SOURCE: The St. Petersburg Times
DATE: Issue #1247 (13), Tuesday, February 20, 2007
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TITLE: Downed Plane Was Flown By Trainee
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Human error was the cause of a Pulkovo plane crash in eastern Ukraine on Aug. 22, 2006 that killed all 170 people on board, Russia’s Aviation Committee announced on Saturday.
The committee stopped short of naming those responsible in person. Prosecutor General’s office is still investigating the accident.
An unexperienced trainee pilot was in the co-pilot’s seat during the flight from the Russian Black Sea resort of Anapa to St. Petersburg when it crashed outside the village of Sukhaya Balka, near the industrial city of Donetsk. 
The plane departed Anapa at about 3:05 p.m and soon encountered strong winds, rain and lightning. 
At around 3:30 p.m., a distress call was sent from the plane at an altitude of 11,700 meters. When a second S.O.S signal was sent shortly after, the plane had dropped to 3,000 meters from the ground. The plane then crashed in a field between two villages.
Leonid Kashirsky, head of the technical commission of the Russian Aviation Committee, said the crew failed to come up with an adequate solution to the situation and develop a consistentresponse to the crisis.
“Weather conditions were harsh but the storm by itself cannot be blamed, and a different solution, if implemented, could have saved peoples’ lives,” Kashirsky told reporters on Saturday. “The plane was in good condition and perfectly fit for flight.”
Originally, bad weather was believed to be at least partly responsible for the crash of the 14-year-old TU-154M. 
Controlling the speed of the plane during the flight was a trainee who had had only 60 hours of flight practice.
Russian training centers for pilots do not have the equipment and simulators to model complicated critical situations of the type faced by the St. Petersburg crew.
“The investigation established that the crash was caused by the pilot exceeding the critical altitude of 11,500 meters, which was a wrong decision,” said  Alexei Morozov, deputy head of the technical commission of the Russian Aviation Committee. 
“When the plane reached the altitude of 11,600 meters it entered a zone of turbulence. The crew then asked for permission to climb to 11,850 meters,  but the pilots lost control over the plane.”
At the critical altitude, the TU-154 stalled and went into a flat tailspin. 
The commission criticised what the experts called “lack of cooperation.”
“The crew demonstrated total absense of team work and resourcefulness during the crisis,” said Transport Minister Igor Levitin. “The transcript from the black box [flight recorder] showed that nobody in the cockpit mentioned exceeding the critical altitude, and neither did they discuss measures to overcome the consequences, and ways to stop spiralling and resume stability.”
The plane fell to the ground like a petal, twirling in an uncontrollable tail spin, and exploded when it hit the ground. 
Had the crew acted differently, the crash could have been prevented, Morozov said. 
Russian aviation authorities say they have learnt several lessons from the Pulkovo disaster. The Aviation Committee has developed a list of forty recommendations aimed at reducing the risk of air accidents.
Aviation Committee officials said in the next five years Russian-made TU-134 and TU-154 will be gradually replaced. 
These models make up the core of the country’s aviation fleet and the lion’s share of the fleet of Rossia airlines, as Pulkovo Aviation Enterprises is now known, in particular.
More steps include the upgrading of simulators and other training facilities, and an increase in flight training in terms of both length and diversity.	
The city of St. Petersburg paid 100,000 rubles in compensation to the families of everyone killed on the flight, irrespective of where they lived or their citizenship. The airline contributed a further 100,000 rubles per victim. More money was collected for the families through private donations.
Moscow lawyer Igor Trunov, who represents relatives of the victims, believes the authorities inadequately compensated the victims’ families. He said the sum should be about “millions of rubles.”
“Even though the Prosecutor General’s office has not completed its investigation, the air carrier has to compensate both material and moral damages to the victims’ families,” the lawyer told reporters on Friday. “But if Rossia proves in court that the pilots’ poor performance was due to lack of training and insufficient education, the situation will become laughable.”
Trunov said Russian legislation concerning payments to relatives of people who died in plane crashes is unclear.
“The law does not stipulate how much exactly should be paid, and the courts typically go for the lowest sums possible,” Trunov said. “We are trying to create a precedent when the air carrier responsible for the disaster is saddled with significant losses.”
There were 45 children on board. Many of the people killed were returning from vacation on the Black Sea coast.
“Together with the Donetsk government we are working on creating a monument to commemorate the victims,” said Governor Valentina Matviyenko. One hundred passengers on board were St. Petersburgers, and 30 more people came from the Leningrad Oblast.”

TITLE: McDonald’s Targeted in Terror Bombing
AUTHOR: By Galina Stolyarova and Ali Nassor
PUBLISHER: Staff Writers
TEXT: Six people, including two children, were injured Sunday by a blast after what the police believe was a device filled with explosives went off under a table in a McDonald’s restaurant on the corner of Nevsky Prospekt and Ulitsa Rubinshteina at around 8.15 p.m.
One of those hurt was a 38-year-old German tourist. No one was seriously injured and five had been released from hospital on Monday. 
The St. Petersburg prosecutor’s office is investigating the incident. No suspects were detained as police searched other McDonald’s branches in St. Petersburg on Sunday night and Monday morning.
Nobody has claimed responsibility for the bombing, but at least one official said he believes there could have been a political motive for the attack.
Vadim Tyulpanov, speaker of the St. Petersburg Legislative Assembly, called the explosion “an attempt to destabilize the situation in town nearing elections for the city parliament,” without pointing his finger to any specific political force.
St. Petersburg prosecutor Sergei Zaitsev said the damage to the cafe was minimal. 
“Only the table nearest to the explosives was damaged,” Zaitsev told reporters on Monday.
The blast shattered glass at the main entrance to the restaurant at 45 Nevsky Prospekt — six windows on roughly a 10-meter long stretch along the thoroughfare, two windows on the Rubinshtein side and broke pieces of furniture, prompting the closure of the restaurant.
As the memories of the blast were still fresh on Monday afternoon, senior staff at the restaurant who were eyewitnesses to the incident appeared too scared to talk to the press. 
“I was there and I saw almost everything, but I’m not going to talk,” said the restaurant’s director who gave only his first name as Dmitry, saying he was not authorized to talk about the event. Junior staff members seemed ill at ease.
Tatyana Smirnova, a spokeswoman for McDonald’s in St. Petersburg said the company had decided to keep the branch closed pending repairs and a damage assessment.
“But one thing is for sure; we are not going to close any of our other restaurants and we are not going to change our development plan,” she said.  
However, Smirnova declined to speculate on the possible motive for the blast, saying “it is up to the police to talk about the motive.” 
The police were quick to brand the incident a simple act of “hooliganism.”
They have released a sketch of a young man who according to eyewitness accounts had acted suspiciously prior to the blast.
However, human rights advocate Dmitry Dubrovsky, director of the Ethnic Studies Programs at the European University in St. Petersburg believes that the attack was the result of “an anti-American mood dominant among the extreme right-wing groups in this city.”
He suggested that the police look for the culprit among the extremist groups not related to anti-globalists. 
“The nature of the attack where a bomb blast is involved is not typical of simple hooligans or mere anti-globalists,” he says. 
He recalled the case of Dmitry Melnik, a convicted organizer of the “Mad Crowd” extremist group who was also found guilty of storming McDonald’s restaurant in the city center in 2003, who told the court last year that he had attacked the restaurant because “it served Zionist food, and promoted the American way of life.”
A Russian extremist group with anti-American views attacked a McDonald’s restaurant in Moscow in 2002. A car bomb was detonated, killing one person and leaving eight people injured.

TITLE: Leadership Void at Defense Ministry
AUTHOR: By Simon Saradzhyan
PUBLISHER: Staff Writer
TEXT: MOSCOW — The appointment of a former furniture store manager and tax collector to the post of defense minister may help bring the military’s books in order but will not boost its overall preparedness, military analysts say.
President Vladimir Putin’s decision Thursday to tap Federal Tax Service chief Anatoly Serdyukov to head the country’s million-strong military created an uproar among many military personnel.
As of Sunday, the Defense Ministry had no official comment on Serdyukov’s appointment. The ministry posted the new minister’s biography and a brief account of the meeting at which Putin announced the change in leadership on its web site.
Presenting Serdyukov to the military’s top brass Thursday, Putin voiced hopes the Armed Forces General Staff, which is headed by General Yury Baluyevsky, would play a lead role in future military planning. The president added that he hoped the new minister, with his numbers-crunching background, would focus on the military’s “financial component.”
Putin has repeatedly asked the Defense Ministry to account for wasteful spending. Serdyukov’s immediate predecessor, Sergei Ivanov, acknowledged during his six-year tenure that wastefulness was a problem.
“In theory, his appointment may indeed help streamline the [military’s] finances,” said Konstantin Makiyenko, deputy director of the Center for Analysis of Strategies and Technologies. 
The center and other independent think tanks have repeatedly highlighted the inefficiencies of the Defense Ministry’s procurement system.
Russia’s defense budget has grown steadily in recent years due to an economic boom fueled by high oil prices, jumping to $31.3 billion in 2007 from $8.2 billion in 2001.
Serdyukov, 45, worked in the furniture business in the 1980s and 1990s before joining the Federal Tax Service, his official biography says. Oddly, the version of his biography posted on the Defense Ministry’s web site makes no reference to what Serdyukov did after graduating from the Leningrad Institute of Soviet Trade and St. Petersburg State University and before becoming deputy head of a tax inspectorate in 2000.
Given Serdyukov’s background, “his appointment has caused nothing but astonishment,” Makiyenko said.
Makiyenko added that the underpaid, conscript-based armed forces must be reformed to become a “fully professional, well paid and motivated” war machine, but he expressed strong doubts that Serdyukov was up to the task. 
“In my opinion, Ivanov did little to improve combat readiness, and I don’t think Serdyukov can do much more,” he said.
Alexander Golts, a retired military officer and columnist for the web magazine Yezhenedelny Zhurnal, was more blunt.
“The man … appointed to the post of defense minister spent more time in his career working in a furniture store than doing anything else and doesn’t understand one darn thing about military affairs,” Golts wrote Friday in an article titled “Anyone Can Become a Minister Here.”
A retired senior Air Force officer, who spoke on the condition of anonymity, said of Serdyukov in a telephone interview:
“To put it mildly, he won’t be able to pull off a revolution in military affairs.”
Another retired officer, who also asked not to be named, concurred, saying the “bright side” of Serdyukov’s appointment was that Baluyevsky and the General Staff are now in a position to fill in the void created by Serdyukov, who lacks the charisma and political heft of his predecessor.

TITLE: Putin Seeks to Narrow Field Ahead of Presidential Race
AUTHOR: By Nabi Abdullaev
PUBLISHER: Staff Writer
TEXT: MOSCOW — By promoting Sergei Ivanov to the post of first deputy prime minister, President Vladimir Putin seeks to narrow the gap in the race between the two major candidates to succeed him, political analysts said.
In recent months, Ivanov’s chief rival — First Deputy Prime Minister Dmitry Medvedev, who oversees social programs — has risen in national prominence, prompting speculation he would be the next president.
But it is not in Putin’s interest that either Medvedev or Ivanov emerges as his inevitable successor before he leaves office, pundits concurred.
“Putin does not want to turn into a lame duck in the last year of his presidency, watching bureaucrats lining up to give loyalty oaths to his successor,” said Igor Bunin of the Center for Political Technologies. “Putin wants to remain the only arbiter in the Kremlin’s power struggle until the last day of his presidency, and even beyond.”
Political analysts added that the critical turning point — when Putin decided he had to give Ivanov a boost — came in Davis last month.
Medvedev led the Russian delegation at the World Economic Forum in Davos, where he spoke on economic and foreign policy.
Also in January, a poll released by the independent Levada Center showed Medvedev gaining ground over Ivanov.
According to the poll, 17 percent of Russians support Medvedev for president compared with 11 percent for Ivanov.
“By elevating Ivanov, Putin shuffled the cards and launched a new round of the whole bureaucratic game,” said Yury Korgunyuk of the Indem think tank. “He also reminded everyone who is the boss.”
During a recent Kremlin press conference, Putin maintained that “there will be no successors — there will be candidates.”
Leveling the playing field between Medvedev and Ivanov also makes it possible for Putin to prop up a third, lesser-known candidate for the post, the Panorama think tank’s Vladimir Pribylovsky and the Levada Center’s Leonid Sedov agreed.
“My advice is to start watching Sergei Naryshkin more closely,” said Olga Kryshtanovskaya of the Center for the Study of Elites at the Russian Academy of Sciences.
Naryshkin, the Cabinet’s chief of staff, is believed to be a close confidant of Prime Minister Mikhail Fradkov. Naryshkin was elevated Thursday by Putin to the rank of deputy prime minister.

TITLE: Yabloko Blocks Nevsky for Demonstration
PUBLISHER: Reuters
TEXT: Supporters of the opposition Yabloko party blocked the city’s main thoroughfare on Sunday to protest its removal from the ballot in the upcoming city council election.
Yabloko was stricken from the ballot for the March 11 election to the Legislative Assembly after municipal election officials found irregularities in the party’s registration documents.
Maxim Reznik, head of Yabloko’s St. Petersburg operation, said some 500 activists demonstrated on Nevsky Prospekt and blocked the road for 15 minutes.
Ekho Moskvy radio put the number of demonstrators at closer to 300.
“We said [blocking Nevsky Prospekt] was just the beginning,” Reznik said by telephone.
He added that the activists also protested a plan by natural gas monopoly Gazprom to build a skyscraper in St. Petersburg, which would tower over the city’s historic center.

TITLE: Kremlin Party Backs Kadyrov
AUTHOR: By Carl Schreck
PUBLISHER: Staff Writer
TEXT: MOSCOW — The pro-Kremlin party United Russia on Friday appeared to throw its support behind Chechnya’s acting president, Ramzan Kadyrov, who assumed the post last week and must get parliamentary approval before becoming the republic’s full-fledged president.
Political analysts said Kadyrov’s ascendancy from prime minister to the top job, replacing President Alu Alkhanov, could backfire for the Kremlin.
Dmitry Kozak, Putin’s envoy to the region, will travel to Chechnya next week and propose potential successors to Alkhanov within the next 10 days, his spokesman, Fyodor Shcherbakov, said.
Alkhanov will now be the republic’s deputy justice minister.
Kozak will submit at least two candidates to the president for consideration, Shcherbakov said. By law, Putin must propose at least two candidates within 14 days after a regional leader steps down.
Putin dismissed Alkhanov on Thursday, automatically elevating Kadyrov to acting president. Putin is likely to submit Kadyrov’s name for president this week; his confirmation by the regional legislature is thought to be a fait accompli.
On Friday, State Duma Speaker Boris Gryzlov, who also heads United Russia, told reporters in Tomsk that United Russia was prepared to back Kadyrov, Interfax reported.
But he also gave his party a little maneuvering room. “Let us see who the other candidates will be,” Gryzlov said.
While voters no longer matter when it comes to regional leaders — a law eliminating regional elections came into force in 2005 — Rusland Yamadayev, a Duma Deputy from Chechnya, said all Chechens support Kadyrov.
Analysts said the Kremlin was playing a dangerous game by betting on a regional leader who is portrayed by critics as a despot and may become more difficult to control as he gains power.
“Putin has shown that loyalty to him personally is more important than loyalty to the country,” said Sergei Markedonov, a Caucasus expert with the Institute for Political and Military Analysis.
Kadyrov became prime minister in 2006 and has been the de facto ruler of the republic ever since.

TITLE: Deadly Bird Virus Found Near Moscow
AUTHOR: By Max Delany
PUBLISHER: Staff Writer
TEXT: MOSCOW — An avian flu outbreak in the Moscow region over the weekend has been traced to a single market, a senior official said Sunday.
The four cases of dead poultry involved birds that had been bought at a market located in southwest Moscow, Alexei Alexeyenko, a spokesman for the Agriculture Ministry’s animal and plant inspection agency, told The Associated Press.
Alexeyenko said the market had been closed Saturday and that experts were working to pinpoint the source of the birds, the AP reported.
If the presence of H5N1 — a strain of avian flu that can be contracted by humans — is confirmed, it would be the first outbreak of the disease to be recorded near the capital. Since it began infecting Asian poultry in 2003, the H5N1 strain has killed 167 people worldwide, according to the World Health Organization.
A number of poultry farms around Moscow were placed under quarantine over the weekend after the authorities confirmed an outbreak of bird flu in the region. But some confusion surrounded the confirmation of the H5N1 strain, with officials contradicting one another.
Alexeyenko confirmed that the H5N1 strain had been found at two locations, Reuters reported Saturday.
But Valery Sitnikov, the chief veterinary inspector for the Moscow region, said the strain of the virus would not be identified until Monday.
“On Monday, the identification of this virus, whether it is H5N1 and how virulent it is, will be made,” Sitnikov said. “As yet the analysis is only preliminary, but nonetheless in the central Moscow region we have implemented all measures fully.”
“The situation is under control — the veterinary service is in control of everything,” Sitnikov said. “Measures to vaccinate birds will begin tomorrow.”
Television footage Sunday showed veterinary workers in protective suits checking homes in the district and spraying vehicle tires with disinfectant.
Sitnikov said he was optimistic that further outbreaks of the virus in the Moscow region could be prevented.
“We hope that the chain of events has been stopped. The Moscow market where the infected birds were bought has been shut down and I hope that we have stopped things,” Sitnikov said.
Despite of the uncertainty surrounding the outbreak, industry specialists are confident that there is not likely to be any decline in demand for poultry.
“I think that consumer demand for chicken will not fall,” said Rinat Mustayev, the editor of a web site for the poultry industry, ptizevod.narod.ru. Mustayev added that when bird flu appeared in Russia in 2005, demand fell by between 15 percent and 18 percent, but soon returned to its former levels and even higher.
Sitnikov was unable to comment on where the infected birds had come from, saying the matter was being investigated by the appropriate government agency.
“If traces of the virus appear at the poultry market, we cannot exclude the possibility that there will be new outbreaks. But there should be no panic because conditions in Russia, especially in the winter, mean that there is not even any theoretical possibility of human infection,” senior government veterinarian Nikolai Vlasov said in televised comments, the AP reported.
“People are not sick here. [The disease has only been found] among the birds,” said Andrei Barkovsky, spokesman for the Moscow regional governor.
A resident of the village of Shikhovo, near Zvenigorod, bought a bird at a market in Moscow and a few days later chickens started to die at his farm, a statement posted on the Odintsovo region’s web site said.
“The … farmer brought the dead birds to the management of the market,” the statement said, to claim compensation where he found out that the bird was a carrier of the virus.
Symptoms of the virus afflicting poultry include difficulty in breathing, lack of coordination when moving and a discharge from nasal passages.
The Moscow region has offered a series of guidelines, including avoiding contact with wild fowl and only buying bird meat or eggs in official marketplaces.
“I can’t exclude the possibility of bioterrorism. In that case, the Federal Security Service and other law enforcement agencies will have to be involved,” Sitnikov was quoted as saying by Ekho Moskvy radio.
But Oleg Kiselyov, who heads the Federal Flu Research Institute, dismissed the idea that the flu could be linked to terrorism.
He also said in an interview with Ekho Moskvy on Sunday that Russian scientists had already designed a vaccine for both humans and birds.
The outbreak of bird flu in the Moscow region is the second case in Russia this year.
On Jan. 29, the H5N1 virus was found at three locations in the southern Krasnodar region.

TITLE: In Brief
TEXT: <b>2 Uzbeks Die in Brawl</b>
MOSCOW (AP) — Two Uzbeks were killed in a brawl in a town outside St. Petersburg on Friday.
The victims died of apparent knife wounds suffered in a fight in the town of Pushkin, Itar-Tass reported, citing police.
Interfax said that the fight involved more than eight other people but that their identities had not yet been established because they dispersed before police arrived. 

<b>Bureaucrat Gets 6 Years</b>
MOSCOW (AP) — A Moscow court late last week sentenced Alexander Tugushev, a former deputy head of the Fishing Committee, to six years in prison for taking a $3.7 million bribe, news agencies reported.
Prosecutors said Tugushev accepted the bribe from a businessman in exchange for a promise to allocate fishing quotas to his company.
Two other officials and a businessman, who prosecutors claimed were Tugushev’s accomplices, were sentenced to prison terms ranging from 5 to 5 1/2 years for fraud, the reports said.

TITLE: New Russian Fashion Star Blends Patriotism and Irony
AUTHOR: By Nora FitzGerald
PUBLISHER: The Washington Post
TEXT: MOSCOW — At the recent menswear shows in Milan, Denis Simachev, a rising star of Russian fashion, showed a collection that focused on the country’s antiheroes, telling a story of bare-knuckled thugs working casinos in what he called “badly put together gangster wear.”
Titled “Gop-Stop”— which can only be translated as “bang-bang” — the provocative spoof offered instructions on how to dandify the Russian Soprano: Add a little raccoon trim to a double-breasted jacket, put gold zippers on tweed trousers and line everything with a traditional red and black floral print usually saved for lacquered boxes.
“What Simachev does is combine sincere patriotism with sophisticated irony,” says Alyona Doletskaya, editor in chief of Vogue Russia.
Simachev, 32, also creates what he calls living billboards — Putin’s image on pink T-shirts with floral borders usually reserved for religious icons, for instance, or images of the hooligan wolf from the Soviet Union’s Road Runner-style cartoon, “Nu, Pogodi” (“I’ll Get You”). His boutique offers T-shirts proclaiming “Oil Is Our Everything” in Russian, bracelets with kopeks hanging off them and sheepskin coats featuring the traditional Gzhel floral pattern. There will be more Gzhel when he shows his women’s collection next week in Milan.
“My roots are still Russian and I will never run out of Russian ideas,” Simachev says. “But I think the clothes are international and understandable.”
Simachev has a workshop in a former gasworks factory here that employs 150 people and where he takes meetings in a felt yurt, replete with fur pillows. More than 40 boutiques carry his clothes in Japan, Europe and Los Angeles. His first Simachev boutique opened this year on Stoleshnikov Alley, Moscow’s poshest pedestrian street.
The success of Simachev and at least a dozen other Russian designers was not possible 10 years ago, when only one homegrown designer, Valentin Yudashkin, now 45, endeared himself to the international fashion press. He did this with a catwalk presentation of majestic, walking Faberge eggs — one of the dresses is now in the Metropolitan Museum of Art in New York. Yudashkin was the first Russian to be invited to Paris Fashion Week, in 1991, and his fashion house came to represent Russian luxury abroad. (Since 2002 he has taken part in Milan Fashion Week every year.)
Today, in contrast, a parade of designers from Magnitogorsk in the Urals to Kiev, Ukraine, are creating small multi-brand boutiques in Moscow and the provinces and are showing their stuff at one of Moscow’s two fashion weeks.
They include Igor Chapurin, who designs for the Bolshoi Ballet and shows his collection in Paris, and the firm Nina Donis (designers Nina Neretina and Donis Pouppis), who participated in London Fashion Week in 2005. Yulia Dalakian, who once worked for Roberto Cavalli, returned with an ultra-feminine style and a boutique next to the Tretyakov Gallery. These European credentials help them with their audience at home.
“We are experiencing a terrific inflow of energy from young designers. For the first time there are lots of new names and fantastic examples of success,” said magazine editor Doletskaya.
When Vogue came to Russia nine years ago, it was one of the first fashion titles. Today Russian Vogue has 150,000 readers and lots of competition. L’Officiel has a successful Russian edition, as does Harper’s Bazaar, and Russian magazines have begun to appear with names like Fashion Life and Style.
The middle class has grown more resilient since the economically tumultuous 1990s, when women typically bought designer boots, jeans and perfume on the black market. In 2006, clothing and footwear sales in Russia increased 13 percent from the previous year to $5.4 billion, said Raphael Moreau, a clothing retail analyst with Euromonitor. (Luxury goods sales totaled about $3.5 billion in 2004, with $600 million coming from luxury clothes.) The growth is due, in part, to the increase in stand-alone boutiques, malls and other shopping complexes, in place of the traditional Russian markets. For instance, Ralph Lauren recently announced it will open two boutiques in Moscow in 2007.
And sales of cosmetics, the luxury good for the masses, are predicted to increase from $5 billion to $15 billion in the next five years.
On a recent afternoon, Simachev stepped over mannequins and talked over the automatic drilling in his new Moscow boutique, nestled above his 24-hour, semiprivate club. The shop and club are squeezed next to Hermes and across from Louis Vuitton. Roman Abramovich, one of Russia’s best-known billionaires and owner of the Chelsea soccer team in London, is rumored to be Simachev’s primary investor. Simachev will neither confirm nor deny the gossip, which has been reported in the Russian press. (Designers here don’t often reveal their patrons.) But his popular “Chukotka” collection, which paid tribute to the clothes of indigenous people in the Chukotka region, may have been inspired by Abramovich, the former governor of the region.
“We do have an investor who is Russian and sees this as a business,” says Anna Dyulgerova, managing director for Simachev.
The business side of Russian fashion remains undeveloped. Designers moan about the lack of infrastructure and the cannibalism between two fashion weeks in a city that should only have one. “There’s no hope for the textile industry here,” says Simachev. “It’s much easier to make a profit in oil than in cotton.” Distribution has long been a problem in Russia, but it is improving. And Russian designers’ clothes are appearing in Tsum, one of Moscow’s most venerable stores, and department-style stores in the provinces.
“We had the form before the content, and the style before the structure,” says Chapurin.
Popular taste is changing, too, as shown by television anchorwomen who are brave enough to mix Chapurin with Chanel. From the early 1990s, when the first boutiques opened, Russians slavishly bought European brands and for the most part snubbed their own kind. But Russians are tiring of head-to-toe Dolce & Gabbana and are starting to mix Russian designers with their European favorites.
This has all been good news for designers like Simachev, who flew to Paris in 2001 with a suitcase of “Russian spirit” clothes during Fashion Week and was politely told to leave. He tried again, and a Paris showroom thrust him on the stage. Simachev is probably the only Russian designer who has never had a ready-to-wear show in Russia.
Sitting on a Lucite chair in her modern glass-box office, Doletskaya wonders if Russian design, despite its low profile in the last century, could reach a critical creative mass, much like Belgian design.
“They are sending very strong statements — sophisticated, subtle and ironic,” Doletskaya says. “Russian fashion is very new, and exciting, and it could happen.”

TITLE: Starsoft, Exigen To Merge
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: St. Petersburg-based software outsourcing company StarSoft Development Labs has announced its merger with one of the largest IT service providers in Central and Eastern Europe — Exigen Services. The companies aim to increase competitiveness by combining their centers of development in the EU and CIS and uniting efforts for better promotion of IT services, they said last week in a statement.
“The merger with StarSoft will considerably improve our ability to take on serious large-scale projects. The unified company will benefit from our huge experience in many industries including banking and financial services, telecoms, insurance and state governance as well as wider access to qualified IT specialists in Russia, Ukraine and the Baltic states,” said Alek Miloslavsky, president and chairman of Exigen Services.
As a result of the merger, StarSoft, which has strong positions in Russia and Ukraine, gains access to Exigen’s client base in Central and Eastern Europe as well as its technological know-how.
Exigen operates several software development centers in the EU and has over 10 years’ experience in providing software outsourcing and IT services for large European companies.
StarSoft, in its turn, has access to the Russian and Ukrainian labor market and is experienced in “agile technologies” of software development. The company has research centers in St. Petersburg, Dnepropetrovsk, Dubna and Kazan.
Both management teams believe that by combining the companies’ strengths in this way they will get a competitive advantage and will be able to offer a wider range of services to the leading American and European corporations.
Svetlana Vronskaya, director for corporate communications at Reksoft software company, indicated that mergers and acquisitions in the Russian IT market have been “in the air” for the last two years, forming an obvious trend. Among the recent mergers she enumerated were deals between Epam Systems and VDI, Luxoft and ICTI, and Teleca and Telma. 
“The top Russian players are getting more mature, thus widening the gap between themselves and the rest of the domestic competition,” Vronskaya said.
“At the same time, the market remains fragmented with a multitude of providers having a 10 to 40 headcount. Size is where the competitive advantage for companies like us or StarSoft lies,” she said.
Vronskaya said StarSoft’s revenue amounted to about $20 million while Exigen’s was about $40 million. For comparison, the software outsourcing industry in Russia is estimated to have grown to $1.4 billion in 2006, she said.

TITLE: State Fumbling With
Sberbank Test Case
AUTHOR: By Simon Shuster
PUBLISHER: Staff Writer
TEXT: MOSCOW — The book will close on Tuesday on Sberbank’s share sale, ending a 20-day rollercoaster ride that has been marked by PR fumbles, state interference and widespread investor confusion. 
State-controlled Sberbank has been publicly traded since 1997, and it decided to hold a secondary sale of 3.5 million shares, worth about $12 billion at today’s market price, after demand for loans grew fivefold over the past five years, requiring the bank to replenish its capital. 
The share emission, expected to be the biggest in Russia’s history, is a major test of the state’s ability to handle a public offering — a test that it looks to have failed after managers scrambled to find buyers and signs of share manipulation prompted the Federal Securities Commission to open an investigation. 
The latest murky episode came Thursday, when Sberbank announced that it had auctioned off 2,176 shares to an obscure investment bank called Russ-Invest. Analysts were baffled by the size of the winning bid — $3,450 per share — which was about 2 percent higher than Sberbank’s market price this month. The same shares, therefore, could have been bought cheaper, and without the hassle of an auction on any of the local exchanges. 
Russ-Invest’s head of research, Dmitry Bedenkov, said: “The price we paid is within the current market price range, and our participation in the auction allowed us to buy a single block of the bank’s equity without having to buy scattered shares on the market.
“We view this as a long-term investment,” he added. 
None of Russ-Invest’s four rival bidders has been identified, and many analysts suspect that the auction was staged — an attempt to inflate the value of the stock as Sberbank looked for more buyers. 
What has kept many investors away is the fact that Sberbank has refused to name a price range for the shares. Buyers have been asked to make offers, and when the book is closed Tuesday, the bank’s board will examine them and come up with the final price. If an investor’s bid is lower than this price, the investor can walk away, and the shares they bid on would revert to Sberbank.
Natalya Orlova, banking analyst at Alfa Bank, said she could not remember any other share emission being handled this way.
And MDM Bank pointed out the inherent paradox. “The price should be determined on the basis of demand; however, true demand can only be determined after the price is announced,” the bank said in a note to investors.
In other ways, management of the emission has also looked irrational and poorly planned.
On the eve of the sale, Sberbank CEO Andrei Kazmin said each share would go for at least 68,000 rubles ($2,590), 26 percent below the opening price for that day. This spooked investors so badly that by the close of trading, Sberbank had tanked by 5.7 percent. 
Kazmin then went on damage control, assuring investors on the first day of the emission that the shares would sell above the market price. 
The below-market price he had named the day before was only the lower limit, he said, “like the price of an entry ticket to the auction hall.” 
Kazmin had to calm the market down again after a Reuters report said the shares would sell for well below the market price, citing a source close to the offering. In the seven minutes after the report came out, Sberbank’s stock lost 7 percent of its value. The sudden plunge led the Federal Securities Commission to open an investigation into the apparent news leak.
In both cases, Kazmin insisted that the emitted shares would sell at a premium to the market price. Although this helped the stock recover, it presented a new dilemma. There now seemed to be no incentive for investors to bid. If the market price would indeed be lower than the price of the shares, then it seemed more reasonable simply to buy shares on the market, without going through the bidding process. 
This was especially true for foreign portfolio investors. Despite laws passed in December to give them the same rights as Russians in buying shares of local banks, interest from abroad has been weak. 
“Basically, foreigners are not used to having to pass all of the hurdles that exist in Russia,” said Richard Hainsworth, head of RusRating, an independent bank rating agency. “But that doesn’t mean Russians don’t have to pass them, too.”
To attract Russian investors, Sberbank has undertaken a major PR campaign, printing cartoon posters that look like Soviet placards and inviting bids at its 20,000 branches nationwide. The offering is being lauded as a “people’s IPO.”
President Vladimir Putin, in a move unheard of in the West, has also endorsed the stock, advising the country that Sberbank was a “safe investment” during a televised address. Deputy Prime Minister Alexander Zhukov has said he would act on Putin’s advice. 
But at more than $3,000 per share, the price is a turnoff for mid-income Russians. Partly as a result of this, bidders have been few. RBC Daily reported late last week that Sberbank was pushing employees to buy up the surfeit of shares. The daily cited unidentified branch managers who said their vacation time was on the line if they did not put in a bid.
Vedomosti, citing an unidentified Sberbank manager, published a list of investors expected to bid willingly in the auction. None of them, however, belongs to the middle class, for whom the shares were ostensibly meant. 
Topping the list was Suleiman Kerimov, a billionaire who owns 6 percent of Sberbank and made headlines in December when he crashed a Ferrari in France. Three other billionaires were also named: Yelena Baturina, a real estate developer and the Moscow mayor’s wife; cement tycoon Filaret Galichev; and oil and metals mogul Viktor Vekselberg. 
MDM Bank said “sharing the information on big business with the media appears to be a PR move aimed at helping the book-building process.” 
It said the four owned 12.4 percent of Sberbank’s shares, worth about $8 billion, which entitles them to buy $1.5 billion more during the secondary offering. 
The Central Bank will buy 25.5 percent of the emission, which will bring its total stake down from 64 percent to 58 percent. This would take the Central Bank’s stake just above the level of ownership approved by Prime Minister Mikhail Fradkov this month.
The state body in charge of policing banks will therefore continue to own the largest bank in Russia. “There is a conflict of interest here,” said Julia Kochetygova, head of governance services at Standard and Poor’s. “The state banks can pressure commercial banks and squeeze out competition.”
Anders Aslund, a Russia expert at the Washington-based Institute for International Economics, also criticized the arrangement, saying: “An IPO should aim at taking ownership away from the Central Bank. … Any Central Bank ownership of a commercial bank is wrong.” 
But Moscow analysts were not so categorical. “This is Russia,” Orlova said. “That is the way it is.”
The value of Sberbank’s stock has nearly tripled since the start of 2005 as demand for corporate and consumer loans grows ever stronger. The bank also has deep market penetration, having been established in 1841 under Tsar Nicholas I, and it holds half of all deposits in the country. 
The state will soon have a second chance at the helm of a major share emission. Vneshtorgbank, also known as VTB, is expected to hold its IPO in the second quarter of this year. The country’s second-largest bank, 99 percent controlled by the state, intends to place 25 percent of its stock in Moscow and London, worth some $4.6 billion.
But analysts do not expect that offering to go without a hitch. “Sberbank’s have effectively been the only shares that were in the banking market, and a lot of people bought them, because they didn’t have a choice. But after the VTB emission, I think the value for Sberbank shares will be affected, substantially,” said Hainsworth of RusRating.
Aslund said VTB would also have trouble placing its shares. “VTB is appallingly badly run,” he said. “They are not thinking of their shareholders in terms of providing a big dividend. … They are either looking to enrich themselves or just to build an empire.”

TITLE: Skanska Leaves Russia
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: Swedish construction concern Skanska is quitting the Russian construction market on mounting financial losses, Interfax reported Monday citing the Dagens Industri newspaper.
Skanska “lost dozens of millions of Sweden Kronors” in Russia, Peter Gimbe, senior vice president for corporate communications at Skanska AB, told Dagens Industri. This year Skanska will leave the Russian market and focus on countries more profitable for its operations — Poland and the Czech Republic.
“We are leaving Russia. We still have a few projects that we will complete. We will fulfill all our obligations,” Peter Gimbe confirmed in a telephone interview Monday.
“Business in Russia was not profitable. We have now sold all our companies in Russia. There remains only those projects that we are finishing,” Gimbe said.
Russia is not the only emerging market that has been rejected by the Swedish concern. Skanska has already pulled out of the Chinese and Indian markets.
In St. Petersburg the company operated through its subsidiary Peterburgstroi Skanska. Founded in 1997 on the base of a construction association, Peterburgstroi became a subsidiary of Skanska in 2002.
By that time Peterburgstroi was one of the leading construction companies in the city realizing commercial projects and projects financed from the state budget.
The company had completed over 40 projects in Russia, but will struggle to continue now that Skanska has left, said Oleg Barkov, general manager of Knight Frank in St. Petersburg, who previously worked for Petersburgstroi Skanska.
The press secretary of Peterburgstroi Skanska, Yulia Gordiyevskaya, confirmed that by March 1 the company will complete a residential building at the junction of Leninsky Prospekt and Ulitsa Desantnikov, while its elite residential building at Morskoi Prospekt is due for completion by April 30, she said.
“After that the company will quit the market,” Gordiyevskaya said.
“This decision was unavoidable. Despite the huge effort we have put into developing the St. Petersburg subsidiary of the company, it was impossible in the dynamic Russian market to exercise the same classic corporate procedures that Skanska successfully used in more stable and predictable markets,” Barkov said.
“Russia requires quick intuitive decisions and a familiarity with local features, and a lack of flexibility was fatal for Skanska in this highly competitive market,” he added.
“In Moscow, a market that is ten times larger than St. Petersburg and experiencing a construction boom and huge demand for development and engineering services, similar reasons prevented Skanska from achieving better results,” Barkov said.
Other real estate experts agreed. Dmitry Zolin, managing partner of London Consulting and Management Company, indicated that competition in the St. Petersburg market is particularly high and profitability associated with mid price residential construction is steadily decreasing.
“Eight percent to ten percent profitability makes this business not quite as attractive as it once was,” Zolin said.
However, he indicated that these reasons were in themselves unlikely to make Skanska leave the market, suggesting that the company’s financial troubles had some “inner source.”
“All those external factors would not force such a strong company out of the market. We should not expect a mass outflow of foreign companies from residential construction in St. Petersburg,” Zolin said.
“Any foreign company could operate profitably in St. Petersburg, and the city’s construction industry is no exception,” said Mikhail Bimon, director for marketing and strategic development at Peterburgskaya Nedvizhimost.
“However, to be successful the company should clearly understand what it has to offer to the city and what it plans to get back. It should be familiar with specific features of the local market and have a good team of professionals. And, of course, it has to have financially sound underpinnings to realize any kind of project,” Bimon said.

TITLE: 9 Carriers Banned From EU
PUBLISHER: Combined Reports
TEXT: MOSCOW — The Transportation Ministry said Friday that it had banned nine carriers from flying charter flights to the European Union, including UTAir and units of LUKoil and Gazprom. 
The ministry said in a statement that it had learned that EU authorities were considering blacklisting the companies on safety grounds. 
The ministry decided to take pre-emptive steps to avoid damage to the country’s reputation, Deputy Transportation Minister Alexander Misharin said. 
“Nobody has asked us. We simply decided to fully exclude the possibility” of Russian companies appearing on the blacklist, Misharin said. 
He said the EU deals differently in each case with companies it adds to its blacklist, which comprises carriers not permitted to fly in the 27-nation bloc. 
Companies under the ban include UTAir, Atlant-Soyuz, Russkoye Nebo, Tatarstan, Aviakon Tsitotrans, Aero Rent and Tsentr Avia.
The European Commission conducted inspections of the air carriers over the past two years and turned up numerous violations of air traffic and safety regulations, the Transportation Ministry said in a statement. 
It said all the carriers had been informed of the results of the inspections but failed to submit plans to state regulators on correcting the violations.
The ban on charter flights went into effect Feb. 12, Kommersant reported.
An UTAir official, however, said he was unaware of the ban. 
“We are really surprised because we have received no official warnings or notifications. Our specialists are trying to figure out what’s going on,” said the official, Yury Mishukhin. 
(Reuters, SPT)

TITLE: In Brief
TEXT: <b>Polyus Rumors</b>
LONDON (Reuters) — A source close to Polyus Gold denied on Sunday a newspaper report that Russia’s top gold miner had approached Anglo American to buy a stake in Anglo Gold Ashanti. 
“It’s total nonsense,” the source close to the company said.
British newspaper The Sunday Times had said without citing sources that Polyus Gold had approached Anglo American about its stake in Anglo Gold Ashanti worth 2.25 billion pounds ($4.4 billion).
The newspaper said one option under consideration is for Anglo American, owner of 41 percent of Anglo Gold and the world’s third largest miner, to take a minority stake in an enlarged company. Polyus Gold declined to comment.

<b>Russian Billions</b>
MOSCOW (Bloomberg) — Russian companies plan to invest $400 billion in new domestic projects by 2015, led by oil and gas companies in Siberia and the Far East, Vedomosti said Monday, citing a study by the Institute of Regional Policy.
Ninety percent of the planned investment projects are only feasible if the state invests in roads, railroads, electricity and communications, Vedomosti said, citing Alexander Khloponin, governor of Krasnoyarsk region in Siberia.

<b>Iranian Gas</b>
TEHRAN (Bloomberg) — Iran has started negotiations with other Caspian Sea littoral states such as Turkmenistan to start swapping gas, Tehran Times reported Monday, citing Oil Minister Kazem Vaziri-Hamaneh.
Iran plans to export the swapped gas to Europe in the form of liquefied natural gas, or LNG, the oil minister told the newspaper. Iran’s main gas fields are located in the south, while the country’s main needs are in the north.

<b>Usmanov Union</b>
MOSCOW (Bloomberg) — Russian billionaire Alisher Usmanov’s Gazmetall agreed to create the biggest vertically integrated metals holding in the former Soviet Union with Ukraine’s Industrial Union of Donbass, Vedomosti reported Monday.
The group will annually produce 20 million metric tons of steel and 40 million tons of iron-ore concentrate, the Moscow-based newspaper said, citing an unidentified person familiar with the companies’ plans. That would surpass Russian market leader Severstal and its units, which produced 17.6 million tons of steel last year, Vedomosti said.

<b>Gazprombank Loan</b>
MOSCOW (Reuters) — Russia’s Gazprombank plans to borrow up to $3 billion and 10 billion rubles ($381.2 million) on international and domestic markets in 2007, the bank said on Monday. 
“We have practically all kinds of borrowing instruments in mind — Eurobonds, syndicated loans and rouble bonds,” said Roman Abdulin, head of the bank’s financial operations department. 
At the beginning of February, Gazprombank placed ruble Eurobonds worth 10 billion rubles.

TITLE: Fradkov Stance Given Weight
AUTHOR: By Daan van der Schriek
PUBLISHER: Staff Writer
TEXT: MOSCOW — Sergei Naryshkin’s promotion to deputy prime minister promises to strengthen Prime Minister Mikhail Fradkov’s position in the Cabinet at the expense of liberal ministers, analysts said Friday.
President Vladimir Putin late Thursday appointed Naryshkin to the post, where he will oversee foreign trade, particularly with other former Soviet republics. Naryshkin likely will also keep his previous position of Cabinet chief of staff, Kommersant reported Friday, citing Cabinet sources.
Fradkov has publicly clashed with the liberal ministers in his Cabinet, notably with Economic Development and Trade Minister German Gref, and he appears to have influenced Naryshkin’s appointment. Fradkov called for foreign trade to receive a greater emphasis in the Cabinet several times last year and even suggested that the Foreign Trade Ministry be re-established.
The appointment strengthens Fradkov and weakens his opponents, “liberals like Gref,” said Roland Nash, chief strategist with Renaissance Capital.
It “elevates the position of foreign trade under the prime minister,” Nash said, adding: “There’s a big political angle to this foreign trade.”
Since July 2004, Naryshkin has also been a member of Rosneft’s board. Nash said this post could strengthen Rosneft’s position within the administration with respect to foreign trade. 
Naryshkin, 52, has worked in the federal government since 2004, a year that also saw him rapidly rise through the ranks. In February, he was appointed deputy head of the economic directorate within the presidential administration. The next month he was named Cabinet deputy chief of staff, and in September he was made chief of staff with the rank of Cabinet minister.
Naryshkin has played an “extremely powerful” role behind the scenes, said Denis Maslov, an analyst with Eurasia Group.
Naryshkin, a St. Petersburg native, is thought to be close to Putin. His acquaintance with Putin goes back to at least the early 1990s and perhaps, according to some media reports, to the 1980s. From 1992 to 1995, Naryshkin headed the foreign economic relations sub-department of economics and finance in the St. Petersburg Mayor’s Office. Putin headed the department at the time. Kommersant reported Friday that Naryshkin had become acquainted with Putin even earlier, during a stint with the KGB after graduating from the Leningrad Mechanical Institute in 1982. 
“He has known Putin forever and proven his loyalty,” Maslov said, commenting on the two men’s relationship.
After working with Putin in the early 1990s, Naryshkin headed Promstroibank’s foreign investments department for two years before serving in the Leningrad regional administration for seven years, first as head of its investments department and then as head of its foreign affairs committee. 
He is now one of two deputy prime ministers in the Cabinet. The other, Alexander Zhukov, also has an economics portfolio. It was not immediately clear how they would split their authority.

Staff Writer Miriam Elder contributed to this report.

TITLE: Industry Shrugs Off Strengthened Ruble
AUTHOR: By Gleb Bryanski
PUBLISHER: Reuters
TEXT: MOSCOW — Industrial output soared well above expectations in January, helped by unusually warm weather, according to data Friday that could help break down domestic resistance to the strengthening of the ruble. 
Output rose 8.4 percent year on year, compared with a 3.8 percent median forecast by analysts in a monthly Reuters poll. 
“It’s a positive surprise to growth that should ease political opposition to a stronger ruble,” said Rory MacFarquhar, analyst at Goldman Sachs. 
The country’s industrial lobby is trying to fight the Central Bank policy of using the ruble’s nominal appreciation to curb price growth, saying a stronger ruble eats into exporters’ profits. 
The bank allowed the ruble to appreciate by 4.3 percent in 2006 against the dollar-euro basket it uses to guide its managed float of the currency. The bank said pressure for the ruble to appreciate would remain in 2007 due to large capital inflows. 
Industrial output slowed to 3.9 percent in 2006 from 4 percent the previous year in what many analysts said reflected the impact of a strengthening currency. Gross domestic product rose 6.7 in 2006 due to booming construction and trade. 
The figure was a disappointment for President Vladimir Putin, who has said he wants to promote industrial growth and that the country’s top priority should be to diversify away from its dependence on sales of oil, gas and metals. 
The Central Bank defends its appreciation policy by saying a stronger ruble gives domestic enterprises an opportunity to modernize, paying less for equipment produced abroad. 
An impressive January number spoke in favor of the Central Bank’s policy and was likely to temporarily silence its critics. Most analysts predict a 3 percent appreciation of the ruble against the dollar-euro basket in 2007. The bank earlier this month changed the composition of the basket, increasing the share of the euro to 45 percent in a move that it said should better reflect Russia’s foreign trade structure.
Analysts said the increase in industrial output was a result of record high temperatures in January, which allowed builders and factories to carry on working without suffering the major power cuts they experienced last year. 
“It is the result of very warm weather in January, which allowed builders to continue working. The weather factor played a big role here,” said Yevgeny Nadorshin, analyst at Trust Bank. 
Output was down 11.7 percent month on month. The monthly number is traditionally low in January due to the long New Year’s and Orthodox Christmas holidays, which bring the country virtually to a standstill for the first 10 days of the month. 
The construction industry along with trade is one of the drivers of the country’s economic growth. Production of bricks and cement increased by 34 and 49 percent in year-on-year terms respectively, the data showed. Even the car industry, traditionally a laggard, showed a 25 percent output growth rate. 
“Manufacturing is clearly responding to strong consumer demand and is showing no signs of deteriorating competitiveness,” MacFarquhar said.

TITLE: Gref Joins Chubais, Labels Coal Merger ‘Dangerous’
PUBLISHER: Combined Reports
TEXT: MOSCOW — Economic Development and Trade Minister German Gref said Friday that the merger of Gazprom and coal company SUEK was bad for competition, echoing criticism of the deal by UES chief Anatoly Chubais. 
“Gazprom’s purchase of SUEK’s coal assets is a dangerous extreme in economic policies. We should preserve competition in our country,” Gref told reporters on the sidelines of an economic forum in Krasnoyarsk. 
Gref said that if Gazprom continued its expansion into various industries, the national economy would turn into “19th-century-style monopolistic state capitalism.” 
That “would leave our country far behind in economic development,” he said, Prime-Tass reported.
Chubais, who is overseeing the dismantling of the electricity giant Unified Energy Systems, has said it was “a big government mistake” to allow Gazprom to expand into coal and power generation. 
Gazprom has amassed large oil and power assets in recent years as it has declared a goal of becoming a diversified energy giant like U.S. company ExxonMobil or BP. But Chubais and analysts fear its acquisition of power and coal assets will undermine the country’s power-sector liberalization as Gazprom would control top utilities as well as their supply chains. The federal anti-monopoly watchdog has yet to approve the deal, but it has said it is unlikely to block the purchase.

(Reuters, SPT)

TITLE: Fortum Not Expected To Win Control
Of TGK-1
PUBLISHER: Reuters
TEXT: MOSCOW — Russia will not allow Finnish energy firm Fortum to take control of power firm TGK-1 for strategic reasons as it serves St Petersburg, analysts said Friday.
They said the management of Unified Energy Systems, which is being dismantled as part of power sector reforms, made the comments on Fortum during a meeting with analysts late last week. 
UES declined to comment, while Fortum vice president Kari Kautinen said in a statement that it was too early to discuss what stake it might bid for when more TGK-1 shares are sold in July, but Fortum, as the biggest minority investor, already had an interest in TGK-1’s success. Fortum has a blocking stake of more than 25 percent. 
“The announcement suggests that a leading foreign investor in Russia’s electric utilities sector cannot take charge of its main holding in the industry,” Aton said after the meeting.
“We see the news as negative for the entire generation universe, and believe it increases the political risks faced by potential strategic investors.
On Friday, analysts also quoted UES’s management as saying that Fortum, Italy’s Enel and Czech firm CEZ were seeking a blocking stake in one of the generation firms, OGK-5.
OGK-5 sold 14.1 percent of its capital in a pilot additional share issue last year.

TITLE: UES Signs Krasnodar Power Deal
PUBLISHER: Reuters
TEXT: SOCHI — Electricity monopoly Unified Energy Systems on Saturday signed an 83.6 billion ruble ($3.2 billion) deal to expand the energy network in the southern region of Krasnodar over the next five years.
The agreement with the administration of Krasnodar region, where the Black Sea city of Sochi is located, will see UES invest $1.3 billion in new generating capacity and a further $1.9 billion in the region’s electricity network by 2011.
UES said in a statement that electricity consumption in the Krasnodar region grew 6.3 percent year on year in 2006. It is expected to grow further in the next few years.
“The agreement … seeks to improve the reliability of electricity supply to customers and increase the network throughput capacity,” the energy monopoly said.
It added that the investment would also prevent power shortages amid surging electricity demand in the region.
The agreement was signed in Sochi, which is bidding to host the 2014 Winter Olympics, by UES chairman Anatoly Chubais and Krasnodar Regional Governor Alexander Tkachev.
Chubais said last week that the company needed 3.1 trillion rubles ($117.7 billion) in investment funds through 2010, or almost $30 billion per year.
Chubais said the total amount had been revised upwards from a previous 2.1 trillion ruble forecast.

TITLE: In Brief
TEXT: <b>MTV Stake</b>
MOSCOW (Bloomberg) — Troika Capital Partners, a Russian investment management fund, may buy a 40 percent stake in MTV Russia, Kommersant reported Monday, citing an unidentified person close to negotiations.
Troika Capital may buy the stake from Russia Partners and is in talks with Viacom Inc., the owner of a 54 percent stake in MTV Russia, on the joint development of television, music and other media projects in the country, the Russian daily said.

<b>New Skodas</b>
PRAGUE (Bloomberg) — Skoda Auto AS, the Czech unit of Volkswagen AG, is considering producing a cheap small car for the Indian, Chinese and Russian markets, Hospodarske Noviny reported.
The vehicle would sell for between 7,000 euros ($9,205) and 8,000 euros, the newspaper said Monday, citing an interview with Skoda Chief Executive Officer Detlef Wittig.
Skoda Auto will make European cars based on the company’s current models, vehicles for young and active European customers and cheap cars for emerging markets, Hospodarske said.

TITLE: Commitment, Contacts and an Appetite for Change
AUTHOR: By David Nowak
PUBLISHER: Staff Writer
TEXT: The last time Owen Kemp sat down for an interview, the reporter whipped out his breakfast and started tucking in.	
“He had a hard-boiled egg. I thought, ‘You must be joking!’” said Kemp, vice president for Hewlett-Packard in Russia. As it turned out, it was an office prank. “They showed the video at the New Year’s staff party,” he said. “We all laughed.”
That appetite for fun is just one element of Kemp’s interpersonal skills that are crucial, he says, for success in Russia. 
“If you can’t be pleasant to each other in the office, how are you going to be with the client?” he said in English with a faint Austrian twang.
Kemp has been at HP all his adult life. He started in Vienna in the mid-1970s and has ended up in Moscow. 
During the 30-odd years in between, Kemp traveled the globe opening new HP offices and overseeing successful growth projects that have cemented the firm’s position in the IT sectors of the world’s emerging markets. 
The sporty jetsetter praised New York and the Middle East as his most interesting foreign assignments from the 137 countries he has worked in, Russia not included.
Kemp, 48, was born and schooled in Sussex, England, before moving to Vienna to study communications engineering at technical college. His mother is Austrian; his father died when he was a boy. The labs at the Vienna college during the ‘70s were festooned with now-archaic Hewlett-Packard computing machines that Kemp couldn’t be torn away from.
His fascination with all things IT led him to apply for a job with HP in Vienna, where the company’s Central and Eastern European operations were then based. 
Kemp’s first assignment had him scooting around East Germany and Bulgaria to sell high-end medical equipment to official enterprises. Wherever he went in the former communist bloc, he was met with open arms, aside from the “spooky” border checks, he said. 
“You see, we had something in common,” Kemp began. “We were all interested in technology and I was an exciting person from the West,” he added. 
Still wet behind the ears, Kemp cared little for Cold War politics.
“My political naivete helped keep me afloat,” he said. Back then, he was selling equipment he knew nothing about. Once, he had to read the manual for a fetus-monitoring machine before selling it.
Through the ‘80s, his job was all about changing hats. “You can’t sell equipment in Switzerland in the same way as you’d sell in Oman,” he said. “I was like a chameleon.”
Kemp says building contacts is vital. In the early ‘90s, he put together a growth plan for HP’s operations in Russia: He saw a talent pool that was not being tapped by foreign firms. HP searched for a year for someone to implement that plan in Russia, and in the end Kemp agreed to go and do it himself.
It was 1995 and Kemp was in Russia shooting for a twofold increase in sales. “We actually tripled our growth in the two-year period,” Kemp exclaimed. 
Kemp said his biggest challenge in Russia was the Russian managers’ skepticism about his growth plan. “But they were just upset that I had essentially asked them to work harder,” he added.
According to one of his business associates, one of the things that sets Kemp apart is his adept staff management.
“Owen is the ultimate diplomat,” said Robert Farish, regional director of IDC, a global market intelligence and advisory firm.
“Even when individuals are not meeting targets, he still manages to pull the whole team in the right direction,” Farish said.
Kemp said one thing as important as know-how in Moscow is “know-who.”
“For anyone looking for success in business in Moscow, it is imperative that they build up a mini eco-system of contacts. You need people on site in Russia, so building up a network of dependable people, partners and experts in your field of work is essential.”
Although Kemp is bursting with positivity, there are a few things that get him hot under the collar.
“A lot of the old Cold War-era bureaucracy is still in place,” he said. “But the thing that really frustrates me is the foreign view of Russia.
“Moscow isn’t that different to New York: It’s got a great business climate and buzzing night life. It’s a great place to be.”
Kemp’s commitment to HP borders on the ridiculous: “Chop my head off and you’ll see an HP logo on my neck.” 
It’s a commitment that has come with quite a sacrifice: “I screwed up my family along the way.”
Kemp has a wife and 15-year-old daughter, Olivia, back in Vienna. He rarely sees them, though he walks around with two mobile phones: One for work and one a direct line to his daughter. “Maybe I would have done some things differently,” Kemp said about his family.
Kemp lists gardening, pumping iron and renovating his Vienna house among his hobbies. “But I still find it impossible to switch off,” he said, adding that he’s always contactable wherever he is.
One thing that might have waned over the years is his personal ambition.
One day, would he like to be HP’s CEO? “Ah, I don’t think so,” Kemp said. “It’s too much traveling. And anyway, I probably won’t be asked.”

TITLE: Baltic Pipeline Faces Up to a Minefield of Problems
AUTHOR: By Miriam Elder
PUBLISHER: Staff Writer
TEXT: MOSCOW — When a Gazprom-led consortium begins laying the foundation for a major new pipeline to pump Russian gas under the Baltic Sea directly to Western Europe, it is likely to run into problems — thousands of them.
The North European Gas Pipeline, or Nord Stream, is due to snake along the seabed over an area covered with hundreds of thousands of unexploded mines and munitions dating as far back as World War I. 
Officials and environmental groups in several of the countries that border the Baltic say construction of the 1,200-kilometer pipeline threatens to disturb the resting places of the deadly weapons, which include free-floating mines and decades-old canisters of mustard gas.
“There are major questions that have not yet been fully addressed by the consortium,” Bjorn Skala, Sweden’s ambassador for small arms, said by telephone from Stockholm. “The proof [of environmental safety] is not yet there.”
Concerns over the Nord Stream pipeline have begun to split Europe, potentially pitting beneficiaries like Germany against those countries that say they will lose out from the project, namely new European Union members Poland and the Baltic states.
On Friday, the head of the European Investment Bank, Philippe Maystadt, said he would block loans to the project until all EU members had agreed to back the pipeline.
“There is clear opposition from several member states,” Maystadt said. “As long as there is this opposition, we will be unable to finance the project.” The EIB, the EU’s soft-loan lending arm, was considering granting loans to cover up to 30 percent of the $6 billion project’s costs.
If the first branch of the pipeline, running from the northern Russian port of Vyborg to Greifswald in Germany, comes online as planned in 2010, Europe would no longer be a casualty in Russia’s pricing spats with countries like Ukraine or Belarus, through whose territory pipelines currently run.
Polish concerns center on historical fears as much as present-day worries that with a major pipeline bypassing its territory, its clout in convincing Europe to recognize fears over Russia’s energy muscle could fade away.
Gazprom holds a 51 percent stake in the consortium, which was formally named Nord Stream last year. Germany’s E.On and Wintershall, a wholly owned subsidiary of BASF, currently hold 24.5 percent each, but are each due to hand over 4.5 percent in the consortium to Dutch Gasunie under a deal inked last year.
After a Jan. 21 meeting with German Chancellor Angela Merkel, President Vladimir Putin said pipelines that deliver oil and gas directly to customers were key to ensuring Russia’s reliability as an energy supplier.
Polish Defense Minister Radoslaw Sikorski last year likened the project to the secret pact made between the Soviet Union and Nazi Germany at the start of World War II to divide up Poland.
The country had hoped that instead of choosing the Baltic route, Gazprom would expand the Yamal-Europe pipeline that currently runs across its territory. To push their dissatisfaction at being left out, Poland and the Baltic states may now try to beat Russia at its own game, analysts said.
“These concerns over munitions are just politics,” said Lev Fyodorov, the head of the Union for Chemical Safety in Moscow. “There are no scientific or ecological questions here.”
That argument is eerily reminiscent of the one that the West leveled at the Kremlin last year, when steadily building pressure by environmental authorities was widely taken as a means of pushing Royal Dutch Shell and its Japanese partners into selling a controlling stake in Sakhalin-2 to Gazprom.
Shell, Mitsui and Mitsubishi agreed to hand over 51 percent of Sakhalin-2 to the state-run gas giant in December, but attempts by Poland and the Baltic countries will not be as successful, analysts said.
“The stark reality is that the Germans are dependent on Russian gas and will become more dependent in the medium term,” said Chris Weafer, chief strategist at Alfa Bank. “They need the gas from this pipeline.”
The most the Poles could hope for is causing minor irritations, like increased costs for the $6 billion project, he said.
EU Energy Commissioner Andris Piebalgs already warned last week that the 2010 start date was “optimistic.”
Yet Gerhard Schroder, who controversially took the job of chairman of the Nord Stream shareholders’ committee shortly after stepping down as German chancellor in 2005, said last week that he expected the project to stay on track.
“We plan to complete this project on time,” Schroder said after meeting Piebalgs and other EU officials. “I believe this project is completely essential as far as gas supply security goes, not only for Germany but also for Europe.”
Europe depends on Gazprom for 25 percent of its gas imports, a number due to rise as consumption on the continent grows over the next decade. Yet the dependence goes both ways, with Gazprom counting on Europe for the bulk of its revenues. 
Of Gazprom’s record $39 billion in export sales last year, $37.2 billion came from the 156 billion cubic meters Gazprom exported to countries outside the former Soviet Union.
The Nord Stream pipeline is due to give Gazprom an extra export capacity of 27.5 bcm per year and that amount is set to double by 2012, when a second arm is planned to come online. 
With environmental concerns beginning to top the agenda of U.S. and European leaders alike, the complaints of the countries bordering the Baltic could get a hearing.
On Friday, officials from countries whose ecologies could potentially be affected by the Nord Stream pipeline are due to meet in Helsinki to discuss the consortium’s preliminary environmental study.
Nord Stream insists it has carried out a thorough study of the munitions’ location and will take care to avoid the sites where they lie. Around 40,000 tons of chemical munitions are estimated to have been dumped in the sea in 1947, according to the Helsinki Commission, an intergovernmental group that monitors the Baltic. Skala, the Swedish ambassador, said a further 100,000 mines are estimated to litter its shallow waters.
“In comparison with lots of other infrastructure projects, this one will have a more or less temporary impact,” said Jens Muller, spokesman for the Nord Stream consortium based in Zug, Switzerland.
The consortium is due to submit an environmental impact assessment, or EIA, this summer for approval by nearly a dozen countries. Denmark, Finland, Germany, Russia and Sweden, as well as Estonia, Latvia, Lithuania and Poland, must greenlight the project before it can move to the construction stage. 
In December, the foreign ministers of Estonia, Finland, Iceland, Latvia, Lithuania, Norway, Poland and Sweden signed a joint document calling for an independent assessment by EU environmental authorities.

TITLE: Ford Workers Just Want To Have Fun
AUTHOR: By Anna Shcherbakova
TEXT: Managers at “Ford Motor Russia” will never forget St. Valentine’s Day 2007. On midnight last Wednesday its factory, Russia’s first foreign car-assembly plant, halted production for 24 hours. The workers had given two weeks’ notice of their action. Up until the very last minute Ford’s management tried everything in their power to avoid the strike, which according to experts immediately reduced the factory’s revenues by $3 to 4 million. 
Late Tuesday evening the Leningrad Oblast Court ruled the strike was illegal. The reason was that there was no formal meeting, where workers balloted to strike, but different shifts, voting separately. 
Ultimately, it did not help, because the decision did not have time to become legally binding. The trade union intends to appeal the decision at the Supreme Court. 
Ford’s trade union, the initiator of the action, has long and fruitful relations with the factory’s administration. In the autumn of 2005 it requested a 30 percent rise in salaries and finally agreed to accept half, but only after three strikes – two of which were ‘Italian,’ when production dropped by 25 percent, and another hour-long one. 
Now the trade union, led by Alexei Etmanov, is demanding a regular wage increase, citing consumer index growth, something that City Hall calculates every quarter. 
Last year the index grew by 19.5 percent, which corresponds to the 14 to 20 percent raise proposed by Ford. On top of this the company offered an additional day of vacation, bonus payment for those who have worked at the factory since 2002 and extra benefits for those with children. 
Yet despite this the workers decided to strike. They had nothing to lose, they could not even be fined, let alone fired: Firstly, because the court’s ruling is not yet effective and, secondly, because they were in attendance at the factory on the day of the strike.  
And there they had a very exciting day. First there was a meeting, where they proclaimed that they were not slaves. Then they ate the free lunch provided for them by the company at the factory canteen. 
Of course, it’s election time, so a couple of leaders of political parties visited those on strike and showed their support. 
By the evening Etmanov sounded distinctly drunk when we called him on his mobile phone. He had obviously drunk no alcohol, but was just intoxicated with the bubbly brew of fame and success. He had pulled it off —?Ford’s management has agreed to a new round of negotiations!
Etmanov is also campaigning against contracted factory personnel who have been out staffed by recruiting companies. Approximately 10 percent of the 1900 Ford workforce are contract workers. 
Their presence at the factory reminds those on strike that they are not unique and could easily be replaced by more disciplined workers. It’s not great fun working at the conveyer belt, but there are still enough people who are ready and willing to do it for 20,000 rubles ($750) a month, cheap lunches and other benefits. 
From the workers’ last argument is derived their first. Ford’s trade union wants to regulate the rules and influence its environment. If the management steps back it will lose face forever. And I think it will take more than the loss of $4 million a day for that to happen. 

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

TITLE: Reversing Out of the Cul-de-Sac
AUTHOR: By Anders Aslund
TEXT: A pivotal 12 months lies ahead for Russian politics. According to the Constitution, President Vladimir Putin has to leave office at the end of his second term, in March 2008, and he has maneuvered himself into a lose-lose situation. He needs to stay on for a third term, because his popularity is the key source of legitimacy in current Russian politics. Yet if he prolongs his rule in violation of the Constitution, he will lose his legitimacy.
During his presidency, Putin has systematically diluted the country’s nascent democratic institutions. The members of the Federation Council are now appointed, as are regional governors. Formally, the State Duma is still elected, but the parties, nominations, media coverage and the elections themselves are now so manipulated that nobody can take them seriously.
As a consequence, few elements of political legitimacy remain in Russia. Putin’s election in March 2004 was the last free election, although the OSCE rightly labeled it not fair. Today, no Russian election can be sufficiently free and fair to lend any credence to the “winner.” The Putin regime’s profound dilemma is that it has deprived itself of all means to generate political legitimacy.
Russia’s economic achievements are impressive, but a growing standard of living is not enough to guarantee long-term political survival. Economically, Putin has linked his fortunes ever more to high world energy prices, which will not last forever.
Although the Kremlin has worked hard to stir up Russian nationalism, Russians at large do not seem ripe for such an extreme choice. The Russian Orthodox Church does not enjoy widespread respect. The formation of an alternative, pro-Putin party, A Just Russia, makes United Russia look all the more artificial. The reproduction of more pseudo-parties would only make Putin’s Russia more reminiscent of the former East Germany, with its three official pseudo-parties.
The conventional wisdom is that Putin wants to leave his presidency in constitutional order. One of his two semi-official heirs apparent, First Deputy Prime Minister Dmitry Medvedev or Defense Minister Sergei Ivanov, is supposed to be appointed as his successor, after which the grateful Russian people are supposed to vote for Putin’s choice. Any one of a number of dark horses could still be brought in, but the modus operandi will be the same.
If this sounds like some kind of dream world, that’s because it is. Boris Yeltsin could appoint Putin and get away with it because no one thought his team could pull it off. The very essence of Russian politics is surprise, so what is anticipated becomes difficult, and sometimes impossible to pull off.
Another reason why a smooth succession is unlikely is that, in the best Machiavellian tradition, Putin has encouraged a maximum of strife between his subordinates to ensure that they cannot collude against him. According to most accounts, the relationships between his underlings are on the verge of open warfare. Whomever Putin chooses as his successor will be seen as a dangerous enemy by his or her colleagues, who will insist that Putin stay.
Putin’s top people currently control huge amounts of wealth through state companies. Because they do not officially own these companies, they have to operate through informal contracts, often worth billions of dollars. But they cannot defend these informal contracts in court. People kill for less, and Russia has already seen a regression to the high-level commercial murders of the mid-1990s. Regardless of who takes over, many of Putin’s top officials will likely fear the loss of their fortunes and will do whatever they can — meaning a lot — to ensure that a real transition does not take place.
The final reason no orderly transition is likely stems from Putin himself. He is notorious for making decisions as late as possible. Inevitably, he will make this final big decision very late, if at all, because he is afraid of becoming a lame duck. In all probability, he will miss the most favorable time to make his exit. His recent statement that he will announce his preference at the beginning of the election campaign presumably means less than three months before the scheduled election date.
Putin’s success at maintaining high popularity ratings is admirable, but that is the only strength that remains of this regime, and it may pass faster than anybody currently imagines. Few people remember today that Ukrainian President Leonid Kuchma was quite popular and won a run-off in reasonably free presidential elections in the fall of 1999. One year later, however, when it appeared plausible that he had ordered the murder of a critical journalist, his popularity plummeted to single digits, never to recover. And all this despite the fact that he controlled Ukrainian media almost as closely as Putin manages Russia’s.
Is there a chance, alternatively, that the government could change the situation with the application of effective policy? After the disaster with the social benefit reforms, Russia has maintained a near moratorium on changes to the system of this magnitude. At present, the main government policy initiative is to evict all foreign nationals from outdoor markets by April 1, which will reduce supply and boost the prices of produce for the country’s poorest, who are the markets’ chief customers. This is hardly an election-winning strategy.
Another possible election strategy is a war on corruption. Corruption is a dominant popular grievance, but eminent Bulgarian political scientist Ivan Krastev has pointed out that all postcommunist governments that lose elections do so because of corruption. The more attention a government pays to corruption, the more people realize how bad the problem is, with the incumbent administration being viewed as the culprit.
Corruption in Russia has risen in the last few years, while it has been abating in most other postcommunist countries, according to Transparency International, the EBRD, the World Bank and the Indem think tank. Eventually, this observation will come home to roost with the would-be electorate.
Furthermore, Putin has built a structure that does not allow him to retire. Yeltsin could do so because he had established a certain rule of law, which guaranteed the validity of the law on his immunity. Putin has undermined the rule of law to such an extent that he cannot repeat Yeltsin’s elegant exit, because no successor can guarantee that he will not be prosecuted.
Putin is no fool. He understands that he is currently at the peak of his power, so things can only get worse. He no doubt realizes that it would be best for him to resign after two terms, but he has painted himself into a corner. His only apparent option is to stay on as president. Even if Putin were to become chairman of the Constitutional Court and tried to impose his professed “dictatorship of the law,” he could not control the country because of insurmountable strife among his former underlings. The fundamental problem is that Russia no longer possesses institutions that can grant legitimacy to any successor.
So is this a dead end? Can Putin avoid crashing? The answer is “yes.” As in any cul-de-sac, the solution lies in hitting reverse, which in this case leads back to the road of democratic principles. Admittedly, societies based on civil rights and freedom often present rulers with some rude surprises, but they do function and generate legitimate leaders. Hitting reverse makes more sense than crashing.

Anders Aslund is a senior fellow at the Peterson Institute for International Economics.

TITLE: The End of Tax Romanticism: Tax Violators Will Pay
AUTHOR: By Ivan Smirnov
TEXT: A mere two months after the official publication of the notorious Information letter of the Supreme Arbitration Court on unfair tax benefits (for more details please see the article published in St. Petersburg Times on December 26, 2007), another supreme court (this time, the RF Supreme court) has issued an Instructive Ruling on how to deal with tax crimes. The message behind the recommendations of both Supreme courts is quite evident. The state clearly wants to inform  taxpayers that any tax scheming and even interactions with bad-faith taxpayers are prohibited and will result in serious sanctions. 
Brief analysis of the RF Supreme Court’s instructions shows  further  strengthening of tax administration in Russia, this time in the area of criminal prosecution of tax offences.
Despite the formal reasonableness of the RF Supreme court’s instructions, their practical implications may be devastating for taxpayers, especially considering the current approach used by law enforcement authorities to initiate criminal investigations of tax crimes based solely on a material element of tax offences i.e. tax underpayments. 
Based on the fact that the amount of unpaid tax or levy equals $20,000 for a period of three years, it is evident that any taxpayer may be a potential target of criminal investigation.
For reference purposes:
• There are three corpus delicti related exclusively to tax offences. 
A. Tax evasion by a company by means of non-submission of tax returns or other mandatory documents, inclusion of false information into tax returns (mandatory documents) - article 199 of the RF Criminal Code.
B. Failure to fulfill obligations as a tax agent - article 199.1 of the RF Criminal Code
C. Concealment of monetary funds or property from enforcement authorities - article 199.2 of the RF Criminal Code.
• Material element of the tax offence under article 199 of the RF Criminal Code.
At present, the amount of unpaid tax or levy for a company is treated as a criminal offence if it exceeds: 
- 500,000 rubles ($19, 000) for a period of three calendar years with the portion of underpaid taxes exceeding 20 percent of the amounts payable, or
- 1.5 million rubles ($56, 600) for the same period of three calendar years. 
If the amount of unpaid tax or levy for a company exceeds:
- 2.5 million rubles ($94, 340) for a period of three calendar years with the portion of underpaid taxes exceeding 10 percent of the amounts payable, or
- 7.5 million rubles ($283, 019) for the same period of three calendar years, the violation is treated as a criminal offence on a particularly  large scale. 
• The most severe sanction for tax offences is imprisonment for a period of up to six years.
Unfortunately, the RF Supreme court did not emphasize the importance of the subjective element of tax offences — the intention of a taxpayer to underpay taxes as a pre-requisite  for the initiation of any criminal charges. Such an approach might have been an effective barrier against a formal initiation of criminal investigations based solely on fact of underpayment of tax. 
Moreover, the RF Supreme court has produced  such an open list of possible motivations, to use as evidence of intentional underpayment of tax, that virtually anybody would fit into it. The list includes material or immaterial benefits, careerism, protectionism, family connections, desire to embellish factual circumstances or obtain a reciprocal service, support for resolving a certain issue, etc.
Up until now it was quite common that law enforcement authorities did not bother to establish the guilt of a particular person, incriminating  CEOs and chief accountants simply because the tax authorities had established a certain amount of tax underpayment.  
In practice, such a formal approach means that the initiation of criminal charges on tax underpayment, which has not been established by the court, may be based solely on incorrect information contained in tax returns or other mandatory documents filed with the tax authorities.
Another hot issue is a specific reminder by  the RF Supreme court that not only the CEO or chief accountant of a taxpayer may be held liable and subjected to criminal prosecution but that any of a taxpayer’s officials (including accountants, tax and legal specialists) and even consultants, may be charged as accomplices, abettors, organizers or executioners of tax crimes.   
In conclusion, we  recommend  taxpayers to pay special attention to all transactions and activities, which might result in significant tax deficiency charges on the part of tax authorities. If you have doubts about how to treat a particular transaction or expense, try to obtain  official clarification to avoid accusations of intentional tax underpayment. In any event, avoid any dubious transactions or activities and remember that nothing is worth as much as personal freedom.

Ivan Smirnov is Senior Associate, Head of Litigation practice at DLA Piper in St. Petersburg.

TITLE: An Increase 
In Isolationism
AUTHOR: By Alexei Bayer
TEXT: In 1992, I witnessed an extraordinary street scene in Dresden. Although Germany had already been reunified for a while, Russian troops were still lingering on in the east — mainly because they had nowhere else to go.
A Russian Army truck was driving in busy downtown traffic. Suddenly, it pulled up to the curb and a soldier got out. He walked over to the line of trees planted between the roadway and the sidewalk and began to urinate — but not before looking up and down the street to make sure the coast was clear.
The street was far from empty. It was crowded with shoppers, parents with their children and elderly people, but their presence didn’t seem to register. The soldier was watching out for a Russian officer. Amazingly, the Germans ignored him, too. They looked through him as though he wasn’t there.
I am reminded of this episode whenever debate about Russian relations with the West flares up. Not just in the context of President Vladimir Putin’s criticism of U.S. foreign policy at a security conference in Munich on Feb. 10, but even in less weighty matters, like the arrest of a prominent Russian businessman in France or Western criticism of Moscow’s policies toward its former satellites. This debate is invariably framed in terms of “us against them.” Worse, it seems at times as if Russians think they inhabit a separate, parallel universe.
Russia has always been distinct from the West. It only became European two centuries ago, during the reign of Peter the Great. To this day, you can hear complaints about Peter’s Westernizing reforms, which supposedly compromised Russia’s unique identity and contaminated its pure soul. 
This yearning was fulfilled when the Bolsheviks brought in a Western ideology, Marxism. Suddenly, Russia leapfrogged the West on the path of progress, becoming the carrier of universal truth and a trailblazer for the misguided world. It retreated behind the Iron Curtain and “us against them” became a world-historical struggle.
In much of communist Eastern Europe, the dissidents’ struggle was to rejoin the West. In Russia, even anti-communists insisted on Russia’s separate path and its role as a kind of beacon for the rest of humanity. 
It could not have turned out more differently. The lasting legacy of communism in Russia seems to be widespread coveting of imported material possessions. In the Soviet Union, the vidak, the video cassette recorder, was an abiding status symbol. What has changed today is that the toys have become more expensive. While Russia has neither Orthodox piety nor the secular communist religion — nor for that matter any other, however tenuous, claim to moral authority — its president still can’t resist the urge to preach to foreigners.
Nor do Russian elites feel that their country is part of the international community, even though Russia is rich because the rest of the world puts a high price on its raw materials. The elites themselves are more sophisticated than the Communist Party apparatchiks of old because they have unhampered access to luxury goods and services produced by the world economy. Under Putin, nevertheless, Russia has repudiated earlier, tentative attempts to rejoin the rest of the world and retrogressed once more into self-imposed isolation.
And therein lies Putin’s problem. There are large numbers of people in Europe and the United States who share his negative assessment of current U.S. international policy. According to recent polls, two-thirds of Germans agree with the points Putin made. The thing is that they aren’t interested in hearing them from him.

Alexei Bayer, a native Muscovite, is a New York-based economist.

TITLE: No Good Old Days
AUTHOR: By Paul Kennedy
TEXT: It was funny, in a grim sort of way. Last week, U.S. Defense Secretary Robert Gates responded to President Vladimir Putin’s polemic attack on the United States by remembering the 50-year Cold War as a “less complex time” and saying he was “almost nostalgic” for its return.
Gates should know. He himself is the quintessential Cold Warrior, having served nearly 27 years in the CIA (facing off against the likes of Putin, who was for 17 years an agent in the foreign intelligence branch of the KGB).
Gates is not alone. There is a palpable sense of nostalgia these days for the familiar contours of that bygone conflict, which has been replaced by a much more murky, elusive and confusing age.
The argument goes as follows: The Cold War, although unpleasant, was inherently stable. It was a bipolar world — centered on Washington and Moscow. Yes, it’s true that the two sides possessed masses of nuclear weapons aimed at each other’s biggest cities, but the reality is that they were constrained by a mutual balance of terror.
They had divided Europe and divided Asia, and no one, except in the Korean War, crossed those lines. Even that conflict confirmed the essential stasis. Of course, they carried out surrogate wars — in Asia, Africa and Central America, in Vietnam and Afghanistan — but they never came into direct conflict. Hot lines, summit conferences and SALT treaties kept things under control. Polish and Czech dissidents might get tossed into prison but, hey, that was not a cause for an international crisis. Those were indeed the good old days. East was East and West was West.
Today’s world is far less stable and, indeed, much less favorable to comfortable Western democracies. It is not just that we face an almost-impossible-to-manage “war on terrorism,” with all of its capacities for asymmetrical damage to ourselves, our allies and everyone else, even as we swat the occasional terrorist group. It is not just that we are deeply mired in Iraq and Afghanistan and that the whole Middle East may totter because of the failure to win on the ground.
It is not just that Putin is advertising his anger against the United States in speeches and continuing his support of Iran and intrusions into the Middle East. It is not just that the Chinese leadership is openly staking a new place in the world order, in its Africa diplomacy, its missile tests and its move into hitherto Western-dominated international institutions. And it is not just that a dozen or more fragile states, chiefly in Africa, are collapsing into chaos. It is the unnerving fact that all of this is happening at the same time.
So is it true? Was the Cold War era, on the whole, a safer era? Ponder the following counterarguments:
First, however tricky our relationships with Putin’s Russia and President Hu Jintao’s China are nowadays, the prospect of our entering a massive and mutually cataclysmic conflict with either nation is vastly reduced.
We seem to have forgotten that our right-wing hawks argued passionately for “nuking” communist China during the Korean War and again during the Taiwan Straits crisis of 1954. We also have apparently forgotten how close we came to a nuclear Armageddon during the Cuban Missile Crisis.
Likewise, we’ve forgotten the shock of the Soviet invasion of Afghanistan in 1979, which prompted then-German Chancellor Helmut Schmidt to ask, “Is this the new Sarajevo?” a reference to the outbreak of World War I.
Those were really scary times, and much more dangerous than our present circumstance because the potential damage that could be inflicted during an East-West conflagration was far, far greater than anything that al-Qaida can do to us now. No one has the exact totals, but we probably had 20,000 missiles pointed at each other, often on high alert. And the threat of an accidental discharge was high.
The years 1945 to, say, 1990 were horrible on other accounts. China’s Mao Zedong’s ghastly Great Leap Forward led to as many as 30 million deaths, the greatest loss of life since the Black Death. The Soviet Union was incarcerating tens of thousands of its citizens in the gulags, as were most of the other members of the Warsaw Pact. The India-Pakistan wars, and the repeated conflicts between Israel and its neighbors, produced enormous casualties, but nothing like the numbers that were being slaughtered in Angola, Nigeria, the Congo, Vietnam and Cambodia. Most of the nations of the world were “un-free.”
It is hard to explain to a younger generation that such delightful countries as Greece, Spain, Portugal, Chile, Brazil, South Africa, Poland and Czechoslovakia (to name only a few) were run in those days by fascist generals, avowed racists or one-party totalitarian regimes. I am ancient enough to remember the long list of countries I would not visit for summer holidays; old enough to recall how creepy it was to enter Walter Ulbricht’s East German prison house of a state via Checkpoint Charlie in the late 1960s. Ugh.
Let us not, then, wax too nostalgic about the good old days of the Cold War. Today’s global challenges, from Iraq to Darfur to climate change, are indeed grave and cry out for solutions.
But humankind as a whole is a lot more prosperous, a great deal more free and democratic and a considerable way farther from nuclear obliteration than we were in the era of Dwight Eisenhower, John F. Kennedy, Nikita Khrushchev and Leonid Brezhnev. We should drink to that.

Paul Kennedy is a professor of history and director of International security studies at Yale University and the author of “The Rise and Fall of the Great Powers.”

TITLE: Promoting Ivanov
TEXT: In many countries, being moved from defense minister to first deputy prime minister might sound like a demotion. Logic suggests that this is even more the case in Russia, where the defense minister is one of the few Cabinet members who reports directly to the president.
But a different logic comes into play in the year ahead of the 2008 election to choose a successor to President Vladimir Putin. The almost unanimous opinion among Kremlin watchers is that Putin’s decision to move Sergei Ivanov from defense minister to first deputy prime minister is good news for Ivanov.
At face value, the new position puts Ivanov on par with Dmitry Medvedev, the other favorite in the race for Putin’s blessing ahead of the 2008 vote.
It also relieves Ivanov of the responsibility for the functioning, or perhaps more appropriately malfunctioning, of the Defense Ministry. Under Ivanov, the armed forces have done little toward establishing a professional army — something Ivanov named as a top priority when he took over in 2001.
Under Ivanov, media coverage of defense issues has been devoted largely to political infighting — like the replacement of Anatoly Kvashnin as chief of the General Staff by Yury Baluyevsky in 2004 — or to shameful cases of hazing. The high-profile case of Private Andrei Sychyov, whose legs and genitals had to be amputated following a New Year’s Eve hazing, has dogged Ivanov’s image as defense minister for most of the past year.
The advantage of Ivanov’s new post is that his responsibilities will probably be just as nebulous as Medvedev’s. In announcing the appointment, Putin told Ivanov that he would be “coordinating a part of the civilian sector of the economy.”
Medvedev’s job of implementing the national projects translates into daily opportunities to parade confidently in front of news cameras without responsibility for results, which will only surface after the presidential election anyway. Even if Ivanov proves to be overambitious in making economic decisions, it is highly unlikely that he would be able to severely harm Russia’s booming economy in the short period left before the election.
So we are likely to see even more of Ivanov on the television news for the next year. Shorn of direct responsibility, he will be able to devote more of his time to developing his public image. Thursday’s announcement was, indeed, all about promotion — in every sense of the word.

This comment first appeared as an editorial in The Moscow Times.

TITLE: Without Your Health, Money Isn’t an Option
PUBLISHER: Vedomosti
TEXT: Lyudmila Kostina was denied entry to a Samara nightclub on Feb. 5 because she is confined to a wheelchair. In places like the Karachayevo-Cherkessia and Novosibirsk regions, stocks of Cyclodol — a medicine needed by people with psychiatric and serious nervous disorders — have nearly run out. The problem developed when pharmaceutical companies stopped making the drug and state officials failed to warn doctors.
Kostina’s case is probably an exception, if because only disabled people rarely go to nightclubs in Russia, especially with monthly disability pensions of 2,178 rubles, or about $85. But the reaction of the club’s security staff and administration, who tried everything in their power to prevent Kostina from entering, and to separate her from the other patrons, was all too typical.
The importance of the problem grows larger when we look at official statistics, which show that the number of Russians with disabilities is increasing at a rate of 1.4 million to 1.7 million per year, reaching a total of 12.5 million in 2006. As much as 35 percent of those classified as invalids are of working age.
The ideal solution would be to help the disabled live lives as normal as possible. But according to the Health and Social Development Ministry, disability payments to handicapped adults barely reach 63 percent of the official subsistence-level income, which is itself unrealistically low. People with physical disabilities encounter countless barriers such as stairs and entrances that obstruct their movement and ability to lead a normal life. Not even World War II veterans, rendered disabled while defending their country, qualify for government-issued automobiles designed specially for the handicapped.
The clearest sign that the state makes no effort to help those disabled trying to help themselves is that only 15 percent of the country’s officially handicapped have jobs.
By comparison, 35 percent of disabled people in the United States work, and 40 percent in both Great Britain and France have jobs. In developed countries, employers are required to hire a specific number of disabled people — in France the figure is 6 percent of the workforce. Should a French employer not meet this criterion, the firm must pay a significant fine to the Social Welfare Ministry in compensation.
At issue here are not only gains that can be made by tapping the labor potential of a significant percentage of the population. The popular saying “It is better to be rich and healthy than poor and ill” appears to present the only options available. People with disabilities almost automatically lose out on a range of opportunities available to most others.

This comment appeared in Vedomosti as an editorial.

TITLE: Just Muddying the Waters
AUTHOR: By Georgy Bovt
TEXT: Was President Vladimir Putin’s unexpected shuffle of his Cabinet on Thursday somehow connected with his shocking speech at a security conference in Munich on Feb. 10? It seems likely.
It is difficult to follow the thinking of a president who seems to value secrecy above all else when making decisions. But a lot can be gleaned from clues coming largely from the siloviki bloc of Putin’s inner circle. His Munich speech was also full of power jargon, staking out opposition to the United States and the West in general.
It is worth noting that the recent staffing changes coincided with talk among the ruling lobby that First Deputy Prime Minister Dmitry Medvedev, considered one of the two most likely successors to Putin as president, has had some trouble living up to the role: He doesn’t look good on television, is a poor speaker and seems too “bureaucratic;” and the national projects have yet to generate significant public attention. Inasmuch as the current regime considers image to be important, all of these factors constitute drawbacks for Medvedev.
On this front, Sergei Ivanov looks better. On one hand, his former role as defense minister is associated with power and plays to the voters’ fetish for all things military, including innovative weapons and high technology. The hazing scandals that occurred on his watch at the Defense Ministry, on the other hand, have spoiled his image somewhat in recent years.
Anatoly Serdyukov, who replaces Ivanov as defense minister, has come to prominence largely through the efforts of the Kremlin deputy chief of staff and unofficial leader of the siloviki, Igor Sechin. The appointment of Serdyukov, who started working in a Leningrad furniture store, is an obvious slap in the face for the army, where his lack of military experience is unlikely to make him welcome, a problem Ivanov also faced. Serdyukov also played a key role in formulating the government’s case against Yukos while working in the Federal Tax Service. It now remains to be seen what will happen to charges against former deputy finance minister and Federation Council member Andrei Vavilov on embezzlement charges related to MiG-29 fighter-jet sales to India. It is a complicated story. The investigations against former Yukos CEO Mikhail Khodorkovsky began after he publicly accused high-ranking members of Putin’s administration of corrupt business dealings. This was at least partly in response to Vavilov’s sale of his oil company, Severny Neft, to Rosneft, at which Sechin is chairman of the board.
Viktor Ivanov, another member of the siloviki bloc who has at times clashed with Sechin, also gained a higher profile recently, when he was named head of the federal anti-corruption commission. This post may prove very important in any jockeying leading up to the presidential vote.
With his appointment as deputy prime minister for foreign trade, Sergei Naryshkin also becomes a bigger player. With his political base located in the St. Petersburg security services, closer connections with government circles could make him a dark horse for the president’s seat. He could well become a third “candidate” for the succession, with some citing his relative obscurity as an advantage. It certainly didn’t hurt Putin in 2000.
So Thursday’s announcements could lead to the formation or solidification of different power centers within the government in the lead up to the presidential vote. Still, other “mini-centers” of power could crystallize outside the government proper. It is too early to rule out figures like Federal Security Service Chairman Nikolai Patrushev or Justice Minister Vladimir Ustinov. Ustinov’s close ties to Sechin remain a factor here.
And among those with Kremlin connections, the head of state arms exporter Rosoboronexport, Sergei Chemezov, is also considered by some to be a potentially strong player. And Federal Drug Control Service head Victor Cherkesov, also close to Putin, could be another waiting to ambush the current front-runners. The classic dark horse in this race could be Russian Railways chief Vladimir Yakunin. And the “liberal” Dmitry Kozak, presidential envoy to the Southern Federal District, remains an exotic, and perhaps unexpected, addition to the list of possibilities.
The whole point running through the names above was to help demonstrate whether Putin’s recent appointments have clarified anything in the pre-election power struggles? The simple answer: Not a bit.
Medvedev and Ivanov might look like the two options, but there is still ample evidence that Putin’s support could just as easily go to someone else.

Georgy Bovt is editor of Profil magazine.

TITLE: Literary Salon
AUTHOR: By Victor Sonkin
TEXT: Last week, The New York Times reviewed the debut novel by a young horror writer named Joe Hill, and quite matter-of-factly mentioned that “it would be much easier to compare Mr. Hill’s work to Stephen King’s if Stephen King were not his actual father.” Russian media outlets reported this as if a huge secret had been revealed. In fact, Variety had said it loud and clear almost a year ago, and one of Hill’s colleagues had noted in his blog that it was “the worst-kept secret” in the industry. In any case, this doesn’t seem like a case of publishing-world nepotism; Hill’s talent as a horror writer appears to be genuine.
Unlike acting, writing doesn’t seem to be a family thing, perhaps because it’s too personal. In Russia, there have been several dynasties where one family member won fame through literature, while others stayed in the public eye for other reasons. One such example is the Mikhalkov clan. Its patriarch, the nonagenarian Sergei Mikhalkov, is a famous children’s poet; he is the author of endless fairy tales, parables, screenplays, song lyrics and three national anthems (from the Stalin version of 1944 to the present-day version, written in 2001). His two sons, Nikita Mikhalkov and Andrei Konchalovsky, are both famous movie directors; so is his grandson Yegor Konchalovsky. A thinly disguised Mikhalkov dynasty was the subject matter of “Shishkin Wood,” a recent novel by Alexander Chervinsky, while back in Soviet times everyone knew the epigram attributed to actor Valentin Gaft: “Russia, don’t you feel the terrible itch? It’s the three Mikhalkovs crawling on you.”
Another famous family is, of course, the Tolstoys. This lineage gave Russia three authors of the very first caliber. Apart from Leo, who doesn’t need any introduction, there were also Alexei K. Tolstoy, a first-rate poet with the best sense of humor in all of Russian literature, and Alexei N. Tolstoy, the author of several sweeping historical novels and the children’s book “Buratino,” a free retelling of “Pinocchio.” The latter’s granddaughter is the well-known writer, essayist and television personality Tatyana Tolstaya — so in this case, the literary gene kicked in after all. 
It doesn’t end there. Artemy Lebedev, Russia’s best-known web designer and the founder of an eponymous design studio, is Tatyana Tolstaya’s son. This secret was revealed by television journalist Dmitry Dibrov while Lebedev was a guest on his late-night talk show. Lebedev — a household name among young, tech-savvy Russians, and a man who fiercely prides himself on being self-made — kept his cool, but in the course of the show he manipulated Dibrov into looking awkward and misinformed. So, even if there’s no direct inheritance of literary talent, there’s certainly some kind of panache and popularity that runs in families.

TITLE: Joined at the Heart
AUTHOR: By Natasha Randall
TEXT: The controversial postmodernist Vladimir Sorokin has struck through the language barrier again in a crystalline English translation by Jamey Gambrell of his unnerving novel “Ice.” Sorokin himself may already be known outside of Russia for his clashes with conservative groups over the last several years — but until now, very little of his particular brand of gritty satire has been available to English-language readers. “Ice,” one of 11 novels he has written, and the first installment in a projected trilogy to be published by New York Review Books, is a marvelous introduction to his work. 
Sorokin first published “Ice” in 2002, the same year that the pro-Kremlin youth group Moving Together attempted to sue him for “distributing pornography” in the form of his novel “Blue Lard,” which depicts clones of Nikita Khrushchev and Josef Stalin engaged in a sex-act. The case was dropped, but there’s no question that Sorokin’s work inspires strong reactions. Some of it is physically hard to stomach, his stories tend to be painfully damning of everything they touch and his phantasmagorical style is often startling.
“Ice” is a thriller, and though it is far less violent on the whole than Sorokin’s previous work, it is explicitly not for the faint of heart. Indeed, the novel begins with a kidnapping scene in which two hostages are tied to trees and beaten on their bare, bloody chests with ice-tipped hammers. The first hostage expires after a few hefty blows, but the second one, a young man, has just what the kidnappers are seeking. When the youth’s chest is struck, his heart issues a haunting sound — a signal that he is one of them, one of the chosen people whose hearts speak. 
The murderous kidnappers are members of a secret Gnostic sect whose mission it is to find and awaken their fellow heart-speaking brethren. They have blond hair and blue eyes, and they mercilessly sift through people of that description, discovering new brethren or murdering those whom they call “empties,” whose hearts don’t speak. “Ice” unfolds in a series of bloody re-awakening scenes, very gradually shedding rays of light on the mysterious purpose of these Ubermenschen. What keeps you reading this peculiar page-turner are the questions, “Who are these people?” and “What do they want?”
New brethren are discovered in prostitutes, businessmen and drug-addicted adolescents, each of whom struggles to understand his or her strange heart-speaking after enduring the painful process of being kidnapped and beaten. One of the newly awakened, Borenboim, tries to explain to an old friend what happened: “And then — picture this — the broad starts slamming my chest with this hammer. She keeps saying, ‘Talk to me with your heart, tell me with your heart.’ … I’m mooing, she’s bashing me. … Then I just lost consciousness. … But the most interesting part was after. I wake up and I’m sitting in a Jacuzzi. … And these women start patting me gently and telling me some nonsense about a brotherhood, that we’re all brothers and sisters — talking about sincerity, frankness, and so on.” 
In the second part of “Ice,” Sorokin takes us into the inner sanctum of the “awakened” group, following the life of a young Russian village girl who is rounded up by the Nazis during World War II for deportation to a concentration camp. The brethren discover her among the captives and sequester her in their safe house in the Alps. There, the girl, whose heart name (the name her heart speaks) is Khram, is bathed and anointed, and introduced to the others. Through her, we learn about the rites and objectives of the heart-speakers. “Khram, you are our sister, share our repast with us,” Bro, the eldest heart-speaker, says. “The rules of our family are to eat nothing living, neither boil nor fry food, neither cut nor pierce it. For all these things violate its Cosmos.”
True to Gnostic form, it is some abstract higher galactic energy that the brethren hold sacred. They believe that the Earth was created by cosmological error, and that it is their task to find every brother and sister so that they may initiate a transformation back to “Eternity” and return to the “Primordial Light.” This journey back to Eternity was begun several decades earlier, when a meteorite made of interstellar ice landed in Siberia and was discovered by Bro — indeed, it is with this ice that the heart-speakers batter their captives in their “awakenings.”
And so Sorokin has conjured up a vicious species of Superman (with both the Nietzschean and the DC Comics associations), whose aims, from within, seem strangely beautiful, but whose ruthlessness brings several 20th-century atrocities to mind. That he isn’t directly commenting on any one episode of ideological fanaticism becomes clear as Khram migrates from Nazi Europe to Soviet Russia, witnessing purges and falling prey to a long bout of torture at the hands of Soviet authorities. The second part of “Ice” presents a litany of competing evils in the midst of what continues to be truly gripping writing.
And then, in Part Three, something strange — even stranger? — happens. Sorokin returns to his talent for summoning pitch-perfect voice in “Instructions for Using the ICE Health Improvement System,” a do-it-yourself awakening kit. With the help of little hammers made of interstellar ice and a virtual-reality helmet, the heart-speaking experience has now become a commodity. Sorokin provides 16 testimonials from customers who have enjoyed the kit: “I can honestly say: It is amazing! At first there were tears and extraordinarily intense childhood memories; then emptiness, peace, and flight! And what a flight it was! It was something like a collective orgasm. …” As these characters relate their childhood memories, many remember some cruelty wrought on an animal or person and begin to cry uncontrollably. They see themselves holding hands in a large circle of people while some sort of great light emerges. And then they take off the video helmet. 
Is this a mockery of “empty” human hearts, or a counterweight to the horrific dogma of the ice-hearted brethren? Whose hearts are true? Or, as the epigraph from the Book of Job relates, “Out of whose womb came the ice? And the hoary frost of heaven, who hath gendered it?” 

Natasha Randall is a writer whose new translation of “We,” by Yevgeny Zamyatin, was published last year by The Modern Library.

TITLE: Pakistan Train Bombed in India Leaving 66 Dead
AUTHOR: By Muneeza Naqvi
PUBLISHER: The Associated Press
TEXT: DEWANA, India — A pair of explosions on a train headed for Pakistan set off a fire that killed at least 66 people, some of whom became trapped when a train door was fused shut by the heat of the flames. Officials said the attack was aimed at disrupting improving relations between the rivals. 
The explosions and fire struck just before midnight Sunday, a day before peace talks between India and Pakistan.
The fire swept through two cars just before the Samjhauta Express reached the station in the village of Dewana, about 50 miles north of New Delhi. As on most Indian trains, the windows of many cars are barred for security reasons.
Rajinder Prasad, a laborer who lives near the site of the attack, raced with his neighbors to the scene, scooping up water from a reservoir and throwing it on the flames, which rose high above the carriages.
“We couldn’t save anyone,” he said. “They were screaming inside, but no one could get out.” Within minutes, he said, the screams were drowned out by the roaring flames.
Bharti Arora, superintendent of the Haryana state railway police, put the death toll at 66 but authorities warned it could rise.
“From the less damaged coach, some people were seen jumping out with their bodies on fire,” Arora said.
At least 30 passengers were hospitalized in the nearby town of Panipat, though they were later moved to larger medical facilities, officials said. A dozen critically injured people were brought to New Delhi’s Safdarjung Hospital, a hospital statement said.
Dozens of families converged on the Panipat hospital, which was turned into a makeshift morgue. Nasruddin, 58, who like many in the region goes by just one name, traveled up from New Delhi to look for his sister in-law, Skeena, who was on the train — but he could only identify her by her possessions.
“The police have shown us the charred passport and the money she was carrying and also some burned bits of her clothes,” he said.
Outside, police set up a desk next to a stack of makeshift wooden coffins where worried relatives could sift through recovered documents. Piles of burned, sodden Pakistani passports and currency indicated the nationality of most of the victims.
Authorities said two suitcases packed with unexploded crude bombs and bottles of gasoline were found in cars not hit in the attack, leading them to suspect the fire was set off by identical explosive devices. V. N. Mathur, general manager of the Northern Railway, confirmed that there had been two explosions.
India’s junior home Minster, Sriprakash Jaiswal, said the homemade bombs were not powerful, and were simply intended to start a fire on the train, one day before Pakistani Foreign Minister Khursheed Kasuri was to arrive in New Delhi for talks on the ongoing peace process.
“This is an act of sabotage,” Railway Minister Laloo Prasad told reporters in Patna, India. “This is an attempt to derail the improving relationship between India and Pakistan.”
Indian Prime Minister Manmohan Singh expressed anguish and grief at the loss of lives and said that “the culprits will be caught,” a brief statement by his office said.
Pakistani President General Pervez Musharraf said leaders on both sides of the border should move forward with efforts to secure peace.
“We will not allow elements which want to sabotage the ongoing peace process and succeed in their nefarious designs,” he was quoted as saying by state-run Associated Press of Pakistan.
There were just over 600 people on board the train, railway officials said, though it was unclear how many were traveling in the burning coaches. 
The train was traveling from New Delhi to Atari, the last railroad station before the border with Pakistan. At Atari, passengers change trains in a special station, switching to a Pakistani train that takes them to the Pakistani city of Lahore. 
Within hours of the fire, authorities detached the burned cars and the rest of the train left for the India-Pakistan border. 
The train links are one of the most visible results of the peace process under way between nuclear-armed rivals India and Pakistan, and one of the easiest ways to travel across the heavily militarized border. 
Relations between the two countries have warmed in recent years, though they nearly went to war following a 2001 attack on the Indian Parliament that India blamed on Pakistan. The two now hold talks regularly. 
The enmity between India and Pakistan centers on Kashmir, a largely Muslim Himalayan region divided between the two countries but claimed in its entirety by both. 
More than a dozen militant groups — most based in Pakistan — have been fighting in Indian Kashmir for nearly two decades, seeking independence for the region or its merger with predominantly Islamic Pakistan. More than 68,000 people, most of them civilians, have died in the violence. 
Pakistani Foreign Ministry spokeswoman Tasnim Aslam said there were “all kinds of terrorists” who may have been behind the attack but said it was too early to speculate about the possible motive. 
“We expect the Indian authorities to conduct a full investigation and punish those responsible for this heinous act of terrorism,” she said. 
Monday’s blaze revived memories of the train bombings on Mumbai’s commuter rail lines last July that killed more than 200 people. 
Police say Lashkar-e-Tayyaba, or Army of the Pure, a Pakistan-based Islamic militant group, as well as the Students’ Islamic Movement of India, or SIMI, a banned group based in northern India, were behind those blasts. Officials also have alleged that Pakistani intelligence was involved in the attacks, but Pakistan repeatedly has denied the accusation. 
In 2002, Hindu-Muslim riots broke out after a train fire killed 60 Hindus returning from a religious pilgrimage. Muslims were blamed for the fire in the western state of Gujarat, and more than 1,000 people, most of them Muslim, were killed by Hindu mobs. 
About 84 percent of India’s more than 1 billion people are Hindu, and Muslims account for about 14 percent.

TITLE: Team Austria Strikes Gold in World Cup Skiing Event
PUBLISHER: Agence France Press
TEXT: ARE, Sweden — Austria topped the medals table on the final day of what could otherwise be seen as a disappointing campaign for the alpine superpowers at the world ski championships.
Only a victory in the nations event, after Mario Matt had won well-deserved slalom gold to add to Nicole Hosp’s giant slalom win managed to soothe their concerns over having to rebuild for the next Olympics.
The Canadian city of Vancouver will host the 2010 Games and Austria, who won 14 of the 30 medals in Italy last year, may have to consider the likely retirements of speed specialists Hermann Maier and Fritz Strobl.
Former Olympic champion Strobl won silver in the downhill, while a medal-less Maier complained that his bid was doomed from the start.
“I haven’t been able to train well since the start of the competition because of the weather (rain) and I had some problems with my material,” said the 34-year-old who finished 13th in the downhill and seventh in the super-G.
Austrian speed queen Renate Goetschl, who won bronze in the super-G, competed in her last world championship race on Sunday and the 31-year-old is unlikely to see the Olympics again.
All in all, Austria should have done better.
And to rub salt into their wounds, alpine rivals Switzerland grabbed six medals from the men’s events with Daniel Albrecht, Marc Berthod and veteran Didier Cuche all getting on the podium.
If not for Sunday’s team victory ahead of Sweden and Switzerland, Anja Paerson’s three gold medals from her victories in the super-G, downhill and super-combined would have left the hosts topping the table.
Paerson and her dedicated team of technicians, coaches and physios combined to boost her efforts on the slopes after a miserable, winless season in the World Cup.
Her decision to come home to prepare for the competition and try to iron out equipment worries instead of racing in the World Cup proved decisive.
Her father and coach Anders admitted: “A lot of people in Sweden thought ‘Anja is coming for the world championships, it’s no problem’.
“But they didn’t know that we were totally nervous and didn’t know what to do.”
Paerson finished the star of the show, winning a bronze in the slalom and silver in the team event to go home with five medals.
Her downhill win made her the first skier in history to hold world titles in all five disciplines, an achievement which brought out the Swedish royalty.
“Coming here and winning three golds at my home championships, and having the king and queen (of Sweden) seeing it all, I’m speechless,” Paerson said after winning the super-combined.
Patrik Jaerbyn meanwhile won Sweden’s first ever downhill medal behind winner Aksel Lund Svindal of Norway.
Jaerbyn, who fought his way into the team after being thrown off for a second time last year, became the oldest winner of a world championships medal at 37.
The closeness among rivals on the tough World Cup circuit became apparent when Svindal remarked: “As the best speed specialist in Sweden it was a little bit strange that he got kicked off the team just before the world championships.
“He proved them wrong, and I hope they’re going to say sorry and not just drink the champagne with him.”
Svindal became the first Norwegian to win the downhill, and the first to win the giant slalom crown since Lasse Kjus in 1999.
Kjus and fellow great Kjetil Andre Aamodt, who between them hold 36 medals from the world championships and Olympic Games, retired last year.
Inevitably, Svindal, the current World Cup leader, has been hailed as their successor.
The confident 24-year-old remarked, however: “It would be great to have them around. But once you get in the start gate it’s every man for himself.”
While Austria, Sweden and Svindal dominated the gold medal count, the Swiss men’s team showed plenty of promise.
Albrecht, 23, claimed gold in the super-combined as his boyhood friend and rival Berthod won bronze behind Austria’s defending champion Benni Raich.
Raich crashed out of the giant slalom and failed to defend his slalom crown when he finished fourth just 0.03 behind France’s Jean-Baptiste Grange.
Albrecht also won silver in the giant and bronze from the team event - giving him the full set after Berthod’s fall in the slalom handed Sweden the silver.
In Switzerland the kids are playing at being ‘Dani and Marc’ on the slopes.
And Albrecht, who felt he was being left behind by Berthod at the start of the seaon because of back problems, is going home to new found status.
“The impact of what I did here will only hit me when I go back home,” he admitted.
“When you’ve worked so hard for these moments you learn how to cherish them.”

TITLE: Kobe Helps West Take NBA All-Star Game
AUTHOR: By Steve Ginsburg
PUBLISHER: Reuters
TEXT: LAS VEGAS — Kobe Bryant scored 31 points to capture his second MVP award and lead the West to a 153-132 victory over the East in the NBA All-Star game on Sunday. 
The West had a 20-point lead by halftime and was never threatened in the annual affair that saw a lot of dunks and fast breaks but little defense.
Cleveland Cavaliers guard LeBron James scored 28 points to lead the East, who trailed 119-88 after three quarters and saw its two-game winning streak snapped in convincing fashion.
“We had lost two in a row, so we all made it a point to come out and go for it,” Bryant told reporters.
“Nobody wants to lose three in a row.”
Bryant hit 13 of 24 shots and had six steals and six assists in the game, played just off the glittery gambling mecca known as “The Strip.” The Los Angeles Lakers guard also had 31 points when he was MVP in the 2002 All-Star game in Philadelphia.
Phoenix Suns center Amare Stoudemire scored 29 for the West, hitting 14 of 22 shots, while Denver Nuggets forward Carmelo Anthony added 20 in the Las Vegas debut for the All-Star game.
The West rolled to a 79-59 lead by halftime behind 17 points from Bryant and 12 by Anthony. Bryant hit eight of 14 shots by intermission as the West hit 57 percent from the floor in the opening two quarters.
“I thought the West was a little bit more energetic than we were,” said Washington Wizards coach Eddie Jordan, who led the East. “We thought we would have to win with the tempo and the open floor and we just didn’t quite get that.”
James had 16 in the opening half on six of 10 shooting but despite a 23-12 lead in fast-break points, the East could not keep pace with the West’s torrid shooting.
Last year, James was the MVP of the All-Star game after leading the East to a come-from-behind 122-120 victory. He said they dug themselves too big a hole on Sunday.
“This time they didn’t miss shots when we got behind,” he said. “Last year we were able to get behind and they missed shots and we were able to get back into it.”
Bryant scored 11 in the second quarter to key a 40-28 West advantage and give the winners their comfortable 20-point cushion at the half.

TITLE: ‘Congestion Charge’ Zone Widened
AUTHOR: By Jeremy Lovell
PUBLISHER: Reuters
TEXT: LONDON — London’s congestion charge zone, already the world’s biggest, nearly doubled in size on Monday, despite objections from businesses and a national campaign against road tolls.
The original zone in central London will now extend westwards to take in some of the capital’s most exclusive areas like Chelsea, Kensington and Notting Hill.
So successful has the existing charge zone been, with vehicle numbers down about 10 percent four years after it started, that cities in the U.S. and Europe are following suit and the government is planning national road tolls from 2015.
But the plans to extend road pricing schemes to highways and urban centers throughout the country have attracted widespread opposition.
So far 1.5 million people have signed a petition against a national scheme on Prime Minister Tony Blair’s Downing Street Web site in a campaign that ends on Tuesday.
Congestion in Britain has become a major headache for the government and businesses with more than 30 million cars clogging the roads in a nation of 60 million people.
While the aim of the 8 pound weekday daily charge on all vehicles in the new London zone extending from Hyde Park to Earl’s Court is to cut congestion and journey time, it is actually expected to boost traffic in the original zone.?
Cameras snap every vehicle entering the zone and match up the licence plates with a database of payments, issuing fines of up to 100 pounds ($150) to those who fail to pay.
“The western extension of the zone will reduce traffic levels by 10 to15 percent, congestion by 15 percent and make life better for Londoners in the area,” said Michele Dix, director of Congestion Charging.
“Because of the 90 percent discount to residents there, it will have the effect of raising traffic in the central zone, but only by about one percent,” she said.
But other calculations suggest the resulting increase in traffic in the central zone could be as much as 5 percent — in effect a halving of the traffic reduction achieved there.
Instead of having to pay the full daily charge to drive anywhere in the enlarged area — covering 38 square kilometres — the 60,000 residents in the new western zone will only pay 80 pence, less than a bus journey.
Businesses in the extended zone have complained it will put off customers.
“We are not against congestion charging as such, but it has hurt our members and not enough is known about the economic impacts, so we want an independent inquiry,” said Colin Stanbridge of the London Chamber of Commerce.
Putting in 693 more cameras at 137 sites has cost more than 100 million pounds. Net revenues are expected to be 25 to 40 million pounds a year.?
Money from the new scheme is supposed to be used for buying more buses and improving roads and cycle paths.
But employers’ group the Confederation of British Industry said it was not value for money, and a local residents group said it expected revenues to be low.

TITLE: Minister Linked to Dead Model Resigns in Shame
PUBLISHER: The Associated Press
TEXT: NASSAU, Bahamas — Photos of the Bahamas’ immigration minister embracing Anna Nicole Smith forced the official to resign amid speculation the Playboy Playmate received special treatment when applying for permanent residency on the island nation. 
Photos recently appeared in a Bahamas newspaper showing Immigration Minister Shane Gibson on a bed with Smith — both fully clothed — and embracing her.
“I want to apologize to all persons who may in any way have been offended by anything that I have said, done, or perceived to have said or done,” Gibson said on state TV Sunday night. “To the extent that my beloved country has in any way suffered… I want to apologize to the Bahamian people as a whole.”
However, Gibson, who fast-tracked Smith’s application for residency, denied any wrongdoing and said he did not have a sexual relationship with Smith.
Smith died on Feb. 8 in Hollywood, Florida. She had based her residency application upon her claimed ownership of a waterfront mansion in the Bahamas. However, the ownership of the property is disputed.
Prime Minister Perry Christie said he had accepted Gibbon’s resignation.
“However sad Shane’s decision to resign may be, I also believe, as does he, that it is the correct course of action for him to take in all of the circumstances,” the prime minister said on TV.
Gibson stated emphatically during a special broadcast on the national television station that although he was stepping down, he was not admitting to any of the allegations against him, calling them “vicious and wicked lies.”
“I unconditionally deny that I ever abused my ministerial office by granting Anna Nicole Smith any permit of which she was undeserving or for which she was not qualified under the laws of the Bahamas,” he said.
The Tribune of Nassau on Feb. 12 published two photos on its front page showing Smith and Gibson embracing on a bed decorated with pink flowers and a white ribbon. 
The newspaper said the photographs were taken in Smith’s bedroom and that it obtained the pictures from an unidentified source.

TITLE: Murray Battles To Win ATP Tour Title
PUBLISHER: Reuters
TEXT: SAN JOSE, California — Andy Murray pinpointed his battling qualities as the key factor in his 6-7 6-4 7-6 win over Ivo Karlovic in the final of the San Jose Open on Sunday. 
The 19-year-old Scot had to come from a set down, and a break down in the second set, to win his second ATP Tour title in a battle lasting more than two and a half hours. 
His straight-sets win over top-seed Andy Roddick followed two tough three-set battles against Dane Kristian Pless and Lee Hyung-taik of South Korea. 
Murray admitted he had to dig deep to overcome the challenger of the big-serving Croat in the final. 
“On a court (as fast as) this, I’ve had to play some big servers so it’s about mental strength,” Murray said. 
“You have to play a great tournament to win, regardless of how well you’re hitting the ball. But you do have to strike the ball pretty well to win an ATP tournament and I think I did that this week.” 
After his victory in San Jose last year, Murray suffered a slump in form with early defeats in several tournaments until Wimbledon, where he reached the last 16, which included a win over Roddick. 
Murray said he hoped to avoid the same kind of let-down this time. 
“I think I have more experience this year,” he said. 
“I am looking forward to the clay-court season this year. Last year I lost in three sets in Indian Wells, Miami, Monte Carlo and Barcelona. 
“This year I have won all the three-set matches I’ve played. So that’s the key, sticking in there in tough matches.”

TITLE: Matviyenko Hints at 2012 Olympic Bid
PUBLISHER: The St. Petersburg Times
TEXT: As a delegation from the International Olympic Committee was due to visit the southern Russian city of Sochi to evaluate its bid to hold the 2014 Winter Games, Governor Valentina Matviyenko said that St. Petersburg could bid to hold the Summer Games.
If Sochi loses the race, St. Petersburg will compete to host the Summer Olympics in 2016, Matviyenko told reporters on Friday.
“Of cause, if Sochi wins, Russia’s attempt to host the subsequent summer Olympics as well is doomed,” Matviyenko said. “But if Sochi loses, then we will certainly put St. Petersburg forward as a candidate. I am convinced that St. Petersburg would win, if the city becomes a candidate.”
The IOC will announce which city will host the 2014 Winter Games on July 4. Also competing are Almaty (Kazakhstan), Borjormi (Georgia), Jaca (Spain), PyeongChang (South Korea), Salzburg (Austria) and Sofia (Bulgaria). 
Applications to host the 2016 Olympic Games must be submitted to the IOC no later than Sept. 15, according to Gamesbid.com, a web site that tracks bids for Olympic events. Other cities reportedly considering a bid include Rio de Janeiro (Brazil), Dubai (United Arab Emirates) and Tel Aviv (Israel).  
Moscow bid for the 2012 Summer Games, but lost out to London. The next summer games are to be held in Beijing, China, in 2008. 
Thirteen members of the IOC Evaluation Commission arrived in Sochi on Sunday at the state-of-the-art new terminal of Sochi International Airport to begin the evaluation of Sochi’s bid for the 2014 Winter Olympic Games, Gamesbid.com said. 
The group was met by a traditional Russian welcoming party in national costume and then transported to the five-star Rodina hotel where the group will be staying until they leave Sochi on Saturday.

TITLE: Australia Presses Cheney
AUTHOR: By James Grubel
PUBLISHER: Reuters
TEXT: CANBERRA — Australia will press U.S. Vice President Dick Cheney this week to ensure a speedy trial for Australia’s Guantanamo Bay inmate David Hicks so he can be brought home by the year’s end, said Prime Minister John Howard. 
With his government trailing in the polls and facing a tough election around October or November, Howard said he would use Cheney’s visit to Australia on Thursday to push for Hicks to be brought before a military trial “without any further delay.” “Now we are very unhappy that it has taken this long,” Howard told Australian television on Monday, blaming much of the delay on the processes within the U.S. Defense Department.
If convicted, Australia and the United States have agreed Hicks can return to Australia to serve out any prison sentence.
Cheney will visit close U.S. ally Australia for two full days during which he will hold talks with Howard about U.S. plans to send an extra 21,500 U.S. troops to Iraq.
Australia has about 1,450 personnel in and around Iraq, with a battle group of only 520 troops in Iraqi’s south. Howard has ruled out sending more combat troops to Iraq, but said more trainers may be sent to help build up the Iraqi security forces.
Hicks, 31, has been in U.S. custody for five years and faces charges of providing support for terrorism, but opinion polls show Australians are increasingly unhappy about his treatment and the Australian government’s refusal to demand his release.
Australia’s Greens leader Bob Brown said Howard wanted Hicks returned to Australia by Christmas to ensure the issue was off the agenda by the time of the Australian elections, due any time from August but most likely to be called for October or November.
“More plainly than ever, Hicks has become Howard’s political captive,” Brown said in a statement. “Hicks will come home before Christmas so that Howard can get home before Christmas.” Howard’s tougher stand against Hicks came as conservative government lawmakers complained the Hicks case was becoming a concern with voters, and with a poll showing 56 percent of people were opposed to the government handling of his case.
Hicks was arrested in Afghanistan in late 2001 and accused of fighting for al Qaeda, blamed for the Sept. 11, 2001 airliner attacks on the United States.
Hicks is among around 395 suspected al Qaeda and Taliban fighters being held at Guantanamo Bay, and will be one of the first to face a Military Commission trial.
U.S. officials in early February said Hick’s trial might not start until July, meaning the trial could overlap with Howard’s campaign to win a fifth straight election to extend his 11 years in office.

TITLE: No Breakthrough as Olmert, Abbas Meet
AUTHOR: By Sue Pleming
PUBLISHER: Reuters
TEXT: JERUSALEM — Israeli-Palestinian talks hosted by U.S. Secretary of State Condoleezza Rice ended on Monday with a vague promise to meet again and little sign of progress on reviving peace moves. 
The talks, attended by Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas, were overshadowed by a Palestinian unity deal that calmed factional fighting but cast a new cloud over prospects for peace with Israel.
“All three of us affirmed our commitment to a two-state solution, agreed that a Palestinian state cannot be born of violence and terror,” Rice said after the meeting in a Jerusalem hotel, which lasted more than two hours.
She stood alone to deliver the brief statement in a hotel ballroom, and took no questions from reporters. Her two partners in the talks were not present.
Rice said Olmert and Abbas “reiterated their acceptance of previous agreements and obligations,” including a U.S.-backed road map for peace charting reciprocal steps toward a Palestinian state, and the two leaders would meet again soon.
Rice gave no date, but said she expected to return to the region shortly.
Olmert and Abbas, she said, discussed the deal the Palestinian president signed with the Islamist movement Hamas to establish a unity government, an accord that fell short of international demands on policy toward Israel.
“The president and the prime minister discussed their views of the diplomatic and political horizon and how it might unfold toward the two-state vision of President Bush,” Rice said.
Olmert said on Sunday that he and President Bush agreed to boycott the unity government, which has yet to be formed, unless it renounced violence, recognized Israel and accepted existing interim peace accords. Rice did not mention the issue in her brief remarks after the meeting, but noted it was the position of Middle East mediators known as the “Quartet” that the terms must be met.
The group comprises the United States, the European Union, Russia and the United Nations.
The unity government deal, forged in Mecca, Saudi Arabia, earlier this month, helped curtail Palestinian factional warfare that caused 90 deaths in recent weeks.
A boycott by the United States could prevent a resumption of direct aid from Western donors to the Palestinian Authority, cut off after Hamas defeated Abbas’s Fatah movement in an election a year ago. Bogged down in Iraq, the United States has been seeking progress on stalled Israeli-Palestinian diplomacy.
It has said it would like both sides to start talking about the tough issues, such as the outlines of a new Palestinian state, refugees and the status of Jerusalem.

TITLE: Financial Results Show That
Chelsea’s Books are Balanced
PUBLISHER: Reuters
TEXT: LONDON — Premier League champions Chelsea recorded a pre-tax loss of 80.2 million pounds in the 2005/06 financial year, the club announced on Monday. 
The loss is a cut of 60 million on the previous year and lower than the 87.8 million pounds Chelsea lost in 2003/04, the first of owner Roman Abramovich’s ownership. 
Chelsea also announced “significant increases” in turnover (up 2.3 percent), merchandising (up 44 percent from 7.7 million to 11.1 million) and football activities (up 6.3 percent). 
“These figures demonstrate that the business is moving in the right direction with increases and growth in all the major income streams,” said Chelsea Chief Executive Peter Kenyon. 
“That positive trend will only continue as, for example, this year end does not take into account the benefits of the adidas deal,” he added, referring to an eight-year kit deal signed in 2005 worth around 100 million pounds. 
“Last year we took some painful decisions in order to help us achieve our long term business aims. This year’s figures prove they were the correct decisions,” he said.

TITLE: Britney Spears Sports Bald New Look After Rehab
PUBLISHER: Reuters
TEXT: WASHINGTON — Pop star Britney Spears got ready for the weekend by shearing all her hair off and dropping by a Los Angeles tattoo parlor, where she quickly drew a crowd. 
The Friday evening visit to the “Body and Soul” tattoo shop in the Sherman Oaks district of Los Angeles came on the same day People magazine and other entertainment media reported that Spears, 25, had recently entered a rehabilitation center in Antigua and checked out a day later.
Spears representatives could not be reached for comment on the rehabilitation reports, but the Access Hollywood entertainment news outlet cited a representative denying them and saying she was not in rehab.
Los Angeles television station KABC showed video of Spears entering the parlor with a small tattoo visible on the back of her neck and her head completely bare. People magazine carried a picture of her shearing her locks herself, with an electric clipper at a hair salon.
Tattoo artist Max Gott told the station Spears got a “dainty” new tattoo. “She got some cute little lips on her wrist — red lips, a little pink,” he said. Outside, police controlled a large crowd of onlookers and cleared the way for her to leave.
Spears reached pop stardom with hits such as “Oops!... I Did it Again,” and developed a reputation for a reckless spontaneity, including her two-day marriage to a childhood friend.
A mother of two young sons, Spears has acknowledged her image had taken a beating in recent months. She has become a regular fixture on the circuit of big-city U.S. nightclubs since her split in November from husband and former backup dancer Kevin Federline.
Spears was repeatedly photographed in December climbing out of automobiles without wearing underpants while in the company of celebrity Paris Hilton.
Spears and Hilton recently made the cover of Newsweek magazine with a story headlined “The Girls Gone Wild Effect” and a poll of readers who said celebrities like them were having too much influence on young girls.
In January, Spears posted a message on her web site acknowledging the negative publicity while writing, “I look forward to coming back this year bigger and better than ever and to reach out to my fans on a more personal level.”

TITLE: On U.S. President’s Day, George W. Bush Mulls His Legacy
AUTHOR: By Steve Holland
PUBLISHER: Reuters
TEXT: WASHINGTON — In the Lincoln Bedroom, President George W. Bush likes to show off one of the most treasured historical artifacts in the White House, a handwritten copy of Abraham Lincoln’s 1863 Gettysburg Address. 
The building’s walls speak of past battles, victories, defeats, heartache. President George Washington’s portrait hangs in the Oval Office. Civil War Commander and two-term President Ulysses Grant is placed in Bush’s private study.
The Queen’s Bedroom offers memories of Winston Churchill, who stayed there before and after World War II, as Bush told C-SPAN, “waddling around… with a cigar in one hand, a brandy in the other, demanding attention.”
As Bush marks the Presidents Day holiday and George Washington’s 275th birthday on Monday, he faces a drumbeat of criticism for the event that will likely be a big part of his legacy — the Iraq war.
The president believes it will take some time to determine his place in the pantheon of presidents, despite the negative assessments some historians have already made.
“I don’t think you’ll really get the full history of the Bush administration until long after I’m gone. I tell people I’m reading books on George Washington and they’re still analyzing his presidency,” Bush told CBS’ “60 Minutes” in an interview last month.
Many in the current crop of historians are already prepared to declare Bush’s presidency a failure.
In a December opinion article in The Washington Post, Columbia University history professor Eric Foner wrote that Bush was likely to join mediocre presidents like Franklin Pierce, James Buchanan and Andrew Johnson.
“Even after being repudiated in the midterm elections of 1854, 1858 and 1866, respectively, they ignored major currents of public opinion and clung to flawed policies. Bush’s presidency certainly brings theirs to mind,” Foner wrote.
Foner’s article was headlined, “He’s the worst ever.”

BE LIKE IKE?
But Vanderbilt University history professor Thomas Alan Schwartz said it was too soon to judge Bush. “Presidential reputations tend to go up and down,” he said.
He cited Dwight Eisenhower as a president whose stock has risen in the decades since he handed over power to John Kennedy in 1961.
“But Bush will face some enormous obstacles to being fully rehabilitated. Much does depend on Iraq, but even if that does not end in disaster — still an open question — the mistakes made in the occupation will be ascribed to him. Were Osama Bin Laden to be captured or killed before Bush leaves office, that could help, but the uncertainties involving Afghanistan will also hurt him,” Schwartz said.
Bush, a Republican, sees historical parallels in Democrat Harry Truman’s presidency. Truman set in motion the Cold War doctrine that shifted U.S. foreign policy from one of getting along with the Soviet Union to trying to contain its expansion.
Bush sees his ultimate legacy as starting a years-long effort to check a radical Islamist militant movement from spreading globally. He sees Iraq as a central battleground.
“Today, at the start of a new century, we are again engaged in a war unlike any our nation has fought before. And like Americans in Truman’s day, we are laying the foundations for victory,” he said last May.
After Truman, presidents from Eisenhower to Ronald Reagan confronted the Soviet threat. Will future presidents similarly continue to wage Bush’s war on terrorism? 
Many of the 2008 presidential candidates are searching for a way out of Iraq. Illinois Democratic Senator Barack Obama, for example, says he would bring U.S. forces home by March 2008. 
And Obama’s comments on the war on terrorism, laid out in his Feb. 10 speech announcing his candidacy, did not appear as muscular as the president’s. He said terrorists could be tracked down with a stronger military and better intelligence. 
“But let us also understand that ultimate victory against our enemies will come only by rebuilding our alliances and exporting those ideals that bring hope and opportunity to millions around the globe,” Obama said.