tonnes of fertilizer from the South, reports said. The South has already delivered 150,000 tonnes of fertilizer this year but did not make any further pledges of aid. North Korea has been battling food shortages for years and relies on handouts to feed its people. The next inter-Korean, ministerial-level talks will be held in July in the South Korean city of Pusan, the statement said. TITLE: Thai Elections Fail to End Deepening Political Crisis AUTHOR: By Sutin Wannabovorn PUBLISHER: The Associated Press TEXT: SONGKHLA, Thailand — Thailand’s ruling party may be blocked from forming a new government after weekend elections failed to fill several seats in Parliament, deepening the country’s political crisis, preliminary results showed Monday. The Election Commission said it was meeting to decide whether to call a third round of parliamentary elections, admitting it was unsure how to handle polls that have propelled the country into uncharted constitutional territory. Boycotts, ballot destruction and some violence punctuated voting Sunday in 40 constituencies where seats were left vacant in earlier polling for the lower house of Parliament, which cannot convene unless all seats are filled. The rerun was triggered by an opposition boycott of April 2 elections and a constitutional requirement that any unopposed candidate must garner at least 20 percent of the votes in order to win. Preliminary results showed that in at least 13 constituencies candidates of the ruling Thai Rak Thai party who ran unopposed failed to meet the minimum requirement, the Election Commission said, after 80 percent of the vote was counted. Election officials say there is no textbook solution to the problem, which could send Thailand into a period with no solid leadership. If the Election Commission decides to hold another round of voting, it would delay the formation of a new government and lead the nation into an unprecedented postelection quandary. The law stipulates that Parliament should convene within 30 days of an election to form a new government, but also that it cannot do so unless all 500 seats of the lower house are filled. A Constitutional Court ruling would be needed on whether the lower house can convene if all 500 seats are not filled. Another possibility is for King Bhumibol Adulyadej, the constitutional monarch, to appoint an interim government pending fresh elections. “We do not know yet what to do,” said Ekachai Warrunprapa, secretary-general of the Election Commission. He said the commission was weighing whether to pronounce the election completed despite the empty seats and let the Parliament decide how to continue. “Or, we might organize a re-election to make sure there are winners for the 500 seats.” “But chances of getting 500 seats are slim,” he added. The polling was concentrated in southern Thailand, a center of opposition to former Prime Minister Thaksin Shinawatra — who handed over power to a caretaker leader earlier this month — and the scene of a bloody Muslim insurgency. Thaksin has been accused of corruption, abuse of power and mishandling the insurgency. Following mass street protests in Bangkok and elsewhere, Thaksin announced that he was taking “a break” from politics, but critics say he plans a comeback. Before Sunday’s voting began, unidentified gunmen shot and killed the driver of a district official and wounded a woman in Narathiwat province, the government Thai News Agency said. In separate Senate elections last Wednesday, two police officers and an election volunteer were killed and 22 others were wounded in attacks by militants in the south. TITLE: 6 Die in Nepalese Rebel Attack AUTHOR: By Binaj Gurubacharya PUBLISHER: The Associated Press TEXT: KATMANDU, Nepal — Communist rebels stormed army bases and government buildings Monday in a bold assault in northern Nepal, battling government troops in a night-long gunfight that left six people dead. In the capital, security forces fired rubber bullets on crowds of pro-democracy protesters. With no sign of the violence abating, the U.S. State Department ordered all non-emergency embassy staff and family members to leave Nepal. About half the staff were expected to leave. Katmandu has been the scene of nearly three weeks of demonstrations in which police have clashed with protesters demanding King Gyanendra relinquish the power he seized 14 months ago. The rebels and Nepal’s main political parties are both backing the movement. Five rebels and one government soldier died in the fighting in the north-central town of Chautara after Maoist guerrillas launched an attack on several government installations, the army said. Four civilians were injured. The attackers knocked down an antenna tower, severing communications, and raided an army base, police post, local jail and district administration office, a local official said on condition of anonymity because he was not authorized to speak to the media. Security forces eventually repelled the attackers. The official said the rebels also bombed the local hospital, post office and education office, and that soldiers were combing the area for the attackers. The Maoists have seized control of much of Nepal’s countryside in a 10-year communist anti-monarchist insurgency that has killed about 13,000 people. In the northern edges of Katmandu, meanwhile, police fired rubber bullets at hundreds of protesters who had gathered ahead of a massive protest set for Tuesday. Seven people were wounded, news reports said. The protest was smaller than on previous days and located on the ring road that surrounds the city, which did not fall under the capital’s 7-hour curfew. Tuesday’s protest called by the opposition alliance will start from several points on the road. Hundreds of thousands of people were expected to attend. “We urge all the people, the old and the young alike, to come out of their homes, their villages, their neighborhoods and get to the nearest point on the ring road for the mass rally,” the opposition statement read. Protests across the Himalayan country have intensified since Friday, when Gyanendra offered to allow the alliance to nominate a prime minister and form a government. Opposition leaders and the communist rebels say the king’s offer fell short of a key demand — the return of parliament and creation of a special assembly to write a new constitution that could limit, or even eliminate, the monarchy. On Sunday, police and protesters clashed on the ring road outside Katmandu, leaving several demonstrators injured. By late afternoon, the protests had degenerated into young men hurling bricks and bottles at police, who responded with tear gas and baton charges. In the southern town of Bharatpur, hundreds of women chanted slogans against the king, banging plates and utensils. In Nepalgunj, 310 miles southwest of Katmandu, farmers came out with plows to protest. Some broke down the statue of King Tribhuwan, Gyanendra’s grandfather. The chaos in Nepal has stoked worries among the international community of a humanitarian crisis in what was already one of the world’s poorest countries. Many also worry that a political vacuum could give the Maoist rebels — who have seized control of much of the countryside in a bloody, 10-year insurgency — a route to power. TITLE: Thousands Evacuated in Romania As Danube Overflows, Dikes Burst AUTHOR: By Martin Dokoupil PUBLISHER: Reuters TEXT: BUCHAREST — Thousands of Romanians were evacuated on Sunday night when the swollen Danube burst several waterlogged dikes and officials said on Monday more defenses could break. The evacuations countered the hopes of local authorities that the worst may be over as Europe’s second longest river had begun to recede from its highest level for a century. Fed by rain and melting snow, swollen waterways have swamped vast tracts of land in Romania, Bulgaria, Serbia and Hungary in recent days, driving thousands of people from their land and swamping vast tracts of farmland. In Romania, the worst-hit Balkan country where tens of thousands of hectares are submerged, some 2,800 people fled their homes on Sunday night after dikes near the southern villages of Bistret, Spantov and Oltina could no longer bear the pressure. “The situation is very bad here. Half of the dike was broken last night and we could not repair it,” Constantin Raicea, mayor of Bistret, told Reuters. “We have evacuated 1,500 people so far, and they went to relatives and friends in the villages near Bistret,” he said. Hundreds of volunteers helped soldiers and gendarmes build sandbag dikes near Bistret and other villages to prevent water from flooding low-lying houses. Further downstream in Spantov, television footage showed gendarmes rushing hundreds of people out of their houses with many taking their horses and cattle with them. Officials said the Danube had receded where it leaves Serbia and enters Romania, but predicted more breaches may occur. “Water pressure is very high on these earth-made dikes and there are more in danger of collapse as the floods last a long time and the levels are decreasing very slowly,” said Elena Anghel, hydrologist at the National Hydrology Institute. In Hungary, more large cracks had appeared by Monday morning on the dikes at the confluence of the Tisza and Koros rivers, where 6,000 people, including 1,600 troops, battled floods overnight. TITLE: Pakistan Keeps Silent About Terrorist No. 1 AUTHOR: By Sadaqat Jan PUBLISHER: The Associated Press TEXT: ISLAMABAD, Pakistan — Pakistan has no information on where Osama bin Laden could be hiding, a Cabinet minister said Monday, following the broadcast of a new audio tape purportedly from the al-Qaida chief. Interior Minister Aftab Khan Sherpao refused to comment on the tape, broadcast Sunday by Arab news network Al-Jazeera. But he said Pakistan’s efforts to fight terrorism were not focused on just trapping bin Laden, long suspected to be hiding in Pakistan’s tribal regions bordering Afghanistan. “It is not to arrest one particular person but to curb terrorism in all its forms and manifestations,” Sherpao said. “We have no information on his whereabouts,” he said, adding that he would not speculate on bin Laden’s presence at the border “unless we get credible information.” In the tape, bin Laden issued new threats and accused the United States and Europe of supporting a “Zionist” war on Islam by cutting off funds to the Hamas-led Palestinian government. Bin Laden also urged followers to go to Sudan, his former base, to fight a proposed UN peacekeeping force. In Sudan, Foreign Ministry spokesman Jamal Eldin Mohammad Ibrahim said the country was “not concerned with such statements” and would not host any terrorist groups, according to the Al Sahafa newspaper. In the tape, bin Laden called on “mujahedeen and their supporters, especially in Sudan and the Arab peninsula, to prepare for a long war against the crusader plunderers in Western Sudan.” TITLE: Belgians Deny Russia Another Fed Cup PUBLISHER: The Associated Press TEXT: LONDON — After three years apart, Kim Clijsters and Justine Henin-Hardenne combined impressively to end the run of two-time defending champion Russia in the Fed Cup quarterfinals on Sunday. Clijsters and Henin-Hardenne conceded only seven games in their reverse singles to defeat Russia 3-2 in Liege, and set up a home semifinal on July 15-16 when they will try to beat the United States for the first time. In the other semi, Spain will welcome Italy, which upset Amelie Mauresmo’s France, which had reached the final the past three years, 4-1 in Nancy. “Spain are a good side but we’ve beaten France and that will give us a lot of confidence,” said Italy’s Flavia Pennetta. “Now we want to go as far as possible.” An American team with three Cup rookies surprised Germany 3-2 in Ettenheim, and Spain whitewashed Austria 5-0 in Valencia. Second-ranked Clijsters, who’d lost her season debut on clay the day before, outplayed 19-year-old Cup debutant Maria Kirilenko 6-1, 6-4 to give Belgium a 2-1 lead. Kirilenko replaced world No. 5 Nadia Petrova, who was suspected to be fatigued. French Open champ Henin-Hardenne clinched the tie when Elena Dementyeva, a winner over Clijsters on the first day, double-faulted on match point, losing 6-2, 6-0. “It was great with the whole team together. There is a great atmosphere,” said Henin-Hardenne. Clijsters and Henin-Hardenne then doubled up to reward the crowd’s support but lost to Kirilenko and Dinara Safina 7-6 (4), 7-5. The last time the Belgians committed to a full Fed Cup together, they led their country to its first and only title in 2001. Chances are they’ll stick together to beat the U.S. on home soil. In four previous ties, Belgium has won only 2 of 16 rubbers; it was swept 5-0 last year. However, none of that American team — Lindsay Davenport and the Williams sisters — were available this weekend when Jamea Jackson on debut led the record 17-time champ past Germany. After German No. 1 Anna-Lena Groenefeld beat Jill Craybas 6-2, 7-5 to halve the Americans’ lead to 2-1, Jackson stopped Martina Muller, a replacement for an ill Julia Schruff, 7-6 (2), 6-2 to seal the win. “I’ve been playing well against top-ranked players in recent months,” said Jackson, at 75th, the lowest-ranked American to win a Fed Cup match. “Martina is tough to play and I struggled a bit in the middle of the first set — but I kept my head.” Germany won the doubles when Groenefeld and Jasmin Woehr beat Shenay Perry and Vania King 2-6, 6-4, 6-2. Italy toppled France 4-1 for the first time in seven meetings, and reached its first semifinals since 2002. Mauresmo, the Australian Open champion, had a chance to give France a 2-1 lead in the first reverse singles when she had match point on Francesca Schiavone at 6-4, 5-4. But the Italian hit a crosscourt winner, won the tiebreaker 7-4, and broke Mauresmo again in the final game to win 4-6, 7-6 (4), 6-4. “Considering the player I was up against and the problems I had to overcome, I would say this is my most beautiful win of my career,” Schiavone said. Pennetta beat Nathalie Dechy 6-4, 6-2, at one point winning nine of 10 games, to give Italy an unbeatable lead, and Mara Santangelo and Roberta Vinci added a straight-sets doubles victory. In Valencia, Spain swept Austria, dropping just two sets in five rubbers. Anabel Medina Garrigues beat Austria’s Sybille Bammer 6-0, 6-3 for the clincher, Maria Sanchez Lorenzo won the fourth singles, and Virginia Ruano Pascual and Lourdes Dominguez-Lino took the doubles. Spain, which won the last of its five titles in 1998, was glad to have a home semifinal with Italy after losing to France in the semis the last two years. “It’s always a fantastic advantage playing at home, but anything can happen in the semifinals,” said Spain captain Miguel Margets. TITLE: Schumacher Regains Top Form In Grand Prix AUTHOR: By Alan Baldwin PUBLISHER: Reuters TEXT: IMOLA, Italy — Ferrari fans had almost forgotten how it felt to see Michael Schumacher standing on top of the Formula One podium, happily conducting their Italian national anthem. The German reminded them at the San Marino Grand Prix on Sunday, with the seven-times world champion capping his record 66th pole position with Ferrari’s first ‘real’ win since October 2004. The last time the German stood on the top step was actually in Indianapolis last June, 13 races ago. But, with angry U.S. fans booing and hurling bottles at the track after all but six cars withdrew before the start due to tyre safety concerns, there was little real reason to celebrate then. Sunday ensured that fiasco will not be the last win of Schumacher’s career and Imola may not be the last appearance at Ferrari’s home circuit either for the most successful driver in the history of the sport. Although the 37-year-old has yet to decide whether to continue racing after the end of the season, he has said he sees no reason to stop if he is still enjoying himself and that seemed evident enough in the April sunshine. Asked whether the result at Imola, his seventh win at the circuit since 1994, would affect his feelings for the future, he replied simply ‘No’. His feelings on Sunday were very much for the present, an expression of relief that the long wait had ended in front of Ferrari’s home crowd. “We had an amazing weekend,” said Schumacher, whose victory comes with perfect timing to sell a few more tickets for the next race at his home Nuerburgring circuit in Germany. “The result shows that work pays off and that the effort put in by everyone — the team and our partners — has delivered its reward.” Ferrari had been eclipsed by Renault in 2006 with Schumacher crashing out in Australia this month and slowed by engine troubles in Malaysia. At Imola, he was able to turn the tables on Renault’s world champion Fernando Alonso, the young Spaniard who so audaciously beat him on the same track last year in a nose-to-tail duel. “In a way it was similar to what it was last year, honestly,” he said. “If you close the door and you do the job in the right way then you don’t give a chance, really, to the driver behind. “In the middle stint, I had to work a bit harder and in the final stint I just drove the car at a nice limit, not to over-push anything and just controlled what was necessary.” All that was left was to spray the winner’s champagne, with Ferrari team boss Jean Todt joining him on the podium in an ebullient mood. “When I was going up to the podium, I said to Michael that I could not remember the way anymore, it had been such a long time since the last victory,” said the Frenchman. TITLE: Reborn Vladimir Klitschko KO’s Chris Byrd for IBF Title AUTHOR: By Roy Kammerer PUBLISHER: The Associated Press TEXT: BERLIN — Vladimir Klitschko refused to let the rematch with Chris Byrd go the distance. The Ukrainian stopped Chris Byrd in the seventh round of a one-sided fight to gain the IBF heavyweight title on Saturday. Klitschko’s right hook finished off the American 41 seconds into the round, the second time Byrd was floored in the fight. The rematch was similar to their first encounter in October 2001. Byrd also lost that bout, surviving two knock downs on his way to losing a decision. This time around Klitschko — executing American trainer Emanuel Steward’s strategy flawlessly — finished off Byrd early. It began in the third round when Byrd, dropping his hands for a second, took a pair of hard left-right combinations from the 2-meter Klitschko that shook him up. “It was like a musician playing notes,” Klitschko said. “Everything we trained worked.” After the fight, Klitschko first went to speak to his beaten rival, then to Byrd’s trainer and father, Joe. “He should be proud — I have never seen anybody take that much punishment and come back,” Klitschko said. “They are a great family.” In the fifth round, Byrd climbed to his feet after being knocked down, then withstood a barrage of shots. He took a beating for more than a minute as 14,500 spectators roared until Klitschko backed off. Byrd waved his gloves at Klitschko, telling his opponent to come at him. “He’s a fighter with a big, big heart,” Klitschko said. “But he provoked me.” The 35-year-old Byrd had made four successful defenses of the belt he won from Evander Holyfield in 2002. He was the longest reigning of the four heavyweight champions. “I never hit him, not the way he hit me,” Byrd said. “I was just so pumped up for the fight, it got the better of me. If I had to do it again I would go in there with a different strategy, but Vladimir will be hard to beat. He is very talented for a big man.” Byrd said he will have to decide if he wants to continue his career. He was taken to the hospital after the post-fight news conference for X-rays on his swollen face. “I will talk to the wife,” he said. “I enjoy this a lot, of course not when you’re pounded like that.” Klitschko has now resurrected his career. After being knocked out by Corrie Sanders and Lamon Brewster, he started his comeback by beating Nigerian Samuel Peter in October. It is very important to know both sides,” said Klitschko, 30. “I enjoyed a lot of success in my early years, then come the tough years.” Byrd acknowledged that Steward, who has trained more than 30 world champions, put together a smart plan for Klitschko. During the first fight the Ukrainian used his 15-centimeter height advantage and jabbed from outside until Byrd’s eye swelled shut. Klitschko became the third fighter from the former Soviet Union to win a heavyweight title in four months. Russian Nikolai Valuev took John Ruiz’s WBA belt and Sergei Liakhovich of Belarus won Brewster’s WBO crown. That leaves Hasim Rashman as the only American champion. TITLE: Nowitzki Swipes Victory Against Mavericks AUTHOR: By Jaime Aron PUBLISHER: The Associated Press TEXT: DALLAS — Dirk Nowitzki had all week to think back on the terrible way the Mavericks started last year’s playoffs. Minutes into this postseason, it was clear he wasn’t going to let that happen to Dallas again. Nowitzki scored 19 points during a surge that produced 60 by halftime against the NBA’s stingiest defense, then the Mavericks got key baskets from a variety of players the rest of the way to beat the Memphis Grizzlies 103-93 in the opener of their first-round series Sunday night. “We wanted to come out a lot more aggressive and we did,” Nowitzki said. “It’s good to get the first one out of the way, even though it wasn’t a great game.” A 1-0 lead might not seem like much for a team that won 60 regular-season games, but it’s a big relief for Dallas after starting last year’s playoffs with two home losses. Although the Mavs recovered to beat the Houston Rockets in seven games, they don’t want to work that hard with the San Antonio Spurs likely looming in the second round. “We learned from last year,” Nowitzki said. The MVP candidate opened this game with a strong drive to the basket, drawing a foul. He made his first jumper soon after and had 13 points after one quarter. Nowitzki finished with 31 points and 11 rebounds. He made 13 of 15 free throws, missing only his first and last attempts. “The first couple of possessions I wanted to get the ball in my hands and feel good about myself,” said Nowitzki, adding that he feared being rusty after sitting out the season finale. “I wanted to find my rhythm real quick and was able to knock a few shots down to get my confidence up.” As good as Nowitzki was, Dallas’ energy and depth went a long way, too. Backup center Erick Dampier exemplified both. A huge disappointment last season after signing a $73 million contract, he provided 12 points, 12 rebounds and plays like a crowd-thrilling dunk off a loose ball just before halftime and an offensive rebound that turned into a three-point play early in the fourth quarter. “I can give that type of effort every night. I know I’m capable of it,” said Dampier, who was memorably chastised on the court by Nowitzki during last year’s playoffs. “I’ve got to put it all together.” Memphis hung on as long it could considering its star player, Paul Gasol, missed all five shots he took in the first half, apparently limited by a foot injury that’s nagged him the last week. Then he swished a jumper at the start of the third quarter and scored 13 in the period, helping the Grizzlies get within 75-74. But Marquis Daniels, another Dallas reserve, answered immediately with a powerful baseline dunk, sparking a rally that culminated in him taking a steal all the way for a finger-roll layup that made it 96-82. On Memphis’ next possession, Jake Tsakalidis committed a foul and got a technical for complaining. The frustration was understandable — the Grizzlies are now 0-9 in their postseason history, extending what already was the wrong kind of league record. After being swept by San Antonio and Phoenix the last two years, they were hoping that coming into the playoffs on an 8-1 roll would change their luck. “We have to be concerned a little bit, but at the same time we have to do a better job overall in playing with a little bit more hustle,” said Gasol, who finished with 24 points. The Grizzlies get another chance in Game 2 on Wednesday night.