SOURCE: The St. Petersburg Times
DATE: Issue #1271 (37), Tuesday, May 15, 2007
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TITLE: No New Cold War Says Rice
AUTHOR: By Arshad Mohammed
PUBLISHER: Reuters
TEXT: MOSCOW — U.S. Secretary of State Condoleezza Rice, seeking to repair strained ties with Russia, said on Monday she did not like its rhetoric toward Washington but said there were no grounds for talk of a new Cold War. 
As she flew to Moscow to meet President Vladimir Putin, Rice conceded it was “not an easy time for the relationship,” but said ties were nowhere near as bad as during Soviet times.
“I know people talk about, throw around terms like new Cold War. As somebody who came out of that period as a specialist in it I think the parallels ... frankly, they have no basis whatsoever,” she told reporters.
Rice said she hoped to ease Moscow’s concerns about U.S. plans to place 10 interceptors in Poland and radar in the Czech Republic as part of a missile defense shield for Europe.
She also hopes to allay Russian concerns about a plan to grant effective independence to Kosovo, which has been under UN administration for nearly eight years.
Russia is strongly opposed to both proposals, and Putin has accused the United States of seeking to impose its will on the rest of the world.
While acknowledging the strains, Rice highlighted areas where Russia and the United States cooperated, such as reining in nuclear programs in Iran and North Korea.
U.S. companies have been enjoying sharply growing profits in Russia, as its strong oil- and gas-fuelled growth enters its ninth consecutive year.
Russian officials say they are ready for calm and positive talks with Rice on her two-day visit, in contrast to the shrill exchanges of the past few months.
But Moscow — flush with oil money and once again flexing its muscles as a world power just as Washington is mired in Iraq — warned that it would not be dictated to by its U.S. visitor.
“We always call on our American partners to talk frankly and not try to force their point of view on others,” Mikhail Kamynin, Russian foreign ministry chief spokesman, said.
“What we need is not briefings but joint work and a joint search for solutions.”
Rice is the highest-ranking U.S. official to go to Moscow since Putin stunned the West with a speech in Munich in February in which he sharply criticized Washington’s foreign policy.
Rice said she did not like the rhetoric but also stressed the need to view U.S.-Russian ties in a wider context.
“It’s not an easy time for the relationship. It’s not,” Rice said. “But it’s also not a time in which ... catastrophic things are happening in the relationship. It’s mixed.”
“If you look at the actual ... facts on the ground and you look at the level of cooperation that we have had on North Korea, on Iran, if you look at the WTO agreement that we’ve signed with Russia ... it just doesn’t accord with some of the rhetoric that does sometimes come out,” she said. “It’s a big, complicated relationship, but it’s not one that has anything like the implacable hostility which really did lead to zero-sum politics between the United States and the Soviet Union,” she added. 
Washington has grievances with Russia, including concerns about what it sees as an erosion of democracy under Putin and complaints about the Kremlin’s treatment of ex-Soviet neighbors who seek closer ties with the West. 
But Rice said it would be a mistake for the United States to seek to isolate Russia.

TITLE: Jewish
Student Murdered
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Prosecutors on Sunday detained a suspect in the case of the murder of 22-year-old Dmitry Nikulinsky who was killed Saturday in the stairwell of his apartment building on Svetlanovsky Prospekt.
Nikulinsky, a sixth year student of the biology faculty of St. Petersburg State University, was stabbed to death and died of multiple wounds to his face and neck.
The student left his flat on Saturday morning to go to university. His mother, who left the flat a few minutes later, found the body of her son covered in blood lying on the floor by the entrance door.
The suspect, who remains unnamed, was interrogated overnight Sunday and prosecutors said Monday that the murder was sparked by jealousy in what most likely had been a love triangle. The prosecutor’s office said that the suspect, a former boyfriend of  Nikulinsky’s last girlfriend, has confessed to the crime.
But human rights advocates suspect racial motives lie behind the killing because Nikulinsky was Jewish and because of the brutal way he was attacked.They speculate the student was killed by a neo-fascist skinhead group.
“Everyone who knew Dmitry would tell you that this so-called personal motive is utter nonsense,” said Ruslan Linkov, head of the liberal political organization Democratic Russia. “Besides, slashing people’s face and neck with knives is a trademark style of fascist youth groups. He received at least twenty stab wounds.”
Human rights advocates point out that the way Nikulinsky was murdered is reminiscent of the attack on antifascist activist Timur Kacharava in November 2005. 
Kacharava was stabbed to death outside the Bukvoyed bookstore on Ligovsky Prospekt opposite the Moskovsky Railway Station. About ten teenagers armed with knives attacked him and his friend Maxim Zgibai, also a student. Kacharava received five wounds in the throat and died before the ambulance arrived at the scene.
“Xenophobia is rife in the country, and rampant attacks on non-Slavs became commonplace a long time ago,” Linkov added. “With his distinct Jewish features and appearance,  Nikulinsky was bound to have attracted the attention of skinheads. Skinhead gangs attack minorities on a daily basis, and in this respect no one can feel secure anymore.”
Nikulinsky did not belong to any political party and was not a member of any non-governmental organizations. In addition to his studies at the university, he taught a biology class at the Anichkov College and at a Jewish community school.
Moishe Treskunov, spokesman of the St. Petersburg’s Jewish Community, said its members were profoundly shaken by Nikulinsky’s “execution-style” murder.
“We do not know enough about Dmitry’s murder to be able to guess — with any certainly — why he was killed,” Treskunov said. “But the extent of aggression against him, the way his body was savaged by his killers, strongly suggests that Russian society is in a state of deep spiritual crisis. It has come to the point when the value of human life has degraded into something null and void, as if it has disappeared into thin air.”

TITLE: Dissenters’ March in Samara Allowed
AUTHOR: By Carl Schreck and David Nowak
PUBLISHER: Staff Writers
TEXT: MOSCOW — Samara authorities have granted permission for a Dissenters’ March to be held in the city center during a Russia-EU summit, but police on Sunday detained several journalists and march organizers. 
Sergei Kurt-Adzhiyev, editor of the Samara edition of Novaya Gazeta, was detained along with his daughter Anastasia, Samarskaya Gazeta reporter Mikhail Kuteinikov and Yury Chervinchuk, a rally organizer. The four were held for three hours and released without charge.
“Two men stopped me, saying they had information that I was armed with grenades,” march organizer Anastasia Kurt-Adzhiyeva said by telephone Sunday.
Kurt-Adzhiyeva said she had received written permission to hold the march last Friday from a senior city official, Alexander Kuznetsov. The march is timed to coincide with the beginning of the Russia-EU summit in the Volga resort of Volzhsky Utyos near Samara.
Kurt-Adzhiyeva was distributing flyers advertising the march when 
she was stopped by police. She phoned her father, who arrived with Kuteinikov. 
Both were immediately detained. When Kurt-Adzhiyeva called Kuznetsov to demand an explanation, he refused to speak with her, she said.
The Samara march is the latest in a series of opposition rallies organized this year by The Other Russia, an opposition coalition led by former chess champion Garry Kasparov and former Prime Minister Mikhail Kasyanov.
Kurt-Adzhiyeva, 20, described herself as “a supporter” of The Other Russia. 
Mikhail Gagan, another march organizer, said by telephone Sunday that the authorities had bowed to pressure from abroad in permitting the protest.
“Russia knows everybody will be watching,” Gagan said. “How would European partners view the banning of such an event as a peaceful demonstration?” he added. 
President Vladimir Putin will host the Russia-EU summit. German Chancellor Angela Merkel and European Commission President Jose Manuel Barroso are among the leaders expected to attend.
Thomas Steg, a spokesman for the German government, which currently holds the European Union presidency, urged Russia to respect human rights.
“Critical voices must be able to express themselves,” Steg said Friday, The Associated Press reported.
Citing road repairs along the proposed route and the organizers’ proposal to hold the march during the evening rush hour, Samara authorities had previously rejected The Other Russia’s request.
The city reversed its decision on Friday several hours after police raided the Samara offices of Novaya Gazeta, confiscating two computers and preventing the release of its Monday issue.
Novaya Gazeta chief Dmitry Muratov said the raid was an attempt to pressure Sergei Kurt-Adzhiyev into steering his “independent, grown-up daughter” away from pushing ahead with plans to organize the march, Interfax reported.
Officers from the Interior Ministry’s Samara regional office entered the newspaper at 11 a.m. Friday with a search warrant, Darya Grigoryan, a Novaya Gazeta journalist who was present during the raid, said by telephone Friday.
“They even ordered me to stop working on my laptop computer,” Grigoryan said. Grigoryan said the officers claimed to have evidence that the newspaper was running unlicensed software on its computers.
Regional Interior Ministry officials could not be reached for comment Friday or Sunday.

n

 The Federal Security Service said Friday that 1,700 officers had already been deployed in Samara in the run-up to the summit, and that an additional 3,500 border guards would provide security during the event, Itar-Tass reported.

TITLE: Five Leaders Make Caspian Energy Security Agreement
PUBLISHER: Combined Reports
TEXT: Leaders from five European and Caspian Sea nations agreed Saturday to work together on energy security issues and on a possible extension to Poland of a pipeline carrying Caspian oil. 
Polish President Lech Kaczynski, who met in Krakow with his counterparts from Lithuania, Ukraine, Georgia and Azerbaijan to discuss ways of lessening Russian dominance in oil and gas supplies, declared the gathering a success. 
“We have become much closer on the political level,” he said. 
The absence of Kazakh President Nursultan Nazarbayev — who stayed in Central Asia for energy talks with President Vladimir Putin — underlined the difficulties of bypassing Russia. 
The five leaders agreed that their countries would form a working group to pursue issues of joint energy security. 
They also called for a group to be set up to plan an extension of the Odessa-Brody pipeline through Ukraine to bring Caspian Sea oil to a refinery in Plock, Poland, and on to the Baltic Sea port of Gdansk, to be ready in about 2012. 
Kaczynski said a follow-up meeting would be held in October in Vilnius, Lithuania — hopefully with Turkmenistan in attendance. 
Kazakhstan was represented at the conference in Poland by Lyazzat Kiinov, a special envoy of Nazarbayev’s. He expressed interest in finding new ways of exporting the nation’s natural resources. 
“We have made a decision to take part in the pipeline project to Alexandroupolis [Greece]. We are now also thinking of taking part in Odessa-Brody-Gdansk,” Kiinov said Friday. 
Azeri President Ilham Aliyev threw his weight behind the Odessa-Brody-Gdansk project, which envisions reversing the flow of the pipeline. It currently brings Russian crude to the Black Sea.
“Today we give very strong political support for this project,” Aliyev told reporters at the summit. “We want to play a bigger role in guaranteeing the energy security of Europe.”
He added that technicians would need to analyze the project before he could give details on how much oil Azerbaijan could supply. 
Georgian President Mikheil Saakashvili said Europe had “a vital interest in securing lasting, reliable alternatives” to a potential Russian “monopoly,” and that ultimately this would benefit Russia.
“If Russia functions as a monopoly, then there are no incentives for them to make long-term investments and further develop their energy resources,” he said. “Paradoxically, I think Russia will benefit the most from greater diversification and market-based competition.”
In March, Nazarbayev urged Poland to include Russia in the pipeline despite Polish and Ukrainian interest in cutting their reliance on Russian energy. 
The six countries at the summit agreed to establish a joint company to work on the pipeline. 
Ukrainian President Viktor Yushchenko called Friday’s meeting a breakthrough. 

AP, Reuters, Bloomberg

TITLE: Adoption Delays Tied To Rising Political Tensions
AUTHOR: By Michelle Nichols
PUBLISHER: Reuters
TEXT: NEW YORK — Some U.S. couples hoping to adopt children from Russia are concerned that rising political tensions between the two countries could add further delays to their bids to become parents.
“We’re getting kicked when we’re down,” said Kathleen Dorrian, 41, a New York police officer who started the process to adopt a child from Russia with her husband, Joseph, 48, in October 2005.
Under new Russian laws meant to boost domestic adoptions, agencies that arrange international adoptions must seek re-accreditation in a slow process involving multiple government agencies. No U.S. agencies are now accredited to organize adoptions in Russia, and Moscow has given no indication of how long the re-accreditation process will take. Independent adoptions are still allowed.
“From the beginning everybody was very honest that things aren’t that great in Russia, but just stick with it,” Dorrian said. 
“I think they want to keep these children in the country, to me I think that has a lot to do with it.”
The tightening of the adoption process had been demanded by Russian politicians shocked by a series of well-publicized murders of Russian children abroad. More than a dozen adopted children have been killed by U.S. parents over the past decade.
Some U.S. agencies, parents and experts have raised concerns that the accreditation process could become caught up in a rise in political tensions between U.S. President George W. Bush and President Vladimir Putin. 
“[Adoption is] seen as a fraught issue for Russians in general, which is therefore going to be particularly sensitive to changes in U.S.-Russia relations,” said Cathy Nepomnyashchy, a professor at Columbia University in New York.
Dale Herspring, a political science professor and Russian expert at Kansas State University, said he had no doubt that the mood in the Kremlin has a “trickle down” effect.
“That does not mean that Putin gave an order to slow down or create problems when it comes to adoptions,” he said. “If U.S.-Russian relations are bad, this means that those bureaucrats who don’t want to see Russian children leave the country, have a stronger position to resist adoptions.”
The U.S. State Department said in a statement that it had been “actively encouraging the Russian government to complete its reviews and proceed with appropriate accreditations or re-accreditations as expeditiously as possible.”
Officials at the Russian Embassy in Washington were not immediately available for comment.
“There are people on both sides of the government who are very happy for this to happen, and truly the officials on the ground and the embassy were very happy for us,” said Simon Alexander, 38, a New York photographer who adopted a 16-month-old boy, Jack, from Russia last month with his wife, Leslie.
“But in a greater sense, politically it’s a football that people are kicking around.”

TITLE: Gay Pride Parade Planned
PUBLISHER: The St. Petersburg Times
TEXT: Gay rights activists said Monday some 2,000 people are expected to take part in a gay pride parade in St. Petersburg later this month despite authorities’ opposition to events celebrating gay culture, RIA Novosti reported.
Organizers of the parade said they had notified municipal authorities of their intention to stage a march along Nevsky Prospekt on May 26. Officials at City Hall, however, said they had not yet received any notification. 
Last May, gay parades in St. Petersburg and Moscow took place despite authorities’ refusal to give the go-ahead, but many of their participants were detained by police and attacked by neo-Nazi groups. 
Moscow Mayor Yury Luzhkov has vowed to stop any attempt by homosexuals to march through the Russian capital, publicly branding gay pride parades a “satanic act.” 
Two gay rights activists filed a lawsuit against Luzhkov, demanding that he retract his remark and pay a nominal fine of 1,000 rubles ($39) in moral damages to each, but a Russian court refused to qualify the mayor’s words as libel.

TITLE: TV Song Contest Looks East
PUBLISHER: Combined Reports
TEXT: HELSINKI — Serbia’s Marija Serifovic won the 2007 Eurovision Song Contest early Sunday with a heart-wrenching ballad that beat 23 other entries in a competition dominated by East European countries. 
Serifovic’s song “Molitva” (“Prayer”) received the highest score in a 42-nation vote count, followed by a glitzy drag show act from Ukraine and a Russian girl band.
Hosted by the 2006 winner Finland, the annual extravaganza of clashing musical tastes was broadcast live to an estimated audience of 100 million, with viewers picking the winner by phone and text messages.
“All my life I have been singing and tonight this [victory] makes me very proud,” said Serifovic, 22, who sang about love and pain in Serbo-Croat, flanked by five other women dressed in black suits and ties.
It was Serbia’s first appearance in the competition as an independent nation after Serbia-Montenegro split last year.
Maligned by some as an exhibition in bad taste, Eurovision is hugely popular among aficionados of kitsch and bubble-gum pop who travel across the continent to watch their idols in an event known for its camp acts and over-the-top performances.
Eastern European countries took 14 of the top 16 spots in the three-hour final, which ended in the early hours in Helsinki’s main hockey stadium where 9,000 people packed the arena.
Outside, police closed off the main city square where 25,000 people jammed to watch the show on large screens.
Serifovic’s victory at the contest caused an outpouring of national pride in Serbia, a country more used to rebuffs from Europe over its wartime past than to accolades (See story, page 16). 
Government officials, political parties and President Boris Tadic congratulated Serifovic on her victory.
“Congratulations, Marija! Serbia is very proud tonight and celebrates your success,” Serbian Prime Minister Vojislav Kostunica said in a statement.
Serbs took to the streets with flags, tooting horns and chanting the winning entry until the early hours. Newspapers were dominated by the win: “Marija takes over Europe” and “European Prayer for Serbia” among their headlines. 
“A rare time when I was proud to be Serb,” wrote user Zarko on the web site of the popular B92 broadcasting network. 
“I’m so glad it wasn’t some war song,” said Aleksandar Tijanic, director of RTS state television. “Hosting this event in Belgrade next year will mean we have finally crossed into normality.” 
The victory could go some way toward assuaging Serbia’s persecution syndrome: the country’s role in the Yugoslav wars made it an international pariah for a decade. Many Serbs feel they were unfairly blamed by Western politicians and media. 
“To those who say ‘the world is against us,’ this shows Europe doesn’t hate us, it gives ample reward when it’s due,” another user wrote on the B92 web site. 
The competition put the Finnish hosts into a carnival mood with 350 events organized during what was dubbed “Eurovision Week.” 
Serbia received 268 points in the final tally, benefiting from top scores from a number of East European countries. 
Pre-competition favorite Verka Serdyuchka of Ukraine, a bespectacled drag-queen whose dress sparkled like a disco ball, came in second with 235 points. Russia’s girl trio Serebro had 207 points and Kenan Dogulu of Turkey finished fourth with 163. 
The United Kingdom and Ireland, the most successful countries in Eurovision history, finished last among the 24 finalists, with 19 and five points, respectively. 
(AP, Reuters)

TITLE: Ten People Die In Orsk Blaze
AUTHOR: By Steve Gutterman
PUBLISHER: The Associated Press
TEXT: MOSCOW — Ten people were found dead after a fire swept through a cafe in a Russian city, police and emergency officials said Monday, and prosecutors indicated they suspect arson. 
The early morning blaze gutted a small cafe and bar at a market in the city of Orsk, about 870 miles southeast of Moscow.
The bodies of five men and five women were found, regional Emergency Situations Ministry spokesman Vladislav Zubchenko told The Associated Press. He said all the victims were believed to have been found.
Officials initially said the fire followed an explosion, but Zubchenko and other officials later said the cause of the blaze was unclear. Witnesses reported hearing loud banging noises around the time the fire broke out, but the source of the noise was unclear, Zubchenko said.

TITLE: Missile Defence Talks Stall As Moscow Stands Firm
PUBLISHER: Combined Reports
TEXT: BRUSSELS — Talks between NATO leaders and General Yury Baluyevsky late last week failed to narrow the gap between Moscow and the West over a missile defense shield in Central Europe.
But the Czech foreign minister said Friday that the Russians were signaling a readiness to negotiate about the shield.
After NATO talks Thursday, Baluyevsky, chief of the General Staff, repeated Russia’s opposition to the shield and dismissed U.S. assertions that it was needed to defend against potential threats from Iran. 
He told reporters that Iran was decades away from producing missiles that could target Europe and said the U.S. plans posed a threat to Russia. 
Iran “cannot be the reason for the deployment of the U.S. strategic elements,” Baluyevsky said. “What is being created is exactly what we moved away from 15 years ago with the end of the Cold War.”
U.S. officials have said the plan to install 10 interceptor missiles in Poland and a radar station in the Czech Republic poses no threat to Russia’s strategic weapons. Baluyevsky said, however, that Russia could not be sure the U.S. deployment would remain on that scale. 
“Today 10, tomorrow 20? Who can give us the guarantees?” he asked. “Nobody tells us how many interceptors there will be in 2020, or 2030.”
In Berlin, Czech Foreign Minister Karel Schwarzenberg said Friday that the Czechs were noticing a change in tone over the missile shield. 
“They’re sending signals ‘negotiate with us,’ and we are naturally ready to negotiate,” Schwarzenberg said after a meeting with German Foreign Minister Frank-Walter Steinmeier. 
Schwarzenberg was asked whether Russia was now becoming “reasonable” about the issue. “I would not talk about being reasonable,” he said. “There are Russian interests, and they are trying to figure out what’s the best way to satisfy Russian interests. It’s always a question of whether there will eventually be a compromise.” 
AP, Reuters

TITLE: Shop Red-Faced Over T-Shirt Mishap
PUBLISHER: Combined Reports
TEXT: One of Britain’s largest menswear stores has pulled a T-shirt off its racks after realizing it bore a slogan similar to those used by Russian ultranationalists to promote ethnic cleansing, the company said.
Burton stores stopped selling the T-shirts on Friday in response to concerns raised by a Russian-speaking staff member, a week after 6,000 of the shirts went on sale, a spokeswoman said.
The slogan written in Cyrillic script reads “Ochistim Rus Ot Vsekh Nerusskikh!” (We will cleanse Russia of all non-Russians!). The words wrap around the Russian state symbol of the double-headed eagle. In the center of the eagle is a Russian Orthodox cross.
Burton said it thought the slogan meant “Be proud of Russia!”
“We were assured by our supplier that it was a patriotic slogan,” a company spokeswoman said on condition of anonymity in line with company policy.
“As soon as we realized its significance and that it was not something we would want on our T-shirts, it was withdrawn from stores,” she said Saturday.

TITLE: Putin Triumphant in Turkmen Gas Deal
AUTHOR: By Miriam Elder
PUBLISHER: Staff Writer
TEXT: MOSCOW — President Vladimir Putin scored a victory for access to Turkmen gas on Saturday, winning approval for a direct pipeline around the Caspian in a major setback to U.S.-backed plans for an alternative route that would bypass Russia.
The new pipeline is due to run from western Turkmenistan along the Caspian shore, pumping billions of cubic meters of gas through Kazakhstan before entering Russia, from where it will likely be exported at great profit.
A triumphant Putin announced the deal after a meeting with Turkmen President Gurbanguly Berdymukhammedov and Kazakh President Nursultan Nazarbayev in the Caspian port of Turkmenbashi.
The deal serves a big blow to U.S. and European Union interests. Washington and Brussels have been lobbying hard for a pipeline that would send Turkmen gas to Europe under the Caspian Sea, cutting Moscow out of the picture.
The new pipeline will come as a relief for Gazprom, which relies on Turkmen gas to fulfill its supply contracts as production at home stagnates and energy demand across Europe grows.
Competition for Turkmen gas reserves, estimated by BP’s Statistical Review to stand at 2.9 trillion cubic meters, has intensified since the death of President Saparmurat Niyazov in December.
An official agreement would be signed by July, and construction could begin within one year of its signing, Putin said in remarks posted on the Kremlin web site.
Under an agreement signed with Niyazov in 2003, Turkmenistan was committed to ship 50 billion cubic meters of gas to Russia next year, a number due to rise to 80 bcm by the time the agreement runs out in 2028.
Putin said the new pipeline would pump at least 20 bcm of gas annually by 2012, and Industry and Energy Minister Viktor Khristenko said in Turkmenbashi that the number could eventually reach 30 bcm, Itar-Tass reported.
Officials failed to indicate how much it would cost to build the pipeline, but Itar-Tass cited 2003 estimates placing construction costs at $1 billion. The true cost of the pipeline would likely run much higher, as the prices of materials such as steel have risen drastically in recent years.
Russia, through state-run Gazprom, already imports about 42 bcm of gas per year from Turkmenistan at a price of $100 per 1,000 cubic meters.
It then exports the gas to Europe for an average price of $250 per 1,000 cubic meters, reaping tremendous profit while using domestic reserves to fulfill cheaper supply contracts at home.
Gazprom CEO Alexei Miller, who was accompanying Putin on his trip, said the $100 price for Turkmen gas would last through 2009 and that a new price would be negotiated by July of that year.
The three presidents said they would also expand the capacity of an existing pipeline that currently pumps Turkmen gas to Russia through Kazakhstan and Uzbekistan to 90 bcm. Uzbek President Islam Karimov signed off on the deal from Tashkent before the Turkmenbashi summit, Putin said.
Niyazov won key concessions from Putin on oil transit during talks in the Kazakh capital, Astana, on Thursday, prompting some analysts to speculate on a possible trade-off for Kazakhstan’s approval of the Caspian pipeline project.
Putin said he would drop longstanding objections to expansion of the Caspian Pipeline Consortium, which carries oil from Kazakhstan’s Tengiz field to the Russian Black Sea port of Novorossiisk. He also agreed to Kazakhstan’s participation in the Russian-controlled pipeline from the Bulgarian Black Sea port of Burgas to Alexandroupolis on the Greek Adriatic.
“We will transport [oil and gas] by whichever route is profitable,” Nazarbayev said in Turkmenbashi, news agencies reported.
Putin said the Turkmen leadership had initiated plans for the new Russia-backed Caspian pipeline. “We are opening the Caspian route at the request of Turkmenistan,” Putin said, The Associated Press reported.
No other countries would be invited to participate in the pipeline’s construction, he added. “It’s enough to have three countries,” he said.
The deal will likely further put off discussion of a trans-Caspian pipeline that would ship Turkmen gas under the Caspian Sea to Baku. Azerbaijan and then on to Europe, Russian officials and analysts said.
“Existing technical, legal, environmental and other risks relating to the trans-Caspian project are so great that it would be impossible to find an investor,” Khristenko said, remarks posted on the Kremlin web site showed.
“Unless this is a political project, and then it does not matter what would be inside the pipeline as long as it exists,” he said.
Berdymukhammedov said consideration of the alternative route was still “on the table,” Russian news agencies reported.
The Turkmen leadership has promised to build a gas pipeline to China, and Berdymukhammedov said the country was also considering routes to Afghanistan and India.
“Don’t worry, there is enough [gas],” he said, Reuters reported.
Turkmenistan, largely closed to the outside world during Niyazov’s rule, has refused to allow any independent assessment of its gas reserves and claims closer to 10 times the figure put forward by BP.
“If these claims are substantiated and if the Turkmens find investors to produce this gas, the possibility of the trans-Caspian pipeline remains on the table,” said Valery Nesterov, an analyst at Troika Dialog.
Both the Odessa-Brody pipeline in Ukraine and the Nabucco pipeline, planned to carry gas from the Caspian to Austria, were approved despite Russian objections, he noted.
The EU, supported by the United States, has been pushing to reduce its reliance on Russian gas amid concerns over Moscow’s ability to wield its energy power for political ends.
Nesterov said politics would win out. “If politicians really have a strong desire to get more gas that would bypass Russia, they could offer to incur some financial losses and risks,” he said.
Putin moved to reassure critics on Saturday, saying: “We take our responsibility in the world energy supply very seriously.”
Putin wrapped up his three-day visit to Turkmenistan on Sunday.

TITLE: Two Dead In Chita Bank Heist
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Bank robbers killed two guards and stole 38 million rubles ($1.5 million) from a Sberbank branch in Chita, pulling off one of the country’s biggest heists in a decade.
Police found the bodies of the guards, their hands in cuffs and legs bound with duct tape, when bank employees called to say the doors were locked from the inside and that they could not start work Saturday morning.
“The robbery was discovered when the new shift started in the morning. Police helped open the door, and the two security guards who had been killed were found in the room,” a police spokesman told Interfax.
The guards apparently were shot with one of their own Makarov pistols, RIA-Novosti reported.
In addition to the cash, the robbers made off with 9 ounces of gold and 62 ounces of silver bullion from the branch of the state-owned bank, located in the center of the east Siberian city.
The robbers fled in a Toyota sedan owned by one of the guards. The burned-out shell of the car was later found on Chita’s outskirts.
Anatoly Uskov, a senior aide to Chita’s regional prosecutor, said the robbery was well planned, with the robbers leaving few traces and even taking the video recordings from the bank’s security cameras.
Uskov said locks on the bank’s doors had not been damaged.
“Investigators are working on several versions of how the robbers got into the building, but the main ones are that they had stayed in the bank since the previous evening or that they had known the guards,” Uskov said, RIA-Novosti reported.
Sberbank is offering a reward of 300,000 rubles (about $11,600) for information on the bank robbery.
Police said Sunday that the search for the robbers was ongoing.
Bank robberies are relatively rare in Russia, where banks that work with a lot of cash have elaborate security systems. In July 2005, three masked robbers attacked guards delivering about $1 million to a branch of Vneshprombank in central Moscow, killing one and injuring a second before fleeing with the cash.

TITLE: Armenian Poll Declared ‘Improved’
PUBLISHER: Combined Reports
TEXT: YEREVAN, Armenia — Pro-presidential parties have won a majority in Armenia’s parliamentary elections, the country’s election commission said Sunday, in a vote Western monitors described as a vast democratic improvement. 
The expected big winner in the election — viewed as a dress rehearsal for the presidential vote next year — is Prime Minister Serzh Sarksyan’s Republican Party, which received 33.8 percent with 99.99 percent of the vote counted, RIA-Novosti reported. 
Prosperous Armenia, a comparatively new pro-presidential party, had 15.1 percent of the vote, followed by Dashnatsutyun, with 13.1 percent. 
Opposition parties Orinats Yerkir and Heritage won 7 percent and 6 percent, respectively.
The country voted Saturday to fill 131 seats in the parliament — 90 to be chosen according to proportions that parties get nationwide and 41 in single-mandate contests. Final turnout figures showed roughly 1.37 million people voted, a 59.4 percent turnout, election officials said. 
Sarksyan, 52, is a former welder and a trusted lieutenant of Armenian President Robert Kocharyan, who steps down as leader next year. He has said he would enter a presidential election if his party asked him. 
“We were not expecting to get more than 50 percent of the vote as we had worthy opponents,” said Armen Ashotyan, a Republican lawmaker. “We are satisfied.” 
International observers, who said the 2003 vote fell well short of democratic standards, praised Saturday’s elections as a step forward.
“The Armenian elections were an improvement from previous elections,” said Tone Tingsgaard, from the Organization for Security and Cooperation in Europe monitoring team. “Some issues remain and more is needed to consolidate this democracy.” 
Observers highlighted the close relationship between businesses and politicians as a concern and an inadequate electoral complaints procedure. One of the pro-presidential parties is run by a millionaire businessman. 
A fringe opposition group that wants to start proceedings to impeach the president and says he has failed the country with his policies is not expected to win enough votes to clear the 5 percent barrier and enter the parliament. 
Nikol Pashinyan, one of the leaders of the Impeachment party, said there had been voting violations, and he promised street demonstrations. 
“We do not recognize the result of the election and our struggle will shift to another stage,” he said. 
Impeachment supporters and police clashed in the election run-up, but Sunday the streets of Armenia’s capital were quiet. 
Impeachment has a few thousand supporters. 
Simmering tensions burst to the surface last month when gunmen tried to kill a senior member of the Republican Party, and two blasts ripped through the offices of another pro-presidential party. 
The violence has revived memories of a 1999 shootout in the parliament that killed the speaker and the prime minister.

Reuters, AP

TITLE: Matviyenko Lets Rip At Local Advertisers
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: Four years into her reign as St. Petersburg governor, Valentina Matviyenko has acknowledged the “outrageous” nature of the city’s outdoor advertising and vowed to banish it from the center of town.
Matviyenko has offered to remove banners spanning Nevsky Prospekt and other main roads, as well as large posters and billboards both in public and private areas.
At a meeting in Smolny on Friday a working group was created to regulate and standardize advertisement in the city. Within a month the group will have agreed which advertisements to remove or replace.
“Obviously, advertising companies will suffer financially,” RBC cited Alla Manilova, chairman of the Committee for Press and Media Relations and head of the working group, as saying Friday. She suggested removing the banners at the advertisers’ expense.
According to the City Center for Advertisement, St. Petersburg accounts for about 12 percent of all outdoor advertisement in Russia. 
In 2005, the city’s outdoor advertisement market accounted for $85 million compared to just $20 million in 2000. The whole advertisement market in St. Petersburg was estimated at $260 million in 2005 and $85 million in 2000.
Last year outdoor advertising contributed $28 million in taxes to the city budget.
“I am mostly outraged by the larger advertisements. I would like to see the architects who in the 1990s allowed such things. Large advertisements should be banned in St. Petersburg because of the unique architectural environment, especially in the city center,” Interfax cited Valentina Matviyenko as saying Friday.
According to Smolny, about 1,000 large adverts hang in St. Petersburg. “They were sanctioned by the previous administration. I promise to exclude large advertisement from St. Petersburg’s visual image,” Matviyenko said to Interfax.
According to ESPAR-Analytic agency, by November last year St. Petersburg housed 252,500 square meters of outdoor advertisements — between Moscow, with 742,800 square meters, and Yekaterinburg, with 116,500 square meters.
Citizen complaints and road safety concerns were among the main reasons for placing limits on adverts in the city center, the authorities indicated.
In July last year, a new Law on Advertisement came into force imposing new standards of advertising space on roads and in urban and rural areas. Experts warned that the outdoor advertising industry could lose up to 80 percent of its placement areas.
The new standard prohibited mobile advertising and advertisements near road signs. In city areas, advertising must be located no closer than five meters from the roadside, in rural areas no nearer than ten meters.
The president of the National Association of Advertising and Information, Sergei Zheleznyak, described the standard as “unrealizable.”
“This standard puts at risk the very existence of outdoor advertising,” said Vladimir Ryabovol, head of News Outdoor Russia in St. Petersburg.
Advertisements hanging over Nevsky Prospekt will be the first to be removed. The authorities claim that such advertisements were put up against the law. The same practice will be followed on Moskovsky, Ligovsky and Kamennoostrovsky prospekts and all across the city center.
Billboards, brandmakers and even posters with dimensions of three by six meters could be banned.
Advertising companies will be invited to move large advertisements to the outskirts and suburban roads outside residential areas. Alternatively, they could replace large advertisements with scrollers.
“In order to prevent any speculation, I state that we will remove advertisement from all private territories,” Matviyenko said at the meeting.
According to Dimtri Gritsenko, Deputy Director at Gallery, the most European of Russian cities is lacking in new, high-tech solutions to advertising.

TITLE: SAP May Add Russian Software Laboratory
PUBLISHER: Bloomberg
TEXT: VIENNA — SAP AG, the world’s largest business-management software maker, may open a software development center in Russia to improve access to customers in the country, Chief Executive Officer Henning Kagermann said. 
Walldorf, Germany-based SAP may open the center in the coming two to three years, Kagermann told journalists at a meeting in Vienna on Sunday, where SAP will hold its annual Sapphire customer conference from Monday. 
“You have to distribute around the world for proximity to clients and in places where you feel you can attract the next generation of engineers,’’ Kagermann said. 
Almost 30 percent of SAP’s 40,000 employees are software engineers at one of SAP’s eight global laboratories. SAP, whose software helps companies manage tasks such as accounting and payroll, has accelerated investments to win smaller clients and slow the advance of rival Oracle Corp. in the $56 billion market. 
Russia belongs to a group of countries commonly called the BRIC, which includes Brazil, India and China, and where the economies are growing faster than in the U.S. and Western Europe. Outside Germany, SAP has set up software laboratories in Bulgaria, Hungary, China, India, Israel, the U.S. and Canada. 
“If you look at R&D, we’re now 65 percent of capacity in Walldorf,’’ Kagermann said. “It’s pretty good to see one third outside.’’ 
SAP has a target of more than doubling its total client base to 100,000 by 2010 by selling more of its software to a larger group of smaller businesses. Its most recent product, codenamed A1S, is sold online via subscription. Kagermann said last month that “a few thousand’’ customers will be using the product by the end of next year. 
The A1S product will “cover 80 percent of the world’’ in terms of markets in the first two years, Deputy CEO Leo Apotheker said Sunday. 
“We have enough time,’’ Kagermann said. “For the financial market, the business model is a concern. This year we’ll prove that the product is ready. Next year, we’ll prove that the business model works.’’ 
Shares of SAP have dropped 17 percent this year, the worst performance among the 30 members of Germany’s DAX Index, which gained 26 percent. 
SAP co-founders Dietmar Hopp, Hasso Plattner and Klaus Tschira own about 10 percent of SAP each. 
Following a March report in German magazine Wirtschaftswoche that U.S. buyout firm Silver Lake Partners wants to persuade at least one of the three founders to sell a stake, SAP has repeatedly said that the three men remain committed to the company. SAP hasn’t received any approaches from private equity firms, Kagermann said Sunday. 
Last week, SAP agreed to buy privately-held OutlookSoft Corp. in the U.S. to add 700 clients and gain products that help companies meet compliance needs and manage financial forecasts. It was SAP’s second purchase in 2007 after Pilot Software Inc. 
“OutlookSoft was more or less the last piece we need’’ to complete the offering in the market of so-called business intelligence software, Kagermann said. He reiterated SAP’s strategy of making smaller “tuck-in’’ purchases. 
Redwood City, California-based Oracle has paid more than $20 billion for acquisitions since 2004. SAP spent no more than 500 million euros on acquisitions in 2006. 
SAP’s supervisory board in February extended Kagermann’s contract until 2009. A month later, chief software architect Shai Agassi stepped down, after being told that he would have to wait two years before becoming CEO. 
Kagermann then overhauled management, and SAP promoted sales head Apotheker to deputy CEO. 
Kagermann said he won’t comment on his personal plans beyond 2009 or possible candidate as his successor. 
“Today I have enough on my plate and I want to do it as best as possible,’’ he said. 
“It’s important whoever is leading the company is a strong person.’’

TITLE: VTB Shares Surge as Its IPO Raises $8 Billion
AUTHOR: By Douglas Busvine
PUBLISHER: Reuters
TEXT: MOSCOW — No. 2 bank VTB raised $8 billion on Friday in the world’s largest stock market float of 2007, and its shares rose by up to 11 percent in initial trading as investors piled into the stock.
State-controlled VTB priced its offering of 1.513 trillion new shares at 13.60 kopeks and its global depositary receipts at $10.56, near the top of an indicative range. Sources said the total IPO book was covered seven times. 
The placement of the 22.5 percent stake values VTB at $35.5 billion. That compares to the $89 billion market capitalization of market leader Sberbank, whose shares have rallied by 117 percent in the past 12 months. 
“The strength of demand for our shares reflects investor appetite for high-quality exposure to the fast-growing Russian banking market that VTB offers,” VTB president Andrei Kostin said in a statement. 
The VTB deal, the country’s second-largest float, drew eager interest from the outset, unlike last year’s $10.6 billion IPO by state-controlled oil firm Rosneft, where foreign oil majors and Russian oligarchs stepped in to cover the book. 
It also differed from a recent rights issue by Sberbank that raised more money than VTB on the domestic market but had to be underwritten by the Central Bank to succeed. 
VTB said it had allocated shares worth $1.6 billion to 131,000 Russian retail investors, who formed long lines at its branches to sign up, satisfying their bids in full. 
“It was a model IPO, out of the text book,” said Anton Tabakh, banking analyst at UralSib. “It was a great promotion. Every street dog knows about this bank now.” 
Prior to VTB, the biggest IPO in the world so far this year was China CITIC Bank, which raised $5.4 billion. 
Sources said 30 percent to 40 percent of the IPO went to domestic investors and the rest to international investors via a London listing. 
VTB’s GDRs rose as high as $11.76 in early conditional trading, as institutions whose orders were cut back sought to boost their exposure to Russia’s booming banking sector. They later settled back to $11.27, a gain of 6.7 percent. 
“The IPO should result in VTB becoming the most-liquid Russian bank tradable overseas, ensuring stable interest among foreign investors,” said Rustam Botashev at Aton Capital.  Investors bought into VTB as a way of diversifying their portfolios out of Sberbank. Although Sberbank’s return on equity of 30 percent last year was higher than VTB’s 19.7 percent, VTB is cheaper by other benchmarks. 
Natalya Orlova, banking analyst at Alfa Bank, said VTB was worth 2.2 times its forecast 2007 book value, compared to a Russian banking sector average of 3.3, suggesting its shares had upward potential of as much as 40 percent. 
VTB wants to invest the IPO proceeds in expanding its VTB-24 retail arm, which has 524 branches, bulk up the foreign operations it took over from Russia’s Central Bank, and make investment banking acquisitions. 
Citigroup, Deutsche Bank and Goldman Sachs were joint global coordinators for the IPO, together with Renaissance Capital as joint bookrunners.

TITLE: Rail Freight To Estonia To Resume
PUBLISHER: Reuters
TEXT: ST. PETERSBURG — Rail freight between Russia and Estonia, interrupted during a dispute over the relocation of a Soviet war memorial in Tallinn, will soon resume in full, Russian Railways chief Vladimir Yakunin said Saturday.
“Traffic is limited at present, but soon it will be restored in full,” Yakunin was quoted by Interfax as telling reporters in St. Petersburg.
Russia cut exports of fuel oil, diesel and gasoline through Estonia by at least 30 percent in the first 10 days of May after a dispute over the removal in Tallinn of a World War II monument that sparked riots by local ethnic Russians.
Russian Railways said last week that the rail link to Estonia was undergoing routine maintenance. 
But oil traders said the Kremlin had ordered the cut in refined products supplies.
The dispute has added to tensions between the European Union and Russia over Moscow’s ban on Polish meat imports ahead of a summit on May 18 in Samara. Estonia received support from both the EU and NATO for its action.
Yakunin, a powerful bureaucrat who has been suggested as a possible successor to President Vladimir Putin, said he was personally offended by the Estonian government’s decision to remove the statue but would keep his official contacts.
“I will talk business with these people but will never accept them as friends,” Yakunin said.

TITLE: Telenor Increases Vimpelcom Stake
PUBLISHER: Reuters
TEXT: OSLO — Norwegian phone group Telenor said on Monday it spent $745 million to increase its stake in Russian mobile group Vimpelcom to 29.9 percent of the voting stock from 26.6 percent.
“Telenor believes this transaction will increase the likelihood of three or more of its nominees to (be elected to) the board of directors of Vimpelcom,” Telenor said.
Telenor has been locked in a battle for control of Vimpelcom with fellow leading shareholder Russia’s Altimo group. 
n  
Vimpelcom mobile operator (Beeline brand) increased the number of subscribers in St. Petersburg and Leningrad Oblast by 30 percent in January-March 2007, Interfax reported Monday.
The company currently serves 2.2 million people — most of them (75 percent) in St. Petersburg. By the end of the year Vimpelcom expects to attract 400,000 new subscribers in the region and increase by 30 percent the number of base stations (at the moment the company operates 1,100 stations).

TITLE: Work 
Starts In Myanmar
PUBLISHER: The Associated Press
TEXT: YANGON, Myanmar — Two Russian oil companies have begun drilling their first test well in Myanmar’s northwestern Sagaing region, state media reported Monday.
The Russian companies — Silver Wave Sputnik Petroleum Pte Ltd. and Silver Wave Energy Ltd. of Kalmykia — began drilling a test well in the Pinlebu region of the Sagaing Division on Saturday, the New Light of Myanmar newspaper reported.
The companies in March signed a production-sharing contract with the state Myanmar Oil and Gas Enterprise for exploration, drilling and production of onshore oil and gas in the block, which was explored by Amoco in the early 1990s.
Silver Wave Energy has another production-sharing contract signed along with Gas Authority of India to jointly drill, explore and produce oil and gas exploration in another offshore block.

TITLE: TMK’s Interpipe Talks
AUTHOR: By Anastasia Teterevleva
PUBLISHER: Reuters
TEXT: MOSCOW — TMK, the world’s third-biggest steel pipe maker by market capitalization, said Friday that it was in talks with Ukrainian producer Interpipe over “a potential transaction,” but stopped short of confirming they involved a possible tie-up. 
TMK, owned by billionaire Dmitry Pumpyansky, said in a statement that talks were at an exploratory stage and that there was no certainty a deal would result. 
Interpipe said it was in talks with some market players, including TMK, on the future development of its pipe business. 
“Interpipe’s strategic goal is to do an IPO. This strategy has been approved and cleared by our shareholders and is currently implemented by Interpipe’s management,” an Interpipe spokesman said. 
Market sources said last month that the firms were in merger talks, and analysts said Friday that a consolidation move could be perceived well by the market. 
“TMK’s expansion will be taken positively by the market if the price is right,” Renaissance Capital analyst Yury Vlasov said. “The market will value the advantages of consolidation within the sector.” 
TMK, or Trubnaya Metallurgicheskaya Kompania, is the main Russian supplier of pipes used in the booming oil and gas industry and counts Gazprom among its customers. 
The company raised over $1 billion in a London share listing last year that was more than 19 times oversubscribed, and is currently valued at more than $8 billion. 
“Judging by the market capitalization and net debt of TMK, the upper estimate for a deal could be $3.3 billion,” Alfa Bank analyst Valentina Bogomolova said. 
Other analysts valued a potential deal at $2 billion to $2.8 billion. 
Pumpyansky, TMK’s 43-year-old chairman and majority owner, was ranked Russia’s 20th-richest man with a personal fortune of $5.4 billion in the latest Russian edition of Forbes magazine. 
Interpipe is controlled by tycoon Viktor Pinchuk, one of Ukraine’s richest men and the son-in-law of former President Leonid Kuchma. 
TMK produced 2.15 million tons of steel and shipped 3.02 million tons of steel pipe in 2006. It said in January that it had financed 30 percent of a strategic investment program that runs until 2010. 
The company accounted for 56 percent of Russia’s steel pipe exports last year and controls the Volzhsky, Seversky and Sinarsky pipe plants and Taganrog Steel Plant, all in Russia. It also owns the Romanian companies Artrom and Combinatul Siderurgic Resita. 
Interpipe produced 1.2 million tons of steel pipes in 2006 and owns the Nizhnedneprovsky, Novomoskovsk, Nikopol and Nikotube plants, the Mogilevsky steelworks and Nikopol ferro-alloy plant.

TITLE: Amnesty For Immigrants Is Rejected
AUTHOR: By Tai Adelaja
PUBLISHER: Staff Writer
TEXT: MOSCOW — The Federal Migration Service has rejected a proposal to grant an amnesty to immigrants working illegally in the country, the service’s deputy head said Friday.
Vyacheslav Postavnin told a news conference that the new regulations in force since January would help immigrants legalize their status.
“We have decided on a different measure — giving legal status to immigrants through the law,” Postavnin said, Interfax reported. Experience in other countries show that “no single measure is capable of solving the problems of illegal immigration,” he said.
Boris Titov, head of the Delovaya Rossia business lobby, had called at the same news conference for some migrant workers who could not get work permits to be granted an amnesty.
Titov said Russian businesses would like to see the regulations relaxed for immigrants already here, and suggested that centers could be set up in those countries that supply migrant workers to help them prepare for working in Russia. Such centers, he said, should educate immigrants on migration laws and medical and language requirements. 
Titov said that of 5 million migrant workers in the country, only 1 million were working legally, Interfax reported.
Postavnin said that more than 2 million foreign citizens had registered at migration offices in the last four months and that more than 750,000 had received work permits in the same period.

TITLE: Yukos Office Auction Raises $3.9 Billion
AUTHOR: By Tanya Mosolova
PUBLISHER: Reuters
TEXT: MOSCOW — A mystery firm called Prana bid $3.9 billion to beat Rosneft in a fiercely fought auction on Friday for assets of bankrupt oil firm Yukos, including its head office.
The price was far higher than expected, and Prana’s backers are as yet unknown.
The lot also included Yukos’ other Moscow property and a trading unit that several sources said might have access to oil inventories or cash. Otherwise, the price would make the firm’s headquarters one of the most expensive buildings in the world.
Rosneft has snapped up most of Yukos’ assets so far, and it was widely thought to covet lot No. 13 since capturing Yukos’ Moscow headquarters would crown a string of victories in the series of auctions held to pay off Yukos’ $26 billion in debts.
But after 707 bids and counterbids, the price topped 100 billion rubles ($3.9 billion) — 4 1/2 times the 22.1 billion ruble starting price — and Rosneft threw in the towel.
“I don’t think anyone would have expected the price to go up so quickly and such a big battle to break out,” said Nikolai Lashkevich, a spokesman for Yukos’ bankruptcy receiver. “We just hope that the winner of the auction will be able to meet the obligations it has taken on.”
Representatives from Prana declined to comment after the auction, which took almost three hours. During the auction, the organizers declared three breaks to give the bidders a rest.
“We considered the lot interesting and we went as far as we were prepared to go,” said Rosneft spokesman Nikolai Manvelov, without explaining why it was worth almost $4 billion.
The bidding amounts appeared unjustified by the value of the 22-story Moscow headquarters and several other buildings in the city center.
“In the investment sales market, the largest sales of office buildings have been around $120 million to $140 million. This is off the scale,” said Christopher Peters, head of research at real estate firm Cushman & Wakefield Stiles & Riabokobylko. 
Some observers of the auction said it was possible the bidders knew about hidden value in another asset in the lot.
“I can’t see why a big building in Moscow could cost that much. Some people say that the lot, which also contains Yukos’ trading firm, Trading House Yukos-M, is attractive because there are some oil inventories left,” a market source said.
Another industry source said it was possible that Trading House Yukos-M held billions in cash as it was always the profit center and cash flow handler for Yukos.
A former top Yukos shareholder and deputy CEO, Alexander Temerko, said by telephone from London that he was also surprised by the price paid as he valued the lot at around $1.5 billion. 
He said he did not know whether the trading unit held significant oil inventories or cash. Temerko said he did not know who was behind Prana. 
One source said he suspected Prana represented the interests of Gazprom, Rosneft’s only real competitor for Yukos assets.
Lashkevich said minority Yukos shareholders had “some theoretical” chances of getting access to excess cash.

TITLE: Funny Cartoons, Laughable Budget, Serious Business
AUTHOR: By Joyce Man
PUBLISHER: Staff Writer
TEXT: Natalya Vashko labors under the slogan “Turn off your brain!” But her own brain won’t heed that advice.	
On a recent afternoon in Correa’s cafe, sardined between couples out for afternoon tea, the 38-year-old director of the 2x2 television channel sat down for what she called relaxation: reading a thick manual titled “Managing Media Companies.” Emblazoned across the cover was a light switch etched with the word “On.”
Vashko’s 2x2 channel shows animation aimed at adults, including “Beavis and Butthead,” “Pinky and the Brain” and “Cow and Chicken.” 
But behind the controls of a station whose sole purpose when turned on is to allow viewers to shut down, Vashko runs on a loop round the clock. “Turn off my brain?” she said. “Only if the channel is pulled from the air.”
It’s clear why the face of the channel needs such stamina. When Vashko took over the controls in April 2006, 2x2 had just been acquired by Prof-Media. Previously, it had been a shopping channel, and her job was to conceptualize its future. For a new venture approaching film distributors with budgets that Vashko called “laughable,” energy was necessary.
After evaluating the market, Vashko decided against targeting quickly lucrative and large audiences. She homed in on 11- to 34-year-olds, who watch TV least of all age groups and pose the greatest challenge, and decided the channel would show exclusively animation programs. This idea did not please the company’s leadership. 
Vashko is credited for her originality and an ability to make unusual decisions. “I said, ‘Give me 10 minutes and you’re going to agree,’” said Vashko. First she tried to convince them about the target audience. “And then I said, ‘Give me another 10 minutes, and I’ll convince you why it has to be just animation.’”
Eventually, Vashko’s idea won the day, and she managed to convince distributors to provide cartoons despite 2x2’s meager budget. The cartoon channel went on air for the first time on April 1.
Vashko remembers every detail about the channel’s first steps into airtime. One day before broadcast, the first episode of “12 oz. Mouse” — a U.S. Cartoon Network series featuring an antisocial and alcoholic mouse — had not been dubbed into Russian. The person responsible for the recording stopped picking up his telephone at 2 p.m., said Vashko, leaving the rest of her 50-person team to show “Pollitrovaya Mysh” in English.
But things worked out: “On April 1, we had 1.3 percent of the audience,” Vashko said. “On April 2, 3.9 percent, and April 3, 4.5 percent.”
2x2 now claims 2.1 percent of television viewers in Moscow — not impressive by any means, but it places above MTV, competing for the same audience, the TNS Gallup Media monitoring agency showed in its latest statistics.
“In the leadup to the opening of 2x2, there were many skeptics,” said Roman Petrenko, director of TNT television, where Vashko was director of programming before leaving for 2x2. But the channel has defied expectations, Petrenko said, thanks to Vashko’s originality, independent thinking and an ability to “make unusual decisions.”
Unusual decisions, after all, are how Vashko got to 2x2 in the first place. Growing up in Kiev, where her family still lives, the future television director wanted to pursue physics and mathematics. “It was all about the brain,” she said of her youth. But when she was applying for university in 1986, on the advice of a professor with whom she said she had only spoken for 10 minutes, Vashko spontaneously decided to enter a newly developed sociology stream at Kiev State University. 
Upon graduation, she worked in communications and marketing, eventually jumping from the Gallup Media polling company to marketing and directing positions at TNT and NTV.
Vashko’s decision to leave her high-flying stint as programming director at TNT — a national station ranked third in audience share according to Gallup Media — and join the little-known 2x2 was another unusual step.
But this, said Vashko, is the first job where she is completely independent. “I don’t need to answer to anyone or check decisions with anyone,” she said. “That’s boring.”
Still, being leader has brought its own difficulties, and Vashko, who used to go snowboarding in her down time, hasn’t touched the slopes in two years. She said she called a psychologist sometimes to air her problems.
But Vashko’s energy, Gallup Media deputy director Alexander Kostyuk said, will keep her going. “Natalya has had a crazy career,” he said. “She’s very up to the moment, and that’s very important in television.”
As for career advice, Vashko said there aren’t enough people who are determined enough to be original and follow it through, convincing others in the process. Success in television, she said, comes to leaders who carry out their visions.

TITLE: Capital’s Investment Bankers Get $7 Million Payday
AUTHOR: By Elisa Martinuzzi and Todd Prince
PUBLISHER: Bloomberg
TEXT: MOSCOW — Within a mile of the tomb of Vladimir Lenin, who vowed to destroy capitalists, investment bankers in Moscow are now earning double the pay of their counterparts anywhere else. 
Dealmakers such as Ed Kaufman, who left UBS AG in March for Alfa Bank, and Nicholas Jordan, who will run Lehman Brothers Holdings Inc.’s new Moscow office, are offered $7 million and more a year, industry recruiters said. In New York, managing directors who arrange corporate mergers and stock and bond sales typically get $2 million to $3 million, according to estimates from headhunters at Options Group and Napier Scott Executive Search Ltd. 
“This market is hot, hot, hot, and if you want to keep top talent, you have to pay big,’’ said Peter Necarsulmer, chief executive officer of PBN, which advises foreign companies investing in Russia including BP and Merrill Lynch. 
The oil market’s five-year boom, record numbers of initial public offerings and the fastest-growing major economy in Europe have combined to drive up salaries during the past 12 months. The Russian market has attracted U.S. securities firms led by Goldman Sachs Group Inc., Merrill and Lehman, which are on a hiring binge as they compete with local rivals Renaissance Capital, Troika Dialog and Alfa Bank for the most experienced staff. 
“Russia has been spectacular in terms of wage growth for western-trained, Russian-speaking bankers,’’ said Yiannis Demopoulos, an industry recruiter at Delta Executive Search, who spends much of his time these days in Moscow. Demopoulos said pay packages of $7 million to $10 million are common for managing directors in the city. “There are just not enough high-quality guys and the shortage creates the spike in price.’’ 

Garden Ring
Inside Moscow’s Garden Ring, bankers spend $7 million for a five-room apartment near the Bolshoi Theater, drop $350,000 for a Bentley at the car dealership next to Revolution Square, and rent private dining rooms at Turandot, a new $50 million two-story restaurant furnished in a late 18th century Marie Antoinette theme, complete with musicians in white wigs playing chamber music. 
Alfa Bank, Moscow’s largest closely held bank, lured the 41- year-old Kaufman from his job as UBS’s investment-banking chief in Russia with a multi-year contract that could net him $20 million if targets are reached, said two people with knowledge of the hiring. Jordan is getting as much as $7 million to join Lehman, said two people familiar with the matter. 

U.S. Counterparts
By comparison, senior U.S. bankers in the mergers, equity and debt underwriting departments typically receive salaries of about $200,000 and bonuses of $2 million to $3 million, according to consultants at Options Group. Executives running investment- banking units in Frankfurt and Milan make nowhere near $10 million. 
Compensation for bankers in Russia rose by about 25 percent last year, exceeding the 15 percent to 20 percent increase in the U.K., said Shaun Springer, London-based CEO of Napier Scott. Income taxes in Moscow are 13 percent, while anyone who earns more than 42,055 pounds ($83,700) in Britain pays 40 percent. 
Industry recruiters at RosExpert estimate that about 150 senior corporate bankers work in Moscow, compared with more than 1,000 in New York. Top dealmakers in New York, still the world’s financial capital, can take home as much as $20 million, including bonuses that depend on the fees they generate for their firm, according to Options Group. 
‘Former Spies’
There’s “a shortage of strong managers’’ in Russia to handle the record demand for merger advisory and underwriting services, said Igor Shekhterman, co-founder of Moscow-based RosExpert, who’s trying to recruit senior bankers for two local firms. 
“Before, banks were hiring former spies and politicians,’’ he said. “Now, they’re after experienced professionals.’’ 
Merrill’s Mike Eggleton left last year for Moscow-based Trust Investment Bank. The firm then recruited 46-year-old Bernard Sucher, co-founder of Troika Dialog, in February to run its Moscow office. Gordon McCulloch, a managing director at Goldman, left in March for Moscow-based Renaissance Capital, the same month that UBS’s Kaufman joined Alfa Bank and Lehman hired Jordan from Deutsche Bank AG. None would comment on their pay. 
“If you want a banker to move, you have to offer a guaranteed multi-year deal and title bump,’’ said Demopoulos of Delta Executive Search. “It’s a huge commitment.’’ 
Securities firms want “a combination of western experience and an understanding of the local conditions,’’ said Kaufman, who worked for UBS in Moscow for four years. “That is hard to find. And they are having to compete for that small pool with the big guys like Rusal.’’ 

‘Behind the Curve’ 
Eric Kraus, a strategist-turned-investor who moved to Moscow in 1997, said U.S. investment banks are paying too high a price to attract talent just as six years of stock market gains may be about to end. 
“The global banks are always either in front or behind the curve, and this time they’re behind it,’’ said Kraus, who worked at Societe Generale SA and Dresdner Bank AG before starting an investment fund. 
Risks are emerging again as Russian President Vladimir Putin prepares to step down next year, money managers Bill Browder of Hermitage Capital Management Inc. and Samuel Lieber at Alpine Management & Research LLC said in the past month. 
While Putin has been credited with stewarding the longest period of political and economic stability since the rule of Leonid Brezhnev in the 1960s and 1970s, his relationship with the U.S. and Europe has worsened because of his crackdown on opposition groups and the free press. Russia and the west also are at odds over the Kremlin’s attempts to retain influence in the former satellite states of Georgia, Ukraine and Kazakhstan. 

Paulson’s View 
Securities firms are shrugging off concerns about the potential for political and economic instability less than a decade after Zurich-based UBS and Credit Suisse Group and New York-based Citigroup Inc. lost more than a combined $2 billion when the government defaulted on its debt. 
U.S. Treasury Secretary Henry Paulson, who was paid $38.3 million during his last full year as Goldman’s CEO in 2005, has said economic development is a spur to political liberalization. Goldman has identified Brazil, Russia, India and China as the four most important developing economies. 
“There’s sort of an unnatural act to have economic freedoms without having political freedoms follow,’’ Paulson said on April 20 in an interview on the “Charlie Rose’’ show on PBS television in New York, responding to a question about China.”Any country that engages in economic reform and economic freedom, and moves to market-driven principles, will ultimately move in that direction. And if they don’t, there will be a problem.’’ 

Blankfein’s Visits 
Treasury spokeswoman Michele Davis in Washington didn’t immediately respond to a request to speak with Paulson on how political conditions in Russia may affect its economy. 
Goldman CEO Lloyd Blankfein will meet with businessmen and politicians in Russia for the second time this year when he attends the St. Petersburg Economic Forum in June. He sat down last month with First Deputy Prime Minister and presidential candidate Dmitry Medvedev. Goldman plans to double its staff in Moscow to 70. 
“Three to four years ago we were less than 20 people and now we’re about 100,’’ said Rair Simonyan, head of New York-based Morgan Stanley’s Russia unit. “It’s extremely difficult to manage such exponential growth.’’ 
Morgan Stanley, the world’s second-largest securities firm by market value after Goldman, is the top-ranked manager of share sales in Russia during the past three years, followed by Deutsche Bank and Credit Suisse, data compiled by Bloomberg show. 

Red Square 
Behind Lenin’s Red Square mausoleum, the Kremlin has a hand in many of Russia’s biggest deals, 15 years after the collapse of the Soviet Union. 
State-owned oil company Rosneft sold $10.7 billion of stock last year in an initial public offering. New York-based JPMorgan Chase & Co. was among the advisers after arranging a $7.5 billion loan for the company. Government-controlled VTB Group, Russia’s second-biggest bank, raised $8 billion last week in the world’s largest IPO of 2007. 
Companies in Russia have raised $16.7 billion in 2007 by selling shares, more than companies in any European country and equal to about 22 percent of the region’s total, up from 4 percent in 2005, according to Bloomberg data. Companies in Germany, Europe’s biggest economy, sold $7.8 billion of stock this year and U.K. companies placed $12.5 billion. 

Troika Dialog
The combination of record share sales and mergers and acquisitions will increase investment-banking fees at an annual rate of 35 percent in the next five years, said Ruben Vardanian, the 38-year-old chairman of Troika Dialog, Russia’s oldest independent securities firm. Moscow-based Troika boosted staff to 800 from 500 in the past year. 
“You need to be in Russia because of the pure size of the market and to gain access to the eastern European markets, Ukraine and Kazakhstan,’’ said Springer of Napier Scott. “It’s never too late.’’

TITLE: Daimler to Sell Chrysler for $7.5 Billion
AUTHOR: By Jeremy van Loon and Jeff Bennett
PUBLISHER: Bloomberg
TEXT: STUTTGART — DaimlerChrysler AG said private-equity firm Cerberus Capital Management LP will buy the U.S. Chrysler Group for 5.5 billion euros ($7.5 billion). 
Cerberus will buy 80.1 percent of Chrysler with Daimler holding the remaining 19.9 percent, the Stuttgart, Germany-based automaker said in a statement. The transaction will be completed in the third quarter. 
Cerberus purchases a company that lost 500 million euros last year and lost market share to Toyota Motor Corp. while relying too much on the stagnant North American market. DaimlerChrysler Chief Executive Officer Dieter Zetsche failed to keep the U.S. carmaker profitable after completing a reorganization he began as head of the business. 
“We will be the leading manufacturer of premium vehicles and a provider of premium services in every market segment we serve worldwide,’’ said Zetsche in the statement. The company will change its name to Daimler AG. 
Shares of DaimlerChrysler rose as much as 4.73 euros, or 7.8 percent, to 65.34 euros and were up 6.5 percent at 10:47 a.m. in Frankfurt. The stock has surged 31 percent since Feb. 13, the day before Zetsche said “all options’’ were on the table for Chrysler’s future. 
United Auto Workers President Ron Gettelfinger said in the statement he supports the deal, terming the takeover “in the best interests of our UAW members, the Chrysler Group and Daimler.’’ 
Cerberus may have established itself as the front-runner by hiring former Chrysler Chief Operating Officer Wolfgang Bernhard as an adviser, Canadian Auto Workers union President Buzz Hargrove said yesterday. Bernhard, who left in 2004 after four years as COO, has a strong personal relationship with Zetsche, Hargrove said. 
Last year, Cerberus led a group of investors that bought a 51 percent stake in finance company GMAC from parent General Motors Corp., the world’s largest maker. Detroit-based GMAC makes loans for purchases of homes and cars. 
The firm was also part of a group that offered to invest $3.4 billion in bankrupt auto-parts maker Delphi Corp. Without giving a reason, Delphi said last month it expects Cerberus to back out, and Cerberus has so far declined to comment. 
Cerberus and other private-equity firms are interested in the Auburn Hills, Michigan-based automaker because they expect to profit on their investment by reducing wages and paring other costs such as pension expenses. 
Cerberus’s auto division is run by former Ford Motor Co. executive David Thursfield, 61. The firm’s acquisitions in the car industry include Peguform GmbH, a German manufacturer of plastic parts for vehicle interiors, as well as a controlling stake in GM’s financing unit. 
Stephen Feinberg, a trader at Drexel Burnham Lambert Inc. in the 1980s, started Cerberus with $10 million in 1992. He’s since built it into a $24 billion investment firm that also owns Albertson’s LLC supermarkets and IAP Worldwide Services Inc., one of the largest providers of logistics support to the U.S. Army in Iraq. 
Chrysler sells fewer cars in the U.S. than General Motors, Ford and Toyota, making it the fourth-largest U.S. carmaker. Daimler-Benz AG bought Chrysler Corp. in 1998 for $36 billion in what it billed as a “merger of equals.’’
 Zetsche has also said Chrysler may remain part of the Stuttgart-based group. 
Daimler tomorrow may say Chrysler lost 908 million euros in the first quarter on the cost of job cuts and closing a factory, with group net income reaching 1.26 billion euros, according to the median of nine analysts surveyed by Bloomberg News. Year- earlier figures are not available because of an accounting change. 
Chrysler CEO Tom LaSorda already is in the midst of a restructuring designed to reduce costs, including shedding 13,000 jobs and closing a Delaware manufacturing plant by 2010.
Canadian auto-parts supplier Magna International Inc. and a partnership with New York buyout firms Blackstone Group LP and Centerbridge Capital Partners LP have also been bidding for Chrysler. Magna announced May 10 that Russian billionaire Oleg Deripaska will buy a stake in the Canadian company, adding $1.54 billion in cash for a possible purchase.

TITLE: Reuters Trustees To Back 
Offer
PUBLISHER: Reuters
TEXT: LONDON — The Independent on Sunday reported that the Reuters Founders Share Company, the trust that acts as guardian to the editorial independence of Reuters Group Plc, is set to back a proposed takeover of the media group by Canada’s Thomson Corp.
“It looks like this deal is now almost certain to go ahead,” the newspaper quoted an unidentified banker close to the trust as saying.
It added that a formal announcement by Thomson and Reuters could be made as early as this week.
A spokeswoman for Pehr Gyllenhammar, chairman of the Reuters Founders Share Company, was not immediately available for comment. 
Reuters and Thomson declined to comment. 
The Reuters Founders Share Company has a “golden share” which it can use to block a takeover of the company.
A takeover of Reuters by Thomson would create the world’s biggest financial news and data company, with a market share of 34 percent, just ahead of privately owned Bloomberg on 33 percent, according to Inside Market Data.

TITLE: Mylan to Buy Merck Generics for $6.6 Billion
AUTHOR: By Angela Cullen and Gautam Chakravorthy
PUBLISHER: Bloomberg
TEXT: FRANKFURT — Mylan Laboratories agreed to buy the generic-drug unit of Merck KGaA of Germany for 4.9 billion euros in cash to become one of the world’s largest makers of generic versions of drugs.
Interest in generic-drug companies is increasing as patents expire and governments seek ways to stem the rising cost of public health care.
Mylan, which is based in Pennsylvania, is paying more than its own market value to buy a company with annual sales almost double its own. It beat out companies including Teva Pharmaceuticals Industries in the four-month battle for Merck, a leading maker of generic medicines.
Mylan is buying a unit that makes a cheap version of AstraZeneca’s Prilosec ulcer pill and specializes in patent-protected reformulations of older medicines. Merck is selling the unit to pay down debt from its $13.7 billion acquisition of Serono in January.
“It’s slightly on the expensive side, but I don’t think they could have bought this kind of business any cheaper,” said Rohit Bhat, a drugs analyst with Batlivala & Karani Securities in Mumbai, India. Mylan will more than double its revenue, so “it’s worth the effort. These opportunities don’t come around very often.”
Mylan’s offer values the Merck unit at 14.6 times 2006 earnings before interest, tax, depreciation and amortization and 2.7 times sales, according to Bloomberg calculations. That compares with the 13.7 times earnings that Zentiva agreed to pay in March for its 460-million euros purchase of a majority stake in the generic-drug unit of Eczacibasi of Turkey.
“Scale, scale, scale, scale is what we’re after,” Mylan’s chief executive, Robert Coury, said by phone. “When you’re in this type of low-cost pharmaceuticals, driving the cost of goods down is very critical.”
The purchase, worth $6.6 billion, is the biggest among generics companies since Teva’s $7.6 billion takeover of Ivax in January 2006. Last October, Barr Pharmaceuticals won the battle for Pliva of Croatia with a $2.5 billion offer.
“It seems that Mylan saw a good fit here, because Merck has achieved a price that is right at the top of the range that we expected,” said Jack Scannell, an analyst at Sanford C. Bernstein in London
Mylan has arranged debt financing to fund the transaction.
Merck will use proceeds from the sale “to pay back debt,” said Phyllis Carter, a spokeswoman. “Shareholders can expect a dividend from the transaction.”
Merck reported a first-quarter loss last month because of writedowns linked to the $13.7-billion purchase of Serono, which made it the largest biotechnology company in Europe.

TITLE: Insuring Oneself Against a Change of Heart
PUBLISHER: The Associated Press
TEXT: DENVER — If anyone knows the value of a good insurance policy, it’s Romeo Lavarias.
As the director of emergency management operations for Miramar, Fla., Lavarias has seen his share of disasters. So it was a no-brainer when his fiancee, Stephanie Goldstein, suggested buying insurance for their wedding, set for July during the upcoming hurricane season.
“My job is to prepare our city in the event of a disaster, so naturally, this is right up my alley,” Lavarias said, whose city was hit by Hurricane Wilma in 2005. “The number one reason (we bought) was hurricane season.”
Heading into a prime weddings month in June, and with weddings becoming ever more elaborate and expensive, more couples are opting to buy wedding coverage. Natural disasters aside, many reception facilities now require liability coverage for out-of-control celebrations. Wedding planners often require insurance, too, in case of cancellations.
Increasingly, policies cover all sorts of contingencies. Lost the bridal dress? No problem. Guests stranded by a hurricane or a Denver snowstorm? Covered. Photographer ruins pictures? Piece of cake to re-stage. There is even a policy that offers reimbursement in case the bride or groom gets cold feet.
Fewer than 1 percent of the betrothed purchase policies in the United States, said Kyle Brown, executive director of the Bridal Association of America in Bakersfield, Calif.
But given that the average cost for a wedding is $27,000, according to insurance industry estimates, Brown thinks it’s a good buy.
“For 1 percent or 2 percent of the cost of your entire wedding, you can insure it,” Brown said.
Since Hurricane Katrina, New Orleans wedding planner Jennie Keller requires every couple to buy insurance. She once required it just for couples marrying during hurricane season, which runs from June through November.
“I know that you can’t play around with Mother Nature,” the New Orleans native said. “Wedding insurance will cover it all even if you cancel your wedding.”
Among the companies that offer it are Fireman’s Fund, WedSafe Wedding Insurance Program offered through Affinity Insurance Services Inc. and Traveler’s Insurance, which added the coverage in February.
Depending on the company and the type of coverage, a policy can cost anywhere from a couple hundred dollars to more than $1,000. Typical coverage can include reimbursement of nonrefundable deposits for misfortune such as a death in the family or a military deployment. Some policies cover repairs for a damaged dress or replacement of lost wedding attire; theft of wedding gifts; and the cost of gathering wedding party members to retake photographs and videotape.
Policies also can pay for some counseling if canceled or postponed nuptials cause emotional stress, according to the Insurance Information Institute in New York.
Even a ‘change of heart’ can be insured in a special option Fireman’s Fund Insurance Co. began offering this month that costs about $25 on top of the policy. It’s for those who pay for a wedding only to have the groom or bride back out, said insurance broker Rob Nuccio of RV Nuccio and Associates, who wrote the option.
“Oftentimes, there is an innocent person involved in that. There is the poor father who lays out 50 grand and he’s just left dumbfounded,” said Nuccio.
Nuccio drafted his company’s first insurance policy in 1990 when couples primarily purchased liability coverage required by reception facilities. Now, he says, more are adding cancellation insurance.
“After some kind of natural disaster like Katrina, the interest is high but the public has a fairly short memory and it tends to drop off after that,” he said.
Not everyone is won over by the policies, however.
Independent insurance agent Michelle Mestnik of Colorado Springs and fiance Nathan Green opted for a $350 liability policy for their July 7 wedding, which is expected to cost about $10,000. Mestnik doesn’t think she needs specific wedding insurance.
“I have looked into it. It does not sound like that great a deal,” she said. “If your husband is going overseas, great. They can give you some leeway and help you out there.”
But Lavarias, who plans to marry in the Miramar area that same day, said all bets are off during hurricane season.
“It doesn’t matter how many there are,” he said. “It only takes one to hit you to make it a horrible hurricane season.”
Lavarias, 42, and Goldstein, 36, were engaged in September and began their wedding planning, the 7-7-07 date a tribute to their love of Las Vegas.
But rather than leave it to chance, Goldstein said a friend suggested she look into insuring the nuptials, which are expected to cost up to $75,000.
“I feel comfortable putting down $565 to insure such a large wedding,” said Goldstein.

TITLE: Tackling the Problem of Economic Inequality
AUTHOR: By Yaroslav Lissovolik
TEXT: Uneven development, as reflected in political polarization, geographical and ethnic diversity, the minuteness of the middle class and sectoral imbalances, is a defining feature of Russian history. Imbalances persist today and are prevalent across regions and sectors, as well as in income distribution and the comparatively minor role of small and medium enterprises. 
Addressing the problem of unbalanced growth has become a top priority for the government, and this to a significant degree will determine sectoral priorities as well as the macroeconomic mix of fiscal and monetary policies in the years to come.
The imbalance among economic sectors is most obvious in Russia’s excessive dependence on oil. The fuel sector — petroleum, petroleum products and natural gas — accounts for roughly one-quarter of gross domestic product, more than half of federal budget revenues and nearly two-thirds of total exports. 
The fuel sector is also the largest recipient of foreign direct investment and accounts for more than half of stock market capitalization. 
The “resource curse” looms even larger when you factor in other resource-based sectors, such as timber and metals, which together with fuel account for nearly 90 percent of total exports, leaving Russia extremely exposed to swings in global commodities markets.
Among the regions, the imbalance begins with the city of Moscow. The capital’s per-capita consumption is more than twice that of any other region. It accounts for nearly one-fifth of the country’s GDP; if you add the oil-rich Tyumen region, this share increases to one-third.
One reason for the discrepancy in regional development is resource distribution. According to government statistics, 54 percent of all resources are extracted in the Tyumen region, and two-thirds of resource wealth is concentrated in just three regions. 
As a result, per-capital fiscal revenues in the richest regions are 10 to 20 times higher than in the poorest regions, such as Dagestan.
Inequality among people has also risen in the last few years. Income disparity, already higher than in most Central and East European countries, continues to increase. At the same time, decreases in nonpayments and inflation, along with higher pensions and public-sector wages, have made reducing poverty a realistic goal. Government statistics show that the number of people below the poverty line declined from 29 percent in 2000 to 17.6 percent in 2004.
A key to structural asymmetry in the economy is the limited role of small and medium enterprises, which in most developed economies account for more than 50 percent of total employment and GDP. In Russia, these indicators are well below 20 percent. 
Finally, there is the intergenerational divide. The living standards of the elderly continue to deteriorate relative to other age groups, driven by the declining value of pensions, among other things. If in 1998 the average pension was equivalent to 40 percent of the average wage, by 2006 its value had dropped to just 30 percent.
Empirical evidence on transition economies suggests that the costs of such imbalances could be high. An International Monetary Fund study of transition economies demonstrates a direct link between greater inequality and lower GDP growth. 
During the tsarist period, persistent and high income inequality contributed to political instability and killed off modernization efforts under Peter the Great and again in the late 19th and early 20th centuries. In the 1930s, sectoral imbalances were the bane of the economy, as industrialization was pursued at the expense of the agricultural and service sectors. 
More recently, concerns over economic imbalances have resurfaced as the election season approaches, putting the spotlight on income and regional inequality. The government’s failure to reform the social safety net, including pensions, has reinforced awareness of the unequal distribution of wealth, and the bungled reform of in-kind benefits resulted in shortages of free medicine for some of the most vulnerable members of society.
The government’s drive to modernize the economy once again faces the familiar challenge of unbalanced development. 
The good news is that the Kremlin is clearly aware of these risks. During his state-of-the-nation address this year, President Vladimir Putin underscored the perils of the high income gap in society. Rhetoric aside, the government is actively seeking ways to overcome the imbalances that threaten the political and economic sustainability of the ongoing modernization effort. 
Over the last year, the government has launched several policy initiatives aimed at bridging the inequalities in regional and sectoral development, starting with the national projects scheme, which directs resources to four high-priority sectors: education, housing, agriculture and health care. 
The national projects are designed to address the income inequality gap, which is especially pronounced in terms of access to public services.
A second initiative, special economic zones, is intended to diversify regional development by creating greater economic activity outside of Moscow and the oil-rich regions. 
Attempts to spread out sectoral development and to reduce dependence on the fuel sector include the creation of the Development Bank to finance large-scale industrial projects; the Russian Venture Company to finance high-risk projects in high-tech; and the Investment Fund to finance infrastructure projects such as roads and railroads.
In addition, the stabilization fund will be split next year into a reserve fund and a national welfare fund to address the problem of inequality between generations. 
More generally, the country appears to be entering a period of consolidation. Some of the features of this process are familiar from East Asian models, such as the rise of so-called national champions, which are intended to create market stability and combat the mistrust of institutions left over from the 1990s. 
The string of “people’s IPOs” that began with Rosneft and continued with Sberbank, provided for greater public ownership of these national champions.
Macroeconomic policy is also likely to be tailored to reduce inequality. Heavy taxation of resource-based sectors of the economy is likely to continue in the medium term — even to increase in the case of the fuel sector — in order to promote sectoral diversification. Policymakers will continue to target inflation, which leads to greater poverty and income inequality and high mortgage rates.
Finally, the development of specific sectors is likely to be prioritized through fiscal spending and tax incentives with a view to making rapid growth consistent with reduced poverty and inequality. 
The World Bank says that for governments to avoid so-called inequality traps and promote equity and growth, they must expand access to public services, develop infrastructure and invest in education. 
In his state-of-the-nation speech, Putin addressed these very issues and identified new housing and infrastructure as top priorities. Rebuilding the country’s infrastructure alone will not bridge the inequality gap, however. In addition to sectoral and macroeconomic policy initiatives, the government must guarantee property rights, fight corruption and ensure market fairness by curbing the power of monopolies.
Russia’s priority in the years to come will be overcoming the imbalances that inhibit long-term growth. To achieve this, the government will pursue political consolidation, efforts to expand the nascent middle class and economic diversification across sectors and regions. 
The sectors most likely to benefit during this new phase of economic development include banking and construction, with mortgages being the critical link; infrastructure, most notably electricity and metals; and such public service sectors as health care and education. 
Long branded a country of extremes, Russia is now searching for a happy medium.

Yaroslav Lissovolik is chief economist at Deutsche Bank Russia.

TITLE: Must Yanks Lead the Bank?
AUTHOR: By Moises Naim
TEXT: For more than 60 years, Mexico’s most important political practice was known as the dedazo. It was a moment near the end of the president’s term when he would metaphori-cally point his finger (dedo) at a crony, thereby anointing his successor. An election campaign would ensue, but everyone knew who the winner would be.
This primitive practice was abandoned in Mexico in 2000, but it is still very much alive at the World Bank, an institution that preaches — and often tries to impose — good governance, transparency and meritocracy on poor countries. Like his predecessors, World Bank president Paul Wolfowitz was anointed by a dedazo from the U.S. president, even though the bank is not part of the U.S. government and 84 percent of the bank’s shares are owned by 185 other nations. The bank’s board of directors has a formal process by which it considers candidates, but the process is as bogus as Mexican elections used to be. The pool of candidates is usually limited to friends of the U.S. president or members of his inner circle.
This last restriction results from a long-standing informal deal, whereby the United States appoints an American to run the World Bank while Europe appoints the head of the International Monetary Fund. Americans and Europeans have happily done this for 63 years, and they may have to do it again soon if Wolfowitz leaves over the uproar caused by his handling of a conflict of interest over the pay and promotion of his girlfriend, Shaha Ali Riza, a long-time bank employee.
The selection process for Wolfowitz’s successor is likely to be as arbitrary, secretive and medieval as ever.
That’s too bad.
In an ideal world, the bank’s shareholders would insist on a competitive method for choosing a replacement. To make good on our rhetoric about fighting world poverty, we should start by finding a World Bank president who has produced real economic success in a poor country. The world does not lack for competent, highly trained and experienced leaders. Many of them just happen not to be American.
Take Kemal Dervish of Turkey. During an earlier stint at the bank, he proved to be a highly effective manager of economic reconstruction in Bosnia. Later, as Turkey’s economics minister, he engineered the reforms that avoided a financial meltdown there. He holds a doctorate in economics.
Or consider Ernesto Zedillo, a former president of Mexico who not only dealt skillfully with his nation’s 1994 economic crisis but also killed off the dedazo. He has a doctorate in economics from Yale, ministerial experience and a proven track record in managing large-scale change.
Another attractive candidate would be Trevor Manuel, South Africa’s long-serving finance minister. Not only would he bring valuable experience about Africa’s economic development challenges, but he is a skilled politician whose previous life as an anti-apartheid activist landed him in prison for years.
Montek Singh Ahluwalia is an Oxford-trained Indian economist who has held several important jobs in the Indian government. He was founding director of an independent IMF unit charged with evaluating the fund’s work. He would also bring useful political experience.
Leszek Balcerowicz is a former deputy prime minister and finance minister of Poland who has also served as governor of its Central Bank. He became legendary in the 1990s for shepherding the reforms that tamed run-away inflation and created the conditions that have allowed Poland to enjoy some of the fastest growth rates of all post-communist countries. Balcerowicz is also a savvy politician.
Want an even bigger revolution? Don’t just appoint the first foreigner to lead the World Bank; also pick the first woman. One fine candidate would be Rebeca Grynspan. 
She is a former vice president of Costa Rica, where she led major programs in social development.
She now serves as the head of the United Nation’s Development Program for Latin America.
Of course, these candidates lack one key requirement: a U.S. passport. So none of these superbly qualified, passionate, lifelong advocates for the poor are in the running, although any U.S. policymaker, no matter how undistinguished or tainted, could be. 
Surely Washington should want to pick a candidate at least as good as the ones above. For now, though, the only foreigner who seems genuinely to be in the running is a man seen around the world as an honorary American: Tony Blair.

Moises Naim, the editor-in-chief of Foreign Policy magazine, served as executive director of the World Bank in the early 1990s. This comment appeared in The Washington Post.

TITLE: Glancing Back at the Blair Record
AUTHOR: By Matthew d’Ancona
TEXT: If ever there were a political conundrum, this is it. On Thursday, British Prime Minister Tony Blair announced he would leave office on June 27. The decision came only days after dreadful results for his Labour Party in the Scottish, Welsh and local elections, mired in the “loans-for-peerages” scandal — which may yet lead to criminal charges against some of his closest aides, who arranged seats in the House of Lords for leading Labour backers — and overshadowed by the dark cloud of Iraq. Yet extraordinarily after such a politically turbulent decade, a poll last week showed that 61 percent of voters think that Blair has done a good job overall.
What is the Blair attraction? The prosaic answer is that enough people feel reasonably affluent after 10 years of Labour rule to give the departing British leader his due, but not their adoration. Too much that was promised on May 2, 1997, as Britain savored Blair’s first landslide victory, has not been delivered. The “New Britain” of his early rhetoric — a modernized version of Labour’s ancestral dream of the “New Jerusalem” where schools, hospitals, transport and welfare services would match Continental European levels — simply did not materialize.
Blair understood in many cases what had to be done. But too often the story was too little, too late, nothing at all or public spending bonanzas unaccompanied by reform. In public policy the dominant narrative of the Blair years was one of lost opportunity. He was right (in my view) about the war on terror and in his unflinching support for U.S. efforts in the Middle East, but never persuaded the British public. The voters came to regard Iraq not as a war that had to be won, but as a metaphor for all that disappointed them about Blair.
Yet on the spectrum of political sentiment, disenchantment is a long way from loathing. However deep their grievances about Britain’s antiquated public services and scandalous transport infrastructure, however profound their contempt for his government’s addiction to spin and its alleged lies about the case for war in Iraq, however sharp their sense of dashed expectations and unfulfilled hopes, voters believe they’ve been reasonably well served by the economic policy of the Blair era.
Blair is richly entitled to feel that his chancellor of the Exchequer, rival and now formal heir, Gordon Brown, failed to support and often thwarted his reforms of education and the state-run National Health Service. But he owes Brown a huge debt for granting independence to the Bank of England in 1997 and for refusing to take Britain into the euro currency. On these two pillars has economic stability been built — which is one of many reasons why the Brownites feel that their man’s turn at the helm is long overdue.
Such policy audits, however, do not do full justice to the cultural and psychological impact a politician of Blair’s stature can have upon his times. He was often accused of vapidity, of a tendency to the trite and the glib. His detractors hated his embrace of popular culture, the verb-less sentences in his speeches and his insistence that he was a “pretty straight sort of guy.” It was said that with this prime minister you had to “take the smooth with the smooth.”
True enough. But the terrible error of the Blairophobes was always to underestimate his political powers, his capacity to connect with the public and his unexpected reserves of determination. He won elections on a scale undreamt of by previous Labour leaders, chalking up an aggregate of parliamentary majorities that surpasses even Margaret Thatcher’s mighty record. He did not match the Iron Lady’s transformation of the country, but he restored two-party democracy to Britain. He inherited a party that had just chalked up its fourth successive general election defeat and bequeaths one that might yet win a fourth successive victory.
He dominated his era spectacularly. Even those who hated him could not avoid his gravitational pull, and were forced to define themselves in relation to this singular politician. The legendary charm faded, inevitably. But even at the last it was doing its work, as Blair on Tuesday put the finishing touches on a remarkable power-sharing deal in Northern Ireland between once-sworn enemies, hard-line Unionist Ian Paisley and former IRA commander Martin McGuinness.
For as long as he was Labour leader, he was the magnetic north of British politics, the fixed point that set the trajectory of friend and foe alike. He saw off four Conservative Party leaders — John Major, William Hague, Iain Duncan Smith and Michael Howard — none of whom came close to a truly effective anti-Blair strategy.
The answer, as the present Tory leader David Cameron has grasped, was to give up that particular battle as lost, absorb the lessons of Blairism, and look beyond it. Cameron is happy to style himself as “Blair’s heir” — another English public schoolboy with a talent for communication, a gift for reassurance and a whiff of generational change about him — and march toward the center ground of British politics, which has been so successfully colonized by New Labour for more than a decade. Small wonder, then, that so many senior Blairites find the Tory leader more appealing than they do the grim Scot who’ll be the next prime minister.
If recent history has one indisputable lesson, it is that reconstruction is harder than regime change. After many bursts of “shock and awe” attacks, subverting Blair through his allies or plotting to remove him, Brown has at last seen off his old rival: The so-called September coup last year finally did the trick, when rebellious Labour backbenchers forced the prime minister to promise to leave by this summer — and Blair will soon be gone.
The Cold War-like standoff of the Blair-Brown rivalry — a factional impasse in the Labour Party when the Tories were largely irrelevant — is going to be replaced by something much more fluid, much more bitter and much less predictable. Three forces will be vying for position: the Brown government, the neo-Blairite insurgents and the Cameron Conservatives. It will be an ugly conflict, the outcome of which is unknown. But one thing is for sure: Brown had better brace himself for a wave of Blair nostalgia before too long, and the sound of mournful voters singing, “Tony, we hardly knew ye.”

Matthew d’Ancona is editor of the Spectator. This comment appeared in The Wall Street Journal.

TITLE: Cashing in on Empire
AUTHOR: By Yulia Latynina
TEXT: The day after U.S. Defense Secretary Robert Gates met with President Vladimir Putin and invited Russia to take part in a joint anti-ballistic missile defense system to counter the threat from rogue states, the head of the General Staff, General Yury Baluyevsky, snapped that Russia “would not cooperate in the creation of an anti-missile system directed against ourselves.” Two days later, Putin announced that Russia would suspend its participation in the Treaty on Conventional Armed Forces in Europe.
Strange as the reaction was, it might have been in response to legislation introduced in Washington to eliminate sovereign immunity for countries participating in international cartels. The primary aim of the bill, which was approved by the U.S. Senate Judiciary Committee during Gates’ visit to Russia, is to counteract the OPEC-style gas cartel Russia has shown interest in helping create.
One of Russia’s main foreign policy goals over the last few years has been to help Gazprom buy gas transport and distribution networks in Europe.
Not even in the days of Peter the Great and his niece, Empress Anna Ivanovna, was foreign policy based on something as strange as the purchase of commercial real estate beyond the country’s borders. But this goal is clear to anyone who has read Putin’s public speeches over the last two years. In virtually every meeting with European leaders, Putin has brought up Russia’s desire to buy the West European pipelines. His message has been, “We’ll sell you the gas if you sell us the pipes.”
But this plan has so far fallen through, not because it was unrealistic, but because of the way Putin went about trying to achieve it. 
The Kremlin conducted the pipeline negotiations with the same blunt diplomacy that the pro-Kremlin youth groups demonstrated in throwing eggs at the Estonian Embassy last week. It should come as no surprise that the proposals fell on deaf ears.
Moscow’s next move was to replace that grand commercial plan with a new one: the creation of a cartel of gas-producing nations. Instead of meeting with German Chancellor Angela Merkel, Putin began holding talks with the emir of Qatar, switching his tack from the European Community to Saudi Arabia. In order to form an OPEC-style gas cartel, it was indispensable to first obtain Qatar’s agreement, since that country and Russia are the two largest gas producers in the world. The other major players in this game are Iran, Iraq, Indonesia and Algeria. As was the case with the pipeline plan in Europe, the idea of a gas cartel is based upon the ability of authoritarian governments to extract a commodity at well below market prices domestically and then sell it on the world market to reap enormous profits. Thus, a gas OPEC is just one more way for the Kremlin to convert its empire into a cash cow.
For one of the potential cartel member states, it is easy to see how important Russia’s influence in the Middle East is, with its status as an empire and its ability to provide arms and enriched uranium.
The problem, however, is that Russia’s status in the Middle East is not as high as it appears to be on state television. For the emir of Qatar, for instance, it was a fairly serious insult when his personal guest, Chechen separatist Zelimkhan Yandarbiyev, was killed in his country. Putin may have smoothed things over, but some aftertaste lingers.
For this reason the gas cartel idea will likely go the same way as the pipeline plan. And if the Kremlin’s plans failed in Europe primarily because of its inability to conduct negotiations properly, then they will fall short in the Middle East because Russia’s status there is even lower than that of the United States.
Not even an empire can always call the shots.

Yulia Latynina hosts a political talk show on Ekho Moskvy radio.

TITLE: A More Constructive Approach to Building
PUBLISHER: Vedomosti
TEXT: The pickup in housing construction has yet to have much effect on the availability of housing. In the first quarter of 2007, according to the State Statistics Service, the rate of residential construction was 9.5 million cubic meters, or 50 percent higher than for the same period last year. In all of 2006, 50.2 million square meters of new living space were built, which was 15 percent more than in 2005. At the same time, according to the Regional Development Ministry, apartments became less affordable. In January 2006, the average middle-income family could expect to take 4.7 years to save enough to buy a standard apartment. By the end of the year, this had grown to six years.
This means that housing prices grew much faster than average income. Housing prices grew by about one-third for the country as a whole, and from 60 percent to 100 percent in Moscow. Average nominal income rose by just 23.2 percent.
Growth in the housing stock is not keeping up with demand, which is being fueled by increasing access to mortgage programs. Part of the problem is that people with higher incomes are snapping up much of what is being built for investment purposes. This might be helping to fuel an investment boom in housing, but it’s not helping people buy homes.
In these conditions, builders can count on high profits without having to worry at all about controlling costs. And Russia leads Europe in real estate transaction costs, according to a recently published study by Global Property Guide, which placed their value at 25 percent of the average purchase.
But this isn’t the main factor fueling rising prices. It is difficult to get an idea of real construction costs. Besides the obvious expenses — building materials, equipment, labor and taxes — there are some that aren’t so visible: bribes to officials to get access to land or to building inspectors, for example. There are also entirely standard expenses that could easily be reduced, including infrastructure and the actual cost of land itself.
State officials and real estate analysts have long discussed how to overcome the two main factors holding back construction — a deficit in available land and underdeveloped infrastructure. 
Even if they manage to deal with these difficult problems, this still won’t help deal with the corrupt, under-the-table nature of the market. What the market needs is competition. 
This would allow builders to reduce the amount they paid in bribes and reorient their business toward earning profits on higher volumes of middle-priced housing provided, and not just on the high profits earned from elite developments.

This appeared as an editorial in Vedomosti.

TITLE: A Last Salute to Federalism
AUTHOR: By Nikolai Petrov
TEXT: With its detailed financial calculations and planning, the style of President Vladimir Putin’s final state-of-the-nation address last week was reminiscent of reports given at Communist Party congresses, with a couple of pages on domestic policy thrown in. But Putin’s speech did provide some food for thought.
First of all, the picture Putin painted of political conditions seemed to be aimed at critics of Russia’s commitment to democracy, as if he were arguing with some invisible opponent. He offered the standard lip service to the formation of an active civil society, the democratization of the electoral system, an increase in access to information, and an unprecedented decentralization of state authority.
In general, Putin’s comments on what is positive and negative about democracy were not particularly controversial. He set out a number of priorities, including the need to develop civil society, the state’s responsibility to provide a sufficient standard of living for its people, the need for a free and socially responsible business community, the importance of fighting corruption and terrorism, and so on. This was a far cry from earlier statements about the importance of Russia’s traditions and its unique model of democracy, or retorts that Russia’s critics themselves have violated democratic principles.
But if we delve further, we enter the political world behind the looking glass, where black is white and bad is good.
Putin called the transition to a completely proportional representation system for the upcoming State Duma elections a revolutionary democratic electoral system that will reduce the chances that local elites will manipulate results in their regions. As evidence, he pointed to the larger number of political factions in regional legislatures following the introduction of a new system in 2004. But the “new system” is the same mix of proportional and direct electoral districts that was dismantled at the federal level.
This is not to overlook the cancellation of the minimum voter turnout rule, after which voter activity increased rather than decreased, thereby bringing into question the rationale for the decision in the first place. Putin made no direct reference to protest votes or street rallies in March. Instead, he spoke only of dirty campaigning and the need to strengthen measures against extremist activities. The Kremlin is clearly satisfied with the current electoral system, has no plans to reconsider anything it has canceled, and considers criticism on this front groundless.
Putin’s speech contained no reference to federalism. He seemed, however, to consider the increase in authority given local and regional governments to be an important part of political and cultural development, saying “the decentralization of authority in state government has reached its highest level in all of Russian history.” Putin argued that regional governments were granted “important powers” in various fields over the previous year. These, of course, were just some of the same powers already taken from the regions on his watch, only to be partially returned as an extension of federal authority. These weren’t even powers the regions wanted; they were powers that had become burdensome for Moscow. And the money still comes in the form of direct payment from Moscow, and not through individual regional budgets.
Despite all of the recent scandals involving senators, Putin still described the Federation Council as “consistently standing up for the interests of the regions.” With the transition to a system where the Kremlin appoints governors, who then appoint the senators, the chamber has effectively been reduced to an extension of the executive. Ignoring calls from United Russia that the Federation Council be elected, Putin suggested that senators simply be required to have lived 10 years in the region they represent.
There was no mention of the results of the re-registration requirement for parties and nongovernmental organizations instituted since last year’s address, a move that has significantly decreased their numbers. Rather, Putin spoke of the greater number of organizations and their members as testimony to the formation of an active civil society.
This is only a short laundry list of Putin’s eighth state-of-the-nation address — the last granted him by the Constitution. It had little of the sense of a last political will and testament of a departing president, and more the feel of a final set of economic instructions detailing who should get what, and from whom. There was no overall summary offered, no analysis of past mistakes or lessons learned. In this sense, it serves as a fitting epigraph for Putin’s second term.

Nikolai Petrov is a scholar in residence at the Carnegie Moscow Center.

TITLE: Canadians Win Record 24th World Title
AUTHOR: By Steve Keating
PUBLISHER: Reuters
TEXT: MOSCOW — Every time Canada competes at the world championship it is expected to bring home the gold. 
But the record 24th world title clinched with a 4-2 win over Finland on Sunday will be considered a bit of a surprise, coming from a team that overcame the absence of some top NHL players who said “no” to the chance to represent their country. 
Hockey Canada has always taken great pride in fact that players regularly line up to answer the country’s call. 
This year, however, the team received numerous ‘no thank you’ replies and rounded out their roster with 19-year-old university student Jonathan Teows and Finnish league defenseman Cory Murphy. 
In the absence of a more skilled line-up, coach Andy Murray returned to the hard-working, blue-collar game that has come to symbolize Canadian teams, powering the country to a perfect 9-0 record and their third gold medal in five years. 
“I don’t know how they [players who turned down invitations] feel, I think it’s disappointing, especially some of the young players,” Murray told reporters. 
“The key thing for me is to focus on the guys who said ‘yes’. 
“Those guys are feeling pretty good about themselves, their summer is going to be a little bit better then some of those guys who ended the (NHL) season on a bit of a sour note. 
“I’ll do anything Hockey Canada asks me. If they want me to drive the bus or carry the sticks, I’m a proud Canadian and I’ll be there if they ask me. 
“I just think it’s your responsibility as a Canadian, if they ask you, you go.” The next call Murray could be receiving from Hockey Canada could be one asking him to coach the team at the 2010 Vancouver Olympics. 
Having guided Canada to three world championship titles, Murray was tipped as the top contender for the prestigious but pressure-packed Olympic job by Hockey Canada president Bob Nicholson. 
Murray downplayed his contribution to this year’s team but his experience and attention to small details made a big difference. 
Despite the distraction created by the controversy surrounding Shane Doan’s selection as team captain following allegations that he insulted the country’s Francophone minority, Murray kept his squad focused on the task of bringing home gold. 
“Our theme here was ‘Digging in for Canada’ and we were digging in there pretty deep until [Rick] Nash got that final goal,” Murray said. 
“I always feel our emotional well as Canadian hockey players runs deeper than any other country in the world. 
“If we have to dig deeper, we’ll go deeper.” 
Like Canadians, there was also a time when Russia expected great things from their hockey team, but since the break up of the Soviet Union, their fans have come to expect only disappointment. 
Loaded with NHL talent such as Washington’s Alexander Ovechkin and Pittsburgh’s Yevgeny Malkin, Russia had hoped to end a frustrating 14-year gold medal drought on home ice but the hosts once again came up short, settling for the bronze with a 3-1 win over Sweden. 
Next year Canada will defend its crown at home when the International Ice Hockey Federation (IIHF) celebrates its 100th anniversary by bringing the world championship to the sport’s birthplace for the first time. 
But the IIHF left a dark cloud hanging over future world championships and Olympics when it failed to get Russia to sign a new player transfer agreement in Moscow, opening the door to years of legal disputes and chaos.

TITLE: Pakistani City Grinds to a Halt
AUTHOR: By Kamran Haider
PUBLISHER: Reuters
TEXT: KARACHI — Shops were closed and public transport off the streets of Karachi on Monday after nearly 40 people were killed and about 150 wounded in Pakistan’s worst political street violence in two decades. 
The authorities have banned demonstrations in the city and declared a public holiday. The opposition called for a protest strike.
The weekend violence began when Pakistan’s suspended top judge tried to meet supporters in the southern city.
The government on Sunday authorized paramilitary troops to shoot anyone involved in serious violence in Karachi, Pakistan’s biggest city that has a long history of bloody feuding between ethnic-based political factions.
City police chief Azhar Farooqi said security forces had stepped up patrols and the situation was under control. There had been no violence on Monday although the city was very tense.
“The city is totally paralyzed. Shops are closed and very little public transport is on the roads. People are scared,” Farooqi told Reuters.
Government attempts to remove Chief Justice Iftikhar Chaudhry over unspecified accusations of misconduct on March 9 have outraged the judiciary and the opposition.
The judicial crisis has snowballed into a campaign against President Pervez Musharraf and is the most serious challenge to the authority of the president, who is also army chief, since he seized power in 1999.
But the violence has raised the specter of the bloody feuding that plagued the city in the 1980s and 1990s.

TITLE: Samoa Mourns King Who Fostered Independence
PUBLISHER: Reuters
TEXT: WELLINGTON — Church services across the tiny Pacific island nation of Samoa paused for a moment’s silence in honor of the late King Malietoa Tanumafili II on Sunday as the nation prepared for a week of official mourning. 
Malietoa, who had been king of Samoa since the nation of about 180,000 people gained independence from New Zealand in 1962, died late on Friday in hospital in his country’s capital, Apia. He was 94.
The Samoan government has declared public holidays for Thursday and Friday for the king’s official funeral and burial, while flags have been lowered to half-mast across the country.
“There is a huge feeling of sadness amongst people, even from people who didn’t know the man. From the few public appearances he made, he’s touched a lot of people,” Keni Lesa, editor of the Samoan Observer newspaper told Reuters from Apia.
“He was much loved by everybody and he was highly respected.”
Malietoa inherited his royal title in 1940, and was made a special adviser to the New Zealand governor in Samoa, following the death of his father, Malietoa Tanumafili I.
He was a key figure in Samoa’s drive towards independence and was made joint head of state for life, alongside Tupua Tamasese Meaole when Samoa became the first Pacific Islands country to achieve independence in 1962.
Malietoa became sole head of state when Tupua Tamasese Meaole died in 1963. Under Samoa’s constitution, Malietoa’s successor will be appointed for five-year terms and will be decided by the country’s Legislative Assembly, which is elected from mainly customary chiefs every five years.
Another paramount chief and former prime minister from the 1970s, Tuiatua Tupua Tamasese Efi, is being seen as a likely successor.
Malietoa’s body will lie in state on Thursday with thousands expected to pay their respects in person, ahead of the funeral service on Friday.
Air New Zealand said it would increase capacity on flights to Samoa to cope with an expected demand by the large Samoan community to return for the funeral.
An estimated 130,000 Samoans or people of Samoan descent live in New Zealand, which captured the islands from Germany at the start of World War 1 in 1914, and ruled the country under international mandate until 1962.
A Samoan-born New Zealand member of parliament, Taito Philip Field, said Malietoa laid the foundation for the development of Samoa as a modern country.
“He held a lot of the wealth of history, what happened prior to independence and the struggle for independence,” Field told Radio New Zealand.
In 1940, Malietoa married Lili Tunu, who died in 1986, a year after their eldest son died. Another child died in infancy. He is survived by two sons and two daughters.

TITLE: Kuznetsova Loses To Serb Teen
AUTHOR: By Iain Rogers
PUBLISHER: Reuters
TEXT: BERLIN — Serbian teenager Ana Ivanovic fought back from a set down to win the first title of her career on clay on Sunday, defeating Russian third seed Svetlana Kuznetsova 3-6 6-4 7-6 in a thrilling final at the German Open.
The tall 19-year-old from Belgrade, seeded 12 here, started nervously in sunny conditions at the Steffi Graf Stadium, allowing the powerful world number four to race into a 3-0 lead inside 10 minutes.
After losing the first set, Ivanovic battled back into contention with some robust hitting of her own and held her nerve to take the decisive tie-break 7-4 when Kuznetsova hit a forehand long.
With the French Open looming at the end of this month, Ivanovic said the victory in Berlin had improved her chances of success at the only grand slam played on clay.
“It’s obviously very exciting,” Ivanovic said. “Maybe I have more expectations now but I also don’t want to put too much pressure on myself.”
Ivanovic, who may break into the Top 10 for the first time when the updated rankings are published on Monday, said she had been suffering from a troublesome ankle during Sunday’s match but was still likely to play at this week’s Rome event.
“I took some painkillers but they didn’t kick in until the end of the third set so I tried to hit winners earlier in the rallies,” she said. “It’s probably nothing too dangerous.”
Kuznetsova was playing her second match of the day, having earlier beaten world number one Justine Henin 6-4 5-7 6-4 in their interrupted semi-final which began on Saturday.
The former U.S. Open champion had beaten the Belgian only once in 15 previous meetings and lost to her in last year’s French Open final.
Kuznetsova said at a news conference her victories this week over Henin and defending German Open champion Nadia Petrova had boosted her confidence ahead of Roland Garros, which begins in Paris on May 27.
“I was disappointed to lose the final today of course but I have been winning against top players and I am very happy about that,” she said. “I’m on the right way.”
Henin, who has won three of her five grand slams in the French capital, said earlier it had been a very demanding week in Berlin, with numerous interruptions for rain and poor light, blustery conditions and slippery courts.
“It was very dangerous actually and everyone was scared they were going to get injured,” she said.

TITLE: Sheffield United Loses Relegation Dogfight
AUTHOR: By Trevor Huggins
PUBLISHER: Reuters
TEXT: LONDON — Sheffield United was relegated from the Premier League on goal difference after it lost 2-1 at home to Wigan Athletic and Carlos Tevez fired West Ham United to a shock 1-0 win at champions Manchester United on Sunday.
Sheffield United finished the season in 18th place with a goal difference of -23, a single goal worse than Wigan, to join already relegated Charlton Athletic and Watford in the second division.
It was a dramatic finale at Sheffield, with Wigan down to 10 men after Lee McCulloch was red-carded in the 75th minute and his team mates struggling to keep the ball out of their penalty area.
Everton, who drew 1-1 at deposed champions and runners-up Chelsea, Tottenham Hotspur and Bolton Wanderers all booked spots in next season’s UEFA Cup.
Third-placed Liverpool, who drew 2-2 at home with Charlton, and Arsenal, who finished goalless at Portsmouth, had already sealed their places in the Champions League qualifiers.
Liverpool will qualify automatically for the group stage, though, if it beat AC Milan in this season’s final in Athens on May 23.
There was no shortage of tension in the relegation dogfight and few would have predicted the day’s outcome, with West Ham completing a remarkable double over the new champions.
West Ham, who had beaten Alex Ferguson’s side 1-0 at Upton Park in December, won seven of its last nine league games to complete a near-miraculous escape.
Tevez, whose controversial transfer from Corinthians last August led to West Ham’s record $11 million fine last month for a breach of ownership rules, has been key to that late revival.
He topped some fine recent performances by scoring the only goal at Old Trafford in first-half stoppage time, a mixture of determination in the tackle and a cool right-foot finish past keeper Edwin van der Sar.
Consolation for the hosts was hoisting the Premier League trophy after the game before their own fans, ahead of next Saturday’s FA Cup final with Chelsea at Wembley.
Consolation for Chelsea was finishing the season by equalling Liverpool’s record of 63 home league games without defeat.
Chelsea’s Ivorian striker Didier Drogba equalised with his 32nd goal of the season in all competitions after James Vaughan had put Everton, who finish sixth, ahead at Stamford Bridge. Drogba finished the season as the Premier League’s top scorer with 20 goals.
Spurs finished fifth with a 2-1 home win over Manchester City and Bolton were seventh after drawing 2-2 with Aston Villa.
There was a scare for Newcastle United and England in the Magpies’ 1-1 draw at Watford when Michael Owen, recently back from long-term injury, was carried off on a stretcher.
The club said later the striker was fine and had only suffered mild concussion.
Along with the relegation agony suffered by Wigan, it was an emotional and unlucky day for striker Robbie Fowler in his last game for Liverpool.
A hero to the Anfield faithful, Fowler was taken off in the 88th minute by coach Rafa Benitez to give him an ovation — only for Liverpool to get a 90th minute penalty he would certainly have taken and was instead converted by Harry Kewell.
“I’d like to have got a goal but the important thing is that we didn’t lose,” said Fowler, who was captain for the day.

TITLE: Serbia’s Mood Lifted By Eurovision Victory
AUTHOR: By Ellie Tzortzi
PUBLISHER: Reuters
TEXT: BELGRADE — It’s been a long time since Serbia won a popularity contest, and the country is going wild.
Some 25,000 people gathered in downtown Belgrade to welcome back Marija Serifovic, winner of the 2007 Eurovision song contest, waving flags and singing her passionate ballad “Molitva” (Prayer) again and again.
It was one of few reasons for national celebration this country has had in over 15 years of troubles, from war in the Balkans to international isolation and politics plagued by a nationalist hangover.
“A rare time when I was proud to be Serb,” wrote user Zarko on the web site of the popular B92 broadcasting network.
“I’m so glad it wasn’t some war song,” said Aleksandar Tijanic, director of RTS state television. “Hosting this event in Belgrade next year will mean we have finally crossed into normality.”
The victory could go some way towards assuaging Serbia’s persecution syndrome: the country’s role in the Yugoslav wars made it an international pariah for a decade. Many Serbs feel they were unfairly blamed by Western politicians and media.
“To those who say ‘the world is against us’, this shows Europe doesn’t hate us, it gives ample reward when it’s due,” another user wrote on the B92 blog site.
The Saturday competition showcased the usual tactical voting, where states vote for neighbours or allies: Serbia’s entry got the maximum 12 points from all fellow ex-Yugoslavs, even those that were its enemies in the wars of the 1990s, Croatia and Bosnia.
Congratulations came from the European Union, which had criticised Belgrade last week for electing an ultranationalist to a top post while the pro-Western parties bickered over a coalition more than three months since an inconclusive election.
An 11th hour deal on Friday that spared the country new polls was met with relief in the West, keen to keep the Balkans’ biggest country from the warmongering nationalism of the 1990s.
“Congratulations,” EU Commissioner Olli Rehn told state news agency Tanjug. “This is a European vote for a European Serbia.”
Serifovic, representing the country in Helsinki on Saturday night in its Eurovision debut as an independent state, said “a new chapter opened for Serbia, and not only in music.”
The victory also gave hope to Serbia’s tiny and harassed gay community, who celebrated the lesbian chic-tinged performance as a rare sight in the conservative Christian Orthodox country.
“A big win for Serbia, a small step for gay rights!” said one partygoer, leaving Belgrade’s only gay-friendly club.

TITLE: Beating Sweden, Russia Settles for Bronze
AUTHOR: By Gennady Fyodorov
PUBLISHER: Reuters
TEXT: MOSCOW — Russia beat Sweden 3-1 in a consolation game for third place at the world championship on Sunday to win the bronze and salvage some pride.
The Russians, who were heavy favorites to win their first world title since 1993 on home ice, rebounded from a 2-1 semi-final defeat to Finland in overtime on Saturday with three unanswered goals in the first two periods.
The hosts, who were missing three key players through injury — the tournament’s top goalscorer Alexei Morozov, leading defensemen Andrei Markov and captain Petr Schastlivyi — still had enough fire power to tame the Olympic champions.
“Of course, everyone was very very disappointed after losing to Finland,” Pittsburgh Penguins’ Sergei Gonchar, who replaced Schastlivyi as Russia captain for the Sweden game, told reporters.
“But we wanted to give something back to our fans who gave us such a great support throughout the whole tournament and finish on a positive note.”
The Swedes came out a bit flat after surrendering their reign as world champions with a 4-1 defeat by Canada less than 24 hours ago.
“We made a couple of mistakes in the first period and it was pretty hard to get back into the match,” said Sweden coach Bengt-Ake Gustafsson, who last year led the Swedes to a golden double by winning both world and Olympic titles.
Alexei Emelin and Sergei Zinoviev scored in the first period and Alexander Frolov added a powerplay goal early in the second to put the home team in control.
Toronto Maple Leafs’ Alexander Steen, the only NHL player on the Swedish roster, scored midway through the third period to bring his team to life, but the Russians, who beat Sweden 4-2 in the qualifying round, held on for a comfortable win.
Russia also beat Sweden 6-3 in a game for third place at the 2005 championship in Austria.

TITLE: Canadian Separatist Drops Leadership Bid
PUBLISHER: Reuters
TEXT: MONTREAL — Veteran politician Gilles Duceppe said on Saturday he was abandoning the race for the leadership of the Parti Quebecois, just one day after vowing to leave Canadian federal politics in a bid to lead Quebec’s top separatist party.
Duceppe, 59, leader of the separatist Bloc Quebecois, which has seats in Canada’s federal Parliament, said he would throw his support behind Pauline Marois, 58, currently the only other candidate for the PQ leadership.
In a statement issued on Saturday evening, Duceppe said he made the decision after assessing Marois’ popularity within the Parti Quebecois and in Quebec generally.
A CROP poll of 932 Quebec voters published on Saturday in the Montreal newspaper La Presse put popular support for Marois at 45 percent, compared with 21 percent for Duceppe.
“The message, ‘Pauline in Quebec and Gilles in Ottawa,’ also carried sway. For these reasons, I am withdrawing from the race and offering my unconditional support to Pauline Marois,” Duceppe said in his statement.
Duceppe had announced a day earlier, also by press release, his intention to seek the PQ leadership.
Andre Boisclair quit as PQ chief on Tuesday, just days after accusing Duceppe of wanting his job.
Boisclair, 41, was the fourth PQ leader to step down in less than 12 years amid growing impatience from hard-liners inside the party who want Quebec to break away from Canada.

TITLE: In Brief
TEXT: <b>Woolmer Death</b>
KINGSTON, Jamaica (Reuters) — Scotland Yard investigators have concluded that Pakistan cricket coach Bob Woolmer died of natural causes and was not strangled as local police have said, a Jamaican newspaper reported on Sunday. 
In London, Scotland Yard declined to comment on the report in the Jamaica Gleaner newspaper that Woolmer died of heart failure and said it would not discuss an analysis of toxicology tests that a British government lab conducted on behalf of Jamaican authorities.
“This is an inquiry being conducted by the Jamaican authorities,” said a Scotland Yard spokesman, on customary condition of anonymity in line with policy. “It’s down to them to comment on developments.”

<b>Sex Toy Case</b>
BERLIN (Reuters) — German sex shop chain Beate Uhse must pay German soccer stars Michael Ballack and Oliver Kahn 50,000 euros ($67,380) each for using their names for vibrators without permission, the company said Monday. 
The company had marketed the sex toys, dubbed “Michael B.” and “Olli K.,” before Germany hosted the World Cup in 2006.
Although the surnames of the two German soccer stars were not used, it was clear they referred to Chelsea midfielder Michael Ballack and Bayern Munich goalkeeper Oliver Kahn.
Kahn and national team captain Ballack sued Beate Uhse in court for unauthorized use of their names and won.
“The products have been withdrawn,” the spokeswoman said. “We have to pay 50,000 euros to each of them.”

<b>New PM on June 24</b>
LONDON (AP) — Britain’s Labour party will announce its new leader June 24 at a conference in northern England to replace Prime Minister Tony Blair, it said Sunday.
Blair will formally step down as prime minister June 27, handing power to his replacement — almost certain to be Treasury chief Gordon Brown.
Nominations of candidates to replace Blair and his deputy, John Prescott, opened Monday, when legislators with the backing of 44 fellow Labour MPs can put themselves forward.
Two leftist MPs are hoping to run against Brown for the Labour leadership and force the party to hold a ballot, but neither man has yet secured the necessary backing.
Six senior MPs have said they will compete to replace Prescott, who announced he would also relinquish his position June 27.
Nominations for both posts close Thursday and candidates will take part in a campaign tour across England, making speeches and taking part in debates, Labour said in a statement.
The party will hold a conference in Manchester on June 24 to announce the results of ballots.

TITLE: Violence Hits Philippines Elections
AUTHOR: By Paul Alexander
PUBLISHER: The Associated Press
TEXT: MANILA, Philippines — Filipinos braved the threat of violence to choose local and congressional representatives Monday in elections likely to do little to ease political instability and animosity. 
Seven more fatalities took the death toll to 120 since campaigning began four months ago. But warnings that communist rebels might try to disrupt the balloting with a rash of attacks proved to be unfounded. 
Election officials projected turnout at a whopping 75 percent of the 45 million registered voters as people took advantage of the day off, sunny skies and tight security. Precincts closed in mid-afternoon, and those still in line at that time were allowed to go ahead and vote, and several precincts that opened late were allowed to extend their hours. 
Filipinos are electing 12 out of 24 senators, all 236 House of Representatives members and nearly 17,500 governors, mayors and other local officials. 
Counting is by hand, so official results are weeks away, but opinion polls showed the opposition certain to hold onto control of the Senate, where the top 12 vote-getters nationwide will win seats. Among the candidates is Gregorio “Gringo’’ Honasan, a military officer on bail while fighting allegations of involvement in several coup plots. 
The House of Representatives was likely to remain in the hands of President Gloria Macapagal Arroyo’s backers, which would doom any effort to launch a third impeachment bid against her over allegations that she fixed the 2004 election. 
At least 116 people have died and 121 others been wounded since campaigning began in January, police said. The 2004 election left 189 dead. 
“There are intense fights in all campaigns, but let us be gracious, win or lose,’’ Arroyo said in a statement. “For the sake of the nation, we should put a closure to all chapters of conflict and battles once the nation makes its decision, and open all doors to national reconciliation and unity.’’ 
At least seven people were killed in six separate election-related incidents around the country Monday, and explosions injured several others. Three of the fatalities occurred in the central province of Masbate, which was under Commission of Elections control due to outbreaks of violence. 
The race largely was seen as a proxy war between Arroyo, a daughter of the political elite, and her predecessor, Joseph Estrada. 
Despite being forced out of office in January 2001 in the country’s second “people power’’ revolt and going on trial for corruption allegations, Estrada has maintained much of his popularity among the poor for his action film career in which he frequently portrayed underdog heroes. 
Arroyo’s six years in power have been a mixed bag of steadying the economy while lurching from crisis to crisis, including at least two coup plots, terrorist attacks and a string of natural disasters. 
“The Philippines needs change, we are No. 1 in Asia in corruption,’’ said bus driver Efren Santos, 58. “I voted for people who can change this country because it is becoming poorer.’’ 
But while Arroyo’s approval ratings are low, general disenchantment among the poor majority has been offset by the stock market rising 12 percent this year and the peso hitting its strongest level against the U.S. dollar since October 2000. 
The Commission on Elections postponed voting in several townships due to a variety of irregularities. The Supreme Court has designated 111 regional tribunals to handle allegations of fraud and other irregularities. 
Six armed men barged into a precinct in the village of Gambar in southern Shariff Kabunsuan province, snatched two ballot boxes half filled with votes and threw them into a nearby river, police chief Supt. Joel Goltiao said.

TITLE: Parents Confident Daughter is Safe
AUTHOR: By Nick Allen
PUBLISHER: Bloomberg
TEXT: Praia da Luz, PORTUGAL — The parents of Madeleine McCann, a 3-year-old British girl snatched from a vacation apartment in Portugal 11 days ago, said they remain sure she’s safe and well. 
“Until there is concrete evidence to the contrary we believe Madeleine is safe and being looked after and that’s how we can continue in our efforts,’’ her father Gerry McCann, a cardiologist, said in a televised statement in Praia da Luz, a resort in Portugal’s southern Algarve region. 
Madeleine, from Rothley in the English county of Leicestershire, disappeared after her parents put her to bed in the apartment with two younger siblings and went to eat nearby. Portuguese police believe she was abducted. The search for her has gripped the public and media in the U.K. and Portugal. 
The missing girl’s fourth birthday was on May 12. Her mother, Kate McCann, clutched her daughter’s favorite cuddly toy as she spoke to reporters Monday near the apartment from which she vanished. “We can’t even consider returning home at the moment, I can’t even let it enter my head,’’ she said. 
Rewards totaling 2.5 million pounds ($4.96 million) have been offered for Madeleine’s safe return. Potential contributors include businessman Richard Branson, England and Manchester United footballer Wayne Rooney, and children’s author J.K. Rowling. There have also been televised appeals for information from former England football captain David Beckham and Portuguese soccer star Cristiano Ronaldo. 
“We have taken tremendous strength from the warmth and the spiritual outpouring that we have received here and all around the world,’’ Madeleine’s father said today. 
“That has given us great encouragement and hope that we will bring back Madeleine safely.’’ 
Potential witnesses and friends of the family are this week giving statements to a Portuguese court so they can return home. The statements may be used in any eventual court case. 
Searches around Praia da Luz itself have been completed and the focus is now shifting to an international hunt. 
“Our police are working internationally, so there is cooperation taking place, the police forces in other parts in southern Europe are working and that’s what we are going to step up over the next few days,’’ U.K. Chancellor of the Exchequer Gordon Brown said in an interview with GMTV today. Brown is the favorite to succeed Tony Blair as Prime Minister next month. 
“Every effort has to be made so that we can get Madeleine back,’’ Brown said. “We must respond by making the maximum effort and as a parent I feel so bad about this. What the family is going through is impossible to imagine.’’ 
Some U.K. media commentators have criticized the Portuguese police for allegedly making slow progress and failing to release more details about the investigation. Madeleine was reported missing on May 3. No arrests have been made. 
While police in the U.K. often use the media to appeal for information, their counterparts in Portugal say they are bound by a law of judicial secrecy which prevents them from revealing details of their inquiries. 
Madeleine’s father defended the police’s performance following discussions with them. Today he said the family was “fully supportive’’ of the investigation.

TITLE: Japan Passes Constitutional Revision Procedure Law
AUTHOR: By Sachiko Sakamaki
PUBLISHER: Bloomberg
TEXT: TOKYO — Japan passed into law rules for revising the country’s pacifist constitution for the first time in 60 years, a central goal of Prime Minister Shinzo Abe. 
The upper house of parliament approved the legislation Monday, a month after it passed through the lower house. The law, which will be enacted in 2010, sets procedures for a national referendum should a constitutional amendment pass both chambers of parliament by a two-thirds vote. 
The law reflects Abe’s aim to revise the constitution and allow Japan to assert itself militarily for the first time since the end of World War II. The 1947 document, written by U.S. occupation forces after Japan’s defeat, renounces war as a sovereign right and forbids military forces. 
“We now have a legal framework for the procedures of revising the constitution,’’ Abe told reporters at his official residence in Tokyo. “It’s important to debate this broadly and deeply in a calm environment.’’ 
Japan maintains a 240,000-strong Self-Defense Force that courts have ruled is legal over the objection of pacifist groups. The 52-year-old Abe, Japan’s first prime minister born after the war, says the constitution is outdated as it forbids the right of collective self-defense — to defend an ally that is attacked — in a nuclear age riven by international terrorism. 
In a statement on May 3, the 60th anniversary of the document’s adoption, Abe called for “a bold review of the postwar regime all the way back to its origins and an in-depth discussion of the constitution’’ which has become “incapable of adapting to the great changes taking place.’’ 
Today’s law is the second piece of legislation passed during Abe’s seven-month administration that demonstrates his intention to cast off Japan’s pacifist past, following last year’s law upgrading the defense agency to a ministry. The government last month set up a panel to study how to change the legal interpretation of the right of collective self-defense.

TITLE: 8 Combatants Killed in Sri Lanka
PUBLISHER: The Associated Press
TEXT: COLOMBO, Sri Lanka — Tamil rebels attacked a group of Sri Lankan soldiers who had crossed into insurgent territory in the north, sparking a battle that left seven guerrillas and a soldier dead, the military said Monday.
The fighting took place Sunday and was the latest in a series of clashes that have killed dozens in Mannar, a northwestern district that has in recent weeks become a flash point in Sri Lanka’s deepening conflict.
As violence continued in the north, the military said it started resettling tens of thousands of people who fled their homes during fighting between government troops and Tamil guerrillas in the east.
The military said Sunday’s violence broke out when soldiers pushed ahead of their defensive lines to pre-empt an attack by insurgents. The seven rebels and one soldier were killed in the ensuing fight, said military spokesman Brig. Prasad Samarasinghe.
The rebels disputed the government’s claim.
“We didn’t suffer casualties for the past week in that area,” rebel spokesman Rasiah Ilanthirayan said by telephone from the insurgents’ stronghold in the northern town of Kilinochchi.
Separately on Monday, the military said soldiers fatally shot a suspected rebel who attempted to throw a grenade at a patrol. A government official who spoke on condition of anonymity, fearing reprisals, identified the man as a security guard at a government office.
The incident occurred in the Jaffna peninsula, which lies at the northern tip of Sri Lanka and is the heartland of the island nation’s 3.1 million ethnic minority Tamils, in whose name the Tigers are fighting for an independent homeland.
More than 150,000 people were displaced in the east, mainly from Batticaloa district, during clashes early this year. Samarasinghe said the government hoped to resettle about 29,000 people before June 1.
Tamils have faced decades of discrimination at the hands of the Sinhalese, the predominantly Buddhist ethnic group that accounts for more than 70 percent of the country’s 20 million people and dominates its government and military.
A 2002 cease-fire brought a measure of relief, but has largely collapsed in the last 19 months, leaving an estimated 4,000 more people dead, despite international pressure for calm.
Meanwhile, authorities were trying to establish a motive for Sunday’s killing of a Buddhist monk in eastern Sri Lanka, the Defense Ministry said.
Unidentified gunmen stormed a Buddhist temple in eastern Trincomalee district, which lies near Tamil Tiger territory, and fatally shot the chief monk, the Rev. Handungamuwe Nandarathana. More than 69,000 people have been killed since Sri Lanka’s war began in 1983.