SOURCE: The St. Petersburg Times
DATE: Issue #1275 (41), Tuesday, May 29, 2007
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TITLE: Off-Plan Hunger Strike Ends
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: A group of local investors in off-plan residential property developments, or dolshchiki as they are known colloquially in Russian, ended a week-long hunger strike on Sunday after an apparently fruitless meeting with City Hall officials.
The investors, who had paid for apartments in buildings under construction, were demanding action from City Hall after the apartments were sold to third parties or construction was never completed, leaving them out-of-pocket.
More than 45 off-plan investors went on hunger strike on May 16, representing a protest committee that unites almost 1,000 victims of various construction scams.
In a meeting with the protestors, Alexander Vakhmistrov, vice-governor of St. Petersburg, said he recognized the problem but stopped short of suggesting solutions and refrained from offering a helping hand to the investors, whose legal battles over disputed flats have now been dragging on for three to seven years in local courts.
Addressing the issue during a speech on housing problems last Wednesday in City Hall, Governor Valentina Matviyenko was adamant that the protest would fail. 
“A hunger strike is not a remedy; it is not going to work,” Matviyenko said. 
But she did offer to create a private foundation aimed at helping victims of construction swindles while making it clear that no funds from the city budget would be spent on settling matters for cheated investors. 
“No officials said what we really needed to hear, namely that they would ensure that we receive the apartments we had paid for,” said off-plan investor Mikhail Yemelin, who participated in the strike. “They mentioned partial compensation but we do not find this solution even remotely suitable. Not only does it not cover our true losses but the price per-square-meter [of residential property] has grown by several hundred percent since we paid for our apartments. Most of us put all of our money into those apartments; we are forced to rent rooms or hang around cheap hostels.”
Earlier this year, off-plan investors in other Russian cities, including Moscow and Ulyanovsk, held local hunger strikes as part of a nationwide protest campaign. In Ulyanovsk 38-year-old Igor Vosevoi died suddenly of a heart attack during the hunger strike.
One of the most common ways to buy an apartment in a residential block that is under construction in Russia is to sign an investment contract.
Investors typically pay part of the price of an apartment — usually 20 percent to 30 percent of the total cost — before construction work begins. The rest of the money is paid on a monthly or quarterly basis during the construction period.
Under such terms the total cost of an apartment is much lower than it would be after the residential block is completed — thanks to rising property prices — as well as allowing future flat owners to gradually invest into their property instead of paying one lump sum.
Although it is the investors’ money that makes construction possible, their legal position has been dependent on the construction company, sharing all the risk — from natural disasters to local authority certification.
But large numbers of off-plan investors across the country have been caught in limbo, being trapped by various kinds of scams on the part of construction firms.
Construction companies may ask investors for extra, unplanned payments amounting to thousands of dollars; despite providing full or partial payment the investors may discover that what they thought they had bought had already been sold to another person already claiming ownership; construction is stopped due to lack of funds; or rogue firms make off with the money before an apartment block was completed.
Experts find it difficult to estimate the scope of the problem.
According to City Hall’s Construction Committee, there are currently 11,000 “problematic apartments” with disputed ownership, unfinished construction or legal battles around them. But Yemelin stressed the committee has calculated only the cases that had been sent to them and said figures might be higher in reality.
Dmitry Shchupanovsky, head of the regional branch of the Russian Committee of Cheated Off-Plan Investors, compared such investment with gambling. 
“You bet your money, and you hope you’ll win,” he said. “But you may not.”
Shchupanovsky urged City Hall to follow steps taken by Moscow Mayor Yury Luzhkov and the Moscow city government, which used budget money to complete unfinished construction projects and intervened in construction disputes.
As Shchupanovsky watched Luzhkov award a group of 165 cheated investors with keys to new Moscow apartments on television last weekend, he became furious. 
“At this stage, it is entirely a question of political will; the difference between the two cities’ attitudes toward the issue is very much like that between a man who teases a woman about marriage and a man who has the guts to tie the knot,” Shchupanovsky said. 
Off-plan investors who participated in the hunger strike said they would consider another hunger strike in the future.
“Going to courts and paying lawyers does not always help,” said off-plan investor Natalya Dunayeva. “In many cases there are so many falsifications used and tricks played that the best lawyers and best judges simply cannot get to the bottom of things.”

TITLE: Riot Police Detain Gay Rights Activists
AUTHOR: By Natalya Krainova
PUBLISHER: Staff Writer
TEXT: MOSCOW — OMON riot police detained gay rights activists, including three European lawmakers, on Sunday as they tried to deliver a letter to City Hall appealing a banned gay march.
A crowd of gay rights opponents, meanwhile, shouted “Moscow is not Sodom!” and pelted the activists with eggs and stones. Activists spoke of seeing knives and a gun as well.
Organizers had promised that 100 to 200 activists would show up at noon at City Hall on Tverskaya Ulitsa. But police and reporters far outnumbered the 50 who gathered with a letter signed by 40 European lawmakers asking Mayor Yury Luzhkov to allow the activists to march.
City Hall rejected a request to march this month; Luzhkov has called gay marches “satanic.”
Outside City Hall, riot police quickly detained a dozen activists, including leading gay rights campaigner Nikolai Alexeyev, and pushed them into vans.
“I tried to protect him, but I was roughly shoved away,” Vladimir Luxuria, a transgender Italian lawmaker, said of Alexeyev on Italian Radio Capital.
“After that someone started throwing eggs. They said, ‘Moscow is not Sodom.’ I then saw someone with a knife, and people started to throw stones at us,” said Luxuria, who was detained briefly.
“One Orthodox protester had a real gun on him. I wonder what he was going to do with that?” said Alexei Davydov, an organizer of the protest who was briefly detained.
Police also detained German lawmaker Volker Beck and Marco Cappato, a European Parliament lawmaker from Italy. An egg struck Beck in the face as he was being led away. Cappato was detained after a man kicked him and he started to shout: “Where are the police? Why don’t you protect us?”
Also detained was Peter Tatchell, a British human rights activist. A woman threw water at him from a bottle as he tried to speak with reporters. A young man then punched him in the head, and the police stepped in.
A total of 31 people were detained, and most of them later released, Moscow police spokesman Yevgeny Gildeyev told The Associated Press. He indicated that the man who had punched Tatchell was among the detainees.
But Davydov said 15 gay activists were still being held in custody late Sunday.
“Police are trying to hold them until morning, but [State Duma Deputy Alexei] Mitrofanov is asking for their release, and maybe they will be let go earlier,” Davydov said.
Mitrofanov, who attended the protest, is a member of the ultranationalist Liberal Democratic Party who recently started to voice his support for gay rights.
Davydov accused police of mistreating detained activists, including Alexei Kiselyov, who he said had suffered a concussion outside City Hall and was being refused medical assistance.
Western observers at the protest denounced what they called a heavy-handed police response.
“It was a big mess, a lot of violence. Police arrested peaceful demonstrators,” Sophie Int’Veld, a Dutch lawmaker in the European Parliament, said by telephone.
“They were hitting and kicking gay people, and police didn’t protect them,” said Boris Dittrich, who oversees gay rights for Human Rights Watch.
Dittrich criticized Moscow authorities for not giving permission for a “peaceful demonstration.” “It’s a shame that this happens,” Dittrich said. “I think it’s important that gay people have the same rights as other people.”
Dino Renvert, an aide to Beck, said the German lawmaker was detained for about an hour and released on the condition that he “leaves the area immediately.” He returned to his hotel. Beck was beaten by gay opponents and detained by police when he attended an unsanctioned gay rally last May. That rally and Sunday’s protest coincided with the anniversary of the decriminalization of homosexuality in 1993.
Renvert accused Russian authorities of trying to prevent Beck from returning this year by making it unnecessarily difficult for him to obtain a visa. “It took us two months to get a visa,” he said.
Int’Veld expressed her regret over what she called “a travesty to democracy.” She said the issue was not only gay rights but the right of free assembly.
“I’d like to take home a political message that the European Union can’t turn a blind eye to this any more,” she said. “I am very sad.”
Davydov said For Human Rights leader Lev Ponomaryov and Moscow Helsinki Group head Lyudmila Alexeyeva were gathering information about Sunday’s detentions in order to appeal them in court. Moscow Helsinki Group helped organize a city-sanctioned rally against homophobia on Pushkin Square on Saturday.
Yulia Volkova and Lena Katina of the faux-lesbian pop duo t.A.T.u. made a brief appearance at Sunday’s protest, but left quickly as their car was pelted with eggs.

TITLE: Mironov Claims World Is Getting Cooler
AUTHOR: By Simon Shuster
PUBLISHER: Staff Writer
TEXT: It was a failure from the start. Russia’s biggest conference on the Kyoto Protocol, which aims to fight global warming, began with a speech from a top official who denied that global warming even exists.
“In reality, the scientific basis for the protocol is fairly weak,” Federation Council Speaker Sergei Mironov told a crowded opening session of the two-day conference Thursday, which drew more than 200 environmental experts and carbon market participants from around the world. “In the opinion of many experts, the emission of carbon dioxide into the atmosphere does not have any effect on the climate.”
On this point, Mironov stands on the fringes of global scientific opinion. A growing consensus has formed among top scientists and politicians, who have been warning governments to reduce the amount of greenhouse gases being spewed into the atmosphere. The Kyoto Protocol, first signed in 1997, created a system of financial incentives for doing this.
Although Russia ratified Kyoto in 2004, the government now looks to be reneging on its commitments. Mironov’s speech made that clear.
In fact, a process of “global cooling” is now taking place, Mironov argued, citing several obscure Russian studies to prove it. At one point, he referred to the warmly colored paintings of 16th-century Dutch masters as evidence that temperatures were indeed higher back then. The remark drew as many frowns as chuckles from the crowd.
At the end of the session, Mironov hurried out without opening the floor to questions. Though several other state officials were invited, he was the only one to attend the conference, which was held at the St. Petersburg State Mining Institute, where President Vladimir Putin earned his doctorate in 1997.
Most troubling for some of the delegates was the news that the event’s chief organizer was not allowed into the country Wednesday.
Jorund Buen, the director of Point Carbon, a leading carbon emissions consultancy, had to fly back to Oslo from St. Petersburg after experiencing “a slight visa problem,” said Christian Sommer, the Point Carbon analyst who addressed the conference in his place. “We had our Kiev office on the phone all night trying to find a solution,” said another Point Carbon associate. “Mr. Buen was very upset.”
The mood of the event never seemed to recover from the government’s apparent snubs.
“It was clear at that point what the message was,” said Martin Kruska, director of 3C Group, a climate change consultancy based in Frankfurt, Germany. “We might as well go home.”

Kyoto Off the Agenda

For many delegates, Mironov’s speech seemed typical of Kremlin policy. Since it has reasserted its place as an energy superpower, Russia has tended to turn up its nose at environmentalism, except when it comes to foreign oil and gas majors accused of environmental violations on Russian soil, such as Shell at the Sakhalin-2 project.
Kyoto implementation — which offers the Russian state relatively little money and a bureaucratic headache — is not exactly high on the agenda, delegates said.
In a 15-minute speech that touched on Kyoto only once, Vladimir Litvinenko, the head of the mining institute and a government energy adviser, said Kyoto implementation would “threaten the independence” of the oil and gas industry.
“It means we will have to answer for the right to refine our own fuel, to create carbon emissions. ... This creates an instant increase in our expenditures,” Litvinenko said.
For political reasons, Russia agreed to ratify Kyoto in 2004 after seven years of firm refusals. The change of heart was linked to Russia’s ongoing bid to join the World Trade Organization. It was reported at the time that the European Union, in exchange for supporting the bid, wanted Russia to ratify Kyoto, which was then at risk of failing due to a shortage of signatories.
Another factor seems to have been tensions with the West over the ending of the Beslan hostage crisis in September 2004, and Putin’s subsequent decision to end gubernatorial elections. Amid an outcry in the West against Moscow’s heavy-handed tactics in Beslan and concerns over democracy, Russia six weeks later ratified Kyoto in an apparent effort to restore its image.
Now, however, there are no political incentives to actually implement the accords. “They have lost their value in negotiations,” said Yuji Mizuno, senior policy researcher at the Institute for Global Environmental Strategies. “If Mr. Putin or the next president of the Russian Federation can use [Kyoto] as a political tool, only then will we see some progress.”
The Kyoto Protocol, based on the good faith of its participants, does not punish nonimplementation.
The main way for Russia to follow through on its commitments is to participate in the global carbon market. At least financially, the government does not have a lot to gain from this, even though it is the largest potential supplier on this market, where permits to emit greenhouse gases are bought and sold.
The market was created under Kyoto to offset the amount of these gases being released into the sky by everything from cars to power plants. Studies show that their concentration is now at the highest levels in history, threatening to cause untold damage to the planet by raising temperatures around the world.

Making Polluters Pay

Under Kyoto, a project that reduces these gas emissions - by patching leaky pipelines or installing more efficient machines, among other methods - can qualify for carbon reduction credits.
Each carbon credit represents a 1-ton cut in carbon dioxide emissions.
Once certified, these credits can be sold for $5 to $15 each on the global carbon market, and the buyer can use them as a permit to emit 1 ton of carbon dioxide elsewhere in the world. The most likely buyers are from European Union countries, where polluters must pay fines if they do not have enough carbon allowances.
In this way, Kyoto potentially makes it more expensive to emit harmful gases, hitting polluters in the pocket and encouraging them to clean up their act. It also encourages richer countries to fund projects in developing countries, where it is cheaper and easier to reduce emissions and produce the valuable credits. Today, the world carbon market is worth nearly $30 billion.
According to most estimates, Russia has the potential to produce hundreds of millions of carbon credits per year, unlocking a multibillion-dollar industry and helping to slow global warming.
“Already there are 24 projects in the works in Russia, and a few are already showing emissions reductions,” Vladimir Liktionov, a lawyer at Norton Rose, said at the conference. “So what you have now is all these global firms sitting around waiting for state approval. If they get it, the payoff will be huge.”
Most of the cash from credit sales would go to lawyers and brokers on the carbon market, but the biggest gains from Kyoto go to the environment.
Projects to stop the flaring of billions of cubic meters of natural gas, capture methane gas released by landfills, and create waste-water treatment systems, can all be financed, along with many others, simply by selling the carbon credits they produce, said Jan-Willem van de Ven, head of the carbon credit fund at the European Bank of Reconstruction and Development.
None of these projects would happen otherwise.
But if the Kremlin withholds its approval, all the carbon credits already produced in Russia would be worthless under the laws of the carbon market. The firms producing them by lowering emissions in cities such as Arkhangelsk, Murmansk and Khabarovsk would then cut their losses and go elsewhere, leaving Russia either to ignore the problem or to deal with it alone, and at a much higher price, in the future.
“The private sector is really turning away from Russia already. They are tired of waiting [for approval], and are turning to countries like China and Ukraine ... [that] already have the approval mechanisms in place,” said a United Nations envoy to the conference, who asked not to be identified. “Time is really ticking if Russia wants to get on board.”
The laws set up under Kyoto only run through 2012. Talks are under way about how initiatives will move forward beyond that date, and many believe that the next phase of implementation will be a lot less favorable to Russia.
The original Kyoto accords, which now have 160 signatories, gave former Soviet states a big edge. After the Soviet collapse many industries ground to a halt — and so did the smokestacks that were pumping greenhouse gases into the atmosphere. By default, therefore, Russia appeared to achieve major emissions cuts in the 1990s.
Kyoto calculated emissions from exactly this period — an enticement that allowed Russia to join without having to reduce its emissions at all. Indeed, even though it is one of the worst polluters in the world, Russia is allowed to emit more greenhouse gases under Kyoto than any other nation. Most others, especially developed nations such as Japan, Australia and EU members, were obliged to reduce emissions by 5 percent, a goal that has proven tough to reach.
Kyoto “bent over backwards to get Russia to participate,” said Marcel Hanakam, 3C Group’s senior project manager for Russia and the CIS. “It was given the largest surplus of [emissions] allowances that it can sell to other countries.”

Window of Opportunity

In recent years, the treaty’s other signatories, especially among developing nations, have begun to cry foul over the unfair advantage Russia enjoys. Their lobbying power is growing, and the treaty’s favoritism toward Russia and the former Soviet Union has become hard to ignore. So the next Kyoto round is expected to get much tougher on Russia.
“There is no guarantee of carbon credits being available as a system after 2012,” said Jesse Uzzell, regional manager of MGM International, a brokerage on the carbon market. “The window of opportunity is closing.”
To take advantage of this window, Russia would have to write letters of approval for Kyoto-based projects, and set up a government department to certify the carbon credits such projects produce.
Given Mironov’s speech, many delegates saw hopes for this outcome fading away.

TITLE: Ex-Thai Premier Robbed At Moscow McDonald’s
PUBLISHER: Combined Reports
TEXT: MOSCOW — Thailand’s globe-trotting deposed leader, Thaksin Shinawatra, garnered an academic honor by visiting Moscow last week, but lost thousands of dollars and his passport when he stopped at a McDonald’s in the city center.
Thaksin, who has been living in exile since a coup last year ousted him as prime minister, had entrusted his briefcase to an aide sitting at a nearby table as they had a meal Monday at the McDonald’s restaurant on the Arbat, said his lawyer, Noppadol Pattama, in Bangkok.
When the party got up to leave, they found that Thaksin’s briefcase, with his passport and about $9,200 in dollars and rubles, had been snatched, he said.
Kommersant newspaper reported on Saturday that the amount of cash in the briefcase was closer to $20,000. It said that the briefcase had also contained a digital video camera and a digital camera.
A woman who answered the phone at the restaurant confirmed the robbery but directed all other questions to McDonald’s head office. Officials there were unavailable for comment.
Thaksin, a billionaire, was in Moscow to accept an honorary degree in science from the Plekhanov Russian Academy of Economics.
Noppadol said the Thai Embassy in Moscow had helped Thaksin, issuing him a new passport and other temporary travel documents.
A Foreign Ministry spokesman said the ministry had not received full information about the theft and as a result was not in a position to comment.
A city police spokesman said he could not immediately comment on the case.
The Thai Embassy could not immediately be reached for comment.
Thai government agencies are not usually so helpful to Thaksin. Several months after Thaksin was toppled, the Thai Foreign Ministry canceled his diplomatic passport, which former prime ministers are normally allowed to carry as a special privilege.

AP, SPT

TITLE: Duma Takes Steps to Restrict Smoking
AUTHOR: By Nabi Abdullaev and Nikolaus von Twickel
PUBLISHER: Staff Writers
TEXT: MOSCOW — The State Duma gave tentative approval Friday to legislation aimed at restricting smoking in public places such as restaurants and waiting lounges in train stations and airports.
Restaurant owners, who would face fines of up to $3,900 for noncompliance, expressed some unease about the bill. But if the lax enforcement of a previous attempt to crack down on second-hand smoke is any indication, they and smokers themselves have little to worry about.
The new rules would prohibit smokers from lighting up anywhere except specially designated areas in restaurants, trains, ships, municipal government offices and waiting lounges. Smoking on airplanes would be banned altogether.
In a restaurant, the designated area would be limited to half the space of the establishment, while in other places the area would be limited to one-quarter of the space.
The bill proposes fines of up to $190 for individuals and $3,900 for companies that fail to enforce smoking rules. No fines are proposed for smokers.
Under a 2002 law, smoking is currently restricted to designated areas in federal government buildings, workplaces, universities, hospitals and theaters. There are no penalties, however, for violations. The only fine in place right now — of 100 rubles ($4) — is for people who smoke on wooden bridges and public transportation.
In an explanatory note to Friday’s bill, its authors argued that the measure would protect passive smokers, particularly children and women, from the “harmful effects of tobacco smoke.”
However, even within the walls of the Duma — where smoking is theoretically forbidden because the building lacks a formally designated smoking area — skepticism about the new bill permeated the air together with the stale scent of tobacco on Friday. Most Duma deputies smoke right in their offices, several deputies’ aides acknowledged during smoking breaks in the building’s stairwells.
“The worst is [Deputy Duma Speaker] Artur Chilingarov. He smokes like a chimney,” said an official who works in the United Russia faction. He declined to give his name and said he preferred to smoke in the stairwell because he respected visitors who might not like the smell of tobacco.
Chilingarov was not available for comment.
A middle-aged aide to another Duma deputy called the bill “idiotic.” “People will not smoke less but will hide with a cigarette like cockroaches in dark corners because no one will set up proper smoking areas,” he said, puffing on a cigarette.
Another aide complained that the bill, like a previous ban on beer, could not be enforced. “We have already been through it all. Remember the ban on selling beer near schools and drinking it in the metro? Nothing has changed,” he said.
The bill, approved in a first reading by a vote of 406-0, was authored by nine United Russia lawmakers, including Duma Deputy Speaker Lyubov Sliska, as well as Federation Council Senator Lyudmila Narusova.
Representatives of the tobacco industry were decidedly soft-spoken about the plan. “We will accept any reasonable regulations,” said Anatoly Vereshchagin of Japan Tobacco, which sells Camel, Salem and Winston in Russia.
He stressed that the law should be “balanced and not extremist,” citing the partial ban on restaurants as a step in the right direction.
Some restaurants might face difficulties, however. “We could only ban smoking completely,” said Anatoly Sokolov, director of Vinosyr, a wine bar located in a cellar behind Tverskaya Ulitsa.
Sokolov said he opposed the bill but did not see a way to avoid it. On the other hand, he added, a smoke-free environment might actually do some good: “Wine tastes better without cigarettes.”
Frank Caruana, manager of Sportland, a bar on the Arbat popular with expatriates, acknowledged that he had not heard of the bill at all. He said he did not think that smoking was a great concern to his guests. “I never had any complaints,” he said, adding that he had an elaborate ventilation system.
While he said designating a smokers’ area would be no problem, he expressed surprise that the legislation was being considered in the first place. “This is probably the only place in the world where smoking is no issue at all,” he said.
Health experts criticized the restaurant restrictions as insufficient. “It will not work at all,” said Kirill Danishevsky of the Moscow-based Open Health Institute. Ventilation would only spread the smoke evenly, he explained.
But he praised deputies for trying to do something about second-hand smoke and cautioned them not to move too quickly. “You must make the laws stricter step by step not to risk riots,” he said, adding that in regions such as Chelyabinsk, 82 percent of men are smokers.
Russia’s tobacco market is considered to be Europe’s biggest. The World Health Organization estimates that 64 percent of men and 21 percent of women smoke, said Haik Nikogosian of the WHO Regional Office for Europe.

TITLE: Evraz to Take Over Mining Company
AUTHOR: By Miriam Elder and Denis Kungurov
PUBLISHER: Special to The St. Petersburg Times
TEXT: NOVOKUZNETSK, Kemerovo Region — Steel giant Evraz Group announced Friday that it would assume full control of the company that owns the Yubileinaya mine, where a methane gas explosion a day earlier killed at least 39 miners.
Evraz currently holds a 50 percent stake in Yuzhkuzbassugol, which owns Yubileinaya and other area mines and is valued by analysts at about $2 billion. Evraz is expected to buy out the rest of the company at a steep discount.
“The decision has been made because of the circumstances,” Evraz spokesman Nikolai Kudryashov said.
He said Evraz’s board would meet in the “near future” to approve the deal, which also requires Federal Anti-Monopoly Service approval.
The explosion at Yubileinaya is the second this spring at a Yuzhkuzbassugol mine. A methane blast at the company’s Ulyanovskaya mine in mid-March killed 110 people.
On Thursday, Kemerovo Governor Aman Tuleyev called for Evraz to take over Yuzhkuzbassugol and bring in new management. The governor also said Yuzhkuzbassugol’s business license could be revoked if it resisted the takeover by Evraz, whose major shareholders include Roman Abramovich and Alexander Abramov, RIA-Novosti reported.
On Friday, however, Tuleyev and Abramov rejected a proposal by Konstantin Pulikovsky to pull Yuzhkuzbassugol’s license, Interfax reported. Pulikovsky heads the Federal Service for Ecological, Technological and Atomic Inspection, the government’s main industrial safety watchdog.
“The southern Kuzbass, and Yuzhkuzbassugol in particular, account for 85 percent of Russia’s coking coal. This region is indispensable not just for Evraz, but for the country’s entire steel industry,” Abramov said.
Yuzhkuzbassugol general director Georgy Lavrik said the takeover would be “better for the company, and things won’t get worse for the miners,” Interfax reported.
Abramov, who also sits on the board of Evraz, said major changes were in store for Yuzhkuzbassugol, including a management shake-up.
Andrei Litvin, a metals analyst at MDM Bank, said Yuzhkuzbassugol was valued at $2 billion, but Evraz could expect to pay less than $1 billion for the 50 percent stake belonging to Lavrik and two other senior managers, Alexander Govor and Yury Kushnerov.
“Evraz was forced to buy this stake and the shareholders were forced to sell,” Litvin said, adding that the company would probably restore order at Yuzhkuzbassugol and then announce an initial public offering. “Now they will have to spend a lot of money on this asset, improving operations, restoring production and spending on staff,” he said.
Evraz will likely pay $500 million to $750 million for the stake, Aton brokerage said in a research note. The deal will likely have a negative effect on Evraz in the short term, adding to the company’s liabilities before improving operating results in the long term, Aton said.
Yuzhkuzbassugol produced more than 16 million tons of coal in 2006, and planned to raise output to nearly 20 million tons this year, according to company figures.
The Yubileinaya mine accounts for nearly 6 percent of Yuzhkuzbassugol’s total production and less than 0.2 percent of Evraz’s revenues, UralSib said.
The death toll in the Yubileinaya mine disaster rose to 39 early Sunday when a miner injured in the explosion died in a hospital in Leninsk-Kuznetsk, about 150 kilometers from Novokuznetsk.
The miner, identified as Eduard Lyakh, 33, will be buried Tuesday. Four miners were buried Sunday and another 34 on Saturday in Novokuznetsk and other nearby towns. One miner remains in critical condition.
In Novokuznetsk on Sunday, a team of investigators spent 10 hours inside the mine in a preliminary attempt to determine the cause of the blast. The team will continue its work Monday, said Andrei Malakhov, who heads the Kemerovo regional office of the Federal Service for Ecological, Technological and Atomic Inspection. Malakhov said the fire at the blast site had been extinguished. The team noted that the electrical equipment at the site had suffered relatively minor damage, he said.
Tuleyev said Saturday that the bill for equipment lost in the blast and ensuing fire could reach 600 million rubles ($23.2 million).
The governor had opposed allowing the team into the mine, arguing that conditions were too dangerous. A fire broke out shortly after the blast, leading to calls to flood the shaft. Authorities decided instead to seal off the affected coal faces.
On Saturday, Tuleyev said he would only allow investigators to enter the mine if they signed waivers that would absolve Yuzhkuzbassugol of any responsibility for their welfare.
“Then the investigation will have to be conducted on the basis of the black boxes and the data-recording devices in the gas-control system,” he said.
A mine supervisor said the data collected from these sources would be insufficient for a thorough investigation.
“The so-called black box only comes on after an explosion. It’s an ordinary mic that records conversations with the dispatcher on the emergency telephone,” said the supervisor, who declined to give his name because he feared retribution from the company.

Staff Writer Miriam Elder reported from Moscow.

TITLE: Britain Asks Russia to Extradite Suspect
PUBLISHER: Reuters
TEXT: MOSCOW — Britain’s ambassador on Monday submitted an official request to Russia for the extradition of the man suspected of murdering Alexander Litvinenko.
British prosecutors said last week they wanted to bring Russian businessman Andrei Lugovoi before a British court to try him for the murder of Litvinenko, who died on November 23 after being poisoned with polonium 210.
Ambassador Anthony Brenton submitted the request to the Foreign Ministry in Moscow, a spokesman said.
“I can confirm that today the ambassador submitted to the Russian Foreign Ministry papers requesting the extradition of Mr. Lugovoi,” a spokesman for the British embassy said by telephone.
Asked if they had received the documents, an official with the Russian prosecutor general’s office said: “We confirm this.”
Lugovoi, who has always protested his innocence, met Litvinenko in a London hotel on November 1, the day Litvinenko fell ill.
Moscow has refused to hand over Lugovoi to Britain because the Russian constitution forbids the extradition of its citizens. The affair has set the two countries, now tied by billions of dollars of trade, on a diplomatic collision course.

TITLE: Chechen Killed in Brawl
PUBLISHER: The Associated Press
TEXT: ROSTOV-ON-DON — A Chechen man was killed and at least eight other people were injured in a brawl involving migrants from the Caucasus and local residents in Stavropol, officials said.
Several hundred young men armed with metal rods, baseball bats and knives took part in the fight, which started late Thursday and continued overnight at a park in Stavropol, police said Saturday.
Gelani Atayev, an ethnic Chechen student who also worked as a guard at a casino, was killed and eight others were hospitalized with wounds, police said.
The brawl was triggered by a dispute between Atayev and a local resident and broken up by riot police firing warning shots into the air. Prosecutors were investigating the fight.
Police sought to downplay any racial element in the brawl. Last year, a fight in the northwestern town of Kondopoga that left two local residents dead triggered anger against Chechen migrants.

TITLE: Website Launched for Doing Business
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: A new web-based business information service, “Doing business in St. Petersburg,” was officially launched last week.
The new portal is the work of the St. Petersburg Foundation for SME Development in cooperation with Danish National Agency for Enterprise and Construction, Danish Federation of SMEs, COWI consultancy and City Hall.
The www.doingbusiness.spb.ru website is to become an entry point to St. Petersburg for international SMEs, investors and companies wishing to trade, outsource or start a business in the city. The Danish side invested 80,000 euros into the portal.
“This site will be useful not only for small but for any foreign enterprises,” said Anders Christian Hougaard, Consul General of Denmark in St. Petersburg.
“SMEs stabilize the society and the economy in periods when oil prices fluctuate,” he said.
The portal, which took 18 months to develop, contains English language information on different business sectors, “10 step” instructions on starting business in the city, publications on business affairs, relevant links and interactive services. Industry, trade, construction and transport are extensively featured.
150 people visited the portal on its opening day and two document downloads were requested, said Maxim Balanev, senior consultant of St. Petersburg Foundation for SME Development.
“St. Petersburg is a city of SMEs,” said Jesper Karup Pederson of COWI. According to him, there are 700 SMEs per 100,000 residents in Russia, while in St. Petersburg that figure is 2,400 SMEs.
The share of people employed in SMEs is 25 percent in Russia and 32 percent in St. Petersburg. Pederson predicts this to increase to the European average of between 53 percent to 66 percent. He hopes that a considerable share of new SMEs in St. Petersburg will be foreign.
“Russia and St. Petersburg are attractive, except for the language barriers and bureaucracy,” Hougaard said.
Bringing information together in one place is good, he said, though not enough. “We get a lot of small businesses requesting individual meetings,” Hougaard said.
Edward Hoeks, General Consul of the Netherlands in St. Petersburg, pointed out that many Dutch companies have “hazy apprehensions about doing business in St. Petersburg.”
“For them it’s easier to do business with the Baltic states, Bulgaria or Romania than with Russia,” he said.
Even as the number one investor in Eastern European countries, the Netherlands still hesitates to invest in Russia. Investors are still scared despite the enormous opportunities, Hoeks said.
He listed three necessary conditions for improving the investment climate – predictability, accountability and transparency. “SMEs don’t have huge amounts of money like big corporations. They can’t overcome bureaucracy,” Hoeks said. “The first thing is to give the information and the second is to change something in government regulations and procedures,” said Dmitry Bykov, deputy chairman of the Committee for Economic Development, Industrial Policy and Trade. He said that giving information “step by step” was the main advantage of the portal.
The local business community also welcomed the portal. “Finally we’ve got it,” said Natalia Kudryavtseva, executive director of St. Petersburg International Business Association (SPIBA).
She called for both the obstacles and opportunities of doing business in the city to be clearly presented and regularly updated.

TITLE: Raiffeisen Announces Ambitious Expansion
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: Raiffeisen Capital plans to acquire 300 million euros ($400 million) worth of assets by the end of the year through regional expansion. The management company’s foreign shareholders are even more ambitious — they target $1 billion in assets by the end of 2007.
“We are interested in the regions, where trusts and managing companies are not yet widely represented,” said Andrei Zaitsev, general director of Raiffeisen Capital.
Expansion started from St. Petersburg — “a market of special importance.” Besides St. Petersburg, Zaitsev listed the Urals and South Federal District as the regions where penetration of management companies is low.
So far the regions have accounted for less than 15 percent of the assets of Raiffeisen Capital.
“We hope to be among the five largest management companies in Russia. We have every opportunity. As a result of the merger between Raiffeisenbank Austria and Impexbank we expanded our retail chain,” Zaitsev said.
Raiffeisen Capital was founded in 2004 as a 100 percent subsidiary of Raiffeisenbank Austria. In Austria, Raiffeisen Capital occupies about 30 percent of the asset management market. They manage a total of $40 billion euros. 
In Russia Raiffeisen Capital manages about $200 million and serves over 6,000 clients. About 65 percent of the funds come from individual clients.
Despite the fact that the Russian fund market lost over seven percent this year, Vladimir Soloviev, manager of equity fund at Raiffeisen Capital, expects it to grow 25 percent to 30 percent by the end of the year. “Some brokers even forecast growth of 40 percent,” he added.
The market environment is not as favorable as is it was during the last two years when the RTS grew at 70 percent to 80 percent a year. Raiffeisen Capital expects its trusts to deliver a 20 percent return this year, Soloviev said.
Raiffeisen Capital manages four trusts. “This summer we will establish several new trusts — an index fund for Moscow Interbank Currency Exchange, bonds fund and a couple of industry funds,” Zaitsev said.
Yevgeny Tupikin, senior finance counselor at Brokercreditservice investment company, also expects the Russian fund market to grow at 25 percent to 30 percent this year.
“We do not expect any positive activity over the summer, but by the fall the market will start growing. If the current political and economic trends continue, the Russian fund market will reach 2200-2300 points by the end of the year,” Tupikin said.
“If we see any force-major accident in the Middle East, the market will vary between 2100 and 2400 points,” he said.
The changing fund market negatively affected the performance of management companies. “A number of industries will hardly reach the maximum levels of the previous year. As a result of recent decreases in profitability, investors have started fleeing,” Tupikin said.
“Risky trusts based on ‘blue chips’ and shares of power companies or companies in the banking sector could deliver higher returns. Investment into oil and gas companies will be less profitable,” he said.

TITLE: In Brief
TEXT: <b>Containing Process</b>
ST. PETERSBURG (SPT) — Petrolesport stevedoring company will invest $250 million into the development of its container terminal in the next four years, Interfax reported Saturday.
By 2012 Petrolesport plans to increase the capacity of container processing up to 1.2 million Twenty-foot Equivalent Units, by 2015 to 1.8 million TEUs. The container area will expand from 23 hectares to 60 hectares. A new 190 meter mooring line and new refrigeration terminal will be constructed.
Last year freight turnover was reported at 313,000 TEU, this year it is expected at 430,000 TEU.

<b>AVANTA Expansion</b>
ST. PETERSBURG (SPT) — AVANTA Personnel recruiting company has announced it is to expand across the Russian regions. The company is partly an international project financed by foreign investment funds.
A Russian branch was established in St. Petersburg in April this year by Yelena Novikova, Natalia Ganina and Tatiana Bogus — former managers and shareholders of ANCOR recruiting company.

<b>Private Labels</b>
ST. PETERSBURG (SPT) — The X5 group, which operates Pyatyorochka and Perekrestok retail chains, will increase the share of private labels in its stores to 40 percent and 25 percent respectively in the next five years, Interfax reported Friday.
Last year the share of private labels in Pyatyorochka accounted for about nine percent, generating sales of $201.1 million. In Perekrestok private labels accounted for 4.3 percent of the assortment last year generating sales at $71.7 million.

<b>Rostelecom Shares </b>
MOSCOW (Bloomberg) — Rostelecom may decide to remove its shares from trading on the New York Stock Exchange, Interfax reported Monday, citing Chief Executive Officer Dmitry Yerokhin.
The board of Moscow-based Rostelecom may decide within a month to end the listing, the Russian news agency reported.
Rostelecom began to trade on NYSE in 1998 and 5.9 percent of the company’s shares were American depositary receipts last year, down from 23.6 percent a year earlier, Interfax said. The Kit Finance investment bank has accumulated a 35 percent voting stake and 6 percent of preferred shares in Rostelecom, Interfax said.
Rostelecom spokesman Andrei Polyakov declined to comment when contacted by phone today. Rostelecom is Russia’s biggest long-distance telephone company and controlled by Svyazinvest.

<b>Consumer Prices </b>
MOSCOW (Bloomberg) — Russian consumer prices will probably grow no more than 0.6 percent in May, the Economy Ministry said.
The monthly pace of price growth will be between 0.5 percent and 0.6 percent in May, the Moscow-based Economy Ministry said in a report posted on its web site Monday.
“The slowing pace of inflation that we have seen recently is probably over,’’ Alexander Morozov, chief economist at HSBC Bank in Moscow said by telephone Monday. “Inflationary risks are high’’ because of budgetary policies and the fast expansion of money in the economy, he said.
 Consumer prices grew 0.6 percent in April, the same pace as in March, according to the Federal Statistics Service’s figures. Russian inflation quickened in April to 7.6 percent from a near nine-year low of 7.4 percent in March, according to the Federal Statistics Service’s figures.

<b>Xstrata Offer</b>
MOSCOW (Bloomberg) — Xstrata Plc said it extended until June 7 its offer to acquire all the shares outstanding of LionOre Mining International Ltd., as it competes with a bid from Russia’s GMK Norilsk Nickel.
Xstrata, the world’s fourth-largest nickel producer, offered to buy LionOre for C$25 on May 15, or about C$5.5 billion, and C$18.50 on March 26. Norilsk offered C$27.50 a share on May 23, up from its original offer of C$21.50 on May 3.
Xstrata’s previous tender deadline was May 25. No other terms of the agreement for Toronto-based LionOre have changed, Xstrata said in a statement Monday.

<b>Korean Debt </b>
SEOUL (Bloomberg) — Russia will repay $1.33 billion in debt to South Korea over the next 19 years, the Maeil Business Newspaper reported Monday, citing an unidentified South Korean government official.
In June, Russia will begin paying $35 million in cash every six months until 2025 to repay part of $1.47 billion it borrowed from South Korea in 1991 as an economic cooperation loan, the Korean-language newspaper said.

<b>Cheaper Model</b>
MOSCOW  (Bloomberg) — AvtoVAZ, Russia’s largest carmaker, plans to make a budget version of its Kalina model to fill the gap when production of its cheapest car, the Klassika, ends in 2009, Vedomosti said, citing the company’s chief executive officer, Vladimir Artyakov.
The company hopes to cut $700 to $2,000 from the Kalina sedan’s list price, which is currently $9,800, Vedomosti said Monday.
AvtoVAZ will reduce costs by simplifying the assembly process and using cheaper materials, the newspaper said, citing an unidentified AvtoVAZ director.

<b>Iranian Truckbuilding</b>
TEHRAN  (Bloomberg) — Iran started producing Russian KamAZ trucks in the northwestern city of Tabriz, Sarmayeh reported.
The assembly line’s capacity will reach an annual 3,000 trucks of three different models, the newspaper said Monday.
The project is through a $6.5 million joint investment between Iran’s private-owned Rakhsh Khodro Diesel Company and the Russian republic of Tatarstan, where KamAZ, Russia’s biggest truck maker, is based, the newspaper said.
Some 1,500 trucks will be built by March 2008 under the Iranian brand name Araz, with 20 percent of the spare parts supplied domestically, the newspaper said, citing Mohammad Mirza Hosseini, managing director of Rakhsh Khodro Diesel.

<b>Relative Share</b>
MOSCOW (Bloomberg) — Relatives of senior Russian government officials including Finance Minister Alexei Kudrin and central bank Deputy Chairman Alexei Ulyukayev bought shares in the initial public offering of VTB Group, Vedomosti reported Monday.
Executives of state-run VTB, including Chief Executive Officer Andrei Kostin, bought a total of about $6 million of shares, the newspaper said, citing a central bank report.
VTB, the former Soviet bank for foreign trade and now Russia’s second-biggest lender, raised $8 billion in its IPO this month after President Vladimir Putin recommended people to buy the shares and VTB was allowed to advertise the share sale in government buildings, Vedomosti said.
The stock is listed on the London Stock Exchange and started trading on Russian stock exchanges Monday.

<b>Fixing Prices</b>
ROME (Bloomberg) — Ukrainian President Viktor Yushchenko said Europe should set a price for the transport and sale of natural gas, according to an interview published Monday in Italy’s Corriere della Sera newspaper.
“No European country is able to independently conduct an effective energy policy, and the Ukraine is no exception,’’ Yushchenko said. When asked whether there should be European tariffs for the sale and transport of natural gas, Yushchenko replied: “You got it right — European tariffs in both cases.’’

TITLE: BP Russian Unit Faces Loss Of Kovykta Field After Court Ruling
PUBLISHER: Bloomberg
TEXT: MOSCOW — BP Plc’s Russian venture lost a court case over its license to the giant Kovykta gas deposit, allowing the government as early as this week to regain control of a field with enough fuel to supply Asia for five years.
A court in Irkutsk, Siberia lifted an order forbidding the federal government from revoking the license held by TNK-BP’s Rusia Petroleum unit, after dismissing the unit’s demands to clarify how much gas it had to provide to the region.
“We won the case,’’ said Rinat Gizatulin, spokesman for Natural Resources Minister Yuri Trutnev, by phone Monday in Moscow. “We’re just waiting for the final audit.’’
The government of Russia, the world’s biggest energy supplier, has used license and environmental audits to restore state dominance over major energy projects. Gas-export monopoly Gazprom, which has negotiated for a stake in Kovykta, gained control over Royal Dutch Shell Plc’s Sakhalin-2 oil and gas project last year after months of pressure from regulators.
Oleg Mitvol, the environmental regulator at the Natural Resources Ministry who led the campaign against Shell, said the last review of Kovykta was completed May 25. That review found Rusia Petroleum violated its license by failing to produce and supply Irkut with 9 billion cubic meters of gas, Mitvol said by phone Monday. The license can be annulled once the review is received in Moscow, Mitvol said.
“They can file court cases, but what’s the point?’’ Mitvol said. “They promised to produce that much, they didn’t, and the rest is written in the law.’’
TNK-BP has been defending its Kovykta license for more than four years, saying the terms of the license only require it to meet the gas demand in the local Irkutsk region, which it has said can only use 2.5 billion cubic meters of gas a year, not 9 billion as the government claims.
“TNK-BP regrets the Irkutsk court’s negative decision and the pressure to revoke Rusia’s license,’’ said Marina Dracheva, a TNK-BP spokeswoman. “We’ll use every avenue to defend and retain this license.’’

TITLE: Billionaire Vekselberg Buys Stake in TGK-5 Generator
PUBLISHER: Bloomberg
TEXT: MOSCOW — Billionaire Viktor Vekselberg’s power holding company bought 26.5 percent of TGK-5, a Russian power generator, as the investor seeks to profit from plans to deregulate the country’s electricity prices.
Integrated Energy Systems, Vekselberg’s company, raised its stake in TGK-5 to slightly more than 40 percent, said Chief Executive Officer Mikhail Slobodin at a briefing in Moscow Monday. The holding aims to gain control of three generators in the next two years.
Unified Energy System, Russia’s national power utility, is seeking to attract strategic investors to the industry to boost competition and raise as much as $27 billion to upgrade and expand the country’s aging power infrastructure. The government has said it will stop controlling electricity prices by 2011.
TGK-5, based in the Volga region, raised 11.6 billion rubles ($453 million) selling 329.7 billion shares, equivalent to 26.8 percent of the company, to Integrated and other minority shareholders in the generator on Monday, Unified Energy said in a statement distributed after the sale.
Integrated Energy will offer to buy out TGK-5’s minority owners at “very close to the buying price’’ of 3.53 kopeks a share, Slobodin said. A kopek is a hundredth of a ruble.
Unified Energy System, Russia’s national power utility, gave up control of TGK-5 through the sale, diluting its stake to 47 percent. Unified Energy, which will be dissolved by July 2008, will distribute its shares in TGK-5 among its own shareholders within the next three months, Slobodin said.
The sale values TGK-5 at $501 per kilowatt of capacity, said Unified Energy Deputy CEO Alexander Chikunov. Morgan Stanley and Moscow-based CIT Finance arranged Monday’s share sale.

TITLE: Estonia March Trade Gap Widens 24% on Car Imports
PUBLISHER: Bloomberg
TEXT: TALLINN — Estonia’s trade deficit widened an annual 24 percent in March, led by vehicle imports.
The March deficit increased to 4.6 billion krooni ($400 million), up from a revised 3.2 billion krooni in February and 3.7 billion krooni in March of last year, the Tallinn-based statistics agency said in an e-mailed statement Monday. A 4 percent rise in imports boosted the deficit.
“Estonia’s foreign trade depends a lot on trade flows,’’ said Maris Lauri, chief economist with Hansabank Markets. “A significant part of cars that were imported to Estonia will go to the Latvian and Lithuanian or Russian markets. On average, about 40 percent of imported vehicles are re-exported from Estonia.’’
Rising imports of consumer goods, fueled by rising wages and falling unemployment, increased the Baltic country’s current-account deficit, the broadest measure of trade in goods and services, to a record 14.8 percent of gross domestic product last year.
The central bank and Finance Ministry expect the gap to widen this year as wage increases, at 20 percent in the first quarter, keep spending growth above 10 percent.
Imports of transport equipment rose 36 percent and exports of such equipment increased 15 percent, with the deficit making up 28 percent of the total gap. Imports of fuel declined 6 percent, while fuel exports fell 27 percent, also boosting the deficit. A 44 percent surge in food exports kept the overall gap from widening more.
New car sales in the Baltic country surged 55 percent in March to a new monthly record of 2881 cars, according to data from the association of car sales and service employers AMTEL, published last month.

TITLE: Gazprom Neft, LUKoil Set Up Venture
PUBLISHER: Reuters
TEXT: MOSCOW — Gazprom Neft, the oil arm of Gazprom, and LUKoil have set up a joint venture to cooperate in new projects in Russia and abroad, the firms said Friday.
The venture, in which Gazprom Neft and LUKoil will hold 51 and 49 percent respectively, will acquire new licenses and explore, develop and produce oil and gas, mainly in Russia, but also overseas.
“The document that we have signed will help our companies develop more dynamically,” LUKoil CEO Vagit Alekperov said after signing the deal. 
The venture will develop new projects in production and refining of hydrocarbon resources,” he said
He gave no details about the value of the venture, the investment that would go into it or how much oil it was expected to produce.
The companies will share operational control of the venture, which will work in the regions of their mutual interests, such as east Siberia, Timan-Pechora in the Arctic, and the Caspian Sea, LUKoil first vice president Ravil Maganov said.
Analysts said Gazprom’s strong ties with the Kremlin could protect LUKoil from excessive pressure from state authorities, while LUKoil could help Gazprom become a major oil player.
“LUKoil may fear possible amendments to the subsoil use law that would restrict access to strategic fields even for domestic private sector firms,” said Oleg Maximov from Troika Dialog. 
An alliance with Gazprom Neft could enhance LUKoil’s chances of winning upcoming oil field auctions in Timan-Pechora, where LUKoil is actively working, Maximov said.
LUKoil and Gazprom Neft had planned to sign the deal last year, but, after Gazprom Neft CEO Alexander Ryazanov quit in November, decided it was better for both sides if they postponed it.

TITLE: Arctic Port at Heart of Norilsk’s Empire
AUTHOR: By Robin Paxton
PUBLISHER: Reuters
TEXT: DUDINKA, Krasnoyarsk Region — Every spring, the cranes in this Arctic port are shifted several hundred meters away from the banks of the Yenisei River.
With good reason. The river rises 8 meters when it thaws, tossing chunks of ice into anything blocking its path. Annual repairs cost more than $1 million.
Dudinka, 320 kilometers inside the Arctic Circle, is the gateway to Russia’s ice-bound northern shipping lanes, taking metals from the heart of Siberia up the Yenisei to the Arctic Ocean, and from there to destinations all over the world.
“And it’s probably the only port in the world where the cranes have to be moved every year,” said Nikolai Kostetsky, head of administration at the port.
About 4.5 million tons of goods pass through the port every year, mostly from the smelters of Norilsk Nickel, which supplies one-fifth of the world’s nickel and more than half its palladium.
Norilsk, which owns the port, is building five $110 million ships. The first was launched last year and the last will be ready by 2009.
A settlement has existed at Dudinka for 340 years, but its modern existence began in 1935. Among the first arrivals were 1,000 political prisoners exiled to Russia’s frozen north by Stalin to exploit mineral resources and build a smelter in Norilsk, 80 kilometers to the east.
More than 300,000 people were held in the gulag from 1935 to 1956. Many others died from the journey.
From such grisly beginnings, Dudinka has developed into a town of 28,000 people, mostly port workers and scientists.
Buildings are painted bright blue and pink, and water pipes run above ground to avoid the permafrost.
The average year-round temperature is minus 14.7 degrees Celsius, occasionally hitting minus 60 C. It is dark for six weeks in the winter.
The port closes only for a month, during the thaw in late May and early June.
The Yenisei, five kilometers wide at Dudinka, is clear of ice for 131 days per year, and in the winter, icebreakers cut a path through the frozen water.
“When you’re on the ice, you feel the vibrations,” Sergei Kamyshev, a senior assistant ship captain, said as he sipped tea on the bridge of the Finnish-built Kapitan Danilkin.
Dudinka is his favorite among Russia’s Arctic ports.
“The port works well. We never have any problems here, and with two weeks’ rest for loading it’s possible to get things done and to relax a little.”
While Kamyshev relaxes in the ship’s recreation room or visits the newly revamped Arktika movie theater, 11,000 tons of copper from Norilsk — worth more than $80 million at current prices — is loaded for the six-day voyage through the Arctic Ocean to Arkhangelsk, on the Barents Sea.
“I love you, Dudinka,” says a mural on the main street and a banner covering the entire side of an apartment block proclaims: “Town, port, destiny.”
But its destiny is not clear and not everybody loves it, evidenced by a declining population.
The average monthly wage of 28,000 rubles ($1,100) is more than double the national average, but food and everyday products, shipped from thousands of kilometers away, are more expensive.
Kostetsky has worked in Dudinka for 36 years. His son has already left for relatively warmer climes, and he dreams of his native Odessa. “One day I may return to the Black Sea.”

TITLE: Unified Energy’s Volga Sale To Generate Billions
PUBLISHER: Bloomberg
TEXT: MOSCOW — Unified Energy System, Russia’s national utility, is looking to raise 15 billion rubles ($580 million) from a sale of shares in the Volga regional generating company, OAO TGK-7, as the national company is broken up to create competition.
TGK-7, also known as Volzhskaya Territorial Generation Co., will sell 3.86 billion new shares, equivalent to 12.9 percent of the company’s increased capital, in a public offering later this year, Moscow-based Unified said in an e-mailed statement.
Volzhskaya TGK was created on January 1 last year. It operates thermal power plants in four Central Russian regions with a capacity of 6,879.7 megawatts.
The national utility will lose control of TGK-7 after the share sale, scaling down its stake to 47.46 percent from 54.47 percent. Volzhskaya shareholders have a preemptive right to maintain their stake, Unified said.

TITLE: In Brief
TEXT: <b>New Dalsvyaz CEO</b>
Dalsvyaz, a provider of telecommunications services in the Far East region, on Friday confirmed Anton Kolpakov as its new chief executive officer. (Bloomberg)

<b>New Mosenergo Chair</b>
Gazprom deputy CEO Kirill Seleznyov was appointed chairman of Mosenergo after the state-run natural-gas company gained control of the utility’s board, Mosenergo said in a statement Friday. (Bloomberg)

<b>Plasma TVs</b>
n MOSCOW (Bloomberg) — Samsung Electronics Co. and LG Electronics Inc. plan to assemble plasma televisions in Russia’s Kaliningrad region, Kommersant reported Monday.
Samsung will start assembly at the Telebalt plant in July and LG will start at the Rolsen plant in August, the Moscow- based newspaper said.
Local production of plasma televisions will cut the retail price by between 10 percent and 20 percent from the current 30,000 rubles ($1,160), Kommersant reported. Kaliningrad is a so-called special economic zone and manufacturers are exempt from import duties on components and value added taxes.
Russians bought about 240,000 plasma televisions for $670 million last year, the newspaper said.

TITLE: Costing a Little More Conversation
AUTHOR: By Alyona Zhuravleva
PUBLISHER: Special to The St. Petersburg Times
TEXT: Given the high levels of mobile penetration in St. Petersburg, operators have been reduced to attracting customers by lowering their prices. And yet, most market players admit that, despite the decrease, customers are still not paying less for calls.
Cuts in the cost of mobile services were previously related to either a dampening effect, when companies first arrived on the market and needed to attract customers, or as a form of marketing, which offered a discount on a particular service. In both cases any cut in price was a temporary phenomenon.
Now the fall in prices has taken on the character of a more general phenomenon, with operators needing to keep up the competition.
“When the quality became consistently high enough not to be a differentiating factor, companies reverted to a price war. Now, with ARPU falling to $8.4, companies prefer a more careful approach and play on marketing and service,” said Senior Consultant at iKS-Consulting Margarita Zobina. 
According to representatives from Mobile TeleSystems (MTS), “With mobile penetration at over 100 percent, it becomes more difficult to develop according to a continual growth in the number of new subscribers.”
“It follows that operators now focus on developing subscriber loyalty and luring subscribers away from competitors. This can involve reducing the cost of services,” they said.
In February 2007, MegaFon Northwest released the Domashny tariff, which was essentially characterized by the low cost of calls between MegaFon subscribers - 0.95 rubles ($0.036) per minute. The company’s Student plan also involved a discounted rate for inter-subscriber calls in St. Petersburg and Leningrad Oblast of 0.99 rubles ($0.038) per minute. MegaFon Northwest is also actively encouraging the use of tariff “modifiers” or options, which in most cases reduce the cost of calls by 50 percent.
Similarly, in February MTS put out the tariff Red_Text, an addition to the Red line of tariffs, which grants subscribers cheap calls, text and photo messages. It is interesting to note that this tariff was released the same day as MegaFon’s Domashny offer. Moreover, at the beginning of this year MTS released another two tariffs, which, taken as complete plans, appear attractive for subscribers. The Sprint tariff reduces the cost of inter-subscriber calls in a “home” region to 0.9 rubles ($0.035) per minute, although this includes a 50 percent discount, which is activated automatically if the startup package is purchased before the end of September, and remains active up to Nov. 5, 2007. 
But the most interesting tariff currently on offer from this operator is Svobodny, which offers a discount when subscribers talk more than three minutes a day. 
And in addition to this, MTS also has its very own happy hour – from noon to 1 p.m. every weekday the cost of all local, inter-subscriber calls is just 0.2 rubles a minute.
Nevertheless, new tariff plans are not the only way to decrease the cost of services. Recently Beeline, for example, again adjusted its Proshe Gavorya tariff, originally released in St. Petersburg in the spring of 2007. Customers now receive a variety of bonuses and don’t pay for every second minute of outgoing calls.
MTS has also modified its old tariffs, which has basically involved amending costs, and in most cases the costs have fallen. “Otherwise everything has pretty much remained the same, including the structure of tariffs and their names,” the MTS representatives revealed. “We are confident that the new, improved versions will be more profitable for our subscribers and make it easier to plan one’s budget spending on mobile calls,” they said.
The other way of reducing costs was through tariff modifiers. That with Beeline, for example, one can choose one’s five favorite numbers – both landline and mobile – significantly increased sales of the operator’s starting packages and allowed the company to see positive growth in February (in January growth was negative).
At the beginning of the year, both MTS and MegaFon also renewed their modifiers. Of more interest here is the position of MegaFon. Not only did the company release a previously terminated option called Subscription 6, which allows subscription payments to be put off for up to six months, but it also extended the possibility of receiving discounts for the Drive tariff. However, the period during which discounts for the tariff itself were active was not extended— rather a new option, Drive 300, was introduced.
In February, even Tele2, traditionally not a company that offered modifiers, released the option Favorite number, though, admittedly, only for a limited period.
It is worth noting that even the company Sky Link Petersburg has been caught up in the general price-cutting trend. This year the company released a bonus program that applies to almost all its tariffs, as well as the Turbo line of tariffs, which offers a certain amount of internet traffic with a discount.
The PR Manager of VimpelCom (Beeline brand) in the Northwest, Yevgeny Aleshko said that mobile phone subscribers are now spending less, “and chiefly because the Beeline tariff policy follows the principle that a decrease in a client’s spending will mean they will talk more.”
“Over the last two months our dealers have offered exactly that kind of thing. And ultimately in the development of mobile communications it is not just the price that is important but the relationship between price and quality. It is now not enough that calls are cheap, expectations have risen for the whole range of services.”
Representatives from Beeline observed that subscribers are responding less actively to various promotions than they did before. Now some kind of prolonged discount has a more tangible effect. 
According to Kirill Voloshin, the head of PR at Delta telecom, the situation is deceptive.
“Subscribers are not spending less on mobile phone calls – the consumption of traffic has grown as well as that of additional services, which means subscribers are spending pretty much the same amount as they did before,” he said.
Such a view was confirmed by representatives from MTS, who said because of the lower cost of calls, subscribers are communicating more, which results in an increase in traffic.
“With a fall in the average cost of calls per minute, there is a rise in the average number of minutes of conversation a month.  So the general decrease in the cost of communications is not reflected in an operator’s profits,” they confirmed.
In the future, prices for mobile calls in St. Petersburg will fall even lower, said Zobin. She alluded to the cheaper rates in some other regions in Russia, for example, in the Prevolzhe Federal region – where Tele2 introduced a tariff where all outgoing calls cost as little as five kopeks per minute.

TITLE: VimpelCom Equips Itself for Eastward Push
AUTHOR: By Lyubov Pronina
PUBLISHER: Bloomberg
TEXT: MOSCOW — VimpelCom, Russia’s second-largest mobile phone operator, will announce a contest among equipment makers to build its network for faster mobile-phone services.
Moscow-based VimpelCom will send requests for proposals within the next few weeks, Chief Executive Officer Alexander Izosimov told reporters Monday.
VimpelCom last month won a government license to provide the so-called third-generation services such as video-conferences and mobile television. The company will invest up to $350 million to build the network in 39 Russian regions by the end of next year.
It will build 6,000 base stations over the next five years. 
Izosimov said that VimpelCom is studying whether to hold an open competition or focus on the suppliers it already has.
 VimpelCom currently gets equipment from Ericsson AB, Nokia Siemens Networks, Alcatel-Lucent, Motorola Inc. and Huawei Technologies Co. Ltd. Izosimov said that ZTE Corp., China’s biggest publicly listed telephone equipment maker, is also aggressively offering its services at prices “which you cannot ignore.’’
Isosimov also said the company may invest $100 million in building a network in Russia’s Far East if it gets a license.
VimpelCom on Monday applied to the Russian Communications Agency to take part in the government auction of the licenses, Izosimov told reporters in Moscow. 
Izosimov said he doubts VimpelCom will win the license as the bidding conditions discourage investors.
“I doubt the winners will have either the resources or the will to invest as much as we plan,’’ Izosimov said. “We are fed up with it.’’
     VimpelCom is present in four of the 13 regions in the far eastern part of Russia, which is populated by 8 million people. 
The company has applied for licenses covering the far eastern regions more than 30 times but was repeatedly denied for lack of frequencies.

TITLE: Forms Of Destructive Snobbery
AUTHOR: By Anna Shcherbakova
TEXT: St. Petersburg is Russia’s former imperial capital and one of the nicest cities in the world but for all that it is a very snobbish place. Snobbery here comes in different forms. Some people feel obliged to read Japanese writer Murakami, or buy Prada shoes, or visit particularly fashionable clubs. Others go to the ballet, listen to classical music and go on vacation to Lake Como. Some, though there aren’t that many of them, cannot afford to drive anything less than a Lexus or Mercedes. 
Each devotee boasts to each other with their status. 
Sometimes, when a particular author has been read or when the latest model of car sits idly in the garage, it is time to change one’s status and recover a feeling of prominence. 
Owner and CEO of fruit importer JFC, Vladimir Kekhman, was recently appointed General Director of the Maly Ballet and Opera theater. In just a few years Kekhman, 40, founded and developed the company that now supplies almost half of all bananas consumed in Russia. Now he is going to develop a theater that has always been in the shadow of the Mariinsky, looking humble and unprivileged. Kekhman has promised to renovate the Maly theater and attract the best artists to perform there. And to do that he is ready to spend up to $10 million a year — partly from his own pocket and partly raised by his friends and partners. 
Known as a tough manager and strong negotiator, Kekhman likes parties and loves to sing himself, according to his former employee. For several years JFC sponsored the jazz-club that carries its name. As the sponsor of a classical theater, Kekhman earn more fame and prominence. As well as the money, the new director has promised to revert its name to its original one — Imperial Michael’s Theater. I bet he dreamt of giving it his own name, but that, unfortunately, is impossible. 
Another benefit of managing a city-owned theater is the access it gives to the offices of local government. Kekhman has already visited governor Valentina Matvienko and explained to her the future of the theater where he is now director. No one knows if he discussed anything else with her, like the destruction of the Frunzensky department store bought by JFC a couple of years ago. Kekhman’s idea is to replace the 17,000 square meter behemoth, constructed in 1938, with a 65,000 square meter complex of residential, office and commercial space. The project has already been drawn up by British architect Sir Norman Foster and is being widely discussed by the business community. Destruction of historical buildings is quite typical for Moscow, but in St. Petersburg the process is still, thank goodness, rare. I see two general reasons why here less gets destroyed. Firstly, it’s expensive to knock a building down and start again — the modest means of local business have meant original buildings have stayed up in the city center. Secondly, the watchdog that controls historical landmarks is pretty strict. So concerning Fruzenskly, also a historical landmark, the question is whether Kekhman’s achievements will be enough to circumvent the law. 

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

TITLE: Ignatyev Between a Ruble and a Hard Place
AUTHOR: By Martin Gilman
TEXT: Central Bank Chairman Sergei Ignatyev is a man who is battle-hardened to deal with tough situations. He was, after all, a first deputy finance minister at the time of the 1998 default. Since taking over at the Central Bank in 2002, he has had a relatively easier time dealing with a bulging balance of payments surplus. His burden has been all the lighter because his old friends at the Finance Ministry did the heavy lifting by using taxation to channel a significant portion of oil export earnings into the stabilization fund starting in 2004. He has, in fact, run a very loose monetary policy, as evidenced by negative real interest rates.
This peculiar mix of monetary and fiscal policy made sense. By keeping real interest rates lower than those available elsewhere, net capital outflows continued. This was also a form of sterilization of incoming oil revenues. While you could argue over the merits and longer term costs of this approach, the real problem is that it is no longer working. Ignatyev is now in an uncomfortable position where he is damned if he does, and damned if he doesn’t.
In the past year, the ruble has appreciated in nominal terms against the dollar by 6.5 percent, with the Central Bank rate moving from 27.5 rubles per dollar to 25.84 rubles as of Monday, while it appreciated by only 3.3 percent against the euro, which is now worth 35.1 rubles. Criticized recently by the Kremlin for purposely allowing the ruble to appreciate, the Central Bank has become a passive spectator as the relative value of the dollar declines.
In fact, to prevent an even more rapid fall in the dollar’s value, the bank was forced to add more than $30 billion to its reserves in April, and from May 4 to 11, the latest reporting week available, it accumulated an unprecedented $14.2 billion in gross international reserves. This was the result of significant foreign capital inflow, and the initial public offering by VTB was clearly not large enough to account for the entire amount. Gross international reserves reached $386.3 billion, bringing the growth in reserves thus far in 2007 to $82.6 billion. As a consequence, the Central Bank’s initial forecast of reserves of $396 billion at the end of the year may have already been surpassed when new data become available later this week.
The continuing current account surplus (especially with oil prices edging up again), large external borrowing by Russian companies and banks, and portfolio investments by nonresidents are all contributing to capital inflows, leading to the attempts by the Central Bank to prevent a massive appreciation in the nominal value of the ruble by buying dollars and adding them to its reserves.
This rapid reserve accumulation translates directly into a rapid expansion of ruble liquidity. Indeed, M2 — a key measure of money supply often used to forecast inflation — was up 52.7 percent year on year in April (and a staggering 5.7 percent month on month), the fastest rise since early 2004.
Though it might be too early to sound the alarm, it is possible that even a fast-growing economy like Russia’s will be unable to absorb a money injection of this magnitude. In this case inflation will accelerate, as already appears to be the case this month. The real ruble rate will then continue to appreciate, and Ignatyev’s policy dilemma will grow.
This comes at a bad time. With parliamentary and presidential elections on the horizon, the Finance Ministry is weakening its traditional efforts to sterilize much of the excess liquidity. With a loose monetary policy and looser fiscal policy, it is likely asking too much of the Russian economy to expect it to offset the potential inflationary effects through higher money demand. The government’s inflation target of 8 percent for the year is now in jeopardy, and there is little that can be done at this stage to reverse the trend.
It is important to look at why this is all happening. As Ken Rogoff, a Harvard economist and former International Monetary Fund chief economist, noted recently: “Many people have been asking why the dollar hasn’t crashed yet. Will the United States ever face a bill for the string of massive trade deficits that it has been running for more than a decade?” He also wondered how long the rest of the world would have an appetite for financing U.S. prolificacy, especially as U.S. borrowing now absorbs more than two-thirds of the combined excess savings of all the surplus countries in the world, including China and Russia.
The fall in the dollar’s value appears to be based on economic fundamentals. The basic question is under what conditions will foreigners continue to add to their already considerable stock of dollar assets. The market dictates that the price of U.S. assets must decline to encourage greater demand. This can come about in one of two ways: a fall in the value of the dollar relative to other currencies or a drop in U.S. bond prices. Either of these, or some combination, would make U.S. assets more attractive. In fact, the growth in net dollar purchases began to slow in the fourth quarter of 2006.
So what we are seeing is more a diversification away from the dollar than a rush to the ruble. Most of the movement is actually toward the euro, but there has been some increase in demand for the ruble as well.
Demand for the ruble certainly climbed last year when the Central Bank publicly advocated a stronger currency. While it might make perfect sense from an analytical point of view to use ruble appreciation as a tool against inflation, it defeats the purpose if you announce that this is the posture you are assuming. It is tantamount, in effect, to giving speculators a one-way, guaranteed bet when investing in rubles. At least in the short-run, you can’t lose. The bank has now learned this lesson, but too late. If you are moving out of the dollar, the ruble is now an attractive destination.
So what can the Central Bank do?
One modest step to sterilize some of the major capital inflow was announced by the bank on May 14. This was a rise in mandatory reserve requirements from 3.5 percent to 4 percent on ruble-denominated retail deposits, and from 3.5 percent to 4.5 percent on other liabilities. 
This step is the simplest of the policy tools available to the Central Bank other than letting the ruble appreciate further. I think that we may see more such measures given the rate of growth in the money supply and increasing inflationary pressures in the economy. (China, in a somewhat similar situation as Russia, with a significantly undervalued currency the authorities are trying to keep down and very strong domestic demand growth, has raised the reserve requirements seven times over the past 11 months).
As long as Russia has portfolio capital inflows in the billions of dollars — in addition to current account surpluses — arriving every month, the Central Bank has a strong incentive for clamping down on the rate of ruble-value appreciation to avoid any additional speculative pressures. 
And when the inflows slacken, the bank has just as strong an incentive to allow some ruble appreciation again. If the Central Bank is forced to choose between the possibility of increasing inflation arising from an increase in reserves in an effort to stabilize the ruble’s value, on one hand, and the possibly of unsustainable inflows driven by currency appreciation expectations on the other, I think Ignatyev would opt to risk the inflation and try to prevent the ruble from getting too strong. Either way, I wouldn’t want to be in his shoes.

Martin Gilman is a Professor at the Higher School of Economics.

TITLE: 		A System Best Unborrowed
AUTHOR: By Malcolm Carlisle
TEXT: For the last 200 years, the United States and Europe have exchanged ideas, groundbreaking technologies and political philosophies.
And while both parties have benefited from this relationship, the latest export from the United States to Europe could, if not carefully managed, do irreparable damage. No, it’s not bioengineered foods or the latest pop culture craze. It’s U.S.-style litigation.
Over the last decade we have seen increasing signs of the U.S. litigation culture taking root at the national level in Europe. Some nine class-action bills have been making their way through the parliamentary procedures in Italy; the German Supreme Court has issued a judgment that makes it unconstitutional to ban contingency fees for lawyers under any circumstances; Denmark, Finland and Norway all have new laws that make it easier to act collectively in judicial matters; France, Poland, Ireland and Britain are considering introducing legislation that allows class-action suits.
Of equal concern is Brussels’ interest in the issue. At the end of 2005, European Competition Commissioner Neelie Kroes opened the debate with a green paper seeking public comment on the value of encouraging private litigation to recoup damages resulting from breach of anti-monopoly rules. In 2007, the discussion picked up momentum with the arrival of the new commissioner from Bulgaria, Meglena Kuneva. Her five-year strategy for consumer policy makes express reference to the potential value of collective actions for consumer re-dress.
But even more ominous clouds loom on the horizon with major U.S. law firms setting up shop in European capitals.
In light of these changes, they’ll have a bountiful hunting ground. So how concerned should Europe be? One only needs to look at U.S. statistics to gain a sense of where this road could lead. In the United States, tort costs in 2004 alone reached $260 billion, equal to a “litigation tax” of $886 on every U.S. citizen, or just more than 2 percent of the U.S. gross domestic product. 
Tort costs in Europe today are already heading toward 1 percent of GDP.
The real concern isn’t implicit in the numbers. Despite record settlements in the United States, allegedly to provide redress for the unprotected, the real winners have been trial lawyers. The horror stories are endless, with plaintiffs being promised millions and in reality receiving only a small fraction of the pay-outs.
One notable case is the Bank of Boston class-action settlement in Alabama.
The lawyers reaped $8.5 million, leaving the plaintiffs with $8.76 each. It truly was a million-to-one return — for the lawyers, not the plaintiffs. Europe needs a balanced legal system that protects consumers and businesses alike. But in order to accomplish this, civil justice systems must differentiate between meritorious claims and frivolous ones that stand only to clog up an already overburdened legal system. Redress mechanisms must be designed in a fashion that ensures that those with a genuine cause for complaint are compensated, not the trial lawyers.
A top priority for Europe should be to modify the judicial system in a way that combines public and private mechanisms to address the regulatory and compensation issues. Member states need ways to handle multiple claims and correct some antiquated legal regimes.
But moving toward class actions would primarily increase litigation.
As part of the solution, the EU should continue to promote mediation, alternative dispute-resolution mechanisms, small claims and other similar approaches that combine public and private solutions. We have witnessed the benefits of such approaches in the Nordic countries and Britain, and we should study the cost benefits of the respective proposals for EU intervention before moving hastily toward a “one size fits all” approach at the EU level.
These recommendations not only make good legal sense; they make good economic sense as well. If Europe is committed to improving its economic competitiveness, it must put in place a legal system that guarantees legal certainty, transparency, predictability and swift dispute resolution. One of the driving factors of European growth has been the confidence of investors in its solid legal framework — one based on its diverse and sophisticated legal traditions. Europe must look seriously at the cost impact of a system that would introduce incentives for private enforcement.
Proposals now under discussion on the EU and national levels could lead to the spread of unregulated contingency fees and removal of the “loser pays” rule under the guise of “protecting the unprotected.”
Such an approach will definitely yield huge benefits — but only for trial lawyers, not the unprotected.

Malcolm Carlisle is chairman of the European Justice Forum. This comment appeared in The Wall Street Journal

TITLE: Standing Up to Moscow on Kosovo
AUTHOR: By Philip Stephens
TEXT: When I hear foreign policy realists extol the virtues of inaction I think of the Balkans. As Yugoslavia began to unravel during the early 1990s, an over-excited European foreign minister said that posterity would recall that this had been “the hour of Europe.” In the event, Europe sat on its hands as the region fell to carnage. History records only an eternal shame.
Now Europe is to be tested again. The time has come to close one of the remaining Balkan chapters by putting Kosovo on the road to independence. For the enterprise to succeed, Europe must show in 2007 the unity and boldness so conspicuous by its absence during the 1990s.
The American-led military intervention in 1999 to expel the marauding army of Serbia’s Slobodan Milosevic left Kosovo as a United Nations’ protectorate. Eight years later, the time has come to end the constitutional limbo. The road-map has been drawn by Martti Ahtisaari, the United Nations special envoy.
After many rounds of fruitless negotiation with Belgrade, Ahtisaari concluded this year that a negotiated solution to Kosovo’s status was impossible. Serbians will not yet accept that Kosovo was lost to them forever by Milosevic’s crimes.
So the UN envoy put forward a plan for gradual independence — supervised at the outset by the European Union and safeguarded by existing NATO forces. Independence, incidentally, is the non-negotiable demand of the overwhelmingly ethnically Albanian population.
Few would say that Ahtisaari has produced the neatest of constitutional blueprints. In his anxiety to give proper protection to the rights and interests of the minority Serb population, he has alighted on a system of political and administrative checks and balances almost numbing in their complexity.
There is also awkwardness that extends beyond Kosovo and, indeed, well beyond the Balkans. Unlike Bosnia, Croatia or Macedonia, Kosovo was never an independent republic within the old Yugoslav federation. Instead it was a province of Serbia. 
The fear among some elsewhere is that independence might thus set a dangerous precedent. Spain worries about Catalonia, Slovakia about its ethnic Hungarian minority, Greece about Cyprus.
In other circumstances any one of these imperfections might have been enough to make the case for delaying Ahtisaari’s plan. The problem, as Margaret Thatcher used to say, is that there is no alternative. 
Kosovars will accept nothing less than independence. Delay makes things worse. The process of state building cannot begin properly until Kosovo is assured of statehood. Serbia will be reconciled to its loss only when it is seen to be irreversible. 
As for precedents, the UN will simply have to make it clear that Kosovo is indeed the exception to the rule. What is required now is a new resolution to end Kosovo’s protectorate status and begin the process that will take it to statehood.
In spite of the individual misgivings in some capitals, the Ahtisaari plan has thus far secured the support of all 27 EU governments. Energetic diplomacy by the United States has secured the backing of a large majority in the UN security  council. That leaves Russia as the only serious obstacle.
How serious, we do not know. 
Vladimir Putin’s Kremlin has thus far said that a new UN resolution to implement the proposals would be unacceptable. Russian diplomats have talked of the dangers of setting a precedent for Chechnya, Russian politicians of solidarity with fellow Slavs in Serbia.
Kosovo has become entangled with Putin’s broader — and crassly misguided — effort to rebuild Russian prestige by threatening its near neighbors, deploying energy as a crude instrument of power and being generally obstructive. In the Kremlin’s new mythology of victimhood, the NATO intervention against Milosevic was one among a shoal of deliberate efforts by the west to humiliate Russia and its allies.
Whatever Moscow’s motives, though, it will carry out the threat to veto a new resolution only if it calculates that, in so doing, Russia can divide Europe from the United States and Europeans among themselves. A veto exercised against a united international community would serve only to humiliate Moscow.
The answer then is for European governments to bury any misgivings and, to borrow the cliche, stand shoulder to shoulder with the United States. They should tell Moscow that, regardless of any Russian posturing at the UN, they intend to carry on with the process of moving Kosovo towards statehood. There will be no room for temporizing.
Europe’s vital security interests are at stake in Kosovo. 
The soldiers, civilian administrators and aid workers threatened by a return to disorder and violence are overwhelmingly European. Russia has nothing at stake but misplaced pride.
Europe’s responsibilities, of course, will begin rather than end with recognition of Kosovo’s independence. 
Bringing to Kosovo, and to the rest of the western Balkans, the peace and prosperity the rest of Europe takes for granted demands a clear glide path for EU accession. 
Croatia, Macedonia, Bosnia, Albania, Montenegro, as well as Kosovo and, yes, Serbia, should all expect to be full EU members by the middle of the next decade.
What all this requires of European political leaders is just a small amount of the political courage so lamentably absent during the early 1990s. So what is it to be: Europe’s hour or, once again, Europe’s shame?

Philip Stevens is a columnist for the Financial Times, where this comment appeared.

TITLE: Missing Moral Authority
AUTHOR: Alexei Bayer
TEXT: I recently attended a dinner in New York at which the American Jewish Historical Society presented its annual award to former U.S. Secretary of State George Schultz for his efforts on behalf of Soviet Jewry during the 1980s.
Sitting in the audience were former Soviet prisoners of conscience and refuseniks, many of whom had to wait for over a decade for permission. That they were eventually let go was due largely to U.S. pressure. Moreover, while there was political, economic and military horse-trading between the two superpowers, the most effective pressure applied on the Kremlin in the human rights area was, in fact, moral.
Two decades ago, Washington’s moral authority gave U.S. leaders the right to urge Soviet leaders to do the right thing. It was a moral act when Schultz attended a Passover Seder at the U.S. Embassy in Moscow in April 1987, sitting at the table side by side with wives of imprisoned activists. It was a moral stand, too, that U.S. President Ronald Reagan took in June of that year, calling on Soviet leader Mikhail Gorbachev to “tear down this wall!”
Soviet officials bridled at U.S. interference in their internal affairs, but they listened.
Today, it is inconceivable that George W. Bush could pull off such a stand. Since 2003, his government has squandered most of the moral authority the United States had built since World War II. Bush’s criticism of anyone on moral grounds — no matter how corrupt or murderous the regime — is likely to elicit only cynical laughter. His is the government of Abu Ghraib, Haditha and Halliburton, and its poster boys are U.S. Vice President Dick Cheney, former Defense Secretary Donald Rumsfeld, Attorney General Alberto Gonzales and former Deputy Defense Secretary Paul Wolfowitz.
Had a similar administration held power in the mid-1980s, not only would Jewish emigration from the Soviet Union not have been possible, but the United States might not have won the Cold War. Gorbachev’s liberalization at home and the loosening of the Soviet grip on Eastern Europe were largely driven by his desire to see his country reintegrated into the community of nations.
Now, in a stunning role reversal, President Vladimir Putin could go to the notorious U.S. prison at Guantanamo and challenge Bush to tear down those walls.
But don’t hold your breath. Putin is unlikely to infuse morality into politics lest somebody else starts judging Russia’ endemic corruption, rollback of democracy, blatant confiscation of private property and murky political murders.
Putin is not alone. Even if there aren’t more unsavory characters, demagogues and dangerous dictators in the world today, they are certainly getting bolder. Just look at North Korean leader Kim Jong Il and Iranian President Mahmoud Ahmadinejad brandishing their existing or soon-to-be-acquired nuclear weapons. Or at the government of Sudan, blithely carrying out genocide in Darfur in defiance of world public opinion. There is a great need for international moral guidance today, without which such disparate, pressing issues as the Israeli-Palestinian conflict, the spread of Islamic radicalism and global warming can’t be addressed effectively. It is clear that no other nation can replace the United States as a moral arbiter in the world.
But it is equally clear that the Bush administration can never be that arbiter. Bush lacks the moral standing of U.S. Presidents Jimmy Carter and Bill Clinton, for instance, to bring the Arabs and the Israelis to the table. The carnage in Iraq, too, will drag on because all sides in the conflict and Iraq’s neighbors hold Washington in utter disdain.
The global agenda will be in abeyance until a new U.S. president takes office in January 2009. The question is whether the United States will be able to revitalize its moral climate at home enough to recover moral authority abroad, regardless of who the next president will be.

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

TITLE: Friendly Fire for Journalists
PUBLISHER: Vedomosti
TEXT: Journalism is becoming an increasingly dangerous profession, but the state is doing its part to try to help. The Defense and Foreign ministries and the Federal Press and Mass Media Agency have begun a second round of security training for journalism students. 
The program, titled “Bastion,” is more complicated this time: Journalists will not only learn how to avoid stepping on mines and being taken hostage, but also how to keep from getting beaten up at protests.
The first graduates of the courses were newspaper and television journalists whom their editors planned to send to report from dangerous locations. 
Providing objective and professional reports from these hot spots depends on journalists’ ability to stay alive and talk to people on the ground, as well as on cooperation and protection from the military and police . 
Thus, NATO also offers courses of this type and a number of Western media outlets will not allow reporters to work these dangerous assignments if they haven’t completed personal security courses. 
To work in conflict zones, Russian journalists don’t even need to leave the country. Russia is a world leader in attempts on the lives and freedom of journalists. 
According to the International Federation of Journalists, the 42 journalists killed or abducted in the last 15 years inside the country trails only the figure of 78 in Iraq and 60 in Algeria.
Of late, Russian journalists increasingly fall victim to overzealousness on the part of law enforcement agencies. 
According to the Center for Journalism in Extreme Circumstances, 12 journalists were beaten up during the Dissenters’ March in St. Petersburg in March and another 10 combined at marches inMoscow and Nizhny Novgorod. The need for the courses is real, and the courses are like a warning from the state that there is more danger to come from its side.
Journalists are being warned to wear bright vests and protective headgear while covering these events and to stay at official control centers or in areas set aside for the media. They are told they should get off to the side and “not provoke police officers to get a good photo or news report.”
But journalists at the Dissenters’ March in St. Petersburg were already wearing the special vests. They didn’t help. Perhaps OMON crackdowns should be treated as spontaneous disasters. 
All joking aside, however, “protest safety” is now becoming the reason cited for many of the latest restrictions on freedom of assembly, with City Hall taking the job of issuing permits over from administrative districts and the Public Chamber proposing that they only be allowed in certain areas away from city centers.

This appeared as an editorial in Vedomosti.

TITLE: A 12-Step Arms Approach
AUTHOR: By Frida Berrigan
TEXT: They don’t call the United States the sole superpower for nothing. Paul Wolfowitz might be looking for a new job right now, but the term he used to describe the pervasiveness of U.S. power back when he was a mere deputy secretary of defense — hyperpower — still fits the bill. Consider some of the areas in which the United States is still No. 1: 
• First in weapons sales: In fiscal 2006, the Pentagon broke its own re-cent record, inking arms sales agreements worth $21 billion. 
• First in sales of surface-to-air missiles: From 2001 to 2005, the U.S. delivered 2,099 surface-to-air missiles to nations in the developing world, 20 percent more than Russia, the next largest supplier. 
• First in sales of military ships: During that same period, the United States sent 10 “major surface combatants,” such as aircraft carriers and destroyers, to developing nations. Collectively, the four major European weapons producers shipped 13. 
Rest assured, governments around the world, often at one anothers’ throats, will want U.S. weapons long after their people have turned up their noses at a range of once dominant American consumer goods. 
The trade publication Defense News, for instance, recently reported that Turkey and the United States signed a $1.78 billion deal for Lockheed Martin F-16 fighter planes. 
As it happens, these planes are already ubiquitous — Israel flies them; so does the United Arab Emirates, Poland, South Korea, Venezuela, Oman and Portugal, among others. 
The Turkish air force already has 215 F-16 fighter planes and plans to buy 100 of Lockheed Martin’s new F-35 Joint Strike Fighter as well, in a deal estimated at $10.7 billion over the next 15 years. That’s $10.7 billion on fighter planes for a country that ranks 94th on the United Nations’ human development index. 
Here’s the strange thing: This genuine, gold-medal manufacturing-and-sales job on weapons simply never gets the attention it deserves. As a result, most Americans have no idea how proud they should be of their weapons manufacturers and the Pentagon — essentially our global sales force. 
There’s tons of data on the weapons trade, but who knows about any of it? I help produce one of a dozen or so sober annual (or semiannual) reports quantifying the business of war making, so I know that these reports get desultory, obligatory media attention. Only once in a blue moon do they get the sort of treatment that befits the country’s No. 1 product line. 
Even when there is coverage, stories on the arms trade can’t possibly convey the feel of a business that has always preferred the shadows to the sun. 
The connection between the factory that makes a weapons system and the community where that weapon “does its duty” is invariably missing in action, as are the relationships among the companies making the weapons and the generals (on-duty and retired) and politicians making the deals. In other words, the most successful (and most deadly) U.S. export remains our invisible one.
Maybe the only way to break through this paralysis of analysis would be to stop talking about weapons sales as a trade and the export of precision-guided missiles and start thinking about them in another language entirely — the language of drugs. After all, what does a drug dealer do? He creates a need and then fills it. He encourages an appetite or an addiction, and then feeds it. 
Arms dealers do the same thing. They suggest to foreign officials that their military just might need a slight upgrade. 
After all, they’ll point out, haven’t you noticed that your neighbor just upgraded in jets, submarines and tanks? And didn’t you guys fight a war a few years back? Doesn’t that make you feel insecure? 
And what’s the point in feeling insecure for another moment when, for just a few billion bucks, we’ll get you suited up with the latest military model, even better than what we sold them — or you the last time around. 
Why do officials in Turkey, which already has 215 fighter planes, need 100 more in an even higher-tech version? They don’t, but Lockheed Martin, working with the Pentagon, made them think they did. 
The United States doesn’t need stronger arms control laws. It needs a global sobriety coach and some kind of 12-step program for the dealer-nation as well. 


Frida Berrigan is a senior research associate at the World Policy Institute’s Arms Trade Resource Center. A longer version of this comment appeared in the Los Angeles Times.

TITLE: Dynamo Claims Cup Against Arch-Rival Shakhtar Donetsk
PUBLISHER: Reuters
TEXT: KIEV, Ukraine — Dynamo Kiev beat arch-rivals Shakhtar Donetsk 2-1 in the Ukrainian Cup final on Sunday to retain the trophy for a fourth straight year. 
Brazilian striker Kleber put Dynamo ahead in the 58th minute and Ukraine international Oleg Gusev added the second goal against the run of play 10 minutes from time. 
Shakhtar’s Brazilian international midfielder Elano pulled one back from close range in the 89th minute but Dynamo held on for victory despite having Brazilian defender Rodrigo sent off after picking up his second yellow card in the 70th minute. 
Among the 60,000-strong crowd at Kiev’s Olympic stadium were Ukraine President Viktor Yushchenko and his chief political adversary, Prime Minister Viktor Yanukovich, sitting side-by-side in the VIP box. 
The match, however, was marred by serious clashes between riot police and a large section of Dynamo supporters. 
The police moved in to prevent the fans throwing firecrackers onto the pitch to celebrate the Kleber goal and after a 10-minute clash with fans order was restored. 
It was Dynamo’s ninth cup triumph since 1992, following the break-up of the Soviet Union. They beat Shakhtar in two other finals, in 2005 and 2003. The Donetsk side, who have won five cups, beat Dynamo in the 2002 final. 
It was also the second meeting between the country’s top two clubs in four days following Wednesday’s 2-2 league draw in Kiev which moved Dynamo a step closer to securing their 12th title. 
Dynamo, who lead Shakhtar by six points with two games remaining, could clinch their seventh league and cup double at home on June 10.

TITLE: U.S., Iran in Groundbreaking Direct Talks
PUBLISHER: The Associated Press
TEXT: BAGHDAD — The United States ambassador in Baghdad said he and his Iranian counterpart agreed broadly on policy toward Iraq during four-hour groundbreaking talks on Monday, but insisted that Iran end its support for militants. 
The Iranian ambassador later said the two sides would meet again in less than a month.
Hassan Kazemi Qomi, the Iranian envoy, also said that he told the Americans that his government was ready to train and equip the Iraqi army and police to create “a new military and security structure.”
Kazemi did not elaborate nor would he say how U.S. Ambassador Ryan Crocker responded.
The Baghdad talks were the first of their kind and a small sign that Washington thinks rapprochement with Iran is possible after more than a quarter-century of diplomatic estrangement that began with the 1979 Islamic revolution.
“The next meeting will occur in Iraq in less than one month,” Kazemi told an Associated Press reporter after his news conference at the Iranian Embassy.
Crocker earlier said the Iraqis planned to propose a second session and that the United States would decide upon a follow-on meeting when the invitation was issued.
“We will consider that when we receive it,” Crocker told reporters in the U.S.-controlled Green Zone. “The purpose of this meeting was not to arrange other meetings.”
Crocker described the session as businesslike and said Iran proposed setting up a “trilateral security mechanism” that would include the U.S., Iraq and Iran, an idea he said would require study in Washington.
The U.S. envoy also said he told the Iranians their country needed to stop arming, funding and training the militants. The Iranians laid out their policy toward Iraq, Crocker said, describing it as “very similar to our own policy and what the Iraqi government has set out as their own guiding principles.”
He added: “This is about actions not just principles, and I laid out to the Iranians direct, specific concerns about their behavior in Iraq and their support for militias that are fighting Iraqi and coalition forces.”
Kazemi did not raise the subject of seven Iranians now in American custody in Iran, Crocker said: “The focus of our discussions were Iraq and Iraq only.”
House Speaker Nancy Pelosi, who was criticized by the White House for her trip to Syria — also a U.S. rival — praised the Bush administration for holding Monday’s talks.
“I think it’s very important, and at the end of the day we want to know that every remedy, every diplomatic remedy has been exhausted,” she said in Berlin.
The talks were held at Iraqi Prime Minister Nouri al-Maliki’s Green Zone office.
Al-Maliki did not attend the meeting, but the prime minister greeted the two ambassadors, who shook hands, and led them into a conference room, where the ambassadors sat across from each other.
Before leaving, al-Maliki told both sides that Iraq wanted a stable country free of foreign forces and regional interference. The country should not be turned into a base for terrorist groups, he said. He also said that the U.S.-led forces in Iraq were only here to help build up the army and police and the country would not be used as a launching ground for a U.S. attack on a neighbor, a clear reference to Iran.
“We are sure that securing progress in this meeting would, without doubt, enhance the bridges of trust between the two countries and create a positive atmosphere” that would help them deal with other issues, he said. 
Speaking in Tehran, Iranian Foreign Minister Manouchehr Mottaki said the United States should admit its Middle East policy has failed. 
“We are hopeful that Washington’s realistic approach to the current issues of Iraq by confessing its failed policy in Iraq and the region and by showing a determination to changing the policy guarantees success of the talks and possible further talks,” Mottaki said. 
Monday’s talks, as predicted, had a pinpoint focus: What Washington and Iran — separately or together — could do to contain the sectarian conflagration in Iraq. 
“The American side has accusations against Iran and the Iranian side has some remarks on the presence of the American forces on Iraqi lands, which they see as a threat to their government,” said Ali al-Dabagh, an Iraqi government spokesman. 
But much more encumbered the narrow agenda — primarily Iran’s nuclear program and Iranian fears that the Bush administration will seek regime change in Tehran as it did against Saddam Hussein in Iraq. 
Washington and its Sunni Arab allies, on their side, are deeply unnerved by growing Iranian influence in the Middle East and the spread of increasingly radical Islam. 
Compounding all that is Iran’s open hostility to Israel. 
Other issues clouding the talks included U.S. Navy exercises in the Persian Gulf last week and tough talk from President Bush about new UN penalties over the Iranian nuclear program. The United States says Iran is trying to build a bomb; Iran says it needs nuclear technology for energy production. 
Further complicating the talks, Iran said Saturday it had uncovered spy rings organized by the United States and its Western allies.

TITLE: TV Station Shut Off By Chavez
AUTHOR: By Christopher Toothaker
PUBLISHER: The Associated Press
TEXT: CARACAS, Venezuela — Venezuela’s oldest private television station was pushed off the air as President Hugo Chavez’s government replaced the popular opposition-aligned network with a new state-funded channel on Monday. 
Radio Caracas Television shut down just before midnight Sunday as its broadcast license expired and soldiers took control of the station’s transmitters. Chavez refused to renew its license, accusing the channel of “subversive” activities.
The new channel, TVES, launched its transmissions with artists singing pro-Chavez music, then carried an exercise program and a talk show, interspersed with government ads proclaiming, “Now Venezuela belongs to everyone.”
Thousands of government supporters reveled in the streets as they watched the changeover on large TV screens, seeing RCTV’s signal go black and then be replaced by a TVES logo featuring Venezuela’s national colors. Others launched fireworks and danced to the classic salsa tune “Todo tiene su final” — “Everything Has Its End.”
In the countdown to the midnight deadline, thousands of RCTV backers banged pots in protest and played recordings of sirens. Some fired gunshots into the air.
Earlier Sunday, police broke up an opposition protest using a water cannon and tear gas and later clashed with protesters who set afire trash heaps in affluent eastern Caracas. Police said some protesters fired shots, and others threw rocks and bottles. Police said 11 officers were injured.
Inside the studios of RCTV — the sole opposition-aligned TV station with nationwide reach — disheartened actors and comedians wept and embraced in the final minutes on the air.
They bowed their heads in prayer, and presenter Nelson Bustamante declared: “Long live Venezuela! We will return soon.”
Chavez says he is democratizing the airwaves by turning the network’s signal over to public use. His opponents condemned the move as an assault on free speech.
Germany, which holds the European Union presidency, expressed concern that Venezuela let RCTV’s license expire. It said the EU expects that Venezuela will uphold freedom of speech and “support pluralism.”
Founded in 1953, RCTV had broadcast talk shows, sports, soap operas and a popular comedy program that poked fun at presidents — including Chavez — for decades. It had some 3,000 employees, including 200 journalists.
RCTV was regularly the top channel in viewer ratings, but Chavez accused the network of “poisoning” Venezuelans with programming that promotes capitalism, violating broadcast laws and other infractions.
The government promises TVES will be more diverse, buying 70 percent of its content from independent Venezuelan producers. It will carry sports, news and an educational program for children emphasizing socialist values, as well as foreign-made programs such as National Geographic documentaries.
“We’ve come here to start a new television with the true face of the people, the face that was hidden, the face that they didn’t allow us to show,” said Roman Chalbaud, a pro-Chavez filmmaker appointed by the government to TVES’ board of directors.

TITLE: Nuremberg Crowned German Champion
AUTHOR: By Erik Kirschbaum
PUBLISHER: Reuters
TEXT: BERLIN — It’s been a long time since one-time German powerhouse Nuremberg last won a title. 
The long-suffering club beat Bundesliga champions Stuttgart 3-2 in an extra-time thriller to win the German Cup on Saturday. 
It was the first silverware in two generations for the club that was once a dominant force with nine German championships. 
It was also a fitting conclusion to a season of surprises — such as back-to-back double winners Bayern Munich falling to fourth place. 
From the first German championship in 1920 to the last in 1968, the side known across the country as “der Club” were feared. Nuremberg had an incredible 104-match winning streak from 1918 to 1922. 
“It’s a beautiful moment for all the ‘Club’ fans who had to endure all the problems and dubious past performances for so long,” said Nuremberg coach Hans Meyer. 
Nuremberg fell to the third division in 1996 after being penalised six points for financial problems. It climbed back to top flight but was relegated again in 1999 and 2003. 
It bounced right back in 2004 but struggled to avoid relegation until Meyer arrived in 2005. 
“It’s a wonderful resurrection for us,” said president Michael Roth. “It’s mostly the older generation that remembers the glory days we used to have. It’s great to be back.” 
But Roth did not want to gloat when asked how it felt to win more silverware this year than arch enemy Bayern Munich. 
Nuremberg qualified for the UEFA Cup this season after a sixth place finish in the Bundesliga. 
“It’s a huge story for Nuremberg,” said Stuttgart coach Armin Veh. “But it would have been a huge story for us too.” 
Veh, who led his team to their first Bundesliga championship in 15 years, said he was proud of his men for fighting from behind despite being down to 10 from the 31st minute — Cacau was sent off for punching a Nuremberg defender. 

n ZURICH, Switzerland — FIFA has banned international games from being played at high altitudes. FIFA president Sepp Blatter said the decision to ban games more than 8,200 feet above sea level was made Sunday after a review by the medical team for world soccer's governing body. 
Bolivia has held World Cup qualifiers at an altitude of about 11,810 feet at its capital La Paz. There has been criticism that Bolivia's advantage is not only unfair, but also dangerous for the players' health.
Earlier this year, Brazilian club Flamengo said it would not play again at altitude after several players needed oxygen during a game staged at nearly 13,120 feet against Bolivian team Real Potosi.
(AP)

TITLE: SPORTS WATCH
TEXT: <b>Beckham Returns</b>
LONDON (AP) — David Beckham’s chance of starting for England improved when teammate Aaron Lennon withdrew Sunday from games against Brazil and Estonia because of a knee injury. 
The 20-year-old Tottenham winger limped off after 10 minutes of Friday’s England “B” victory over Albania. 
A scan on Saturday ruled him out of an exhibition against Brazil on June 1 at Wembley and the European Championship qualifier at Estonia on June 6, according to the English Football Association. 
Beckham was recalled to the England team this week by coach Steve McClaren after being overlooked for nine matches since last year’s World Cup. 
After replacing Sven-Goran Eriksson at the end of the World Cup, McClaren dropped Beckham, the former England captain. 
McClaren said he didn’t see a future on the team for the 32-year-old Real Madrid midfielder. 
Beckham’s recently improved play prompted McClaren to change his mind. Beckham, who has played 94 games for his country, has signed a deal to play for the MLS’s Los Angeles Galaxy next month.

<b>Karpets in Front</b>
BARCELONA, Spain (AP) — Vladimir Karpets of Russia won the Volta of Catalunya on Sunday, finishing sixth in the 72-mile trek from Lloret de Mar to Barcelona. 
Samuel Sanchez of Spain won the seventh and last leg of Spain’s oldest cycling race in 2 hours, 46 minutes, 6 seconds. 
“It’s an important victory for me and my team,” said Karpets. 
In the overall standings, Karpets had a 40-second lead over second-place T-Mobile rider Michael Rogers of Australia and third-place Rabobank rider Denis Menchov of Russia.

<b>Hammer Record</b>
SOCHI, Russia (AP) — Tatiana Lysenko broke her world record in the women’s hammer throw with a toss of 258 feet, 1 1/2 inches at the Russian nationals. 
She set the mark on her first attempt Saturday at the meet in the Black Sea resort of Sochi, the Russian Track and Field Federation said Sunday. 
Her previous world record of 255-5 was set last August in Tallinn, Estonia.

TITLE: Japanese Agriculture Minister Hangs Himself Amid Scandal
PUBLISHER: Reuters
TEXT: TOKYO — A scandal-tainted minister in Prime Minister Shinzo Abe’s cabinet committed suicide on Monday, compounding problems for the Japanese leader whose support has slumped ahead of a July election. 
“This will have serious political fallout, but at this point it’s hard to tell how much,” a government official said.
Agriculture Minister Toshikatsu Matsuoka’s suicide came as Abe’s public support rate fell to its lowest level since he took office last September, due largely to voter anger over mismanagement of pension premiums that could shortchange retirees.
The dent in Abe’s popularity had already increased chances that his ruling camp would lose its majority in the election for parliament’s upper house, his first big test at the polls.
Matsuoka, 62, under fire for a series of political funding scandals, died in hospital after he was found unconscious in his room at a Tokyo residential complex for lawmakers.
Police said he hanged himself but declined to comment on Japanese media reports that he left a suicide note.
“I am overwhelmed with shame. I deeply hope his soul will rest in peace,” a visibly-shaken Abe told reporters.
Matsuoka, who had repeatedly denied any wrongdoing, had been scheduled to be grilled again in parliament later on Monday.
Critics had charged that Abe was protecting Matsuoka, and the prime minister’s image would likely suffer in the short term, political analysts said. But they added that the long-term fallout could depend on how Abe handled the matter.
“It’s hard to say what will happen. It depends on Abe’s response,” said Jun Iio, a political science professor at the National Graduate Institute for Political Studies. 
“This could make it hard for the opposition to follow up on the scandals, but it could also give the impression that there was something so bad that he had to commit suicide.”
Opposition leaders expressed shock at Matsuoka’s suicide.
“It’s regrettable that Prime Minister Abe didn’t make [Matsuoka] explain himself to the public,” Mizuho Fukushima, leader of the tiny Social Democratic Party told reporters. 
“The prime minister has heavy responsibility over this.”

TITLE: Lokomotiv Victorious In Cup
PUBLISHER: Reuters
TEXT: MOSCOW — Substitute Garry O’Connor scored in extra time to give Lokomotiv Moscow a 1-0 victory over city rivals FC Moscow in the Russian Cup final on Sunday. 
The Scotland striker, who came on for Roman Kantsedalov midway through the second half, fired the 103rd-minute winner into an empty net after a great solo run by Dmitry Sychev. 
“It’s a great feeling to be able to score the winning goal in a cup final,” said O’Connor, who has struggled to adapt to Russia and its game since joining Lokomotiv in February 2006. 
“Dmitry did all the work with his run and I was just in the right place to finish it off,” he said.” 
It was the seventh cup triumph for the railway side, winners of the inaugural Soviet Cup in 1936, but the first under former Russia manager Anatoly Byshovets who took over in December. 
With the early afternoon start and the temperature on the artificial turf of Luzhniki stadium rising above 30C, both teams were forced to play at a slow tempo during normal time. 
Lokomotiv, in their ninth final, wasted a number of chances in the first half while FC Moscow, playing in their first final, came alive after the break but missed several opportunities. 
The Lokomotiv coach blamed the heat and the synthetic pitch for his team’s poor finishing. 
“It was a very tough match especially in such conditions,” Byshovets told a news conference. “The Luzhniki pitch is probably the worst place for a match in this kind of weather.” 
Lokomotiv and Zenit St Petersburg, who finished just behind them in fourth place in the league last season, will represent Russia in the UEFA Cup next season.

TITLE: Despite Ceasefire Call, Israel Still Targeted By Hamas Fire
PUBLISHER: Reuters
TEXT: GAZA — Hamas kept up rocket fire into Israel on Monday in defiance of a ceasefire call by Palestinian President Mahmoud Abbas and Israeli threats to escalate military strikes in the Gaza Strip.
In the first internal Palestinian violence since a May 19 ceasefire, fighting between Hamas gunmen and members of a security force loyal to Abbas’s Fatah faction erupted in the territory. There were no reports of casualties.
At least seven rockets struck the town of Sderot in southern Israel but no one was hurt, the military said. Previous salvoes during an almost two-week-old surge of cross-border fighting have killed two Israelis — one a motorist hit on Sunday.
Israel has struck back with an aerial bombing campaign that has killed more than 40 Palestinians in Gaza, most of them militants. Yet the failure to end the rocket barrages has prompted the Israeli government to speak of tougher action.
“I think the measures are effective but not enough, and we have a large battery of some more steps that I hope we will be able to take,” Internal Security Minister Avi Dichter told Reuters during a visit to Sderot. He did not elaborate.
Israeli Prime Minister Ehud Olmert said on Sunday that Hamas would be fought “without limitation.” 
But having been rapped by a commission of inquiry for his handling of last year’s costly Lebanon war, Olmert has resisted rightist calls for a major ground sweep of Hamas bastions in the congested Gaza Strip.
In the West Bank, Israeli troops detained in the Palestinian city of Ramallah a senior militant from al-Aqsa Martyrs Brigades, which is part of Fatah, who was involved in deadly attacks against Israelis, an army spokesman said.
Citing “security concerns” stemming from Olmert’s comments, Palestinian Prime Minister Ismail Haniyeh of Hamas stayed away from a weekly cabinet meeting at his Gaza office on Monday, a government official said.
Abbas, who agreed a now-defunct Gaza truce with Olmert in November, has been trying to coax Hamas’s armed wing and other militants into holding their fire again.
The Fatah leader was rebuffed on Sunday by Hamas, which said Israel must agree to a comprehensive truce in Gaza and the occupied West Bank. Israel says it will continue West Bank raids against militant suspects.
Abbas’s difficulties reflect his deeper challenges in sustaining a power-sharing deal with Islamist Hamas, which is shunned by the West for its refusal to make peace with Israel.
In new factional violence, Hamas security men exchanged fire with members of one of Abbas’s forces in Gaza, residents said. Fatah said Hamas men attacked a vehicle carrying a Force 17 officer. Hamas was not immediately available for comment.
Witnesses said rival forces deployed gunmen on some of Gaza’s main roads, raising fears among local residents of more bloodshed.
Earlier, Hamas said it was responsible for Monday’s salvo against Sderot.
“Our strikes against the enemy are continuing and we will chase the occupation’s soldiers and settlers from every inch of Palestine,” the group said in a statement. Hamas refers to Gaza, the West Bank and Israel as Palestine.

TITLE: 60th Cannes Film Festival is a Hit
AUTHOR: By Mike Collett-White and James Mackenzie
PUBLISHER: Reuters
TEXT: CANNES, France — The Cannes Film Festival pulled it off in its 60th year, picking a popular winner from an eclectic competition lineup that had many more hits than misses. 
The annual movie extravaganza also attracted a string of big Hollywood stars to its red carpet, always key to a festival’s success, and reports of a healthy crop of new film deals signed on the margins meant 2007 would go down as a vintage Cannes.
“The Cannes film story this year has been one of selflessness,” said film critic and historian Mark Cousins. “I can’t remember that coming across as strongly before, so I think it’s been a great Cannes.”
Romanian entry “4 Months, 3 Weeks and 2 Days” walked away with the Palme d’Or for best film out of 22 in the main competition, a popular choice after critics had raved about its hard-hitting story simply but powerfully told.
A further sign of the growing stature of Romanian cinema, the movie follows student friends Otilia and Gabita as they are ruthlessly exploited when one goes to have an illegal abortion.
Yet despite being set in the pitiless and colorless landscape of socialist Eastern Europe, the story underlines the lengths to which friends go to save each other.
The choice was a rare example of the 9-member jury and the wider audience of journalists and critics agreeing on the Palme d’Or winner.
There will also be few complaints about other winners.
The Grand Prix runner-up prize went to the acclaimed “The Mourning Forest,” a lyrical Japanese movie about mourning and grief directed by Naomi Kawase.
Best director was Julian Schnabel for “The Diving Bell and the Butterfly,” based on the true story of French journalist Jean-Dominique Bauby who suffered a stroke and was paralyzed yet managed to write a book using one eyelid to communicate.
Best screenplay was awarded to German-Turkish director and writer Fatih Akin for “The Edge of Heaven,” a cross-border story of love and reconciliation, while best actor was Konstantin Lavronenko from Russian Andrei Zvyagintsev’s “The Banishment.”
Best actress was Jeon Do-yeon for South Korean competition entry “Secret Sunshine.”
One complaint heard along the palm-lined Croisette this year has been that Cannes is too big for its own good, with thousands of journalists packing screenings and press conferences and too many stars jostling for media attention.
Cannes veterans wondered if, for example, Leonardo DiCaprio should be asked to the festival to showcase his environmental documentary “The 11th Hour” when it seemed to be more about having a famous face in town than the quality of the film.

TITLE: Henin Off Balance As French Open Starts
AUTHOR: By Jerome Pugmire
PUBLISHER: The Associated Press
TEXT: PARIS — Justine Henin was thrown off her game by starting her French Open title defense on a Sunday. 
“It’s strange. I’m not sure it’s a good idea,” Henin said after beating Yelena Vesnina of Russia 6-4, 6-3. “It breaks our habits. Everyone’s a bit lost.” 
Henin also had to wait more than five hours to play because of a rain delay. 
“It was so crowded at the players’ cafeteria, men and women everywhere, overcrowded,” Henin said. “That’s what I hate about the start of a Grand Slam. You’re not really at ease. You can’t really be in a peaceful place.” 
Henin also was unhappy with the string tension of her racket and hit some loose forehands. 
She lost two straight service games at the end of the first set and beginning of the second. 
“Winning today is all that counts,” the two-time defending champion said. 
She was pleased with the center-court crowd, even though the stands were about half empty. 
“I got a great reception,” Henin said. “And that warms the heart. That’s a positive thing for me today.” 
The French Open opened on a Sunday for the first time last year, with 28,084 spectators. There were 30,185 this time. 
Henin next plays Wednesday against 16-year-old Tamira Paszek of Austria. 
Marat Safin predicts another Roger Federer-Rafael Nadal final at the French Open. 
“Nobody can come close to beating them on clay, especially here,” said Safin, a semifinalist at Roland Garros in 2002. “A tough call who’s going to win this year, Roger or Nadal.” 
Nadal has beaten Federer five times out of six on clay, including in last year’s final. 
But Federer beat the Spaniard 2-6, 6-2, 6-0 in the Hamburg Masters final this month, ending Nadal’s clay-court record winning streak at 81 matches. 
“It looks like he finally found how to play against Rafa,” Safin said. 
“Rafa will have been playing for many tournaments already, and I think he’s tired.” 
Safin may think he knows who will be in the June 10 final, but he’s still not certain of the winner. 
“Depends how they are going to start, how the match is going to develop and who’s going to get scared first,” he said. 
Safin and younger sister Dinara Safina both won first-round matches Sunday. 
First up on center court was Safin, the 2000 U.S. Open and 2005 Australian Open champion. He avoided most of the rain and beat Fernando Vicente of Spain 6-1, 6-3, 6-1. Safina then beat Yuliana Fedak of Ukraine 7-5, 6-4, with a long rain delay disrupting the second set. 
Safina was glad for the break. She was trailing Yuliana Fedak 4-2 in the second set. 
“I was struggling,” Safina said. “[All} I could think about [was] what I was doing wrong.”

TITLE: Bush Calls War Dead Heroes
PUBLISHER: The Associated Press
TEXT: ARLINGTON, Virginia — President Bush paid tribute Monday to America’s fighting men and women — “a new generation of fallen leaders” — in a solemn Memorial Day visit to the national burial ground for war heroes. 
Speaking under overcast skies after laying a wreath at the Tomb of the Unknowns and meeting privately at the White House with the families of some fallen servicemen and women, Bush called the wars in Iraq and Afghanistan a part of the nation’s destiny. He said they follow a rich tradition of similar American sacrifices throughout this country’s history.
As people across the country marked the day of remembrance, violence continued in Iraq where a suicide car bomber struck a busy commercial district in central Baghdad, killing at least 21 people and damaging a shrine revered by Sunnis and Shiites alike.
Speaking of the more than 368,000 buried through history at Arlington National Cemetery, Bush said, “Nothing said today will ease your pain. But each of you needs to know our country thanks you and we embrace you and we will never forget the terrible loss you have suffered.”
“The greatest memorial to our fallen troops cannot be found in the words we say or the places we gather,” he added. “The more lasting tribute is all around us.”
Bush said the freedoms that people enjoy in this country today “came at a great cost and they will surive only so long as there are those who are willing to protect them.”
The president said that even after four years, many young men and women still volunteer for the U.S. armed forces.
“We’ve heard of 174 Marines recently, almost a quarter of a battalion, who asked to have their enlistments extended,” Bush said. “They want to serve their nation.”

TITLE: MacLaren Declare Hamilton Free to Race
PUBLISHER: Reuters
TEXT: MONACO — McLaren have assured Lewis Hamilton that he still has every chance of winning the Formula One world title despite being reined in by the team in Sunday’s Monaco Grand Prix. 
“Of course he does,” team boss Ron Dennis told reporters. “We will not favor one driver, no matter who it is. We never have, never will. This [the Monaco race] is a unique one-off.” 
Double world champion Fernando Alonso won the showcase race ahead of Hamilton after Dennis told them effectively not to race each other after the first pitstop in order to safeguard a one-two finish. 
That decision triggered questions about so-called ‘team orders’, banned by the governing FIA after the infamous Austrian Grand Prix of 2002 when Ferrari ordered Brazilian Rubens Barrichello to let Michael Schumacher win. 
Dennis said his conscience was clear. 
“We don’t have team orders, we had a strategy to win this race,” he said. 
“I make no excuses for instructing the racing drivers to slow their pace after the first stop and to affect our strategy. 
“You can all give whatever twist or headline you want on it, my job is sometimes difficult and today was one of those times,” said Dennis. 
“There will be places where they will be absolutely free to race, but this isn’t one of them.” 
“This is a place where one driver pushing another driver... is the way to induce a mistake,” he continued. 
“Everyone in the pit lane would be saying what an idiot the team principal of McLaren is for allowing their cars to compete to a level where one of their cars and maybe two of them are in the barrier.” 
Hamilton had qualified with a far heavier fuel load than Alonso — a tactical move that would have won him the race had the safety car come out and given an advantage to those able to make only one stop. 
In the end, the safety car stayed in. Alonso now leads the standings on race wins, level with Hamilton on 38 points. 
Despite celebrating his fifth podium in five races, the 22-year-old Briton fueled the flames by saying he had number two on his car and was the team’s number two driver. 
Dennis denied Alonso was favored and said McLaren had only ever manipulated a race in exceptional circumstances. 
He referred to the 1998 Australian Grand Prix where someone hacked into the team radio and told Mika Hakkinen to pit, handing team mate David Coulthard the lead. Dennis then ordered his drivers to exchange positions. 
“I sleep easy and have a clear conscience, both on that distant race and this race here,” he said.

TITLE: Rain Drenches Short Indy 500
PUBLISHER: The Associated Press
TEXT: INDIANAPOLIS — Dario Franchitti was the winner of a rain-shortened Indianapolis 500 on Sunday. He crossed the famed strip of bricks in a downpour, his high-powered machine poking along at about 40 mph. He barely beat the tow truck that was lugging a teammate’s battered car. 
The Indianapolis 500 seemed like two races Sunday, with a three-hour break in between and not enough daylight to get in the final 85 miles. It was confusing and difficult and dreary, finally going to the team with its eyes on the skies.
“Restart after restart,” said runner-up Scott Dixon, who couldn't do a thing as Franchitti crept to the finish line under a yellow flag. 
“It’s just one of those days where you feel like you haven’t even raced. It's sort of being on the freeway and watching lots of people smash into each other.”

TITLE: Straight People Banned From Gay Bar in Oz
PUBLISHER: Reuters
TEXT: MELBOURNE, Australia  — An Australian hotel catering for homosexuals has won the right to ban heterosexuals from its bars so as to provide a safe and comfortable venue for gay men. 
In what is believed to be a first for Australia, the Victorian state civil and administrative tribunal ruled last week that the Peel Hotel in the southern city of Melbourne could exclude patrons based on their sexuality.
Australia’s equal opportunity laws prevent people being discriminated against based on race, religion or sexuality.
But Peel Hotel owner Tom McFeely said the ruling was necessary to provide gay men with a non-threatening atmosphere to freely express their sexuality.
“If I can limit the number of heterosexuals entering the Peel, then that helps me keep the safe balance,” Peel told Australian radio on Monday.
McFeely said that, while the hotel welcomed everyone, its gay clientele had expressed discomfort over the number of heterosexuals and lesbians coming to the venue in the past year.
He said there were more than 2,000 venues in Melbourne that catered to heterosexuals, but his hotel was the only one marketing itself predominantly to gay men.
Victoria’s state human rights commission backed the ruling, saying it was in line with equal opportunity guidelines defending the rights of groups subject to discrimination.
Commission chief Helen Szoke said the hotel’s gay clientele had experienced harassment and violence. “[They] also have felt as though they’ve been like a zoo exhibit with big groups of women on hen parties coming to the club,” Szoke told reporters.
McFeely told the radio that the hotel had received homophobic telephone calls since news of the ruling was made public.

TITLE: Shamed Wolfowitz Blames Media
PUBLISHER: The Associated Press
TEXT: LONDON — Departing World Bank President Paul Wolfowitz in a radio interview broadcast Monday blamed an overheated atmosphere at the bank and in the media for forcing him to resign. 
Wolfowitz, who has announced he will step down June 30, denied suggestions that his decision to leave was influenced by an apparent lack of support from the bank’s employees.
“I think it tells us more about the media than about the bank and I’ll leave it at that,” he told the BBC. “People were reacting to a whole string of inaccurate statements and by the time we got to anything approximating accuracy the passions were around the bend.”
Wolfowitz said that he was pleased the bank’s board accepted that he had acted ethically, and in good faith in his handling of a generous compensation package for his girlfriend and bank employee Shaha Riza in 2005.
“I accept the fact that by the time we got around to that, emotions here were so overheated that I don’t think I could have accomplished what I wanted to accomplish for the people I really care about,” he said.
By tradition, the United States — the bank’s biggest financial contributor — names an American to run the institution.
Wolfowitz’s departure ends a two-year run at the development bank that was marked by controversy from the start, given his previous role as a major architect of the Iraq war when he served as the No. 2 official at the Pentagon.