SOURCE: The St. Petersburg Times
DATE: Issue #1245 (11), Tuesday, February 13, 2007
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TITLE: Recruits In Alleged Prostitution Racket
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: A recruit serving in the Russian Interior Ministry’s signals corps in central St. Petersburg has sent a letter to the Soldiers’ Mothers human rights group claiming that he and dozens of his fellow soldiers are being forced into prostitution by older recruits.
“Instead of having a well-earned rest, young recruits are ordered up by phone and delivered nightly to their top-ranking clients — including army generals,” said Ella Polyakova, head of the St. Petersburg arm of Soldiers’ Mothers.
“The facts described by the soldier are horrifying, and we will not, at least for the time being, disclose the identity of the recruit, who is still in his detachment,” Polyakova said.
Bullying, extortion of money, physical abuse and rape in the Russian army have been documented, but the prostitution claim is new. 
Potential prostitutes are carefully selected by older recruits, and those who resist are physically tortured, according to the recruit’s evidence that Soldiers’ Mothers has passed on to the military prosecutor’s office.
Soldiers’ Mothers visited the signal corps detachment seeking contact with two recruits described in the letter as phone-order prostitutes. But Polyakova was told both men were demobilized on medical grounds — one with Hepatitis C and one with HIV.
Andrei Gavrilyuk, press-officer for the military prosecutor’s office, said an investigation into the accusations will be launched promptly.
“Every single claim will be checked thoroughly, including those about HIV, Hepatitis and prostitution,” he said.
Vasily Panchenkov, deputy head of the press-office of the Interior Ministry, said the allegations made by Soldiers’ Mothers are “beyond common sense.”
“This talk about army generals using services of recruit-prostitutes is absurd,” Panchenkov said on Monday. 
“The distribution of such information must seriously be looked into by law enforcement agencies. As the spring draft is approaching, Soldiers’ Mothers are apparently trying to fuel yet another anti-service campaign.”
Ruslan Linkov, head of the Democratic Russia pressure group, said the level of brutality exerted against the weaker recruits is enormous.
“The recruit who contacted us told us said he was tortured with electric devices,” Linkov said. “The poor man nearly had a permanent stutter. He really tried hard to avoid prostitution but after one especially severe beating, when he was hit fifteen times on the head with a metal stool, he gave up and took the mobile phone with clients’ contacts.”
According to the evidence obtained by Soldiers’ Mothers, the young recruits-turned-prostitutes were either ordered up by phone, or woken suddenly at night after a client’s contact asked for a man of a certain build and looks.
In July 2005, a Yaroslavl-born recruit, Denis T., sent a letter to the Leningrad-district military prosecutor’s office describing the horrors of forced prostitution. The soldier, who is now back at home, compared his army service to brutal slavery.
“The older conscripts demanded money from us, and forced the newcomers to earn the money selling themselves on the street,” Denis wrote. “I really did not want to go. But in the end they got me and broke my will.
“At nights, they sent me — along with the others to that spot by the monument to Catherine the Great’s.”
The garden surrounding the monument is a well-known local cruising area for male prostitutes and those who seek their services.
“Drive past the monument of Catherine the Great on Nevsky Prospekt at night, and there is a good chance you see some of the guys described in the letter,” Polyakova said.
After the court case that followed, Denis was demobilized from the army but none of the pimps were punished. 
“Unfortunately, it was the best outcome that we could have possibly hoped for,” Polyakova said. 
“At best, the abused and raped soldiers can escape from this hell. But [those that organize the prostition and profit from it] always escape from justice, because the system is corrupt and witnesses are too scared to give evidence.”
The sad case of Andrei Sychev’s hazing is notable less for its brutality than for the fact that his tormentors were brought to justice.
A 19-year-old private at the Chelyabinsk Tank Academy, Sychev was beaten and tortured by older, drunken soldiers on New Year’s Eve 2005. Due to delays in medical treatment he contracted infectious gangrene and ultimately had to have both his legs and part of his genitals amputated.
A case was brought against those Sychev said beat him and the offenders received jail terms.
Colonel Yury Klenov, head of the press office of the Leningrad military district, said the district has no authority over the corps at the center of the latest allegations.
“The signal corps in question are part of the Interior Ministry, and are not affiliated with us,” he said. 
“As for the Leningrad military district, I have no knowledge of prostitution going on.”
Linkov is convinced that the high-ranking officers consciously turn a blind eye on the problem or even openly protect the illegal business.
“During a night patrol, officers can of course pretend they ‘do not notice’ the absence of ten or fifteen recruits — gone for their night shifts — but there is no way they really do not pay attention,” Linkov said.
A 2004 report by Human Rights Watch documented the routine abuse conscripts endure under a system known as dedovshchina, or the “rule of the grandfathers.” 
Older conscripts force younger recruits into a year-long system of servitude, forcing them to polish boots and procure food and alcohol, and punishing them violently for any infractions, real or imagined.
The hazing tradition creates an endless cycle of violence, as recruits who suffered abuses in their first year avenge themselves on the next generation of conscripts.
Polyakova said she knows of several cases of soldiers committing suicide after being raped in the army.
“One young man committed suicide after he returned home from the service,” she said. “He simply could not get back to normal life; he could not bear to even look at himself in the mirror.”
Overall, the Defense Ministry estimates that between 500 to 1,000 recruits die from non-combat-related causes each year. Rights group say the actual number is as high as 3,000.

TITLE: Putin Lashes Out at U.S. Foreign Policy
AUTHOR: By Carl Schreck
PUBLISHER: Staff Writer
TEXT: MOSCOW — President Vladmir Putin accused the United States of carrying out a reckless and dangerous foreign policy, in a blistering speech that some U.S. politicians likened to Cold War rhetoric.
Senior Russian officials, however, insisted that honesty and openness — not hostility — were behind Putin’s address to an international security conference in Munich on Saturday. Political analysts expressed doubt that the remarks would cast a chill on U.S.-Russia relations.
Putin, issuing perhaps his harshest public rebuke of the United States, said it had “overstepped its national borders in every way” and that its plans for an anti-missile shield “could provoke nothing less than the beginning of a nuclear era.”
“Today we are witnessing an almost uncontained hyper-use of military force in international relations, force that is plunging the world into an abyss of permanent conflicts,” Putin said in a clear allusion to the U.S.-led war in Iraq.
Putin also decried what he called “greater and greater disdain for the basic principles of international law” and criticized “first and foremost the United States” for forcing its values on other countries. “This is visible in the economic, political, cultural and educational policies it imposes on other nations. Well, who likes this? Who is happy about this?” Putin said.
The White House expressed disappointment with the speech. “His accusations are wrong,” U.S. President George W. Bush’s national security spokesman, Gordon Johndroe, told The Associated Press. “We expect to continue cooperation with Russia in areas important to the international community such as counter-terrorism and reducing the spread and threat of weapons of mass destruction.”
U.S. presidential hopeful Senator John McCain, who was also attending the conference, described Putin’s remarks as “the most aggressive speech from a Russian leader since the end of the Cold War.” McCain also accused Russia of taking an “autocratic turn” and its foreign policy of being “opposed to the principles of the Western democracies.”
“Moscow must understand that it cannot enjoy a genuine partnership with the West so long as its actions, at home and abroad, conflict fundamentally with the core values of the Euro-Atlantic democracies,” McCain said, The New York Times reported.
Putin also took a swipe at accusations from the West that the Kremlin was rolling back democratic institutions.
“We are constantly being taught about democracy, but for some reason those who teach us do not want to learn themselves,” Putin said.
Putin slammed the Organization for Security and Cooperation in Europe, which has become increasingly critical of Russia’s electoral politics since the 2000 presidential election. At the time, it praised the 2000 vote, which ushered Putin into a first term, as providing a “framework for pluralist elections and for a significantly high level of transparency.”
“People are trying to transform the OSCE into a vulgar instrument designed to promote the foreign policy interests of one or a group of countries,” Putin said.
He chided the OSCE for “interfering in the internal affairs of other countries” and warned that it should not be involved in “imposing a regime that determines how these states should live and develop.”
The OSCE has raised red flags about the fairness of elections held in other former Soviet republics in recent years.
U.S. Defense Secretary Robert Gates, who sat in the audience next to German Chancellor Angela Merkel during Putin’s speech, said Sunday that “one Cold War was quite enough.”
“As an old Cold Warrior, one of yesterday’s speeches almost filled me with nostalgia for a less complex time,” Gates said, the AP reported. “Almost.”
Gates announced Sunday in Munich that he had accepted an invitation from Putin and Defense Minister Sergei Ivanov to visit Russia. He did not give a date for the trip.
Speaking in Munich on Sunday, Ivanov said he did not think Putin’s speech was aggressive or confrontational but showed, rather, that “our relationships with the European Union and the United Sates and Germany are so mature that we can freely say what we truly think.”
“Open, without hypocrisy and without the Cold War philosophy,” Ivanov said, Interfax reported.
Mikhail Margelov, chairman of the Federation Council’s Foreign Affairs Committee, said the speech did not indicate any change in Russia’s foreign policy and that talk of a return to the Cold War was unwarranted.
“Russia is not the second coming of the Soviet Union,” Margelov said, Interfax reported. “The Russian president is the president of all Russian citizens, including those who — not without reason — are worried by missile systems placed at our borders, as well as prejudice against Russia and insinuations that we are unpredictable.”
Margelov was traveling with Putin in Saudi Arabia and could not be reached for further comment, his spokeswoman said Sunday.
Political analysts downplayed suggestions that Putin’s speech represented any sharp new direction in Russia’s relations with the West.
“He did not say anything that he hasn’t said before in one way or another,” said Vyacheslav Nikonov, a Kremlin-connected analyst.
Nikonov said the timing of Putin’s speech was likely connected with a statement by Gates last week that lumped Russia together with North Korea and Iran.
Gates told the House Armed Services Committee on Wednesday that the United States needed a “full range of military capabilities” because “we don’t know what’s going to develop in places like Russia and China, in North Korea, in Iran and elsewhere.”
With regional parliamentary elections approaching in March, State Duma elections in December and the election of Putin’s successor next year, Putin’s speech was meant primarily for domestic consumption, said Vladimir Privylovsky, head of the Panorama think tank.
“It helps create the image of building a fortress around Russia to keep out enemies,” he said. “This keeps the populace afraid of the West and encourages them to rally around the Kremlin.”
Kremlin spin doctor Gleb Pavlovsky said that far from being confrontational, Putin’s speech would likely be received at home as “very reserved and diplomatic.”
“Even among the middle class, anti-Americanism runs very deep,” Pavlovsky said.

TITLE: Human Bones Offered for Sale on Internet
AUTHOR: By Evgenia Ivanova
PUBLISHER: Staff Writer
TEXT: Human remains advertised on the Russian internet as relics for sale went missing from the Kunstkamera museum but are not valuable, it emerged on Monday.
The remains went missing because of “managerial blunders” when the museum’s collection was moved in the 1970s and 1990s to make room for additional storage space, the museum’s director Yury Chistov said. 
“To consider the items to be stolen is illogical because they have no commercial value,” Chistov said in a statement published on the website of the Museum of Peter the Great, as the Kunstkamera is now officially known.
The items were confiscated last week by the police after the attempt to sell them on theInternet came to the attention of Rosokhrankultura, the state watchdog charged with preserving the nation’s cultural property. 
“Museum items are state property and cannot be legally owned by private persons,” the organization said in a statement published on its website on Wednesday. 
The remains, supposedly those of “an Orthodox saint including a skull in good condition and a shoulder bone,” were offered for sale at Antiquariat.ru, an antiques-related website by someone registered on the website as Boris Georgiyev. 
Georgiyev allegedly acted as a mediator on behalf of a friend, the BBC reported. He told the BBC that the last owner of the remains had rescued them when museum stocks were being destroyed in the 1990s. 
“There was initially no price set for the relic,” Georgiyev was quoted by the BBC as saying last Monday. “But I suggested to the owner it might sell for at least 1,000 euros (?660). This isn’t a lot of money — but our web page has been up for 18 months, and we’ve had very few callers up to now.” 
The attempt to sell the bones became the center of a controversy last week after the Orthodox Church found out about it and condemned the attempt as “immoral.”
“Whether or not the items that were put up for the auction represent relics or regular human remains, the attempt to sell them is evidence of utmost disrespect to the memory of the deceased. It contradicts codes of ethics and Russian and European cultural traditions,” reads a statement from the Russian Orthodox Church that was published on Feb. 5.

TITLE: State Slammed Over Information Secrecy
AUTHOR: By Ali Nassor
PUBLISHER: Special to The St. Petersburg Times
TEXT: Information rights monitors have voiced concern over what they regard as the Russian government’s culture of secrecy and say they have suspicions of high level corruption in the corridors of power.
A survey of the websites of 85 federal agencies using 300 assessment criteria to measure timeliness, significance, nature of the contents and their accessibility revealed that an average of more than 75 percent of public information was not disclosed.
“I think it has something to do with corruption when less than 25 percent of the information about the state spending [which is supposed to be publicly available] is disclosed, “ said Yelena Bogdanova, a sociologist at the St. Petersburg-based Institute for Information Freedom Development (IRSI) and a member of the research team that carried out the survey.
Last week, Vadim Tyulpanov, speaker of the St. Petersburg Legislative Assembly, called for an anti- corruption drive within government departments.
“Harboring information is the best way to conceal corruption,” said IRSI director Ivan Pavlov. 
“Almost every kind of information is considered sensitive, and if you insist on its disclosure you are in for trouble as it appears tantamount to an attempt to reveal corruption,” he said.
Pavlov recalled that last May he was admitted to hospital after being attacked by unknown assailants near his home — an attack he claims was connected to a court case he had filed against the Federal Agency for Units and Measurements (Rostekhregulirovaniye) because it resisted publicly disclosing information about its activities.
Pavlov won the case, prompting Rostekhregulirovaniye to launch a web site that now discloses an impressive 34.4 percent of the information it is supposed to. This figure earned the agency fifth place in the latest information transparency list of federal agencies. 
The case was one of 15 heard by the Supreme and Constitutional Courts, among others, during the last two years which  the IRSI has filed against federal authorities for abusing freedom of information laws. 
Apart from corruption, Pavlov attributes such abuse to a lack of awareness of the public’s right to know by both the judiciary and the public itself. In the course of the proceedings, it was not uncommon to find judges who were ignorant of freedom of information laws, he said. 
However, Pavlov said the IRSI cases had prompted all but two federal structures to launch web sites by 2006 — up from only 54 of the 85 by the end of 2004.
According to IRSI lawyer Yelena Golubeva, the research highlights grave violations of a government decree mandating transparency about the activities of the state made four years ago.
The Presidential Supreme Board for Special Programs has been dubbed the worst offender following its failure to launch a website at all — despite constant appeals by the IRSI.  
Of those departments with a website the Federal Immigration Service (FMS) is rated the worst performer in the IRSI ranking of online transparency with just 11.2 percent of its information available.
Despite public confusion caused by the lack of information over new immigration regulations in force since mid-January, the FMS website (www.fmsrf.ru) sheds no light on the changes. 
Access to the Russian-only site requires a subscriber not only to disclose his passport details, telephone and fax numbers, but also the area code of his migration district — apparently barring illegal migrants, non-Russian-speakers and Russians living abroad to information online. 
With  43.7 percent of its information available online, the Ministry of Emergency Situations tops the list in the transparency rating, followed by the Federal Agency for Real Estate Survey with 4 points less.

TITLE: Putin Hints at Kosovo Veto
AUTHOR: By Slobodan Lekic
PUBLISHER: The Associated Press
TEXT: MUNICH, Germany — Russia will not support any international plan to resolve Kosovo’s status that is not accepted by both Serbia and the province’s ethnic Albanian majority, President Vladimir Putin said Saturday.
“Only the Kosovars and Serbs can resolve this,” Putin told a forum of the world’s top security officials. “Let’s not play God and try to resolve their problems.”
Putin’s remarks raised the specter that Russia might use its veto in the United Nations Security Council to block a U.S.- and European Union-backed proposal that envisions internationally supervised statehood for Kosovo.
“If we see that one of the parties is not happy with the solution, we will not support that decision,” Putin said. “If one participant in this problem feels hurt, this will drag on for centuries.”
Serbia and Kosovo’s ethnic Albanian leadership have failed in negotiations to reach agreement on the province’s future, with Serbia demanding the province remain within its territory and Kosovo’s ethnic Albanians wanting independence.
The Kosovo proposal — unveiled recently by UN envoy Martti Ahtisaari and which needs UN Security Council approval to take effect — does not explicitly mention independence, but spells out conditions for self-rule, including a flag, anthem, army and constitution, and the right to apply for membership in international organizations.
Thousands of Kosovo Serbs rallied in protest of the proposal in the northern city of Kosovska Mitrovica on Friday. They waved banners reading “Long live Serbia” and “Russia, help!’’
Moscow has said any solution favoring Kosovo’s independence could encourage separatist movements elsewhere in the world, including in the former Soviet republics of Georgia and Moldova.
Defense Minister Sergei Ivanov on Friday issued a strong warning that granting independence to Kosovo could spark a “chain reaction.”
“If we imagine a situation in which Kosovo achieves independence, then other people — people living in regions that are not recognized — will ask us: ‘Are we not as good as them?’” Ivanov told reporters ahead of a meeting of his NATO counterparts in Seville, Spain.
“This concerns obviously the post-Soviet space, but also regions in Europe,” he said. “This can create a chain reaction … we must be careful not to open Pandora’s box.”

TITLE: Abramovich To Stay On As Governor
PUBLISHER: Combined Reports
TEXT: MOSCOW — Roman Abramovich wanted a transfer away from Chukotka, but President Vladimir Putin isn’t letting him go.
Billionaire oil tycoon and Chelsea football club owner Abramovich will stay on as governor of the Chukotka region, the Kremlin said Friday, suggesting that Putin has rejected the resignation that Abramovich tendered late last year or persuaded him to withdraw it.
“He agreed to stay on,” said a spokesman for the billionaire who mostly spends his time in Europe, including Britain where he has property.
Since his election in 2000, Abramovich has invested hundreds of millions of dollars and used his close Kremlin ties to fight poverty in the sparsely populated region lying just across the Bering Strait from Alaska.
Abramovich’s work in Chukotka has been widely cited as an example of what Kremlin-loyal oligarchs should do to help the country.
The development suggests that Putin wants Abramovich to remain in his post as governor of Chukhotka so that he can continue to show loyalty to the Kremlin by pumping money into the impoverished region, which has experienced significant improvements since his election in 2000.

(AP, Reuters)

TITLE: Two Suspects Detained Over Killing of Anna Politkovskaya
AUTHOR: By Maria Danilova
PUBLISHER: The Associated Press
TEXT: MOSCOW — Law enforcement agents have detained two suspects in the killing of investigative journalist Anna Politkovskaya, Komsomolskaya Pravda reported Saturday.
Novaya Gazeta, where Politkovskaya worked before her death, dismissed the report as “absolutely wrong.”
Politkovskaya, whose reports exposed human rights abuses in Chechnya, was shot dead in her Moscow apartment building last October. The killing sparked an international outcry.
Komsomolskaya Pravda, citing unidentified sources, reported that two ethnic Chechens had been detained on suspicion of carrying out the slaying. The report said the arrests were based on satellite photos taken shortly after the crime. A spokeswoman for the Prosecutor General’s Office on Sunday declined to comment on the report.
Novaya Gazeta, however, strongly denied the report. “Everything that was said is absolutely wrong,” deputy chief editor Sergei Sokolov said on Ekho Mosvky radio. He declined to provide further information on the investigation.
The Chechen connection to the killing has long been discussed.
Politkovskaya wrote passionately and critically about abuses by federal and pro-Moscow regional forces fighting separatists in Chechnya. Novaya Gazeta initially said the murder might have been masterminded by Chechen strongman Ramzan Kadyrov or those who wanted to blacken his name. Kadyrov vehemently denied the accusations.
The New York-based Committee to Protect Journalists said last month that they had been told by Foreign Ministry officials that prosecutors were investigating the Chechen police.
Foreign Ministry officials gave a different account, saying a separate investigation was under way, but that it was being conducted by prosecutors in Chechnya — not the Prosecutor General’s Office — and that it concerned allegations of abuse that Politkovskaya had raised.

TITLE: Yabloko Election Ban Upheld
PUBLISHER: The St. Petersburg Times
TEXT: The Central Election Commission in Moscow has agreed with the earlier decision of the St. Petersburg Election Commission to exclude the liberal opposition party Yabloko from the elections to the St. Petersburg Legislative Assembly.
The party was expelled from the race on the grounds that a percentage of signatures presented to the commission as a requirement to register in the election failed to meet the required standards. The election is set for March 11.
Yabloko is considering a court case against the St. Petersburg election commission. 
“We have to use all legal means available to us,” said Boris Vishnevsky, a member of the political council of the local branch of Yabloko party.
There is pressure on Yabloko to file the case quickly with less than a month left until the vote. 
“As long as the court decides in our favor, whatever time is left, would be fine with us,” Vishnevsky said.
The party is also discussing plans for organizing a protest vote among the voters.
But Vadim Tyulpanov, speaker of the St. Petersburg Legislative Assembly, believes that the Yabloko battle is over. The politician has already made a statement where he said that he regretted “Yabloko’s absence in the next parliament.”

TITLE: Gazprom, Interros Ready to Carve Up Power Industry
AUTHOR: By Simon Shuster
PUBLISHER: Staff Writer
TEXT: MOSCOW — Anatoly Chubais’ long-held dream of free-market electricity reform looks to be in disarray after two giant business groups, Gazprom and Interros, emerged as the favorites to carve up the country’s power production and form regional monopolies.
Gazprom announced Thursday that it would pool its electricity assets with the country’s biggest coal supplier, the Siberian Coal and Energy Company, known as SUEK. The merger will create a holding company worth about $12 billion, by far the largest in the country’s power sector, with Gazprom in majority control.
Considering the holding’s wealth, its closeness to the state and its near monopoly over the fossil fuels used to produce electricity, analysts said it could easily dominate power generation, creating just the kind of monolith the reforms had sought to break apart.
Chubais, head of Unified Energy Systems and the architect of the reforms, was unable to conceal his frustration Friday when asked about Gazprom’s move into coal.
The joint venture is “a major mistake for the government, and sadly not its first mistake,” Chubais said during an hourlong conference call. Asked to clarify, he added, “I think you heard me right.”
Earlier this month, Interros holding company announced that its president, Vladimir Potanin, would buy out longtime business partner Mikhail Prokhorov, the CEO of mining giant Norilsk Nickel. The sale of Prokhorov’s Norilsk shares alone is expected to leave him with about $7.5 billion in cash. Prokhorov said he intended to go into the electricity business.
Assuming he does, Prokhorov’s cash could buy him nearly 20 percent of all the generation assets being spun off from UES, said Dmitry Terekhov, an analyst with Antanta Capital.
Although the Gazprom-SUEK venture is far wealthier, its wealth is in the form of UES shares, which are worth pro rata stakes in generating assets, but are not as maneuverable as Prokhorov’s cash.
In light of this, the two holdings would have “comparable muscle” in the power sector, said Tigran Hovhannisyan, a utilities analyst at MDM Bank.
Both are likely to use it in laying claim to strategically placed generating companies. Yet their management styles will be different, Hovhannisyan said.
“Prokhorov is a businessman. He wants to consolidate [electricity] stock and build a business that will bring him profits,” he said. “Gazprom is more interested in building an empire. … It has a mania for buying these electricity assets.”
Prokhorov is likely to take control of power stations in the north of Russia, where Norilsk and gold firm Polyus, the two companies he helped to found, run some of the country’s biggest mining operations. The Gazprom-led venture is expected to buy out generators in the south, where SUEK mines its coal, and in the regions where Gazprom extracts natural gas and oil, including Murmansk, Omsk and the Yamal Peninsula.
Mosenergo, the country’s largest generating company and the sole provider of power to the capital, is already controlled by Gazprom.

GAZPROM BIDS FOR CONTROL
Gazprom has made no secret of its plans for the electricity sector. It wants nothing short of dominance.
In a recent speech, Gazprom CEO Alexei Miller claimed electricity as part of his company’s “core business.” And the strategy statement on its web site says, “There is an understanding that today Gazprom is the most interested of all in developing Russia’s power sector.”
Unlike Surgutneftegaz, which analysts consider more of a niche oil producer, Gazprom has set itself the goal of becoming “a global energy firm with full vertical integration,” the statement said. That means it wants to control production, transport and sales, at home and abroad, and it wants to do so with gas, oil and electricity.
The joint venture with SUEK is a major advance.
Currently, coal makes up about 15 percent of the fuel used at power stations, but President Vladimir Putin said last week that this figure must rise to 35 percent, roughly the European average, by 2015.
Such an increase would be much to Gazprom’s advantage. Natural gas now accounts for about 60 percent of the power sector’s fuel balance, and shifting that toward coal would free up gas for Gazprom to sell abroad, where it is sold for roughly five times the domestic price.
SUEK churns out 30 percent of the nation’s coal and holds significant stakes in 27 energy companies and a 2 percent stake in UES, according to Aton Capital. MDM bank values the coal firm’s electricity assets at $2 billion.
Combined with Gazprom’s $10.5 billion in UES shares, the joint venture would control at least 25 percent of Russia’s generating capacity, and that is before any of the buyouts it has planned, Aton said in a note to investors Friday.
And Gazprom has its eyes on more than generation. In December, the monopoly created a new company to handle the dispatch and sale of electricity. The company began distributing power in January to all of Gazprom’s affiliates, which jointly consume about 32 billion kilowatt hours per year, nearly enough to power Las Vegas.
SUEK also controls low-voltage power grids in the regions where it mines for coal, Hovhannisyan said.
On Nov. 28, Gazprom signed a far-reaching deal with Rosneft in which both companies pledged, among other things, to join forces in “the generation and sale of electricity and thermal energy,” they said in a joint statement.
But even without the help of Rosneft, which does not hold much electricity stock, “Gazprom will have enough money for everything,” said Andrei Gromadin, oil and gas analyst at MDM Bank.
As gas and electricity tariffs are gradually freed up over the next five years, the prices for both will rise exponentially, as will Gazprom’s profits, Gromadin said.
Aton Capital highlighted the risks of a Gazprom hegemony Friday. Minority shareholders of generation companies, or gencos, may suffer, the bank said, as Gazprom is more likely to capitalize its oil and gas operations rather than the noncore power sector, which needs about $110 billion of capital for renovation, according to UES estimates reported last week. The bank also warned of an electricity monopoly — and all the inefficiencies that come along with it — spanning the vast Siberian operations of Gazprom and SUEK.
The main goal of electricity reform was to break up the national monopoly and introduce competition. Toward this end, UES advisers have consistently lobbied for a diverse investor base, even if it meant taking less money than the big strategic investors were offering. Chubais and Dmitry Akhanov, head of strategy at UES, have vocally favored portfolio investors and foreign firms with industry know-how.
Other elements within UES — including UES chief financial officer Sergei Dubinin and Mosenergo general director Anatoly Kopsov — have defended Gazprom’s record.
The biggest upside to a monolithic power sector would be unity, said Gianguido Piani, a St. Petersburg-based energy expert. The ability to coordinate output is vital for meeting Russia’s growing demand, Piani said, and a variety of small investors would bring chaos. He added that foreign investors, who have been wary of trusting the heads of the newly formed gencos, would be enticed by Gazprom’s clout.
And when it comes to boosting supplies — to building dozens of power stations and spending billions of dollars on repairs — Gazprom may be the only one with such deep pockets.

PROKHOROV BRANCHES OUT
But Prokhorov’s pockets are not exactly shallow either. According to Forbes’ rich list for 2006, Prokhorov was the country’s eighth-richest man with a personal fortune of more than $6 billion. A survey published Monday by Finans magazine puts him in third place, tied with Potanin, at $14.2 billion.
Interros, the holding company Prokhorov founded with Potanin in 1990, has $15 billion of assets in industries ranging from banking, machine building and mass media, to its core business, metals. Norilsk Nickel, in which Interros holds the controlling stakes, is the largest producer of base metals in the world, and doubled its net earnings last year to $7.5 billion on the back of rising prices for nickel, a key ingredient for making steel.
The electricity holding Prokhorov plans to start after resigning from the top post at Norilsk will also be part of the Interros holding, and his loyalties to the umbrella company are expected to stay strong, Alfa Bank analyst Vladimir Zhukov said.
Unlike Gazprom, which is often criticized for inefficiency and bad management, Zhukov said Prokhorov was one of the savviest and most effective entrepreneurs in the country and is much praised for successfully turning Interros’ gold assets into a $9 billion company, Polyus Gold, last year.
In its market note, Aton said a profit-driven group could be tempted to tinker with prices if it controlled a major part of the country’s power supply.
In 2000 and 2001, this kind of price fixing was one of the main causes of the California energy crisis, which UES officials have often referred to as a worst-case scenario that they would do everything to avoid. That crisis arose when California liberalized its energy market in order to introduce competition and two private companies — Enron and Reliant Energy — ended up controlling the bulk of the state’s power stations, grids and fuel. By restricting supply, the companies made prices soar until a state of emergency was called and almost 2 million customers faced rolling blackouts.
The California case is extremely unlikely to happen in Russia, analysts said, because the state will maintain control of the grid, and would step in to curb a sudden rise in prices.
Yet Prokhorov, unlike Gazprom, has no special ties to the state, and it is unclear how willing he will be to take advice from the Kremlin.

‘FOREIGNERS KEEP OUT’
At a recent press briefing, Chubais said his investment goal was “to support any foreign strategic company.”
“The general principle is to attract not only financial investors but strategic investors who will own not 25 percent but 51 percent in at least two, three or four generation companies.” He named Italy’s Enel, Germany’s E.On, and Finland’s Fortum as the main potential partners.
But of the three, only Fortum has so far made any serious inroads. Its main asset is a blocking stake in TGK-1, which it may come to control after the company’s July IPO.
Fortum vice president Kari Kautinen said in an e-mailed statement that the Finnish company was looking to buy a “substantial stake” in a number of gencos, but did not specify which ones.
“There are enough opportunities for many players in this field,” she wrote.
Interros is also playing the field for TGK-1, with a stake of more than 7 percent in the company that should go to Prokhorov when he forms his holding.
TGK-1, which serves the Northwest Federal District, including St. Petersburg and the Leningrad region, enjoys two advantages that will make it worth fighting for. First, because it borders Finland, it exports more than 1 billion kilowatt hours per year to the lucrative European market. It is also the only genco allowed to produce power through hydro-generation, by far the most efficient method, which accounts for about half of its 6,200-megawatt installed capacity. The government-held Hydro-OGK is, and will remain, the only other purveyor of hydroelectricity.
When asked why TGK-1 enjoys these special privileges, Andrei Zubarev, its head of capital management, said: “It is because [St. Petersburg] is the home region of the president.”
Italy’s Enel runs the Northwest Thermal Power Plant, but owns none of it. It also holds 49 percent of Rusenergosbyt, a distribution firm recently undercut by Gazprom’s distribution venture.
An Enel spokesman who requested anonymity said Enel was prepared to invest up to 4 billion euros ($5.2 billion) in the country’s electricity sector. “We have capital, technology and engineers and I think this is the perfect mix for upgrading the electricity sector,” he said.
Piani, however, was quick to explain away the interest of both foreign players mainly as a way of ensuring steady gas supplies from Russia. The state, he added, would resist their involvement.
“Electrical systems are considered a national strategic asset. It means: Foreigners keep out,” he said.
As for portfolio investors, analysts agreed the power sector could not offer the quick turnarounds they like to see.
“Right now, the companies [in the electricity sector] demonstrate only limited profitability … and the investors who are looking at them are looking three to five years ahead when the reform takes full effect,” Andrei Burlinov, director of investment banking at Troika Dialog, told a recent news briefing.
Strategic, not portfolio, investors are the ones with the patience for such a long-term outlook, said Zoltan Szalai, another director of investment banking at Troika, which handled the IPO of OGK-5 and the restructuring of four other gencos last year.
Global ratings agency Fitch last month slammed Russia’s power sector as a “very high-risk market,” mainly due to political uncertainty.

CHUBAIS’ LEGACY
By the end of next year, there will be no more UES, and Chubais will no longer be in charge of the country’s electricity network. The landmark sign outside the UES headquarters in southwestern Moscow will have to be taken down, and its employees will have to look for work elsewhere.
“Oh, don’t worry about me,” UES chief spokeswoman Margarita Nagoga said. “All this power-sector trivia will come in handy somewhere.”
For Chubais, however, the situation is not so clear. His decade-long crusade to save the electricity sector from ruin is, for better or worse, coming to an end. And of his future plans, he has said only that he will not go into politics.
His reasons for this are clear enough. His record as privatizations tsar under President Boris Yeltsin earned him the scorn of millions of Russians after he oversaw the 1995 loans-for-shares scheme, a proposal of Potanin’s. The program sold off valuable state property to well-connected oligarchs at knockdown prices, helping them become billionaires. The scheme is still blamed by many for Russia’s sharp economic divide.
“In a way, [UES reform] was his chance to make up for it,” said Antanta’s Terekhov. “If it doesn’t work out, I don’t know. You’d have to feel bad for the guy.”

TITLE: Experts Lash Out at Microsoft Monopoly
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: Russian private companies, state bodies, associations and individual PC users are getting increasingly dependent on software provided by American IT giant Microsoft — a dangerous and expensive luxury for a country that is to join the WTO, experts said at a meeting at the Rosbalt new agency on Friday.
The recent case against Alexander Ponosov, a school principal in Permsky Kray, accused of piracy after buying 16 computers with non-licensed software for his school, has given the issue wide coverage in the Russian media.
Ponosov could spend five years in jail and be charged over $10,000 for copyright violation. When Russia joins the WTO, copyright regulation will become even stricter. Given the high levels of computer piracy in Russia, any company could be charged with violating copyright law and using pirated software, if competitors suggest to law enforcement authorities that they check the software, the experts said.
Though blaming piracy, they focused on the threats associated with Microsoft’s monopoly and discussed whether Linux or other open source operational systems could rival the giant.
“Competition between schools for a better education should be fair. Abuse of intellectual property rights has become normal practice in Russia, while schools aim to teach moral principles,” said Andrei Lovyagin, deputy of the St. Petersburg legislative assembly.
In St. Petersburg the situation as regards schools is rather favorable. A city government decree has ensured that since 2005 local schools have been supplied with licensed Windows software. This year 264 million rubles ($9.96 million) will be spent on that purpose, Lovyagin said.
“This complete dependence on Microsoft is a deadlock. I do not agree with this policy. We think of our informational safety and the need to use informational systems with open codes,” Lovyagin said.
Other participants listed the disadvantages of using Microsoft software.
“Nobody knows what is hidden inside those programs with closed codes. Developers are based outside Russia and all the money goes to other countries,” said Pavel Frolov, director of Linuxcenter company.
Oleg Sadov, technical director of Linux Inc., said that all large web servers use Linux because of its better infrastructural solutions.
“Linux software consists of separate components that may be assembled in a way convenient to each particular company and its particular purposes,” he said. 
And Linux does not suffer from computer viruses, he added.
However other experts were more cautious about the prospects of Linux.
“Any operation system is good in an appropriate environment. Windows is good for game lovers. Linux could take its place in education or industrial production,” said Filipp Torchevsky of Sun. He called for more diversity.
“Interest in open source software emerged three to four years ago. At the moment the Central Bank of Russia is discussing the installation of open source software, which offers such an organization undisputable advantages,” said Kirill Stepanov, technical director at Novell company.
However Stepanov doubted that open source software would become a mass product in the foreseeable future.
“Both types of product could coexist,” he said, noting that Novell distributes Microsoft as well as Linux and other open source systems.
Vitaly Kuzmichev, development director at Lynx BCC, spoke out against making a fuss about open source software. “You can either use it or not. I personally do not think that Linux is user-friendly or convenient,” he said.
“As for safety, obviously, we should create our own infrastructure. We could build it from scratch or use available open source software and improve it,” Kuzmichev said.
Kuzmichev forecast that in the future IT services would become more important than software infrastructure. “Just as when some cellular operators grant you a handset when you get a subscription, software service providers will be interested in universal hardware and software,” he said.

TITLE: Lukoil To Deposit Billions
AUTHOR: By Eduard Gismatullin
PUBLISHER: Bloomberg
TEXT: MOSCOW — Lukoil, Russia’s largest oil producer, plans to invest about $2 billion to develop a Saudi Arabian field, after the company found natural gas and gas condensate at its first well in the Middle Eastern country.
Lukoil found an estimated 620.5 million barrels (85 million tons) of hydrocarbons at Block A in the northern Rub al-Khali basin, said Grigory Volchek, a spokesman at Lukoil Overseas Holding Ltd. The company estimates the whole deposit may hold about 700 million tons of oil equivalent.
“This is the first discovery a Russian company has made in the post-Soviet period in Saudi Arabia,’’ Volchek said in a phone interview Monday from Saudi Arabia.
Lukoil owns 80 percent of the rights to develop the 30,000-square-kilometer Block A, south of Ghawar, the world’s biggest oil field. The Russian company plans to produce as much as 20 percent of oil and gas outside of Russia by 2016, up from a 7 percent share last year.

TITLE: Heineken Targets The Teetotaler
AUTHOR: By Maria Ermakova
PUBLISHER: Bloomberg
TEXT: MOSCOW — Heineken, the third-biggest beer company in Russia by sales, will start selling a non-alcoholic version of its Bochkaryov beer as part of a plan to boost its market share in Russia.
 Heineken’s PIT company will brew the premium Russian brand at its factory in Kaliningrad city and will start selling it this month, Heineken Russia said Monday in an e-mailed statement. Heineken has 35 beer brands in Russia.
 Heineken is expanding in Russia to gain market share from competitors such as Baltic Beverages Holding AB, the country’s biggest beer producer, and as consumers drink more beer. Russian beer output jumped by 10 percent to 100 million hectoliters in 2006, according to the Federal Statistics Service. One hectoliter equals 100 liters.
“Bochkaryov is a strong national brand. It showed a significant growth in 2006,’’ said Rolan Pirmez, president for Heineken Russia, in the statement. “Bochkaryov production in Kaliningrad specifically will help strengthen our presence on the Russian market.’’
Heineken bought PIT in 2005, boosting the number of its beer plants to 10 in Russia to help make up for lack of growth in western Europe. The Russian brewer, founded in 1903, sells brands including Goesser, Koenigsberg, Doctor Diesel, Three Bears and Ostmark.
Heineken aims to increase its 16 percent share of the Russian beer market to 20 percent as it taps rising consumer demand in the country, Pirmez said July 5 in St. Petersburg.

TITLE: A Quality New Space
AUTHOR: By Hannah Gardner
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russia plans to make its space industry more competitive by consolidating five enterprises in a holding based around Moscow’s Khrunichev Space Center, echoing decisions in the aircraft and shipbuilding sectors.
The four other state-owned facilities to join the manufacturer of the Proton launch vehicles are the Voronezh Mechanical Plant, the Korolyov-based Chemical and Machine Building Plant, Moscow’s Dlina equipment plant and the Omsk-based Polyot Production Association, the Federal Space Agency said Monday in a statement on its web site.
Russia wants to increase its 11 percent share of the global market for space products and services by bringing together rocket and equipment manufacturers. The government united major aircraft makers Irkut Corp. and Sukhoi Co. Holding with design bureaus and other manufacturers last year.
“The current stage of industrial development in Russia means consolidating production structures and giving them new qualities that correspond to the demands of the market economy,’’ the agency statement said.
Defense Minister and Deputy Prime Minister Sergei Ivanov is chairman of Unified Aircraft Corp, which is valued at $3.6 billion. Russia plans to set up at least three shipbuilding holdings, Ivanov said earlier this month, without specifying when.

TITLE: Chevron May Bid For Several Yukos Assets
AUTHOR: By Miriam Elder
PUBLISHER: Staff Writer
TEXT: MOSCOW — U.S. oil major Chevron is interested in bidding for several Yukos assets when the remains of the dismantled oil company go up for auction this year, a spokesman for Yukos’ court-appointed bankruptcy manager said Friday.
“Chevron, among other large international companies, has expressed an interest in Yukos assets,” said Nikolai Lashkevich, a spokesman for bankruptcy receiver Eduard Rebgun.
Gazprom CEO Alexei Miller said Thursday that he had received an inquiry from a U.S. oil company expressing interest in bidding for Yukos.
Chevron and Gazprom’s oil unit, Gazprom Neft, formed a joint venture in November. Gazprom spokesman Sergei Kupriyanov said the joint venture, Severnaya Taiga Neftegaz, would not bid for Yukos assets. Lashkevich said he had never heard of the company.
When asked about Lashkevich’s comments, Chevron spokeswoman Irina Rybalchenko did not deny that Chevron would bid for Yukos assets. “Chevron continues to be engaged in looking at long-term investment opportunities in Russia’s energy sector,” she said, adding that the company did “not comment on discussions concerning merger and acquisition activities.”
The joint venture with Gazprom is Chevron’s first foray into Russian oil production. 
Chevron expressed its interest in a letter to the bankruptcy receiver late last year, Lashkevich said. The bidding process would begin after an official announcement in Rossiiskaya Gazeta, he said, adding that he could not yet speculate when the process would begin.
Chevron said it was interested in “several assets,” he said, declining to provide further details.
Chevron was one of the U.S. oil companies former Yukos chief Mikhail Khodorkovsky was believed to be negotiating with on the sale of a Yukos stake before his arrest in October 2003. 
Lashkevich would not name the other foreign firms that had expressed interest in the Yukos assets, which include refineries and two oil production units. 
Gazprom is positioning itself as one of the main bidders for the Yukos assets, partnering up with foreign participants after its failed bid for Yuganskneftegaz, Yukos’ main oil production unit, in December 2004. Gazprom was forced to withdraw its bid at the last minute after a legal challenge from a U.S. court and the unit went to Rosneft instead.
Rosneft is also hoping to bid on Yukos assets and is close to drawing on $24.5 billion in loans from a consortium of eight international banks.
Rebgun will sell off 193 assets in open auctions this year to meet Yukos’ total liabilities, including back tax demands of $26.6 billion. He was appointed in March 2006 on the recommendation of Rosneft, which, along with the Federal Tax Service, is one of Yukos’ main creditors.
Among the assets are two oil-production units, Samaraneftegaz and Tomskneft, which together produce about 470,000 barrels per day. The Yukos assets are estimated to be worth about $22 billion.
Also Friday, prosecutors for the first time detailed the new charges filed against Khodorkovsky and his associate Platon Lebedev. The two men, who are already serving eight-year sentences for fraud and tax evasion, were charged last Monday with money laundering and embezzlement.
The Prosecutor General’s Office said in a statement posted on its web site that the two men were accused of embezzling more than 850 billion rubles ($32 billion) from 1998 to 2003. Khodorkovsky and Lebedev took oil from Yuganskneftegaz, Samaraneftegaz and Tomskneft, and then resold the crude through Russian and offshore companies for three to four times the price, the statement said. The statement said two men were able to launder 450 billion rubles and $7.5 billion dollars, or a total of $24.5 billion.
Khodorkovsky and Lebedev, along with other associates, also stole shares in Yukos unit Eastern Oil Company in 1998, which caused “material damage” to the state, the statement said. 
In the past, prosecutors have singled out Ratibor and Fargoil, two Yukos subsidiaries registered in tax havens inside Russia. The heads of those trading units have also been charged with money laundering and embezzlement, but the trial was delayed after former Fargoil president Antonio Valdes-Garcia fled police custody in January.
Alexei Golubovich, the former head of Yukos’ strategic planning department, is widely believed to be a main witness in the trial. Golubovich returned to Russia in January, after fleeing the country in the wake of Khodorkovsky’s arrest.

TITLE: Deripaska Tops List of Richest
AUTHOR: By Daan van der Schriek
PUBLISHER: Staff Writer
TEXT: MOSCOW — Russian Aluminum owner Oleg Deripaska has overtaken Chelsea owner Roman Abramovich as the country’s richest man, according to a new survey.
Deripaska has taken the top spot with his $21.2 billion fortune, surpassing Abramovich with his reported $21 billion, Ekho Moskvy said on its web site, citing an advance copy of Finans magazine’s Monday issue. Deripaska’s fortune has nearly doubled from $12.7 billion since last year. Over the same period, Abramovich has increased his holdings from $18.7 billion.
Although the aluminum trade is not very transparent, it is possible that last year’s strong commodity prices helped Deripaska increase his riches, MDM Bank analyst Michael Kavanagh said. 
Deripaska, Abramovich and the two tycoons tied in third place, former Interros partners Mikhail Prokhorov and Vladimir Potanin, both worth $14.2 billion, all have substantial metals interests.
Prokhorov and Potanin jumped a few places in the rankings since last year, when the magazine estimated their wealth at $6.7 billion (eighth place) and $6.6 billion (ninth) respectively.
Both have profited from the growth in value of Norilsk Nickel and Polyus Gold, Ekho Moskvy cited Finans as saying. MDM Bank’s Kavanagh said he would not be surprised if the share prices of Norilsk and Polyus were instrumental in the two men doubling their fortunes. Prokhorov and Potanin are currently in the process of splitting up these and other Interros assets. 
Finans had listed London-based Abramovich as the country’s richest man for three years straight since starting its survey in 2004. Deripaska was second in 2006 and 2005, up two places from 2004.
Deripaska took control of RusAl in 2000, buying Roman Abramovich out of the company in October 2003. In addition to owning a 100 percent stake in RusAl, he also has controlling shares in automaker GAZ, aircraft manufacturer Aviacor, and insurance company Ingosstrakh. Deripaska has continued to invest in his Russian business empire, unlike Abramovich who has been liquidating his holdings. As well as yielding control over RusAl, he sold Sibneft to Gazprom for $13 billion in 2005.
But Deripaska is also eyeing investments outside the country. On Feb. 1, European Union regulators agreed to the merger of RusAl with SUAL, controlled by Viktor Vekselberg, and the aluminum assets of the commodities trader Glencore, creating the world’s largest aluminum company. The merger should be completed by April. RusAl will own 66 percent of the new firm. 
In a separate development, Deripaska is trying to block a British lawsuit targeting a 20 percent stake in RusAl, Bloomberg reported Friday. His former business partner Mikhail Chyorny claims that Deripaska agreed in 2001 to pay him the value of a 20 percent share in RusAl in a series of installments, as payment for Chyorny’s stake in a Siberia-based rival. 
But Deripaska’s lawyer argued Friday that the case should be heard in Russia because the agreement, drafted in Russian, would involve questions of Russian law and language that could not be resolved in Britain, Bloomberg said.

TITLE: TNK-BP Gets Deadline To Fix Violated Kovykta Fields
PUBLISHER: The Associated Press
TEXT: MOSCOW — The subsoil agency has given TNK-BP three months to fix licensing violations at its giant Kovykta natural gas development or risk losing the license to develop the field, environmental regulator Oleg Mitvol said Friday.
Observers say intense regulatory pressure on Shell’s Sakhalin-2 project led to the company selling a controlling stake to gas monopoly Gazprom, and suggest Kovykta could be next as the Kremlin seeks to expand its control over key energy projects.
Officials have threatened to revoke the license due to underproduction at the field. The joint venture, TNK-BP, has maintained that the local area needs only a fraction of the 9 billion cubic meters of gas it was obliged to produce last year under the original development license, which was drawn up in the 1990s.
Mitvol said he was not aware of any significant environmental violations at the production area. As deputy head of the Federal Service for the Inspection of Natural Resources Use, he has taken an aggressive stance against oil companies.
The company has long been unable to reach an agreement with Gazprom on exporting the gas to China and South Korea. By law, Gazprom is the only company in Russia allowed to export gas.
TNK-BP chief executive Robert Dudley has said his company is in little danger of losing the license for Kovykta, but has also played down the damage that pulling the license would cause since TNK-BP has yet to book any of the Kovykta reserves.

TITLE: ‘Straightforward’ Manager Enjoys Cultural Renaissance
AUTHOR: By Evgenia Ivanova
PUBLISHER: Staff Writer
TEXT: Don’t be afraid to ask questions, carefully observe the culture before making any decisions, and, most importantly, have fun. 
For Patrick Naughter, the new general manager of Renaissance Baltic Hotel, these are the major ingredients for success. 
Although Naughter has been involved in the industry for nearly 20 years, most of his positions were finance-related, and he had never managed his own hotel until now. 
Asked if he felt uncomfortable embarking on the new role, Naughter said he had found a way of making the process of settling-in more painless, (“not entirely painless – but definitely less painful,” he says) by using the experience of other managers within the entire Marriott International group of hotels.
 “When I applied for this position, I think I understood the responsibilities of the position less than when I received it,” he says. 
“It wasn’t a huge gap between the two, but when I was given the position my initial reaction was ‘Great, let’s get on with it!’ But then the decision started to sink in, I thought, ‘Oh my God – I can’t be responsible for all this!’”
Regarded by his friends and colleagues as a “very straightforward” person, Naughter lives up to the image.  
“So certainly the pressures are there, but I’ve got plenty of external resources that I can call upon at any time, day or night, for their advice,” he says.
“Just keep asking questions — it’s healthy; don’t forget the answers, but keep asking questions — that’s really what I did and what I’m doing and that’s helping me,” he says. 
Another way of avoiding stress is deriving enjoyment from everything you do, Naughter says.
“In work or out of work, I like to enjoy myself. I feel that anybody who is working should either enjoy the work that they are doing or they should address why it is they are not enjoying it,” he said.
 “Perhaps they should leave and find work that they would be much happier doing.”
Born in England, Naughter moved to Ireland at the age of two, and says he is happy to be working in Russia because he finds Russians are very similar to Irish people in the sense that to have fun is part of the mentality of both nations.
“In both my experience of working in Moscow and in St. Petersburg everybody was eager to enjoy themselves. I remember birthdays were always celebrated [in the office] and were sometimes ridiculously wild,” he said.
“But it’s good, it brings people together even if they don’t realize it at the time,” said the manager, who this year celebrates his 10th year of living in Russia. 
Naughter came to Russia for the first time in 1994 to work as assistant to Charles Barks, then director of finance at the Renaissance Hotel in Moscow. 
Within a year of his arrival he decided to come to St. Petersburg, tempted to see a place everybody was talking about.
St. Petersburg is now his second home, where he met his Russian wife Irina and where his son Ciaran (now eight-years old) was born. 
“When I came to Russia in 1994 not knowing much about the country, St. Petersburg often came up in conversation. Everybody without exception told me that it was a much more attractive city [compared to Moscow], only the weather is much worse,” Naughter recalls. 
Naughter and three friends decided to visit St. Petersburg during the summer of 1995. 
Now after all the years of experiencing the city, Naughter has only two disappointments: St. Petersburg’s infamous mosquitoes (“Nobody told me about them when I first came here. I was eaten alive by those things!”) and the notion of salted fish as a common beer snack, (“I still find it bizarre!”).
“When coming into a new culture, before bringing your own experience I think it’s important to try and understand that culture first,” Naughter said, adding that he wanted to stay away from the “expatriate bubble” as far as possible.
“One can learn a lot about how things are done from observing that culture rather than coming in with the arrogant perspective saying ‘Well, I used to do things this way, so we need to do everything the same way here.’ I’ve seen many failures as a result of this,” he said.

TITLE: Caught Up in Advanced Webs of Customization
AUTHOR: By Anastasia Simakina
PUBLISHER: Special to The St. Petersburg Times
TEXT: St. Petersburg is preparing itself for the simultaneous release of several projects in a revolutionary new format — Web 2.0. Over the last two years the latter has become increasingly popular, both in Russia and abroad as it begins to attract the interest of key investors and funds. 
The key difference between Web 2.0 and its predecessor, Web 1.0, comes down to the fact that content can now be generated by the user himself, whether it be for a blog-type service, social networks or a videoportal.
At ‘.ru’ websites there are altogether nearly twenty Web 2.0 resources, but it should be pointed out that many of them are imitations of their Western equivalents. 
And although in St. Petersburg such projects are for the moment limited in number, players on the city’s web market are predicting the active development of this trend over the year ahead.

What is Web 2.0?
The appearance of the term Web 2.0 is related to an article by Tim O’Reilly, “What is Web 2.0?” published in September 2005. O’Reilly is considered one of the founders of the OpenSource movement and is head of his own publishing house, responsible for more than half of all classical computing literature currently available.
In the article O’Reilly explains the appearance of a large number of sites sharing several principles, as part of the general tendency for the development of Internet society, and called this Web 2.0, as opposed to older tendencies – Web 1.0.
Irrespective of continuing disagreements among experts as to what this term actually means, those who admit the existence of something called Web 2.0 identify several basic aspects of its form.
The familiar resource structure of the standard net Web 1.0 implies the availability of some kind of manager, who allocates the content of its resources for other users who receive this information unilaterally. 
The main difference in Web 2.0 resource comes down to the fact that here the users themselves create their own content. The number of such users is defined by the informational value of the resource.
Orientation through this information is helped by key words through which the search service gets rid of unnecessary content. 
In this way, the new Web transforms users of the Internet from a passive, anonymous mediator into an active public participant.
Standard Web 2.0 resources involve a blog service, social networks through which users interact on the basis of some characteristic that unifies them, and also RSS-ribbons and wiki (an online means to structure letters from multiple authors, a characteristic example being Wikipedia).
Web 2.0 includes resources allowing the allocation of media files to users (photos, video, music). Something else related to this is podcasting: the word coming from a combination of iPod and broadcasting and means broadcasting on portable audio players using RSS channels with links to audio recordings. Ultimately, podcasting is a blog made up of recorded mp3 files.
The classic way of using the standard Web 2.0 is the so-called mash-up, or the integration of various services. For example, by integrating a real estate web site with Google Maps one ends up with a new, more convenient service, which a user can use to see the exact location of each respective property on the market.
On top of semantic differences, Web 2.0 services should be distinguished by their simple and agreeable design and a minimum of graphics, which almost completely exclude flash and gif animations and other complex technologies. 
Interactive applications are created using Ajax, RSS, SOA, CSS, XHTML, Atom and other technologies.

Web 3.0 on the Horizon
While use of the term Web 2.0 still provokes controversy among web specialists, Western programmers are already working on new technologies that will allow another web revolution.
Most specialists agree that the logical step from Internet documents linked together (Web 1.0) and linked information through the Internet (Web 2.0) will be the so-called ‘Semantic Web’ (Web 3.0) or World Wide Database.  
Web 3.0 allows the creation of systems that give the clearest and most in-depth answers to difficult requests, saving users from analyzing a whole host of resources by themselves.
And for the moment, allowing for a number of skeptical enunciations, the popularity of Web 2.0 projects is an indisputable fact. 
In 2006 the Western social networks My Space, You Tube and Facebook were successfully expanded.
The apotheosis of the popularity of these networks was the purchase of YouTube for $1.65 billion, suggesting that such projects are becoming more and more attractive to investors.
Web 2.0 became popular in Russia quite recently and is still underdeveloped: many projects are in the stage of beta testing, while their business models are equally insufficient. For the time being Russians use foreign Web 2.0 services like gmail.com, livejournal.com and others.
At the moment, the more popular Russian projects are being developed by programmers in the capital – resources such as www.blogus.ru (rating blogs on the basis of visitor numbers), www.moikrug.ru (a social network for professionals linked to information technology and the web), www.dirty.ru (one of the first collection of blogs, which appeared in November 2001), www.habrahabr.ru (news and blogs service for IT specialists), www.comby.ru (an analog to the foreign blog service www.MySpace.com), www.news2.ru (news portal, equivalent to the foreign www.digg.com), www.russianpodcasting.ru (podcasting project) and others. 
All basic Russian search engines have also contributed to the active development of Web 2.0 services, for example, Yandex recently released its own RSS reader and finder among Runet blogs. 
As far as St. Petersburg is concerned, the city lags around two to three years behind the capital in terms of the development of Web 2.0 services, and the amount of similar local resources are limited to single figures. 
The first project on the horizon is probably the portal www.Free-lance.ru, which presents itself as a system of cooperation between employers and freelancers working at a distance.  
The first pilot version of the portal was released in mid July 2004. However, as the project’s programmers have remarked, for the moment Free-lance.ru is only trying to comply to the Web 2.0 standard while gaining popularity among users. 
25,000 users are currently registered, with more than 10,000 individuals visiting every day.  
According to the head of the www.Free-lance.ru project, Anton Mazhiriin, deals made using the site worth a total of $3 million were concluded in 2005 – last year the number was at least three times bigger. The well known companies that searched for freelancers using this service include www.Mail.Ru, www.DP.ru, Defa, ‘Araba,’ Stockholm School of Economics and Mamba. 
In the autumn of 2005 the creators of Free-lance.ru announced two new services – 10Mpx.ru and Syem Ruk (7ruk.ru), which were posited as Web 2.0 projects. 
www.10Mpx.ru is intended to let photographers use the site to sell their work. The idea of Syem Ruk (seven hands) is based on a theory that everyone is known to one another across seven handshakes. In this way, Syem Ruk is a social network (a well-known federal equivalent is www.moikrug.ru or Moi Krug) and allows relations to be established between shared acquaintances.
Last month in St. Petersburg another portal was launched, claiming the title of the city’s first news portal in Web 2.0 format and called www.SP5.ru. The portal’s content takes form under the active participation of its users, who become united by the resource.
The creators underline the non-commercial character of the project and see it as unique, at least for the web market in St. Petersburg. The portal is currently available as a beta-version.
Those involved with St. Petersburg’s web market agree that in the local segment of ‘net.ru,’ the Web 2.0 services currently available are limited, linking it to the way St. Petersburg typically lags behind Moscow in the realm of IT technology.
Nevertheless, the directors of the city’s studios claim they have started work on projects related to Web 2.0 resources with several of them due for launch this spring.
According to Andrei Dobriy, general director of the Portal Design Group, “Most consider Web 2.0 to be a combination of a certain-styled design, clear usability and services, inducing people to create ‘unique content.’ Precisely the quality of this last aspect is what interests and is demanded by users.”  
“In my opinion, there is currently no local Web 2.0 resource. It would be an exaggeration to label the latest initiatives coming from the Gorodovoi and SP5 portals, for example, as Web 2.0 resources,” he continued.
However, I am confident that the first Web 2.0 resource will appear in St. Petersburg sometime in the spring,” Dobriy said. 
He also confirmed that the Portal Design Group is working on a new version of the popular city portal, www.cityspb.ru, which will be maintained in the ‘sleek’ style of Web 2.0.
“It will be a bigger service than a portal and more customization than information,” said Dobri.
Andrei Ryabikh, general director of the web studio Web Master.Spb, agreed that “apart from blogs, there are no fully-fledged Web 2.0 projects in St. Petersburg.” 
However, he did say that there are more and more projects being done in the style of Web 2.0. 
“In this sense, Moscow is normally two or three years ahead of us, although even this year will see the appearance of a few local Web 2.0 resources, one of which is from our own company,” he said.
“Typical Web 2.0 projects include www.7ruk.ru, and www.Free-lance.ru, as well as online services allowing one to add one’s own information and use new technology such as Ajax, and, sometimes, to use several services together to create a more convenient product (the so-called mash up),” said Yuri Stepanov, general director of Peterlink Web. 
“We are always ready to integrate the Web 2.0 ideology into projects that fulfill the needs of our customers if that is a necessary condition for success,” he said.

TITLE: Mobile Operators Adopt A Segmented Approach
AUTHOR: By Alyona Zhuravlyova
PUBLISHER: Special to The St. Petersburg Times
TEXT: In conditions where use of mobile phones has become extremely widespread and competition for every subscriber, whether it be a new potential user or existing client, has become incredibly intense, players on the market have begun to take more individualistic approaches. One of the new instruments that’s been introduced to achieve this in recent years is the segmented offer: rates that are orientated towards specific target groups. 
According to the Advanced Communications & Media Consulting analytical agency, the number of mobile phone users in Russia in December 2006 reached 151.92 million, having increased during the course of the year by 26.12 million. The penetration level amounted to 104.6 percent, also having risen steeply over the course of the year by 18 percent. In St. Petersburg, there were 8.819 million subscribers at the end of 2006, with the figure having risen by 1.311 million over the course of the year, with penetration of 139.1 percent. It’s perhaps worth noting that the growth for 2006 was 20.7 percent higher in the city than in the rest of the country. 
From these figures it can be seen that competition is for existing mobile phone users, although it should also be noted that the figures are for all active SIM cards and, as a result, the number of actual subscribers is significantly lower. Equally, as well as attracting new subscribers, operators are now being faced with the task of hanging on to those they already have and, if possible, raising their loyalty. 
The operators are working hard to achieve these tasks, carrying out various forms of advertising campaigns, running competitions and quizzes and developing and launching new services and rates. The approach to the provision of services itself has changed, however. At present, it’s not enough to merely come up with something new. In today’s market, the operator also has to present it in such a way that the subscriber or potential subscriber will understand that it has been developed specifically for them. The changes in the Mobile TeleSystems (MTS) commercials are indicative here: the visuals are no longer abstract, now being addressed to individuals and to concrete subscribers. It is on this wave of change in approach that operators have begun to focus attention on segmented rate plans. 
Segmented rates are offers that in their basic characteristics are aimed at concrete groups of subscribers. The groups can be defined in social terms, in terms of lifestyle, age groups or by using other parameters - it’s all down to the imagination of the operator’s marketing specialists.
It would be wrong, however, to try and claim that segmented rates only appeared in 2006. But it was only in that year that they truly came into fashion among the “big three” operators in the region. 
Back in February of last year, Northwest Megafon presented a new marketing concept. Its slogan was “Build Your Contacts,” and in essence it could be reduced to the following: a small number of rate plans and a series of rate modifiers were put on the market, with the aid of which subscribers could select the most convenient payment scheme designed for them. Thus, a “rate building” scheme was presented. The original rates offered were developed with further developments for specific clients: “We’re Together”, “Call”, “Secondometer”, “Minute Package”, “Sunny Subscriber”, and the like. 
In the autumn, however, MegaFon introduced four new rates directed at specific groups. The “Drive” plan, for example, was aimed specifically at youth groups. “Lux.1000” was aimed at those who talk a lot on their mobiles relative to other subscribers. The other two plans were even more specific, a fact that was enhanced by fairly harsh connection conditions. The “City” rate, for example, apart from being aimed at those with prestigious direct numbers, was only available to those in St. Petersburg and the Leningrad Oblast rather than everyone in the Northwest region. The fourth rate, “ISIC.Lite”, was only available to those with an International Student Identity Card (ISIC). 
According to representatives of the firm, however, the concept of allowing subscribers to build their own rate with a number of modifiers hasn’t been rejected – new modifiers are continuing to appear in the Northwest MegaFon range. The approach to this range, however, is being further “segmented”: “SMS-Contact” services were introduced for those with hearing or speech difficulties, providing cheap rates for SMS messages, as well as the “PRO.Cocktail” (those with ISIC cards could receive a package of 25 SMS messages, 25 minutes of talk-time and 25 megabytes of GPRS traffic). 
MTS’s northwest region branch, meanwhile, has taken a slightly different approach in the segmenting of its rates. Changes in the rate plans began last May with the “First” and “Business Without Borders” plans, the latter being aimed at businessmen working with different regions of Russia and the world. 
The operator’s next initiative was the “Red” rate, aimed at younger users. The accompanying marketing campaign focused on sponsoring youth events and advertising in venues frequented by youngsters. Several events were organized by dealerships in association with institutes and nightclubs. The plan offered cheap calls for those communicating with other “Red” subscribers and a unique service which allowed users to check if other numbers were using the “Red” scheme. 
The “We” rate plan launched in November offered much the same terms – subscribers could join up in their own groups and receive discounts on calls. The operator aimed this new product at subscribers that communicate, predominantly, with a restricted group of family and friends, with the groups comprising two to seven users who can also be subscribed to other rate plans. On Dec. 1, however, MTS also introduced the “Stimulus” plan to counterbalance “We” – here, the rates were aimed at those who talk to large numbers of people with low rates for calls to all mobile users in the region. 
MTS’s latest initiative in St. Petersburg has been the “Mobile Modem” rate aimed at business users and web-surfers who need mobility and are prepared to spend to get it. It’s perhaps worth noting that this is the first package deal among the GSM operators to be specifically aimed at providing access to the Internet. 
Like the other members of the “big three,” MTS allows subscribers to use modifiers to tailor their rates. “This system, in our opinion, is the most promising. It combines a main rate with so-called modifiers allowing you to adapt the plan to meet your needs and wishes, although the personalizing is actually built in to the rate itself. This approach makes our work with target groups more flexible, not limiting the variables in marketing by developing the same thing over and over again. People aren’t all the same. Simplicity is great – the simpler communications are, the more comprehensible they are. But there are also important terms such as ‘sophistication’ and ‘telecommunications literacy’,” said Ruslan Gurdzhiyan, marketing director for MTS in the northwest region. 
Another key player on the St. Petersburg mobile market, Vimpelcom, which operates under the Beeline brand, is sticking to the same strategy that it started out with in the regions. As one of the firm’s managers stated at a recent press conference, Beeline has never used uniform rates, always focusing on distinct groups. 
At present, the Beeline brand offers 11 rate plans. They include “Family”, with cheap rates within a small localized group that the subscriber can define; “Click,” which provides cheap Internet access and “City,” which is aimed at those who, for the most part, call local fixed lines. 
In its tariff policies, Beeline tends to focus on groups of subscribers that are distinguished by their interest in certain services, rather than age group, social class or the like. Beeline does, however, offer a special service for the hard of hearing or speech-impaired with SMS and MMS offered at low rates, and its “Intuition” rate, now discontinued, was specifically aimed at women.
Segmented rates have proven particularly popular among the smaller players, namely the regional operators. There are two reasons for this. Firstly, in small towns, creating and promoting rates aimed at specific subscribers has proven easier than in large cities. Secondly, regional operators have had to put a lot of energy into their work in order to compete with the federal players as they have fewer financial opportunities. 
The SMARTS operator in the Volga region, for example, has come up with different rate plans for different religions - the “Belfry” plan for Russian Orthodox subscribers, the “Azan” for Muslims and a dedicated “Buddhist” plan. 
SMARTS also has rate plans for those serving in the armed forces (“DMB”) and those visiting from CIS countries and South-East Asia (“Countrymen”). 
“Our last offer in 2006 in terms of niche rates was a ‘Union’ rate offered to members of the Professional Union of State Institution and Social Services Workers of the Russian Federation,” said Igor Halivaiko, director of the commercial department at SMARTS. 
Federal operators also find it easier to segment their rates in specific geographical regions. An example is the “Submarine” rate for those working in the defense region in the Arkhangelsk region. 
Operators stress the benefits to subscribers that are entailed in the creation of segmented rate plans – the names of the rate plans themselves usually indicate who they’re designed for, making the selection of the most cost-efficient plan easier. As the marketing and sales vice president of Vimpelcom Kent McNeil points out, rate plans with one key aspect are more easily understood by subscribers and easier to promote. 
Operators also note that tailored rate plans give subscribers the impression, often on good grounds, that rates or services have been specifically designed for them, increasing loyalty to the operator. 
Market players are convinced that segmented rates are set to continue developing in the near future, both in terms of new offers from operators – both on a federal and regional level - and in terms of the numbers of subscribers using them.

TITLE: Petersburg Hosts More ‘Focused’ Norvecom
AUTHOR: By Alexander Yankevich
PUBLISHER: Special to The St. Petersburg Times
TEXT: From Feb. 13 to Feb. 17, Petersburg will be playing host to the Norvecom-2007 international telecommunications exhibition. This is the fourteenth time the exhibition, aimed at specialists in the communications field and humbler consumers, has been held in the city.
The exhibition traditionally attracts mobile phone and landline operators, internet providers, equipment suppliers and other players from the telecommunications market. 
Norvecom-2007, organized by Restek-IKT, the Restek Exhibition Association and North-West Telecom, will be hosted at the 6,000-square-meter Pavilion 7 of the Lenexpo exhibition complex. The event has the support of the Information Technologies and Communications Ministry, the Electrocable Association, the St. Petersburg Information and Communications Committee, the Committee for the Informatization and Telecommunications of the Leningrad Oblast and the Telecominvest Holding. 
The official opening of the exhibition is scheduled for Tuesday at 2 p.m. at the North-West Telecom exhibition stand with 50 companies taking part. The exhibition itself will be divided into two zones. The Norvecom Pro zone is aimed at specialists in the field while the Norvecom Open zone will provide an insight into services and technologies of interest to the mass market. 
Traditionally, North-West Telecom has the largest presence at the exhibition and its stand this year will present its Avangard and Alliance services, as well as its new IP-TV service Avangard TV. 
The mobile phone operator Sky Link will also be presenting new services, with visitors to the exhibition being able to see a professional video-observation system, Goal Mobile, in action, and a high-speed mobile channel entitled Sky Turbo (EV-DO) providing a connection with a speed of up to 2.4 Mb/sec. 
The service allows live video feeds to be transmitted from a camera hooked up to the GOAL system and displayed on the screen of an Ubiquam U300 mobile telephone. The user can also guide the camera in real time with the aid of the phone’s joystick. 
There will also be a presentation of the Sapphire mobile content service, the third version of the SkyPoint service platform.
Another mobile phone operator taking part in the exhibition, MegaFon, will be presenting the MegaFon PRO services on its stand, with an emphasis being placed on its latest service, Push-to Talk.
The Russian Post will be dividing its exhibition stand into four thematic zones which will focus on financial and traditional postal services, internet services and electronic self-service kiosks.
Web Plus and Peterstar will be presenting their traditional services, such as telephony and broad-band access to the internet through ADSL, as well as home networks. 
As part of Norvecom-2007, there will also be a conference on “Paths and the Technological Base for the Formation of a Market for Info-Communications Services of a New Generation,” the main aim of which will be an exchange of experiences and opinions on issues concerning strategies for the further development of new generations of communications networks and familiarization with new telecommunications equipment. 
The themes to be covered in the conference include the development of new generation networks in Russia, issues in the introduction into commercial use of 3G/UMITS mobile networks on Russian territory, the organization of access, control of telecommunications sites, measurement within mobile phone networks, centers for the processing of calls and databases, network equipment, broad-band access, conditioning and ventilation systems and the protection of communications equipment. 
In addition, SvyazKomplekt will be holding a seminar focusing on AddPac Technology for IP-telephony and there will be a training-seminar entitled “Raising the Effectiveness of Sales with Cisco Solutions” run by the BigOne educational center. 
Throughout the course of the exhibition, the Popov Central Communications Museum will be hosting an open competition testing the skills and professionalism of specialists in the laying of communications cables organized by Lentelefonstroi.
The Norvecom exhibition has tightened up its focus, with the number of participants being reduced over the last two years. In 2005 there were 150 participating companies, in 2006 there were 101 and, according to the official catalogue of the event, there will be about 50 participants this year. The exhibition has also reduced its size, with the exhibition area being reduced from 10,000 square meters last year to 6,000 meters in 2007.

TITLE: Retail Giants Reveal Ambitious Assortment
AUTHOR: By Yelena Schukina
PUBLISHER: Special to The St. Petersburg Times
TEXT: After a year of active consolidation, St. Petersburg’s mobile phone retail market is now the property of just a few large players. We asked some of the companies concerned to assess last year’s business and reveal their plans for 2007. 

Alexei Kluchnikov, 
Director of Ultra in Northwest Russia.

How would you assess your company’s performance in terms of the local market in 2006?
On a federal level, all assessments of the Ultra chain bear witness to dynamic and effective development. In St. Petersburg the focus was on opening new stores, which would be attractive in terms of accessibility and the comfort of their layout. 
Between August and December more than 20 new stores were opened in St. Petersburg and the Leningrad Oblast alone. 
The opening of a new store in Pskov at the end of the year heralded the company’s expansion into the Northwest region. 
In order to attract new brands, the company also actively widened its product assortment, which now includes digital technologies from the world’s leading producers.

Which events that took place last year in the Northwest region do you consider of particular importance?
The most significant event for the mobile phone market as a whole, and for the Northwest in particular, was Euroset’s acquisition of Ultra. Ultra held onto its brand while receiving extra investment to aid its development.
Another fact, of no little importance, and influencing the mobile phone retail market, was that mobile phone penetration in St. Petersburg hit 100 percent, meaning a related fall in new connections. 
Profits from the sale of contracts (of operators of mobile connection) already account for less than a third of a dealer’s overall profits and this share will only decrease in the future. 
The related loss of earnings will be compensated for by the sale of other products, and by way of a wider assortment of goods.

How does your company seek to develop its business in the Northwest in 2007?
One of Ultra’s priorities this year is intensive development across the whole of the Northwest region. New stores will be opened in Novgorod, Arkhangelsk, Severodvinsk and Murmansk. 
A no less important aspect of the company’s development in 2007 will be in the sphere of advertising.  We plan to carry out advertising projects in parallel to those of our vendors (producers).
We’ll focus particular attention in 2007 on widening our assortment of goods and services.
The most important project, however, for Ultra on a federal scale, will be the process of rebranding, which, in St. Petersburg, has involved the opening of a new store in one of the city’s biggest supermarkets.

Alexei Chuikin, 
General Director of Dixis.

How would you assess your company’s performance in terms of the local market in 2006?
For our St. Petersburg branch last year saw active development across the region, which is why, in fact, it is now called Dixis Northwest. In 2006 we expanded our network into the Arkangelsk, Murmansk and Kaliningrad regions. At the moment, therefore, there are Dixis stores in almost every region in the Northwest region.
It is necessary to point out that the Northwest developed in accordance with Dixis’ general policy for the regions. So, last year, saw us strengthen our presence in Rostov and Povolzh, conclude a series of successful deals on franchises, including in the Far East, expand into the Saratovsky Oblast and the Jewish autonomous region, and also develop in regions where we were already present. 
As a result, over the year we more than doubled our total number of stores from 700 (at the beginning of the year) to 1,500 across the whole of Russia by the year’s end. From this number a total of 220 stores are currently operating in the Northwest region.
To strengthen our position in the St. Petersburg market we began rotating retail locations, so that we’d only be left with the most efficient stores on our roster. The number of Dixis stores in the Northern capital has grown to 120. When opening a new store we mostly look for space in shopping centers with high visitor numbers.
As part of our general development strategy, we are focused on widening our assortment of goods and additional services. In this way, in those stores offering digital technology last year saw the appearance of portable DVD players and digital video cameras, with a significant increase in our list of operators and providers, payment for whose services became possible in our stores, and from September our company accepts payment for communal services.
This year we opened three Nokia outlets — in Kazan, Sochi and Moscow (in the European shopping complex), which means, at the present time Dixis has a total of six Nokia stores, including one in St. Petersburg, after Dixis bought the Svyazar chain there.

Which events that took place last year in the Northwest region do you consider of particular importance?
Last year, one of the most important events for the Russian (and particularly St. Petersburg) mobile phone retail market was the long-awaited decision by producers to import equipment to Russia and create their own warehouses across the territory of the Russian Federation.
Some vendors have already carried out these intentions, while others will do so over the coming year. For the Russian mobile phone market this is a large step forward.
It is worth noting that the Ministry for Economic Development has already talked about canceling the rates of import custom duties on mobile phones. The fact that this initiative exists at all is important, and its eventual fulfillment will no doubt influence the development of the market.
Apart from this, in 2006 the market witnessed a lot of fairly large deals, mergers and acquisitions (the largest and most noticeable deal in the Northwest region being the sale of Ultra), and this tendency for consolidation has reached its peak — the resulting market has already been divided up between a few large players.
In terms of the market for mobile calls, one might say the most important aspect was the canceling of charges on all incoming calls, as well as the transition to ruble tariffs.

How does your company seek to develop its business in the Northwest in 2007?
Our development strategy in 2007 involves, more than anything, increasing profit margins and optimizing our stores. Further ahead, we are looking to develop new areas of business, including an increase in the share digital technology accounts for in overall sales, broadening our assortment of goods and services, and actively pursuing cooperation with producers, as well as opening new manufacturer outlets and running joint large-scale promotions.
At the same time we will continue our regional development, concentrating on regions with high-earning populations. We will place special attention on the marketing of our brand and on increasing familiarity with the company’s style.

Valeria Solok, 
Director of Tsifrograd.

How would you assess your company’s performance in the local market in 2006?
By the end of 2006 Tsifrograd had 102 centers of mobile electronics in St. Petersburg and the Leningrad Oblast. Over the year the company integrated three local companies, rebranding them as one corporate chain. Today one can consider this consolidation complete. All of this has had a positive influence on sales.

Which events that took place last year in the Northwest region do you consider of particular importance?
The most important event for the market was, without a doubt, the acquisition of Ultra by Euroset. This purchase is indicative of that company’s intention to occupy the premium segment, bringing more money to retailers, who are replacing their old phones with new ones.

How is your company looking to develop in the region in 2007?
As with other market leaders, we will work to maintain and increase our share of the market, increasing revenues.
We have plans to acquire no less than 20 percent of St. Petersburg’s mobile phone market, which will increase the chain’s turnover by a minimum of 50 percent in relative terms. 
We plan to give more attention to marketing tools, with which we can fight for customers, without ever forgetting quality and professional service.

TITLE: Sitronics Priced At Lower End
PUBLISHER: Reuters
TEXT: MOSCOW — Russia’s first high-tech initial public offering fell short of expectations Wednesday, as the firm, Sitronics, priced shares at the bottom of the expected range, giving it a market value of about $2.3 billion.
Sitronics, owned by services conglomerate Sistema, said it was selling shares at 24 cents each and Global Depositary Receipts at $12, at the bottom end of an indicative range announced last week. 
Sitronics said in a statement issued through the London Stock Exchange that it had raised $352.6 million. That was well short of earlier company guidance of $500 million to $550 million.
“Of course it could have been better,” Interfax quoted Sistema’s core owner, billionaire Vladimir Yevtushenkov, referring to the IPO. 
Analysts said Sitronics had been fairly valued by the market, howver.
“Sitronics’ valuation is fully realistic. A higher capitalization would have meant overvaluing the business,” said Nadezhda Golubeva, an analyst at Aton brokerage.
The offering comprised 1.68 billion ordinary shares, including 1.55 billion newly issued stock and 125 million shares sold by chairman Alexander Goncharuk; Gennady Krasnikov, head of the company’s microelectronics solutions division; and Alexander Titov, a former Sitronics manager. 
The fact that managers sold shares did not help push the price higher, said a Western banker who requested anonymity. 
“The quality of the asset is low. It effectively consists of telecoms equipment which is mostly sold to Sistema,” he said. “I have a feeling it cannot exist as an independent business.”

TITLE: In Brief
TEXT: <b>Microsoft Rebuffs Plea</b>
PARIS (NYT) — Microsoft rebuffed a public appeal by Mikhail Gorbachev last week for its chairman, Bill Gates, to intervene on behalf of a Russian school principal charged with software piracy.
“Ponosov’s case is a criminal case and as such was initiated and investigated by the public prosecutor’s office in Russia,’’ a statement from Microsoft said. “We are sure that the Russian courts will make a fair decision.’’ 

<b>Disney Talks</b>
MOSCOW (Bloomberg) — Walt Disney Co., the second-largest U.S. media company, is in talks on making television shows in Russia with a unit of billionaire Vladimir Yevtushenkov’s holding company AFK Sistema.
Talks began in November and Sistema hopes to reach an accord on jointly making shows at a studio being built in St. Petersburg, Sistema Mass-Media Chief Executive Officer Michael Dounaev told reporters in Moscow Thursday, declining to elaborate.
Sistema Mass-Media’s has more than 3 million household subscribers for its cable television and Internet service.

TITLE: Foreign Giants Window-Shop for Supermarkets
AUTHOR: By Simon Shuster
PUBLISHER: Staff Writer
TEXT: MOSCOW — The long-awaited entry of a global retail giant into the Russian market appeared to inch closer as a senior executive for Wal-Mart hinted of an expansion into Russia and reports surfaced that the U.S. firm was planning talks with X5, Russia’s biggest food retailer. 
“So far, we are currently studying the market, but the decision on how to enter it has not yet been made,” Wal-Mart vice president Mike Bratcher told a Moscow conference Thursday, Interfax reported. 
Kommersant reported Jan. 29 that officials from X5 and Wal-Mart were due to hold talks in the United States last week. Wal-Mart could not be reached to confirm these reports. 
The food retail market, though it accounts for less than 2 percent of GDP, has seen annual growth of more than 25 percent since 2001. At a time when Russian portfolio investors are getting tired of the instability in the country’s core oil market, the consumer sector’s steady growth has been a welcome source of relief. 
“Right now, I’ll do anything I can to buy something that is not tied down to the traditional industries of Russia,” said James Beadle, head of research at Pilgrim Asset Management. “Anything which is not commodity or metals can fetch a very high price in an IPO.”
There are only three listed food retailers in Russia, X5 (FIVE.LN), Sedmoi Kontinent (SCON) and Magnit (MGNT).
As a whole, the sector is one of the country’s most unconsolidated and underdeveloped. Only 28 percent of food is purchased in large, Western-style stores, with the top five retailers controlling just 8 percent of the market, as opposed to an average of 60 percent in the West. The rest of the Russia’s grocery shopping, 72 percent of the total, is done in “non-organized” venues, such as kiosks, corner stores and open-air markets, according to a study released Thursday by UBS.
“But habits are changing, because Russians demand more and more quality,” said Svetlana Sukhanova, the author of the UBS study. “And once they move from non-organized to organized food retail, then it will be very difficult to move them back to these crazy open bazaars.”
UBS expects 40 to 45 percent market penetration for organized retailers by 2010. The Economist Intelligence Unit predicts that the size of this market will reach $203 billion by that year, nearly double the 2005 figure of $113 billion.
Forecasts for 2007 are bullish at most local banks. “In two years’ time, however, the concentration of organized trade in Moscow is likely to trigger more intense competition on prices,” Aton Capital said in a note last week. This will in turn cause a drop in prices and profitability after 2008.
Both trends are likely to be driven by the entry of the three biggest global retailers, Wal-Mart, France’s Carrefour and Britain’s Tesco, all of which have so far been conspicuously absent from the Russian market. 
Analysts agree that acquisition is a much more likely tactic for foreign entrants than greenfield constructions or franchising, mainly because of non-transparent land codes and the experience of firms like Sweden’s IKEA, which after $2 billion of investment, 6 years of work and several costly run-ins with authorities has yet to turn a profit on the Russian market.
Acquiring an established firm would guarantee one of the big three firms a loyal customer base and a local partner to help navigate the infamous tangles of red tape.
The most likely acquisition target is X5, which was formed in May 2006 through the merger of major retailers Pyaterochka and Perekryostok. In 2008, X5 will have the option to buy another supermarket chain, Karusel, a move which analysts expect to take the company’s market share to 5 percent, and to make its stock price soar by as much as 25 percent. 
X5 has denied speculation that it will be sold this year.
Sukhanova said a buyout by one of the big three was unlikely for any firm with less than 4 percent of the market. As of now, X5’s 3 percent is the biggest market share, and Sukhanova pointed out that Wal-Mart has been analyzing the Russian market for the last five years without making a move. 
“Living here, we think Russia is top priority for foreign firms, and this is not always correct. They also have the priorities of India and China,” she said. 
“Frankly, I am becoming more and more resistant to comments from the heads of these companies.”

TITLE: In Brief
TEXT: <b>Urals Loan</b>
MOSCOW (Bloomberg) — Urals Energy, a London-based trading company with oil assets in Russia, has received the first portion of a $130 million loan from Goldman Sachs Group Inc. and Standard Bank Plc to develop reserves in Siberia.
The company received $50 million and expects to get the remaining $80 million in the next three weeks, Urals Energy said in a Regulatory News Service statement.
The loan is to be used to develop the Dulisma oil field in the Irkutsk region of eastern Siberia, which is expected to produce as much as 30,000 barrels a day by 2011.

<b>MMK Investment</b>
MOSCOW (Bloomberg) — Magnitogorsk Iron & Steel plans to invest more than $570 million in development this year, Interfax said.
Magnitogorsk has signed a 300 million-euro ($388 million) contract with Germany’s SMS Demag for a new steel-plate mill, Interfax cited Igor Vier, vice president for commerce at MMK Managing Company, as saying. The mill will be completed by July 2009 at a cost of $1 billion, Interfax citied Vier as saying.

<b>Nuclear Plans</b>
MOSCOW (Bloomberg) — Russian billionaire Viktor Vekselberg’s Integrated Energy Systems is considering building a nuclear power plant, Kommersant reported. Analysts said they doubt the sector is profitable for private business.
IES is in talks with Rosenergoatom, a Russian nuclear-plant builder, about a station in the Urals, the Moscow-based newspaper said, citing IES President Mikhail Slobodin.

TITLE: No Direct Lines to a Liberalized Market
AUTHOR: By Nicholas Watson
TEXT: The EU’s liberalization of its energy market “may disrupt the entire system of gas security in the region,” Gazprom deputy chairman Alexander Medvedev told the World Gas Conference in Amsterdam last year. His warning echoed long-standing complaints from Moscow that the introduction of competition into Europe’s gas markets is undermining long-term supply contracts and encouraging new players whose only goal is to make a fast buck.
Other — potentially less self-interested — voices also question the central thrust of the European Union’s grand project to stimulate competition in the energy sector at a time when security of supply is becoming a strategic concern.
These supply concerns have been used by countries to justify energy deals with a distinctly anti-competitive feel. France, for example, claims the merger of its energy giants Gaz de France and Suez “will guarantee the safety of our energy supplies” by creating a company large enough to stand up to producers like Gazprom. Germany argues that the controversial Nord Stream pipeline, which will pipe Russian gas directly to Germany under the Baltic Sea, will help secure Europe’s supplies.
Yet it is largely a myth that energy market liberalization is hurting security of supplies. Behind the scaremongering, you can detect naked economic nationalism at work and a desire to entrench the dominance of former monopolies at the expense of new competitors.
Awkwardly for the cheerleaders of liberalization, however, it is becoming increasingly apparent that Medvedev has a point when he argues that Europe’s energy market reforms are hindering investment, which is desperately needed to keep energy supplies in line with rapidly rising demand. In 2000, there was a fundamental shift in world energy markets from a period of relatively low fossil fuel prices to a new era of high prices and excess demand. The United States, Australia and Japan have all reviewed their regulatory environments to reflect this change and support new investment to balance supply with demand.
The situation is particularly acute in Europe, which is projected to face a shortage of 70 billion cubic meters of gas per year by 2012. Europe therefore needs to redesign its regulatory framework to promote investment in new production, transport and storage infrastructure, as well as encourage competition. This should include a re-examination of the two basic concepts that currently underpin EU efforts to liberalize the region’s energy markets, meaning phasing out long-term supply contracts and opening pipelines to all competitors.
Long-term contracts have traditionally been an integral part of the energy business as they provide “security of demand” to the builders of hugely expensive infrastructure projects. The consortium behind Nord Stream, for example, estimates the total cost could reach 7.5 billion euros ($9.8 billion). The European Commission needs to relax its position over long-term contracts, especially in relation to new investment, to allow investors to offset some of the risk inherent in such projects.
The issue of making pipelines equally open to all competitors also needs to be reviewed. “Third-party access” is regarded as essential for new competitors to prosper — after all, you can’t change suppliers if your new contractor can’t pipe gas to you. Unfortunately, equal access also discourages investment in new infrastructure, as financiers and industry fear they won’t recoup their costs.
Gazprom cites the example of the TAG pipeline, which carries Russian gas through Austria to Italy, as a prime example of the detrimental results of strict implementation of the EU’s gas directive on access. When the pipeline was opened to third parties, some 149 companies from 10 countries won capacity. But only a handful of these companies had gas in worthwhile quantities and, Gazprom claims, some tried to sell their capacities back to Russia at a significant mark-up. Such a situation is unimaginable with a pipeline between Russia and China, which is now competing with Europe for Russian energy exports.
Supporters of liberalization say exemptions are available on the EU directive on third-party access. But haggling over exemptions tends to delay investment as national authorities compete with one another to offer the most attractive terms and suppliers endlessly debate the regulations.
This exemption to third-party access also needs to be extended to the new interconnector pipelines the EU must build if it is to really to create an internal market for gas. The commission has been somewhat guilty of putting the cart before the horse by forcing competition onto markets without actually putting the infrastructure in place that would allow this competition to thrive. As well as developing competition, interconnections between the various national markets improve security of supply enormously because they mean an area of scarcity can be fed by one with a surplus.
The lack of cross-border interconnections is having other negative effects on competition as former monopolies buy their way into each other’s territories rather than competing head-on for customers. This is illustrated by the wave of consolidation among Europe’s utilities. The commission has been complicit in this process, allowing mergers which will effectively rule out future competition even if new interconnecting infrastructure is constructed.
Even more controversial is the question of strategic gas storage to smooth over bumps in supply caused by seasonal variations in demand and volatile spot markets. Such stores are unlikely to be built spontaneously in a competitive market without some state help. Experience in Britain, which has the longest history of a deregulated gas market in the EU, shows that price signals are far too short term to encourage purely private investment in expensive storage facilities.
The EU also needs to improve relations with its most important supplier, Russia. U.S. public opinion may approve of Washington rebuking Moscow for bullying over energy exports, but Europe needs to take a more realpolitik approach. Russia is, after all, acting in an entirely rational way to insist that former Soviet states pay the market rate for gas so that it can invest in future production. President Vladimir Putin is also proving much more assertive than his predecessor, Boris Yeltsin.
Europe therefore needs to speak with one voice when negotiating with Russia, rather than pursue national self-interests. Nord Stream, for example, is a German solution to a German problem. Polish concerns about this pipeline — likened by one minister to the 1939 Nazi-Soviet pact that divided Poland — might receive a more sympathetic hearing if it were less problematic over other EU matters.
Forging a common energy policy with Russia may be difficult, but so is managing the transition to a world where investment in energy is paramount. The EU must meet these challenges to secure the energy needs of its member states. If the EU fails, then national governments will be tempted to act alone and that would cast doubt over the future of the whole EU liberalization process.

Nicholas Watson is managing editor of Business New Europe. This comment was published in Europe’s World (www.europesworld.org).

TITLE: President Hillary and Russia
AUTHOR: By Richard Lourie
TEXT: Many Russian observers are looking ahead to a win by Senator Hillary Clinton in the 2008 U.S. presidential election. For some this is a cause for worry. Political analyst Sergei Markov fears her victory will result in stepped-up criticism of Russia’s failures in human rights and democratization, thereby increasing friction. Sergei Rogov, director of the Institute of the U.S.A. and Canada, said “relations between Russia and the United States will continue to worsen,” but that it won’t be Clinton’s fault because there is “no principal difference between Republicans and Democrats.”
Some Russians assume that Hillary Clinton’s views on Russia are similar to those of her husband, former President Bill Clinton. And many believe the United States’ error in the 1990s was to treat Russia as if it lost the Cold War. The United States managed both to meddle in Russian internal affairs and treat it with benign neglect. Oligarchs robbed the country blind, President Boris Yeltsin was blind drunk and the United States turned a blind eye. Worse, even though the first President Bush’s secretary of state, James Baker, promised that NATO would not move “an inch” to the east, Russia will be effectively encircled by NATO from the Baltic to the Black Sea if Ukraine is admitted.
But what are candidate Clinton’s views? “The Russia Hand,” by President Clinton’s chief Russia adviser, describes a rare instance of her joining in a foreign policy discussion. It was 1993, and though things didn’t look promising under Yeltsin, she stood up for Russia: “Before we give up on Russia, we should look at Taiwan or South Korea. Democracy comes in fits and starts after all those years of dictatorship. Russia’s not doing that badly when you compare it to Asia. We’ve got to give them time.”
Her views now? Her web site features a long speech in October to the Council on Foreign Relations, where she spoke of the danger of “Russia and China pursuing their own interests often at odds with such global imperatives as nuclear nonproliferation and ending genocide in Darfur,” which comes close to saying nothing.
The lack of a clear public track record on Russia can work to Senator Clinton’s advantage. With a single strong opening move, she can surprise those who think her policies will be the same as her husband’s or the Republicans’.
The move should come in the form of the immediate repeal of President George W. Bush’s plan to place 10 interceptor missiles in Poland and a radar system in the Czech Republic to counter missile attacks from North Korea or Iran. It is unlikely that North Korea will attack the United States by firing missiles across Europe, and Israel has the technology to contain Iranian threats. Even if there are some tactical military advantages to positioning the missiles in Poland, they are outweighed by the arrogance and idiocy of placing them on the land of a traditional enemy. It is because of ill-conceived moves like these that Russia is plowing billions of its petrodollar profits into new ICBMs.
Because she is a Democrat and a woman, Clinton will have to prove her toughness as commander-in-chief in the war against terrorism before she can cancel the Bush plan. When she does cancel it, she will need to link it with concessions from Russia, whose assistance will be critical in dealing with Iran and Korea, the likely flashpoints for her administration if she becomes president. In a stroke she will distinguish herself from the policies of her predecessors and put the pivotal Russian-U.S. relationship back on track.

Richard Lourie is the author of “The Autobiography of Joseph Stalin” and “Sakharov: A Biography.”

TITLE: Where to Focus if You Are Expecting Change
AUTHOR: Fyodor Lukyanov
TEXT: Interest in next year’s presidential election is gradually eclipsing all other current events in Russia. The main pursuit of analysts and commentators has become peering across this political Rubicon into the dense fog that enshrouds the opposite bank.
The supercharged intrigue in this instance is peculiar to the Russian political system. Decisions are made behind closed doors, shut off from virtually everybody. And the less reliable the information available, the more room there is for people’s imaginations to run free. Yet nobody doubts that President Vladimir Putin will choose his successor from among his close colleagues. If this is true, then from what quarter can we expect any significant changes?
Since power is likely to remain in the hands of the same select group, it follows that no substantial changes should be expected after the 2008 election. So we are left with the question of what we mean when we say things will stay the same.
First, relations with the West will not change. There is general consensus that these have hit a post-Soviet low during Putin’s second term. But a more objective appraisal shows that relations with the West have followed a consistent pattern over the past 15 years. Under both Putin and former President Boris Yeltsin, periods of thaws in relations and apparent rapprochement have been followed by cold snaps and even crises. These then gave way to improved relations and the cycle continued.
Actual cooperation has remained at about the same relatively low level throughout. It is just that in the 1990s there was a lot of fine talk about integration, despite the modest level of real progress. Now, when it is accepted practice to emphasize the differences and even ideological incompatibilities, interdependence between Russia and the West is actually increasing. Don’t forget that both Yeltsin and Putin have pushed for Russian membership in the most prestigious Western clubs. At first, this meant the Council of Europe and the Group of Seven, but then it was followed by the World Trade Organization and the Organization for Economic Cooperation and Development.
A sense of latent or even outright geopolitical competition has always characterized relations with the West. Given the same opportunities that exist today, Yeltsin might have followed the same course Putin is following now. In fact, Yeltsin’s decision to send Russian troops into Kosovo constituted the riskiest attempt in recent history to demonstrate Russia’s independence from the West.
What has changed is not so much Russia’s approach to the West, but prevailing global conditions, and economic conditions in particular. Both sides react to these in their own traditional way, and this is likely to continue after the 2008 presidential election. Russia, having regained its role as a great power, will continue to compete with the West for influence in international affairs. But the Kremlin is not in a position to risk escalating tensions, and the political elite understands that a full-scale confrontation with the West is not in its interests.
There’s no doubt that Russia will attempt to strengthen its position in the Middle East. The region is critical to ensuring stability on world energy markets, and no country with an economy so reliant on oil and gas can afford to ignore that region. Russia also will continue its efforts to expand its presence in eastern and southern Asia, as relations here are extremely important for both global development and for the security and development of Russia’s Far East. As for discussions with the European Union, the positions on both sides have been clearly defined, and while they coincide in part, there is still considerable disagreement. There is little likelihood that a common set of shared values can be established anytime soon.
Finally, nothing new should be expected in relations with former Soviet republics. As the disintegration of former bonds continues, these countries are likely to gravitate toward different centers of influence. Competition between the great regional powers is inevitable. Russia will take part, of course, but will face a more even playing field. Given current trends, Moscow will eventually accept that the former Soviet Union no longer exists as a single entity, or even a zone of common interests.
So leadership changes in the Kremlin are more likely to alter the style than the substance of foreign policy. A more effective, balanced foreign policy approach might result from a fall in world energy prices, which would result in a bit of a drop in the country’s self-image. But fundamental positions will still be determined by a fundamental compromise between groupings among the elite.
This doesn’t necessarily mean there will be no changes in foreign policy in the foreseeable future. The new administration will witness the final stages of the process that began with the collapse of the Soviet Union, the main feature of which has been the absence of an ideological basis for action. Early moves at democratic reform were impossible to develop into a complete ideology given the country’s deep political and economic crisis. The entire period since perestroika has been characterized by attempts first to preserve, then to imitate and, finally, to restore Russia’s former international influence. There has been some success here, but the foundation for this regained influence is still shaky.
Whether generated by a fall in energy prices or some other impetus, a real change in foreign policy can only arrive under one of two conditions: the appearance of a serious pro- or anti-Western doctrine, or the creation of a well developed strategy based on a long-term evaluation of Russia’s place in the world. Neither of these exists at present.
With regard to doctrine, the demand for a new ideology can only spring from society itself. This doesn’t mean some contrived doctrine imposed from above and as an ideological superstructure, but rather a true aspiration toward ideological self-identification that comes from the people itself. It is hard to imagine a return to the liberal outlook that held sway at the beginning of reforms, just as it is unlikely that any system of common values will arise to serve as a basis for real partnership with the West.
The opposite is actually more likely: The formation of a conservative ideology built upon rejection of Western precepts. In the process of creating a nation-state — which is exactly what Russia is attempting to do — traditionalism and a tendency toward nationalism are natural. At the same time, Russia’s ethnic diversity and relatively high degree of openness are probably sufficient to limit this conservative trend.
The chief factor behind the development of an overall strategy is likely to be conditions on the international stage. The world of the 21st century, the outlines of which are forming quickly, is both dangerous and harder to control. Rivalries will increase in every sphere — from economic and geopolitical competition to the battle for hearts and minds. By any significant criteria other than wealth in natural resources — the quantity and quality of human capital, the level of development in infrastructure and high technology — Russia lags behind its major partners and rivals on the international stage. The stakes are high, with success going to those countries able to make far-reaching, less opportunistic and, perhaps, unusual decisions. And the Russian intellectual class should prepare for it right now, paying no attention to the fuss over the “2008 problem” which, in fact, is not really a problem at all.

Fyodor Lukyanov is editor of Russia in Global Affairs.

TITLE: Obama Hits Out at War, Australian PM
AUTHOR: By John Whitesides
PUBLISHER: Reuters
TEXT: AMES, Iowa —Democratic presidential contender Barack Obama drew a contrast with rival Hillary Rodham Clinton on the Iraq war on Sunday and said it was unclear how she planned to end the conflict. 
On the day after he formally launched his 2008 White House bid, Obama said on a campaign swing through Iowa that even before the war began it was possible to see the dangerous consequences of a U.S.-led invasion of Iraq.
“Even at the time, it was possible to make judgments that this would not work out well,” the Illinois senator told reporters, indirectly contrasting his stance with presidential rivals Clinton and John Edwards, who both voted to authorize the war in 2002.
Clinton, now a war critic who has promised to end the conflict if she wins the White House, has been criticized by some Democrats for her 2002 Senate vote on authorization and for not renouncing the vote.
Edwards, the party’s 2004 vice presidential nominee and a former senator from North Carolina, has called his vote in 2002 a mistake.
Obama was not in the Senate at the time of the vote but opposed the war from the start. He has proposed a phased withdrawal of U.S. troops from Iraq to be completed by the end of March 2008, and he told reporters he was uncertain how Clinton intended to end the conflict.
“I am not clear to how she would proceed at this point to wind down the war in a specific way,” Obama said when asked to evaluate Clinton’s Iraq stance.
“I have tried to consistently present a responsible course of action that recognizes our national security interests in the region but would allow us to start redeploying our troops,” he said.
Clinton came under pressure again on Saturday during a campaign trip through New Hampshire to explain her 2002 Senate vote.
“Knowing what we know now, I would never have voted for it,” she said, adding she was not casting a vote to authorize preemptive war but intended to give President George W. Bush the authority to send inspectors back in to Iraq.
“I do not believe that most of us who voted to give the president authority thought he would so misuse the authority we gave him,” he said.
Obama, a first-term senator and former Illinois state legislator, has quickly jumped into the top tier of a crowded Democratic presidential field along with Clinton and Edwards.
His early opposition to the increasingly unpopular war is a centerpiece of his stump speech, drawing big cheers on a two-day swing through the state that traditionally kicks off the presidential nominating fight.
He repeatedly said voters should demand a clear plan on how to end the war from all the Democratic candidates.
On Sunday afternoon, he flew to his hometown of Chicago for a boisterous rally attended by more than 8,000 people at the University of Illinois-Chicago, where he once taught.
“The time has come for us to end this engagement in Iraq,” he said, saying he was proud he had been “consistent and constant” in his Iraq message.
Obama also had a sharp response for Australian Prime Minister John Howard, a Bush ally who said Obama’s proposals would create chaos in the Middle East. 
Obama said it was “flattering” for a Bush ally to attack him the day after he formally launched his presidential bid but noted Australia had contributed 1,400 troops to the war compared to 140,000 U.S. troops. 
“If he’s ginned up to fight the good fight in Iraq, I would suggest that he calls up another 20,000 Australians and send them to Iraq,” he said. “Otherwise it’s just a bunch of empty rhetoric.”

TITLE: Russia Advances Over Chile in Davis Cup
AUTHOR: By Rex Gowar
PUBLISHER: Reuters
TEXT: LONDON — Perennial Davis Cup protagonists Australia were upset 3-2 by Belgium while holders Russia clung to their crown in the first round on Sunday. 
Belgium beat the Australians for the first time to reach the April quarter-finals along with Russia, 3-2 winners in Chile, the U.S., France, Germany, Spain, Sweden and 2006 runners-up Argentina. 
All eight ties were not decided until Sunday’s reverse singles after they went into the final day for the first time since the world group was introduced in 1981. 
Six nations, however, won with a rubber to spare, taking unassailable 3-1 leads by winning the first reverse singles, leaving only Australia and Russia to go the distance with a different fate for each. 
Germany await the Belgians after Kristof Vliegen followed up his surprise five-set win over former Wimbledon champion Lleyton Hewitt on Friday. 
Hewitt defeated Olivier Rochus 6-2 6-3 6-7 3-6 6-1 earlier on Sunday to leave the teams level at 2-2 and send the tie down to the wire. Vliegen then overcame Chris Guccione 6-4 6-4 6-4. 
Russia beat Chile in a hot, hostile environment in La Serena when Igor Andreyev overcame Nicolas Massu 6-2 6-1 6-7 6-4 in the final rubber after Fernando Gonzalez had thrown the home team a lifeline with his three-set win over Marat Safin. 
Ranked 147 in the world following an injury-marred 2006, 23-year-old Andreyev beat two players ranked more than 100 places above him in the ATP rankings to take the defending champions into the quarter-finals of the competition. 
“I think I can play at a very good level. It’s just that last year was a shame because I got injured. But if things carry on like this I think I have every possibility of getting back to having a good ranking,” he said. 
“The Davis Cup is very different from the other tournaments we play each week. You play for your country, with your heart and all your soul and you don’t think about rankings and things like that.” 
The Russians, who have won the trophy twice since 2002, meet France, who went through when Richard Gasquet beat Andrei Pavel 6-3 6-2 7-5 in their tie against Romania at Clermont-Ferrand. 
Andy Roddick came from one set down to beat the Czech Republic’s Tomas Berdych 4-6 6-3 6-2 7-6 and secure the U.S. a place in the last eight at home against Spain. 
The Americans, who have won the cup 31 times but not since 1995, intend to go all the way this year. 
“That’s a stat I do not like, especially considering I have been on the team for the seventh year now,” said Roddick after his victory in Ostrava. 
“I’d love to be a part of a winning Davis Cup team.” 
Spain overcame Switzerland in similar fashion with Fernando Verdasco winning the first reverse singles 6-3 6-3 6-2 against rookie Stephane Bohli in Geneva. 
By April, the Spanish should have world number two Rafael Nadal back on the team following his late pullout with a thigh muscle strain shortly before the start of Friday’s opening rubber. 
Spain captain Emilio Sanchez said: “I’m very happy that we finally won away from home after struggling for the last few years.” 
Spain, winners in 2000 and 2004, were eliminated in the opening round the last two years. 
“It will be unbelievable if we can continue this and win in America as they have one of the toughest teams in the Davis Cup,” Sanchez added. 
“If it’s played in similar conditions to Miami (Masters Series) then it would be great for them and for us, but that probably won’t happen because in this situation the home nation often don’t choose the fairest surface but the one that is the worst for the opponent.” 
Tommy Haas sealed Germany’s place when his crushing 6-2 7-6 6-4 victory over Croatia’s Ivan Ljubicic gave the three-times champions a 3-1 winning lead. 
“Tommy was on fire. I wasn’t, so a straight-sets defeat was logical,” said Ljubicic, who led Croatia to victory in 2005 but announced on Sunday he would retire from the Davis Cup this year. 
Robin Soderling outlasted Max Mirnyi 6-7 7-5 6-7 7-6 6-3 in a four-hour marathon to clinch victory for Sweden against Belarus. 
The Swedes, champions seven times, will be at home when they meet last year’s runners-up Argentina.

TITLE: English Required For U.K. Jobless
PUBLISHER: Reuters
TEXT: LONDON — Unemployed people who cannot speak English face losing their benefits as part of a far-reaching review into the U.K’s labor market and welfare system, announced by the government on Monday.
More than four million pounds is spent on translators at jobcenters to help those who cannot speak English claim benefits.
Welfare Minister Jim Murphy proposed that from April, this money should instead be spent on improving the language skills of the unemployed to help them find work.
Government figures show that 15 percent of unemployed ethnic minorities have language problems.
“Potentially that’s 40,000 people being denied the opportunity to work because they do not have the language skills to get a job,” Murphy said.
Language skills would also result in empowering ethnic minorities in the labour market.
On average, they earn a third less than their counterparts nationwide, Murphy added.
He also pointed out that more than half of Pakistani and Bangladeshi children in Britain live in poverty.
“This is a social injustice in our society which is not only bad for individuals, families and their communities, but is a barrier against social cohesion and is bad for Britain,” he said.
The minister added: “We must utilize the resources we have to redress the balance: to put the emphasis not just on translating language to claim benefit; but to teaching language to get a job.
“Not just for the sake of employment rates; but for the benefit of the individual, their community and society as a whole.”
He did not outline any specific measures that would be imposed on those who do not sign up for classes, but withdrawing benefits could be an option.
The minister called for the measure as part of a longer-term overhaul of the current system.
Meanwhile, Civitas think-tank said in a report that about one in three British households receive more than half their income in benefits, despite a fall in unemployment.
It said tax credits were the main cause.
“What has been happening in the last few years is that unemployment has fallen but the number of people receiving incapacity benefits has been going up a little bit,” the report’s author David Green told BBC radio.
“But there’s also been a huge increase in people receiving what’s now called working tax credit. So you’ve got a mixture of pure benefit dependency and what you might call in-work benefit dependency.”

TITLE: Arsenal To Face Bogey Team Bolton In FA Cup
AUTHOR: By Trevor Huggins
PUBLISHER: Reuters
TEXT: LONDON — No love will be lost between Bolton Wanderers and Arsenal when they meet for a Valentine’s Day FA Cup replay at the Reebok Stadium on Wednesday. 
A fifth round tie at home to Blackburn Rovers this weekend is the prize awaiting the winner of what will be a tough, physical encounter that has plenty of recent history. 
Though they are a much smaller club by reputation, Bolton thrashed Arsenal 3-1 at the Reebok in November and have won four of their last five home games against Arsene Wenger’s side. 
The misery Sam Allardyce’s side have inflicted on Wenger over the years also includes a 2-2 draw in April 2003 which effectively scuppered Arsenal’s title campaign. 
More recently, Bolton were set to inflict Arsenal’s first defeat at the Emirates Stadium until Ivorian defender Kolo Toure cancelled out Kevin Nolan’s strike with a 78th minute equaliser. 
Aside from the FA Cup, the two clubs are also duelling for a fourth-place finish at the end of the season, worth a place in the Champions League qualifiers. 
Bolton occupied the prized slot for two and a half hours on Sunday after beating Fulham 2-1, only for Arsenal to wrest it back with a late 2-1 victory over Wigan Athletic. 
Cup action gets underway on Tuesday with two other fourth round replays, with Middlesbrough at home to third division Bristol City after a shock draw at Ashton Gate. 
Second division Norwich City are at home to third division hopefuls Blackpool. 
Boro, beaten for the first time in 2007 in Saturday’s 3-0 defeat at Chelsea, should make no mistake a second time and would line up another winnable home tie with second division West Bromwich Albion. 
“We’ve got a great week to look forward to,” manager Gareth Southgate told the Boro web site. 
“It will be a tough game against Bristol but one we feel we can win and that would keep things very lively for the rest of the season.” 
Bristol City coach Gary Johnson had little to celebrate either at the weekend and gave his men a dressing down after their 1-1 home draw with Huddersfield. 
But he told the club’s web site: “It will be a totally different scenario up there. 
“We certainly don’t want to be on the end of a hiding, even by Premiership opposition, so we have to improve.” 
Whoever comes out on top between Norwich and Blackpool is unlikely to have much of a run. 
The winners must travel to Stamford Bridge to face Premier League champions Chelsea. 
The final is due to be played at the new Wembley Stadium on May 19.

TITLE: Isinbayeva Breaks Record
PUBLISHER: Reuters
TEXT: DONETSK, Ukraine — Olympic champion Yelena Isinbayeva broke the world indoor pole vault record by clearing 4.93 meters at the Sergei Bubka invitational meet on Saturday.
The Russian improved her own mark of 4.91 set at the same competition organised by the great Ukrainian men’s pole vaulter in his home town a year ago.
It was Isinbayeva’s 20th world record.
“I can’t describe how happy I am because I had a very tough year in 2006,” the tearful 24-year-old told reporters.
Isinbayeva has struggled for form after splitting with her long-time coach Yevgeny Trofimov in November 2005.
Despite setting the indoor mark 12 months ago in Donetsk and winning last year’s world indoor championships in Moscow to add to her glittering medal collection, she could not match her record-breaking production of the previous two years.

TITLE: Royalty Reigns at U.K. Film and TV Awards
PUBLISHER: Reuters
TEXT: LONDON — Royalty reigned at the British film awards on Sunday, with “The Queen” clinching best film and Helen Mirren best actress for her portrayal of the monarch, while “The Last King of Scotland” scooped three awards.
In contrast, the latest James Bond movie failed to shake or stir, picking up just one of the nine BAFTA nominations it received — winning the sound quality category.
The other main victor on a night of glitz and glamour in London’s theater-packed West End was “Pan’s Labyrinth” — a fantasy set just after the end of the Spanish Civil War — which also picked up three awards. All eyes were on Mirren as she accepted the mask-shaped trophy at a star-studded BAFTA award ceremony at the Royal Opera House.
“I wish I could sing,” she said, speaking from a stage normally reserved for operas. “This is great. What an honor,” the actress added, looking suitably regal in a flowing champagne-coloured gown and large pearl necklace.
Mirren, 61, beat Judi Dench, nominated for her role in the school sex drama “Notes on a Scandal”, Penelope Cruz in “Volver”, Meryl Streep in the fashion comedy “The Devil Wears Prada” and Kate Winslet in “Little Children.”
She thanked her “royal” cast, including the corgis, and gave a tearful note of gratitude to her mentor, actor Ian Richardson, who died last week.

TITLE: Beckham’s Comeback
PUBLISHER: The Associated Press
TEXT: SAN SEBASTIAN, Spain — David Beckham scored in his return to Real Madrid on Saturday in its Spanish league game at Real Sociedad. 
Beckham, making his first start since Dec. 20, tied the match in the 37th minute with a low, bending free kick from outside the area which skidded off the wet surface and beat diving Sociedad goalkeeper Claudio Bravo.
The halftime score at Anoeta stadium was 1-1.
Beckham’s comeback represented a reversal by Madrid coach Fabio Capello, who said last month that the former England captain would never again play for the Spanish powerhouse team.
Beckham annoyed Capello by announcing on Jan. 11 that he would leave for the Los Angeles Galaxy when his contract expires in June. Madrid had offered the midfielder a two-year extension.

TITLE: Dixie Chicks Back on Top At Star-Studded Grammys
AUTHOR: By Nekesa Mumbi Moody
PUBLISHER: The Associated Press
TEXT: LOS ANGELES — The Dixie Chicks completed a defiant comeback on Sunday night, capturing five Grammy awards after being shunned by the country music establishment over the group’s anti-Bush comments leading up to the Iraq invasion. 
The Texas trio won all the biggest categories, including record and song of the year for the no-regrets anthem “Not Ready to Make Nice.” They also won best country album, which was especially ironic considering they don’t consider themselves country artists anymore.
“I’m ready to make nice!” lead singer Natalie Maines exclaimed as the group accepted the album of the year award. “I think people are using their freedom of speech with all these awards. We get the message.”
Mary J. Blige’s comeback also was richly rewarded: She received three trophies for her double-platinum album “The Breakthrough.” The Red Hot Chili Peppers won four for their double-disc “Stadium Arcadium.”
The Dixie Chicks won all five awards they were nominated for, sweet vindication after the superstars’ lives were threatened and sales plummeted when Maines criticized President Bush on the eve of the Iraq war in 2003. Almost overnight, one of the most successful groups of any genre was boycotted by Nashville and disappeared from country radio.
With “Taking the Long Way,” the women relied on producer Rick Rubin’s guidance for an album that was more rock and less country. (Rubin, who also produced “Stadium Arcadium,” was honored as producer of the year.)
The standing ovations the Chicks received Sunday illustrated how much the political climate has changed regarding the Iraq war, and even Bush.
“That’s interesting,” Maines crowed from the podium after the country award was handed out earlier in the night. “Well, to quote the great ‘Simpsons’ — ‘Heh-Heh.’
“Just kidding,” added Maines. “A lot of people just turned their TVs off right now. I’m very sorry for that.”
Bandmate Emily Robison noted, “We wouldn’t have done this album without everything we went through, so we have no regrets.”
All the trophies collected by the Dixie Chicks (who shared song of the year honors with songwriter Dan Wilson), Blige and the Chili Peppers contributed to the evening’s old-school feel.
The show often derided as The Grannys embraced its baby boomer status as in its 49th year. 
Maybe the Recording Academy was trying to relive the industry’s glory years — 2006 saw a sharp downturn in record sales, a decline that seems to grow each year as fans flock to the Internet and even ringtones to experience their tunes.
The Grammys tried to tap that new technology with its “My Grammy Moment” contest, in which three unknown singers vied for the chance to perform on stage with Justin Timberlake. 
Viewers determined the winner by voting on the Internet and text messaging, but the winner’s performance was forgettable.