SOURCE: The St. Petersburg Times
DATE: Issue #1195 (60), Tuesday, August 15, 2006
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TITLE: Britiain Eases Level Of Terror Alert
AUTHOR: By Robert Barr
PUBLISHER: The Associated Press
TEXT: LONDON — Authorities downgraded Britain’s terror threat level Monday, offering hope to travelers mired in chaos at airports since security forces foiled an alleged plot to bomb packed trans-Atlantic jetliners. But more flights from London were canceled on the fifth day of the crisis.
The threat level was lowered from critical to severe to reflect an intelligence assessment that a terrorist attack remained highly likely but was no longer imminent.
The critical level was declared last week when police rounded up two dozen people suspected of involvement in the terror plot. Police questioned all but one of the suspects Sunday, but authorities remained silent on what, if anything, they learned.
“I want to stress ... that the change in the threat level does not mean that the threat has gone away,” Home Secretary John Reid said.
“There is still a very serious threat of an attack. The threat level is at severe, indicating the high likelihood of an attempted terrorist attack at some stage, and I urge the public to remain vigilant,” he added.
Those sentiments were echoed across the Atlantic by U.S. Homeland Security chief Michael Chertoff, who said Sunday there was a risk that other groups might try to cause bloodshed on the false assumption that law enforcement and intelligence services might be distracted.
He also called for taking a renewed look at U.S. laws that could give authorities the flexibility to detain suspects for longer periods of time. Britain recently passed controversial legislation giving the government up to 28 days to hold terror suspects without charge, and the jetliner plot is the first major test of how those new powers will be used.
With the reduction in the threat level, Britain’s Department of Transport said passengers would be allowed to carry a single, briefcase-sized bag aboard aircraft, and that books, laptop computers and iPods would be permitted again. 
However, Heathrow and other major airports said they would not adopt the relaxed regulations until Tuesday.
British Airways, the dominant carrier at Heathrow, said it canceled a fifth of its flights there Monday. That was down from about a third of flights canceled at Heathrow over the weekend, but passengers faced continued frustration.
Ivana Djak, 16, a student from Columbia, Maryland., said she slept on her luggage Sunday night, using rolled up T-shirts for a pillow. “It was freezing,” she said.
Henry Burkett, 19, a student from Seattle, said he stood in line for three hours Saturday to check his luggage before his flight was canceled 20 minutes before its departure time.
“They don’t know where my luggage is at. Maybe in Seattle,” he said.
Meanwhile, a British Airways plane en route to New York returned to London after a cell phone on board began to ring and no one admitted owning it. The flight resumed after security checks, and arrived about seven hours late in New York.
Paul Marston, a British Airways spokesman, said the fact that no one could explain how the phone got on the flight made the situation particularly suspicious. Cell phones — along with all other electronic devices — had been banned from cabins on flights out of Britain since Thursday.
London’s anti-terrorist police pressed ahead with a major search in a woodland area in High Wycombe, about 35 miles west of London, said a police official speaking on condition of anonymity. The search would continue for at least 24 hours, though officers declined to say if anything significant had been discovered.
Meanwhile, a court hearing was expected later in the day to determine if officers would be granted more time to question one of the 24 suspects arrested last week.
On Friday, a judge sanctioned extending the custody of 22 other suspects, who can be held until Wednesday for questioning. One suspect was released.
Police arrested the suspects in raids across England on Thursday, saying they had thwarted a plot to blow up as many as 10 passenger planes flying between Britain and the United States. One suspect was released without charge, and a court will decide Monday on the detention of another.
An additional 17 people were detained in Pakistan, including Rashid Rauf, a British national named by Pakistani intelligence as one of the key suspects. Rauf was picked up along the Pakistan-Afghanistan border and is believed to have connections to a senior al-Qaida leader in Afghanistan.
In Kabul, Afghanistan’s Foreign Ministry on Sunday denied any Afghan connection to the plot, saying the country — home to thousands of NATO and American troops — was no longer a safe place for al-Qaida to operate.

TITLE: Emergency Meeting Held for Russian Museums
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: The Presidium of Russia’s Museum Union is holding an emergency meeting in St. Petersburg on Monday and Tuesday to discuss the security and preservation of the most valuable art collections across Russia. 
At the meeting on Monday, Mikhail Shvydkoi, head of Russia’s Agency for Culture and Cinematography, called for the creation of a full electronic catalogue of Russia’s vast museum resources.
Shvydkoi welcomed President Vladimir Putin’s initiative to form a commission to review and audit the collections of Russia’s museums. The commission, to include representatives of the Interior Ministry, the Culture Ministry, the security services and other state organizations, is due to start work on Sept. 1. 
“The review will help to dispel a recent vicious myth about all museum directors and curators being thieves,” Shvydkoi told reporters on Monday. “The audit has to be carried out at high speed and completed within the next 15-30 years.”
Seventeen of the 221 artworks that were stolen from the State Hermitage Museum have been returned since their theft was officially reported on Aug.1.
Many of the items were recovered following anonymous tip-offs detailing where they had been left, usually near police headquarters. 
It remains unclear who is behind the tip-off and whether they are coming from a single source. 
St. Petersburg police arrested the son and husband of Hermitage curator Larisa Zavadskaya, who died of a heart attack at her desk in October. Her death came at the beginning of an inspection of her department which eventually exposed the absence of the works. 
Since his arrest, Zavadskaya’s husband Nikolai has changed his evidence several times. Originally, he claimed he had not known the items were stolen, saying that he took them to antique dealers at the request of his wife who had told him she had received the works as gifts from friends. 
Now Zavadsky, a 54-year-old history teacher at the Lesgaft Academy of Physical Culture admits having always been aware of the illegal provenance of the items.
The third suspect, local antiques dealer Maxim Shepel, who was found to have purchased one of the stolen items — a 19th-century silver chalice — has been undergoing treatment in a psychiatric ward at the city’s Gaaza regional hospital since Aug.10. 
Shepel’s lawyer, Andrei Pavlov, said on Monday that he has not been able to visit his client at the hospital owing to restrictions imposed by his doctors. “Since my client was delivered to the hospital, I have been learning about his condition from his doctor,” Pavlov said. “Mr. Shepel’s mental condition is severe, and neither myself or the investigators are allowed into the ward.”
Shortly after his arrest last week, Shepel was reported to have had a nervous breakdown. While in prison, the antiques dealer also sustained a severe, possibly self-inflicted, eye wound. The circumstances of the accident have not yet been established.
Pavlov said Shepel had pleaded innocent, and maintained that the chalice was purchased legally, from an antiques shop at 13 Ulitsa Lenina.
The Hermitage’s management has found itself under fierce criticism over the past two weeks. Critics have expressed their outrage at the scale of a theft, which appears to have been carried out over a number of years, as well as at the Hermitage’s loose internal security system and lack of control over both inventories and curators. The museum’s electronic catalogue covers less than 10 percent of its vast collection which boasts over 3 million items. The museum lacks photographs of many of the items that have gone missing.
On Saturday, NTV television broadcasted an interview with Moscow collector Vladimir Studenikin, who handed a precious 19th-century silver chalice to the Russian Board for the Preservation of Cultural Valuables. Studenikin’s firm, Moscow-based Orthodox Antiques, had purchased the item from Maxim Shepel. 
Denouncing the Hermitage management, the art dealer said: 
“If anything this extraordinary happened in the past, either before the [1917] Revolution, or in the Soviet era, the museum manager whose organization found itself in such a shameful situation would have shot himself or hung himself using his scarf,” the collector remarked, hinting at the director of the Hermitage Mikhail Piotrovsky’s noted habit of wearing a scarf, weather conditions notwithstanding.
Mikhail Piotrovsky received an official reprimand from the Culture Ministry on Friday, but his position remains secure.
Speaking to reporters in Moscow last week Mikhail Shvydkoi said he had no intention of replacing Piotrovsky.
Piotrovsky’s reaction to calls for his departure has been adamant.
“I am not going to resign, do not waste your time waiting,” Piotrovsky told reporters last week. “Theft is happening in major foreign museums as well, for example, in the Louvre, and nobody resigns.”
At the Russia’s Museums’ Union on Monday, Piotrovsky apologized to his colleagues for the embarrassing theft. “It is a very unpleasant subject but we have to discuss it,” he said. “I hope that the scale of the reaction and the commotion the case has caused will help to assess and investigate the situation objectively.”

TITLE: Russian Takes Last Heavyweight Belt from U.S.
PUBLISHER: Reuters
TEXT: LOS ANGELES — Oleg Maskaev scored a 12th round victory over Hasim Rahman to claim the WBC heavyweight championship on Saturday in Las Vegas, leaving the United States without a heavyweight champion.
Rahman, making his second defense, was the busier boxer throughout and had appeared headed for a narrow victory until the 37-year-old Maskaev came to life late, leaving everything to fight for as the bell sounded for the final round.
Maskaev (33-5, 26 KOs) staggered Rahman with a right-left combination then pinned the American in the corner landing a series of hard rights before referee Jay Nady stepped in and stopped the contest with just 43 seconds left in the 12th round.
“This was like I said it was going to be, a war,” Maskaev told ringside television after the fight. “But I believed until the last minute that I was going to win.
“I believed the fight was even and I had to push it up if I was going to win this fight.
“I knew I had two more rounds, three more rounds left, if I want to win this title I had to fight.”
Maskaev’s victory means all four major heavyweight belts are now held by fighters born in the former Soviet Union.
Maskaev was born in Kazakhstan and was an army officer in the former Soviet Union but became an U.S. citizen two years ago and lives in Staten Island.
The three other belts are held IBF champion Wladimir Klitscho a native of Ukraine, WBA champion Nikolay Valuev from Russia and WBO champion Sergei Liakhovich of Belarus.
“I’m a proud Russian American,” said Maskaev, who also knocked out Rahman in an earlier meeting in 1999. “There is a message to everybody that European fighters, they’re tough and strong as athletes.
“They have a chance to go somewhere.”
Rahman, using his jab to great effect, dominated the early rounds while Maskaev seemed content to try and land the same thundering right that knocked the American out of the ring in the eight round of the first meeting.
But Rahman tired in the later rounds and in the 12th was caught by vicious combination from Maskaev, who had won his last 10 fights, eight by knockout.
“I thought I was winning the fight, the ref said break and that was it,” said Rahman. “The ref said break, don’t throw a punch and I was hit with a shot.
“I’m disappointed. I’m extremely disappointed.
“I think (American heavyweights) are a little spoiled, make too much money too quick and lose sight of the grand prize which is to win the title and keep it.”

TITLE: Russia Uses Text Messages To Contact Chechen Rebels
PUBLISHER: Reuters
TEXT: GROZNY — Russia’s intelligence services have found a new way of getting a surrender appeal to Chechen separatist rebels — they are sending it on mobile phones by SMS text message.
Mobile phone subscribers in Ingushetia, which neighbours Chechnya, have begun receiving SMS messages from Russia’s state anti-terrorist committee urging rebels to take up an offer to disarm in exchange for a fair trial.
The message provides four telephone numbers for rebels to call to negotiate an end to “their participation in illegal armed groups”.
State security (FSB) officials last month set an Aug. 1 deadline for rebels to put down their arms and start negotiating with authorities as a first step towards re-entry into normal life. That deadline has since been extended until Sept. 30.
Moscow stepped up pressure on rebels to disarm after Russian forces killed top Chechen rebel commander Shamil Basayev on July 10, telling them to “listen to reason and look truth in the eyes”.
Many fighters involved in the Chechen insurgency have fled into Ingushetia, where they often operate alongside local rebel groups also opposed to Moscow’s rule.

TITLE: Japan Opens Investigation Of Industrial Espionage at Nikon
PUBLISHER: The Associated Press
TEXT: TOKYO — Tokyo police on Thursday asked prosecutors to investigate a former employee of Nikon Corp. on suspicion of stealing a high-tech device from the electronics company and handing it to a former Russian trade official, officials said. 
The Tokyo Metropolitan Police filed papers with the public prosecutors office against the Nikon employee and a former member of Russia’s Trade Representation office in Tokyo, said a police spokesman who spoke on condition of anonymity, citing protocol. 
The men, whose names were not disclosed, conspired in the theft of the device, called a variable optical attenuator, the police spokesman said. 
The device, which is still in the development stage, is used to help stabilize optical transmissions in long-distance fiber optic communications, Nikon spokeswoman Sayaka Suzuki said. 
The former employee is believed to have stolen the device while he worked at Nikon in February last year, and gave it to the Russian trade official, Suzuki said. 
Police believe the two men met “dozens of times” and that the Russian official paid the Nikon employee an undisclosed amount for acquiring the device, Kyodo News agency said. 
Thursday’s police action came after Nikon, the Tokyo-based maker of cameras and precision instruments, filed a complaint with police against the employee on July 7, Suzuki said. 
She said that the employee had left the company for “personal reasons” in March this year. 
Police suspect the Russian official, who has already left Japan, may have thought about converting the civilian-use device into a defense technology, Kyodo News agency said. 
An official at the Russian Trade Representation office refused to comment on the case. 
Nikon said in a statement that it would fully cooperate with a police investigation, while stepping up its in-house management of products and equipment. Suzuki said the company could not disclose at this time how the device, if fully developed, will be used. 
It was the sixth case since 1989 that Japanese police have opened into suspected espionage involving members of the Russian trade office.
Last October, police accused a member of the trade office of buying company secrets from a worker at a subsidiary of Japanese electronics maker Toshiba.
The 35-year-old Russian, who arrived in Japan in October 2003 and left in June last year, is thought to have links with Russia’s foreign intelligence service, Kyodo News reported in October.
The 30-year-old Japanese man worked for Toshiba Discrete Semiconductor Technology Corp., and was suspected of selling secrets to the Russian nine times between September 2004 and May 2005 for a total of 1 million yen ($8,700), police said.
Kyodo said the man sold secrets related to a type of semiconductor technology that can be used in radars of military submarines, fighter aircraft or in missile guidance systems. Toshiba, however, said the leaked information was for semiconductors used in digital cameras, mobile phones and electric cookers and had no conceivable military applications.
Kyodo said the Russian posed as an Italian business consultant in his dealings with the Japanese man.
In 1991, a Russian trade official approached executives at a Japanese electronics firm to try to acquire semicondutor chips regulated under the now-defunct Coordinating Committee for Multilateral Export Controls, or COCOM, a watchdog group formed by Western governments in 1949 to prevent the transfer of military-related technology to the Soviet Union and Eastern Europe. The official was not charged, Kyodo said.
A different Russian trade official is also suspected of trying to obtain classified information on missile technology from a former member of Japan’s Self-Defense Force in 2002, Kyodo said.

TITLE: U.S. Sailor Accused of Espionage
PUBLISHER: Combined Reports
TEXT: WASHINGTON — A 21-year-old U.S. sailor has been charged with espionage for purportedly taking a Navy laptop loaded with classified information and peddling its contents to Russian agents, U.S. officials said.
The Navy said Petty Officer 3rd Class Ariel Weinmann was successful in giving the classified information to a foreign government before he destroyed the computer. 
The Navy did not identify the government, but defense officials said it was Russia.
The classified information was described by the Navy as “relating to the national defense of the United States of America.” 
Weinmann is confined at the brig at Norfolk Naval Air Station on six charges returned at a July 26 Article 32 hearing, the military equivalent of a grand jury, the Navy said in a statement. 
The charges include three counts of espionage, including a March 2005 visit by Weinmann to Bahrain to “attempt to communicate, deliver or transmit” the classified information to “a representative, officer, agent or employee of a foreign government.”
Months later, the Navy said, Weinmann deserted the USS Albuquerque for more than eight months to travel to Austria and Mexico to “communicate, deliver or transmit” the information to a foreign government. 
In March, near Vienna, the Navy said, Weinmann used a mallet to destroy the computer’s hard drive. 
Weinmann was picked up at the Dallas/Fort Worth International Airport on March 26 and transferred a brig to Norfolk Naval Station. 
(AP, Reuters)

TITLE: IN BRIEF
TEXT: Medvedev Pulls to Front
- MOSCOW (SPT) — Voters would pick First Deputy Prime Minister Dmitry Medvedev as president if the election were to take place today, a new survey found.
Medvedev would win 9 percent of the vote, followed by Communist Party leader Gennady Zyuganov with 8 percent, according to the national survey by Bashkirova and Partners, a market research agency.
Defense Minister Sergei Ivanov, who with Medvedev is seen as a top possible contender to succeed President Vladimir Putin, trailed with only 4.6 percent. Other possible candidates, including Prime Minister Mikhail Fradkov, received less.
An overwhelming 25.7 percent said, however, that they opposed all the suggested candidates.
The survey of 1,500 people did not include a margin of error.

Estonian Hostage Freed
- RIGA, Latvia (AP) — An Estonian woman kidnapped in Dagestan earlier this month has been returned to her family, an Estonian government official said Saturday.
Aminat Mahmudova, a 19-year-old Estonian national of Dagestani descent, was returned safely to her parents late Friday after being abducted in Makhachkala by masked gunmen on Aug. 3.
“The girl is alive and well,” Aarne Veedla, an adviser to Estonia’s population minister, told the Baltic News Service.
Veedla said Mahmudova was returned to her parents in Makhachkala after negotiations. He did not elaborate.

TITLE: Leading Party Eyes Merger
AUTHOR: By Nabi Abdullaev
PUBLISHER: Staff Writer
TEXT: MOSCOW — United Russia is looking to absorb another political party in a move that would give the pro-Kremlin party even more influence over the political process.
Vyacheslav Volodin, the secretary of United Russia’s general council, said late last week that talks were underway with officials from another party.
Volodin declined to disclose which party but did say it had “views close to that of United Russia.”
Four parties have been mentioned as possibilities — the Russian United Industrial Party and the People’s Party, both led by Duma members who belong to United Russia, the Agrarian Party, and the Pensioners’ Party.
Gennady Gudkov, head of the People’s Party, told RIA-Novosti it would not merge with United Russia.
Boris Makarenko, a Center for Political Technologies analyst, said Friday that it made sense to try to absorb certain smaller parties, noting that some of those mentioned could siphon as much as 4 percent of the vote away from United Russia in upcoming elections.
The parliamentary elections will be held in December 2007. Parties are required to win at least 7 percent of the vote to get into the Duma.
But gobbling up tiny, loyal parties that garner less than 1 percent of the vote, including the People’s Party, Makarenko said, is not in United Russia’s interest.
“United Russia needs these parties to sign different agreements, so these agreements look like an initiative coming from a dozen different parties and not only one of its own design,” Makarenko said.
Yury Korgunyuk, an Indem think-tank analyst, was skeptical of United Russia’s plans, saying Volodin’s comments amounted to a public-relations ploy.

TITLE: Russians’s Wax Poetic on Fidel’s Birthday
AUTHOR: By Vadim Nikitin
TEXT: Special to The Moscow Times
MOSCOW — Fidel Castro celebrated his 80th birthday on Sunday, and admirers from poet Yevgeny Yevtushenko to Vitaly Vorotnikov, a political hard-liner and former Soviet ambassador to Cuba, praised the Cuban leader.
President Vladimir Putin congratulated Castro and wished the ailing Cuban leader a speedy recovery.
“In Russia, you are known as one of the most authoritative and brilliant political leaders of our age,” Putin said in a birthday message, which was posted on the Kremlin web-site.
Putin expressed confidence that Russia and Cuba would remain “active partners” in years to come. Putin visited Cuba in 2000 — the first time a Russian leader has made the trip since the collapse of the Soviet Union.
Castro is still recovering from stomach surgery, which forced him temporarily to relinquish the presidency to his brother Raul two weeks ago — the first break in his 47-year rule.
The Cuban leader said his condition had improved, but warned that he faced a long recovery from surgery and advised Cubans to prepare for “adverse news,” The Associated Press reported.
“I feel very happy,” said a statement attributed to Castro in the Juventud Rebelde newspaper. “For all those who care about my health, I promise to fight for it.”
Yevtushenko once claimed to be in love with Castro, but these days the world-famous poet finds it hard to talk about his old friend. It is a subject too personal even for this most public of intellectuals.
“I simply cannot talk about it right now,” said the author of Babi Yar and the Heirs of Stalin, two key poems of the so-called Thaw under Nikita Khrushchev in the early 1960s. “I am writing something about him at the moment, and I want to do it myself.”
In 1964, while co-writing the screenplay for “I Am Cuba,” a joint Cuban-Soviet film about the Cuban revolution, Yevtushenko struck up a friendship with Castro and Che Guevara.
“I was young, and it was a different time,” Yevtushenko said. “Back then, young people all over the world — including Americans — were in love with these young men [Castro and Che Guevara].”
Yevtushenko believes that Castro’s magnetic personality and charisma contributed to Khrushchev’s decision to deploy nuclear missiles in Cuba.
“Khrushchev had no aggressive intentions toward the United States,” Yevtushenko said. “He never seriously intended to use the missiles. He was already an elderly man, one of the last who had participated in the October Revolution. He understood perfectly well all the things in the Soviet Union that didn’t work because of the terror under Stalin, and he fell in love with Castro and the other young Cuban leaders who managed to pull off the revolution without our help. He simply wanted to protect them.”
This apolitical and very personal admiration for Castro links Yevtushenko, an outspoken liberal, to Vorotnikov, a conservative member of the Soviet ruling elite and Soviet ambassador to Cuba from 1979-82.
Vorotnikov first met Castro in 1972, when Castro visited an aircraft factory and nuclear power plant in Voronezh, where Vorotnikov served as first party secretary. During his time in Cuba, Vorotnikov became good friends with Raul Castro. The two, with their wives, continue to vacation together to this day.
“Fidel is a unique and legendary person comparable to Nehru, Nasser and Mitterrand,” Vorotnikov said in tones reminiscent of programmatic, communist-era tributes.
But Vorotnikov loosened up as he told of Castro’s hospitality, cooking skills, appreciation of modern art and comprehensive understanding of Catholicism.
“He knows how to listen,” Vorotnikov said. “That is one of his best traits. He immediately makes contact with people, whether he is talking with a child or an old man.” In a reference to Putin, Vorotnikov added: “He wouldn’t kiss a child on the stomach like some people. He treats children as adults — with sincerity and respect.”
In late June, Putin stopped a young boy walking through the Kremlin, asked his name, lifted up his T-shirt and kissed him on the stomach.
The man once responsible for ensuring that Cuba towed the Soviet line also praised Castro for breaking with Soviet economic policies and integrating Cuba into the world economy after 1992.
“When we left, 80 percent of the Cuban economy crumbled,” Vorotnikov said. “Now, it is growing by 7 percent to 8 percent per year,” Vorotnikov said.

TITLE: Cabinet Sets up State Venture Company to Invest in High-Tech
AUTHOR: By Maria Levitov
PUBLISHER: Staff Writer
TEXT: The Cabinet on Thursday approved the creation of a state venture company that is to invest 15 billion rubles ($560 million) in the country’s high-tech sector.
Also known as the “fund of funds,” the Russian Venture Company is set to boost technology investments and diversify the economy away from commodities. The company will create eight to 15 venture funds to be managed by private companies, Economic Development and Trade Minister German Gref told the Cabinet meeting, Interfax reported.
“We aim to attract more than 30 billion rubles ($1.12 billion) to the Russian high-tech sector by the end of 2007,” Gref said.
Russian Venture will be fully established by the end of this year and fund-management companies will be chosen by tenders in early 2007, Gref said.
Lax protection of intellectual property rights, the high risks associated with technology start-ups, and attractive returns from investing in large private companies and the stock market have all served as disincentives to investment in small, fledgling technology firms.
Education and Science Minister Andrei Fursenko told the meeting that the capitalization of venture funds at was pegged 4 billion conditional units in Russia. Conditional units can be interpreted to mean dollars or euros, or the average of the two.
“But only 5 percent of these resources is allocated toward high-tech. This is very small, [and] without government participation this percentage is not going to grow significantly,” Fursenko said, Interfax reported.
Russian Venture — expected to be set up by the end of this year — is an important first step in building a competitive high-tech sector. But Russian Venture will not do the job alone, experts said.
“There’s clearly a need for investment in this sector. It’s a question of doing a lot of things simultaneously,” said Ulf Persson, co-founder and Managing Partner of Mint Capital.
By definition, start-ups constitute risky investment because, unlike larger private companies, they have not proven their profitability. Gref said world-famous brands, including Microsoft and Cisco, emerged as a result of venture capital funding. Only a few technology start-ups are destined to become global powerhouses, however.
“Without government support, venture capital investment [in technology start-ups] will emerge in 10 years at best,” said Mikhail Gamzin, managing partner of Russian Technologies, an investment fund backed by Alfa Group.
It is difficult for start-ups looking for financing to compete with established private companies.
Private equity funds investing in companies that bring in $10 million or more in profit post 40 percent to 50 percent annual returns in Russia, Gamzin said.
Few funds invest in start-ups because there are more attractive alternatives, like supermarket chains that already have proven returns, said Kirill Dmitriev, managing director of Delta Private Equity Partners.
Start-ups investments also lose out in comparison with more liquid assets, like stocks, said Casper Heijsteeg, partner at Eagle Venture Partners.
Another issue is a shortage of managers, who can bring Russian high-tech companies from their early stage to a successful commercial company, Heijsteeg said by e-mail.
In the West, start-ups are chasing venture capitalists, but Russian start-ups must often be educated about what venture capital is and how it can be used to develop and grow the start-up, Gamzin said. “In Russia, funds are chasing start-ups,” he said.
The venture company will get its charter capital from the state investment fund, also called the infrastructure fund. Its venture funds will manage 600 million rubles to 1.5 billion rubles ($22 million to $55 million) each, Interfax reported.
State support should go hand-in-hand with a push to attract more private-sector funding for research and development to ensure that investments are made efficiently, the World Bank said in a recent report.
Involving professional fund mangers will be the key to success because, unlike government officials, they will base their investment decisions on a start-up’s potential profitability, said Pavel Teplukhin, president of Troika Dialog Asset Management.
The fund management companies will be paid 2 percent of the portfolio they manage and 20 percent of the returns they make, Interfax reported.
More importantly than just pouring money into high-tech, the venture company will create a “critical” push for addressing other problems in the sector, said Delta’s Dmitriyev, who is also president of the Russian Private Equity and Venture Capital Association.
“Often, when investors are ready to provide capital, they lobby for improving legislation,” he said.
The inadequacy of intellectual property rights enforcement is forcing some Russian start-ups to patent their technologies abroad, taking their benefits outside of the country, Teplukhin said. Having the state on the investment side may help stem this brain drain and improve intellectual rights protection, he said.

TITLE: Couple Learn About Property Spravki the Hard Way
AUTHOR: By Carl Schreck
PUBLISHER: Staff Writer
TEXT: MOSCOW — Nelson Algren once warned never to play cards with a man called Doc, never to eat at a place called Mom’s and never to sleep with a woman whose troubles are worse than your own.
And if the Chicago writer were around to counsel Russian homebuyers, he might tack on another useful tip: Never purchase an apartment from someone on a four-day bender.
Vyacheslav Ryabov and his ex-wife, Nadezhda Ryabova, say they knew the family that sold them an apartment five years ago had problems, but they were not sure they were alcoholics.
“The apartment was in terrible condition, and it was clear that the people were poor,” Ryabov said. “But we never once saw anyone in the family drunk or hung over.”
Just to be safe, the couple conducted a type of due diligence that is common in residential real estate purchases in Russia. “We insisted that they provide us with medical and psychological evaluations,” said Ryabov, a 47-year-old retired policeman. “I was very scared that the owner might be crazy, or a drug addict or an alkie.”
Now, however, Ryabova has been ordered to vacate the apartment, all because of a purported four-day drinking binge by the seller — and despite documentation that the seller was fit to make the deal.
The Ryabovs bought the apartment so that Nadezhda would have a place to live after their planned divorce.
Furthermore, there is little chance of the couple getting a full refund because, as is common practice, the full price of the apartment was not indicated on the contract.
Apartment buyers traverse a legal minefield in securing property rights, and digging up information on the addiction history and sanity of a seller has become an almost obligatory step for those trying to solve the eternal kvartirny vopros, or “apartment question,” as housing issues are popularly termed.
Numerous Civil Code articles allow for purchase and sale contracts to be annulled even years after buyers have moved into an apartment — and a seller deemed by a court not to have been “sui juris,” or legally capable, at the time of the deal is one of the most common scenarios in which sales are invalidated.
Because alcoholism, drug use and mental problems are all serious grounds for declaring a person legally incapable, apartment buyers in Russia often try to protect themselves by demanding notarized spravki, or certificates, confirming the seller is of sound mind and has never been registered with health officials as mentally unstable or a substance abuser.
So widespread is the practice that mortgage lenders will frequently demand a full set of spravki from a seller before agreeing to release funds for a purchase.
But the spravka system is far from watertight, as the Ryabovs learned the hard way.
In a country with rampant alcoholism, the practice of documenting substance abuse history in real estate deals has been around almost since the beginning of Russia’s short history of private property, real estate experts say.
The Moscow City Court last year annulled Ryabova’s December 2000 purchase of the three-room apartment in Moscow’s southwest Solntsevsky district, ruling that one of the sellers, Lyudmila Tatyushina, 19, was in an alcoholic haze during the four-day stretch when the deal was made. The court ruled that Tatyushina was “incapable of understanding the meaning of her actions” when she and her mother, who died of liver failure two weeks after the deal, sold the apartment.
The court’s judicial board on civilian cases rejected Ryabova’s appeal on March 28, meaning she will have to either vacate the apartment voluntarily or be forcibly removed from the premises.
The Ryabovs said they thought the deal was safe when Tatyushina and her mother, Vera Chernyshova, handed over notarized medical documents dated Dec. 4, 2000, that said neither exhibited symptoms that would interfere with the sale of the apartment.
But according to Anya Levitova, managing partner of the Evans real estate agency, which was not involved in the deal, the Ryabovs made a crucial error in timing: The sale contract was signed two weeks after the medical examinations, meaning the documents did not account for the sellers’ mental state at the time of the deal.
“If a person is an alcoholic or a drug addict, then it’s still possible to buy the apartment,” Levitova said. “But you need to have notarized documents saying that specifically on the day of the deal the person is mentally fit.”
There are no statistics available on exactly how many apartment sales in Russia are voided by courts on the grounds of alcohol or drug abuse by one of the parties, though Kommersant last year estimated the number at around 10,000 annually.
According to court documents, Tatyushina and Chernyshova, who were both unemployed, sold the apartment to the Ryabovs and bought an apartment in the Tula region city of Alexin, where they moved with Chernyshova’s twin sons, Tatyushina’s brothers, who are still minors.
Chernyshova died at age 41 a few months after moving with her family to Alexin, after which her sister filed a complaint with prosecutors to have the deal annulled on the grounds that Tatyushina and Chernyshova were abusing alcohol when they signed the contract. According to court documents, Chernyshova’s sister claimed the sale violated the rights of Chernyshova’s two underage sons, even though Tatyushina never showed up for court hearings, her whereabouts were unknown, and her court-appointed lawyer asked the judge to reject the complaint.
The judge shot down the argument that the sale had violated the rights of the two young boys, but the claim that Tatyushina was drunk and legally incapable stuck thanks to a medical evaluation from the Serbsky Institute conducted 3 1/2 years after the contract was signed.
Doctors from the institute, basing their conclusions on interviews with the patient herself, said Tatyushina was on a four-day drinking binge during the time she and her mother sold the Moscow apartment and bought the Alexin apartment.
The initial medical and psychological check-ups conducted around the time of the deal were too cursory to carry any weight, the court ruled.
Yulia Matyugina, a lawyer with Evans Real Estate, said court documents indicated that the Ryabovs bought the apartment in good faith, given the efforts they made to establish the legal capability of the seller.
Whether the Ryabovs were sincere buyers or not, their purchase involved the type of contract wrangling that has become an institution in real estate transactions and, for many kopek-pinching homebuyers, the rope with which to hang themselves.
About 85 percent of all apartment transactions are based on contracts showing a price well below the actual amount paid by the buyer, Matyugina said. “It’s a means of reducing the [seller’s] tax burden,” she said.
Under tax laws, any seller who has owned an apartment for less than three years is required to pay taxes on the amount by which the sale price exceeds 1 million rubles ($37,050).
The seller, therefore, will often give the apartment buyer two choices: Pay the amount of the taxes on top of the sale price, or agree to list the price of the apartment in the contact as 1 million rubles, regardless of the amount of money that actually changes hands.
Natalya Petelina, head of N. Petelina Legal Office, a real estate consultancy, said the practice of showing a knockdown price in the contract was also a way to hide income and avoid possibly uncomfortable questions from tax authorities.
Hiding income was a key motivation for this practice in the 1990s, but apartment buyers have gradually come to recognize the benefits of transparency, Petelina said.
“People now are trying to legalize their incomes rather than hide them,” she said. “We advise our clients that it’s in their best interest to indicate the full price in the contract.”
According to the Ryabovs’ contract, they officially bought the apartment for $16,500, or about 468,000 rubles at the time. But according to a copy of their contract with Kommerzh, the agency that brokered the deal, the Ryabovs actually paid $22,000. And because the court only recognized the contract between the buyer and the seller, the Ryabovs, on top of losing the apartment, also lose the $5,500 difference between the official and actual price.
Ryabov said he did not realize at the time the possible negative consequences of not indicating the actual value of the apartment in the contract.
“I would do things differently now,” he said.
The Ryabovs actually got off relatively lightly. The practice of showing a lowball price on the contract is ripe for enterprising con artists, who, if they can successfully convince a court they were not of sound mind at the time of the deal, can make off with a lot more than $5,000.
The average price of a 40-square-meter apartment in a building similar to the one Ryabova will soon have to vacate is currently hovering around $140,000, according to the IRN.ru consultancy, which releases weekly and monthly market indexes. If a seller unloads an apartment officially for 1 million rubles but in reality receives $140,000, a contract annullment could put the buyer out to the tune of more than $100,000.

TITLE: Military Begins Investigation Into Hazing Death of Serviceman
AUTHOR: By Oksana Yablokova
PUBLISHER: Staff Writer
TEXT: MOSCOW — Prosecutors are investigating the death of a serviceman who suffered severe head injuries after his drunken commanding officer kicked him in the face, a spokeswoman for the regional military prosecutor’s office said Friday.
The comments by the spokeswoman, Natalya Zemskova, contradicted an earlier account of the incident by military higher-ups, who suggested the commanding officer was simply punishing the serviceman for insubordination.
Dmitry Panteleyev, 20, was attacked on Aug. 4 by Captain Vyacheslav Nikiforov at the base where they were stationed in the Moscow region town of Lukhovitsy, prosecutors said.
Panteleyev, from Syktyvkar, the capital of the Komi republic, had less than four months to serve before he was to be discharged.
After being beaten, Panteleyev was taken to a local hospital, where he died last week, never having regained consciousness.
Zemskova called Nikiforov a heavyset man, weighing in at about 160 kilograms.
The hazing incident came a week after the new military prosecutor, Sergei Fridinsky, touted what he called a dramatic decline in hazing-related deaths and suicides in the military.
Deaths from hazing have fallen by 28 percent, Fridinsky said at a meeting attended by Prosecutor General Yury Chaika, Defense Minister Sergei Ivanov and top military prosecutors.
Initially, military officials said Nikiforov beat Panteleyev after the serviceman was said to have left his detachment without permission and returned drunk with another serviceman.
But on Friday, prosecutors said they had established that it was Nikiforov who had attacked his subordinates. The other serviceman with Panteleyev, who suffered only minor injuries, was not identified. No alcohol was found in Panteleyev’s blood.
Nikiforov was detained last Monday and remains in custody in the nearby town of Kolomna, Zemskova said. He faces charges of abusing his post and inflicting severe injuries resulting in death. If he is found guilty, he faces up to 15 years in prison.
Soldiers’ rights groups have long accused the military of covering up hazing incidents.
“Dozens of similar crimes are committed everyday, and dozens of crippled soldiers are scattered across the country in hospitals and might never reach the public eye,” said Valentina Melnikov of the Union of Soldiers’ Mothers Committees.
In 2003, Melnikov said, 24 servicemen deserted the same detachment in Lukhovitsy that Panteleyev had belonged to, adding that 18 of those had turned up at her central Moscow office complaining of hazing.
“This is a very typical case for the armed forces,” said Veronika Marchenko, head of Mothers’ Right Fund. 
“Kicking servicemen is the only way of punishing subordinate servicemen that most officers know of.”
Based on parents’ reports, Mothers’ Right said 3,000 servicemen died yearly due to hazing and other accidents. This figure is much higher than that of the Defense Ministry.
A Defense Ministry spokesman declined to comment on the incident.
Panteleyev was part of a detachment of so-called railway troops. Such troops are usually deployed for civil and military construction projects, including the construction of roads and bridges and repairing railways.
The Defense Ministry spokesman voiced surprise that railway troops were part of the Defense Ministry.
 In another high-profile case, that of Andrei Sychyov, a military hospital doctor said the serviceman had been misdiagnosed by doctors in Chelyabinsk.
Sychyov, a first-year conscript serving at the Chelyabinsk Armor Academy, was attacked in a January hazing incident. His legs and genitals were subsequently amputated.
The trial for the suspect in the incident, Alexander Sivyakov, is now taking place. Sivyakov is a second-year soldier.
Vyacheslav Klyuzhev, the head doctor at Burdenko hospital, where Sychyov is being treated, said at least one of Sychyov’s legs could have been saved, Interfax reported. He also said Sychyov could move around the hospital in a wheelchair and testify in Sivyakov’s trial, though he could not leave the hospital.

TITLE: Boeing Gets Putin Blessing For $18Bln Titanium Deal
AUTHOR: By Yuriy Humber
PUBLISHER: Staff Writer
TEXT: MOSCOW — With President Vladimir Putin’s blessing, Boeing struck an $18 billion deal Friday with VSMPO-Avisma to supply titanium for its airplanes.
The agreement came exactly a week after the United States announced it had imposed sanctions on state arms trader Rosoboronexport, which is acquiring VSMPO-Avisma, and could help Boeing land a large planes order with Aeroflot.
The development should alleviate fears that the sanctions will harm U.S. companies’ business in Russia.
As part of a 30-year deal, Boeing and VSMPO signed off Friday on a joint venture under which Boeing will purchase $18 billion-worth of VSMPO’s titanium products.
Meeting with a trio of senior Boeing executives at his Novo-Ogaryovo residence outside Moscow, Putin said the venture was “an attempt to enter a new level of cooperation,” according to a version of his comments posted on the Kremlin web site.
Representing Boeing at the meeting were company vice president Thomas Pickering, a former U.S. ambassador to Russia and undersecretary of state for political affairs; Alan Mulally, CEO of Boeing’s commercial airplanes division; and Sergei Kravchenko, head of Boeing in Russia and the CIS.
VSMPO general director Vladislav Tetyukhin and Rosoboronexport chief Sergei Chemezov, a close ally of Putin’s, also attended the meeting. 
Chemezov confirmed late Friday that Rosoboronexport had agreed to buy more than 51 percent of VSMPO from current owners Tetyukhin and company chairman Vyacheslav Bresht, and would soon pay for the shares, Bloomberg reported.
Putin’s approval of the Boeing-VSMPO deal appeared to be a defiant reaction to the United States slapping trade sanctions on Rosoboronexport and military jetmaker Sukhoi. Under the sanctions, the two Russian firms’ trade with U.S. firms is restricted, while their trade with U.S. government agencies is banned altogether.
The sanctions come under the Iran Nonproliferation Act of 2000, but their timing — they took effect July 28, the day after Russia sealed a $3 billion arms sale to Venezuela — has been widely seen as a response to Russia aiding Venezuelan President Hugo Chavez, a staunch critic of U.S. policies.
As well as its cooperation with VSMPO-Avisma, Boeing acts as a consultant and minority investor in the Superjet medium-sized passenger jet project, formerly known as Russian Regional Jet.
U.S. firms, and Boeing in particular, would suffer the most from the sanctions, analysts in Washington and Moscow said last week. Putin’s comments, however, appeared to suggest that trade relations would not suffer.
“Since 1992, ... your company has proved itself a reliable partner,” Putin said. “We, for our part, will with pleasure support the development of your activity, of your business in Russia.” 
National flag-carrier Aeroflot has yet to announce whether Boeing or European rival Airbus will win a $3 billion order for 22 new long-haul airliners. 
By appearing to broker the Boeing-VSMPO deal, the Kremlin was sending out a familiar message, said Roland Nash, chief strategist at Renaissance Capital. “Putin wants to signal, ‘Yes, you can have private enterprise, but enterprise under the eyes of the Kremlin,’” Nash said.
“The Kremlin has made it clear that any deals happening in strategic sectors must have its stamp of approval.”
Although VSMPO-Avisma exports 75 percent of its output, it also supplies titanium for submarines, rockets and nuclear power stations in Russia. The company produced about 30,000 tons in 2005, one-third of the world’s titanium, making it the largest producer of the metal.
Boeing’s venture with VSMPO gives it a major, low-cost titanium parts supplier at a time when prices for the light, durable metal are set to soar.
Analysts predict titanium demand will rise by 13 percent over the next three years, with prices for the metal seen as rising by one-third by 2008. High aviation fuel prices and increased insurance costs due to terrorist threats are leading aircraft makers to demand lighter, more fuel-efficient aircraft parts.
Boeing would save 20 percent on costs through the $60 million, 50-50 joint venture, at the titanium maker’s Verkhnyaya Salda plant in the Urals, VSMPO’s Tetyukhin said. The venture will also supply other projects, including Sukhoi’s Superjet.
As VSMPO’s largest client, Boeing already buys 40 percent of its titanium from Verkhnyaya Salda, which also supplies close to 60 percent of Airbus’ titanium needs.
The latest jets from both companies, Boeing’s 787 Dreamliner and Airbus’ A350, each require 36.3 tons of titanium. One-tenth of the Dreamliner’s parts are made from Russian titanium, Tetyukhin said at Friday’s meeting.
“This agreement is an outstanding example of how a joint venture should work, with benefits for both of our companies,” Mike Cave, vice president of airplane programs at Boeing’s commercial airplanes division, said Friday in a statement.
“VSMPO will expand its capabilities in titanium parts production, and Boeing will increase efficiency and reduce the waste associated with titanium machining,” Cave said.
The venture will perform rough machining and stamping of titanium forgings — turning primary metal into polished, semi-finished products. The final machining and processing of the forgings into airplane components will be mostly done at Boeing’s U.S. facility in Portland, Oregon.
In 10 years, VSMPO hopes to progress to making final parts for Boeing, Tetyukhin said Friday, Bloomberg reported. After the Rosoboronexport takeover, VSMPO’s business strategy will not change, Tetyukhin said.
VSMPO recorded a net profit of $128 million and revenue of $506 million in the first half of 2006, according to Russian accounting standards.
 After Russia’s sale of arms to Venezuela, it is also in talks to sell arms to Mexico and other Latin American nations, Rosoboronexport’s Chemezov said on the sidelines of a Boeing reception late Friday, Bloomberg reported.
“Venezuela’s example has proved catching,” Chemezov said, Bloomberg reported. “Latin America used to be a blank spot for us, now they all want it — Brazil, Argentina, Chile.”

TITLE: Ford Pays the Price of Profit
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: Ford’s Russian subsidiary incurred a net loss of 60 million rubles ($2.22 million) last year. This seemingly disappointing result followed two successive years of profit, Interfax reported Friday referring to the SPARK database.
Yekaterina Kulinenko, public affairs manager at Ford Russia refused to deny or confirm the report, when contacted Friday.
“Ford does not publish financial reports on its operations in Russia. Thus I can’t comment on those figures,” she replied via e-mail.
The Ford Motor Company established its plant in Leningrad Oblast in 2002. Referring to SPARK, Interfax reported that Ford earned a net profit of 680 million rubles ($25.2 million) in 2003 — the highest profit for the company so far. However, in 2004 profits fell by almost a half to 332 million rubles ($12.3 million).
At the same time Ford’s revenue has been steadily increasing — from 14.88 billion rubles ($551 million) in 2003 to 24.2 billion rubles ($896 million) in 2004 to 39.2 billion rubles ($1.45 billion) last year.
Ford’s sales in Russia increased from 20,712 cars in 2003 to 39,241 in 2004 to 59,700 last year. Production at the plant increased from 16,000 cars in 2003 to 29,000 cars in 2004 to 33,000 cars last year.
However, only over the last year the total value of long-term loans increased from 2.1 billion rubles ($77.8 million) to 2.9 billion rubles ($107 million), Interfax reported.
The absence of official financial reports prevented industry experts from giving definite comments on company performance and from making reliable forecasts.
Denis Orlov, analyst for metallurgy and industrial construction, at Veles Capital investment company, only suggested that Ford revenue is likely to increase by 60 percent this year as “over the last two years this was the approximate rate of growth.”
A net loss could result from the expense of expanding production facilities. According to the Interfax report, during plant construction the company incurred a net loss of 453 million rubles ($16.8 million) in 2001 and 649 million rubles ($24 milliom) in 2002.
According to a Ford statement, the volume of production will increase to 60,000 cars this year.
Business daily Vedomosti suggested Monday that Ford’s net loss last year was caused by higher commercial expenses.
“In this case, the carmarker’s plan is interesting,” Orlov said. “They continue working for some time with a minimal marginal profit or even with a loss. When they reach the maximum planned production volume, they will decrease some expenses and skim the cream,” Orlov said.
If this suggestion is correct, Orlov said, Ford’s real profit levels have not yet been achieved, and last year’s loss could be regarded as investment into brand popularity and market share.
“In the future such investments will pay off with interest,” Orlov said.
In June this year, Ford lost the status of ‘free customs warehouse’ and the tax concessions related to this status, but  the ministry for economic development and trade was quick to sign a new agreement with Ford to provide it with the status of an ‘industrial assembling’ company and grant it the associated tax concession.

TITLE: Belarus IntoIranian Car Assembly
PUBLISHER: The Associated Press
TEXT: MINSK, Belarus — Iran’s industry minister inaugurated a new assembly plant for Iranian-designed cars in Belarus on Friday, wrapping up a four-day visit to the isolated former Soviet republic and pledging to further bolster ties. 
Ali Reza Tahmasebi said the plant’s opening was “another step toward the strengthening of bilateral cooperation.” 
The plant will assemble up to 1,000 Iranian-designed Samands — a model based on old French Peugeot designs — by year’s end, and up to 6,000 by next year. 
Earlier this week, Tahmasebi invited Belarus’ authoritarian President Alexander Lukashenko to travel to Tehran to meet with Iranian leader Mahmoud Ahmadinejad. 
A pariah in the West for quashing dissent and for allegedly rigging his latest re-election in March, Lukashenko has sought to develop ties with nations that have strained relations with the West. 
Last month, he played host to Venezuelan President Hugo Chavez, a frequent and harsh critic of the United States. 
During a meeting with Belarussian parliament speaker on Thursday, Tahmasebi said the Iranian government “intends to develop relations with friendly nations, with whom it shares common positions on all international issues.” 
Trade between Belarus and Iran stood at a modest $40 million last year.

TITLE: IN BRIEF
TEXT: Lenta Expansion
ST. PETERSBURG (SPT) — The Lenta retail chain will invest $80 million into construction of four new hypermarkets across Russia, which will open by the summer of 2007, the company said last week in a statement.
Four other hypermarkets are being constructed and due for completion this year. Total investment into the expansion is estimated at between $130 million and $150 million this year.

Port Tendered
ST. PETERSBURG (SPT) — The Sogaz insurance group won the tender for the servicing of St. Petersburg Sea Port and will insure 119 transport vehicles for 65 million rubles, Interfax reported Friday.
The one-year insurance policies cover both compulsory motor third party liabilities and voluntary car insurance.

Bank Deposits
ST. PETERSBURG (SPT) — CIT Finance investment bank increased net assets by 48 percent up to 27.6 billion rubles in the first half of 2006, Interfax reported Friday.
The total value of deposits increased by 24 percent up to 14.48 billion rubles. Total value of individual deposits increased by over four times reaching 1.38 billion rubles. Net profit increased by 8.2 times up to 2.4 billion rubles.

TITLE: Ukraine to Delay WTO Talks
PUBLISHER: Reuters
TEXT: SIMFEROPOL, Ukraine — Ukraine’s government is committed to joining the World Trade Organization but may delay talks to ensure membership conditions meet producers needs, Ukrainian Prime Minister Viktor Yanukovych said Friday. 
Ukrainian President Viktor Yushchenko set a government task to join the bloc by the end of this year. But Yanukovych said more time to study all conditions might be required. 
“Certainly, we have a huge interest, and the government set itself a task to join the WTO as soon as possible. But the main issue for us is the conditions for joining,” he told reporters during a visit to the Crimea. “If we manage to do it in 2006, then it will be 2006. But our task is to resolve this issue in a clear way and within national interests. If we need to extend the term to do it, then we will extend it,” Yanukovych said. Yanukovych was appointed prime minister earlier this month after he promised to try to secure WTO entry this year. He is due to visit Moscow on Tuesday in his first foreign trip since his appointment.
Ukraine wants to cut its dependence on energy imports by participating in gas and oil extraction projects in Russia, Central Asia and Libya, Yanukovych said Friday, Bloomberg reported.
Ukrainian Interior Minister Yury Lutsenko pledged Friday to continue his fight against graft in the Cabinet led by Yanukovych, whose associates he has investigated on corruption charges, The Associated Press reported.
Also Friday, NATO countries sent ships to the Black Sea port of Sevastopol for a naval exercise, the first after an anti-NATO protest forced the cancellation of U.S.-Ukrainian maneuvers, the AP reported.

TITLE: Rebgun Fires Yukos Dutch Unit Chiefs
PUBLISHER: Reuters
TEXT: AMSTERDAM — Yukos receiver Eduard Rebgun fired the management of a foreign unit of the company hours after a Dutch court ruling Friday, Interfax reported. 
“They stood against the interests of shareholders,” the news agency quoted Rebgun as saying about Bruce Misamore and David Godfrey of Dutch-based Yukos Finance BV. 
“They held talks, while I was completely sidelined. I considered that unacceptable and made a decision to change the managers,” Rebgun said. 
Rebgun said his decision was authorized by an extraordinary meeting of Yukos shareholders called Friday hours after the Amsterdam court ruled Rebgun was within his rights to call for a meeting to discharge the managers. 
The decision paved the way for creditors to get control of Yukos Finance’s main assets, including a 54 percent stake in Lithuanian refinery Mazeikiu, worth almost $1.5 billion, and a 49 percent stake in Slovak oil pipeline operator Transpetrol, worth between $100 million and $200 million. 
“Under Dutch law a foreign receiver is competent to execute his role here,” the judge ruled. Rebgun was appointed receiver by the Moscow Arbitration Court after Yukos was declared bankrupt Aug. 1. 
Misamore and Godfrey said in a statement they would fight their dismissal. 
Rebgun’s lawyer argued in court that the two managers had moved the assets to another Yukos unit in a complex transaction with the explicit goal of keeping them out of the reach of creditors. 
Yukos Finance BV moved the assets in 2005 to its unit Yukos International UK BV, which then transferred its shares to Stichting Administratiekantoor Yukos International in exchange for certificates. 
Poland’s PKN Orlen won a tender in May for the Mazeikiu stake, but has the right to walk away from the deal by the end of the year if Mazeikiu’s value falls significantly. The value of the investment has become uncertain since the refinery had its supply pipe to Russia cut after a reported oil leakage earlier this month. The cut prompted concerns that it was Russia’s punishment for the rejection of Russian bidders in the tender. 
The Slovakian government said earlier this month that it had reached an agreement to buy the remaining 49 percent stake of Transpetrol it did not hold. 
On Aug. 17, the Dutch court will rule in a separate case how Yukos’ creditors are to share the expected proceeds. 

n A Moscow court reduced Federal Tax Service claims against Yukos from $13.2 billion to $11.7 billion Friday, The Associated Press reported, a move that could strengthen the hand of Rosneft among the company’s creditors. A spokesman for the Ninth Moscow Arbitration Appeal Court could not immediately confirm the decision, the AP said. 
Rosneft holds about $4.5 billion in claims and will ask a court to admit a further $8.5 billion on Sept. 12. If these are accepted, Rosneft would become Yukos’ biggest creditor.

TITLE: Russia To Investigate Builders
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russia will investigate whether construction companies are colluding to drive up apartment prices as a plan by Russian President Vladimir Putin to make housing affordable for citizens falters.
The Prosecutor General ordered the Federal Anti-Monopoly Service to undertake checks of construction companies in Moscow, the Moscow region and St. Petersburg for possible price collusion, the prosecutor said in a statement on his web site late Friday.
Putin in Sept. 2005 announced he would boost spending on affordable housing, improving health care and education, and reviving agriculture. He has termed the four priorities “national projects’’ and gave oversight of their implementation to First Deputy Prime Minister Dmitry Medvedev.
“One of the serious problems hindering the successful implementation of this project in Moscow, St. Petersburg and Moscow region is the unfounded high rise in prices,’’ the prosecutor’s statement said. One of the factors may be a “possible price collusion between construction companies.’’ 
Moscow and St. Petersburg account for about a tenth of the nation’s population. The price for a single square meter has risen several times over the past few years, the prosecutor said in the statement. The Interior Ministry and regional prosecutors have been ordered to assist in the case, the statement said.
Regional and municipal governments are violating the law by not permitting open land auctions, Medvedev said in February. The construction market is also highly monopolized, he said.

TITLE: Sberbank Leads Way With Interesting Move on Loans
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: State-owned Sberbank has decreased the interest rates of ruble loans granted to individuals, and increased those of individual dollar and euro loans, Interfax reported Monday, in a move that is likely to have repercussions across the sector.
The changes concerned mortgages, car loans, multipurpose loans and consumer loans and varied between one and five percent.
“Taking into account current macroeconomic environment — decreasing inflation, the stabilization of the national currency in relation to leading world currencies and the transition to ruble convertibility — and in order to develop consumer and mortgage loans, Sberbank decided to decrease significantly the interest on ruble loans,” the bank press service said in a statement distributed on the web.
According to the statement, lower interests will make ruble loans affordable to more people and decrease bank risks.
Denis Moukhine, analyst for banking and currency at Brokercreditservice investment company, recalled that earlier this year, at the end of July, Sberbank, for no apparent reason, stopped issuing loans for individuals.
“The decision made by Sberbank was probably caused by decreasing rates of foreign currency and the strengthening of the ruble, which made dollar loans less profitable for the bank,” Moukhine said.
“Recently Sberbank became a trendsetter among Russian banks by increasing interest on individual deposit accounts. This time Sberbank is likely to start a trend of increasing interest rates for dollar denominated loans,” Moukhine said.
Rustam Botashev, senior financial analyst at ATON brokerage, put Sberbank’s decision down to market conditions.
“They [Sberbank] would have accumulated more rubles than they’d need. And thus they’ve decreased the interest rate for ruble loans,” Botashev said.
As for the other banks, he said it’s hard to predict whether they’ll immediately follow suit, but it seems a likely scenario.
“Sberbank controls over 50 percent of the market. When such a big market player does something, it is likely to affect the market as a whole,” Botashev said.
However, a bank manager considered current interest rates quite balanced and unlikely to change.
“Loan interest rate depends on a number of factors — cost of attracting resources, national economy figures, credit risks, type of the loan and its currency,” said Igor Zhigunov, director for Northwest region at City Mortgage Bank.
“Present interest rates (10 percent to 12 percent in foreign currency and 12 percent to 15 percent in rubles on average) are reasonable and reflect real market situation. There is no real grounds for increasing or decreasing interest rates,” he said.
According to a Sberbank statement, the bank increased foreign currency mortgage interests from 11 percent up to 13.5-15.5 percent. Ruble mortgage interests decreased from 16 percent to 13-15 percent.
Dollar-euro consumer loans interest rates increased from 11.5 percent up to 15.5-17.5 percent. Ruble consumer loans interests decreased from 16-18.5 percent to 15-17 percent.
The interest on euro-dollar car loans increased from 11.5 percent up to 12-14 percent and on ruble car loans decreased from 16-18.5 percent to 11.5-13.5 percent.

TITLE: Reeling in the Tourists With Southern-Fried Bait
AUTHOR: By Oksana Goncharova
PUBLISHER: Vedomosti
TEXT: Many people are hooked on fishing — and Olga Romanenko of Astrakhan thought it would be silly not to try making money out of that. Eight years ago she invested $1,000 into infrastructure, six years ago she opened a fishing tourism services business, and now her company’s proceeds are almost $500,000 per year.
Romanenko’s career was initially on a completely different track, however. Educated as an engineer, she worked as a fishing trade union’s district committee chairperson for two years before starting her business.
“I was absolutely certain that my career would develop along trade union lines,” she said.
Her plans changed sharply when, in 1990, a small German tour agency approached the union with a proposal to organize a hunting and fishing business in the Volga Delta. Parallel with her trade union work, she was charged with developing tourism within the union’s Lotus subdivision. 
“It was necessary to start from zero,” Romanenko said. “There wasn’t a single firm in the region specializing in fishing and hunting services.” 
The first serious problem with the service arose when the first German tourists arrived, she recalled. 
“At that time, there was no canned beer in Russia, and it turned out Germans didn’t drink beer on tap at all,” Romanenko said. “The same with cigarettes — they preferred Marlboro and Bond, which were in deficit, and for us it was a real headache.”
Aspiring to please the clients completely, the enterprise brought in beer from Germany and ordered cigarettes through union connections. Their efforts were rewarded: The Germans became not only regular clients, but also taught the Astrakhan entrepreneurs the finer points of the fishing business. For example, the experienced Germans ordered plastic boats rather than aluminum, explaining that plastic vessels made almost no sound when approaching fish and thus didn’t scare them away.
Romanenko worked at the enterprise for seven years, earned a degree in tourism services, and then decided to go it alone. The timing was not ideal, however — September 1998. Nevertheless, Romanenko used Russia’s financial crisis to her advantage. The Astrakhan port, financially ruined, sold off its unprofitable docks, one of which Romanenko purchased for the equivalent of just over $1,000 from her family’s savings.
For this sum, which Romanenko admits was “practically nothing,” she became the owner of a two-story, 600-square-meter building, which she planned to convert into the Olga hotel and tour depot. Helping Romanenko start were seven members of the Lotus team who followed her into the new business — three huntsmen, a translator, a cook, an administrator and a maid: all the personnel required for serving tourists.
To drum up more tourists, Romanenko went to Moscow. “The initial period was difficult,” she said, adding that the enterprise might never have come into being without its friendly relations with many business partners.
“Naturally, we were interested,” said Alexei Chernushenko, the general director of Moscow-based fishing specialist Night Flight Travel. “It was one of the first tours in the Astrakhan region.” 
Chernushenko said the Olga tour depot had 75 percent occupancy during its second season, a big achievement for a new firm.
Now, Romanenko has no problems finding tourists — her company has all types of tours booked through 2007, with one-week trips costing from $1,200 to $1,400. 
With a staff of 30, the company’s proceeds totaled about $400,000 in 2005, with a 14 percent profit margin and 10 percent average annual growth.
Romanenko’s client base includes skilled tourists from Yekaterinburg, Chelyabinsk, Bashkortostan, St. Petersburg, Omsk, Germany, Poland and the Baltic states. One of her regular clients, the Moscow region Duma speaker Valery Aksakov, said that after each visit, he is always sad to leave.
“Here, as nowhere else, you feel the care and attention shown by the personnel,” Aksakov said, “from the person who fills the gas tank on the boat’s outboard motor and later helps moor it, to the cook, who, before preparing anything, always asks for your preferences.” 
Chernushenko of Night Flight Travel said Romanenko had occupied her niche “forever,” adding that of the more than 300 existing tour companies in the region, only five or six were developing successfully. 
Romanenko’s competitors consider hers to be a family business, with her main advantage being the ability to independently supervise all processes, considerably reducing the cost of services.
“It is one of the first tourist operations to appear in the Volga Delta,” said Vladimir Fialkin, general director of the Astrakhan tour firm Tintour, part of the Moscow holding company Po Klyovym Mestam. He said that despite its modest size, the Olga tour depot holds its own in competition with the large operators that came to the region in the early 2000s. 
“Romanenko has developed the image of an easygoing hostess,” he said.
“People come to visit Olga, and not the tour depot,” Chernushenko added.

TITLE: Local Plant Finds Precious Profits in Diversification
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: Managers at Russkiye Samotsvety are hoping to edge ahead of the competition. The jewelry producer has ambitions beyond its traditional area of expertise, and, with the help of bank credit and more efficient spending, is convinced of higher profits to come.
Although the plant was only founded in 1912, by a decree of Tsar Nikolai II, managers claim they are preserving a style which owes more to Carlo Faberge and even earlier traditions of handcraft enterprise, stretching back to the time of Peter the Great.
“I prefer the word ‘plant’ than ‘company’,” said Sergei Dokuchayev, CEO of Russkiye Samotsvety. Nostalgia for the core business there may be, but Dokuchayev is not immune from other opportunities for profit.

Lucrative diversification
At the beginning of the 21st century, Russkiye Samotsvety was facing crisis. To increase profits, effectively reduced to nothing, a team management team was invited to turn around the company’s fortunes. They proposed a new program for development, focused, in particular, on “the more efficient use of space.”
In this way in 2003 the company moved into new markets, opening a furniture shop, to which it gave up 10,000 square meters of its own floor space for the purpose. Following an initial investment of $3 million, the project has been quite successful, Dokuchayev said. The shop now stocks products from around 75 different manufacturers of furniture.
Currently Russkiye Samotsvety uses only around 25,000 out of a total of 60,000 square meters for the production of jewelry and various related activities. The area for production has recently been reduced from 1,000 to 300 square meters.
Another of the company’s new ventures is the management of real estate, which now accounts for 20 percent of revenue. The company will invest around $6 million into the creation of a business center in the site it itself owns and occupies. Five floors will be rented out while the company squeezes its operations into the other three. The project should pay back within two and a half years, Dokuchayev said.
Around $18 million will be invested into the construction of a shopping and entertainment center near Ladozhsky railway station. It will be open by 2008, occupying a total of 22,000 square meters.
Nevertheless, this aspect of the company’s plans is open to criticism. Dmitry Zolin, managing partner at London Consulting and Management Company, has expressed doubts about the rationality of the shopping complex and saw advantages only in the project for a business center.
“Given the correct marketing, price and quality, such a business center could be in demand. Russkiye Samotsvety’s premises are located in an industrial district where several companies have their operations. The proximity to a metro station and large axes of transportation are also advantages,” Zolin said.
Among the potential tenants he listed the district’s other companies, their suppliers and logistic firms. The only problem could arise from limited space for parking, Zolin said.
Pay-back period could vary from five to seven years, depending on the total area destined for leasing and other terms, he said.
Moreover, in terms of the shopping center, Zolin evoked another two shopping and entertainment complexes successfully operating in the area (Zanevsky Kaskad and Zanevsky Kaskad-2), as well as a new shopping center, Iyun, due to open in December — all of which, he said, leaves the purpose of Russkiye Samotsvety’s project rather ambiguous.

Cut back to the chase
Regardless of how much real estate management contributes to revenue, Dokuchayev said he never let other ventures compromise the main focus of the company.
He claims that Russkiye Samotsvety occupies three percent of the Russian jewelry market and ten percent of the city market.
Last year sales reached one billion rubles ($37.4 million). In the first half of 2006 sales exceeded last year’s level by 10 to 12 percent.
“Our assortment will comprise more expensive jewelry, because consumer demand is steadily increasing in this segment of the market,” Dokuchayev said.
According to a report published last year by the Step by Step marketing agency, annual sales of jewelry in Russia reached $2 billion, with Russian companies annually producing jewelry worth a total of $1.3 billion.
The market grew by only five percent in the last three years, while Russkiye Samotsvety managed to increase profits from three million rubles to 91 million rubles in between 2002 and 2005.
Much of the success was due to its new development program, which included modernizing equipment to decrease production waste.
About 15 percent of production is exported, 40 percent – to retail chains, 45 percent – to wholesalers across Russia. 
In Russia and Asia handcraft and enameled jewelry is very popular, Dokuchayev said, and the company benefits from its widely recognized specialization in these areas.
As one of the largest and oldest jewelry firms in Russia Russkiye Samotsvety also gets state orders. In 1996 it made a set of silverware for the Kremlin. For the 300th anniversary of St. Petersburg the presidential administration ordered a special set of wares for Konstantinovsky Palace.
Last year the company completed a $1 million order for Kazakhstan president Narsultan Nazarbayev.
Clear-CUT rivalry
According to Step by Step, over 6,500 jewelry firms are registered in Russia and the number increases by 15 to 17 percent a year.
Russkiye Samotsvety faces competition not only from major jewelry producers. Small firms can be just as successful in serving VIP-clients and even more fine-tuned to their needs. Some small companies are well known on the international market and better represented at jewelry exhibitions.
“We have overlooked the promotion of our brand and collections. I must admit that there are about ten companies which emerged in the 1990s and it is their experience that we are trying to follow,” Dokuchayev said.
Russkiye Samotsvety normally takes part in three major jewelry exhibitions: in spring in Basel (Switzerland), in summer in Las Vegas (United States) and in winter in Dubai (UAE).
“By visiting these three exhibitions we cover nearly all our client base,” Dokuchayev said.
Another challenge comes from unfair competition. “Up to 50 to 60 percent of all jewelry sold in Russia comes from illegal sources,” Dokuchayev said.
The main sign of illegal jewelry is its unrealistically low price. The cost of handiwork varies between $1 and $15 for every item of jewelry. The price of gold is defined by the London bourse, diamonds are sold at standard prices, so the ultimate cost of jewelry varies insignificantly.
To save money some companies avoid paying VAT, others buy gold at pawn shops, which is five to seven percent cheaper, while others import jewelry as raw materials, get it stamped as a Russian product and economize on costs in that way, Dokuchayev said.
The Step by Step report confirms that competing through price is very popular in Russia.
“The Russian market differs from the European one by lower extra charge on jewelry,” the report said.
Over 22,000 companies operate in jewelry retail. Most of them buy products from wholesalers though “large producers are increasingly interested in creating their own retail chains,” the report said.
Russkiye Samotsvety is also planning to expand its retail chain. At the moment the company has seven jewelry salons in St. Petersburg and two salons in Moscow. By the end of 2006 the company will open three new stores in St. Petersburg and start opening regional stores as of 2007. This year the company invested around $1 million into each new salon. The new regional shops will open in cities of over one million population — one salon for every 400,000 residents, Dokuchayev said.

TITLE: Russia’s Globalization Choice
AUTHOR: By Anthony Brenton
TEXT: Last month’s successful G8 summit in St. Petersburg — which approved a record number of statements and communiques — confirmed that our shared interests, the challenges we face, and the solutions that are needed are all genuinely global in nature. But globalization does not, of course, happen just once a year. And it does not just happen from above, at the level of political leaders. It is a continuous and rapidly developing set of processes bringing economies and societies ever closer together.
Russia’s recent experience strikingly confirms this. Its participation in globalization is deepening at an impressive rate. Here are five examples.
First, Russia has made enormous progress towards WTO membership. With renewed effort in the autumn, there is every hope that it will join this global trading regime soon. Second, Russian companies are increasingly borrowing on international capital markets. Foreign indebtedness rose by $68 billion last year, and nearly $5 billion in IPOs were successfully issued in London — with more to come this year. Third, foreign direct investment this year has already exceeded last year’s total, bringing new capital, management expertise and technology. Fourth, Russian companies are actively investing abroad. For example, British car producers and football teams, among other companies, have acquired Russian owners. Finally, Russia’s role as an energy supplier to major international markets is set to grow significantly.
There is every reason to believe these trends will intensify. This is not just striking in its own terms, but unprecedented in Russia’s history. During the Cold War, the Soviet Union ran a largely autarchic, centrally planned economic bloc with only limited economic ties with the outside world (mainly oil exports, grain imports and aid to allies). It is true that in tsarist times Russia played an important international economic role. In the years leading up to World War I, it became a major agricultural exporter and attracted large loans and direct investment that supported its industrialization. But even this was limited. Historically, Russia’s international economic position has been mostly one of relative weakness. Now, for the first time, it is one of growing strength and self-confidence.
This is a highly positive development for Russia. The record since 1945 clearly shows that the most effective engine of sustained growth is domestic reform plus international integration. The more recent experience of emerging markets, notably China and India, confirms this. Developed economies continue to benefit too. The U.K. attracts more foreign direct investment than any other country except the United States. This openness, together with flexible market institutions, has contributed to Britain’s success as one of the best-performing Western European economies in the past decade.
It is not yet clear how Russia intends to manage its growing involvement in the international economic and financial system. There is a debate to be had on the issue. Some may fear globalization. They may worry that particular sectors of the economy will be hurt. It is true that globalization sometimes creates temporary dislocations. Some other G8 countries have experienced this. But the point is not to respond by restricting integration into the international economy but rather to conduct a flexible and responsive domestic policy that harnesses the long-term benefits while managing and minimizing any short-term difficulties. 
But sometimes the impression is created that there are some in Russia who may seek to limit Russia’s involvement in globalization for a different reason. Some, it seems, may wish to use Russia’s deepening economic relations not only as a source of welfare, but as a means of exerting broader influence on other countries.
Such a view would be misguided. Globalization means mutual interdependence, not the dependence of some countries on others. Russia needs growing foreign investment, as well as access to markets, in order to modernize its economy. And in today’s dynamic and rapidly evolving markets, any attempt to manipulate economic relations for noneconomic ends is bound to fail. Worse, it would be self-defeating. Russian citizens and companies would lose out on the enormous benefits of global economic integration. The country as a whole would risk losing ground to other major emerging markets.
In St. Petersburg, the G8 countries committed themselves to, among other key principles, “open, transparent, efficient and competitive markets for energy production, supply, use, transmission and transit services.” They recognized that such a market-based approach offers the most effective, flexible and mutually beneficial way of organizing relations in the energy sphere. It is in all our interests that the G8 exercise global leadership by implementing these agreed principles.
Russia’s route forward is clear. In a globalizing world it makes no sense to limit one’s involvement in the international economy for protectionist or political reasons. The only path that promises success is to embrace globalization and become an integral part of the engine of global growth. It may not always be easy, but it is the only way to support high-quality, long-term growth and unleash the innovative talents and energies of Russian entrepreneurs on an international scale. Globalization is an enormously powerful driver of growth. It is a challenge to be met, not a threat to be avoided — and least of all a weapon to be honed.

Anthony Brenton is British ambassador to Russia.

TITLE: Russia Finds Cash Alone Won’t Stem HIV/AIDS
PUBLISHER: Agence France Presse
TEXT: Russia’s HIV and AIDS sufferers are not getting the treatment they need despite a dramatic boost in funding because of weak administration, activists will tell a major conference in Canada.
With state coffers bursting with oil revenues, this year’s Russian budget allocates 20 times more money than last year’s to the problem, with a total sum equal to 115 million dollars (90 million euros).
Combating HIV has been formally recognised as a “national priority”.
But years of sluggish progress are taking their toll and top politicians remain reticent about AIDS, say critics. Russian non-governmental organisations attending the 16th international AIDS conference in Toronto on August 13-18 will report on the barriers to combating the disease in such a vast and often poorly run country.
According to estimates by the Federal Centre for AIDS Combating and Prevention there are as many as 1.5 million HIV carriers in Russia — over the symbolic barrier of one percent of the population at which combating the virus becomes a major problem.
The latest failing has been a shortage of drugs for treating HIV, which has caused several people to die in the southern city of Rostov and the insurgency-plagued North Caucasus city of Makhachkala, said Mikhail Rukavishnikov of the Association of People living with HIV/AIDS.
“Many people have had to interrupt their treatment and risk their virus transforming into a form that resists medication,” Rukavishnikov said.
The reason is that provincial administrations that were financing antiretroviral drugs from their own budgets slashed funding this year in anticipation of promised federal money (which is late to come). He says that the federal health protection agency Roszdrav announced a tender in February for antiretroviral drugs, but the results for 14 out of 26 drugs were annulled due to procedural problems. The 12 drugs that are available are of no use because none of them can be used in a combination that is effective, said Rukavishnikov.
A new tender has been announced but provincial centres will not be supplied before September at the earliest, the Federal Centre for AIDS Combating and Prevention said recently.
“One needs to know how to manage these funds effectively,” observed another activist, Igor  Pchelin, of the Shagi (Steps) organisation.
“It’s not enough to increase funding.... It’s necessary to create a federal structure for this and associations of HIV carriers and NGOS should be involved,” Pchelin said. Meanwhile other long-standing problems familiar from other parts of the world persist.
Even when drug treatments are available, many of those who carry the virus remain ignorant about AIDS and are unaware that it is treatable.”They never visit the anti-AIDS centres” that provide drugs for free, said Pchelin.
And despite the spread of HIV beyond the drug users who were the first main group to be infected, discrimination against carriers remains widespread: some risk losing their jobs if it becomes known that they carry the virus.
Even some doctors in provincial areas remain ignorant about HIV and fear they could be infected by their patients, say activists.
The number of officially registered HIV carriers in Russia is 341,000.

TITLE: State Giants Rivalry to Shape Oil Future
AUTHOR: By Dmitry Zhdannikov
PUBLISHER: Reuters
TEXT: The Kremlin’s drive for greater control over Russia’s energy sector will accelerate but, in contrast to other resource-rich countries, will involve fierce rivalry between two state champions, analysts said.
Western oil investors seeking a foothold in Russia have accepted the idea that they will have to partner either state oil firm Rosneft or gas monopoly Gazprom in any big future projects.
But they would not dream of pulling out of Russia — where booking substantial oil reserves or buying minority stakes in sizeable producers is still possible — unless the Kremlin launches a direct attack on their interests.
“It has become clear that it will be increasingly difficult to implement major energy projects in Russia without the involvement of state champions,” said Elena Anankina from Standard & Poors.
“But where Russia differs from Latin America or Kazakhstan is that it has fierce competition between two state giants, which will most likely become more acute over time.”
High energy prices have emboldened energy-rich states to change deals with foreign companies to their advantage. This year Ecuador announced plans to take over oilfields operated by U.S. Occidental Petroleum, Bolivia sent troops to occupy its natural gas fields and Venezuela took back two fields from European oil firms ENI and Total.
In Russia, the drive began in 2003 with the demise of the country’s leading oil firm Yukos, which says the Kremlin acted to punish its politically ambitious owners.
Yukos’s main oil unit was bought by Rosneft, which has just raised $10 billion in its stock market float. Gazprom last year bought oil firm Sibneft, putting more than a third of Russian oil under Kremlin control.
Some critics of the Kremlin say the driving force behind resource nationalism is personal enrichment of different clans around President Vladimir Putin, who steps down in 2008. Others argue it has become a source of funding for social development.
“Increasing state control and sharing windfall oil revenues has become the most effective tool for the Kremlin to fund social needs,” said Sergei Glazer of Vostok Nafta, a fund which owns $3.3 billion of Gazprom stock.
“The key risk would be of Soviet-style super centralization, which would lead to a drop in production,” said Glazer.
Russia provoked a furious reaction when Gazprom briefly cut gas supplies to Europe in January in a dispute with Ukraine. Moscow toned down its resource nationalism before hosting its first summit of the Group of Eight rich nations in July. But, with the West now paying less attention, the Kremlin has shed some of its inhibitions.
Russia has cut oil supplies to Lithuania, blaming a pipeline leak, hitting the Mazeikiu refinery. Yukos sold Mazeikiu to Poland’s PKN after rejecting rival Russian bids.
And Moscow has told Shell to suspend pipeline construction on the far eastern island of Sakhalin at a time when Gazprom is seeking a major stake in the project.
“The overall strategy aimed at boosting state control is very clear. But tactically it will depend on which group within the Kremlin wins specific battles,” said Glazer.
Investors are now looking to see who grabs the leftovers of Yukos, now in liquidation. Also on the radar screens is whether the state will buy out the Russian partners in TNK-BP, a 50/50 venture with BP whose shareholder agreement expires early next year.
One of Russia’s biggest planned projects is the Shtokman LNG project, in which big energy firms are vying to participate. Some analysts believe U.S. companies may lose out because of rocky Kremlin-U.S. relations.
However, difficult relations with the United States have done no harm to U.S. ConocoPhillips’s strategic partnership with Russia’s top oil firm Lukoil, in which the U.S. company plans to raise its stake to 20 percent. And, via the Rosneft IPO and opening up of Gazprom’s 49 percent free float to foreign ownership, the Kremlin is sharing some of the risks and rewards of Russia’s energy boom with international investors. “It is hard to take this too negatively. I cannot foresee this happening in Venezuela. They are going the opposite way and are taking everything,” said Ron Smith, chief analyst at Alfa Bank.

TITLE: Counting the Missing People
AUTHOR: By Alexander Zhelenin
TEXT: The State Statistics Service recently published its latest data on the country’s population, which it said was 143.3 million as of April 1 — a drop of 224,000 from the beginning of the year. If we carry on dying off at this rate, there will be just over 142 million of us left at the beginning of next year.
In 2004, according to the service, Russia’s natural population loss was almost 800,000 people. Meanwhile, President Vladimir Putin once again declared in his state-of-the-nation address in May that boosting the country’s population was a priority task for the state. But the downward trend in the population is not being reversed.
If the population continues to shrink at current rates, it will fall to a mere 100 million in 50 years. In several regions the population is already extremely low. For example, in the Republic of Buryatia, the population density is three people per square kilometer. But this is only the average: In several parts of this depopulated Siberian region — which borders China, with its population of 1.5 billion — the population density is under one person per square kilometer. In other regions of Russia the situation is no better, with the death rate exceeding the birth rate in 71 of the 88 — on average by 50 percent. In densely populated regions like Nizhny Novgorod, Saratov, and Samara, the death rate has in recent years outstripped the birth rate by two to 2 1/2 times.
In 2001, the Economic Development and Trade Ministry forecast that Russia’s population would shrink by “just” 700,000 in 2004. This did not happen. The ministry proposes, while Russians’ social and economic situation disposes. More accurately, it does not dispose them to overcome the demographic crisis of the last 13 straight years. What are the main reasons for this crisis?
Conventional wisdom cites the lowbirth rate, but conventional wisdom is wrong. Demographic concepts like “population loss” and “population growth” are the result of the relationship between the birth and death rates. If the first is higher than the second, we see population growth, and vice versa.
Over the last five years, Russia’s population has dropped even as its birth rate has risen — almost 300,000 more Russians were born in 2004 than in 1999, and the figure topped 1.5 million for the first time since 1992. However, this is still far below the number at the beginning of the 1980s, when there was concern over the fact that the number of Russians born every year had fallen to 2.2 million. The numbers were better in 1986 and 1987, when some 2.5 million Russians came into the world each year.
But, to return to the last five years, in 2003 the death rate was the highest in the last half century, at 2.37 million. This comes against a backdrop of economic growth stretching back over five years to 1999. By comparison, at the start of the 1980s the death rate in Russia was just over 1.5 million people per year.
But this is not all. If we apply the same methods used to number the victims of Soviet-era political repression to calculate Russia’s post-1991 population loss, then we obtain what is at first glance the fantastic figure of almost 20 million people. However, a closer examination reveals that there is nothing fantastical at all about it.
As a base for our calculations, let us take the relatively good year of 1991, when Russia’s population reached its all-time high of 148 million. When radical reforms started in 1992, the population began to fall — by some 220,000 in 1992 alone. Since 1993, the rate of loss has not dropped under 700,000 per year, and in some years — such as 2000 — it was close to 1 million.
In total, in the 13 years since the launch of former Prime Minister Yegor Gaidar’s liberalization campaign in 1992, Russia’s population has fallen by 10.4 million.
Thus, starting with a simple calculation — 148 million minus 10.4 million — Russia’s population today should be not 143 million, but 137.6 million. The 6 million people who have weakened the demographic decline came from an obvious source — other former Soviet republics. Incidentally, the figure of 6 million is more or less compatible with the very rough data from the Interior Ministry, which says 5 million to 10 million citizens of the former Soviet Union have come to Russia in that period. Taking the higher of those two figures for repatriates — 10 million — makes the picture regarding the demographic catastrophe even more shocking.
But this is not the end of the arithmetic. For more than 40 years after 1945, Russia (in its incarnation as a Soviet republic) registered continuous population growth. The figures varied, naturally, but in the 13 years up to the start of the liberal reforms — from 1979 to 1991 — Russia’s population grew by some 9 million people.
Thus, had it not been for the tremendous upheavals that Russia suffered from 1992 to 2004, the country’s indigenous population — or those permanent residents from before 1991 and their offspring — would be not 143 million, as it is today, but 157 million (taking into account the 148 million in 1991 plus growth of 9 million from 1992 to 2004). Adding the 5 million to 10 million immigrants from the former Soviet Union who came to Russia since 1991 would give us a number between 162 million and 167 million. This is what Russia’s population should be today.
However, in 2005, there were just 143 million Russians, and the population continues to shrink.
So what is the reason for this ongoing catastrophe, despite seven straight years of economic growth? Why is this growth not having an influence on Russia’s demographic situation? The answer is relatively straightforward — because the results of this growth are enjoyed by a very narrow group of people in big business that share some of that money only in the form of payoffs to government officials at various levels. What falls to the population from the very wealthy are mere crumbs.
Tellingly, some 60 percent of all deaths in modern Russian are the result of cardiovascular disease. The reasons behind this — in addition to the alcoholism that has swept a country that even previously had always liked its drink — are largely negative social factors such as hard work (lots of people are now working 12- to 14-hour days, with one day off a week, or holding down two or three jobs simultaneously), anxiety over possible job loss, unemployment and insecurity about the future. The meager salaries and pensions received by a significant number of Russians, coupled with inflation, are also factors.
The radical reforms of the early 1990s represented a double blow for the country’s population, in the form of economic hardship and uncertainty about the future. These conditions bear the greatest responsibility for the demographic crisis the country is still experiencing today.

Alexander Zhelenin is a freelance journalist working in Moscow.

TITLE: On the Road in the Outlaw Nation
AUTHOR: By Masha Gessen
TEXT: The road from my dacha to the center of Moscow provides endless opportunities for traffic cops to lay in wait. On weekends, they stand at the turn-off to the beach, to focus on nabbing drunk drivers. On weekday evenings, they hide in the bushes off the wide part of the highway just outside the city, to catch those speeding to the dacha. During the morning, they stand on the side of the road cutting through a bedroom community on the outskirts, where the relative breadth and length of the stretch between traffic lights tempt drivers to exceed the 60-kilometer-per-hour speed limit.
Drivers who see the cops on the other side of the road flash their headlights to warn drivers moving in the other direction. This gesture of solidarity is practiced by drivers the world over but, as often happens in Moscow, the scale of the phenomenon can be staggering. Some days, every single car coming in the opposite direction flashes its headlights at me. I have generally been touched by this helpfulness, but a friend recently said she thinks it all wrong. “How are we ever going to start observing the laws if our whole society is a community of outlaws who warn one another when they see cops?” she asked.
Not much chance, I thought the other day as I sat in my car on the side of the road in that bedroom community. The cops had an assembly line going: They pulled cars over, invited the drivers into the patrol car, from which the drivers emerged 30 seconds later having paid a bribe. When it was my turn, in the space of 15 minutes the officer had violated laws and rules at least half a dozen times: by failing — and then refusing — to introduce himself; by attempting to coerce me to get out of my car and into his; by claiming that my driver’s license was invalid; by demanding that I produce a power of attorney to drive the car, which is registered in my name; by threatening to tow the car; and then by threatening to tow the car with me in it. Then he let me go (I had in fact been speeding).
On my car radio, City FM, a news station recently launched by the state natural gas monopoly Gazprom, was reporting that members of the National Bolshevik Party had staged another in a series of inventive street protests. Rather, this was a river protest: The NBP members had sailed past the Kremlin in a boat with a banner on it. I switched to Ekho Moskvy. It’s a recent hobby of mine, comparing the two Gazprom-owned stations. Conventional wisdom is that, having failed to seize control of Ekho’s editorial policies, Gazprom is trying to put it out of business by pitting it against a more lushly funded station. They have also created good news radio. I wanted to see if Ekho was on top of the boat story. I also wanted to know what was written on the banner, something City FM had judiciously omitted.
Imagine my surprise. Ekho buried the story at the bottom of its newscast. And this was the item: “Supporters of Eduard Limonov have hung an anti-government banner on a boat.” Translated, this means: “We are not mentioning the National Bolshevik Party by name because a government agency recently said the media shouldn’t, and though there is no legal basis for this ban, we’ll obey it anyway because we are so terrified of getting shut down. We are not broadcasting the phrase on the banner because we are scared that will get us punished under the new law on extremism.” Just so you know, the banner on the boat said, “Putin, get out of the Kremlin!” I want to get that kind of information from my news radio. Otherwise, it truly makes me feel like a member of a nation of outlaws who wink at each other because they have spotted a cop down the road.

Masha Gessen is a Moscow journalist.

TITLE: Last Call
AUTHOR: By Chris Floyd
TEXT: WATERTOWN, Tennessee — Our revels now are ended. This is my last column for The Moscow Times and The St. Petersburg Times.
It seems somehow appropriate, if entirely accidental, that I should be writing it here, in the small town in rural Tennessee where I grew up — indeed, in the same room where almost 40 years ago I first heard mysterious snatches of Radio Moscow filtering through the static on my shortwave radio, and where I spent so many hours reading and rereading Solzhenitsyn: my first exposure to Russian literature, and to a deeper Russian culture behind the chest-beating blather of state propaganda.
It was these “echoes from the future,” to borrow Pasternak’s line, that set me on a path that would one day lead to the great city itself. I first saw it swathed in winter gray, in the dying days of the Brezhnev regime, then many years later returned to Moscow in the bright, choking heat of midsummer, at the high-water mark of the Yeltsin era. I came to the city as a supplicant: destitute, no job in hand, no home to go back to — a last, wild throw of the dice.
Against the odds, I found a foothold: a job at The Moscow Times, working in one of the same buildings where they’d concocted the Soviet propaganda I’d heard in those broadcasts years before. The column itself was largely an accident. The paper’s editor wanted a weekly feature for the arts and entertainment section: a round-up of funny stories culled from the newswires. He told the section editor — a fetching young Englishwoman — to cobble it together each week. She was less than enthusiastic about the chore, so I volunteered to take it on. (And reader, I married her — but that’s another story.) I began plucking out items illustrative of human absurdity, then riffing off them, usually in slavish imitation of S.J. Perelman, and the feature quickly turned from a compilation to a personal column. It seemed to go over well enough, and when I had to leave the city later for family reasons, they asked me to keep writing it from abroad. So on it went.
Politics, that rich — indeed, overripe — field of human absurdity, had always been a running theme in the Eye, particularly the rise of right-wing extremism in America, which I’d been writing about since the late 1970s. During the bloodsport of the Clinton impeachment and the sinister buffoonery of the 2000 election, politics came to dominate the column more and more. And when the American Republic was usurped by a gaggle of corporate bagmen and sex-crazed God-botherers in the judicial coup of December 2000, the Global Eye found a permanent theme: high crimes and low comedy in the Bush Imperium.
After the thunderclap of Sept. 11, this theme, and the column, became considerably darker. It was immediately apparent that George W. Bush and his henchmen were going to use the “new Pearl Harbor” — which they had openly pined for, in print, before the election — to advance their long-standing agenda: “full spectrum dominance” over geopolitical affairs and world energy resources; rampant cronyism to loot the public treasury for private profit and partisan ends; a vast expansion of presidential powers, including arbitrary arrest, indefinite detention, even “extrajudicial killing” at Bush’s whim; and the wanton destruction of civic society, of the very idea of a “common good” that might impinge upon the power and privilege of the wealthy elite.
All this was evident — just from reading the mainstream press — in the first few weeks after Sept. 11, so I wrote about it. I didn’t think it was particularly controversial. Yet in those palmy days of the Bush ascendancy, The Moscow Times and The St. Petersburg Times were two of the few mainstream, for-profit media outlets in the world publishing this kind of criticism. The papers were flooded with hate mail for printing such “traitorous filth,” such “lunatic ravings.” But the editors never asked me to change a single word, never censored anything. Nowadays, of course, the column’s view of Howdy Dubya — a crook, a killer, a liar, a tyrant, a mean-spirited, incompetent goon — is practically conventional wisdom. You’ll even hear it from stalwart Republicans of the old school. But The Moscow Times and The St. Petersburg Times were on the case from the beginning. They could have easily washed their hands of this lunatic raver and saved themselves a lot of grief. But they didn’t, and for that I’m eternally grateful.
These days the paper is focusing more intensely on its unique strengths: covering Russia and environs. It’s moving away from the kind of world news and commentary that Moscow readers can now obtain from other sources: the Internet, cable television and so on. So the Global Eye — which by design has no specific Russian content — is being dropped. But its peculiar brand of raving can still be found, for anyone interested, at my political blog, Empire Burlesque (www.chris-floyd.com), and at Truthout.org, the U.S.-based web magazine where I will now be writing a weekly column.
The dogs bark, the caravan moves on; such is life. Yet as Lincoln once said, in a wildly dissimilar context, I am loath to close. My final word here severs my last real link to the city I’ve loved above all others. The echoes from the future that I first heard in this room will now be a whisper from the past. Yet to have known Moscow, to have called it home, even for a season, is surely privilege enough for anyone. Why ask for more? Let the circle come to a close, here where it began. Do svidaniya.

TITLE: Lights, Kremlin, Action!
AUTHOR: By Laura M. Holson and Steven Lee Myers
PUBLISHER: The New York Times
TEXT: James Deck and James Heth — or “the Americans,” as their Russian film crew calls them — descended 70 meters down a rusty ladder into the blank darkness of one of Moscow’s serpentine metro tunnels, far below a cluttered construction lot near the old Red Army Theater.
Deck and Heth are the creative and technical advisers on “Trackman,” a thriller set here, filmed in Russian and aimed at millions of eager moviegoers spread across the former Soviet republics. It is the first local-language film for Monumental Pictures, a joint venture of Sony Pictures Entertainment and the Patton Media Group, a production company backed in part by U.S. investors. 
A primary task for the two men is to instill a studio-style work ethic on the “Trackman” set and to make sure that the movie is delivered on time and on budget. When the film’s director, Igor Shavlak, tells Deck that cameras will roll in 30 minutes, Deck raises a good-natured eyebrow. “Promise?” he asks.
Shavlak welcomes the prodding. “The idea is to absorb the American experience” making films, he said later. “It is common knowledge we are lagging far behind.” 
Not, it would appear, for long. Russia’s movie industry, following a torpid decade that mirrored the country’s social, political and economic turbulence after the Soviet Union’s collapse in 1991, is in the midst of a creative renaissance and box-office boom. And Hollywood — whose producers, distributors and exhibitors rarely pass up a chance to exploit an opportunity — is spending millions of dollars on theaters, distributors and movies themselves.
“It’s like a gold rush right now,” says Michael Lynton, chairman of Sony Pictures Entertainment. “There is a long history of good filmmaking; there are actors and directors who know what they are doing. The trick is getting in at the ground level.”
Russia, of course, is a land where a rush for gold is a perennial pastime. It is also an unpredictable, unwieldy place that in recent years has routinely rewarded and then confounded the expectations of many fortune hunters. Even so, analysts and film executives all say the movie business here looks more promising and more vibrant than it has in many, many years. 
Box-office receipts in Russia increased 20 percent in 2005, to $331 million, with PricewaterhouseCoopers, the U.S. accounting firm, predicting double-digit growth in each of the next five years. (Other hot growth markets, based on preliminary data, are Turkey and China.) By contrast, almost every other major Western and Eastern European country had box-office declines last year, as did the United States, where revenue slid 5.7 percent, to $9 billion. 
The number of tickets sold in Russia jumped 19 percent, to 125 million, in 2005, while movie admissions in the rest of Europe, the United States and much of Asia were either flat or down, according to PricewaterhouseCoopers.
Russia’s biggest movie distributor is Gemini Film, which 20th Century Fox, a unit of the News Corporation, bought in April. Michael Schlicht, a native of the former East Germany, heads Gemini’s Moscow office, and he advises that serious, creative film companies ignore Russia at their own peril.
“You have to be here,” he says.
“Trackman” is the first of three Russian films that Sony plans to make this year with Patton, whose partners include Paul Heth, James’ older brother, and Shari Redstone, the president of National Amusements, the Boston-area-based company that runs movie theaters. Redstone’s father is American media tycoon Sumner Redstone. 
Redstone has also joined with Heth in Rising Star Media, a five-year-old company that has built two American-style multiplexes that are drawing thousands of moviegoers to the sprawling megamalls sprouting on Moscow’s suburban fringes. Rising Star says it has plans for two more multiplexes, including the first in St. Petersburg.
Other media companies are interested, too. Fox, which bought the international rights to Timur Bekmambetov’s eerie, supernatural blockbusters “Night Watch” and “Day Watch,” now has 40 employees here, Fox executives said. In March, the Walt Disney Company announced the hiring of a senior executive to expand operations in Moscow. Such moves, mere baby steps by U.S. corporate standards, still illustrate how much has changed, and how quickly, in Russian moviemaking. 
In the years after the Soviet collapse, the Russian film industry — an accomplished one, despite state controls — ground to a halt after losing its government financing. Like other industries, it struggled to adapt to a free market. Most of the old Soviet movie houses — large halls with single screens — became casinos or auto showrooms. A flood of mostly cheap counterfeit videos, followed later by DVDs, kept Russians out of what few theaters were left. Even acclaimed films like Nikita Mikhalkov’s “Burnt by the Sun,” which won the Oscar for best foreign film in 1994, was viewed mostly on video.
In 1997, more or less the nadir of the Russian film industry, producers filmed only 13 movies in Russia, according to Gemini Films and Kinobusiness Today, a Moscow trade publication. The total Russian box office was a mere $6 million, and only a fraction of that was for Russian films. The next year, Russia defaulted on its debts and the ruble plummeted in value, leaving little money for a night out at the movies.
Then, beginning in 2000, the country’s fortunes turned. The political and economic stability that coincided with the presidency of Vladimir Putin lifted incomes and fueled a consumer spending boom that, inevitably, left struggling Russians with the once unthinkable: disposable income. While Russia remains poor, with an average monthly income of $350, a middle class is emerging, especially in cities like Moscow, where average monthly income is $1,050, according to government data.
After years of bounding growth, Russian-made films accounted for 26 percent of the country’s box-office revenue last year, according to Russian film executives. Analysts predict that the share may rise to 40 percent in the next few years. With subsidies from the government, Russian film production has doubled since 2002; some 85 productions are under way this year. 
Unlike other flourishing markets, Russia poses few obstacles to making a movie inside its borders or having it distributed. In China, by contrast, politicians keep a leash on imports, allowing only 20 foreign films into the country each year. India, for its part, is dominated by a tight-knit group of filmmakers who specialize in stylized musicals. That makes it a hard market for outsiders to crack.
With its relative openness, Russia has become the world’s 13th-largest movie market, according to PricewaterhouseCoopers. Analysts say that the market is likely to keep growing, given Russia’s population of 143 million and the many millions of other Russian speakers in Ukraine, Kazakhstan and other former Soviet republics.
Hollywood has taken notice. Last December, as part of a celebration to re-release “Cinderella” on DVD, Disney staged a ballroom party for 2,000 children at the Kremlin Palace, where Communist Party dignitaries once assembled. 
As snow flecked the Kremlin’s golden domes outside, Disney offered cake and candy to aspiring princes and princesses who learned to waltz inside. Disney’s animated characters — officially frowned upon by some in Russia when the country was under Soviet control — twirled on the dance floor. Disney even flew in actors from the United States to sing popular songs from “Cinderella” and “Snow White.” Several months later, Disney announced that it would expand its presence here, making Russia a top priority. 
But Disney, typically conservative, is only beginning to ponder making movies; so far, the company says it is more comfortable selling DVDs, books and stuffed animals.
In 1996, Paul Heth, with Eastman Kodak as a sponsor, opened Moscow’s first modern, American-style theater here, in a converted conference hall near Pushkin Square. He called it Kodak KinoMir. It was the first theater to show films with digital sound and dubbing that actually stayed in sync. Heth recalls moviegoers waiting in long lines to see the first film, “The Rock,” a Nicholas Cage thriller. The theater sold out for almost every showing during the next two years. 
“The good news is, Russians love movies,” Heth said. 
Still, by 2000, there were only about 78 modern screens in 55 theaters throughout Russia, according to industry analysts. Then the boom hit. The number of screens passed 1,000 in 2005 and is expected to reach 1,350 this year.
But hurdles remain. Shortly before Heth’s company, Rising Star, opened its first KinoStar-branded theater in 2003, the seats arrived without bolts to attach them to the floor. “I don’t want to say doing business there is easy,” said Heth’s partner, Redstone. “It’s complicated enough in the United States. But it’s even more complicated there.”
Heth and Redstone say their theaters try to evoke the glamour of Hollywood, but with a modern twist. All are air-conditioned, built in suburban shopping malls and anchored by a megastore, like the furniture company IKEA. At the first KinoStar theater in suburban Moscow, attendants show customers to reserved seats. There, on a stage above the concession stand, the Bolshoi Theater’s orchestra played one evening. The theater sells beer and wine in the auditorium, as well as local pastries, sandwiches and sushi.
For some, extravagance has its drawbacks. A night at the movies is not cheap: tickets in Moscow cost more than $9. At first, patrons thought the theaters were “too glamorous,” Redstone said. “They thought they needed an invitation.”
Despite pricey tickets, Russian films have recently begun beating out Hollywood’s heavily promoted blockbusters by using Hollywood’s own tactics, including wide releases and promotional onslaughts — all of which are marketing novelties here. In 2004, the hugely popular “Night Watch” became Russia’s highest-grossing film ever, with $16.3 million in Russian box-office receipts, edging out the much-anticipated “Lord of the Rings: Return of the King,” which brought in $14 million. 
Subsequent films made in Russia broke the “Night Watch” record. In 2005, “The Turkish Gambit,” a historical adventure film, garnered $19.3 million. A few months later, “Company 9,” a bloody, emotionally wrought movie about a cadre of Soviet soldiers in Afghanistan in the 1980’s, pulled in $25.6 million. Putin viewed a special “Company 9” screening at his residence outside Moscow and declared the Russian film industry “reborn.”
“Day Watch,” the sequel to “Night Watch,” opened in January and grossed $34.7 million, three times more than Peter Jackson’s “King Kong.” The twist is that locally produced Russian hits — often portrayed here as a backlash against imported American fare — are being spurred by Hollywood’s interest.
“Trackman” bears no resemblance to a Hollywood blockbuster. Its budget is about $2 million and its story is purely Russian: a bank heist goes sour and a group of robbers seize hostages. But it is a touchy theme in a country that in recent years has endured two hostage crises in which hundreds of people died — the first at Moscow’s Dubrovka theater in 2002 and another at a school in Beslan in 2004. The robbers in the film escape into the labyrinthine tunnels under Moscow, only to encounter a mysterious killer, a former KGB agent obsessed with protecting the metro passages that were long rumored to exist as secret escapes for Communist apparatchiks. But the American influence on “Trackman” is clear. Monumental Pictures oversaw the movie from the start, conducting focus groups to test story themes and even bringing in an American script doctor to polish the prose. Star-making is also part of the mix for film producers because, here as in America, stardom sells.
“They also want their own Brad Pitts and Monica Belluccis,” said Michael Dounayev, the managing director of Sistema Mass Media, which founded Thema Production, a Luxembourg company that has produced two Russian films this year. Thema is converting an unfinished St. Petersburg military warehouse into a 4,200-square-meter production studio, and plans to open it next year.
The financial risk of making movies in Russia is small: most budgets are between $1 million and $5 million. But other headaches persist — quotidian problems like securing permits or office space. 
“We couldn’t get an office,” said Lynton at Sony. “It’s not like Shanghai where there are new buildings. And it is not like they are in the best condition.” 
To forestall similar problems, studios like Fox will not consider making a movie in Russia without a local producer onboard. Sony has an international executive, Gareth Wigan, who is based in Los Angeles but travels regularly to Russia to oversee the company’s films here.
Deck says delays that can dog film production anywhere seem compounded here because of Russia’s bureaucracy. And, of course, there is the language barrier. Still, his excitement is palpable. “You can’t build this set,” he said gleefully, peering down a metro tunnel where “Trackman” was being filmed.
Hollywood’s biggest challenge in Russia is a well-known culprit: film piracy. DVDs are sold on the street for as little as $2 to $5 on the same day — and sometimes before — a movie’s theatrical debut. Many are copied directly from movie theater prints, suggesting the work of local industry insiders, not enterprising pirates seated in the back of a movie theater carrying camcorders. Schlicht estimates that movie studios and producers lose about 90 percent of potential Russian box-office revenue because of rampant piracy. But even that is not deterring the most intrepid investors. 
“Russia is a hot market right now because things are actually happening,” said Tomas Jegeus, co-president of Fox’s international theatrical distribution division. “It is not just a promise of good fortune to come, like in so many other countries.” 

Laura M. Holson reported from Los Angeles for this article, and Steven Lee Myers from Moscow.

TITLE: Six Guerillas Killed Following Cease-Fire
PUBLISHER: The Associated Press
TEXT: JERUSALEM — Israeli soldiers killed six Hezbollah fighters in three skirmishes in Lebanon after the UN-imposed cease-fire took effect Monday, the army said. The clashes came as Lebanese civilians defied an Israeli travel ban and streamed back to their homes in war-ravaged areas.
Four guerrillas were killed near the village of Hadatha in southern Lebanon after the group approached an Israeli position, the Israeli military reported. The encounter reportedly occurred less than three hours after the cease-fire went into effect at 8 a.m. local time.
Two other clashes occurred later Monday, with one guerrilla killed in each, the military said.
For the first time in a month, no Hezbollah rockets were fired into northern Israel; still, the Israeli government advised residents who left the area to wait before returning home.
Meanwhile, Israeli Prime Minister Ehud Olmert said he took sole responsibility for the offensive. In a statement to parliament, Olmert said the cease-fire agreement eliminated the “state within a state” run by Hezbollah and restored Lebanon’s sovereignty in the south.
He promised to do everything he could to win the return of two Israeli soldiers captured by Hezbollah in a cross-border raid July 12, the event that triggered the month-long war.
Olmert also sent condolences to those killed in the violence.
Lebanese, Israeli and UN officers met on the border to discuss the withdrawal of Israeli forces from southern Lebanon and the deployment of the Lebanese army in the region, UN spokesman Milos Strugar said.
The meeting, the first involving a Lebanese army officer and a counterpart from the Israeli army since Israeli forces withdrew from Lebanon in 2000, marks the first step in the process of military disengagement as demanded by a UN Security Council resolution.
The fighting persisted until the last minutes before the cease-fire took effect Monday morning, with Israel destroying an antenna for Hezbollah’s TV station and Hezbollah guerrillas clashing with Israeli forces near the southern city of Tyre and the border village of Kfar Kila.
Israeli warplanes struck a Hezbollah stronghold in eastern Lebanon and a Palestinian refugee camp in the south, killing two people, and Israeli artillery pounded targets across the border through the night.
After the cease-fire took effect, lines of cars — some loaded with mattresses and luggage — snaked slowly around bomb craters and ruined bridges as residents began heading south to find out what is left of their homes and businesses.
Israel has not lifted its threat to destroy any vehicle on the roads of most of south Lebanon. But Defense Minister Amir Peretz said Monday afternoon that aside from isolated skirmishes with Hezbollah, the cease-fire was holding and could have implications for future relations with Israel’s neighbors.
In some places in the south, the rubble was still smoldering from a barrage of Israeli airstrikes just before the cease-fire took effect at 8 a.m. (1 a.m. EDT).
“I just want to find my home,” said Ahmad Maana, who went back to Kafra, about five miles from the Israeli border, where whole sections of the town were flattened.
In Beirut’s southern suburbs, a Hezbollah stronghold, people wrapped their faces with scarves as wind kicked up dust from the wreckage left by Israeli bombardments. Ahmed al-Zein poked through the ruins of his shop.
“This was the most beautiful street in the neighborhood,” he said. “Now it’s like an earthquake zone.”
There were no reports of Israeli strikes on cars Monday — a sign Israel did not want to risk rekindling the conflict. But at least one child was killed and 15 people were wounded by ordnance that detonated as they returned to their homes in the south, security officials said.
The rush to return came despite a standoff that threatened to keep the cease-fire from taking root. Israeli forces remain in Lebanon, and Hezbollah’s leader, Sheik Hassan Nasrallah, said the militia would consider them legitimate targets until they leave.
The next step in the peace effort — sending in a peacekeeping mission — appeared days away.
A Lebanese Cabinet minister told Europe-1 radio in France that Lebanese soldiers could move into the southern part of the country as early as Wednesday. The UN plan calls for a joint Lebanese-international force to move south of the Litani River, about 18 miles from the Israeli border, and stand as a buffer between Israel and Hezbollah militia.
“The Lebanese army is readying itself along the Litani to cross the river in 48 to 72 hours,” said Lebanese Communications Minister Marwan Hamade.
A United Nations force that now has 2,000 troops in south Lebanon is due to be boosted to 15,000 soldiers, and together with a 15,000-man Lebanese army contingent is to take control of the border area.
France and Italy, along with predominantly Muslim Turkey and Malaysia, signaled willingness to contribute troops to the peacekeeping force, but consultations are needed to hammer out the force’s makeup and mandate.
Officials said Israeli troops would begin pulling out as soon as the Lebanese and international troops start deploying to the area. But it appeared Israeli forces were staying put for now. Some exhausted soldiers left Lebanon early Monday and were being replaced by fresh troops.
Israel also would maintain its air and sea blockade of Lebanon to prevent arms from reaching Hezbollah guerrillas, Israeli army officials said.
Olmert gave the order Sunday to halt firing as of Monday morning, his spokesman Asaf Shariv said. However, “if someone fires at us we will fire back,” he added.
Isaac Herzog, a senior minister in the Israeli Cabinet, said it was unlikely all fighting would be silenced immediately. “Experience teaches us that after that a process begins of phased relaxation,” in the fighting, he said.
Just three hours after the cease-fire, Israeli troops fired on a group of Hezbollah militiamen approaching “in a threatening way,” the army said. One Hezbollah fighter was hit, but it was not known if he was killed or wounded.
Israeli troops later shot a Hezbollah fighter aiming his rifle at them near the village of Ghanduriya. The army did not say if the man was killed.
No fighting was reported elsewhere.
In Bint Jbail, a border town that was the scene of heavy ground battles between guerrillas and Israeli soldiers, an entire swath of the town center was flattened and rows of cars sat incinerated in the streets. An Israeli tank was parked on the road outside the town.
In Beirut, street life cautiously returned. Traffic was heavier and some stores reopened.
Thousands of vehicles, meanwhile, crept south along bomb-blasted highways. At a key intersection, traffic was backed up for more than a half mile as police tried to direct vehicles around bomb craters.
Many parts of southern Lebanon have been virtually deserted for weeks after a wave of refugees headed north to escape the fighting.
Similar scenes took place in northern Israel, which had been hit by more than 4,000 Hezbollah rockets that forced people to flee or huddle in bomb shelters. Some Israelis cautiously tried to sample small bits of normal life: shopping for groceries or taking a stroll in the sun after weeks in shelters.
In Haifa, Israel’s third-largest city and a frequent Hezbollah target, stores that had been closed for weeks began to reopen, and a few people returned to the beaches.

Kathy Gannon in Bint Jbail, Lebanon; Arthur Max in Jerusalem; and Zeina Karam in Beirut, Lebanon, contributed to this report.

TITLE: Aid Hit By Traffic And Poor Roads
AUTHOR: By Lauren Frayer
PUBLISHER: The Associated Press
TEXT: BEIRUT, Lebanon — Bombed-out roads and traffic jams slowed the delivery of humanitarian relief to south Lebanon after Monday’s cease-fire, and many aid workers were stuck on roads alongside the refugees they were trying to help.
Bridges and roads throughout Lebanon were bombed over the monthlong war between Israel and Hezbollah, and on Monday civil defense workers constructed a makeshift bridge over the Litani River using mud and stones.
The United Nations sent 24 trucks from Sidon across the Litani River to Tyre, carrying food, water and medical supplies on a trip that would normally take 45 minutes. It took more than five hours Monday, said Astrid van Genderen Stort, a UNHCR spokeswoman in Lebanon.
“All the convoys had been stuck for days waiting for (Israeli) clearance, but now I don’t know if they’ll get through the crowds of people heading south,” she said. “It’s not easy to get through — the roads are bombed and there aren’t many others you can take.”
The UN also sent five teams out on roads around Beirut to hand out water and blankets and assess the needs of people stuck in traffic.
“People are extremely happy to go home, but they don’t know if they’ll see their houses and don’t know if they’ll eat tonight,” Van Genderen Stort said.
The UN was setting up an office and warehouse for relief supplies in Sidon on Monday, and hoped to do the same in Tyre within 48 hours, she said.
Israel said a curfew on roads throughout south Lebanon remained in effect, but the UN and other groups did not abide by it.
“With the cease-fire in place, there can no longer be any no-go areas in Lebanon,” said David Shearer, UN humanitarian coordinator in Lebanon. “As a precautionary measure during the transition period, we will continue to notify both sides of our movements.”
Before the cease-fire, aid groups endured what a UN statement called a “lengthy and complicated process” to get clearance from Israel to enter parts of the war zone. “This process, which was regarded by the humanitarian community as a major impediment to relief efforts, will now be abandoned,” Monday’s statement said.
It was the first time aid workers reached many villages along the Israel-Lebanon border, an area hardest hit by Israeli airstrikes and ground fighting during Israel’s offensive against Hezbollah guerrillas.
The Lebanese Red Cross reached Aitaroun, Bint Jbail and Ainata — all within three miles of Israel’s northern border — by Monday afternoon, but was unable to enter the center of the villages because of rubble in the roads, assistance director Mohammed Makki said. Workers were waiting for bulldozers to clear paths, he said.

TITLE: Gates Targets Next Big AIDS Breakthrough
AUTHOR: By Jia-Rui Chong
PUBLISHER: The Los Angeles Times
TEXT: TORONTO — Bill and Melinda Gates, whose foundation has contributed $1.9 billion to fight AIDS, said Sunday that developing antiviral gels and pills that would allow women to protect themselves is an “urgent priority” in fighting the epidemic.
“We want to call on everyone here and around the world to help speed up what we hope will be the next big breakthrough on the fight against AIDS — the discovery of a microbicide or an oral prevention drug that can block the transmission of HIV,” Bill Gates said at the opening session of the world’s largest AIDS conference.
 “The goal of universal treatment — or even the more modest goal of significantly increasing the percentage of people who get treatment — cannot happen unless we dramatically reduce the rate of new infections.”
Gates, chairman of Microsoft Corp. and of the Bill and Melinda Gates Foundation, emphasized the need for such prophylactic tools to give women the means to protect themselves.
“No matter where she lives, who she is or what she does — a woman should never need her partner’s permission to save her own life,” he said.
The Gateses pledged to increase their funding for this research, though they did not specify by how much.
The microbicides could take the form of gels, creams or vaginal rings. Five such formulations are in advanced trials. Antiviral drugs intended for treatment after infection have already been proven to lower the risk of infection for babies born to mothers with HIV. Some of those drugs have also prevented the monkey version of acquired immune deficiency syndrome in macaques.
Researchers at UCLA have been working on microbicides and hope to make them available in about five years.
“If Gates put his voice behind it, that could be faster,” said Edwin Bayrd, associate director of the UCLA AIDS Institute.
Dr. Daniel Kuritzkes, director of AIDS research at Brigham and Women’s Hospital in Boston, said, “It’s clear a vaccine is a long way off. In the absence of vaccines, we need more effective preventive measures.”
Kuritzkes said he hoped resistance to studies that would test the effectiveness of antiviral drugs as a preventive measure had ebbed. He recalled that in 2004 at the last AIDS conference in Bangkok, Thailand, protesters were angry about a proposed study in Cambodia of these drugs, in part because they wanted a guarantee that participating women would be medically cared for after the trial.
Melinda Gates said she hoped the World Health Organization and other international agencies would develop ethical standards for such clinical trials so they could start faster and run without interruption.
She called for help from activists, saying they had shown they could provoke action. “You proved this when you pushed for new treatment,” she said. “The world now needs you to push even harder for prevention.” 
She also encouraged governments and pharmaceutical companies to join the research.
“If all these players do their part,” she said, “we will move forward, as fast as science can take us, to discoveries that can help block the transmission of HIV.”
The AIDS conference, which takes place every two years, drew an estimated 24,000 participants this year, organizers said. The crowd responded to the couple’s speeches with cheers and standing ovations.

TITLE: Humbled Boy George Tries To Sweep New York Streets
PUBLISHER: Reuters
TEXT: NEW YORK — Singer Boy George tried to perform court-ordered community service on Monday but found a major obstacle when a throng of news photographers prevented him from sweeping the streets of Lower Manhattan.
“It’s supposed to be making me humble. Why don’t you just let me do it,” George told photographers.
A judge had sentenced him to five days of community service in March for falsely reporting a burglary. It was part of a plea deal that allowed him to escape more serious charges of drug possession.
George, the cross-dressing front man for the chart-topping 1980s British pop band Culture Club, traded his costumes for dark sunglasses, gloves and an orange safety vest.
But he was boxed in by photographers, forcing city Sanitation Department officials to move him from the streets near Chinatown to a fenced-off parking lot for more sweeping.
He chuckled as he swept leaves at the media.
“My mum was a cleaner, my dad was a builder, you know what I mean,” George said.
The charges stem from an incident last year when police responded to his call reporting a burglary and found 13 bags of cocaine in his apartment.
At a court hearing in June, defense lawyer Louis Freeman warned that a street-sweeping scene “would turn into a media circus” and asked for his client to work with an AIDS charity.
Criminal Court Judge Anthony Ferrara threatened to send George to jail if he failed to complete community service by August 28.

TITLE: Revolt Forces Australian PM To Ditch New Asylum Laws
PUBLISHER: Reuters
TEXT: CANBERRA — Australia abandoned on Monday plans for tougher new asylum laws, designed to ease Indonesian concerns, after a revolt by government lawmakers ensured Prime Minister John Howard could not pass the legislation.
The revolt handed Howard the biggest parliamentary defeat in his conservative government’s 10 years in office, and forced him to withdraw the changes ahead of a vote.
“The whole bill is out,” Howard told reporters, adding he accepted that he did not have the numbers to pass the laws through the upper house Senate.
The new laws, drawn up to ease Indonesian concerns after Australia granted asylum to 43 Papuans, would have sent all asylum seekers who arrived by boat on mainland Australia to detention camps on the remote Pacific island nation of Nauru.
Three government lawmakers defied Howard and voted against the new laws in the lower house last week, and two abstained. At least two government Senators planned to defy Howard in the Senate, where the government has a one-seat majority.
Howard shrugged off any damage to his authority over his party, saying his ruling Liberal Party was proud of having a range of opinions, and that his ultimate authority came from voters at national elections.
Ties between Indonesia and Australia were strained and Indonesia withdrew its ambassador in a temporary protest after Australia granted asylum to the Papuan asylum seekers, who had arrived in the country’s remote north by boat in January. Howard on Sunday said the new laws were not crucial to Australia’s close ties with its larger neighbor, but a day later said he did not know if Indonesia would be upset that the new laws were not passed.
“I don’t know, and frankly that is a secondary consideration,” Howard told reporters. “This bill was not designed to get a tick in Jakarta.”
Jakarta believed that by granting asylum to the Papuans, Canberra was supporting a secessionist movement in Indonesia’s restive eastern province.
Mandatory detention for illegal arrivals has been at the center of Howard’s past two election wins. Church and human rights group have condemned the stance.
Dissenting government politicians were angry that the proposed immigration laws would mean children would have been detained in Nauru, despite a Howard promise a year ago that children would no longer be kept in immigration detention.
However, Howard said asylum seekers who arrived by boat on outlying Australian islands would still be sent to Nauru for processing under existing laws.

TITLE: Iraq Blasts Kill At Least 48 In Baghdad
PUBLISHER: Bloomberg
TEXT: BAGHDAD — A series of attacks in Baghdad’s predominantly Shiite neighborhood of al-Zafaraniyah killed at least 48 people and injured 148 others late yesterday as conflict between the country’s Shiite and Sunni Muslim groups intensified. 
A mortar attack on a four-story apartment block was followed five minutes later by a car-bomb explosion about 100 meters (328 feet) away, then another explosion at a nearby building an hour later, President Jalal Talabani’s political party said today. The Patriotic Union of Kurdistan on its Web site cited medics. 
Prime Minister Nuri al-Maliki laid the blame with Sunni extremists seeking to escalate the conflict as three more car bombs killed three more people today in Baghdad, Agence France- Presse said. AFP put the number of dead at 57, including women and children, citing an unidentified Interior Ministry official. 
Iraqi and U.S. officials have said sectarian killings such as last week’s blast at a Shiite shrine in Najaf that claimed 35 lives are endangering the country’s new government. General John Abizaid, the top U.S. commander in the Middle East, said earlier this month that escalating violence since the Feb. 22 bombing of the Shiite Golden Mosque in Samarra could lead to civil war. 
The U.S. military is redeploying 3,500 troops to Baghdad from elsewhere in the country as part of an attempt to pacify the capital. More than 14,000 Iraqis were killed in the first six months of the year, the United Nations said last month. Last month, the morgue in Baghdad’s al-Adily Medical Center collected 947 unidentified bodies, Talabani’s PUK has said. 
Saheb al-Ameri, a supporter of Shiite cleric Moktada al-Sadr, told AFP that the Iraqi government should bow to demands that ethnic groups form armed units to defend themselves. 
Earlier the military said two U.S. soldiers were killed by a roadside bomb south of Baghdad, bringing the number of American deaths around the Iraqi capital to five since troops were deployed.

TITLE: Pluto’s Planetary Status Attacked
AUTHOR: By Alan Crosby
PUBLISHER: Reuters
TEXT: PRAGUE  — Despite being the farthest planet from Earth in our solar system, Pluto has come under attack from astronomers and may be about to lose its status in the battle.
Some 3,000 astronomers and scientists from around the world will meet in Prague this week to decide whether Pluto, discovered in 1930, measures up to the definition of a planet.
In defining for the first time what exactly a planet is, the International Astronomers Union (IAU) may be forced to downgrade Pluto’s status, or add as many as 14 others.
Such a decision would send shockwaves through the scientific community, instantly outdate textbooks, and cause educators to re-teach the basics of our solar system.
“The pivotal question is the status of Pluto, which is clearly very different from Jupiter, Saturn, Uranus, and Neptune,” Owen Gingerich, professor of Astronomy and History of Science emeritus a the Harvard-Smithsonian Center for Astrophysics told Reuters.
Debate has raged within the scientific community over the status of Pluto for decades after the planet was found to be only one four-hundredths of the mass of the earth.
That discussion intensified in 2003 when astronomers at the California Institute of Technology discovered UB 313. Nicknamed Xena after the character in the television show, UB 313 is one of more than a dozen celestial bodies in our solar system found to be larger than Pluto.
Xena and Pluto are large icy bodies that reside in the Kuiper Belt — where thousands of floating bodies travel — beyond Neptune. Images from the Hubble Space Telescope put Xena’s diameter at 1,490 miles or so. That is slightly bigger than Pluto, which measures 1,422 miles across.
Gingerich is the chair of a committee that was asked to come up with a definition of a planet and hand it to the IAU general assembly, which runs August 14-25.
In the run-up to the assembly, emotions have been running high in both directions. Some have appealed to Gingerich’s group not to downgrade Pluto, saying it would disappoint children and throw our understanding of the universe into chaos. Others say let the chips fall where they may and seem to relish the idea of overturning our current view of the universe.
Gingerich said that modern technologies have allowed scientists to delve into the solar system further, and in more detail, than ever before. Therefore, it is no surprise that questions on the fundamental assumptions of it are arising.

TITLE: Britain Gets Gold But Russia Dominates
PUBLISHER: Reuters
TEXT: GOTHENBURG, Sweden — Britain captured their only gold medal of the European athletics championships courtesy of their men’s sprint relay team on Sunday.
Dwain Chambers, Darren Campbell, Marlon Devonish and Mark Lewis-Francis won the 4x100 metres relay final in 38.91 seconds on the final day of competition on another wet and windy day.
Britain’s celebrations, however, were marred by the fact that Campbell refused to join his team mates on their lap of honour. Campbell, who is expected to retire at the end of the season, would not say what he was upset about.
Poland won a close battle with France to take the silver medal in 39.05. The French, surprise world champions in Helsinki last year, settled for the bronze in 39.07.
Britain have dominated the men’s sprint relay in recent championships and won gold at the 2004 Olympics.
They were stripped of the title at the previous Europeans four years ago in Munich because of a doping offence by Chambers.
“It’s good to get it back and it’s good to make up what we lost by my foolishness,” said Chambers, who served a two-year ban after testing positive for the designer steroid THG in 2003. While Chambers embarked on a lap of honour with Devonish and Lewis-Francis, Campbell left the track.
“He had his reasons for going off,” Chambers told BBC television when asked about Campbell’s attitude.
“He’s done his job and gone off but obviously he’s hurting and I can’t say more than that.”
Britain had won the last five titles for the men’s 4x400 but could not resist a French team featuring individual 400 champion Marc Raquil and bronze medallist Leslie Djhone.
France won in 3 minutes 01.10 seconds and Britain had to be content with the silver in 3:01.63 with Poland winning bronze in 3:01.73.
Russia, as expected, won the two women’s relays, putting the final touch to an impressive week to top the final medals table with 34 medals, 12 of them gold. Traditionally the dominant European country, Russia outclassed the opposition particularly in the women’s events, Tatyana Tomashova and Lyudmila Kolchanova also winning gold on Sunday, in the 1,500 metres and the long jump respectively.
A day which saw Dutchman Bram Som win a tight 800 metres final had started with Olympic champion Stefano Baldini of Italy collecting his second European marathon title.
Baldini, also European champion in 1998, punched the air in delight when he crossed the line after running through the streets of Gothenburg in miserable weather for two hours 11 minutes and 32 seconds.
The fans at the Ullevi stadium, who provided a fantastic atmosphere throughout the week, cheered on Carolina Kluft in the women’s long jump contest. The heptathlon gold medallist finished an honourable sixth.
One of the queens of the championships with double sprint champion Kim Gevaert of Belgium, Sweden’s darling had a busy day, also taking part in the 4x100 relay, in which she fell on a slippery track after passing the baton.
The one to shine through in the men’s events was Portugal’s Francis Obikwelu, who completed the first 100-200 double at Europeans since 1978.

TITLE: Federer Comes From Behind
AUTHOR: By Liz Robbins
PUBLISHER: The Associated Press
TEXT: TORONTO — Roger Federer actually appeared fallible as he blinked into the afternoon sun. But that was on the court and not in his mind. 
Richard Gasquet, an up-and-coming 20-year-old from France, revealed Federer’s rust each time he whipped a backhand passing shot by him in the first set of the final of the Rogers Cup on Sunday afternoon.
Federer, playing his first tournament since winning his fourth Wimbledon title in July, seemed unsettled enough to give others hope on hardcourts this summer.
But after losing the first set, Federer sharpened his focus and ground strokes and won, 2-6, 6-3, 6-2. He came back from 0-40 to hold serve in the opening game of the second set, and from there slammed Gasquet’s opportunity shut.
Federer’s victory in this Masters Series tournament gave him his 40th career title and extended his winning streak in North America to 54 matches.
“I just always do believe that I can turn any match around; that’s what happened today,” Federer said. “I know that once I turn it around, once I would take the lead, then it would be very difficult for my opponent. That’s what I always tell myself. Maybe it’s an illusion sometimes, but it definitely works.”
It is no illusion that Federer, who turned 25 on Tuesday, has spent the past 132 weeks at No. 1 in the world. He will play in Cincinnati this week, attempting to reach his 18th consecutive final and tie Ivan Lendl’s record. That will be Federer’s last warm-up before the United States Open in New York, where he will try to win for the third consecutive year.
Yelena Dementieva overcame her nerves for a 6-3, 4-6, 6-4 victory against Jelena Jankovic in the JP Morgan Chase Open final in Carson, Calif.
Dementieva hit a crosscourt forehand winner on her third championship point of the two-and-a-half-hour match, then jumped and squealed with delight at winning her sixth career title.
Dementieva’s nerves were apparent a game earlier, when she sidearmed some serves in and was broken at 5-4 after squandering two match points.
Dementieva raced to a 5-0 lead in the third set. But Jankovic reeled off four consecutive games to get back in the match after receiving treatment for heat-related symptoms. 
In Stockholm, Zheng Jie beat Anastasia Myskina, 6-4, 6-1, in the Nordic Light Open final. It was Zheng’s third career singles title.

TITLE: Wilson Breaks PGA Tour Duck
PUBLISHER: The Associated Press
TEXT: CASTLE ROCK, Colorado — Dean Wilson earned his first PGA Tour title with a birdie on the second hole of a sudden-death playoff, topping Tom Lehman at the International at Castle Pines in Castle Rock, Colo., on Sunday. 
After Lehman barely missed wide on a 30-foot putt for birdie, Wilson made a six-footer to win the $990,000 first-place prize. Wilson’s best previous finish was a tie for third at the 2004 Valero Texas Open. 
Lehman would have vaulted into seventh place in the Ryder Cup standings with a win. He is captain of the U.S. team that will travel to Ireland next month to try to bring home the cup for the first time since 1999. 
Lehman, who said he would have been reluctant to play for himself because of his putting game, nearly became the first Ryder Cup captain to win a PGA Tour event during his term since Jack Nicklaus won the Masters in 1986. But his eagle putt on the par-five, 492-yard 17th hole in regulation was short. 
Lehman, who hasn’t won since the 2000 Phoenix Open, hit a five-iron to within 15 feet on 17 and figured he had the five-point eagle in his pocket. 
“It looked so fast,” Lehman said of the green. “I was quite shocked I left it short. I hit a beautiful shot right on line. I didn’t think there was any way I’d leave it short.” 
The ball stopped four inches shy of the hole, and his tap-in for birdie tied him with Wilson in the clubhouse at 34 points under the Stableford scoring system. 
Both Lehman and Wilson sank two-foot putts on the 72nd hole. Steve Flesch nearly joined them in the playoff, but he missed a 12-footer for birdie on 18.
Flesch and Daisuke Maruyama tied for third with 32 points, followed by Stewart Cink with 31. 
“Finally got my Tour card here just four years ago at age 32,” said Wilson, who would have been four behind Lehman in stroke play. “So it was quite a battle. It is just really satisfying to be here holding the trophy.”

TITLE: Cards Fall Again, Pirates Run Riot
PUBLISHER: Reuters
TEXT: NEW YORK — Paul Maholm pitched 6-2/3 shutout innings and Jason Bay and Joe Randa hit back-to-back home runs, leading the Pittsburgh Pirates to a 7-0 win over the slumping St. Louis Cardinals in National League play Sunday in Pittsburgh.
Maholm (5-10) scattered eight hits while striking out one and walking three as the lowly Pirates completed a three-game series sweep of the reeling NL Central Division leaders.
“That may be our finest weekend of the season,” said Pirates manager Jim Tracy to reporters.
“Actually, I don’t think there’s any question about that. (We swept) what has been for the past few years the number one class team in our division.”
The Cardinals have lost five of their last six games and 13 of 17 as their division lead has been cut to a game over the Cincinnati Reds, who beat the Phillies 7-5 in 11 innings Sunday in Philadelphia.
St. Louis was outscored 17-3 in the series and now faces an important three-game series against the Reds starting Tuesday in St. Louis.
“They pitched very well against us,” said St. Louis manager Tony LaRussa.
“They were struggling coming in but they did the job against us. We need to get our game in order in the next week, that’s for sure.”
Three relievers finished up for the Pirates to complete the 10-hitter, with Damaso Marte getting the last three outs in the ninth to preserve the shutout.
Bay and Randa homered in the second inning to give the Pirates an early 2-0 lead. Pittsburgh added four more runs in the seventh inning and a single in the eighth to make the most of their eight hits in the game.
Chris Duffy drove in three runs for the Pirates, who remained 28 games under .500 and in last place in the NL Central despite the series sweep.
Freddy Sanchez added two hits and two RBI for Pittsburgh.
Cardinals starter Jason Marquis (12-11) allowed two runs on three hits over six innings and took the loss. He struck out four and walked two before the Cardinal bullpen gave up five runs in the final two innings.
So Taguchi and Ronnie Belliard each had two hits for the Cardinals.
In Philadelphia, Juan Castro and Ken Griffey Jr. drove in runs in the 11th inning to lead the Cincinnati Reds to a 7-5 win over the Phillies.
The NL wild card leaders pounded out 13 hits to win two of the three games in the series. Cincinnati opens an important three-game series in St. Louis Tuesday night.
Edwin Encarnacion, Adam Dunn and Rich Aurilia all homered for the Reds, while Griffey had three hits.
Bill Bray (3-2) pitched two shutout innings for the win, allowing two hits with one strikeout.
Reds manager Jerry Narron is looking forward to the series against the NL Central leading Cards.
“We do want to keep our sights on the division before anything else, and this is the last chance we get at St. Louis, so it should be an exciting three days,” Narron told reporters.
Ryan Madson (10-8) went one inning of relief for the loss, the sixth Phillies pitcher of the game. He allowed two runs on three hits while striking out two and walking one.
Ryan Howard hit his 41st home run of the season for Philadelphia and had three hits and three RBI. Jimmy Rollins led the Phillies 14-hit attack with four hits.