SOURCE: The St. Petersburg Times
DATE: Issue #1251 (17), Tuesday, March 6, 2007
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TITLE: State Keeps Control In Breakup Of UES
AUTHOR: By Simon Shuster
PUBLISHER: Staff Writer
TEXT: MOSCOW — Unified Energy Systems has changed its breakup plan, inserting an interim phase of state control that analysts said could put off full privatization of the power sector for another five years.
“Our decision marks a very important balance, a compromise, taking into account our minority shareholders and our major shareholders,” UES chief Anatoly Chubais said during a conference call Friday evening.
The new reform plan, which was approved Friday by the UES board of directors, amounts to an extremely complicated asset swap between the government and two UES subsidiaries. The change will allow the state to maintain its grip on the Federal Grid Company and the country’s biggest producer of hydroelectricity, Hydro-OGK, even after UES ceases to exist in 2008.
Investors have broadly welcomed the change as clearing some of the final legal obstacles to the long-awaited reform of the electricity sector, and one that will help the government raise an estimated $118 billion required to overhaul the country’s antiquated power system.
According to the original reform laws, passed in 2003, the Federal Grid Company and Hydro-OGK are strategic assets and must therefore be in the hands of the government after UES spins off all its subsidiaries.
But simply buying control of these companies would put too much strain on the federal budget. So large stakes in both companies will be transferred to the state in exchange for the state’s stakes in 18 power generation companies, or gencos.
The state-held shares in these gencos will be placed into two new holdings, one dominated by the grid company, and the other by Hydro-OGK.
UES has not yet decided how it will split things up between the two.
Under the original reform plan, UES was to sell the gencos directly to investors.
Now the grid company and Hydro-OGK will take charge of these sales, which are intended to help them make money for their own development. The grid company alone needs $50 billion to fix outdated power lines.
To prevent mismanagement, UES will draw up documents “spelling out exactly what can and cannot be done with these shares,” Chubais said.
But analysts criticized the plan Friday for its complexity, which they said might scare away investors, and more importantly, for not putting a time limit on this “interim” phase.
“The main risk is that [the two holding companies] will have very little stimulus to sell these generating assets,” said Dmitry Tsaregorodtsev, senior analyst at FIM Financial Services. “It will make sense to withhold them until their market price gets much higher, and then to sell them bit by bit, instead of flooding the market all at once.”
“It could take four or five years,” he added. UES spokeswoman Tatyana Melyayeva said it would take two or three years for these assets to be sold. But until they are, 18 out of UES’s 20 power producers will have a new state insider on their management board.
OGK-4, a genco that owns five power stations across Russia, welcomed the partnership.
“Even without the new plan, all of our projects depend on the approval of [the Federal Grid Company] because you can’t install new capacity if you don’t have a grid to run it through,” OGK-4 spokeswoman Elmira Bobryakova said.
Neither Hydro-OGK nor the grid company will be able to dominate any of the gencos, because their stakes will be too small.
In each case, their stake in a genco will amount to roughly half of what UES now controls. The other half will go pro rata to UES’s minority shareholders.
This means that the grid company or the Hydro-OGK will own at least 25 percent of each genco, but in no instance will it be a controlling stake of more than 50 percent.
OGK-6 will give over the most. UES owns 93.5 percent of this genco, which runs six power stations across Russia, and will therefore have to give almost 47 percent to either the federal grid company or the Hydro-OGK. Sergei Karaulov, chief spokesman for OGK-6, said they had long-standing relations with the grid company in the technological sphere, but not in regard to finance.
He added that if there was some disagreement, the state-owned Systems Operator, which controls the dispatching of electricity from the power stations through the grid, could step in.
“Hypothetically, in case of anything, it would put us in our corners and calm us down,” he said.
As for the new reform plan, Karaulov said his company would do what UES said. “We don’t have much choice,” he added.
The decision must still get shareholder approval, but UES has said any investors who disagree with the plan could simply trade their shares in for cash.
Local banks agreed that the new reform plan presented no danger for minority investors.
Also at Friday’s conference, Chubais said UES shareholders could get their choice of UES spin-offs when stakes in these spin-offs are parceled out pro rata to the shareholders next year.
“I think it is in principle very possible for shareholders to get this choice, if they can come to an agreement among themselves,” Chubais said. He added that no formal decision on this had been made, however.
TITLE: Thousands Take to City Streets for Protest
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Thousands of demonstrators gathered on Nevsky Prospekt on Saturday in support of opposition coalition Other Russia for an unofficial event called “a march of dissenters.”
The St. Petersburg police reported Sunday that 113 activists were detained, while representatives of Other Russia claimed several hundred of their followers had been held after clashes between police and protesters.
The demonstrators stopped traffic for over two hours, and chanted “No Police State,” “We Need Other Russia,” “Russia Without Putin” and “This is Our City” in one of the most important expressions of civil opposition to Kremlin policy that Russia has seen since the election of President Vladimir Putin in 2000.
Marchers included old ladies who were falling to the ground as they tried to get through dense police cordons. Strong words were exchanged as younger, more forceful protesters pushed through — often to be thrown into police cars later.
The police broke the rally into several groups but activists eventually forced their way through police cordons and the march spilled onto Nevsky Prospekt.
Other Russia, an anti-Putin alliance, held a similar but smaller event in Moscow in December. Other Russia was created with an eye to the 2008 presidential elections when it hopes to put forward a strong alternative to Kremlin-backed candidates.
The umbrella group incorporates, among others, Garry Kasparov’s United Civil Front, Mikhail Kasyanov’s People’s Democratic Union and Eduard Limonov’s National Bolshevik Party.
The police estimated the number of protesters at Saturday’s march at “more than 2,000.”
Kasparov, one of the leaders of Other Russia, said the number of protesters exceeded 6,000.
The demonstration was by far the largest that Putin’s home town has seen in recent years, with numerous independent eye-witnesses at the demonstration putting the number of participants at around 5,000. During the last five years opposition gatherings have typically managed to draw no more than a few hundred supporters.
Other Russia had planned to march from the Oktyabrsky Concert Hall to city government offices at Smolny but St. Petersburg Governor Valentina Matviyenko branded the event a “provocation by extremists” and banned it. She called it illegal and sent in armed police.
City Hall had offered to let the activists hold a meeting in a remote area near the Finland Station but the protest groups ignored the offer.
When the protesters departed from their meeting point near the Oktyabrsky at midday, they were immediately surrounded by police cordons.
Activists began to be detained as they tried to force their way through. National Bolshevik head Limonov was arrested before he could even join the demostration.
Many of those who attended the march had been prepared for a tough response from the authorities. City Hall had organised an unprecedented campaign against the event.
Matviyenko appeared on Channel 5 news bulletins on Friday evening denouncing the planned demonstration and warning people not to join what she called “the extremists.” Frequent warnings broadcast on public address systems on street corners and in the metro advised people to stay away.
“Everyone who came here has overcome their fear,” Kasparov, a former world chess champion now devoted to opposition politics, said. “Democracy does not come for granted.”
“I want to live in a free state,” said Olga, a 25-year-old activist. “But I live in a country where the city governor calls civil protest an act of extremism. This is a scary sign. Extremism is a crime, and we are here to voice our concern about freedoms in Russia being squashed by the ruling elite.”
The rally was supported by the local branch of the Yabloko party, and a number of protesters said it was frustration against the ban against the liberal party taking part in upcoming local elections that had prompted them to join the march.
“It was a matter of self-respect for me to come,” said teacher Tatyana Korepanova. “I came to the march to show that I share the concerns about democracy shrinking in Russia at high speed. We are falling back into the Soviet era.”
Boris Shumsky, a 78-year-old pensioner, expressed similar feelings.
“I am a dedicated Yabloko supporter, and I am here because I have had enough of totalitarian regimes in my life,” he said. “The authorities are trying to bring the Soviet Union back. The elections have been turned into a wretched joke, ordinary citizens are treated like slaves with no rights at all, and the only thing that is left to us is to take the streets.”
During an impromptu meeting at Ploshchad Vosstania, Maxim Reznik, head of the Yabloko branch in St. Petersburg, condemned the attitude of the authorities.
“Governor Valentina Matviyenko is behaving like some kind of wayward 19th century feudalist, treating the citizens of St. Petersburg as though they were her own silly servants. Anyone who says a word of criticism is quickly branded an extremist,” Reznik said.
“What has happened in the city today is a provocative act,” Matviyenko told a conference of the pro-Kremlin United Russia party on Saturday. “And it was actually organized by visitors from Moscow. Two train-car loads of extremist youth groups — about 120 people — have arrived. Tell me: who is not happy that the city is developing stably?”
The march was also castigated by mainstream TV channels. ORT called the rally “a clash with police, provoked by hooligans,” and the St. Petersburg edition of a weekly news analysis program on Rossia channel also branded the march organizers extremists.
Neither channel mentioned the content of speeches at the meetings or reported the demonstrators’ slogans, such as “free elections” and the “strangling of liberties.”
“It is much easier to go on Nevsky and make noise, than to win seats in the parliament,” commented the Rossia show’s anchor Alexander Korennikov, apparently referring to Yabloko’s failed efforts to get back to the ballot in the St. Petersburg elections on March 11.
ORT and Rossia praised the police in their news bulletins for “tolerance” but the march’s participants complained about excessive use of physical force by police.
“I could not believe my eyes! We were a peaceful demonstration!” Natalya Yevdokimova, head of the Social Issues Commission of the St. Petersburg Legislative Assembly said.
“The police were let loose on unarmed people, and raged against them like zombies. I saw officers beating young people with sticks like mad. That can’t be justified. The protesters did not present any danger. We did not set cars on fire or throw stones at windows. We took to the streets to say that we exist. But that’s not a crime. Civil protest is our legal right, written into the Russian Constitution.”
Even parliamentarians were hit by the police. Sergei Gulyayev, a liberal lawmaker at the St. Petersburg Legislative Assembly, returned home with an injured back.
“The police knocked me down and dragged me along the ground for at least twenty meters,” says Gulyayev.
Kasparov and the other leaders of The Other Russia seemed pleased with the turnout. “We felt the support and understanding of the ordinary people. The rally left me with a sense that the new Russia is beginning to emerge,” Kasparov said.
TITLE: Reform Party Wins in Estonian Election
AUTHOR: By Patrick Lannin and David Mardiste
PUBLISHER: Reuters
TEXT: TALLINN — Center-right Estonian Prime Minister Andrus Ansip, who backs more tax cuts but is reluctant to brake the economy to speed euro adoption, said on Monday all options were open for a new coalition after a slim election win.
Ansip, who has overseen growth of more than 11 percent, has been in power since April 2005 with the left-leaning Center Party. But Ansip said the program of his Reform Party was closer to that of the nationalist Pro Patria-Res Publica bloc.
“At this stage, you do not find a party leader who rules out cooperation with another party and I do not either,” he told Estonian television.
He said differences remained over economic policy with the Center Party, particularly on the question of raising salaries for public sector workers, which the Center backs.
“Coalitions are not born overnight or in a couple of days,” Ansip added.
The Sunday election gave the Reform Party 31 seats in the 101-seat parliament, a big jump from 19.
Ansip benefited from strong growth figures and rising wealth to record the highest personal score for a candidate in any election at 22,000 votes.
The election, the first in the world to be held partially via the Internet, gave the Center Party 29 seats while Pro Patria-Res Publica took 19, a better performance than expected.
Ansip and the Center Party had ruled with a third, smaller coalition partner, the People’s Union, which won six seats.
Reform and Pro Patria would need a third party for a majority, which is unlikely to be the Center.
Pro Patria leader Mart Laar told Estonian television he and Ansip could link with the Social Democrats, who won 10 seats to be the fourth largest in parliament. While Ansip offered tax cuts, Center Party leader Edgar Savisaar pledged higher wages and pensions for a nation which is still one of the poorest in the EU, despite its strong growth.
Economists have said the country faces an overheating problem but Ansip has said he will not dampen growth in order to meet the conditions to adopt the euro.
High inflation, 5.1 percent in January, has meant Estonia has had to delay entry to the euro zone, which was intended for this year. Ansip has said 2010 is a realistic target date.
The Internet voting, held last week for the first time in the world for a national parliamentary election, saw more than 30,000 take part. Overall turnout in the election rose to 61 percent from 58 percent in the last election in 2003.
The election was overshadowed by increased tensions with Russia, which may have helped Pro Patria.
The tensions were sparked when parliament voted to remove a statue of a Red Army soldier from the center of the capital Tallinn because it was a reminder of 50 years of Soviet rule.
Russia called the plan blasphemous to the memories of the fighters against fascism.
TITLE: In Brief
TEXT: University Status
ST. PETERSBURG (SPT) — St. Petersburg State University might receive “federal status” in 2007, Rosbalt news agency reported Friday, citing the university’s head Ludmila Verbitskaya. Designing its own study programs (instead of running the country-wide standardized versions) and greater financial freedom are among the expected benefits from the move, Verbitskaya told Rosbalt.
Economic Forum
ST. PETERSBURG (SPT) — The Eleventh St. Petersburg International Economic Forum is to be held June 8-10, Fontanka.ru reported Monday, quoting St. Petersburg Vice-Governor Mikhail Oseyevsky. The event is expected to attract 2,500 participants and will focus on “discussion of the problems of the Russian economy and the economies of developing countries,” Oseyevsky said.
Garage Demolition
ST. PETERSBURG (SPT) – City Hall plans to demolish a quarter of the city’s freestanding garages, Rosbalt news agency reported Monday. Garages of this type gained widespread popularity during the Soviet era but are not effective economically in today’s conditions, Rosbalt quoted St. Petersburg Vice-Governor Alexander Vakhmistrov as saying.
TITLE: Russian Tourists’ Murderer Denies Being Linked to Mob
PUBLISHER: The Associated Press
TEXT: PATTAYA, Thailand — A man arrested for the murders of two female Russian tourists in Thailand insisted that he was not a part of any crime syndicate following a re-enactment of the crime Sunday morning.
“I was robbing them and there is no one else involved,” said Anuchit Lamlert, who was arrested Thursday and has confessed to the murders of Tatyana Tsimfer, 30, and Lyubov Svirkova, 25.
The victims’ bodies were found Feb. 24, shot and slumped in lounge chairs on a beach in Pattaya, about 110 kilometers southeast of Bangkok. Sunday morning’s public re-enactment of the crime followed standard Thai police procedure, and was covered by most Thai television stations. The brutal killings shocked Thailand and have been dominating news headlines for the past week, as well as being the subject of intense interest in Russia.
Anuchit told police that the motive for the killings was robbery and that he killed the pair because he was “afraid they would remember [his] face” after they saw him and started crying out for help. Police believe he may be lying, however.
“There are inconsistencies between his confession and the evidence,” a Thai national police official said on Saturday.
TITLE: Kadyrov Appointed as President
AUTHOR: By Musa Sadulayev
PUBLISHER: The Associated Press
TEXT: GROZNY — Chechnya’s parliament approved Ramzan Kadyrov as the republic’s new president Friday in a near-unanimous vote one day after President Vladimir Putin made the nomination.
Human rights groups allege that security forces under Kadyrov’s control abduct and torture civilians suspected of ties to Chechnya’s separatist rebels. Some observers suggest he was tied to last year’s murder of Anna Politkovskaya, who had reported extensively on Chechnya’s wars and sufferings. Kadyrov has denied any involvement.
Kadyrov is credited with a reconstruction boom that he administered as the region’s prime minister, under which Grozny is being transformed from a moonscape of rubble and shattered buildings.
Kadyrov became acting president after Putin’s dismissal of Alu Alkhanov last month. Alkhanov had become increasingly critical of Kadyrov.
Kadyrov’s nomination was approved by 56 votes in the 58-member regional legislature. Two ballots were ruled invalid.
The reconstruction program has been at the heart of a Kremlin strategy to crush rebels, but critics say the alleged abuses by his security forces and by federal and regional police and soldiers severely undermine attempts to bring order to Chechnya.
Kadyrov, 30, is the son of Chechnya’s first pro-Moscow president, Akhmad Kadyrov, who was assassinated in 2004.
Two wars over the past dozen years between federal forces and separatist rebels who increasingly voiced militant Islamic ideology left much of the republic in ruins and its people gripped by fear and resentment. Major offensives died down early this decade, but small clashes continue and rebels attack government forces with booby-traps and remote-controlled explosives.
Prominent Russian and international rights groups boycotted a human rights conference in Grozny on Thursday, saying their presence would lend Kadyrov legitimacy.
Council of Europe human rights commissioner Thomas Hammarberg, who attended the conference, told reporters Friday that Chechnya continued to be plagued by allegations of torture and by officials’ failure to respond to families seeking information about missing relatives.
Hammarberg declined to comment when asked for his opinion on Kadyrov becoming president and he did not point to Kadyrov’s forces as responsible for abuses.
Of the detainees interviewed by Hammarberg in Chechnya who complained of torture, “several of them pointed at the activities of the federal police,” he said in Moscow.
Hammarberg recommended that Chechnya set up a “truth commission” similar to those established in Latin American countries to try to bring to light those responsible for abuses.
Analysts say Putin has entrusted Kadyrov with power in part because he is seen as the only person who can keep large numbers of former rebels under control. Many former rebels now serve in the police and security forces.
But his growing clout is also seen as a risk for the Kremlin, particularly after Putin steps down at the end of his second term next year, because some see his loyalty to Moscow as being closely tied to his relationship with Putin.
TITLE: Corpse of Former Georgian President Found in Chechnya
PUBLISHER: The Associated Press
TEXT: GROZNY — Authorities in Chechnya on Saturday unearthed what appeared to be the corpse of former Georgian President Zviad Gamsakhurdia, his son said, and forensic experts prepared to examine the remains to determine the cause of his mysterious death.
Gamsakhurdia was elected as Georgia’s first president in 1991, but was overthrown in a popular uprising in January 1992.
He fled to Chechnya and lived there until he returned to Georgia and led an unsuccessful rebellion aimed at returning to power.
He died under mysterious circumstances in 1993.
Gamsakhurdia’s son Konstantin Gamsakhurdia told reporters in Grozny on Saturday that he had identified his father’s body based on his watch and shoes, put in his coffin in line with local tradition.
“I have no doubt that it is him,” he said.
TITLE: In Brief
TEXT: Avalanche Hits Resort
MOSCOW (Reuters) — An avalanche killed a 10-year-old child in a ski resort Sunday, Interfax reported.
Interfax quoted local emergency officials as saying a total of four people had been swept away after the avalanche hit the Krasnaya Polyana resort near the town of Sochi, which is competing to host the 2014 Winter Olympic Games.
Fans Arrested
MOSCOW (SPT) — Police arrested dozens of football fans after fights broke out across the city Saturday between supporters of CSKA and Spartak, RIA-Novosti reported.
Police arrested 64 fans, 49 of whom were drunk, after a fight broke out at Luzhniki Stadium Saturday during the CSKA-Spartak Super Cup game, a police spokesman told Interfax. CSKA won the game 4-2. Dozens of other fans were arrested after clashing at metro and train stations throughout the city, metro police told RIA-Novosti.
Georgians in Iraq
TBILISI, Georgia (Reuters) — Georgian President Mikheil Saakashvili said Sunday that he would send more troops to Iraq to take part in the multinational peacekeeping force.
TITLE: Decline In Stocks
AUTHOR: By William Mauldin
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russian stocks dropped Monday, posting the biggest move among equity indexes included in global benchmarks on concern that an economic slowdown could cut international demand for commodities. GMK Norilsk Nickel led the decline.
The U.S. and global economy are slowing,’’ said Guenter Faschang, who manages $1 billion in eastern European stocks at Vontobel Asset Management in Vienna. “The Russian market is dominated by cyclical stocks, especially in oil, gas and metals, and these cyclical stocks are significantly overvalued.’’
The ruble-based Micex Index declined 5.8 percent to 1499.12 at 3:48 p.m. in Moscow. The index has fallen 15 percent in the last five days. The dollar-denominated RTS Index lost 5.2 percent to 1702.01 Monday.
Norilsk Nickel, the world’s biggest nickel producer, dropped 7 percent to 4,104.49 rubles, heading for its biggest fall this year. The price of nickel for three-month delivery declined 3.2 percent to $39,800 a metric ton on the London Metal Exchange. Russian officials said investors were overreacting.
“There are not even the slightest fears that these developments might prompt a crisis in Russia,’’ Economy Minister German Gref told journalists in Singapore Monday, RIA Novosti reported. “There is no reason to dump Russian shares.’’
Gazprom, the world’s biggest natural-gas producer, fell 6.1 percent to 244.40 rubles. Lukoil, Russia’s largest oil producer, declined 4.8 percent to 1,946 rubles.
Oil also declined on concerns about economic growth. Crude for April delivery fell as much as 2.1 percent to $60.33 a barrel in after-hours electronic trading today on the New York Mercantile Exchange. About half of the RTS index is made up of energy stocks and more than half of the Micex comprises energy, metals and mining stocks, according to Deutsche Bank AG.
Unified Energy System, the country’s national power utility, dropped 5.8 percent to 28.17 rubles. The company said its OGK-3 generating unit would keep all the proceeds of its stock sale this month rather than turning over some of the funds to affiliated utilities or the parent company. Mosenergo, a power utility that serves Moscow, fell 7 percent to 5.638 rubles.
Transneft, Russia’s oil-pipeline operator, declined 3.8 percent to 53,500 rubles after Interfax reported that a final agreement on a link bypassing Turkey’s Bosporus strait would be postponed.
Yukos Oil Co. dropped 5.6 percent to 51 cents on the RTS. Russia will auction Yukos’s natural-gas assets and its stake in Gazprom Neft, the oil-production arm of Gazprom, next month.
TITLE: Putin Eyes Belgium As Giant Gas Export Hub
AUTHOR: By Anna Smolchenko
PUBLISHER: Staff Writer
TEXT: NOVO-OGARYOVO, Moscow Region — President Vladimir Putin on Friday met with Belgian Prime Minister Guy Verhofstadt to discuss the building of a large gas storage facility in Belgium that could become a hub for exports to Europe.
Meeting at Putin’s residence outside Moscow, the two leaders discussed ways to increase cooperation in diamonds, electricity and the nuclear industry, with energy talks topping the agenda.
“We may implement a rather big project that would be useful not only for both of our nations but also for all of Europe,” Putin told Verhofstadt. “That would be building a gas storage facility rather big even for Europe, which would allow for the shipment of gas to other, third European nations, including Britain, using subsea transportation systems that start in Belgium,” he said.
Gazprom is one of the main shippers of gas through a subsea pipeline from the Belgian port of Zeebrugge to Bacton, on Britain’s southeast coast.
Verhofstadt, who earlier Friday met with Gazprom CEO Alexei Miller, said Belgium agreed with Gazprom that there were “big opportunities for our further cooperation.” He said Belgium could serve as a hub for gas transport, without elaborating on the storage facility. Ahead of his visit to Russia, Verhofstadt said in comments carried by Interfax on Wednesday that he welcomed plans by Gazprom and Belgian gas transport firm Fluxys to build Belgium-based storage facilities.
Gazprom said in a statement Friday that the depository could be built in Poederlee, a town near the port of Antwerp. An agreement to build it could be signed during Putin’s visit to Belgium in May, Kommersant reported Saturday, without citing anyone.
Last June, Gazexport, a Gazprom subsidiary, established a joint venture with Fluxys to explore possibilities for underground natural gas storage. Berenice Crabs, a spokeswoman for Fluxys, said Friday that the project was still at an early stage and exploratory drilling at the site would take place in the second half of the year.
Some gas experts cast doubt on whether the depository was feasible at the Poederlee site.
Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies, said Poederlee’s geology might not be suitable for gas storage facilities. “Otherwise, they’d have built it already,” he said.
Artyom Konchin, an analyst with Aton, said the depository would help Gazprom become more flexible, storing gas there instead of just shutting off the valve when demand drops.
Gazprom has also expressed interest in Distrigas, Belgium’s major gas supplier, which is expected to be up for grabs as the country opens its energy markets up to competition. In remarks carried by Interfax on Wednesday, Verhofstadt said he wouldn’t oppose a Gazprom bid, saying: “We welcome investors from any country.”
Gazprom is seeking access to European retail markets, sparking concern about its heavy-handed tactics.
Belgian executives, including from Fluxys and Distrigas, accompanied Verhofstadt on his one-day visit to Moscow, the Kremlin said in a statement.
Putin and his foreign policy adviser Sergei Prikhodko also discussed increasing cooperation in the diamond, electricity and nuclear industries, among others, with Verhofstadt and Belgian Ambassador Vincent Mertens de Wilmars.
Verhofstadt also met with Alrosa president Sergei Vybornov earlier Friday, and said Belgium was keen to expand cooperation in the diamond industry.
TITLE: Temasek, Troika Fund Swells
PUBLISHER: Bloomberg
TEXT: MOSCOW — The Russian private equity fund managed by Temasek Holdings Pte. And Troika Dialog will swell to $300 million by April after attracting new investors, said Troika Chairman Ruben Vardanian. Temasek, the Singapore government’s investment company, and Troika in November 2005 pooled $150 million for the Russia New Growth Fund, which targets annual returns of about 35 percent, Vardanian said in a telephone interview on March 2.
The fund has increased to $235 million after attracting new investors last year, including the European Bank for Reconstruction and Development, other European banks and private-equity funds from the U.S. and Asia, Vardanian said.
Russia’s economy, buoyed by high oil and gas prices, is set to grow 6.1 percent this year, the Economy Ministry said last month.
“The private equity business in Russia will grow very rapidly,’’ Vardanian, 38, said. “We believe there will be big interest from Russian companies to raise money through private equity.’’
TITLE: Ford, Union Seal Deal On Plant Pay and Conditions
AUTHOR: By Anna Smolchenko
PUBLISHER: Staff Writer
TEXT: U.S. carmaker Ford has reached a deal on conditions and pay at its plant in Russia, giving its workers several long-awaited concessions, company and labor union officials said Thursday.
The leader of the trade union at Ford’s St. Petersburg-based plant, Alexei Etmanov, said the management offered further concessions, including additional pay and vacations for those with hazardous work. But talks for more concessions will continue, he said by telephone from Vsevolozshk.
“There are still a lot of issues that we will be discussing,” Etmanov said, without giving specific details.
He said the company acceded to an agreement Wednesday so as to avert a strike planned by the workers for the same day. Etmanov said the workers would not strike “for now.”
Ford workers last month staged a daylong strike to persuade management into a collective agreement that would fix working hours, ban outsourcing and reduce safety risks.
The deal is a victory for the labor union, which has won several of the concessions it was seeking after the management had said it would not change its final offer of a wage increase of between 14 percent and 20 percent.
Under the agreement, wages for paint shop and welding shop workers will be 7 percent higher that those of other workers because of the hazardous conditions those employees have to deal with, Etmanov said. They will also have 12 additional days of leave, he said.
But he declined to say how much the plant’s workers would receive with the new salary hike, saying the strike action “was not about the money.” Ford acknowledged in the statement that it offered workers “improvements to other items,” but it did not go into details.
Yekaterina Kulinenko, a Moscow-based spokeswoman for Ford, said the management and the workers had “agreed on the percentage” of workers to be outsourced, without giving a figure.
The one-year agreement covering the plant’s 2,000 hourly-paid workers came into effect Thursday, Ford said in the statement.
“The signing of this collective agreement is very good news for all sides,” said Theo Streit, the plant’s general director, in the statement. Streit declined to offer details on the specific terms of the agreement, saying only that talks would continue on a weekly basis over the year.
“It’s not a bad result,” said Boris Kravchenko, head of the All-Russia Confederation of Labor, an umbrella organization that includes the Ford union. Only a handful of labor unions in Russia have achieved similar results in the past, he said.
TITLE: Evraz CEO Refuses $2.5 Mln
PUBLISHER: Bloomberg
TEXT: MOSCOW — Alexander Frolov, Chief Executive Officer of Russia’s second largest steelmaker Evraz Group, refused $2.5 million of salary and bonus, calling it “unethical.’’
Frolov asked the company’s board on Feb. 26 to approve only the $150,000 compensation paid to all the company’s directors, said Evraz vice-president Irina Kibina Monday by telephone from Moscow. Combining a CEO salary with cash from dividends and a director’s fee would be “unethical,’’ Kibina said, citing Frolov’s comments.
Evraz, based in Moscow, is 41.3 percent-owned by billionaire Roman Abramovich and his partners, while another 41.3 percent is held by company founders Alexander Abramov and Frolov.
The split of the stake between the founders is likely to be two-to-one in favor of Abramov, Vedomosti said today, without saying where it got the information.
The founding shareholders raised $389 million in a secondary share offering of 6 percent in January last year, before the transaction with Abramovich.
On June 19, the date Evraz announced that Abramovich bought a stake in the company, the shares were worth $3.4 billion.
TITLE: In Brief
TEXT: Wild Lingerie
MOSCOW (Bloomberg) — Wild Orchid, a Russian lingerie retailer, sold a 20 percent stake to an investment fund before an initial public offering planned for 2009, Vedomosti reported Monday.
The Greater Europe Fund, managed by Wermuth Asset Management, paid $50 million for the holding and has an option to buy a further 13 percent stake, President Alexander Fyodorov told the Russian newspaper. Wild Orchid aims to raise annual sales to $350 million by 2009 from about $100 million last year and to bring its market value to between $650 million and $700 million after an IPO, he said.
The Moscow-based retailer sells lingerie and swimwear through four store chains and has a factory in central Russia, according to Vedomosti. The company aims to begin exports to Europe, China and the U.S., Fyodorov told the paper.
Solar Vekselberg
MOSCOW (Bloomberg) — Russian billionaire Viktor Vekselberg plans to invest $1 billion in developing wind and solar power, Kommersant said, citing a Vekselberg spokesman.
Renova Group, Vekselberg’s Moscow-based investment vehicle, acquired Energetic Source SpA of Italy, whose units include wind-power producer Vento Energia, for an undisclosed sum, the newspaper said, citing spokesman Andrei Shtorkh.
The acquisition is part of Vekselberg’s plan to develop wind, solar and biomass generators together with Oerlikon Corp. AG, a Swiss engineering company in which he owns 13 percent, Kommersant said. Renova may seek grants from the European Union to pursue alternative energy projects, Shtorkh said, the Russian newspaper reported Monday.
Sibir Blocks
MOSCOW (Bloomberg) — Sibir Energy, a U.K.-based company that extracts oil in Russia, agreed to pay $50 million for licenses to eight oil blocks in the Khanty-Mansiisk region of western Siberia.
The so-called Koltogorsky blocks hold 970 million barrels of estimated oil resources, Sibir Energy said in a Regulatory News Service statement Monday, without identifying the seller.
Sibir will spend another $50 million on exploration, which includes drilling eight wells, over the next two years, according to the statement.
The licensed area is located near the Samotlor field, where BP Plc’s Russian venture, TNK-BP, has its largest production sites.
Sentencing Yukos
MOSCOW (Bloomberg) — Two former executives of Yukos Oil Co. affiliates who were convicted last week of embezzling $13 billion were sentenced Monday to 11 and 12 years in prison, Interfax said.
Vladimir Malakhovsky, who ran oil trader Ratibor, was sentenced to 12 years, one year more than prosecutors sought, the news service said. Vladimir Pereverzin, who headed Yukos’s foreign debt unit, was sentenced to 11 years, Interfax said.
Prosecutors charged the two men a year ago, along with the former head of Yukos trader Fargoil, Antonio Valdez-Garcia, who escaped from police custody in January.
Nobody at the courthouse answered the phone and attempts to reach the men’s lawyers through Yukos were unsuccessful. Claire Davidson, a spokeswoman for Yukos in London, wasn’t immediately available to comment.
Resigned Saglam
MOSCOW (Bloomberg) — The general director of Ramenka, which operates Migros Turk TAS’s supermarkets in Russia, resigned, Vedomosti reported Monday, citing spokespeople for the company.
Mustafa Saglam, who had headed Ramenka’s Ramstore chain development in Russia since 2000, will be replaced by Ihsan Usel, the newspaper said, citing Ramstore’s spokeswoman Elena Skalskaya and unidentified press officials at Migros Turk.
Saglam, Migros and Ramenka officials declined to comment to Vedomosti on the reason for his resignation. Saglam may have resigned after the chain showed slower sales growth than international competitors,
Vedomosti said, citing Maria Davydova, an analyst at Fim Securities in Moscow.
Consumer Prices
MOSCOW (Bloomberg) — Russian consumer prices grew 0.8 percent in February, Interfax reported, citing Economy Minister German Gref.
The monthly rate fell from 1.7 percent in January, the news agency said. Gref was speaking to reporters in Singapore, Interfax said.
Deputy Prime Minister Alexander Zhukov said in a meeting with President Vladimir Putin on Monday that consumer prices grew a monthly 1.1 percent in February, Interfax reported earlier Monday.
TNK-BP Spill
MOSCOW (Bloomberg) — A rupture at an oil pipeline run by TNK-BP, BP’s Russian venture, is endangering water supplies for the southern city of Saratov, said Oleg Mitvol, deputy head of the Natural Resource Ministry’s environmental regulator.
Negligence by TNK-BP’s local Orenburgneft unit led the 50-year-old link to rupture on Feb. 27, Mitvol said by phone in Moscow on Monday. At least 1 ton (7.33 barrels) leaked into the Bolshaya Kinel river, a tributary of the Volga.
Cleanup efforts are being hampered by river ice, Mitvol said. Inspectors are assessing the damage and sampling other bodies of water in the region. TNK-BP spokeswoman Marina Dracheva could not be reached immediately for comment.
Polyus Licenses
MOSCOW (Bloomberg) — Polyus, Russia’s biggest gold producer, gained two exploration licenses for areas adjacent to a gold deposit in eastern Siberia that it operates.
Polyus, owned by billionaires Mikhail Prokhorov and Vladimir Potanin, obtained licenses to explore the flanks and deeper levels of the Chertovo Koryto, or Devil’s Trough, deposit, the Moscow-based company said in an e-mailed statement Monday. The new areas may hold 90 tons of gold under the Russian P2 classification, Polyus said.
Polyus will spend more than $150 million on exploration this year as it seeks to boost reserves to the world’s third- largest by 2011.
Lukoil Billions
MOSCOW (Bloomberg) — Lukoil, Russia’s biggest oil company, will invest as much as $3 billion in refining, petrochemicals production and retail this year.
Lukoil will spend $2.2 billion to upgrade its refineries and petrochemicals plants and $700 million on retail, Chief Executive Officer Vagit Alekperov said Monday in Budyonovsk in southern Russia, in remarks reported by Interfax and confirmed by the company’s press office.
TITLE: Nordic Officials Pipe Up
PUBLISHER: Reuters
TEXT: HELSINKI — Finland and Sweden voiced concern on Friday about the potential environmental impact of a gas pipeline under the sea from Russia to Germany.
“You want to be absolutely sure about all the environmental aspects the pipeline would have,” Finnish Environment Minister Stefan Wallin said after meeting his Swedish counterpart, Andreas Carlgren, on Friday.
“The topography of the bottom of the sea will have to be as flat as possible … you have to be absolutely sure where the corridor for the pipeline is.”
The 5 billion euro ($6.6 billion) pipeline would run 1,200 kilometers from Vyborg to Greifswald in Germany. “We have to underline that we really want good quality environmental impact assessments on the pipe,” Carlgren said. “You could expect effects from the gas pipeline.”
The pipe’s builder, Nord Stream, majority-owned by Gazprom, is drafting an assessment plan. Finland’s Environment Ministry said this week that Nord Stream had not offered environmental justifications for the proposed routing or alternatives to it. “They should describe and compare that with other possible ways to build it or other geographical alternatives for the pipeline,” Carlgren said.
TITLE: Royal Residence Seeks Russian Millionaire
AUTHOR: By Yelena Andreyeva
PUBLISHER: Special to The St. Petersburg Times
TEXT: Over the last few years the number of wealthy Russians investing in Finnish real estate has increased considerably. The country offers acres of unspoilt countryside and relatively low prices.
The latest offering for the Russian millionaire is Rantalinna, or ‘Shore Castle,’ a 1,500 square-meter stone manor built in the art nouveau style and situated on the shores of Lake Saimaa, 20 kilometers from Imatra and 53 kilometers from Imatra Airport — a bargain at 3.5 million euros ($4.2 million).
Compared to Russia, where all historic buildings are subject to strict state planning regulations, in Finland, the owners of Rantalinna are only obliged to keep the original facade of the building, while the interior can be completely reworked.
The castle’s owner, Markou Levasvirta, wants to sell it to a Russian native. “Taking into consideration the building’s Russian history, its cultural and artistic traditions which have been preserved here for a long time, I would like to sell it to people from Russia who could value its cultural heritage and give it a long life to come,” he said.
Constructed in 1913, Rantalinna was sold to Prince Alexander von Oldenburg two years later and used as a summer residence by the Russian royal family until 1918, when the Prince and Princess moved there with the intention of returning to St. Petersburg after the end of the revolution. Now serving as a hotel, Rantalinna has 14 rooms that accommodate 50 people, a restaurant that holds 120 people and two saunas situated right on the shore, with a steam room that can hold as many as 20 guests at a time. Most of the furniture is genuine and was previously owned by the Prince and Princess, and the interior, including ceilings painted by the Tsar’s court painter Miguel Chovin, has remained untouched.
According to Levasvirta, the annual turnover of the Rantalinna hotel is around 500,000 Euros ($600,000), 15 per cent of which is net profit, while another 20 per cent is spent on maintenance, including staff salaries, community charges, taxes, etc.
Each of the castle’s rooms has a different design. The rooms on the first floor have been furnished with original period furniture. In addition to the Prince and Princess suite on the second floor there is a honeymoon suite in the castle’s tower.
In the courtyard there are four flats in two guesthouses, which can each accommodate two to eight guests. The lot includes 12 hectares of land with scope to build a series of cottages, potentially accommodating a further 900 people.
Another benefit for the buyer is Finnish legislation that facilitates the visa process for owners of real estate in the country.
“The only thing you need to buy real estate in Finland is a Finnish bank account. And once you have bought a house in Finland, you can be sure to receive a Finnish visa and constant access to your new home,” said Mikhail Zyazev, manager of the Scandinavian branch of Smirnov and Co real estate company.
Www.rantalinna.fi
TITLE: Magnit, X5 Chains Upgraded To ‘Buy’
PUBLISHER: Bloomberg
TEXT: MOSCOW — UBS AG raised its recommendation on X5 Retail Group NV and Magnit to “buy’’ from “neutral,’’ citing the growth potential of quality grocery stores in Russia.
The price estimate for X5, which controls the Perekryostok and Pyatyorochka chains, was raised 13 percent to $46, while the price estimate for Magnit was lifted 14 percent to $50 at the brokerage.
“In particular, we see the Russian regions offering ample growth opportunities and a benign competitive landscape in the coming years,’’ analysts Svetlana Sukhanova and Bob Kommers wrote in a research note distributed Monday.
Retail sales are growing quickly in Russia as the country heads for a ninth year of economic growth. Moscow has less than 200 square meters (2,150 square feet) of shopping-center area per 1,000 people, compared with 700 square meters per 1,000 people in Paris, the analysts said.
UBS retained its “reduce’’ recommendation on shares of Seventh Continent, a supermarket chain, as well as its price estimate of $26.
TITLE: The Dirty Business Of Elections
AUTHOR: By Anna Shcherbakova
TEXT: This is a column in defense of business. For many years I’ve written on rude entrepreneurs and shrewd lawyers, hostile takeovers and corrupt ways to get good contracts or property as well as those shameless corporations that thrust their new, improved goods on consumers and banks that promise fantastic interest rates.
All these things are typical in business, and not only in Russia. Our national specialty is the turning of gangsters into decent business people who invest their money in respectable businesses like gas-stations, shopping malls, restaurants or casinos. They prefer to forget their past and often end up sponsoring the church, probably in order to atone for their former sins.
However business is a rather merciless activity, especially at the stage of free-market economics when laws and regulations remain weak and unclear and when private initiative plays the leading role.
This is why I always feel a little disgust towards those Russian entrepreneurs whose success should command total respect.
But in 2003 big politics came into our lives. The campaign for Governor of St. Petersburg showed that the aggressive takeover of companies is nothing compared to a takeover of the entire city. The stakes were so high that every type of propaganda was used to force St. Petersburg inhabitants to vote for the right candidate. Three and a half years later we are facing another political campaign that overshadows other business-related games.
Next Sunday the residents of St. Petersburg will vote for a new city parliament. There is not much choice since elections do not involve individuals but political parties. In St. Petersburg, like everywhere else in Russia, the party of power, United Russia, has both the strongest position and all the administrative resources.
Governor Valentina Matviyenko can be seen shaking hands with party leader Vadim Tyulpanov on billboards all over the city. By the beginning of February, UR had spent 36 million rubles ($1.39 million) in advertising. Its main competitor — Just Russia (or JR) — spent 21 million rubles; its leaders promise to increase pensions and wages.
There is not a lot of difference between the advertising of the remaining six parties, including Yabloko, which is not even registered at the elections.
Along with the legal, pretty tasteless billboards, posters and leaflets, the city is filled with illegal advertising materials that throw dirt at political competitors, their relatives and families. Other strategies are nastier. For instance, several acting deputies who are taking part in the elections have been declared dead.
The leaders of political PR campaigns are not lacking imagination, that’s certainly true.
Yet there is no real choice - both UR and JR have been formed inside the walls of the Kremlin - their PR-people are working with huge budgets. Politics is not business — economic rules such as demand and supply do not work here and the means are often unlimited. The audience is much wider than that of banks or investment funds.
Sometimes I think that business is like a kindergarten compared to politics.
Anna Shcherbakova is St. Petersburg bureau chief of business daily Vedomosti.
TITLE: Cooling China’s Growth
AUTHOR: Stephen S. Roach
TEXT: Like nearly everything else in the world these days, it now appears that global stock market corrections are made in China. The rout Tuesday that began in China may have been an anomaly, or the start of something big. But I have long felt that something has to give in China. This may be the beginning of an important venting process.
The basic story about China is that despite its remarkable successes on the economic development front, the nation has a seriously unbalanced economy. The main problem is a runaway investment boom.
By Morgan Stanley estimates, fixed-asset investment — spending on housing, commercial buildings, factories, infrastructure and other property — exceeded 45 percent of China’s gross domestic product in 2006. This is a record for China and, in fact, a record for any major economy in the world.
By comparison, Japan’s investment ratio in the 1960s — the period of maximum rebuilding from the destruction of World War II — never exceeded 34 percent of GDP. China’s annual growth in fixed-asset investment has averaged 26 percent over the last four years. Should investment continue to run at this pace, it could lead to a Japanese-style deflation. That’s the last thing China wants or needs.
The Chinese government recognizes the perils of such a possibility. For nearly three years, it has conducted an on-and-off campaign aimed at cooling its overheated investment sector. Following relatively limited actions first implemented in the spring of 2004, Chinese authorities have upped the ante in the last eight months.
The People’s Bank of China has raised a key short-term interest rate twice, totaling slightly more than half a percentage point, and beginning in mid-2006, the central bank boosted bank reserve requirements five times, going from 7.5 percent to 10 percent, the last such action taking effect last Sunday. The problem for China is that it is still very much a blended economy — both state and market driven. As such, monetary policy actions have had limited success at best.
Dominated by a vast and highly fragmented system of autonomous local bank branches, much of China’s bank lending remains outside the control of its monetary authorities. As a result, Chinese officials have had to rely largely on administrative controls — a case-by-case approval mechanism — to rein in the excesses of runaway investment.
The results have been mixed. Fixed investment growth has finally begun to slow, decelerating from near 30 percent at the start of 2006 to about 14 percent at the end of the year. Unfortunately, bank lending accelerated. That means China’s central bank has been unable to get traction in reining in bank credit expansion at the same time that the central planners are finally gaining traction in orchestrating an investment slowdown. This has resulted in an excess of bank-funded liquidity that is undoubtedly spilling over into the financial system. As a doubling of the Shanghai A-share index over the last six months suggests, a bubble in the Chinese stock market appears to have been a major outcome of this development.
In China, stability is everything. The Chinese leadership believes that it can’t afford to lose control of either its real economy or its financial markets. Pure market-based systems can rely on interest rates, currencies, fiscal policies and other macro stabilization instruments to contain the excesses. With an undeveloped financial system and the still dominant influence of state ownership, a blended Chinese economy is much harder to control.
Just as China has moved to bring its central planners into the business of containing the excesses in the real economy through administrative measures, I suspect it now feels compelled to rely on a similar approach to deal with excesses in its financial system.
In the last five years, China has emerged as a major engine on the supply side of the global economy. But that has brought a new set of risks — in particular, an overheated investment sector and an equity bubble. These two problems are very visible manifestations of China’s control problem.
The sharp dive of share prices last Tuesday may well be symptomatic of China’s increased determination on the macro control front. Ultimately, successful macro control is good news for China and the broader global economy — it sets the stage for balanced and sustainable growth. But for those counting on open-ended Chinese growth, any such slowdown could come as a rude awakening. The China squeeze now appears to be on in earnest.
Stephen S. Roach is chief economist at Morgan Stanley. This comment appeared in the Los Angeles Times.
TITLE: All the Thrills an Investor Can Stomach
PUBLISHER: Vedomosti
TEXT: Prime Minister Mikhail Fradkov tried to lure Japanese investors during this week’s visit to Tokyo with the following description of Russian markets: “You can’t say that business is risk-free … but the presence of risks in Russia makes standard profits higher.”
Returns on capital in Russia are significantly higher than in Japan or other developed countries. Russia was No. 5 on Standard and Poors’ list of the 22 most attractive developing nations for investors in 2006, and foreign investment was $31 billion (a 140 percent increase from 2005). The RTS index rose by more than 70 percent last year, compared with a climb of 6.9 percent by Japan’s Nikkei index.
Japan is among the top 10 countries by investment in Russia, with a total of $2.5 billion. But do Japanese investors really want to increase their stakes in Fradkov’s roulette game?
Risk and the associated high profits attract speculative investors. As much as 70 percent of publicly traded shares in Russian companies are held by foreign pension and investment funds, according to the Federal Securities Commission. An informed approach to the securities market helps them hedge their risks, and they would be crazy not to take advantage of this rapid growth. But even these institutional investors fear too much risk, and rather than hold the stocks themselves, they prefer to hold Russian securities in the form of depository receipts on the London and New York exchanges.
Strategic investors prefer stability and clear rules to risk and high returns. Japanese businesses know the dangers involved from experience: Gazprom’s purchase of a controlling stake in the Sakhalin-2 project at a significant discount from British-Dutch Shell and Japan’s Mitsui and Mitsubishi after ecological complaints were lodged by the government illustrates the rules of the game and risk involved.
Fradkov talked to the Japanese about improvements in the investment climate. But it is important to understand that the Sakhalin case was the second shock to investor confidence, following the assault on Yukos. A few words from the prime minister are unlikely to make things better. A recent study by the international public relations company Edelman reported that just 18 percent of businesspeople in developed countries said they trusted business in Russia, while the figure was 65 percent for doing business in Japan.
The Russian delegation brought a bunch of high-risk projects in a high-risk country to Japan — from a tunnel linking Sakhalin to the mainland to the construction of an oil pipeline in cooperation with Rosneft. Perhaps Fradkov’s talk about risk was trying to make a virtue out of a shortcoming. But he came off sounding more like a carnival barker: “Come on in for a thrill!”
This comment appeared as an editorial in Vedomosti.
TITLE: Replacing Competition With Collaboration
AUTHOR: By Sergei Rogov
TEXT: My generation arrived in this world when the Soviet Union and the United States were engaged in a Cold War. I’ve spent 40 years — all my adult life — studying the United States and Russian-American relations, and now I’m afraid that when my generation leaves this world, the United States and Russia will be adversaries again. When communism collapsed, expectations were high that the former enemies would become strategic partners. But it never happened. Why?
Many people in Russia blame the United States. Many people in the United States blame Russia. Predictably, the backlash against unfulfilled hopes and promises is strong today in both countries.
The 1990s were a difficult time for Russia. Some in the United States saw the beginning of a golden age of democracy, but Russians saw and felt the disintegration of a former superpower. President Boris Yeltsin brought out tanks to fire on the parliament to impose his policy of speedy privatization of industry, business and natural resources, so a few became super-rich and many were pushed into poverty. Russia nearly became a failed state. But the worst-case scenario was avoided. With a lot of help from high oil prices, Russia has managed to begin an economic revival. Today the standard of living is going up, and the threat of a civil war is gone. We still face a long and difficult path to a mature democracy and a modern market economy, of course. New mistakes can still be made, but Russia is on its way to recovery.
Meanwhile, the United States has enjoyed the fruits of “victory” in the Cold War. Since 1991, Washington’s strategy has been to prevent the emergence of a new peer competitor and to extend “the unipolar moment” as long as possible into the 21st century. The United States has failed to resist the temptation of unilateralism and preemption.
On issues of international security, Russia has been treated as a second-rate power whose complaints can be ignored. At the end of the Cold War, U.S. President George H.W. Bush proposed a new security system “from Vancouver to Vladivostok,” but this idea was quickly forgotten. So was NATO’s promise not to expand its military infrastructure eastward beyond West Germany.
“The winner takes all” — so despite Russia’s objections, all former Soviet clients in Eastern Europe have been admitted into NATO, including three former republics of the Soviet Union. And two more former republics — Georgia and Ukraine — could be next. Russia’s objections were also ignored when NATO started its first war in Kosovo.
At the same time, the old arms-control regime is half-dead. The two strategic arms-limitation agreements on the books expire in 2009 and 2012. Today, there are no serious negotiations between Russia and the United States about any new arrangements, and U.S. President George W. Bush’s administration says that there is no more need for legally binding treaties. To demonstrate this point, the administration unilaterally withdrew from the Anti-Ballistic Missile Treaty, ignoring Russian objections.
Now the United States wants to deploy the components of missile defenses (interceptors and a radar) in Poland and the Czech Republic. Russians are complaining that the deployment of American missile defense systems so close to Russia could undermine Russian nuclear deterrence.
Unfortunately, Russia and the United States have never fully escaped from the Cold War doctrine of “mutual assured destruction.” Both pretend that they may someday confront each other with nuclear weapons. Meanwhile, the nuclear club continues to grow ominously. It now has five official and three “de facto” members. North Korea and Iran could also join, if diplomatic efforts fail. A new wave of proliferators would surely follow. What used to be primarily a bilateral Soviet-American nuclear arms race during the Cold War already looks like a multilateral competition that might make a real nuclear war more possible.
After Iraq, the United States will not be able to act as the world’s policeman. The U.S. public does not want to play that role. To avoid chaos, there must be a workable, multipolar international system based on multilateral rules that are accepted by all the major players.
The United States and Russia have unique responsibilities here. If they revert to confrontation, we cannot expect, say, China or France to lead efforts to create a new world order and control the proliferation of nuclear weapons. Only Americans and Russians can lead the world away from the biggest dangers. To do so effectively, they must begin serious cooperation in three areas:
First, a real effort is needed to reinvent arms control. Both countries should make a commitment to take seriously each other’s security concerns and avoid actions that the other side might perceive as a threat. The dispute over anti-missile equipment in Eastern Europe should be resolved through a compromise, not a confrontation.
Even more important are Russian-U.S. initiatives to invite other nuclear countries to demonstrate self-restraint and abstain from the buildup of their nuclear arsenals. Joint brainstorming is needed to prevent the collapse of the nuclear Non-Proliferation Treaty, which is at serious risk.
Second, Russia and the United States must cooperate on bilateral and multilateral efforts to manage regional conflicts. The success of the six-party negotiations on North Korea proves that when the United States gives priority to nonproliferation instead of a regime change, solutions are possible. The same approach should be applied to Iran.
Multilateral efforts must be expanded to prevent the Taliban from restoring its grip on Afghanistan. Russia, China and India can help NATO politically and economically, and even militarily, if Russia can overcome its “Afghanistan syndrome.”
If the United States agrees that the way out of the Iraq quagmire requires multilateral arrangements, Russia also can help. And it can share responsibility for implementing the “road map” to an Israeli-Palestinian peace settlement.
Third are the problems of democracy and values. Russia and the United States face serious terrorist threats. It is premature to claim that either has found the best ways to expand human rights and democratic freedoms. America hardly occupies the high moral ground that would enable it to lecture others. Neither does Russia, which is debating the vague concept of “sovereign democracy,” trying to understand how to apply universal standards of human rights and democratic procedures.
It would be a great blunder to revive the spirit of the ideological crusade that gave us the Cold War. Propagandistic campaigns should belong to history. While there are heated debates on these issues in each country, we need a Russian-U.S. dialogue instead of mutual accusations.
Russia is back as an international player. While it is not a superpower (except in the number of its nuclear weapons) and is still amid a difficult transformation, no one should be surprised that Russia wants to protect its national interests. Russia should be treated as a responsible player, sharing the rights and the duties of membership in the community of democratic market economies in a globalized world. That was President Vladimir Putin’s message in the speech he gave last month in Munich. And Russia, if necessary, should be criticized for her mistakes, as should America, or China, or other members of the international community. But the goal should be a new cooperation, not a new Cold War.
Sergei Rogov is the director of the Institute of U.S.A. and Canada Studies of the Russian Academy of Sciences. A longer version of this essay appeared in The Washington Post.
TITLE: Kluft Looks Forward to World Dominance
AUTHOR: By Alison Wildey
PUBLISHER: Reuters
TEXT: LONDON — Carolina Kluft’s epic battle for pentathlon gold with Kelly Sotherton at the European indoor championships may have given the Swede a competitive boost before this year’s worlds in Osaka.
Kluft has not been beaten in a combined event competition since March 2002 but the world, Olympic and European heptathlon champion almost lost that record in Birmingham when only a personal best in the final event, the 800 meters, took her to victory over Britain’s Sotherton.
World-leading performances from Belgian Tia Hellebaut in the high jump, British triple jumper Phillip Idowu and 400 meters runner Nicola Sanders served notice that new faces could be challenging for medals in Japan in August.
Kluft’s overall total of 4,944 for the pentathlon at the National Indoor Arena was the best in the world in 2007 and only four points off the championship record she set two years ago.
The first six women surpassed 4,700 points, a feat unparalleled in the sport.
“What a great competition to win,” Kluft said. “It is good for the event to have so many athletes so close together.
In recent years France’s Eunice Barber has been the only heptathlete to come close to the peerless Swede, finishing runner-up to her at the last two world championships, but on Friday Kluft found herself in second place for two disciplines as first Briton Jessica Ennis and then Sotherton led her.
“Doing so well against the Olympic champion shows I’m going the right way,” Sotherton said. “I’ve really worked my guts out and it’s been fantastic to come here as we’ve all raised our game.”
Idowu knocked Olympic champion Christian Olsson of Sweden off the top of the year’s best list with a jump of 17.56 meters to take the triple jump title.
His compatriot Nathan Douglas also surpassed Olsson’s best of 17.44 by three centimeters for the silver medal.
Olsson’s compatriot Kajsa Bergqvist was also absent from the championships but Tia Hellebaut produced the series of her life to clear a world leading height and personal best of 2.05 meters in the high jump.
Meanwhile, Sanders, 24, has made her mark over 400 meters indoors this year with four of the top five fastest times in the world.
Her 50.02 in the final meant Russia failed to win the title for the first time since 1998. However, Sanders will need to improve on her outdoor best of 50.68 if she is to seriously challenge American Sanya Richards, who was unbeaten last year.
Andrew Howe may not have produced a world leading mark in the long jump but the 21-year-old, who said he had been concentrating on his preparation for the outdoor season, leaped 8.30 meters to become Italy’s first male European indoor champion in the event.
It is a distance that only Panama’s world indoor silver medallist Irving Saladino has bettered.
“It was incredible to win like that,” Howe said.
“I had almost no preparation and my jumps were a mess. I can’t wait for the outdoor season. This just shows what I’m capable of.”
TITLE: Copenhagen Squat Torn Down
PUBLISHER: Reuters
TEXT: COPENHAGEN — Demolition work began on Monday at a youth center at the heart of a dispute that sparked violent street clashes between protesters and police in the Danish capital.
Police fought the street battles with hundreds of youths last week after squatters were evicted from the building in the blue-collar, multi-ethnic neighborhood of Norrebro.
“We hope they will show their frustration only vocally, but we are out there on the streets, taking no chances,” said Per Larsen, a Copenhagen police spokesman, in an interview on Danish television TV2 News.
A crane began tearing down the structure, which has been sealed off since the disturbances. The identity of the demolition company had been painted over on the crane and workers wore masks to conceal their faces.
Youths milled around and watched the work from outside the police cordon. Some were crying in the arms of their friends.
Demolition stopped before noon to investigate a possible asbestos problem, Danish media reported.
Tensions in the Danish capital subsided over the weekend after more than 600 arrests that included dozens of foreigners.
The conflict over the youth centre has simmered since 2000, when local government, which had lent the building to the youngsters since 1982, sold the site to a religious group.
Police evicted the squatters last Thursday, implementing a court order issued last year.
The religious group said on Monday they did not yet have plans for the area after the demolition.
TITLE: London Shares Tumble Amid Global Sell-Off
AUTHOR: By Dominic Lau
PUBLISHER: Reuters
TEXT: LONDON — The top share index tumbled 1.6 percent by mid-session on Monday amid a global sell-off, as a surge in the yen and the unwinding of carry trades rattled investors.
By 11.25 a.m., the FTSE 100 was down 98 points, or 1.6 percent at 6,018.6, its lowest since Dec. 1, as miners, oil shares and banks led the slide.
The index plunged nearly 5 percent last week.
European shares also slumped, while the Nikkei average fell 3.34 percent on Monday, its biggest one-day fall in nine months that took it to a new closing low for 2007.
The yen hit three-month highs against the dollar and the euro as investors rushed to close out risky trades and pay off the cheap yen loans that financed them. Investors are also concerned over the state of the U.S. and Chinese economies.
“We see the root cause in the further lurch upward of the yen/dollar rate, with the implications for the carry trades — potentially with people getting squeezed out of margin calls and having to close the yen borrowings,” said Roger Cursley, UK strategist at Investec.
“The question is whether or not it would bring out any casualties among the traders or on the banking side.”
Miners and oil shares were bloodied, contributing nearly a third of the index’s downside, as prices on copper and nickel fell 3.2 and 3 percent, respectively, while crude prices fell $1 to below $61 a barrel.
Index heavyweights BP slumped 1.8 percent and Royal Dutch Shell shed 1 percent.
In the mining sector, Xstrata lost 4.2 percent, BHP Billiton dropped 3.3 percent, Rio Tinto fell 2.5 percent and Anglo American slipped 3.2 percent. “Run to the hills, mate,” a trader said.
British Airways tumbled 7.2 percent, topping the losers’ list, after the European Union and the United States came to an agreement about opening their trans-atlantic aviation market and after a newspaper reported on potential strikes at the airline’s subsidiary GB Airways.
HSBC, Europe’s largest bank, posted results that were slightly weaker than analysts had expected, but the stock gained 0.8 percent as its sour loan problem was milder than feared.
But other banks suffered, with Barclays falling 0.8 percent, HBOS losing 1.3 percent, Royal Bank of Scotland down 0.6 percent.
Royal & Sun Alliance shone as it clambered to the top of just four FTSE 100 in positive territory. The insurer rose 1 percent after it said it had completed the disposal of its troubled U.S. operation to Arrowpoint Capital Corp.
“The sale of its U.S. business probably makes it more attractive to take over,” another trader said.
TITLE: Zenit Start ’07 Season In Style
AUTHOR: By Matthew Brown
PUBLISHER: Staff Writer
TEXT: FC Zenit St. Petersburg won its first match of the soccer season Sunday against Saturn in the Russia Cup, with a 1:0 victory that Zenit coach Dick Advocaat said gives the St. Petersburg team the edge on its opponent — again Saturn — in the first game of the 2007/08 Premier League campaign on March 11.
“The first game is always difficult. Lot of expectations. The first half was of good quality,” Advocaat said in post-match comments posted at www.fc-zenit.ru.
“The only thing that could’ve been better was if we had scored more goals. The second half was more even, still we were the better side. Saturn is very dangerous, playing on counterattacks. But we deserved to win this game.”
Last week Zenit announced the latest of its off-season signings, paying a record $20 million for Ukrainian midfielder Anatoly Timoshchyuk.
“The contract with the captain of Ukraine’s champions has been signed for four years,” Zenit announced on its web site.
The fee for the 27-year-old, who played in last year’s World Cup, was the highest paid by any post-Soviet states club, Shakhtar said on their web site www.shakhtar.com.
“We have no doubt that such a high-level professional will become one of the most prominent players in Russian soccer,” the Ukrainian club said.
In December Zenit, backed by the almost limitless resources of Russian energy giant Gazprom, set another record when they signed Rubin Kazan’s Argentine striker Alejandro Dominguez in a $7-million contract — the highest domestic fee between two Russian premier league sides.
Dominguez proved pivotal in Sunday’s season-opener, Advocaat said.
“You’ve seen that Dominguez is an excellent player,” Advocaat said. “It was his second full game and he needs to gain physical shape to play for the whole match. But you could see what a good player he is.”
Turkey striker Fatih Tekke scored in the second minute at Petrovsky Stadium on Sunday, with Saturn coach Vladimir Weiss paying tribute to Zenit’s attacking line-up of Tekke, Dominguez and Andrei Arshavin calling them “three great footballers.”
“They had a lot of chances but scored just once — it’s good for us,” Weiss said. “Anyway, I am satisfied with the result.”
“We should take advantage from our experience and mistakes today,” he said. “We’ll play differently in the championship.”
TITLE: Japan Not Sorry For World War II Sex Slavery
AUTHOR: By Linda Sieg
PUBLISHER: Reuters
TEXT: TOKYO — Prime Minister Shinzo Abe said on Monday that Japan would not apologise again for forcing women, mostly Asians, to act as wartime sex slaves for its soldiers even if U.S. lawmakers adopt a resolution calling for an apology.
Abe, seeking to bolster support among his conservative base, has already sparked diplomatic ire by appearing to question the state’s role in forcing the women to prostitute themselves for soldiers during World War Two.
U.S. Congressman Michael Honda, a California Democrat, has introduced a non-binding resolution calling on Japan to unambiguously apologise for the tragedy that thousands of Asian women, many Korean, endured at the hands of its Imperial Army.
“I have to say that even if the resolution passes, that doesn’t mean we will apologise,” Abe told a parliamentary panel on Monday, adding the U.S. resolution contained factual errors.
But Abe repeated that he stood by a 1993 government apology that acknowledged the Japanese military’s role in setting up and managing wartime brothels and that coercion was used.
“It is not true that Japan has never reflected or apologised,” he told reporters later.
“The facts are as contained in the (1993) statement.”
Abe, who wants to rewrite Japan’s pacifist constitution and restore a sense of pride in the nation’s past, upset his core conservative supporters and startled critics when he softened his stance on wartime history after taking office last September.
Among those shifts was his decision to stand by the 1993 apology, known at the “Kono Statement,” after then-Chief Cabinet Secretary Yohei Kono, in whose name it was issued.
The softer stance on history was widely seen as an attempt to smooth the way for summits with China and South Korea and improve ties that had chilled under his predecessor, Junichiro Koizumi.
Then last week, Abe sparked a fierce reaction from Seoul when he appeared to question the degree to which physical coercion was involved in recruiting the women for the brothels.
“There is no evidence to back up that there was coercion as defined initially,” he told reporters on Thursday, apparently referring to accusations that the Imperial Army had kidnapped women and put them in brothels to serve soldiers.
An outraged South Korea charged that the comment cast doubt on the sincerity of Japan’s past apology and the matter is likely to be broached in bilateral talks slated for March 12 in Tokyo.
On Monday, Abe said there seemed to have been some apparent cases of coercion, such as by middlemen, but he added: “It was not as though military police broke into people’s homes and took them away like kidnappers.”
Some experts agree that not all or even most of the women were physically coerced, but they say that does not absolve the Japanese government of responsibility for their suffering.
“If you look at the statements of comfort women themselves, very few are saying that people actually came into their houses and forced them to leave,” said Andrew Horvat, a professor at Tokyo Keizai University who has written on the topic.
“But recruiters were working for the government and in that sense they were responsible for it, and whether it was physical coercion or the use of authority and deception is really a moot point,” he added. Abe’s effort to draw such distinctions, analysts said, stems from a desire to please his conservative base while not caving in entirely to pressure to revise or withdraw the 1993 apology.
A group of ruling Liberal Democratic Party (LDP) lawmakers is discussing the topic and may ask the government to revise the 1993 statement.
Abe’s popularity has been dented in recent months by doubts about his leadership capabilities, a worrisome decline for the LDP ahead of July elections for parliament’s upper house.
“Abe is unpopular and he is trying to mobilise his core supporters, who tend to be sort of right-wing and nationalist,” said Phil Deans, a professor of international affairs at Temple University’s Japan Campus.
“My impression is that most Japanese voters are worried about old-fashioned bread-and-butter issues and find all of this a distraction,” Deans said.
“But the general public watches the U.S. closely and if this clearly upsets America, that would be damaging,” he added.
TITLE: Record-Breaking Federer On a Roll
PUBLISHER: Reuters
TEXT: DUBAI — No sooner does Roger Federer break one record than he seems to set his sights on another.
A few days after making it 161 consecutive weeks as world number one, breaking the record held by Jimmy Connors, the Swiss maestro defeated Russian Mikhail Yuzhny in Saturday’s Dubai Open final to equal Bjorn Borg’s total of 41 wins in a row.
Several more records are ready to fall when Federer moves on to the Masters Series event at Indian Wells which starts on Monday.
If he wins his opening match in California, he will equal John McEnroe’s record of 42 successive victories.
Two matches later he could equal the Ivan Lendl run of 44, moving in sight of the all-time winning streak of 46 set by Argentina’s Guillermo Vilas in 1977.
“It’s nice to be playing against the history books,” Federer told reporters. “It’s one of the nicest things to be able to do because I never thought I would ever do such a thing.”
His last defeat was against Andy Murray in Cincinnati in August.
“But I think we have to be a little bit patient and see how my records and career finishes up,” said the modest Swiss. “At the end of my career we can sit down and say okay, did I break the records or didn’t I? Am I the best or am I not?
“All this talk right now it’s all speculation. I’m still very far off in terms of grand slam victories and tournaments won.”
It is typical of Federer to take everything in his stride and he shrugged off any prospect of nerves heading to Indian Wells.
“Not one bit,” he said. “I’m playing to win the tournament. In tennis we’re very short-sighted.
“We go tournament by tournament, match by match, point by point even, so the records won’t play a role.”
Federer’s next major target is the French Open.
If he wins in Paris in June, that will give him four consecutive grand slam titles.
“This year again I’ll be playing all the tournaments leading up to the French Open and hopefully I’m going to play well again,” he said.
“It’s definitely one of the huge goals… It’s an exciting time.”
TITLE: Russian Skier Tests Positive For Doping
PUBLISHER: The Associated Press
TEXT: OBERHOFEN, Switzerland — Russian cross country skier Sergei Shiriayev tested positive for the banned substance EPO.
The positive result came from an out-of-competition urine test on Feb. 21, in Sapporo, Japan, shortly before the start of the world championships, the Swiss-based International Ski Federation said.
The Russian was provisionally suspended from competition until his backup B sample is tested at the WADA-accredited laboratory in Tokyo. He faces a possible two-year ban.
The case will be reviewed during the FIS council meeting in May in Portoroz, Slovenia.
“Every doping case is disappointing since this means that the athlete is not playing by the fundamental rules of sport, which means fair play,” FIS president Gian Franco Kasper said. “However, this particular case is a testament to the FIS blood testing program.”
TITLE: Camilla Has Operation
PUBLISHER: The Associated Press
TEXT: LONDON — Prince Charles’ wife Camilla, the Duchess of Cornwall, underwent a hysterectomy at a London hospital Monday, officials said.
Camilla, 59, arrived for the procedure at the King Edward VII hospital on Sunday, having recently returned to Britain following a 10-day tour of the Mideast with husband Charles.
“The Duchess of Cornwall had her operation this morning and is recovering well,” Prince Charles’ office said in a statement. Officials said Camilla is expected to remain in the hospital for the rest of the week.
A hysterectomy is a surgical procedure to remove all or part of the uterus. The operation can be done for various reasons, including cancer, abnormal growths, menstrual problems or complications following birth.
Clarence House had said the operation was not the result of cancer, but did not provide any further details.
Camilla is expected to require six weeks of recuperation.
TITLE: Europeans Kidnapped In Ethiopia
AUTHOR: By Andrew Heavens and Tsegaye Tadesse
PUBLISHER: Reuters
TEXT: ADDIS ABABA — Ethiopian security forces scoured a remote north-eastern region on Monday in search of a group of kidnapped Europeans, including British embassy officials.
Several British newspapers, quoting defence sources, said London had sent a Special Air Service (SAS) team to Ethiopia to help find the group which disappeared last week while visiting Afar, considered one of the world’s most hostile terrains.
The foreigners were seized near the border with Eritrea, along with 13 Ethiopians working as drivers and translators. Five Ethiopians were later found close to the frontier.
Asmara has denied allegations by an Ethiopian official that forces from Arat military training camp in Eritrea had kidnapped the Britons.
On Sunday, Ethiopia, which suffers strained relations with its tiny neighbour following a 1998-2000 border war, said the identity of the kidnappers had yet to be established.
Fears for the missing travellers grew in Ethiopia’s small British expatriate community as another day passed with no word on the group’s whereabouts.
The Daily Mirror newspaper said 60 troops from the SAS Standby Squadron — a rapid response team — had arrived in Djibouti, home to a U.S.-led counter-terrorism operation.
A small delegation of British embassy staff has already flown to the northern city of Mekele, which has the closest airport to the area where the Westerners went missing.
In London, a Foreign Office spokeswoman declined comment on whether Britain had sent hostage negotiators to the Horn of Africa country.
But she said the Foreign Office was in “constant touch with all levels of the Ethiopian government and that includes the prime minister.”
Ethiopian Prime Minister Meles Zenawi is a close ally of Prime Minister Tony Blair.
An official at St Matthew’s Church said the only Anglican church in Addis Ababa had started opening its doors at 8 a.m. for any worshipper or well-wisher who wanted to pray for the missing.
“If they can’t come, we’re asking people just to pause for a few moments … to remember them,” said associate chaplain Rev. Michael Starr.
The church was built on land donated by Ethiopia’s last emperor, Haile Selassie, in 1955 to serve the country’s expatriate British and Anglican community.
One British man who asked not to be named said: “You hear of kidnappings on the news and they sound terrible. But it is unbearable when you know the people involved and can imagine what they might be going through.”
Afar is one of Ethiopia’s poorest but most visually spectacular regions, populated mostly by roaming herders who scrape a living from their sheep and goats.
TITLE: Man U in Pole Position For Title
PUBLISHER: Reuters
TEXT: LONDON — Round-up of the weekend’s action from Europe’s top leagues:
ENGLAND
Manchester United overcame another major hurdle in their quest to wrestle the Premier League title back from Chelsea with a last-gasp 1-0 victory over Liverpool at Anfield.
A stoppage-time winner from substitute John O’Shea left United nine points ahead of Chelsea who responded with a 2-0 victory at Portsmouth — Didier Drogba and Salomon Kalou on target.
United, who last celebrated a league title in 2003, have 72 points from 29 games with Chelsea on 63. Liverpool have 53 points, one more than Arsenal who have two games in hand.
Arsenal beat Reading 2-1 with goals from Brazilian duo Gilberto Silva and Julio Baptista.
At the bottom, West Ham United look increasingly doomed to relegation after losing 4-3 at home to London rivals Tottenham Hotspur despite leading 2-0 and 3-2.
Argentine Carlos Tevez scored his first goal since joining West Ham in August but Paul Stalteri’s stoppage-time winner left West Ham 10 points shy of safety.
Watford and Charlton Athletic, the other two teams in the relegation zone, drew 2-2.
SPAIN
Sevilla knocked Barcelona off the top of the Primera Liga after coming from behind to beat them 2-1 in a pulsating game.
The Catalans had taken the lead through Ronaldinho but the Brazilian then missed a penalty, in a first-half incident that saw Sevilla reduced to 10 men.
The Andalucians stormed back and took the lead with goals from Alexander Kerzhakov and Daniel Alves. Barca finished with nine men.
Sevilla are top with 50 points, one ahead of Barca. Valencia are third with 46 following their 1-0 home win over Celta Vigo.
Real Madrid lost ground in fourth as they were held 1-1 in the Bernabeu by Getafe. They have 44 points and are two ahead of Real Zaragoza, who climbed to fifth with their 3-2 comeback win over bottom club Real Sociedad.
Atletico Madrid dropped to sixth on 40 points, the same as seventh-placed Recreativo Huelva, who beat them 1-0 at home.
ITALY
Striker Zlatan Ibrahimovic inspired Inter to come from behind to beat Livorno 2-1. The Swedish international gave one of his best performance of the season, setting up Julio Cruz to score Inter’s equaliser before curling in a free kick to win the match.
Second-placed AS Roma’s 1-1 draw with basement club Ascoli left them 16 points behind Inter. It was Roma’s second draw in four days after they were held 2-2 by relegation-strugglers Chievo Verona midweek.
Palermo remain third after a 2-0 defeat in the Sicilian derby against Messina, but risk dropping out of the Champions League places after earning just seven points in their last eight games.
Lazio held on to fourth with a 1-0 win over Sampdoria, but Empoli and AC Milan are close behind after beating Udinese and Chievo respectively.
GERMANY
The Bundesliga table tightened when leaders Schalke 04 lost their second successive match and VfB Stuttgart also stumbled, giving up their hold on second place to Werder Bremen.
Champions Bayern Munich, who two weeks ago were 12 points behind Schalke and ready to write off their chances of defending the title, bounced back to just six points behind after their second successive victory and are in fourth.
Schalke, who lost to Hamburg SV 2-0, still lead with 49 points, Werder are second on 46 after beating VfL Bochum 3-0, Stuttgart have 45 after losing 3-1 to Bayer Leverkusen and Bayern are on 43 after beating Hertha Berlin 3-2.
FRANCE
Olympique Lyon made a decisive step towards a record sixth consecutive title with a 3-1 win at bitter rivals St Etienne in a derby marred by crowd violence.
The match was halted for 20 minutes after police were forced to use tear gas to end the trouble that erupted in the stands.
On Sunday evening, two fans, one from Lyon, the other one from St Etienne, were in custody.
Lyon lead the Ligue 1 standings with 61 points from 27 matches with second-placed RC Lens, who snatched a 1-0 win at Olympique Marseille, 13 points behind.
Lille ended a three-match losing streak with a 4-0 thrashing of Troyes to move up to third on 42 points.
Paris St Germain sunk into the relegation zone after slumping to a 2-0 defeat at bottom club Sedan.
TITLE: Hewitt Follows Agassi In Retaining Las Vegas Glory
AUTHOR: By Simon Cambers
PUBLISHER: Reuters
TEXT: LAS VEGAS, Nevada — Former world number one Lleyton Hewitt beat Austrian Juergen Melzer 6-4 7-6 to win the Las Vegas Open on Sunday, his first tournament victory in eight months.
The Australian came back from 4-1 down in the second set and saved four set points before winning an epic tiebreak to clinch his 26th career title, making amends for his defeat by American James Blake in the final 12 months ago.
“It is a big win,” world number 20 Hewitt said in a courtside interview.” After the U.S. Open last year I didn’t play until the Australian summer, this year. I had to take the whole indoor season off and that was rough, not only for me and my rhythm for tennis but also mentally and trying to get back.
“This week I really wasn’t expecting a whole heap, after pulling out of Marseille and Rotterdam (with a hamstring injury) so it’s really great to have an early win here in Vegas.”
After trading early breaks, world number 31 Melzer tested Hewitt with a variety of shot-making, but the Australian snatched the first set by breaking in the 10th game when Melzer missed a simple smash.
Melzer broke in the second game and held the advantage until 4-2 when a series of errors allowed Hewitt to get back on serve. The second seed saved a set point at 5-6 with a solid smash and three more in the tiebreak as he recovered from 6-4 down to win it 12-10 on his fourth match point when Melzer netted a forehand.
Hewitt became only the second man, after American Andre Agassi, to win the Las Vegas title three times and he has now won an ATP Tour event in each of his 10 years as a professional.
“It was a close second set,” Hewitt said. “I was down an early break and had to fight hard to get back into it and definitely didn’t want to give it away.
“He played some of his best tennis when he was down and in that tiebreak, he really took it to me, so it was just nice to hang on in straight sets.”
Melzer said he should have forced the match into a third set.
“Being in the final is nice but you want to win it,” he said, after losing to Hewitt for the fifth time in five meetings.
“I had enough chances at least to take it to a third set. I didn’t take them — some of them maybe a little unlucky, some of them I choked.
“Compared to the other matches I played against Lleyton, this was my best one. I changed tactics, played a bit slower, which is completely the opposite of my normal game, and did not rush.”
The Austrian is projected to rise to a career-high ranking of 27 when the new list is released on Monday.
“Overall, when I wake up tomorrow morning or in two days, it’s a great week,” he said. “To be in the finals is always nice, but today is disappointing.”
TITLE: Clinton, Obama (and Clinton) Meet Up
AUTHOR: By John Whitesides
PUBLISHER: Reuters
TEXT: SELMA, Alabama — Democratic rivals Barack Obama and Hillary Rodham Clinton, joined by former President Bill Clinton, courted black voters at a hallowed civil rights shrine on Sunday and said the movement’s leaders had set the stage for their White House bids.
At a day-long series of events in the small town of Selma, Alabama, the trio of political stars commemorated the 42nd anniversary of the 1965 civil rights march, paying homage to the heroes of “Bloody Sunday” and calling for a new generation to take up the fight.
“I stand on the shoulders of giants,” Obama, who hopes to become the first black president, said at a packed ceremony in the AME church used as a headquarters by civil rights leader the Reverend Martin Luther King. “I’m here because somebody marched for freedom.”
Clinton, in a simultaneous speech in a packed Baptist church less than a block away, said the voting rights won after the march had made possible her campaign to be the first woman president, as well as the runs by Obama and New Mexico Gov. Bill Richardson, who would be the first Hispanic president.
“I know where my chance came from, and I am grateful,” Clinton said. “The people of Selma understood that voting matters.”
Both services ended with the candidates linking arms with other speakers and joining the audience in singing the civil rights anthem “We Shall Overcome.”
The two candidates later joined former President Clinton and thousands of others in walking across the Edmund Pettus Bridge, where state troopers in 1965 violently attacked black marchers in a confrontation that drew national attention and helped lead to passage of voting rights legislation
Crowds of onlookers estimated by police at about 10,000 pressed against about 1,000 marchers and thronged the route. Obama and the Clintons marched in the same line, separated by Congressmen John Lewis of Georgia and Artur Davis of Alabama, and had a brief conversation during the march.
The early campaign collision between Hillary Clinton and Obama, the top two contenders for the 2008 Democratic presidential nomination, was another sign of the budding intensity of their rivalry and the importance of their duel for black votes in the early primaries.
Obama had been scheduled to give the keynote address at the ceremonies for weeks. Clinton, refusing to cede any black support to Obama, decided to attend as well.
Both candidates said the march should be seen as a beginning and urged a new generation to pick up the torch. “We have a march to finish,” Clinton said.
They praised each other at a rally outside the AME church before the march stepped off.
“I think it is so exciting that we have a candidate for president like Barack Obama who embodies all that was done right here 42 years ago,” Clinton said.
Obama said he was glad Clinton is “here with us marching arm in arm. We don’t have the time for other folks to distract us.”
Bill Clinton was inducted in the Voting Rights Museum’s Hall of Fame after the march in his first campaign appearance with his wife since she entered the White House race in January. Hillary Clinton did not speak but stood with Clinton during the ceremony. “All the good speeches have been done today by Hillary and Sen. Obama — I’m just bringing up the rear,” he said.
Recent polls show Obama slicing Clinton’s national lead and gaining ground among black voters as they become more familiar with the freshman Illinois senator. Clinton, a New York senator whose husband is hugely popular with black voters, had enjoyed big leads over Obama.
The event highlighted the potential importance of black voters, typically the most loyal Democratic constituency, in early 2008 primaries. In Alabama, which could hold its primary in early February 2008, blacks could constitute more than 40 percent of the total vote.
TITLE: Chinese PM?Outlines Next Big Move
AUTHOR: By Benjamin Kang Lim and Chris Buckley
PUBLISHER: Reuters
TEXT: BEIJING — China will do more to save energy and cut pollution in 2007 while striving to keep its economy humming following four straight years of double-digit growth, Premier Wen Jiabao said on Monday.
In his annual report to the National People’s Congress, China’s parliament, Wen also promised to lift spending on the restless countryside by 15.3 percent this year to 391.7 billion yuan to improve schools, hospitals and lagging incomes.
The speech, which was light on politics and foreign policy, underscored how Wen and President Hu Jintao have made narrowing the chasm between China’s bustling coastal cities and struggling inland villages a task that will define their legacy.
“Protect social equity and justice, and let all the people together enjoy the fruits of reform and development,” said Wen, who bowed deeply to the 2,890 delegates, some decked out in colourful regional costumes.
Security was tight throughout central Beijing, with Tiananmen Square cleared and roads cordoned off as delegates converged on the Great Hall of the People.
Wen made the need to shun growth for growth’s sake a recurring theme of his 2-hour address, which opened the two-week parliament session.
China has grown by 10 percent or more in each of the past four years, becoming the world’s fourth-largest economy.
But it is also home to five of the world’s 10 most polluted cities; groundwater is tainted in nine out of 10 cities.
“We need to greatly improve the quality and efficiency of economic growth. We must attach greater importance to saving energy and resources, protecting the environment and using land intensively …” the premier said.
Yet Wen conspicuously made no mention of any drive to combat global warming, even though China is on course to overtake the United States as the biggest emitter of greenhouse gases by 2009.
And while stressing a long-term commitment to cut energy use per unit of output, his speech omitted a numerical goal for 2007. China fell well short in 2006 of its target of a 4 percent cut.
Wen said the government was working on the assumption that GDP would grow by about 8 percent this year, the same target it set last year, when GDP actually rose 10.7 percent.
He acknowledged that this year’s growth outcome might also be wide of the mark, but said the target has been set to signal to local officials the need “to avoid seeking only faster growth and competing for the fastest growth”.
The overall tone of Wen’s report suggests policy makers are more relaxed about the state of the economy than this time last year, when breakneck growth in credit and investment raised the spectre of supply gluts and a new crop of non-performing loans.
While the government needed to keep a tight grip on capital spending and bank lending in 2007, the risk of overheating had been successfully averted for now, Wen said.
His emphasis was on rebalancing growth, not halting it.
“The most important task for us is to promote sound and fast economic development,” Wen said.
Nor did he flinch in his support for China’s export-driven growth model, which is fanning protectionist sentiment in the West as manufacturers lose market share to Chinese competitors.
“Promoting economic development and increasing employment through the growth of foreign trade is a principle we must pursue for a long time to come,” Wen said.
He said the government, its tax revenues swelling thanks to strong growth, would cut its budget deficit this year to just 1.1 percent of GDP from 1.3 percent in 2006 — well below the original goal of a shortfall of 1.5 percent.
Wen promised to raise lagging incomes in the countryside, home to more than 60 percent of China’s 1.3 billion people.
A drive to abolish most school fees for rural children would spread nationwide, and a scheme to offer farmers basic healthcare — now beyond the reach of many — would also be broadened.
Demonstrations have been common across rural China in protest against stagnating incomes, land grabs and lawless officials.
Wen, acknowledging that corruption was a problem, demanded a halt to “extravagance and waste”.
“Quite a few local governments, government offices and organisations compete with one another for lavishness and spend money hand over fist, which arouses strong public resentment.”
TITLE: UN: ‘Iran Is Not Playing By the Rules’
AUTHOR: By George Jahn
PUBLISHER: The Associated Press
TEXT: VIENNA, Austria — The chief UN nuclear inspector said Monday his agency cannot be sure if Iran’s nuclear activities are peaceful or a cover for a weapons program until the country cooperates with his experts.
Mohamed ElBaradei, the head of the International Atomic Energy Agency spoke as board member nations of the IAEA gathered for a session on approving the suspension of dozens of technical aid programs to Iran as part of Security Council sanctions meant to punish the country for its nuclear defiance.
Although the issue is not expected to come up until Tuesday at the earliest, the focus of the IAEA’s 35-nation board meeting will be on Iran’s refusal to suspend uranium enrichment activities and linked problems.
The board also will be reviewing another key nuclear issue —
North Korea’s apparent willingness to ultimately dismantle its nuclear arms-making capabilities based on the Feb. 13 agreement when it pledged to take initial steps to dismantle its atomic program in return for aid.
TITLE: Experts Expect Business to Boom
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: A total of 2.3 million square meters of real estate were constructed or reconstructed in St. Petersburg in 2006. Local experts are confident that this year will again be productive for entrepreneurs and investors. New ambitious projects and deals are on their way.
Boom in Development
Commercial real estate is thriving thanks to ever-increasing investments into the local economy. Foreign and local companies are in need of business centers and logistic facilities as well as industrial zones to establish production sites. This year St. Petersburg authorities will continue the development of industrial areas, the press service of the Committee for Economic Development, Industrial Policy and Trade said earlier this month in a statement.
At the moment several zones are being developed including Shushary, Metallostroi, Konnaya Lakhta, Krasnoselskaya, Ruchii, Yugo-Zapadnaya, Rybatskoye, the area near Novo-Orlovskiy park, Obukhovo, Parnas, Rzhevka, Pushkinskaya and Kupchinskaya, as well as Beloostrov and Prevportovaya-3.
As well as these territories, the committee will start the development of 12 new zones this year.
“Among real estate market trends I would indicate the continuing redevelopment of industrial territories in the city, something that is stimulated by the city administration,” said Boris Yushenkov, General Director of Colliers International.
Last year investment into commercial real estate in St. Petersburg exceeded $1.4 billion, with 85 percent of this invested into shopping areas, Yushenkov said. Colliers expects demand for high-quality commercial real estate to keep growing this year.
“In 2007 international investment funds will play an even more active role. Following the leading investors of 2006, Altarea, NIAM, Invesco, Capital Land and other funds are considering putting money into the St. Petersburg market,” Yushenkov said. By the end of 2006 A-class and B-class business centers offered 420,000 square meters of area. Colliers expect about another 330,000 square meters of office area to be added this year.
About 350,000 square meters of logistic area (A-class and B-class) will be completed in 2007, Yushenkov said, and about 700,000 square meters of shopping area, including 500,000 square meters in shopping centers.
Projects that stand out
Yushenkov listed the major new developers that had recently announced large-scale projects. Italian company Margheri Group is investing $120 million into the first “factory outlet” in Russia. The 65,000 square meter shopping center will be opened in 2008 in the Bugry area, near the ring-road.
Austrian company Meinl European Land acquired the 26,000 square meter North Mall from Promocentro Italia. The shopping center will be opened this year.
Israeli holding Fishman Group is planning to open several Home Center DIY stores in the city.
Colliers expects new international and Moscow based operators to enter the St. Petersburg market. This year Billa, Real, Leroy Merlin and Prisma are expected to launch local projects.
At the same time, local developers have started expanding into the regions and launching new projects. Dorinda is constructing 1,500 square meters’ worth of O’Key-Express supermarkets. Lenta plans to develop a chain of 200 to 400 meter shops called Norma.
Among the largest projects Yushenkov listed the 100,000 square meter shopping and entertainment center Gals-Mart that is being constructed by development company Systema-Gals Northwest at Pulkovskoye Shosse.
Aditum is investing $200 million into a 42,000 square meter underground shopping center beneath Ploshchad Vosstaniya.
Dorinda is planning reconstruction of a building at Konyushennaya Ploshchad 1 to create a shopping center of 20,000 to 25,000 square meters total area.
Hypercenter SPb is investing $40 million into construction of the Mosmart supermarket at the junction of Marshala Blyukhera Prospekt and Laboratornaya Ulitsa on territory of 42 hectares. Hypercenter SPb plans to construct three to four shopping centers in St. Petersburg, investing a total of $150 million. Each center will be 20,000 to 30,000 square meters in size.
Shopping centers are likely to become even larger this year, Yushenkov said. Last year, the average size of a shopping center increased from 14,000 square meters to 22,000 square meters. As for logistic centers, Yushenkov expects them to surpass 50,000 square meters in size this year.
Office centers will keep expanding outside the city, Yushenkov said. Developers are considering embankments and remote areas near the ring-road, he said.
Price Stabilization
Rushing to realize the national project “Affordable Housing,” local authorities expect to add some 2.4 million square meters of residential real estate to the existing housing stock this year.
According to St. Petersburg vice-governor Alexander Vakhmistrov, 14 million square meters of residential real estate are currently being constructed in the city, including the Baltic Pearl project.
Last year 2.3 million square meters of real estate were constructed and reconstructed in the city, according to official statistics.
Last year the price for residential real estate in St. Petersburg nearly doubled and the average price for a one-room apartment in a typical building reached $95,000 in December, according to Central Real Estate Agency.
This year agency experts forecast the price for economy-class real estate to decrease by 10 to 12 percent by the summer, while in other market segments the price will keep growing.
“In the second half of the year the price could increase insignificantly,” said Yelena Pavlovskaya, deputy director of Central Real Estate Agency.
Banks benefits
Yury Korolyov, general director of Credit and Finance Consultancy, indicated active inflow of foreign investment into St. Petersburg as the most significant trend that is likely to continue through 2007.
According to the Committee for Economic Development, Industrial Policy and Trade, in 2005 foreign investment into the local economy increased by 44 percent and accounted for $1.417 billion. In the first half of 2006 foreign investment accounted for $1.57 billion.
Korolyov was positive about the prospects of the banking and finance industry this year because of the increasing purchasing power of city residents.
“At the moment the market for credit services, obviously, is only starting to emerge. Many bank products are in demand and their volume could increase several times over, like credit cards, financing on the security of real estate,” Korolyov said.
“The industry will demonstrate an increase both in volume and in the quality of its services,” Korolyov said.
TITLE: City Promotes Projects at MIPIM
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: St. Petersburg ranks as one of the regions in Russia with the lowest level of investment risk. In November last year the national rating agency Expert RA put the city in first place in a list of Russian regions with “the lowest investment risk in 2005-2006,” praising it for “the high efficiency of regional governance.” St. Petersburg has a BBB- credit rating from Standard & Poor’s.
According to the Committee for Economic Development, Industrial Policy and Trade, $5 billion was invested into fixed capital in St. Petersburg in January-November 2006, which is a 6.7 percent increase on the same period for 2005.
Foreign investment tripled, increasing to $2.7 billion in the first nine months of 2006. Direct foreign investment accounted for $479.5 million. Most of the funds were invested into the processing industry, food production and tobacco production.
During the 10th St. Petersburg International Economic Forum held in June last year, companies signed contracts amounting to around $1 billion. Among the major contracts was an investment agreement with Nissan for the construction of a $200 million car plant in the city. Another foreign carmaker, General Motors, started construction of its plant in June.
In the 2006 city budget spending on infrastructure tripled over 2003, reaching $993 million. This year investment into infrastructure will increase to $1.5 billion.
The city has won a national tender to create a special economic zone, a project that will run through 2006-2026 and provide favorable terms for entrepreneurs. On the territory of the special economic zone the development of software, communications, consumer electronics, automatic control systems, military and civil avionics and medical equipment will all be subject to the terms of the scheme.
The benefits of being located in a special economic zone include a unified social tax of 14 percent instead of 26 percent, exemption from custom fees, land tax, property tax and transport tax and a profit tax of 20 instead of 24 percent.
Baltic Pearl
A multifunctional project comprising residential buildings and office and entertainment areas is being constructed in Strelna near St. Petersburg on a 180-hectare site. It should be completed by 2010, providing housing for about 35,000 residents.
The total cost of the project is estimated at about $1.5 billion. Over one million square meters of residential premises and 500,000 square meters of commercial premises are to be constructed and funded by the Shanghai Overseas Investment Company.
Transport Infrastructure
Last year the Russian government allocated two projects financing from the state investment fund — the Orlovsky tunnel under the Neva River and the Western High-Speed Link Road.
The tunnel is to link the city center with Vasilievsky Island from the intersection of Piskarevsky Prospekt and Orlovskaya Ulitsa. The total cost of the tunnel will be $987 million. Apart from the $328 million supplied by the investment fund, the city budget will provide roughly the same amount. Private investors are to cover the remaining costs. Systema Gals, a subsidiary of AFK Systema, has completed the basic planning works.
The cost of the Western High-Speed Link-Road is estimated at $2 billion. The 46.4 kilometer toll-road will run from north to south through the city, connecting the ring road with the sea port and main transport hubs of the city.
The concession scheme is aimed at ensuring that the construction will be financed by an investment fund ($620 million), the St. Petersburg budget ($370 million) and private investments. Planning works have already been completed.
In December 2006 a tender was announced to find a private company to construct and exploit the road. The winner will be announced in October of this year.
The planned overland express is another key infrastructure project. By 2011 it should link the Baltic Pearl with the Prospekt Veteranov metro station. The Kupchino and Obukhovo stations will be linked to the initial line at a latter date. The total cost of the project is 18 billion rubles ($700 million).
Football Stadium
A new $225-million stadium is to be built on the site of the Kirovsky Stadium on Krestovsky Island which was originally built in the 1950s. It will be funded from the tax payments of Gazprom Neft oil company into the city budget.
From a short-list of five architectural companies, City Hall approved the plans drawn up by Kisho Kurokawa architect & associates. According to the signed contract, construction of the 62,000-seater stadium should be completed by December 2008. The building will meet the standards of the governing bodies of European and World football, UEFA and FIFA.
The stadium, designed in the form of a “space-ship,” will be 56.6 meters high.
Sea Passenger Terminal
The federal authorities and the Morskoi Fasad (Sea Facade) firm will invest $310 million in the construction of a sea passenger port on Vasilievsky Island to serve 1.2 million passengers a year. The port will be completed by 2009.
This is currently the largest project in Europe for the development of land on a seashore site — the 476-hectare plot will be home to the port, office centers, shopping and entertainment facilities and residential buildings.
The state budget is funding the reconstruction of the Petrovsky fairway, a new navigation channel and the provision of the navigational systems. The creation of new landing and hydro-technical systems and the port’s buildings are being financed by private companies.
The state budget spent 2.7 billion rubles on the project last year, while private companies invested 2 billion rubles. Thirty-five hectares of land have been reclaimed and dredging works are continuing.
Gazprom-City
To be located on the banks of the Neva and Okhta rivers near the Peter the Great Bridge, Gazprom-City will comprise a high-rise office center for Gazprom Neft oil company as well as office and shopping areas, a hotel and museum, residential buildings and transport and social infrastructure.
Though construction of the 300-meter high skyscraper in the historical center of the city has been criticized by local media and architectural experts, the Gazprom Neft Invest company plans to complete the tower by 2012. The whole project is due to be completed in 2016.
The total cost of the project is estimated at $2 billion. It will be funded from Gazprom Neft tax payments to the city budget. Over one million square meters of area will be developed.
New Holland
The redevelopment of this island, located in the heart of St. Petersburg and first developed in the 18th century, will cost $319 million in investment and take 30 months to complete.
New construction on the 220,000 square meter island will comprise offices, hotels and varied social infrastructure. The construction of a multifunctional center of 10,000 square meters is obligatory as are the provision of 1,000 car-park spaces, a main road and several pedestrian bridges to provide public access to the island.
The British architect Norman Foster and the Moscow based ST Group construction holding were awarded the contract in February 2006 from a selection of three applicants that put in bids for the project.
The state buildings on the island have already been demolished.
Moskovskaya-Tovarnaya
The project includes relocating railway warehouses from the city center to the Shushary district and redevelopment of the territory between Ligovsky Prospekt, Ulitsa Konstantina Zaslonova, Obvodny Canal, the Neva Embankment and Nevsky Prospekt.
About 300,000 square meters of new buildings are to be constructed. The plans are still being developed and getting the necessary approvals.
Higher School of Management
In April 2006 the Russian government issued a decree on the creation of a Higher School of Management. The new school will be created on the basis of the existing departments of the management faculty of St. Petersburg State University and the Scientific and Research Institute of Management.
The University has been allocated the Mikhailovskaya Dacha palace and park ensemble in Strelna, just outside St. Petersburg to create the business school. The total cost of the project is estimated at $200 million.
Last year, the Federal Agency for Education granted the project 500 million rubles. Most of the funds (350 million rubles) were spent on equipment, literature on management, training programs for lecturers and promotion. The remaining amount was spent on maintenance and planning works for the development of the Mikhailovskaya Dacha.
In November of last year construction of the new campus was officially inaugurated.
Hotel Infrastructure
At the moment 137 hotel projects are being implemented in the city, providing for 11,672 new rooms. Of them, 22 hotels are being constructed and engineering and planning works are being carried out in 74 hotels, while 40 hotels are awaiting approvals and city government decrees.
TITLE: BRIC Economies Appeal to Investors
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: Privately held businesses worldwide are now starting to capitalize on opportunities to trade with the fast-growing BRIC economies (Brazil, Russia, India and China), the latest Grant Thornton International Business Report (IBR) says.
These countries are expected to represent 44 percent of global GDP by 2050. Far from being a threat, the growth of Brazil, Russia, India and China has been positive for businesses over the last two to three years. The survey explores the views of 7,200 business leaders in 32 countries that represent 81 percent of global GDP.
“Businesses are increasingly finding ways of doing business with the fast-expanding boom economies of the BRIC countries. It is no longer just the huge multinationals who are finding ways of taking advantage of the BRIC phenomenon — which has to be good news for the global economy,” said Alex MacBeath, global leader of privately held business services for Grant Thornton International.
Of all the BRIC countries, economic expansion in mainland China has had the greatest impact on all privately held businesses around the globe. The positive impact of mainland China has doubled in the past year, rising from +6 percent in last year’s survey to +12 percent this year. By contrast, the economic expansion in mainland China caused a significant negative impact on businesses in Thailand (-39 percent) and Turkey (-17 percent). Both Russia and India share second place in the survey at +8 percent, followed by Brazil at +5 percent.
Expansion of the Russian economy has also had a positive impact on businesses in EU countries over the past two-three years. The research revealed that most positively affected were Armenian owners of privately held businesses (42 percent), followed by 32 percent of German owners, 30 percent from the Philippines, and 19 percent of Italian owners of business.
On average, the EU countries ranked the positive impact of the economic expansion in Russia as +15 percent, in mainland China as +14 percent, in India as +10 percent and in Brazil as +7 percent.
“It is particularly good news that European businesses are focusing on these opportunities for the first time. However, we believe there are further opportunities beyond those currently being exploited — and it will be critical for privately held businesses to continue engaging in these markets if they want to stay competitive,” Alex MacBeath said.
Optimism among privately held businesses is very strong in the BRIC countries. Indian business owners are the most optimistic in the world and those in mainland China are the third most optimistic. Business owners in Brazil and Russia are also more confident about their countries’ economic prospects than the global average.
Respondents from BRIC countries were also asked to comment on their attitude to the process of globalization.
The businessmen from Russia were mostly reserved in their attitude — only 30 percent of them are sure that globalization presents more of an opportunity for their companies, and 20 percent are sure globalization presents more of a threat. 82 percent of Indian business owners consider globalization to be more of an opportunity than a threat for their businesses compared to Brazil at 69 percent, and mainland China at 71 percent.
However, in three out of four BRIC countries, businesses perceive access to finance as a major constraint on their ability to grow. Four in ten businesses in Russia cite the cost of finance, shortage of working capital and shortage of long-term finance as major constraints on expansion.
Russia’s IBR results
Positive sentiment regarding the economic outlook for Russia has increased strongly, with a balance of +57 percent of respondents expressing optimism, well up on the +21 percent recorded last year. The current mood of confidence in Russia is also reflected in buoyant consumer spending and business investment.
Expectations of business performance are also very positive. A balance of +76 percent of Russian businesses expect turnover to increase. This is substantially higher than in last year’s survey (+5 percent) in line with improving sentiment about the economy.
Selling prices are expected to continue to increase over the coming year with the balance of +60 percent significantly higher than the global average and exceeded by only two countries (Botswana and India).
TITLE: Retail Market Developing at Fast Pace
AUTHOR: By Yulia Nikulicheva
PUBLISHER: Real Estate Quarterly
TEXT: St. Petersburg’s retail market today is one of Russia’s most dynamic. Growing personal incomes coupled with a lack of quality shopping space in the city mean that developers and retail chain operators, both Russian and international, are actively trying to establish their presence on the country’s second biggest market.
However, for a city of 4.6 million inhabitants, St. Petersburg’s quality market remains very small and is currently at a very early stage of its development. In mid-2006 the total area of the city’s international-standard shopping centers (i.e. at least 5,000 square meters in size, with a quality selection of tenants and managed as a single project) was only 370,000 square meters, while vacancies there were very low. In addition to that, street retail along the city’s main shopping corridors (Nevsky Prospekt, Bolshoi Prospekt, Ligovsky Prospekt and Sadovaya Ulitsa) is currently at 21,000 square meters.
This means that in today’s St. Petersburg there is only 80 square meters of quality retail space per 1,000 inhabitants — this is one of the lowest figures in Europe. For comparison, Warsaw has 600 square meters, Madrid — 300 square meters and Berlin — 350 square meters. By the amount of quality retail space per 1,000 inhabitants St. Petersburg is not only behind Moscow with 120 square meters, but Samara and Kazan as well and is now on the same level as the majority of other cities with a population of 1 million or more, such as Yekaterinburg, Nizhny Novgorod or Volgograd. Taking the city’s size and importance into account, it becomes obvious that St. Petersburg has a huge, yet unrealized, retail market development potential.
Like in any other city, the retail space on offer in St. Petersburg is not limited to shopping malls and boutiques on main shopping streets. The entire market, which also includes open-air marketplaces, kiosks, neighborhood grocery stores and pavilions, is estimated at 4 million square meters. As the city develops and local consumers become more discerning, demanding better service and a better choice of quality retail, the share of sub-standard properties will decrease. In terms of the sophistication of its shopping centers and the overall development of the market, St. Petersburg is now three to five years behind Moscow, but is quickly closing the gap and the situation is likely to change dramatically in the next 1 1/2 to 2 years.
A number of large-scale Western-standard shopping center projects currently under development — some of these concepts are not present in Moscow yet — will make St. Petersburg one of the retail capitals of Russia. According to our estimates, by late 2008 the amount of quality shopping center space in the city may reach about 1.4 million square meters (compared with 2.7 million square meters that Moscow is scheduled to have in two years).
Both international and Russian developers are present on the city’s market today. Among them are Turkey’s Ramenka, with its Ramstore hypermarkets, and Swedish furniture giant IKEA, which opened its first store in St. Petersburg in 2003. A number of strong local players are very active as well — for example, the Adamant company built the city’s first shopping centers in the 1990s and now controls a portfolio of 11 malls citywide. Another St. Petersburg-based developer, Makromir, has recently opened the Frantsuzsky Bulvar (French Boulevard) shopping center and is planning a number of large-scale projects, including City-Mall, Rodeo-Drive and Kaleidoscope, in the next two years.
The growing personal incomes in the city, while less than half of Moscow levels, continue to stimulate consumer demand. City inhabitants’ consumer preferences are also changing gradually, which is leading to the emergence of new shopping formats with a variety of concepts and a diversified set of brands and services. Despite the fact that the veteran of St. Petersburg’s shopping centers — Balkansky — was opened by Adamant as early as 1994 near Kupchino metro station, it wasn’t until 2002-2003 that development of Western-style malls began in earnest. Among this first wave of shopping centers opened in that period are Merkuri (GLA 65,000 square meters) at Ulitsa Savushkina, Zanevsky Kaskad (GLA 30,000 square meters) and Sennaya (GLA 30,000 square meters) at Ulitsa Efimova.
It is worth noting that the majority of first-generation shopping centers in the city — not unlike their counterparts that opened in Moscow in the mid-to-late 1990s — are typically characterized by unprofessionally thought out concepts and a poor selection of tenants. As the market evolves, such projects will be gradually pushed off the market or will have to undergo reconstruction.
Nevertheless, a number of high-quality, international-standard projects with effective concepts and a quality tenant pool opened in the city in the last two years. Among such developments are Frantsuzsky Bulvar (GLA 11,000 square meters), which opened at the intersection of Bulvar Novatorov and Leninsky Prospekt in 2005; Udelny Park (GLA 28,000 square meters), developed by Ramenka with Ramstore hypermarket as an anchor tenant; Planeta Neptun (GLA 28,800 square meters), featuring an oceanarium; and Grand Canyon (GLA 56,600 square meters), with tenants such as Sedmoi Kontinent, M-Video and Cinema Park. In 2006 developer Adamant finished the conversion of the historic Warsaw train station into a modern shopping center called Varshavsky Express (GLA 28,800 square meters).
The majority of existing shopping centers in St. Petersburg are characterized by a convenient location next to a metro station, an anchor tenant (typically a supermarket), two- or three-level underground parking and a gross leasable area of no more than 30,000 square meters.
The opening of two Mega malls — Mega Kudrovo (GLA 145,000 square meters) and Mega Parnas (GLA 120,000 square meters), both of which opened in late 2006 — revolutionized the market. The projects, developed by Sweden’s IKEA, are based on the company’s successful Mega concept, first tested in Moscow in 2002. The two Megas have become St. Petersburg’s first super-regional shopping center projects (i.e. having a city-wide significance due to their sheer size) and have set new quality standards for all the future developments in the city.
Following Mega Kudrovo and Mega Parnas, there are a number of large-scale projects planned for the next two years. French construction giant VINCI is building the Raduga shopping center (GLA 75,000 square meters) on Prospekt Kosmonavtov near Park Pobedy metro station; its anchor tenants will include Real hypermarket and German DIY store OBI. City Mall (GLA 70,000 square meters) is planned for Prospekt Ispytatelei, while developer Sistema Hals will build Leto shopping center (GLA 80,000 square meters) on Pulkovskoye Shosse by 2008. The biggest planned project is undoubtedly Ligovsky shopping center (GLA 95,000 square meters) to be erected on Ligovsky Prospekt next to the Moskovsky train station.
As the new generation of shopping malls — multifunctional projects with a large leisure component (cinema, bowling, children’s entertainment center, etc.), sometimes divided into several phases of different uses — enters the market, the city’s shopping center portfolio will become more diverse, while buyers will become more demanding as far as quality and selection of brands is concerned.
Like in Moscow, St. Petersburg’s historic center is the most prestigious and expensive location for a shopping center. However, new construction is severely limited by the lack of available land plots and existing restrictive regulations limiting the reconstruction of historic properties. Sennaya, Pik, Varshavsky Express and Planeta Neptun are among the very few shopping centers that opened in the center in the last three years. The Ligovsky project will join their ranks by 2009.
Large-scale projects, characterized by a significant leasable area, several big-name anchor tenants and multi-level parking, will be predominantly concentrated in the suburbs, in particular along the KAD (the city ring road). Northern St. Petersburg is currently being developed most actively due to its high population density. However, existing transportation problems resulting from poor city planning are hampering this development. However, City Hall has announced plans to invest heavily in road infrastructure, in particular in the construction of several radial roads to alleviate traffic congestion in the center.
St. Petersburg’s fast economic development is driving the retail market’s expansion: Bigger and more ambitious projects are being realized to satisfy the growing consumer demand. This market’s active development on the back of the stable macroeconomic situation and the steadily increasing personal incomes in the region is making investors and developers alike start considering St. Petersburg as a viable alternative to Moscow, which until recently had been receiving the lion’s share of all retail investment in the country.
Yulia Nikulicheva is Associate Director and Head of Research at Jones Lang LaSalle Russia & CIS.
TITLE: CEOs Confident Of More Growth Ahead
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: CEOs from all over the world remain optimistic that Russia and other members of BRIC (Brazil, India and China) will see strong economic growth over the year ahead, PricewaterhouseCoopers said in a survey released in January this year.
CEOs’ confidence in business has reached a record level — over 90 percent of the 1,100 CEOs surveyed across 50 countries are upbeat about growth in revenues over the next 12 months. This is twice as many as PwC reported five years ago.
“CEOs around the world are increasingly positive about their ability to expand their companies and take advantage of the opportunities globalization offers for new markets, new products and new customers,” said Samuel DiPiazza, PwC’s Global CEO.
According to the survey, 93 percent of CEOs expect revenue growth over the next three years. Most of the CEOs expect growth to continue in Brazil, Russia, India and China. Beyond BRIC, the top five countries cited for significant growth opportunities are Mexico, Indonesia, Vietnam, Korea and Turkey.
“Russia remains the focus of great attention on the part of investors in countries all over the world,” said Mike Kubena, General Director of PricewaterhouseCoopers Russia.
“The basic characteristics of the Russian economy have become even more attractive compared to other emerging markets. It is related to the positive structural changes in the economy that we have tried to introduce. I want to stress that this goal will remain important in the future,” the official web site of the Russian president cited Vladimir Putin as saying in December.
Putin estimated GDP growth at 6.8 percent in 2006. “Of course, energy export contributed a lot to this result,” Putin said.
He admitted that along with the opportunities, the rising price of energy is stimulating an inflow of dollars to Russia. “Excessive dollar inflow affects the ruble. A rise in the strength of the ruble leads to an increase in imports and makes Russian non-fuel goods less competitive,” Putin said.
In the first nine months of 2006 the volume of foreign investment increased by 31.7 percent and direct foreign investment by 55.5 percent compared to the same period in 2005. Putin expects foreign investment to grow faster than GDP.
Anton Struchenevsky, economist at Troika Dialog brokerage, forecast GDP growth in Russia to decrease to about 6 percent in 2007.
“Interest rates could become positive, especially in currency markets. As a result, growth in foreign investment will slow down, but we will see more quality investment,” Struchenevsky said.
“Russia will remain a rather attractive proposition for investors. Foreign investment could increase up to $35 billion by the end of 2007, though inflow of speculative capital is likely to decrease,” he said.
However, growing competition for foreign investment means that no country can rest on its laurels, PwC experts warned.