SOURCE: The St. Petersburg Times
DATE: Issue #1273 (39), Tuesday, May 22, 2007
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TITLE: FSB Foils Plot to Kill Governor
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Security forces detained two suspects over the weekend in connection with an alleged plot to assassinate Governor Valentina Matviyenko. 
In a joint raid carried out by the Federal Security Board and the Interior Ministry’s investigative unit, two grenades and over 0.5 kilograms of plastic explosives were confiscated and the two suspects seized.
No information has yet been divulged to the press about the possible motives of the detainees or details about their identity other than the fact that both of them are residents of Leningrad Oblast.
The arrests made international headlines but opposition politicians raised eyebrows at the news and questioned the level of seriousness of the alleged attack plans.
Matviyenko told reporters on Sunday she feels “secure and confident,” despite the alleged threat and claimed she will not increase her personal security in any way in the wake of the arrests. “I am aware of the danger I was facing, and I have been briefed about the arrests but I am not at liberty to make any comments on the matter until the end of the investigation,” Matviyenko said.
The governor, who said she has been getting an avalanche of worried phone calls from her friends and fellow politicians from the world over, also regretted the leaking of the information to the press and its being given widespread coverage in the media. “The unfortunate leak happened in Moscow,” she said. “Regrettably, there are problems in our law enforcement [agencies] with the keeping of classified or sensitive information under good wraps.”
Boris Vishnevsky, a political analyst and member of the political council of the local branch of liberal party Yabloko said the assassination story sounded dubious and at the very least exaggerated.
“The assassination of Matviyenko, an official appointed directly by the president, is a pointless and absurd enterprise in principle,” Vishnevsky said. “The chances that the president would send someone more reasonable to replace the current governor are scarce. It looks like the security services are trumpeting their successes and artificially boosting the significance of the event to earn top marks with their bosses.”
“I do not find it even remotely believable that there could be any serious political force behind the murder plot,” Vishnevsky added. “The opposition that exists in St. Petersburg is well-behaved in character, and would not resort to such methods.”
Matviyenko has received death threats in the past. A death threat targeted at Matviyenko was posted on the Internet, on one of the forums of the local online newspaper Fontanka.ru, by a nationalist party at the end of July, 2004. 
The man behind the threat, Alexander Vtulkin, a self-proclaimed minister of national security for the nationalist Russian Republic, was sentenced in 2005 to 1.5 years in prison for inciting national, racial and religious hatred with calls to violence. 
Vtulkin’s threat was deleted by the website’s moderators within minutes after being posted. The threat was posted in the form of a court sentence finding Matviyenko guilty of “anti-Russian policy and populating the city with immigrants from Asia and the Caucasus.”     
A string of other top-ranking politicians and business leaders in Russia have survived attacks in recent years.
In 2005, Anatoly Chubais, the head of Russia’s state-controlled electricity monopoly, the Unified Energy Systems, survived a bomb and gun attack.
The trial of suspects in a suspected plot to kill Aman Tuleyev, the governor of Kemerovo region, in the spring of 2000, is still in progress. Several suspects have been detained but no convictions have yet been made in the case.
The governor of the Magadan region, Valentin Tsvetkov, was gunned down in downtown Moscow in 2002. His murder remains unsolved. A prominent liberal politician, Sergei Yushenkov, was shot to death in Moscow in 2003 in an alleged conflict over his party’s funds. 
Galina Starovoitova, a prominent liberal lawmaker with the State Russian Duma, who was also the founder and leader of the Democratic Russia party, was gunned down in the stairwell of her apartment building in St. Petersburg on the night of Nov. 20, 1998. Following a long investigation and trial that lasted for nearly 7 years, two killers, Yury Kolchin and Vitaly Akishin, were convicted in June 2005 for the murder and sentenced to 20 and 23 years of imprisonment respectively.
Mikhail Manevich, while serving as St. Petersburg’s vice-governor and head of the City Hall’s Property Management Committee, was killed on Aug. 18, 1997, when he was shot through the roof of his car when driving through the city center. No convictions have been made in the case.
Said Amirov, the mayor of Makhachkala, the capital of the southern republic of Dagestan, has survived at least 13 assassination attempts since the mid-1990s.

TITLE: Europe Scolds A Bristling Putin
AUTHOR: By Anna Smolchenko
PUBLISHER: Staff Writer
TEXT: VOLZHSKY UTYOS, Samara Region — Top EU officials accused a visibly annoyed President Vladimir Putin on Friday of meddling in other countries’ affairs, turning a blind eye to the killings of Kremlin opponents, and muffling voices of criticism.
No major deals were reached during the one-day Russia-EU summit at this Volga River resort, as expected. While the two sides spoke of a willingness to cooperate, they disagreed over almost everything, including the freedom of assembly, Polish meat and the removal of a Soviet monument in Estonia.
At a 1 p.m. news conference after two hours of talks, German Chancellor Angela Merkel raised the issue of the detention of opposition activists who had been granted permission — under EU pressure — to hold a Dissenters’ March in nearby Samara on the same day as the summit. Among those detained was former chess champion Garry Kasparov, who was not allowed to board a plane from Moscow.
“I am concerned about the treatment of some people who had problems traveling here,” Merkel said in remarks translated into Russian. “I hope they will be given an opportunity to express their opinion.”
A combative Putin said he was not afraid of “marginal groups” that disrupted everyday life. He noted that Germany had cracked down on protesters ahead of a Group of Eight summit that will be held next month in Heiligendamm, Germany.
Merkel said that detaining people who threw stones and acted violently was different from stopping people on their way to protests.
Putin replied that the European Union was concerned about the rights of demonstrators in Russia but was ignoring the rights of Russian speakers in Estonia. “For some reason you don’t recall that a protester was killed in Tallinn,” he said.
Dmitry Ganin, 20, died after being stabbed during rioting in Tallinn over Estonia’s decision to relocate a Soviet-era memorial several weeks ago. 
Two Russian speakers have been detained in connection with the death.
“We are not calling into question the development of strategic relations with the EU” because of the death, Putin said. And the EU, he added, has not called into question its ties with countries like the United States because of possible human rights violations. “So let us not rub it in,” Putin said testily.
In front of a Tolyatti hotel where foreign reporters for the summit stayed, young people from a regional group called New People waved flags and distributed leaflets condemning the “inert forces in Europe” that portray Russia as an enemy.
“Why do European peoples have to provide a stage for Americans to flex their muscles?” the leaflet, written in Russian and poor English, said in reference to U.S. plans to deploy a missile defense shield in Poland and the Czech Republic.
At the news conference, which lasted an hour, Putin sidestepped a German reporter’s question about whether he considered himself a “pure democrat.”
“What does pure mean?” Putin said. “What does it mean to be a pure German, a pure Russian in modern times? We have a saying: scratch a Russian and you’ll find a Tatar.” He said there was no such thing as pure democracy.
EU officials took pains to defend the bloc’s new members such as Poland and Estonia, reiterating that a dispute over Polish meat exports to Russia was the bloc’s common problem. “The EU is based on principles of solidarity,” European Commission President Jose Manuel Barroso said.
An agreement is needed on the issue before Russia and the EU can sign a new framework partnership agreement that outlines relations in all areas.
In remarks published after the summit, Barroso reiterated a warning to Russia not to drive a wedge between the EU nations. “One can get the impression that Russia views certain EU members, like Poland or the Baltic states, differently from other member states,” he said in an interview in Germany’s Focus magazine Saturday.
Barroso told reporters at the summit that the deaths of Kremlin critics, including the murder of Novaya Gazeta reporter Anna Politkovskaya last year, was “a matter of concern.”
“I don’t understand why a country with that kind of security apparatus can’t solve the murder of journalists,” he told Focus.
During the summit news conference, Barroso was asked by Kommersant reporter Andrei Kolesnikov how he could tolerate a resurgence in fascist sentiments across Europe, especially in Portugal, Barroso’s homeland and a country that suffered under the decades-long dictatorship of Antonio de Oliveira Salazar. “No country in Europe is in favor of fascism or national socialism,” Barroso said.
In a nod to the relocation of the Tallinn monument, he said Europe had “great respect for the great sacrifice” Russians had made during World War II.
Barroso defended Estonia’s right to relocate monuments on its territory but urged caution. “Be careful,” he said in remarks aimed in equal measure to Moscow and Tallinn.
Putin said it was “absolutely false” to suggest that the summit had been useless because it had not delivered any major agreements. He said the sides had agreed on all issues except those that “lie in the sphere of economic selfishness.”
He suggested that Poland was at fault in the meat dispute, saying Russia wanted a solution but Polish officials had not held any talks for more than a year.
On the bright side, Putin said, the EU and Russia agreed Friday to bolster cross-border cooperation and to set up electronic systems to track trade.
Despite the bickering, the leaders were keen to end their news conference on a friendly note.
“Precisely because we have differences, we have an interest in developing our dialog,” said Barroso, reiterating that the EU supported Russia’s bid to join the World Trade Organization.
Prime Minister Mikhail Fradkov told reporters after the news conference, however, that the EU still wanted to link Russia’s WTO bid to Polish meat.
Softening his tone, Putin said Europe had done a lot to help Russia to recover after the Soviet collapse and that Russians should never forget that. He said he remembered aid shipments arriving from Europe when he worked in the St. Petersburg administration.
“We need each other. We are cooperating with each other, and we will cooperate in the future,” he said.
After the news conference, the leaders continued their talks over a lunch behind closed doors.
Russia spent 4 billion rubles ($155 million) to organize the summit, Samara Governor Konstantin Titov said in an interview on the sidelines of the summit. Federal authorities provided 3 billion rubles, while the region covered the rest, he said. He echoed many Russian officials in praising the summit as a success. “The mere fact that they gathered together and had a talk is already a political result,” he said.
Merkel agreed, telling reporters: “During the summit we found that a lot of problems have accumulated, but it’s always better to talk with each other than about each other.”

TITLE: Seven Journalists Quit Jobs in Protest
AUTHOR: By Svetlana Osadchuk
PUBLISHER: Staff Writer
TEXT: MOSCOW — Seven journalists have resigned from Russian News Service after new management censored their reports about a Dissenters’ March and a dispute with Estonia, among other things, several of the journalists said Friday.
Russian News Service — a leading private broadcast news agency that provides news to the country’s largest radio station, Russkoye Radio, and other partner stations — is run by general director Alexander Shkolnik and editor Vsevolod Neroznak, both of whom joined the agency from Channel One state television.
Reporters started leaving after Shkolnik fired editor Mikhail Baklanov last month and replaced him with Neroznak. Deputy editor Maria Makeyeva, who anchored morning broadcasts, and Dmitry Mangalov, who anchored the 5 p.m. news, left first, followed days later by Anastasia Izyumskaya and Artyom Khan. The latest three — Olga Shipsha, Lyubov Shirizhik and Margarita Bondarenko — tendered their resignations Thursday.
Shipsha declined to discuss her resignation, and Shirizhik and Bondarenko could not be reached for comment. 
But Khan and Izyumskaya said censorship and pressure had prompted all seven resignations.
Khan said management had accused him of siding with Estonia in his coverage of protests held by the pro-Kremlin Nashi youth group outside the country’s Moscow embassy in late April and early May. 
The protests were over Estonia’s decision to relocate a World War II memorial in Tallinn.
Khan also said management had refused to air his reports about a World War II monument being relocated in Khimki, a town on Moscow’s northern outskirts, and an opposition Dissenters’ March broken up by riot police in Moscow in April.
“I realized that I would cease to exist as a professional [journalist] if I stayed,” Khan said by telephone.
Izyumskaya said she felt she was not allowed to prepare balanced reports. “I was taught that news can never be good or bad and that all points of view should be presented on the air,” Izyumskaya wrote in her resignation letter, Novaya Gazeta reported May 7.
“Those who have left were the face of the service and our best professionals,” Baklanov, the former editor, said by telephone.
Shkolnik blamed the departures on new rules he had introduced to boost the professionalism of the editorial staff, Interfax reported. Shkolnik, who previously oversaw children’s programming at Channel One, also downplayed the resignations, saying that only five of the 50 members of the editorial team had left on his watch.
Baklanov, who founded the agency in 2000, said he knew of only 25 members on the editorial team.
Elsa Vidal, of the media watchdog group Reporters Without Borders, said the resignations were a positive sign that journalists were willing to form a unified front to resist government pressure.
“It’s a desperate turn, but a good turn because the journalists could have accepted the new rule and that would’ve been even more appalling,” she said by telephone from Paris, where the group is based, The Associated Press reported.

TITLE: President Scraps TV Interview
PUBLISHER: Reuters
TEXT: VIENNA — President Vladimir Putin canceled an interview with Austrian state television ORF because the station’s promotion trailer included “unfriendly” footage, ORF said.
ORF said it had been due to interview Putin jointly with German television station RTL and two Austrian newspapers on Monday before his arrival Wednesday, but the Kremlin told the Austrian Embassy in Moscow that the interview would not happen.
“The official reason for the cancellation, which was relayed to ORF via diplomatic channels: ‘Unfriendly reporting by the ORF ahead of the state visit,’” ORF said in a statement Friday.
A Kremlin spokeswoman said she did not have information about an interview request.

TITLE: Reunited Church Consecrates Temple
PUBLISHER: Reuters
TEXT: BUTOVO, Moscow Region — The Russian Orthodox Church consecrated a cathedral on Saturday at a site of mass Stalinist executions in a symbolic act of unity after an 80-year rift between the mother church and a rival faction.
Russian Orthodox Patriarch Alexy II and Metropolitan Laurus, the New York-based leader of the Russian Orthodox Church Abroad, attended the emotional liturgy at the Cathedral of Christ’s Resurrection and Russia’s New Martyrs and Confessors.
At a secluded military testing site in Butovo, just south of Moscow, some 21,000 people, including about 1,000 Orthodox priests, were executed in just one brief period of communist repressions from August 1937 to October 1938, historians citing KGB files say. Alexy and Laurus, who signed a church reunification act on Thursday, laid the groundwork three years ago for the cathedral in this quiet village.
“We are united by the prayers of the martyrs and confessors. Tens of thousands were killed for their faith and truth,” Alexy said.
Alexy calls Butovo “Russia’s Golgotha,” drawing an analogy with the hill where Jesus carried the cross for his crucifixion.
The nearby ravines hold the bodies of more than 200 Orthodox priests and believers canonized in recent years, making the former shooting range the country’s biggest shrine.
“Today’s event is the final act of our church unification,” said Father Anatoly, of Moscow.
Father John Townsend, serving a parish in the U.S. state of Georgia, said: “It’s just such a beautiful moment to come here and honor these martyrs, and to do it at the same time and at the same church.”

TITLE: Term Limits Dumped For Kazakh President
AUTHOR: By David Holley
PUBLISHER: The Los Angeles Times
TEXT: MOSCOW — Kazakh President Nursultan Nazarbayev could remain in office for the rest of his life as a result of a package of constitutional amendments approved by the nation’s parliament Friday.
The measures, which still need the 66-year-old Nazarbayev’s signature to take effect, would remove any limit on the number of terms he can serve. Under the current constitution, Nazarbayev would be required to step down in 2012.
Critics charged that the vote was tantamount to making Nazarbayev president for life, while supporters said it was recognition of the key role he has played in building the country.
“It is a huge step back for the nation,” said Aidos Sarimov, a political analyst at the Altynbek Sarsenbayev Foundation, an opposition-linked think tank in Almaty.
Yermek Zhumabayev, chairman of a commission that drafted the package, said the elimination of term limits for Nazarbayev was approved in recognition of “the historic role the first president has played in the establishment of our state, as one of the founders of our new independent Kazakhstan.”
Under terms of the package, Nazarbayev would be an exception, with future presidents limited to two five-year terms.
Friday’s action involved changes to amendments submitted to the parliament by Nazarbayev on Wednesday, which had been promoted as measures to make the country’s political system more democratic. Kazakhstan has never had an election that outside observers have judged to be free and fair.
The original set of amendments shifted some presidential powers to the parliament and reduced future presidential terms to five years from the current seven — but said nothing about making changes to allow Nazarbayev to run for office indefinitely.
Under the changes approved Friday, the president would need to seek the parliament’s endorsement for his choice of a prime minister. But the package also increased the number of seats in the parliament and provided for more seats in the lower house to be filled according to the proportion of votes won by parties. Opposition leaders say that would make it more difficult for independent lawmakers to win seats.
It was not clear whether the package as a whole marked any real shift of power toward the parliament, as backers claimed. “From now on, the president will be able to dissolve parliament any time he wants,” Sarimov said. “According to the new amendments, the president also will be able to disband local councils, which is totally undemocratic. If presidential powers were expanded on 15 points, parliamentary powers were uplifted by only five, which resulted in a further imbalance of power in Kazakhstan in favor of the president.”
Kazakh Senator Kuanysh Sultanov, speaking by telephone from Astana disputed the notion that the vote amounted to making Nazarbayev president for life.
“‘Presidency for life’ is an incorrect term here,” Sultanov said. “No one gave President Nazarbayev presidency for life. There is no mention of it in any of the provisions we passed today. He can run for the presidency for more than two terms, but no one obligates him to do it. It is absolutely up to him.”

TITLE: Ukrainian Court Ruling ‘Not Valid’
PUBLISHER: The Associated Press
TEXT: KIEV — Tensions in Ukraine’s six-week political standoff flared Friday when the president’s chief of staff dismissed any decision on the crisis by the Constitutional Court as “not valid.”
Ukraine has been locked in political turmoil since President Viktor Yushchenko issued an order April 2 dissolving the parliament and calling early elections. 
Prime Minister Viktor Yanukovych and his parliamentary majority refused to observe the order.
The two leaders later agreed to abide by the court’s decision on whether the order was constitutional. 
As the court was considering the issue, however, Yushchenko rescinded the order and issued a new one that calls for elections on a different date.

TITLE: In Brief
TEXT: <b>Ambassador Promoted</b>
SEOUL, South Korea (Reuters) — North Korea has appointed its ambassador to Russia, a seasoned diplomat who once accused the United States of planning a nuclear attack on his country, as its new foreign minister, the country’s official media reported Friday.
Pak Ui Chun, 74, will succeed Paek Nam Sun, whose death was announced by the North earlier this year, the North’s KCNA news agency said.
Pak served as North Korea’s ambassador in several countries including Algeria, Lebanon and Syria before being appointed to Russia in 1998, according to data provided by South Korea. 

<b>Litvinenko Report </b>
LONDON (AP) — British prosecutors denied a newspaper report Sunday that the foreign secretary was pressuring them not to charge two Russian suspects in the poisoning of former security agent Alexander Litvinenko.
Ken Macdonald, the head of public prosecutions, dismissed as untrue a News of the World report that said Foreign Secretary Margaret Beckett told a meeting of COBRA, the government emergency committee chaired by Prime Minister Tony Blair, that prosecutors must not file charges because Britain could not afford to upset Moscow.
“It is completely untrue that the Crown Prosecution Service has come under any pressure from the Foreign Office in relation to the Alexander Litvinenko case,” Macdonald said. 
“No decision has been taken in this case and we are still looking at the evidence,” he said.

<b>‘Plan to Encircle Russia’</b>
MOSCOW (Reuters) — A U.S. plan to build a missile defense shield in Central Europe is part of a scheme to encircle Russia, Foreign Minister Sergei Lavrov said Friday.
Lavrov and U.S. Secretary of State Condoleezza Rice earlier in the week failed to bridge their long-standing differences over U.S. plans to put 10 missile interceptors in Poland and radar in the Czech Republic as part of a system to shield Europe from missile attack.
“These Czech and Polish locations perfectly fit into the overall global design of the American missile defense, which is surrounding the perimeters of the Russian borders,” Lavrov told BBC World, speaking in English.
“If you keep them in Poland and the Czech Republic, it’s a perfect place to intercept Russian ballistic missiles located in the northwest part of Russia.” 

<b>1.8 M Drug Addicts</b>
MOSCOW (SPT) — Around 1.8 million people habitually use illegal drugs every year, a top official for the Federal Drug Control Service said Friday.
The number of people using drugs has stabilized in recent years, though the amount of illegal drugs confiscated has increased exponentially since the Federal Drug Control Service was created in 2003, Vladimir Zubrin, deputy head of the agency, told reporters, Interfax reported.
In the past four years, more than 100,000 people have been convicted on drug-related charges, Zubrin said. In 2003, only 30 percent of those convicted were actually sentenced to prison, while that number now is around 20 percent, Zubrin said.

<b>1Heroin Sent Via DHL</b>
DUSHANBE, Tajikistan (Reuters) — Tajik police have arrested a woman for trying to smuggle heroin in a refrigerator through express delivery firm DHL, the Interior Ministry said Friday.
The DHL office in the Tajik capital, Dushanbe, grew suspicious after noticing that its transportation cost to Moscow exceeded the actual cost of the fridge by several times. 
The Dushanbe DHL office then called the police to report its suspicions, the ministry said.
“We have arrested a 26-year-old woman who tried to send via DHL a refrigerator with a total of 17.4 kilograms of heroin hidden in its inner cover plate,” said Interior Ministry spokesman Khudoinazar Asozoda.
DHL in Dushanbe said it could not comment on the matter. 

<b>Arms Depot Blast Kills 2</b>
KIEV (AP) — A missile explosion killed two workers and injured one other Friday at the Novobohdanivka ammunition depot, the Ukrainian Emergency Situations Ministry said.
The accident happened as the workers were trying to disarm the missile, ministry spokesman Ihor Krol said.
The Novobohdanivka arsenal caught fire in 2004, killing five people and setting off explosions of rockets and artillery ammunition that rained shrapnel and shook the region for days. A second, much smaller fire broke out in July 2005. Last year, a fire at the depot injured four. 

<b>Armenian Election </b>
YEREVAN, Armenia (Reuters) — Parties loyal to Armenian President Robert Kocharyan won a large majority in last week’s parliamentary election, the Central Election Commission said Saturday, citing the first official results.
The Republican party, led by Prime Minister Serzh Sarksyan, who is the favored successor to Kocharyan, won 65 seats in the 131-seat parliament, it said.
The pro-presidential Prosperous Armenia party came second with 25 seats, followed by Dashnaktsutiun with 16.
Opposition parties Orinats Yerkir won nine and Heritage won seven seats. 

<b>For the Record</b>
Belarus has been defeated for a seat on the United Nations Human Rights Council after a campaign by the United States, key European countries and human rights groups against the country’s repressive rights record. (AP)
Thousands of Crimean Tatars on Friday commemorated the 63rd anniversary of their deportation from the Black Sea peninsula under Stalin, a forced exile that lasted almost half a century. (AP)

TITLE: Limonov, Kasparov Stopped From Boarding Plane
AUTHOR: By David Nowak and Nikolaus von Twickel
PUBLISHER: Staff Writers
TEXT: MOSCOW — Police stopped opposition activists Garry Kasparov and Eduard Limonov and a group of journalists from boarding a flight to Samara for a sanctioned protest Friday.
In Samara, police prevented two activists and two reporters, including Kasparov’s associate Denis Bilunov and Boris Reitschuster of the German magazine Focus, from attending the Dissenters’ March, which was held peacefully Friday afternoon.
On Saturday, a Dissenters’ March was held in Chelyabinsk without incident after local radio stations warned residents to stay away.
“I am lost for words,” Kasparov said by telephone moments after being released by police at Sheremetyevo Airport on Friday. “This is a flagrant violation of the law.”
Passengers, including Kasparov and Limonov, arrived at the Sheremetyevo-1 terminal at around 8 a.m. for their 9 a.m. flight, Kasparov and other people said.
After they handed over their documents to check in for the flight, Kasparov, Limonov and least 20 others were told by airline personnel that there was a problem with their tickets, and that they would have to check in on the second floor.
Kasparov and a Reuters producer said police had a list of people they were singling out.
Police waiting on the second floor told the passengers that their tickets might be counterfeit. Everyone was required to identify the travel agency through which they had bought the ticket, Kasparov said.
It was 1:25 p.m. by the time all the documents had been returned, Kasparov said, which meant it was too late to make the last flight of the day, which took off at 1:30 p.m.
An Interior Ministry spokesman disagreed with Kasparov’s account. “Everyone’s documents were checked and handed back at 12 p.m., which left the passengers plenty of time to make the second flight,” the spokesman said on condition of anonymity.
He said police had received information that several of the tickets might be counterfeit. “It turned out the tickets were genuine,” he added.
Kasparov said he had asked for and received an official police statement that there were no flights left when the documents were returned.
Limonov, a co-founder of the banned National Bolshevik Party, said Federal Security Service officers were waiting at the Samara airport to detain him and others had they made it that far. “This wave of provocation bears all the hallmarks of fascism,” he said.
About 100 protesters gathered in a central Samara square for the march at about 5 p.m. Friday. They were far outnumbered by police and spectators. As the marchers headed to a bank of the Volga River, they waved the black, yellow and white flags of The Other Russia and shouted, “We need another Russia!” and “Down with the police state!”
The Dissenters’ March is the brainchild of The Other Russia opposition coalition, headed by Kasparov, Limonov and former Prime Minister Mikhail Kasyanov.
Samara officials sanctioned the march after prodding from the European Union. More than a dozen people who helped organize the march have been detained briefly by police in the two weeks leading up to the event.
Bilunov, a member of Kasparov’s United Civil Front, was temporarily detained upon his arrival in Samara from Moscow on Thursday afternoon. Police confiscated 95,000 rubles ($3,700) that he had brought to pay for the demonstrators’ expenses, claiming that it might be counterfeit and needed to be examined, Bilunov said by telephone Sunday. Bilunov said he is still waiting for the money to be returned to him.
Bilunov was detained again before the march began Friday. Plainclothes police officers put him in a Lada sedan, said Reitschuster, who heads the Moscow bureau of the Focus weekly and was standing near Bilunov while waiting for the march to begin.
Then police officers approached Reitschuster.
“When I produced my accreditation from the Foreign Ministry, a policeman called his superiors and asked, ‘There is a journalist, a foreigner. What shall we do? Detain him anyway?’” said Reitschuster, who last fall published a critical book on Russian politics under President Vladimir Putin.
Bilunov and Reitschuster were taken to a police station along with freelance regional television journalist Dmitry Toropov and Stanislav Yakovlev of the youth movement Smena, Reitschuster said. They were released almost two hours later, after the march had ended.
“When I asked them about the reason for my detention, an officer told me, “Let’s say that you resemble the wanted photo of a criminal,” Reitschuster said.
Among the reasons police have offered for detentions in the days before the Dissenters’ March have been: carrying grenades; being similar in appearance to a bank card fraudster; pasting flyers in the wrong place; carrying counterfeit cash; and carrying counterfeit tickets.
None of the detentions has resulted in any arrests.
In Chelyabinsk, dozens of people gathered for a sanctioned Dissenters’ March on Saturday that was heckled by about 200 young people carrying posters reading, “Society of Glamorous Gymnasts” and shouting, “We dissent the arrival of winter,” Interfax reported. Police put the number of protesters at 50, while organizers said it was closer to 150.

TITLE: Lantos Has Harsh Words for Putin
PUBLISHER: The Associated Press
TEXT: WASHINGTON — Days after U.S. Secretary of State Condoleezza Rice made a conciliatory trip to Moscow, the chairman of the U.S. House of Representatives’ Foreign Affairs committee is urging the United States to speak out against the Russian government’s abuse of opponents.
Democratic Representative Tom Lantos gave a starkly worded speech at a hearing Thursday criticizing moves by President Vladimir Putin that he said “threatened to send the country back to its authoritarian past.”
“I do not think Vladimir Putin is a reincarnation of Josef Stalin,” Lantos said. “But I am profoundly disturbed by his pattern of abuse and repression of dissidents, independent journalists, and, in fact anyone who opposes him.”
Lantos warned that Putin was in the process of taking control of all independent media, cracking down on dissidents and using energy monopolies to bend other countries to its will.

TITLE: Endowing A European Elite
PUBLISHER: The St. Petersburg Times
TEXT: The city’s first endowment fund was established this month by the European University of St. Petersburg (EUSP). The board of directors has been appointed for a three-year term and will comprise EUSP professors and graduates, EUSP said Friday in a statement.
The new Russian law on endowment adopted at the end of last year allows transparent, long-term cooperation between business and non-profit organizations, granting substantial tax benefits to the latter – including exemption from VAT and profit tax.
“An endowment is the most efficient form of interaction between the academic and business community,” said Svetlana Lavrova, EUSP Financial Director and Executive Director of the EUSP Foundation.
The trustees, who are soon to join the EUSP Foundation, will be instrumental in directing development strategies and management.
“The first endowment gift should exceed three million rubles ($117,000), however, in the medium term we will attempt to raise $15 million. Of course, that’s not $50 million or $150 million – the figures targeted by the largest Russian business schools. But for our institution – for a small, elite post-graduate course – this amount will be quite adequate,” said Oleg Kharkhordin, EUSP Vice-Rector for Development.

TITLE: Into the Great Beyond Of Mortgage Lending
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: The total volume of mortgages in St. Petersburg increased fourfold in January-March 2007, according to managers of Gorodskoi Mortgage Bank. Reporting on the bank performance they were confident in expanding Gorodskoi market share both in volumes and geographically. Director of Gorodskoi Northwest, Igor Zhigunov put the spectacular growth down to the activities of new market players, new credit schemes and an increase in the price of real estate. At the same time, the mortgage boom shifted from the Northwest region to Siberia and Povolzhye, which were recently opened up to all federal banks. In St. Petersburg over 5,000 mortgage deals were registered in January-March this year. “In the near future, we expect an 80 to 100 percent increase in mortgage lending,” Zhigunov said.
Gorodskoi issued mortgages worth a total of 600 million rubles in January-March. The total volume of loans issued since 2004 accounts for over $420 million.
After merging with Morgan Stanley in December 2006, Gorodskoi “extended the frontiers of its market,” said Andrei Pimenov, head of credit and accounting office in St. Petersburg.
The bank expanded operations in Leningrad Oblast, Sverdlovskaya and Samarskaya Oblast and started lending in Chelyabinsk and Tyumen.
Instead of lending in areas with expensive properties Gorodskoi now offers loans everywhere with the exception of the most remote areas, such as Tikhvin, Lodeinoye Pole and Luga.
“The market for mortgages is developing at higher rates compared to other segments of banking and financing. Though in some regions it’s starting from scratch,” said Victor Titov, Vice-President of Northwest Banks Association.
Banks rely on financial mediators instead of developing their own departments, Titov indicated.
In St. Petersburg the total volume of mortgages increased two-fold last year, while the number of deals increased 1.6 times, said Alexei Kazarin, deputy director for mortgages at Credit and Finance Consultant.
He estimated that the current share of deals signed using credit brokers was 30 percent (15 percent last year). Credit and Finance Consultant increased the number of deals by four–fold last year.
“In an effort to win clients, banks offer new schemes, more attractive to borrowers. Bank of Moscow started granting mortgage loans in Swiss francs with annual interest of seven percent. Some banks offer loans for up to 40 years, like RosEuroBank, while other banks take the  risk of decreasing or abolishing the initial installment,” Kazarin said.
Credit and Finance Consultant organizes mortgages  that exceed the value of acquired property.
Anatoly Pecheritsa, general director of Independent Credit Partnership, said that mortgage brokers provide 25 percent of the deals and their share could increase to 40 percent by the end of 2007.
“Mortgages are the most developed type of bank service because of the low risks involved. However, in St. Petersburg there is no real competition between the banks and, consequently, no optimum credit schemes that can satisfy the expectations of borrowers,” Pecheritsa said.
“We have already offered loans without an initial installment. This scheme mainly attracts young families with stable incomes that have not been able to save enough money,” Zhigunov said.
Another Gorodskoi novelty includes an “express mortgage” in 16 hours. The maximum loan increased from $500,000 up to $2 million for mortgages for elite housing.
Borrowers who failed to officially prove their income were offered a “pawn-shop” alternative – getting a loan at a higher interest rate while submitting to the bank only a copy of their passports and a minimum number of other documents. “They can get up to 50 percent of the value of the property,” Pimenov said.
Kazarin expects the market for mortgages to keep growing for the next five to seven years. In western countries average per capita debt is estimated at dozens of thousands of dollars while in Russia it hardly exceeds $1,000, he indicated.

TITLE: In Brief
TEXT: Web Spinning</b>
ST. PETERSBURG (SPT) — Karusel retail chain will open ten new supermarkets this year, Interfax reported Friday. At the moment the company operates 20 supermarkets across Russia.
The new stores will be opened in St. Petersburg, Volgograd, Yekaterinburg, Chelyabinsk, Saratov, Yaroslavl and Dzherzhinsk. Last year Karusel recorded net profits of $9.9 million, with revenues of $360 million. Karusel was founded in 2004 by the owners of the Pyatyorochka retail chain.

<b>All at Sea</b>
ST. PETERSBURG (SPT) — One of Russia’s largest shipbuilding companies Baltiisky Plant reported a net loss of 679 million rubles in January-March 2007 compared to net profits of 202.8 million rubles in the same period last year, Interfax reported Friday.
The company increased revenues 12 times up to 3.19 billion rubles, while production costs increased by 23 times up to 3.79 billion rubles. The company  put the loss down to customer debts.

<b>Stevedoring Profits</b>
ST. PETERSBURG (SPT) — Petrolesport stevedoring company increased net profit three times in January-March 2007 compared to the same period last year, Interfax reported Friday.
The company reported net profits of 270 million rubles. Revenue increased by 73.6 percent up to 731 million rubles.
In 2006 Petrolesport increased net profit seven times over, up to 608.7 million rubles, with revenue increasing by 33.7 percent up to two billion rubles.

<b>Smoking Stake</b>
ST. PETERSBURG (SPT) — Managers of the Nevo Tabak tobacco plant bought another 40 percent stake in the company from UFG Private Equity Fund I, Interfax reported Monday. As a result, the managers now control 97 percent of all shares.
In August 2006 UFG Private Equity Fund I invested about $25 million into Nevo Tabak to finance development, relocation of the plant away from the city center and development of its territory.
Later, however, the plant managers decided to focus on developing existing production facilities. Nevo Tabak launched a joint project with American Cigarette Tobacco Company promoting the Arctic and Samurai brands of cigarettes in the Russian market.

<b>Absolutely KBC</b>
BRUSSELS, Belgium (AP) — Belgian bank and insurer KBC Groep NV said Monday it increased its stake in Russian mortgage lender Absolut Bank to 95 percent after the World Bank’s private sector lending arm sold it 2.5 percent of the shares.
The lender did not say how much it paid for the stake.
The development bank’s International Finance Corporation will keep the remaining 5 percent stake.
KBC is still waiting for the Russian banking and antitrust regulators to approve its April 18 purchase of Absolut, which values the lender at 761 million euros ($1.03 billion).

TITLE: Exasperation Blamed For Market Slump
AUTHOR: By Simon Shuster
PUBLISHER: Staff Writer
TEXT: MOSCOW — Having come up for air at the end of March and in the first half of April, Russian markets have gotten that sinking feeling once again. But this time, no single factor — except a general exasperation with the riskiness of Russian stocks — seems to be behind the slump.
Since April 13, when the RTS broke through the 2,000-point barrier, the story in Russia has been one of creeping decline. The index closed Friday at 1,859 points, up 0.8 percent for the week after four gloomy weeks in the red.
Analysts blamed a lot of the sluggishness on the VTB initial public offering, which siphoned billions of dollars out of the market as investors sold off equity to free up money for VTB shares.
But mixed news from this month’s Merrill Lynch survey of global fund managers suggested deeper reasons for the downturn. The good news to be taken from the survey was that investors have recovered a lot of their bullishness, which had been badly dented after a worldwide correction in February, leaving many convinced that the global cycle of growth was reaching its end.
Now, following April and May rallies on U.S. and European markets, traders have begun to think of that correction as a midcycle pause, and are carefully getting back into the fray, David Bowers, the Merrill Lynch consultant who conducted the survey, said during a conference call Wednesday.
But to the detriment of Russia, they also seem to have changed their game plan. European stocks look to have unseated emerging markets as the global investors’ favorite, and 56 percent of the survey’s respondents said they were now overweight in Euro-zone equities, with another 15 percent eager to follow suit.
Last Monday, Alfa Bank attributed this trend to a “takeover frenzy” in Europe, saying in a note to investors that takeovers there have reached an astounding value of $1.1 trillion so far this year. But Karen Olney, Merrill Lynch’s chief European equity strategist, said during Wednesday’s conference call that the “infatuation” with Europe went deeper. The maturity of European markets makes for reliable growth and greater immunity to external shocks, a coveted relief for emerging market investors, who seem fed up with the downturns born of these shocks in the last 12 months. “The jitters we saw in February and the major slump in May of last year were a wake-up call to all fund managers,” said Roland Nash, head of research at Renaissance Capital. “The market recognized that if there is going to be any shock, then Russia will be one of the markets that will suffer most, and as a result they have been taking money off the table.”
Emerging Portfolio Fund Research has reported four consecutive weeks of more than $50 million in outflows from the Russia and CIS fund category. Other emerging market funds, especially China’s, are feeling even greater pain, but the hemorrhaging is still far from becoming critical, said Kim Iskyan, co-head of research at UralSib. “There are big, dedicated pools of money in emerging markets,” Iskyan said. “A shift to European funds could happen, but it would be a longer-term trend. For now it is more a question of shifting money around within emerging markets.”

TITLE: Rosneft Becomes Strategic
PUBLISHER: Reuters
TEXT: MOSCOW — Russia’s inclusion of Rosneft in its list of strategic companies will protect the state-controlled oil firm from bankruptcy and keep the state’s share at no less than 75 percent, analysts said Friday. 
The government said Thursday that it had added Rosneft, the country’s biggest oil company, to its list of strategic companies that are protected because they provide research or resources crucial to national defense.
“Strategic status offers special conditions for bankruptcy, and makes the liquidation process more difficult,” said Caius Rapanu at UralSib. “Furthermore, under this status, the Russian government’s 75 percent stake in Rosneft may not be reduced until Rosneft is included in a privatization plan.”
Including Rosneft in the strategic list could lead to a re-rating of its debt, said Steven Dashevsky at Aton brokerage. Rosneft had debt of $13.8 billion at the end of 2006 and earlier this year it arranged an additional $22 billion credit to finance its purchase of assets from the bankrupt oil firm Yukos.
“Investors may find comfort in the state’s enhanced support of the company’s debt obligations, expressed through special bankruptcy procedures and perceived potential link between the country’s and the company’s credit ratings,” he said.

TITLE: Deripaska Raises Stake In German Constructor
PUBLISHER: Reuters
TEXT: MOSCOW — Russian businessman Oleg Deripaska has increased his stake in Hochtief, Germany’s largest construction company, to 9.99 percent from the previous three percent, Deripaska’s investment unit said on Monday.
Deripaska, Russia’s second richest man with a personal wealth of $16.8 billion, according to the U.S. Forbes magazine, has amassed large stakes in building companies in Russia and abroad, betting on Russia’s booming construction sector.
His investment vehicle BasEl said in a statement on Monday it was looking to Hochtief’s experience in airport reconstruction as BasEl is preparing to embark on large investment programs in Russia’s south. 
The statement said the stake had been bought in the market and BasEl now controls around 7 million shares in Hochtief.
Vedomosti business daily valued the deal at 390 million euros ($526.5 million) and quoted BasEl’s construction sector chief Douglas Land as saying Deripaska had no plans for now to raise his holding in Hochtief further.
In April, Deripaska bought 30 percent in Austrian builder Strabag, Europe’s fifth biggest builder, for 1.2 billion euros. He is also holding talks to buy half of Russia’s largest builder Transstroi, Vedomosti said.
Auditor Ernst & Young estimates that Russia will invest some $264 billion in its transport infrastructure modernization between 2006 and 2010.
BasEl said that Strabag has good experience in road and tunnel construction while Hochtief has strong positions in airport reconstruction and development.

TITLE: Capital Inflow Jumps to $40 Billion
AUTHOR: By Vlasta Demyanenko and Gleb Bryanski
PUBLISHER: Reuters
TEXT: KAZAN — Russia will exceed this year’s target for net private capital inflows as early as May amid a series of fund raisings by private and state firms, which puts inflation targets under further pressure, the Central Bank said Sunday. 
“We had $13 billion of net capital inflows in the first quarter, then $17 billion in April alone,” said the bank’s first deputy chairman, Alexei Ulyukayev. 
“This is $30 billion in the first four months and the figure at the end of May is likely to be around $40 billion,” he told reporters in Kazan on the sidelines of the European Bank for Reconstruction and Development’s annual conference. 
Large capital inflows create additional inflation pressures and prompt the Central Bank to resort to its main anti-inflation tool of allowing the ruble to appreciate. 
But real effective ruble appreciation is in turn affecting the competitiveness of the Russian industry by hurting export-oriented companies and spurring imports. 
President Vladimir Putin has told the government to stick to its initial inflation and real effective ruble appreciation targets — a goal seen by many analysts as unrealistic due to rising state spending on social programs and infrastructure ahead of the presidential elections in March 2008. 
In April, the Central Bank raised its forecast for 2007 net private capital inflows to $35 billion from $30 billion. 
Government officials have said capital inflows of over $30 billion will force the Central Bank to allow the ruble to appreciate by at least 5 percent. 
Large private capital inflows are a result of massive fundraising by Russian companies on international debt and equity markets, including loans and initial public offerings. 
A series of major business deals is sucking huge sums into Russia. They include asset sales of bankrupt oil firm Yukos and the world’s largest stock market float this year by Russia’s second-biggest bank, VTB. 
The Central Bank said earlier this month it would raise minimum reserve requirements for banks from July 1 to fight inflation pressures caused by large capital inflows. 
The move means banks will need to set more money aside at the Central Bank when borrowing from their counterparts abroad, issuing eurobonds or taking deposits from individuals in Russia. 
“I would not exclude a further increase in minimum reserve requirements,” Ulyukayev said. 
The government aims to cut inflation to 8 percent this year from 9 percent in 2006, a figure already questioned by many analysts after consumer prices grew by 4 percent in the first four months of this year. 
Putin’s top economic aide, Arkady Dvorkovich, said Sunday he believed the Central Bank would fail to meet its 2007 real effective ruble appreciation target of 5 percent, and the figure will be closer to 8 percent. 
But Ulyukayev said he believed both the inflation and ruble appreciation targets were still achievable. 
“I think the appreciation will be close to the initial estimates,” he said, adding that inflation was likely to be over one percentage point lower in the first half of 2007 versus 6.2 percent in the first half of 2006.

TITLE: License at Risk as BP Gas Field Gets Audit
AUTHOR: By James Brooke
PUBLISHER: Bloomberg
TEXT: MOSCOW — BP’s Russian unit will be audited by the most-senior environmental regulator this week and stands to lose its license to operate Eastern Siberia’s largest known natural-gas field if it fails. 
TNK-BP, a venture between BP and private Russian investors, will be audited May 23 on its production at the Kovytka field, where it has a contractual target, Russia’s Natural Resources Inspectorate said. Rusia Petroleum, a unit 62 percent owned by TNK-BP, produced 1.5 billion cubic meters from the field last year, compared with a target of 9 billion cubic meters. 
“If they have not fulfilled their targets, it will be the end of the license,’’ Oleg Mitvol, deputy head of the inspectorate, said by telephone Monday. 
Russia President Vladimir Putin is tightening state control over the country’s energy resources, which he once described as “the holy of holies.’’ He wants to build up Gazprom and Rosneft, the state-controlled gas and oil companies, to compete with international energy companies such as BP, Royal Dutch Shell and Exxon Mobil Corp. 
Mitvol last year alleged environmental irregularities by Royal Dutch Shell in the construction of Russia’s first liquefied natural gas plant. That contributed to Shell’s decision to sell a majority stake to Gazprom, the gas export monopoly. 
BP, based in London and Europe’s second-largest oil company, and Gazprom have been in talks about Kovytka’s future. Lawyers for Rusia Petroleum have argued that the field can’t produce as much as its target because a planned export pipeline to China hasn’t been built. 

‘License Obligations’ 
Marina Dracheva, a spokeswoman for TNK-BP, said that a judge in Irkutsk, the largest city near Kovytka, will on May 23 review a Rusia Petroleum request for a “clarification of the company’s license obligations.’’ 
“It will be up to the courts to decide whether Rusia is in breach or not,’’ she said in an interview today. Mitvol said the court had no jurisdiction over the issue. 
TNK-BP is the second-largest privately owned oil company in Russia, and much of its market value is based on Kovytka. Energy analysts have estimated the value of the field’s gas at $18 billion and the cost of its development, and the pipeline to China, at $15 billion. 
Kovytka is estimated to hold 2 trillion cubic meters of gas, or enough for Russia to meet 25 years of planned exports. Gazprom has said it wants to export as much as 80 billion cubic meters of gas to China, from as early as 2011. 
Should TNK-BP lose the Kovytka license, foreign-controlled companies won’t be allowed to bid for it, Natural Resources Minister Yury Trutnev said in March. 
TNK-BP’s Russian owners, including Alfa Group, Renova, and Access Industries, are allowed to sell their stakes after a shareholder agreement ends in December.

TITLE: Putin Takes AvtoVAZ Model for a Spin
AUTHOR: By Anna Smolchenko
PUBLISHER: Staff Writer
TEXT: TOLYATTI, Samara Region — President Vladimir Putin on Friday flew by helicopter from his talks with European Union leaders to the AvtoVAZ plant in Tolyatti and gave his blessing to a preliminary deal between the carmaker and Canada’s Magna. 
After Putin witnessed the signing of an agreement to build a new 1.5 billion euro ($2 billion) plant, he walked along the facility’s newest production line and took a Lada for a 120-kilometer-per-hour spin on the plant’s test-drive track.
Magna chairman Frank Stronach and Siegfried Wolf, co-CEO of Magna International, inked a memorandum of intent with AvtoVAZ chairman Sergei Chemezov and Vladimir Artyakov, another senior AvtoVAZ executive, at AvtoVAZ’s blue-glass headquarters building. 
Metals tycoon Oleg Deripaska, who controls AvtoVAZ’s nearest Russian rival, GAZ, also attended the ceremony. Earlier this month Deripaska invested $1.54 billion into Magna.
Putin’s visit appeared likely timed to provide a positive news spin on a day dominated by frosty exchanges between Putin and German Chancellor Angela Merkel over democracy and trade relations at the nearby Russia-EU summit.
The deal confirms the outlines of a cooperation agreement struck in December that envisions initial production of 220,000 cars, in sedan, hatchback and estate body trims, later rising to 450,000 units per year. The plant will make a new, C-class model from scratch. 
“The documents you have signed have potential. I hope it will be realized,” Putin said, adding that the government would lend the project its support.
AvtoVAZ and Magna are each expected to put $1 billion into the project. Due to a lack of state funding, investment will likely come from a loan, Chemezov said on the sidelines of the ceremony. 
“We applied but they wouldn’t give [the money] to us so far,” he said of the government. 
Some analysts have suggested that Chemezov, a close ally of Putin’s, could join forces with the Kremlin-friendly Deripaska in an effort to compete more successfully with foreign carmakers in the country. Chemezov, head of state arms trader Rosoboronexport, was brought in to turn around AvtoVAZ in December 2005. 
A further agreement between AvtoVAZ and Magna will be signed this fall once details of the project are hammered out, AvtoVAZ said in a statement. 
Stronach said he was glad to make a contribution to the development of the Russian car industry. 
“We would like that it would be mighty not only at home, but internationally,” he said.
Magna’s cooperation with Russian firms had developed so rapidly that Stronach’s friends joked that he spoke with “a Russian accent,” he said during the brief signing ceremony.
At the plant, Putin was shown a range of AvtoVAZ models, including a C-Class prototype developed with Magna. Federal Industry Agency chief Boris Alyoshin, who sits on the AvtoVAZ board, told Putin that the company needed $3 billion to overhaul its operations and sales. 
“They are trying to raise some money,” a company spokeswoman quipped.
Company officials also took Putin on a tour of the plant’s Kalina production line. At one point, Stronach stopped to talk to a worker and Putin translated for them, state television reported.

TITLE: Simpler Market Rules
AUTHOR: By Svenja O’Donnell
PUBLISHER: Bloomberg
TEXT: POTSDAM, Germany — Russia plans to simplify the rules for investment in its bond and equity markets to diversify its investor base, Finance Minister Alexei Kudrin said Saturday.
Russia’s “bitter experience” in 1998, when the country defaulted on $40 billion of domestic bonds, means there is still a need to diversify its local debt market, Kudrin told reporters at a meeting of finance ministers from the Group of Eight. “There’s a need for diversification of the investor base,” Kudrin said. “We intend to introduce legislation to simplify the procedures for investors.”
While Mexico’s local debt is worth 30 percent of gross domestic product, and Brazil’s 66 percent, Russia’s local government debt is equivalent to 3 percent of GDP, Kudrin said. Russia is planning to simplify the administrative processes and amend taxation rules to make it easier for both individual and institutional investors to invest in the nation’s bond and stock markets, Kudrin said.
“We are trying to introduce changes to the existing procedures such as the tax consequences, administrative and legal difficulties involved in investing in Russian equity and debt markets,” Kudrin said.

TITLE: Ivanov Sees Military Ahead on High-Tech
AUTHOR: By Simon Shuster
PUBLISHER: Staff Writer
TEXT: First Deputy Prime Minister Sergei Ivanov spoke Friday about the future of technology in Russia, painting a picture in which the military-industrial complex, rather than private enterprise, would lead the way forward.
“Generally, there is every reason to call the military-industrial complex the locomotive of diversification,” he said, adding that it accounted for 30 percent to 35 percent of total domestic production.
This “locomotive” holds the key to breaking the country’s dependence on oil and gas exports and “re-establishing Russia as a strong, thriving and influential government,” Ivanov said at a session of the Public Chamber held at Moscow’s Baumann Institute. 
Dozens of members of the Russian Union of Industrialists and Entrepreneurs attended the session, and its president, Alexander Shokhin, criticized the government’s approach to encouraging technological innovation, in particular over its tax policy.
A visibly agitated Shokhin called for specific tax reforms that would drive private-sector advances in technology. Ivanov stopped short of promising them, and spoke of tax “optimization” in oblique terms.
Despite a highly educated work force, Russia’s technology industry has fallen behind since the collapse of the Soviet Union, once a global leader in this field. Russia ranked 37th out of 81 countries in the Innovation Index released Friday by the Economist Intelligence Unit, showing that it has only 1.6 patents for every 1 million citizens. Cyprus has eight times more patents per capita than Russia, the study found.
Formerly defense minister, Ivanov was promoted in a February shakeup and put on an equal footing with First Deputy Prime Minister Dmitry Medvedev, who heads up the four national projects. The two are widely seen as the leading contenders to succeed President Vladimir Putin next March. 
Since Ivanov’s promotion, he has been given control over 26 of his own federal projects, mainly having to do with industry and technology, and has since seen his poll ratings climb dramatically, in some showings outpacing Medvedev. 
On Friday, he did not miss the chance to boast how much money had been set aside to support these programs over the next three years. “It is a total of 1,314,033,000,000 rubles,” he said before twice repeating this figure, which comes to around $50 billion, and adding, “It’s an impressive sum, isn’t it?”
Above all, the projects will go toward supporting innovation, especially in fields such as transport and nanotechnology, he said. “These federal projects must all be open and subject to the strictest possible control because there is such an enormous sum [devoted to them].”
Even the medical equipment industry, which Ivanov called “one of the most criminalized,” should be brought under the umbrella of the military-industrial complex if it is to avoid stagnation, he said.

TITLE: EADS 
Stake Could Be Raised
PUBLISHER: The Associated Press
TEXT: MOSCOW — Russia could raise its stake in struggling aerospace conglomerate EADS if a deal is struck to make Airbus jet parts locally, a senior aide to President Vladimir Putin said Monday, according to Russian news agencies.
Arkady Dvorkovich said that Russia could increase its 5 percent stake in the European Aeronautic Defence & Space Co. “only ... if United Aircraft Corp. and EADS agree to cooperate on aircraft manufacturing,” RIA-Novosti quoted him as saying, referring to Russia’s state-controlled aircraft manufacturing monopoly.
Dvorkovich said the construction of components for Airbus aircraft or an exchange of assets between the two companies was possible, according to RIA-Novosti.
Last year, Russia’s state-owned Vneshtorgbank, or VTB, announced it had acquired 5 percent of EADS. 
In response, EADS warned that the Moscow bank would not be welcomed as a decision-making industrial shareholder.
Some observers say tighter links with Russia could endanger the European defense group’s U.S. business, and generate concern about governance at EADS and the transfer of sensitive technologies.
Moscow appears determined to increase its role in Airbus, which is struggling to recover from costly delays to the A380 superjumbo, losses because of the weak dollar, and a year of management turmoil that has sent EADS stock tumbling.
In April, Russia’s trade minister pushed for closer partnership while on a visit to Paris.

TITLE: EBRD’s Record Profits Overshadow Work
AUTHOR: By Daniel Bases
PUBLISHER: Reuters
TEXT: KAZAN — Record profits at the European Bank for Reconstruction and Development sparked a major internal debate at its annual meeting on Sunday over what the development bank for the former Soviet bloc should do with the excess cash. 
Held in Kazan, the venue for the two-day meeting that started Sunday is meant to highlight the EBRD’s expansion into Russia’s regions. 
But its biggest shareholder, the United States, used its time at the opening session of the board of governors meeting to criticize the bank for exceeding the approved lending volume and renewed its call for the payment of a dividend. 
The EBRD is owned by 61 member states and two intergovernmental institutions. It was set up in 1991 to help former communist countries move from socialism to market economies. 
At issue is whether a portion of the 3.7 billion euros ($5 billion) in unrestricted reserves accumulated in 2006 should be distributed to bank owners or put to work in the growing economies of the former communist bloc. 
The EBRD’s charter states that it cannot pay out profits unless general reserves amount to 10 percent of authorized capital stock, or 2 billion euros. This occurred for the first time in 2006, when unrestricted reserves grew 51 percent. 
“We have called in the past for consideration of a dividend,” said Kenneth Peel, the U.S. representative at the meeting. The United States owns 10 percent of the bank. 
“While a private sector financial institution would be congratulated for such results, we are concerned about the EBRD’s apparent willingness to finance sponsors with ready access to financial markets,” said Peel. 
Russia also said it was concerned that the bank has not been ready to put forward to shareholders a reasoned proposal on the use of its profits. 
“We support the bank’s conservative approach to risk management and the protection of shareholders’ capital but we cannot support the proposal for the regular allocation of all profits to reserves,” said Economic Development and Trade Minister German Gref. 
The development bank’s net profits, after provisions, rose by 60 percent to 2.4 billion euros in 2006 from the prior record of 1.5 billion euros in 2005. 
EBRD president Jean Lemierre said they rose so fast due to the bank’s exiting of equity investments in central Europe, where many of the countries are on their way to leaving its sphere of operations by 2010. 
The dividend debate has overshadowed the EBRD’s push to expand operations south and east and its push into the regions in Russia, its main area of operations.
“This poses a new question for shareholders, of what to do with surplus profits,” Lemierre said in his speech. 
He asked his board to consider how much should be plowed back into the region and whether shareholder countries should reap part of the benefit.

TITLE: Mechel Plans to Raise Coal Output to 25 Mln Tonnes
PUBLISHER: Reuters
TEXT: MOSCOW — Russian steel maker and coal miner Mechel plans to raise coal output to 25 million tonnes by 2010 from more than 17 million tonnes last year, a senior company executive said on Monday. 
Executive director Alexei Ivanushkin said the increase would be achieved by expanding the company’s current mines and building a new mine, Yerunakovskaya, in Russia’s main Kuzbass coal-mining region. 
About half of the coal would be coking coal used to make steel and half would be thermal coal, Ivanushkin told a conference organised by the Adam Smith Institute. 
Of about 17 million tonnes of coal produced by Mechel last year, coking coal accounted for 9.7 million tonnes and thermal coal 7.3 million tonnes.

TITLE: Customs Asks Court To Apply American Law
AUTHOR: By Anatoly Medetsky and Simon Shuster
PUBLISHER: Staff Writers
TEXT: MOSCOW — The Federal Customs Service will ask a Moscow court to apply U.S. law that allows triple damages for money-laundering in its lawsuit against the Bank of New York, lawyers for the service said Friday. 
The customs service accuses the bank of laundering $7.5 billion from 1996 to 1999 and is claiming $22.5 billion in damages, said Steven Marks, a U.S. lawyer representing the customs service. 
A U.S. investigation into the bank ended in 2005 after the bank admitted breaching the law and reached a $38 million settlement with prosecutors. But this settlement did not compensate the Russian government for lost taxes, lawyers for the service said.
The lawsuit comes at a time when Russian-U.S. relations are strained over a range of issues, from U.S. missile defense to the Kremlin’s flexing its energy muscles and Western concerns over democracy in Russia. It also revisits a 1990s scandal that was widely viewed in Russia as humiliating for the country, coming after a decade of U.S.-promoted liberal reforms and economic hardship.
The Bank of New York on Friday reaffirmed its belief that the lawsuit was without merit and frivolous and reiterated a promise of vigorous defense. The bank has a representative office in Moscow but does not have retail or on-the-ground banking capabilities in the country.
Russian law allows courts to apply the law of the country where the plaintiffs believe their rights were violated, said customs service lawyer Maxim Smal, and experts confirmed that this was common practice.
The damages included $5 billion in lost tax revenues on goods imports and the penalties that have accumulated since that time, Marks said.
Should the customs service win, it would be able to collect the damages in the United States or “anywhere in the world,” said Marks, who works for Podhurst Orseck, a Miami-based law firm.
But Bernard Black, a law professor at the University of Texas who specializes in Russian corporate law, disagreed. “They don’t have a way to get at U.S. assets. If they win, they’ll be able to collect whatever assets the Bank of New York has, directly or through subsidiaries, in Russia. Otherwise, they might say [to the bank] that it can’t do business in Russia until it pays. That might be the most effective way of forcing a settlement, because Russia is an important market.”
Officials at the Moscow Arbitration Court, where the lawsuit was filed, could not immediately be reached for comment.
In February 2000, two Russian emigres, former BoNY vice president Lucy Edwards and her husband, Peter Berlin, admitted to U.S. investigators that several accounts at the bank controlled by Berlin were part of an illegal laundering scheme that was used to defraud Russia of taxes. Russian-born Edwards and her boss, BoNY senior vice president Natasha Gurfinkel Kagalovsky, the wife of then-Yukos vice president Konstantin Kagalovsky, resigned from the bank after the investigation was made public in August 1999. 
Edwards has been cooperating with the customs service’s legal team, Marks said. 
Getting $22.5 billion out of the bank in this case is an unrealistic goal, Black said. He speculated that the settlement would be closer to $100 million.

TITLE: Germany Had No Hope of Saving the Summit
AUTHOR: By Hannes Adomeit
TEXT: Cynics might say the Russia-EU summit at Volzhsky Utyos near Samara on Friday was a success simply because it took place. This was hardly a foregone conclusion.
A few weeks before the summit, European Union Trade Commissioner Peter Mandelson stated the obvious — that the current level of misunderstanding and mistrust between the EU and Russia was greater than at any time since the end of the Cold War.
The summit provided no evidence to the contrary.
When Germany assumed the EU presidency on Jan. 1, it hoped to announce three success stories at the conclusion of this summit: the opening of negotiations on a new strategic partnership pact to replace the Russia-EU Partnership and Cooperation Agreement, which expires at the end of this year; the lifting of the exorbitant fees charged to European airlines for flights to Asia over Russian territory; and progress on improving European energy security.
Failure on all these fronts is certainly not what Germany expected.
Building on the legacy of close ties between President Vladimir Putin and former Chancellor Gerhard Schroder, the current chancellor, Angela Merkel, made the task of improving Russia-EU relations a priority of the German EU presidency.
The summit failed to live up to Merkel’s expectations for a number of reasons, starting with the polarization of views within EU institutions and among EU member countries, governing coalitions and political parties, and the diverging policies that have emerged as a result.
Two rival approaches have emerged in the European debate over relations with Russia. The first is associated with Schr_der, former French President Jacques Chirac and former Italian Prime Minister Silvio Berlusconi. It enjoys support in business circles; socialist, social-democratic, green and liberal parties; and institutions, such as the German-Russian Forum and the so-called St. Petersburg Dialogue, which support the broadening of economic, social and cultural ties with Russia.
These groups accept the Kremlin’s portrayal of Boris Yeltsin’s presidency as a time of disorder and decline, and of Putin as the driving force of political stability and economic growth. They regard a strategic partnership with Russia as a long-term but entirely realistic goal.
In a position paper drafted in advance of Germany’s EU presidency, the German Foreign Ministry maintained that Russia should be actively encouraged to become constructively involved in European affairs through fresh offers of cooperation and integration and the creation of a network of mutual dependence aimed at binding Russia irreversibly to Europe.
In line with this approach, nothing is to be feared from broader cooperation on energy; some have advocated forging an “energy alliance” with Russia.
When it comes to European security issues, adherents of this approach argue that the United States ignored Russian concerns when it announced its plan to install a radar system in the Czech Republic and missile interceptors in Poland and to create military staging posts in Bulgaria and Romania.
Similarly, they say, those who call for further eastward expansion of NATO to include Georgia and Ukraine, and those who oppose ratification of the Treaty on Conventional Armed Forces in Europe, fail to take Russia’s interests into account.
Such moves detracted from rather than enhanced European security, they say.
Finally, the members of this camp regard the current focus on values as misdirected, if not utterly pointless.
The second camp includes conservative governments and political parties; the new Central and Eastern European members of NATO and the EU, notably the Baltic states, Poland and the Czech Republic; and the majority of research institutes and academic specialists who work on Russia and foreign journalists reporting from Moscow.
From this group’s perspective, Putin’s second term has been characterized by an arrogance of power, a return to authoritarian domestic policies and increasing assertiveness abroad.
They note with concern Moscow’s use of energy, along with other commodities and services, as instruments of political coercion. Over the past 16 months, they point to the shut-off of gas or oil to Ukraine, Moldova and Belarus; the diversion of oil from the Mazeikiu Nafta refinery in Lithuania, the Ventspils port in Latvia, and Tallinn in Estonia to Russian ports; the curtailment of coal deliveries to Estonia; and bans on the import of wine, spirits, mineral water or other agricultural products from Georgia, Moldova and Poland.
Members of this second camp see an inexorable progression from the strengthening of the Kremlin’s so-called power vertical to increasing state control over strategic sectors of the economy and the use of energy as an instrument of foreign policy.
They find proof to support this view in such initiatives as the Nord Stream gas pipeline; the idea — endorsed by Putin — of an OPEC-style gas cartel; recent agreements with Kazakhstan and Turkmenistan on the shipment of Central Asian gas and oil through Russia to Europe; and the plethora of deals that Gazprom has signed with companies from Germany, Denmark, France, Italy, Hungary and Slovakia.
This group maintains that Russia poses a threat to European energy security. When it comes to European political and military security, they see Putin’s Russia not as a trustworthy strategic partner, but as a competitor.
As proof they point to Moscow’s uncompromising stance on the so-called frozen conflicts in the former Soviet republics and the issue of Kosovo; its negative assessment and attempts to undermine the color revolutions; its indifference to the repressive policies of Belarussian President Alexander Lukashenko; its almost hysterical reaction to the arrest of four Russian military officers in Georgia on suspicion of spying and the relocation of a Soviet war memorial in Estonia; Putin’s recent diatribe against the United States at a security conference in Munich; Russia’s opposition to the U.S. missile-shield plan; and hawkish remarks made by General Yury Baluyevsky, head of the armed forces General Staff who warned that Russia could target the U.S. missile shield in Europe if it were deployed.
Merkel and German Foreign Minister Frank-Walter Steinmeier have made valiant attempts to bridge the gap between the two warring camps within Europe, and between the EU and Russia. But their efforts have come to nothing.
At a meeting of EU foreign ministers held four days before the summit, Poland’s Anna Fotyga said she was “completely dissatisfied” with German preparations for the summit. Lithuania announced that, like Poland, it would oppose the opening of negotiations on a new strategic partnership agreement unless the gas pipeline Mazeikiu Nafta were put back into operation.
It should be noted that Russia did little to help Germany’s cause. Moscow refused to relent on the Polish meat ban. Neither Merkel’s lengthy telephone conversation with Putin the weekend before the summit, nor Steinmeier’s hastily arranged trip to Moscow, produced any concessions.
As a result, the summit ended with no new agreement, no joint communique and no prospect of any improvement before the Group of Eight summit in Germany early next month.

Hannes Adomeit is senior research associate at the Stiftung Wissenschaft und Politik in Berlin.

TITLE: A Vision of Europe
AUTHOR: By Georgy Bovt
TEXT: It was amusing to watch the final round of the Eurovision Song Contest last weekend. The performers were nothing to write home about; they were good at best and at worst something on the border between rank amateurs and fledgling professionals.
Viewers pick the winner of Eurovision by texting in their votes, and they are not allowed to vote for the act representing their home countries. This caveat turns the contest into a curious sort of test of the popularity of the competing countries. Since viewers obviously also base their votes on the performers’ talent and the quality of the songs — total losers never walk away with the top prize — the result is an entertaining mix of politics and show business.
The Russian girl group Serebro, or Silver, made a fair showing and deserved their third-place finish. The sexy trio received votes from across Europe, including Eastern Europe, where — even judging by the reports on Russian television news — the country’s popularity is not exactly at an all-time high. Serebro was a favorite of viewers in the Balkans, Greece and Turkey. Belarus gave the group high marks, which isn’t surprising. But so did Estonia, which seems incredible at first glance, since relations between Moscow and Tallinn have been severely strained in recent months. It may be that the votes from Estonia were cast by ethnic Russians living there, but Latvia, which has at least as many Russians as Estonia, didn’t give the Russians a single point.
Serbia’s Marija Serifovic won this year’s contest with a ballad called “Molitva,” or “A Prayer,” which fit perfectly with the tone of recent news coverage of the country, which now looks certain to lose the province of Kosovo.
Second place went to precompetition favorite Verka Serdyuchka of Ukraine, a drag-queen character played by comedian Andriy Danilko. Listenting to Danilko’s song, made up of an almost incomprehensible mix of English, Ukrainian and German phrases, you could clearly make out the phrase “Russia, goodbye.”
After that, it wasn’t hard to predict which countries would vote for Ukraine over Russia; most of what is known as the new Europe chose Danilko over Serebro.
One Eurovision contest isn’t enough to tell us about Europe’s emerging political and cultural preferences. But it does offer further evidence that Europe today is entirely different than it was just 15 to 20 years ago. In the near future, another change will take place almost everywhere in Eastern Europe: the removal or relocation of Soviet World War II monuments. The precedent set by Estonia will soon be followed not just in Poland, but in most former members of the old Eastern Bloc.
In his Victory Day speech, President Vladimir Putin said such actions amounted to “an attempt to revise the results of World War II.” This formula has become popular with Russian diplomats. Generalities aside, however, what are the “results” of the war today? Europe is no longer split into two hostile camps. There can be no question of a revival of fascism in the countries conquered in the war, which have long been full-fledged and influential participants in Europe’s political and economic life. Could the results of the war be nothing more than Soviet monuments and the list of the United Nation Security Council’s permanent members.
In a recent editorial, the Kremlin-friendly magazine Expert proposed that Russia call for an all-European conference to review and bolster the results of the war. In my view, however, there is no place in diplomacy today for terms such as “the results of World War II.”
In terms of the state of European countries in May 1945, the results of the war have already been revised in practice. And referring back to the results of the war contributes nothing to the efforts — of both the victors and the vanquished, who in many ways have now switched places — to build a new Europe.

Georgy Bovt is editor of Profil magazine.

TITLE: Georgian Military Puts 
On a Reality TV Show
AUTHOR: By Matthew Collin
TEXT: The Georgian army’s latest recruits leapt from the helicopter as it touched down, scrambled across the field and threw themselves to the ground in the hope of dodging snipers’ bullets or incoming shells. In full battle dress uniforms, they certainly looked like soldiers — but they weren’t. They were contestants in a reality television show that the Georgian Defense Ministry hopes will lure new recruits.
The show, “Barracks,” is filmed at Mukhrovani, an army base east of Tbilisi. The contestants live in quarters that might resemble those inhabited by regular soldiers if they weren’t covered with Coca-Cola sponsorship logos. As in most reality TV shows, the contestants will be voted out, one by one, until the eventual winner takes home a big cash prize.
The difference with “Barracks” is the collaboration with the Defense Ministry. Georgia is strengthening its armed forces in the hope of eventually joining NATO, a plan that has angered the Kremlin, even though it may not be fulfilled for years. Modernizing its bases with the help of U.S. military advisers, the government has also started a recruitment drive for active-duty soldiers and reservists. Promotional videos on the Defense Ministry’s web site show happy grunts enjoying gourmet dinners and free computer access.
At the television station Rustavi-2, one of the reality show’s directors told me it was good for the military because it portrayed the life of a soldier in the Georgian army as not only heroic, but cool. The contestants seemed to agree. Among them were a footballer, a fashion model, a mountaineer and a female boxer. Some of them told me they were seriously thinking about joining the army after the series ended.
“Georgians should do their duty to defend their country, especially when it’s under threat,” one said, referring to the unresolved conflicts over Georgia’s two breakaway regions, Abkhazia and South Ossetia. His words reminded me of President Mikheil Saakashvili, who visited the very same base a few weeks ago to tell genuine recruits that every Georgian should be able to pick up a weapon and defend his country.
Georgia is keen to show how much it has smartened up its tattered armed forces. It says it will more than double the number of soldiers serving with the U.S. mission in Iraq, and has offered to send soldiers to join NATO troops in Afghanistan. Some six years ago, the Mukhrovani base became notorious after a bunch of soldiers mutinied. Now a reality TV series is being filmed here. That’s progress, perhaps, but the real prize is increased national security through NATO membership, and no one knows if Georgia will be the winner of the real military reality show.

Matthew Collin is a Tbilisi-based journalist.

TITLE: Recall Russians Abroad
AUTHOR: By Mark H. Teeter
TEXT: A key phrase for Russian officials in Cold War II is “the fate of Russians abroad.” Intoned regularly and bathetically, it refers to purported human rights abuses against minority Russian speakers outside Russia. What is not clear to the intoners, apparently, is that depending on the audience, the phrase “Russians abroad” may conjure images entirely different from those they intend.
For many Americans who learned Russian during Cold War I, “Russians abroad” brings to mind our teachers, members of a great diaspora who arrived in the United States in three distinct waves, each bringing its own versions of two basic stories: cautionary tales of the perfidies of Moscow and paeans to Russian language, literature and culture. We accepted all three and believed both.
The horror stories were all too credible, as the Soviet system had never hidden its antipathy toward its own citizens. In 1922, the newly proclaimed Soviet state rounded up the cream of its remaining intelligentsia — some 160 philosophers, scholars, scientists and writers — and shipped them into exile, the first authoritarian state voluntarily to lower the IQ of its national gene pool.
If Moscow initially wanted some Russians out, after World War II it wanted others to return. The victorious Soviets prevailed upon their British and U.S. partners to repatriate thousands of displaced Soviet and Eastern European nationals to an expanded Soviet Union. That most of these unfortunates were sent directly to the gulag upon their arrival was both shameful and tragic.
After two generations marked by cataclysm, Russian speakers in the West were joined by a third emigration, whose members successfully cited Israel as their “historic homeland,” or successfully badgered the Soviet authorities into expelling them. All three waves flourished in San Francisco in the mid-1970s, as did Maria Vasilyevna Mironova, a grandmotherly figure who had left Russia before any of them.
In 1905, Vasily Mironov took his family from Rostov-on-Don to the Far East, where he worked for Russia’s Chinese Eastern Railway. The Bolshevik coup found the Mironovs outside Russia, making their decision not to return simple if not easy. Maria Vasilyevna retained only a 5-year-old’s memories of Rostov-on-Don, but grew up steeped in the rich emigre culture of Harbin, until the Chinese Civil War drove the family even farther from home, this time to South America. Five years in Brazil were followed by emigration to California in the mid-1950s. After 20 years in San Francisco, with her husband now deceased and her son teaching in Monterey, Maria Vasilyevna decided to let her spare room to a graduate student in Russian literature. It made sense: She needed the rent, and I needed to speak Russian.
Maria Vasilyevna was happy to talk about her life on four continents, and she was tireless in deciphering my muddled responses. Her stories, however exotic, never strayed far from their origin — and hers — in Russian norms and traditions. Nor did she let me, “Mark Ivanovich,” stray far from them either.
Not content to chat over meals, she would “invite” me to the kitchen in the evening, open the oven against the San Francisco chill and listen attentively as I read classics aloud. Her eyesight failing, Maria Vasilyevna somehow kept in touch with her native culture through these labored recitations, which both encouraged and amazed me.
However feeble the reader, the literature let Maria Vasilyevna demonstrate her authentic heart-on-sleeve Russianness. She would laugh out loud at comic characters and offer commentary or advice for others: “Serves him right!”; “She can do better”; “Don’t go to Petersburg; you’ll be sorry!”
The reaction I recall most vividly came when we finished Turgenev’s “Fathers and Sons.” As Bazarov’s humble parents stand quietly over their son’s grave, the narrator speaks simply but movingly of the peace of a world better than ours, and the novel ends. I looked up, weary as usual from the effort of concentration, and saw my landlady quietly weeping. I remember thinking: These people are different.
Vive la difference. When I hear the phrase “Russians abroad,” I think of banished philosophers, displaced persons, exiled dissidents and Maria Vasilyevna, great emissaries of a great tradition. When I hear officials today decrying “the fate of Russians abroad,” exhuming the manipulative lexicon of feigned indignation from the Soviet era, I want to tell them to find a new term. This one belongs to three earlier generations that brought Russia’s signal contributions to modern culture to millions around the world, including me.

Mark H. Teeter teaches English and Russian-American relations in Moscow.

TITLE: Light at the End of Eurotunnel
AUTHOR: By Tracy Alloway
PUBLISHER: Bloomberg
TEXT: LONDON — Shares of Eurotunnel Plc, operator of the rail link between France and Britain, rose the most in almost eight weeks on speculation the company will receive bids after cutting its 6.2 billion-pound ($12.2 billion) debt in half. 
The shares jumped as much as 16 percent before Monday's deadline for holders to tender at least 50 percent of shares under a debt restructuring plan approved by a French court. The shares were unchanged at 3:48 p.m. in London, giving the company a market value of 624 million pounds. Shares of Eurotunnel SA were down 5 percent in Paris. 
Eurotunnel needs 50 percent of shareholders to tender stock by the end of Monday under a debt restructuring plan approved by a French court in January and altered last week. The plan would place operations in a new France-based entity, Groupe Eurotunnel SA, and reduce Eurotunnel’s debt by half. 
Goldman, Sachs & Co., Macquarie Bank Ltd. and Babcock & Brown Ltd. are waiting for the outcome of the debt-for-equity swap before making offers, the Sunday Telegraph reported Sunday. A Eurotunnel spokesman declined to comment on the report. 
Eurotunnel, Europe’s biggest privately funded infrastructure project, averted insolvency this year by reaching agreements with lenders and suppliers under French bankruptcy protection after 18 months of wrangling over payouts to creditors. 
Over three years, Eurotunnel’s debt restructuring would dilute the stake held by existing shareholders to 13 percent of the new company, unless the tunnel operator buys back convertible bonds issued to creditors. 
The extra yield, or spread, investors demand to hold Eurotunnel’s highest-ranked notes, 620 million pounds of 5.78 percent fixed-link finance bonds due in 2028, was unchanged at 99 basis points, or 0.99 percentage points, according to RBC Capital prices. The spread is the lowest in at least six months. 
The Eurotunnel, which has twin railway and road links, is the longest underwater structure in the world. About 195 million passengers passed through the tunnel between 1994 and 2006. 
The company has failed to meet traffic forecasts since operations began in 1994. That led to a share-price collapse, a 1997 debt restructuring and two management changes since 2004. 
Former British Prime Minister Margaret Thatcher insisted that the nearly 200-year-old vision of a tunnel under the English Channel be funded privately before she and French President Francois Mitterrand awarded a contract in 1986.

TITLE: Pfizer Research Head To Retire, CFO to Resign
AUTHOR: By Adam Satariano
PUBLISHER: Bloomberg
TEXT: Pfizer, the U.S. drugmaker that replaced its chief executive officer and vice chairman in the last year, said John LaMattina, global head of research, will retire and Alan Levin resigned as chief financial officer. 
LaMattina, 57, was responsible for bringing in new products to replace the world’s best-selling medicine, Lipitor, which loses patent protection in 2010. He’ll leave before year’s end, New York-based Pfizer said Monday. Spokesman Ray Kerins declined further comment. 
CEO Jeffrey Kindler took over last year from Hank McKinnell and shook up the management of the world’s largest drugmaker. Pfizer plans to fire 10,000 workers as generic copies of its top-selling drugs cut into sales. The company stopped work on its most-promising new product, cholesterol-reducing torcetrapib, in December after patients died during a study. 
“The company has gotten classically stuck and the pressure has increased a lot on these guys,’’ said Paul Diggle, a London- based Nomura Code analyst. “There probably was an element of pushing here to get new blood.’’ 
Shares of Pfizer fell 7 cents to 20.26 euros ($27.24) in Frankfurt after closing at $27.44 on May 18 in New York Stock Exchange trading. The U.S. shares have risen 6 percent this year. 
LaMattina will retire by December after 30 years with the drugmaker. Pfizer will begin a search both inside and outside the company for his successor, and LaMattina has agreed to remain during this period to ensure a smooth transition. 

Searching Everywhere 
“We intend to make our internal capability even more effective by tapping into the best scientific capability outside our walls — wherever it exists,’’ Kindler said in the statement. 
Levin, who was appointed CFO in March 2005, is leaving after 20 years to “pursue career opportunities outside Pfizer,’’ the company said in a statement today. Levin, 45, agreed to continue in his position while the company searches for a replacement. 
McKinnell was ousted last year. His leadership came under fire as Pfizer struggled to find new medicines and Pfizer’s shares lost 40 percent of their value in his five years in the top job. 
Pfizer’s first-quarter profit fell 18 percent and the drugmaker cut its full-year forecast, as competition from cheaper drugs hurt two of its best-selling products, Norvasc for blood pressure and Zoloft for depression. 

Missed Targets 
Revenue this year will be $1.2 billion less than Pfizer projected after an adverse court ruling accelerated generic competition to Norvasc, and sales of the inhaled insulin treatment Exubera missed targets, the company said April 20. Zoloft also faces generic rivals. 
Pfizer needs new products after drugs accounting for $10 billion in annual revenue lost patent protection in the past 12 months, opening them to competition from cheaper copies. Pfizer also faces generic rivals as early as 2010 to its top-selling drug, the cholesterol pill Lipitor. 
“We all know the problems they’ve had, and they need to take some very aggressive moves with the pipeline,’’ Diggle said. “They’re looking to be a bit more entrepreneurial there.’’

TITLE: Value of Yuan to Dominate U.S. Talks
AUTHOR: By Joe McDonald
PUBLISHER: The Associated Press
TEXT: BEIJING — Shi Xianbin watched with alarm as the yuan kept rising against the dollar, driving his small textile company to slash prices to stay competitive abroad.
Shi, the manager of Shanghai Bin Bin Yuan Import & Export, said that if the yuan were to rise another 2 percent, the privately owned company, which employs 10 people, would face “lots of losses.”
“We cannot survive,” he said.
With a critical round of trade talks between China and the United States due to start in Washington on Wednesday, Chinese leaders point to the potential financial troubles of companies like Shi’s if the United States continues to demand that China ease controls on the yuan.
One of the central issues in the talks is China’s ballooning trade surplus. The United States, which had a trade deficit of $232.5 billion last year, has said that China’s currency controls amount to unfair, predatory trade practices.
Critics of Chinese trade practices charge that by keeping the yuan undervalued, some say by as much as 40 percent, China makes its exports cheaper, creating an unfair price advantage that fuels its trade surplus.
China is sending 16 officials to the talks in Washington. The issues that will be discussed are expected to range from environmental problems to opening aviation routes and financial services.
But the currency dispute is expected to dominate the talks. What the United States views as Chinese intransigence is worsening an already sour mood in Washington, analysts say, strengthening the will of those who want to punish Beijing for failing to act to narrow the trade gap.
Chinese officials do not understand the intensity of anger in Washington and could face a backlash if they fail to mollify their critics, said Jason Kindopp, chief Asia analyst for Eurasia Group, a consulting firm.
“This could lead to a real trade war,” Kindopp said. “It happened with our close ally Japan during the ‘70s and ‘80s. Why couldn’t it happen with China?”
On Friday, in a move timed to show flexibility from China before the start of the talks, Beijing announced changes to its exchange rate system that could let the yuan rise faster. China said that it would widen the daily trading limit to 0.5 percent above or below the previous day’s close, up from 0.3 percent.
But it was not clear whether the change would suffice to satisfy critics in the United States.
U.S. and Chinese officials have been traveling to each other’s capitals in recent months to tee up other issues more likely to produce agreement. Chinese officials say the area where the two sides are most likely to reach agreement is cooperation in environmental protection.
But the leader of the U.S. delegation, Treasury Secretary Henry Paulson, has said that Chinese action on the yuan — rather than market opening, anti-piracy or other areas - is the benchmark by which he would measure progress.
Under international pressure, Beijing broke a direct link between the yuan and the dollar in July 2005 and revalued the currency by 2.1 percent. Since then, it has allowed the currency to rise 5.3 percent against the dollar in tightly controlled trading.
Economists expect the value of the yuan to increase between 4 percent and 7 percent in 2007, based on the current currency rules.
Washington is pushing for faster action from China, saying that the undervalued yuan is contributing to a loss of U.S. manufacturing jobs. A stronger yuan would make Chinese exports less attractive to U.S. consumers, they say, and would make U.S. goods more competitive in China.
U.S. legislators have introduced a bill that would enable companies to seek tariffs on Chinese goods in retaliation for its currency policies, although a similar measure in 2005 failed.
Senator Charles Schumer, a Democrat from New York; Lindsey Graham, a Republican from South Carolina; Max Baucus, a Democrat from Montana; and Charles Grassley, an Iowa Republican, say they are working on a China currency bill that they plan to introduce in June.
Wu Yi, the deputy prime minister of China who will represent China in Washington this week, has noted that some U.S. lawmakers want punitive action, which she has called irresponsible.
“Some even advocate trade protectionism,” Wu wrote.
“Such irresponsible acts can only obstruct economic globalization and hinder the fundamental interests of both China and the U.S., our peoples and the sustainable and steady growth of the world economy.”
A rise of 10 percent in the yuan would lead to the loss of 5.5 million jobs in China, according to a report by the Chinese central bank. The bank also said that the companies that would most suffer are those that make textiles, furniture, shoes and toys for export.

TITLE: Spanish Government Call Treasure Find “Suspicious”
PUBLISHER: The Associated Press
TEXT: MADRID, Spain — Authorities in Spain are looking into whether a U.S. company can be charged with stealing Spanish heritage for excavating colonial-era treasure from a sunken British warship.
Odyssey Marine Exploration said Friday it had discovered the ship — along with gold and silver coins worth an estimated $500 million — somewhere in the Atlantic Ocean.
The treasure-hunting company would not say exactly where the ship was, citing security concerns, but said the site was outside any country’s territorial waters.
Spain’s Culture Ministry said it thought the statement was “suspicious,” after Odyssey had sought permission to explore Spanish waters for the wreck of a British ship, according to the national news agency Efe.
Spain granted the company permission in January to search for the HMS Sussex, which sank in a 1694 storm off Gibraltar while leading a British fleet into the Mediterranean Sea for war against France.
That permission was only for exploration, however, and did not extend to extraction, the ministry said, according to Efe. Odyssey had previously been searching off the Spanish coast, but suspended operations there in 2005 after complaints from the Spanish government.
A chartered cargo jet recently landed in the U.S. to unload plastic containers packed with 500,000 coins — expected to fetch an average of $1,000 each from collectors and investors.
The Spanish Civil Guard, on request from the government, is investigating whether the company could be charged with theft of Spanish heritage if the haul came from a ship found in Spanish waters, Efe reported. Calls to the ministry on Sunday went unanswered.
Odyssey, based in Tampa, Florida, said it was attempting to recover the HMS Sussex under a deal with the British government.
Historians believe the 157-foot (48-meter) warship was carrying 9 tons of gold coins to buy the loyalty of the Duke of Savoy, a potential ally in southeastern France.

TITLE: Lebanese Troops Tighten Siege of Camp
AUTHOR: By Bassem Mroue
PUBLISHER: The Associated Press
TEXT: TRIPOLI, Lebanon — Lebanese troops tightened a siege of a Palestinian refugee camp Monday where a shadowy group suspected of ties to al-Qaida was holed up, pounding the camp with artillery a day after the worst eruption of violence since the end of the country’s 1975-90 civil war.
Lebanese officials said one of the men killed in Sunday’s fighting was a suspect in a failed German train bombing — a new sign that the camp had become a refuge for militants planning attacks outside of Lebanon. In the past, others in the camp have said they were aiming to send trained fighters into Iraq.
Saddam El-Hajdib was the fourth-highest ranking official in the Fatah Islam group, an official said Monday, speaking on condition of anonymity because he was not authorized to speak to the media. El-Hajdib had been on trial in absentia in Lebanon in connection with the failed German plot.
The death toll remained uncertain as hundreds of Lebanese army troops, backed by tanks and armored carriers, surrounded the Nahr el-Bared refugee camp on Tripoli’s outskirts early Monday. M-48 battle tanks unleashed their cannon fire on the camp, sending orange flames followed by white plumes of smoke. The militants fired mortars toward the troops at daybreak Monday.
At least 27 soldiers and 20 militants had been killed, Lebanese security officials said Monday, but they did not know how many civilians had been killed inside the camp because it is off-limits to their authority.
One official in the camp said a total of 34 people had been killed inside the camp, including 14 civilians. But that could not be independently confirmed and other estimates of civilian deaths were lower.
An army officer at the frontline, speaking on condition of anonymity because he was not authorized to speak to the media, said troops directed concentrated fire at buildings known to house militants.
“Everything we know that they were present in has been targeted,” he told The Associated Press.
Ahmed Methqal, a Muslim cleric in the camp, told al-Jazeera television by phone that sniper fire had confined the camp’s 30,000 residents to their houses and that five civilians had been killed.
“They are targeting buildings, with people in them,” he said. “What’s the guilt of children, women and the elderly?”
Mohammed Hanafi, identified by al-Jazeera as a human rights activist in the camp, said a total of 34 people had been killed and 150 wounded.
It was unclear if Lebanese authorities had known El-Hajdib’s whereabouts, or the whereabouts of the group’s leader, before a gunbattle first broke out in Tripoli, a predominantly Sunni city known to have Islamic militants, witnesses said. After the first street fighting, the army began its siege of the nearby camp.
But Lebanon has struggled to defeat armed groups that control pockets of Lebanon — especially inside the country’s 12 Palestinian refugee camps housing 350,000 people, which Lebanese authorities can’t enter.
Some camps have become havens for Islamic militants accused of carrying out attacks in the country and of sending recruits to fight U.S.-led coalition forces in Iraq.
Palestinian officials in the West Bank rushed to distance themselves from the Fatah Islam group and urged Palestinian refugees in the camp to isolate the militant group, which first set up in the northern Lebanese camp last fall after its leader was released from a Syrian jail.
The group’s leader, a Palestinian named Shaker al-Absi wanted in three countries, said in a March interview with The New York Times that he was trying to spread al-Qaida’s ideology and was training fighters inside the camp for attacks on other countries.
He would not specify which countries but expressed anger toward the United States. And he was sentenced to death earlier in absentia along with Abu Musab al-Zarqawi, the leader of al-Qaida in Iraq killed last summer by U.S. forces in Iraq, for the 2002 assassination of an American diplomat in Jordan.
Al-Absi had been in custody in Syria until last fall but was released and set up in the camp, where he apparently found some recruits, Lebanese officials said.
The Lebanese Broadcasting Corp. TV station reported Sunday that also among the dead militants also were men from Bangladesh, Yemen and other Arab countries, underlining the group’s reach outside of Lebanon.
Prime Minister Fuad Saniora said Sunday the fighting was a “dangerous attempt at hitting Lebanese security.”
Major Palestinian factions have dissociated themselves from the group. Lebanese Sunni political and religious leaders backed the army and the government.
Meanwhile, in Beirut late Sunday, an explosion across the street from a busy shopping mall killed a 63-year-old woman and injured 12 other people in the Christian sector of the Lebanese capital — further raising fears of unrest, police said.
Beirut and surrounding suburbs have seen a series of explosions in the last two years, many targeting Christian areas. Authorities blamed Fatah Islam for Feb. 13 bombings of commuter buses that killed three people, but the group denied involvement.
Syria has denied involvement in any of the bombings, but Lebanon’s national police commander Maj. Gen. Ashraf Rifi said Sunday that Damascus was using the Fatah Islam group as a covert way to wreak havoc in the country.

TITLE: Chelsea Beats Man Utd to Claim FA Cup
PUBLISHER: Reuters
TEXT: LONDON — Chelsea won the first FA Cup final staged at the new Wembley Stadium at the weekend, narrowly defeating Manchester United 1-0 after extra time in the battle of England’s top two clubs.
VfB Stuttgart captured their first Bundesliga title in fifteen years in a title race that went down to the final day of the season, while Olympique Marseille claimed the second automatic French Champions League place with a game to spare.
Round-up of weekend action from Europe’s main leagues:

ENGLAND. Didier Drogba scored an extra-time winner to give Chelsea a 1-0 victory over league champions Manchester United in the first FA Cup final at the new 800 million pound ($1.58 billion) Wembley Stadium.
The Ivorian striker denied United a Premier League and FA Cup double with his 33rd goal of the season scored in the 116th minute of a dour encounter that looked destined for penalties.
Chelsea, who were the last Wembley FA Cup winners at the old stadium in 2000, picked up their second trophy of the season after February’s League Cup success against Arsenal in Cardiff.

GERMANY. VfB Stuttgart won the Bundesliga title on the final day of the season when a 2-1 victory over Energie Cottbus kept them two points ahead of runners-up Schalke 04.
Trailing 1-0 after 19 minutes, goals from Thomas Hitzlsperger and Sami Khedira leave Stuttgart on the brink of a domestic double, with the Cup final to come against Nuremberg on May 26.
The now five-times champions won their final eight matches to claw back a seven-point deficit while Schalke, who beat Arminia Bielefeld 2-1, finished second for the third time in seven years.

SPAIN. Real Madrid clung to the leadership of the Primera Liga after a last-gasp 3-2 win over Recreativo Huelva who fought back from 2-0 down to level at 2-2 with five minutes to go only to fall to Roberto Carlos’s injury-time winner.
Barcelona, who dropped to second when they drew 1-1 with Real Betis last weekend, bounced back with a 6-0 destruction of Atletico Madrid including two goals from Lionel Messi — the heaviest ever home defeat in the league for the rojiblancos.
With three games left to play, Real are level on 69 points with Barcelona but stay top thanks to their better head-to-head record. Both teams are now assured of a place in the Champions League qualifiers next season.
UEFA Cup winners Sevilla are two points further back after a 2-1 win at Deportivo Coruna courtesy of Frederic Kanoute’s winner.

ITALY. Fiorentina, Palermo and Empoli will represent Italy in next season’s UEFA Cup after rivals Atalanta Bergamo could only draw 1-1 with champions Inter Milan. Empoli will be playing European football for the first time despite strugglers Reggina coming back from 3-0 down to draw 3-3. Reggina’s second-half comeback means they are level on 37 points with third-bottom Siena in the battle to avoid the final relegation slot with one round of matches to go.
Juventus, who were demoted to Serie B last year because of match-fixing, were promoted back to Serie A with three games to spare after a 5-1 win at Arezzo.

FRANCE. Olympique Marseille made amends for their French Cup final penalty shootout loss to Sochaux the previous weekend by securing a Champions League spot with a 2-1 win at St. Etienne.
With Racing Lens and Girondins Bordeaux both drawing, second-placed Marseille moved four points clear with one match left.

TITLE: Iran Calls For Support Of Program
TEXT: By Jamal Halaby 
The Associated Press 
SOUTHERN SHUNEH, Jordan — Iran urged Arab countries on Sunday to support its nuclear program but received a cool reception at the World Economic Forum, particularly from U.S. allies worried about Iran’s growing regional influence.
Iranian officials said separately that the nuclear program was moving ahead as scheduled and that the country would not suspend uranium enrichment despite the threat of a third set of UN sanctions. The Vienna-based International Atomic Energy Agency is expected to present its latest report on Iran’s nuclear program to the UN Security Council in coming days.
Arab countries should value Iran’s nuclear development because it could help them address their own energy needs, said Mohammed J.A. Larijani, a former deputy foreign minister and brother of Iran’s chief nuclear negotiator.
“Iran will be a partner, a brotherly partner, and will share its capabilities with the people of the region,” Larijani told AP Television News at the end of the three-day World Economic Forum in this dead sea resort town.
In contrast, he argued the West would turn a blind eye if Arab countries came looking for nuclear assistance.
Arab diplomats gave Larijani and other Iranian delegates a cold shoulder during the forum, however.
“There are serious flaws in the regional order and some countries are interfering in the affairs of Arab countries,” Jordanian Foreign Minister Abdul-Ilah al-Khatib said, referring to Iran’s growing influence in Iraq.
Addressing Larijani at a panel session on Iraq’s future, al-Khatib said: “We need to see deeds on the ground and respect for Iraq’s territorial integrity.”
Suspicion of Iran was clear at the conference. Iranian delegates stood by themselves during coffee breaks at the gathering of some 1,000 politicians and businessmen from Arab and Western nations, including the United States.
Iranian Foreign Minister Manouchehr Mottaki often found himself defending Iran’s policies, especially in Iraq, where Sunni Arabs worry Shiite Iran is aiding the flow of arms and fighters into the majority Shiite country.
Iraqi Vice President Tariq al-Hashemi, a Sunni Arab, lashed out at Iran at the conference.
“We say stop your interference in our internal affairs, stop settling scores on our soil, stop being part of covert plans to destabilize Iraq, and sit down with us to settle our differences, resolve outstanding issues and talk about economic cooperation,” he said.
Iranian officials in Tehran, meanwhile, insisted the country had no intention of suspending uranium enrichment.
“I confirm that our technical efforts are going ahead appropriately,” Reza Aqazadeh, the head of Iran’s Atomic Energy Organization, said in comments to the official news agency, IRNA.
Aqazadeh said Iran’s goal remained “improving nuclear technology” and installing 50,000 centrifuges at its underground plant in Natanz. A confidential IAEA document obtained by AP last month said Iran was using 1,300 centrifuges at Natanz.
In the enrichment process, uranium gas is injected into cascades of thousands of centrifuges, which spin and purify it. If enriched to a low level, the result is fuel for a nuclear reactor. To a much higher level it can build the material for a nuclear warhead.

TITLE: United Get Their Man
AUTHOR: By Erik Kirschbaum
PUBLISHER: Reuters
TEXT: BERLIN — Bayern Munich have reached a transfer agreement with Manchester United for England midfielder Owen Hargreaves, Bayern president Franz Beckenbauer said on Sunday.
“Owen is leaving. That was the player’s wish. It’s a good match and it’s also a good deal financially,” Beckenbauer told Germany’s DSF sports television network.
Beckenbauer did not directly confirm media reports that Bayern will get 25 million euros (17 million pounds) for the Canadian-born Hargreaves. But he did say: “It’s in that range.”
If confirmed, it would be the highest fee ever for a Bundesliga player.
Hargreaves, 26, has been pleading with Bayern executives to let him go to United all season in a disappointing year both for him and the club.
Bayern finished fourth in the Bundesliga and without any silverware after back-to-back league and Cup doubles.
Bayern had previously rejected United’s efforts to acquire Hargreaves before the season and during the mid-season transfer window, saying they were not a bank and needed him.
Beckenbauer, however, had openly urged his fellow Bayern executives Uli Hoeness and Karl-Heinz Rummenigge to reconsider if the price was right — arguing that Bayern could use the funds for their own acquisitions.
Hargreaves played in only nine of 34 Bundesliga matches this season, plus five of their 10 games in the Champions League and one of their three German Cup matches. He did not score.
Former Bayern coach Felix Magath had hoped Hargreaves could fill the big gap left by Michael Ballack, who went to Chelsea after the end of last season.
But Hargreaves did not come close, even before breaking his left fibula on September 17 and missing much of the season.
German media reports said that Hargreaves will sign a four-year agreement worth seven million euros per year at United.
Hargreaves is the fifth confirmed Bayern departure after the season that ended on Saturday.
Mehmet Scholl retired, Hasan Salihamidzic will transfer to Juventus while Ali Karimi and Claudio Pizarro will also be leaving — to destinations still not known.
Hargreaves was outstanding in England’s World Cup quarter-final last year against Portugal, lost on penalties.
In England, he won the fans’ vote as England Player of the Year 2006, after he had already been voted England’s best player of the World Cup in Germany by supporters.

TITLE: Israel Targets Hamas in New Campaign
AUTHOR: By Sarah El Deeb
PUBLISHER: The Associated Press
TEXT: GAZA CITY, Gaza Strip — Palestinian rockets slammed into southern Israel on Monday morning after an Israeli airstrike hit a Hamas lawmaker’s house and killed eight people in the deadliest attack of a renewed Israeli campaign against incessant rocket fire.
The Israeli airstrike Sunday night, which followed a government decision to step up operations against Islamic militants, hit the house of lawmaker Khalil al-Haya, who was not at home and was unharmed.
At least 13 people were wounded. Hamas said two of the dead were militants.
Army spokeswoman Capt. Noa Meir said the airstrike was not aimed at al-Haya, but at a group of five armed Hamas men, including a senior militant, near the home.
“They, and only they, were the target, and they were hit,” Meir said. Any civilian casualties, she said, “were the result of the terrorists’ use of civilians as human shields.”
Israel resumed its airstrikes in Gaza last week in response to increased Palestinian rocket fire at southern Israeli towns. The airstrikes have killed 36 Palestinians, most of them Hamas militants.
Early Monday, Israeli aircraft struck four more times in Gaza, the army said, killing a Hamas militant. The military said two of the targets were weapons factories. Palestinians said one was a cement factory and the other was a house.
The Israeli operations have not managed to stem the Palestinian rocket fire, and militants fired four more rockets at Israel on Monday morning.
There were no casualties. But several people have been wounded in recent days, and the rockets have severely disrupted life in the southern border town of Sderot, the militants’ main target.
The Israeli airstrikes appeared to have helped cement a truce between the warring Palestinian factions Hamas and Fatah that began to take hold after a week of intense violence.
“No one would condone fighting one another while the Israelis are shelling Gaza,” said Hamas spokesman Fawzi Barhoum.
At the time of Sunday night’s airstrike, Al-Haya was attending an Egyptian-sponsored truce meeting meant to bring Hamas and Fatah together. Barhoum said the attack was a sign that Israel is targeting “everyone — civilians and leaders.”
“This escalation is very serious,” he said, adding that “all options are open” for responding.
U.S. Ambassador Richard Jones gave a boost of support to the Israeli campaign, but urged Israel to do its best to avoid harming civilians.
“We constantly urge Israel to target its response as closely as possible at those who are responsible for the actions, and to avoid innocent collateral damage,” Jones said at an academic conference Monday. 
The Israeli government decided Sunday to step up military action aimed at Hamas and Islamic Jihad, the two main Islamic militant groups in Gaza.

TITLE: 3 New Faces in Hiddink’s Latest Euro 2008 Squad
PUBLISHER: Reuters
TEXT: MOSCOW — Guus Hiddink has called up three newcomers to his 23-man squad for Russia’s Euro 2008 Group E qualifiers against Andorra and Croatia next month. 
The Dutchman named Kuban goalkeeper Vladimir Gabulov, Ascoli midfielder Viktor Budyansky and Spartak midfielder Alexei Rebko for the June 2 match at home to Andorra in St. Petersburg and then away to Croatia in Zagreb four days later. 
Gabulov, 23 and who joined newly-promoted Kuban from champion CSKA last year, was called up after first-choice Igor Akinfeyev tore knee ligaments earlier this month. The injury sustained in a Russian league match on May 6 could keep the keeper, who has conceded just one goal in Russia’s five Euro 2008 qualifiers so far, out for up to six months.
The Ukraine-born Budyansky, 23, has impressed Hiddink with his all-round play and goalscoring ability, netting three times in the last three games for Serie A strugglers Ascoli. 
Rebko has had to recover from injury to earn a regular place in table-topper Spartak’s line-up this season. The 21-year-old was forced to spend several weeks in hospital after he was badly beaten up by thugs on a Moscow street earlier this year. 
The Russians, who have 11 points from five matches, are third in the group, two points behind leaders Croatia but level on points with Israel and England. 
Goalkeepers: Dmitry Borodin (Torpedo), Vyacheslav Malafeyev (Zenit), Vladimir Gabulov (Kuban ) 
Defenders: Sergei Ignashevich (CSKA), Alexei Berezutsky (CSKA), Vasily Berezutsky (CSKA), Alexander Anyukov (Zenit), Denis Kolodin (Dynamo), Roman Shishkin (Spartak), Sergei Yefimov (Lokomotiv) 
Midfielders: Diniyar Bilyaletdinov (Lokomotiv), Yuri Zhirkov (CSKA), Igor Semshov (Dynamo), Dmitry Torbinsky (Spartak), Alexei Rebko (Spartak), Vladimir Bystrov (Spartak), Konstantin Zyryanov (Zenit), Viktor Budyansky (Ascoli) 
Forwards: Andrei Arshavin (Zenit), Pavel Pogrebnyak (Zenit), Dmitry Sychev (Lokomotiv), Alexander Kerzhakov (Sevilla), Ivan Saenko (Nuremberg).

n  Lokomotiv will host a four-team invitational tournament, involving Real Madrid, Dutch champion PSV Eindhoven and possibly Champions League finalist AC Milan in August, the organizers said. The tournament is scheduled for Aug. 3-5.

TITLE: Federer Looks to Paris After Clay Breakthrough
AUTHOR: By Kevin Fylan
PUBLISHER: Reuters
TEXT: HAMBURG — Roger Federer is itching to get his French Open campaign started after beating Rafael Nadal on clay for the first time in Sunday’s Hamburg Masters final.
Federer, playing more aggressively than in five previous defeats by Nadal on clay, came from a set down to win 2-6 6-2 6-0 and snap the Spaniard’s 81-match winning streak on the surface, a run dating back to April 2005.
“It’s absolutely a breakthrough,” Federer said at a news conference. “It will be interesting to see how we both react to it in the French Open.”
Federer’s first title in five tournaments ended his worst drought since he became world number one in 2004 and it came in the first week since he split from coach Tony Roche.
“For me it’s just nice to be playing well again,” said Federer, who has won 10 grand slams but never the French Open. “It’s not that I was playing so badly but it’s my first clay-court title in a couple of years so that’s great.
“I had a tough draw but I beat really top-class players. I’m feeling very good going into the French Open and I’m excited it’s coming around now.”
The French Open starts next Sunday at Roland Garros in Paris.
Nadal congratulated the Swiss on being the man to end his winning streak.
The 20-year-old Nadal, French Open champion for the past two years, put the defeat down to a punishing run that had already brought him four titles this year.
“I was mentally just a little off,” Nadal said. “You can tell I was not quite right because taking a set off me 6-0 on clay is not that easy. “But I’m very happy to have reached the final. I think I’m playing better tennis than ever.”

TITLE: Seven Killed By Gunmen In Bus in Iraq
AUTHOR: By Ravi Nessman
PUBLISHER: The Associated Press
TEXT: BAGHDAD — A group of gunmen in two cars attacked a minibus heading to Baghdad from a Shiite town north of the capital Monday, killing seven passengers including a child, police said. Meanwhile, thousands of soldiers continued their search for three comrades abducted in a May 12 ambush south of Baghdad. Four other U.S. soldiers and one Iraqi were killed.
The minibus attack underscored the sectarian violence and instability that continues to plague Diyala province north of Baghdad despite the three-month-old security crackdown in Baghdad and the surrounding areas.
The bus, which left the town of Khalis, was driving near the violence-wracked city of Baqouba, 60 kilometers northeast of Baghdad, about 11:30 a.m. when it was ambushed outside the town of Hibhib, police said.

TITLE: China Unbowed Over Darfur
AUTHOR: By Charles Whelan
PUBLISHER: Agence France Press
TEXT: BEIJING — China has signalled during a week of high-level diplomatic wrangling over the Darfur crisis that it is unlikely to bend to global pressure and change its much-criticised policies on Sudan.
Beijing has been showered with international condemnation over its support for the Khartoum government, accused of shielding Sudan from sanctions and abetting genocide in Darfur.
The United Nations says more than 200,000 people have been killed and two million displaced in the fighting in Darfur. Khartoum says only 9,000 people have died.
On Thursday U.S. President George W. Bush reiterated his support for a new UN resolution on Darfur and the imposition of sanctions to force Khartoum to open its door to United Nations troops.
But Chinese leaders including Prime Minister Wen Jiabao and newly installed Foreign Minister Yang Jiechi have resisted pressure to shift Beijing’s policy of opposition to UN sanctions.
“We hope that this issue will be resolved properly through dialogue and negotiation,” Yang said Friday. “On the Darfur issue in Sudan, the position of the Chinese government is consistent and well known.”
On Sunday, the Sudanese government renewed its opposition to the deployment of UN peacekeepers after talks in Khartoum with China’s newly appointed special envoy on Darfur, Liu Guijin.
The seasoned diplomat was named as envoy on May 10, shortly after 100 US lawmakers signed a letter calling on Chinese President Hu Jintao to take immediate action to stop the bloodshed in Darfur.
“The international community is stepping up to its responsibilities, but unless China does its part to ensure that the government of Sudan accepts the best and most reasonable path to peace, history will judge your government as having bank-rolled a genocide,” the letter to Hu read.
The lawmakers’ warning are echoed by activists such as Sudan’s Ali Askouri, who say that the Khartoum regime has no internal support and has been propped up by China since 2000.
“The first country to become a Chinese colony is Sudan,” said Askouri, who head the Piankhi Research group and represents communities displaced by the China-financed Merowe dam project, the biggest hydropower project in Africa.
“This is because of the oil, the need for oil for their own internal security,” he added at a press event in Beijing last week.
Sudan sells more that 50 percent of its oil output to China, which openly admits having strong military ties with Khartoum.
Nevertheless, China is sensitive to the damage Darfur is doing to its efforts to promote itself as a responsible member of the international community and has also been upset at attempts to link the crisis to calls for a boycott of next year’s Beijing Olympics.
“There are a handful of people who are trying to politicize the Olympic Games,” said Yang, the foreign minister.
“Their objectives or the target they are seeking to achieve will never be attained.”
But according to some experts, the fundamental issue for China goes beyond oil and other issues to the heart of Chinese diplomacy.
Beijing’s principle of non-interference in the affairs of other countries was established more than 50 years ago by then foreign minister Zhou Enlai.
For China, Darfur is a matter for Sudan in the same way that Beijing views its own troubled regions as off limits to the international community, says Yitzhak Shichor, an East Asia expert at the University of Haifa.
“Beijing’s response toward the situation in Darfur reflects not only its pragmatic (economic) interests, but also its fundamental and ideological concerns,” he said in a recent commentary.
“For instance, in a hypothetical case of a conflict in Tibet or Xinjiang, China would never permit UN peacekeeping forces onto its territory.”

TITLE: Wasps Relishing Cup Defense
AUTHOR: By Mitch Phillips
PUBLISHER: Reuters
TEXT: LONDON — Heineken Cup winners Wasps are relishing the chance to defend the trophy next season after a boycott that threatened the tournament was averted.
Their 25-9 victory over Leicester on Sunday in the final came only two hours after tournament officials said they had reached an agreement with French and English clubs for Europe’s top club competition to go ahead with a full complement.
Both Wasps and Leicester will try to match Toulouse’s unique feat of winning the tournament three times, but Leicester — the only team to successfully defend the title — will have to do it without the guiding hand of coach Pat Howard who is leaving.
Wasps, upset winners over Toulouse in 2004, repeated the dose on the same Twickenham turf to beat Leicester and deny this season’s Premiership and EDF Energy Cup winners a unique treble.
Captain Lawrence Dallaglio, long weary of the off-field politics that constantly bedevil the game, was delighted to have another shot soon after his 35th birthday in August.
“Today was a great advert for the Heineken Cup and we are all thrilled to bits that we can go ahead next season, it’s fantastic,” he said. “This competition goes from strength to strength.”
Team mate and man-of-the-match Fraser Waters said it would have been “a travesty” if the London club had been denied the chance of matching Leicester’s 2002 achievement of defending the trophy and Toulouse’s mark of three titles.
Director of rugby Ian McGeechan said Wasps had focused on the Heineken Cup from the start of the season, aware that they did not have a big enough squad, particularly after international absences, to compete for the Premiership. “This was the only competition we could pick our first team for — we targeted it,” said the Scot.
McGeechan said his tactics on Sunday had been to up the intensity from that which Leicester had been used to and his players responded with some frightening hits.
“We talked about the first 10 to 15 minutes and said we had to go full out. We wanted them to be frightened by the intensity of it. That got us into the game,” he said.
“There is a great mix of old and young and that told — the experience and the vibrancy in the team.”
Head coach Shaun Edwards paid special tribute to the club’s fitness experts and reserve team for ensuring his players hit the ground running after three weeks off.
“I cannot speak highly enough of our conditioning staff,” he said. “Every team before who have had three weeks off and gone into 80 minutes ... it’s stuck out like a million miles. But we looked like we had been playing all the time.”
Edwards said the Wasps reserves had kept the first team on their toes by beating them in a not-so-friendly but ideally-suited match last weekend while Leicester were thrashing Gloucester in the Premiership final. That proved to be the high water mark of Leicester’s season but departing coach Howard remained convinced that the treble was achievable.
“It’s possible but it’s immensely hard,” said Howard, who returns to Australia next week nine years after joining Leicester and then helping them win the Heineken Cup as a player.
“It’s been pretty special this year. I’ll be down for an hour or so then I’m going to celebrate our two wins.
“I’ve loved the club and this competition but it’s time to walk away. I’m not saying I’ll never come back but I’ve made the right decision.”

TITLE: Fire Damages Famed Cutty Sark in London
AUTHOR: By D’Arcy Doran
PUBLISHER: Agence France Press
TEXT: GREENWICH, England — A spectacular fire caused heavy damage to the clipper ship Cutty Sark on Monday, adding millions to the cost of restoring one of London’s proudest maritime relics.
The cause of the blaze was under investigation, but within hours officials responsible for the graceful 19th-century sailing ship said they were determined to carry on with a four-year restoration project.
“We’re going to redouble our efforts to ensure that the ship is open, available, back and running in the future,” said Chris Livett, the chairman of Cutty Sark Enterprises, responsible for restoring the world’s only surviving tea clipper.
“I think when we finish with this project, she will be better than she was ... in a complete state a year ago,” Livett told reporters.
Firefighters responded to an early morning alarm at the ship’s dry dock. The flames were out about two hours later.
“At the moment we are treating the fire as suspicious, as we would do any fire of this scale and importance,” police Inspector Bruce Middlemiss said. Surveillance cameras showed several people in the area at the time the fire started, but there was no indication that any had been involved in igniting the fire.
“There is no evidence or intelligence to lead us to think this was an arson,” Middlemiss said.
The ship is the world’s only surviving example of an extreme clipper, regarded as the ultimate development of a merchant sailing vessel. Most of the original hull had survived since the ship was built for the tea trade of the 1800s.
Cutty Sark had been closed to visitors since last year for a $50 million renovation.
The leaders of the restoration project said the damage was not as bad as they feared.
“I’m relieved. I came here thinking the ship had gone on her last journey,” said Richard Doughty, chief executive of the Cutty Sark Trust.
However, “this will have resulted in millions and millions of pounds of damage. This is a ship that belongs to the world, and we’re going to need financial help,” said Doughty.
Ian Bell, manager of the ship restoration project, emerged from an inspection of the ship with soot on his cheeks but an optimistic message about the condition of the ship’s iron frame.
“Initial indications suggest we don’t have any massive distortions of the ship,” Bell said.
Cutty Sark left London on its first voyage on Feb. 16, 1870, proceeding around Cape Hope to Shanghai 3 1/2 months later. The ship made only eight voyages to China in the tea trade, as steam ships replaced sail on the high seas.
Measuring 280 feet in length, the ship weighed 979 U.S. tons and its main mast soared 152 feet above the main deck.
The ship was used for training naval cadets during World War II, and in 1951 it was moored in London for the Festival of Britain. Shortly afterward, the ship was acquired by the Cutty Sark Society.

TITLE: Johnson Wins Playoff, Claims Atlanta Classic
PUBLISHER: Reuters
TEXT: ATLANTA — Masters champion Zach Johnson won a sudden-death playoff over Japan’s Ryuji Imada to claim victory in the Atlanta Classic in Duluth, Georgia on Sunday.
The pair finished the four-day event 15-under-par (273), with Johnson firing an impressive round of 67 (five under) on Sunday while Imada needed a birdie on the 18th to force the playoff.
The 20-year-old Imada, whose previous best tour result was fifth, had looked in trouble on the par-five final hole when he overhit his second through the green, but he scrambled home with a superb chip that left him with a simple putt.
The pair returned to the 18th for the playoff but this time there would be no great escape for Imada.
The Japanese landed in the rough from the tee and then found water with his second. Johnson kept his cool to birdie the hole and take the title. Johnson said he was reaping the rewards of practice and steady improvement.
“I’ve gotten better and better every year. Maybe not statistically, maybe not money-wise, maybe not world rankings-wise, but I know I’ve gotten better and better every year,” he said.
“I’ve learned both on and off the golf course.”
All three of Johnson’s PGA tour wins have come in the state of Georgia, he won the Atalanta classic in 2004 and in April he claimed the 2007 Masters in Augusta.
Imada, who has played golf in the United States since the age of 14, said he was pleased with the way he coped with starting the day in top spot.
“I did all right under the pressure. I made a great putt on 15 to stay tied with Zach, made some good shots coming in,” he said.
“I know I can do it. It’s just a matter of putting myself in that position again. I’m looking forward to the next opportunity.”
Troy Matteson, who shared the lead with Imada after Saturday’s third round, had to settle for a share of third place after shooting a one over par in the final round — a double-bogey on the 17th ending his hopes.
Matteson finished tied with Camilo Villegas and Matt Kuchar on 12-under.

TITLE: Dead Whales, Dolphins Displayed in Berlin
AUTHOR: By David Rising
PUBLISHER: Agence France Press
TEXT: BERLIN — Greenpeace activists laid the carcasses of 17 small whales and dolphins in front of the landmark Brandenburg Gate on Monday in a dramatic protest to urge countries to resist increasing pressure for a resumption of commercial whaling.
Some of the animals died after getting trapped in fish nets, while others showed the scars of being hit by ships’ propellers, the activists said.
The gruesome collection, kept in a trough of ice under the hot sun, represented the number of whales and dolphins that die every half-hour or so through human impact, protest organizers said.
In a year, 300,000 whales and dolphins drown in fishing nets, “and it is impossible to calculate how many more fall victim to pollution, ship strikes, the impacts of sonar or climate change,” Greenpeace marine biologist Stefanie Werner said.
“How can pro-whaling nations justify hunting them as well?” she said.
The bodies were collected in the last two to three months from beaches on France’s Atlantic coast, the English Channel and Germany’s North Sea and Baltic coasts, Greenpeace said.
Next week, the International Whaling Commission holds a meeting in Anchorage, Alaska, where Japan is expected to push for a moratorium on commercial whaling to be overturned.
Germany, a member of the IWC, currently holds the presidency of the Group of Eight industrialized countries and also holds the rotating presidency of the European Union, which bans member states from commercial whaling and supports the IWC moratorium. The EU holds IWC observer status.
“The action is a general call on German politicians, but it’s now particularly important because Germany has the presidencies of the EU and G-8,” said Greenpeace Germany spokesman Bjoern Jettka.
Japan has been on a diplomatic drive to win support for its bid to overturn the 20-year moratorium on commercial whaling ahead of this year’s annual IWC meeting on May 28-31.

TITLE: Greek Police Into Position
AUTHOR: By Karolos Grohmann
PUBLISHER: Reuters
TEXT: ATHENS — More than 7,500 police officers and thousands more security personnel on Monday started taking positions in and around the capital ahead of Wednesday’s Champions League final between AC Milan and Liverpool.
With about 50,000 English and Italian fans expected in Athens, many of them without tickets, police are bracing for three days of potential clashes.
“It is not only the 7,500 officers who will patrol the city. Every single employee of the police force is on full alert until after Wednesday,” a police official told Reuters.
Greece has activated a part of its successful Athens 2004 Olympics security plan, including cameras, helicopters and three security perimeters as well as limited vehicle access to the area around the Olympic stadium.
“We feel the need to show again that we as a society and as police are worthy hosts,” Public Order Minister Byron Polidoras said following a security meeting on Sunday.
Polidoras and his senior officers have done their homework in the run-up to the final, liaising with British and Italian police for information regarding known trouble-makers but their main source of concern is potential demonstrations by their own officers on the day of the final.
Police unions seeking pay hikes and improved working conditions have pledged not to go on strike on Wednesday so as not to disrupt the match but have confirmed they will stage a demonstration on the day.

TITLE: Vilnius, Another Beauty on the Baltic Shores
AUTHOR: By Clifford J. Levy
PUBLISHER: The New York Times Service
TEXT: Maybe it is the cobblestone byways that meander through Vilnius and appear more suited for horses than horsepower. Perhaps it is the unexpectedly historic architecture or the hulking castles that whisper of medieval derring-do. While modernity certainly intrudes — it would not be a European capital without its Prada and Ermenegildo Zegna stores, now would it? — somehow or other, this Lithuanian city, despite its many recent changes, often has the feel of an old-world diorama sprung to life.
In Vilnius, you’ll find an easygoing, appealing and less expensive alternative to Paris or Prague. Restaurants and museums proliferate in this city of 550,000, and well-established hotel chains, not to mention stylish boutique hotels, have staked their claims in recent years. Ramada and Novotel have opened in the city center, and Kempinski will soon as well. Le Meridien, a high-end hotel and conference center on the city’s outskirts, even has a golf school. At many hotels, Wi-Fi and other high-tech staples are a given.
On the streets, it is readily apparent that young people have embraced West European mores, hence all those fashion shops. English has replaced Russian as the second language of public life, after Lithuanian. In whatever language, people are welcoming.
In the Old Town, it is not difficult to get lost among the crazy-quilt streets, and you may be thankful that you do, especially when you alight at places like St. Anne’s Church, as curious and enthralling a Gothic edifice as you will find. Go ahead, squint. The facade truly is made of exposed bricks of numerous shapes, even the spires, as if someone turned loose a master builder with a masonry Lego set.
All over Vilnius, nightlife is lively and unpretentious. Food culture has blossomed, and you can sample everything from Greek to Chinese. In search of local fare, we ended up at Forto Dvaras, a restaurant that is a bit of a Lithuanian culinary theme park. Rustic furniture, staff in national costumes and a menu laden with blini, pancakes and giant dumplings called zeppelin. California spa cuisine it is not. But portions were tasty and sizable, and the bill for six for lunch was only the equivalent of $35.
The contemporary art scene has also taken off. The city recently established an avant-garde visual arts center named after the Lithuanian-American filmmaker and counterculture icon Jonas Mekas, a fellow traveler of Andy Warhol and Allen Ginsberg. The roster of private galleries seems to grow every month, taking advantage of a robust economy and a rich artistic history.
The Jewish quarter of Vilnius was in its heyday one of the world’s most vibrant Jewish communities, later decimated by the Nazis. We wandered the site of the former Jewish quarter, spotting only a few instances of Jewish stars and Hebrew writing chiseled into buildings, then feeling a little more hopeful when we reached the restored synagogue on Pylimo Street, one of the few Jewish institutions to survive the war.
After visiting the city’s Holocaust museum, in a small green cottage set back from a main road, and viewing maps and photographs of the two ghettos where Jews were detained, we realized how little the footprint of the city had changed. In some places, what now look like quaint gates were once covered with barbed wire. Larger Holocaust museums may present comparable exhibits, but to gaze upon them here, after walking those very same streets, is especially affecting.
One afternoon we hiked up a cobblestone path to the Higher Castle Museum. First constructed in the 13th century, the castle offers lovely views of the city from its open-air roof, as well as exhibits of medieval weaponry (if you don’t want to walk up the hill, you can ride a funicular).
Another walk brought us to the Gates of Dawn, a bulwark that blocks a narrow road. Once part of the city’s original fortifications, it was later transformed into a small chapel containing a venerated icon that has long drawn pilgrims, including Pope John Paul II. On Cathedral Square, the city’s main cathedral, which has several chapels and bell towers, is another prominent attraction.
The Old Town has an alluring mishmash of architecture — from Gothic to neo-Classical and more — and locals say Vilnius has one of the world’s largest assortments of baroque buildings. Whatever the style, the place sure is nice to gaze upon, whether you are lugging around an architectural tome or, as we did, simply enjoying going astray among the narrow streets.

Where to Stay
Mabre Residence Hotel, on the outskirts of the old city, is in a restored former monastery and has a private sauna with a small pool that you can rent. Rooms from 120 euros (about $163). 13 Maironio St., (370-5) 212-2087, www.mabre.lt
Shakespeare Boutique Hotel, another quaint hotel in the old city, has rooms whose designs and decorations are inspired by you-know-who. Rates from 105 euros. 8/8 Bernardinu St., (370-5) 266-5885, www.shakespeare.lt
Ramada Vilnius and Novotel are two new luxury hotels in the city center. Rates start at around 100 euros. Ramada Vilnius, 2 Subaciaus St., (370-5) 255-3355, www.ramadavilnius.lt; Novotel, 16 Gedimino Ave., (370-5) 266-6200.

Where to Eat, What to Do
Forto Dvaras offers typical Lithuanian food, heavy on the quaint atmosphere and sour cream, light on the wallet. Dinner for two is about 70 litas ($17.50). 16 Pilies St.,
(370-5) 261-1070, 
www.fortodvaras.lt
Kazys Varnelis House Museum, has works painted and collected by the artist Kazys Varnelis, viewable by appointment only. Admission is free. 26 Didzioji St., (370-5) 279-1644.
Admission to the following museums is 8 litas or less, depending on age and student status:
Higher Castle Museum: views of the city, along with military exhibits. 
5 Arsenalo St., (370-5) 261-7453.
Holocaust Museum: a small, deeply affecting museum on the massacre of the nation’s Jews. 
12 Pamenkalnio St., (370-5) 262-0730.
Museum of Genocide Victims: 
a history of communist oppression. 2A Auku St., 
(370-5) 266-3282, www.genocid.lt/muziejus/en/
National Museum: an overview of Lithuanian culture and art. 
1 Arsenalo St.; (370-5) 262-9426; www.lnm.lt