SOURCE: The St. Petersburg Times
DATE: Issue #1277 (43), Tuesday, June 5, 2007
**************************************************************************


TITLE: Kasyanov Promises Homes
AUTHOR: By Natalya Krainova
PUBLISHER: Staff Writer
TEXT: MOSCOW — Former Prime Minister Mikhail Kasyanov promised better apartments for half the population and free health care for all if he is elected president next year.
Kasyanov, speaking at a weekend conference that nominated him as a presidential candidate, also reiterated an earlier warning that the country was headed for an economic crisis if it remained on the current course.
A veritable who’s who of liberal politicians stood up to give speeches supporting Kasyanov’s bid during the two-day conference, which ended Saturday.
Pro-Kremlin youth activists tried to disrupt the proceedings at the Kosmos hotel several times, dressing up as doctors to detain the “mentally ill” Kasyanov, lighting flares, and throwing leaflets from a top floor.
A visibly pleased Kasyanov told the 650 delegates from his Russian People’s Democratic Union that “for the first time in recent years, a real opposition has been created in Russia.”
But political analysts and even several fellow opposition politicians said Kasyanov had little hope of being elected, noting his single-digit popularity ratings and the Kremlin’s powerful grip over political life in the country. It remains to be seen whether Kasyanov or any other opposition candidate will be registered as a candidate by the Central Elections Commission.
Kasyanov gave a flurry of election promises at the conference, and he identified social issues as the priority of his electoral program, which was adopted Saturday.
Among other things, Kasyanov promised that within three years of being elected he would bring back free health care, stamp out bribery in public education, move one-fourth of Russians into new apartments, and completely refurbish the apartments of another quarter of the population.
“Today, when the state has such a huge concentration of natural resources, there is nothing that justifies the authorities’ reluctance and inability to solve the country’s problems,” said Kasyanov.
He also warned of what would happen if the country continued down the economic and social path laid by President Vladimir Putin, who fired him as prime minister in 2004.
“In three to four years there will definitely be a crisis,” he said.
Opposition leaders Garry Kasparov, Eduard Limonov, Irina Khakamada and Boris Nemtsov took the stage to praise Kasyanov.
“Kasyanov is the most successful opposition figure in recent years and the best banker in the country,” said Kasparov, a former chess champion.
“If your whole speech had been shown on Channel One, the ratings of all of [Putin’s potential] successors would have fallen,” Khakamada said. “But that is exactly why it wasn’t shown.”
Former Central Bank chief Viktor Gerashchenko, another opposition candidate, and Moscow Helsinki Group head Lyudmila Alexeyeva also attended the conference. Gerashchenko did not make any public comments, while Alexeyeva wished luck to all the opposition leaders.
Several activists with Young Russia, a pro-Putin youth group, lit flares and threw dozens of leaflets down from a top floor of the building before the meeting started Saturday. 
The leaflets suggested that Kasyanov was being funded by the U.S. government. As the leaflets rained down and a black malodorous smoke swirled through the air, the activists vanished.
Later, a small group of young people dressed in doctor’s gowns tried to storm the conference, saying Kasyanov was mentally ill. OMON riot police held the protesters back, though one young man broke through and approached Kasyanov, saying, “He needs treatment,” Reuters reported. Security guards escorted him from the building.
Near the end of the conference, a young man stood up in the audience and said, “Hi, my name is Roman, and I am not indifferent to what is happening in our country.” At that moment, several hotel guards rushed up to him and carried him away by his arms and legs. As he was being carried down a hallway to the hotel exit, he struggled to free himself and shouted, “Kasyanov, traitor!”
The conference ended with a final speech by Kasyanov, who stood on stage with a group of smiling, applauding supporters.

TITLE: Russia Warns U.S. About Missile System
AUTHOR: By Maria Danilova
PUBLISHER: The Associated Press
TEXT: MOSCOW — Russian President Vladimir Putin warned that Moscow could take “retaliatory steps” if Washington proceeds with plans to build a missile defense system for Europe, including possibly aiming nuclear weapons at targets on the continent.
Speaking to foreign reporters days before he travels to Germany for the annual summit with President Bush and the other Group of Eight leaders, Putin assailed the White House plan to place a radar system in the Czech Republic and interceptor missiles in neighboring Poland. Washington says the system is needed to counter a potential threat from Iran.
In an interview released Monday, Putin suggested that Russia may respond to the threat by aiming its nuclear weapons at Europe.
“If a part of the strategic nuclear potential of the United States appears in Europe and, in the opinion of our military specialists, will threaten us, then we will have to take appropriate steps in response. What kind of steps? We will have to have new targets in Europe,” Putin said, according to a transcript released by the Kremlin. These could be targeted with “ballistic or cruise missiles or maybe a completely new system,” he said.
On Monday, Iran’s top security official called the U.S. plans for the missile defense shield a “joke,” saying Iranian missiles do not have the capability to reach Europe.
“Claims by U.S. officials that installing a missile defense system in Europe is aimed at confronting Iranian missiles and protecting Europe against Iran is the joke of the year,” Ali Larijani told the state-run IRNA news agency.
“The range of Iran’s missiles doesn’t reach Europe at all,” IRNA quoted Larijani as saying in Iran’s first public reaction to the plans. Larijani is secretary of Iran’s Supreme National Security Council, the country’s top security decision-making body.
Iran is known to possess a medium-range ballistic missile called the Shahab-3 that has a range of at least 800 miles, capable of striking Israel. In 2005, Iranian officials said they had improved the range of the Shahab-3 to 1,200 miles.
Although Western experts believe Iran is developing the Shahab-4 missile — thought to have a range between 1,200 and 1,900 miles, which would enable it to hit much of Europe — Iran has not confirmed such reports.
Iran initially acknowledged in 1999 it was developing the Shahab-4, but claimed it would be used only as a space launch vehicle for commercial satellites.
Putin told reporters that he hoped U.S. officials would change their minds regarding the missile plan, warning that Moscow was preparing a response.
“If this doesn’t happen, then we disclaim responsibility for our retaliatory steps, because it is not we who are the initiators of the new arms race, which is undoubtedly brewing in Europe,” he said.
“The strategic balance in the world is being upset and in order to restore this balance without creating an anti-missile defense on our territory we will be creating a system of countering that anti-missile system, which is what we are doing now,” Putin said.
Last week, Russia tested a new ballistic missile capable of carrying multiple nuclear warheads and a new cruise missile. While Western analysts said the system has probably been under development for several years, Putin has described the test as part of Moscow’s response to the U.S. anti-missile plan.
Relations between Moscow and Washington have soured in the past year. The two former Cold War foes are at odds over Washington’s missile plans, over Russia’s conflicts with former Soviet nations — including Ukraine, Georgia and Estonia — and over U.S. concerns of democratic backsliding in Russia.
Putin, who is nine months from the end of his second and final four-year term in office, also said Russia’s presidents should serve longer terms.
The Russian leader has consistently rejected suggestions that the constitution be amended to allow him to seek a third consecutive term, and during his annual address to parliament in April said it would be his last as president.
But his ambiguous comments to reporters from G-8 nations seemed certain to feed speculation that he would seek to stay in power beyond the spring of 2008. His suggestion, just days before the G-8 summit in Germany, could ensure other leaders treat him as a figure to be reckoned with — rather than as a lame duck.
“Four years is a fairly short time,” Putin said according to a transcript of the interview. “It seems to me that in today’s Russia five, six or seven years would be acceptable, but the number of terms still should be limited.”
Russia is scheduled to hold presidential elections in March. Putin, who was re-elected in 2004 with over 71 percent of the vote, has presided over one of the most prosperous periods in Russian history and enjoys sky-high approval ratings in the polls.

TITLE: City Seeks Backing for Transport Plans
AUTHOR: By Evgenia Ivanova
PUBLISHER: Staff Writer
TEXT: Plans for a new airport, bridges, roads, river terminal and new port in St. Petersburg are set to become a reality if the projects receive backing by the federal government, City Hall has said.
Proposals for a raft of infrastructure improvements were put forward at the First International Transport Forum and Transport in Russia 2007 exhibition last weekend in Sochi, the Russian candidate city for the 2014 Winter Olympic Games. 
“The assigned task is to get the complex of St. Petersburg’s transport and logistical projects to be included in the federal modernization of transport program initiated by Russia’s Ministry of Transport,” Yulia Shukareva, a delegate to the forum who is also an advisor to vice governor Yury Molchanov, said on Monday.
“During one press conference, [Russian transport minister Igor] Levitin said that St. Petersburg was the only [Russian] region to present fully-fledged proposals to the [federal] program,” Shukareva said, adding that St. Petersburg’s display at the exhibition was recognized by the organizers as the best of the show.
The building of a river passenger terminal is one of the proposals. 
“There are cruises to Moscow, Kizhi, Mandrogi and Valaam Island along the River Neva and the business is in rapid development," according to a statement emailed from Molchanov’s office. 
“Seventeen shipping companies are currently in the business transporting 250 thousand tourists a year to St. Petersburg by river.” 
“The existing river terminal is owned privately and is virtually unused for servicing cruise passengers,” the statement continues. 
A new highway to connect Prospekt Stachek to Prospekt Energetikov, and a new bridge across the River Neva are also planned. 
If none of the proposals come to fruition, according to City Hall estimates, gridlock could occur in the area around Alexander Nevsky and Volodarsky bridges by 2026. 
Although Shukareva confirmed rumors that City Hall is planning to build a new airport, little detail is known.
“The creation of an airport for business aviation is needed and a reserve take-off runway in close proximity to Pulkovo Airport was the only proposal that we had on our [exhibition] stand,” she said. 
“The project is to be launched as soon as the financing is available to us. That’s why we made our proposals. We don’t know whether they will be supported [by the government], or whether we will have to find private investment to cover the entire sum. At the moment it’s all just dreams,” she said.
City Hall however believes it’s the matter of time before the money is allocated.

TITLE: New Litvinenko Book Accuses FSB
AUTHOR: By David Nowak
PUBLISHER: Staff Writer
TEXT: MOSCOW — The FSB, which received a direct order from President Vladimir Putin to kill Alexander Litvinenko, also had a hand in the 1999 apartment bombings, the Dubrovka theater siege and the murder of Anna Politkovskaya, according to a book being released Monday.
The 370-page “Death of a Dissident,” authored by Litvinenko’s widow, Marina, and close friend Alex Goldfarb, recounts Litvinenko’s life from when he joined the KGB in the waning days of the Soviet Union until his poisoning in November.
The book, an advance copy of which was obtained by The Moscow Times, portrays the Federal Security Service as “rotten to the core” and filled with guns for hire. “The point was not to make propaganda,” Marina Litvinenko said by telephone from London on Sunday. “We just wanted to tell the story as it really happened.”
The story begins with Goldfarb, who said he wrote about two-thirds of the book, describing how he helped the Litvinenkos escape to Britain via Turkey in 2000 — the first time Goldfarb and the Litvinenkos met. The book then delves into Putin’s relationship with businessman Boris Berezovsky, citing it as a catalyst for the security services’ re-emergence in Russian politics and a factor that led to Litvinenko’s murder.
The book says Putin and Berezovsky were close at the start of Putin’s presidency. But the FSB — locked in a power struggle with the oligarchs for access to the president — was highly suspicious of Berezovsky and eventually won out, causing Berezovsky to flee to Britain.
Since then, the book says, the FSB has been essentially running the country under orders from Putin. It links the FSB to the 1999 bombings that killed about 300 people in Moscow and other cities and the 2002 seizure of Moscow’s Dubrovka theater that killed 129 hostages. Both attacks have been blamed on Chechen rebels. The FSB is also implicated in the killing of reporter and Kremlin critic Politkovskaya in her apartment building in October and Litvinenko’s death a month later.
Kremlin spokesman Dmitry Peskov, who has not read the book, dismissed the accusations and said the notion that Putin had ordered Litvinenko’s murder was “a continuation of theater of the absurd.” “Goldfarb’s role in the whole story is understood. After all, everybody knows whom he works for,” he said.
Goldfarb heads a Berezovsky-funded civil liberties group. The Kremlin has repeatedly linked Berezovsky to Litvinenko’s death.
An FSB spokesman refused to comment about the book on Sunday.
The book notes that Russia has linked Berezovsky to Politkovskaya’s murder and Dubrovka but is silent on whether he played a role. Goldfarb said by telephone that he believed Berezovsky was not involved. “But he made a mistake by teaming up with Putin,” he said.
While the book does not uncover any new developments in the Litvinenko case, it claims to have an insider perspective, including a purported 1999 conversation between Berezovsky and then-FSB head Putin in which Putin schemed “to get rid of” Litvinenko and then-Prosecutor General Yury Skuratov.
The book, which took about 4 1/2 months to write, is being released in English and French in London and Paris bookstores Monday. Goldfarb said he was trying to find a way to get it published in Russia. Colombia Pictures has acquired the rights to turn the book into a movie, Ekho Moskvy radio reported.

TITLE: Visa Regime Eased With 24 Countries
AUTHOR: By Nikolaus von Twickel
PUBLISHER: Staff Writer
TEXT: Russia and 24 other European countries took a step toward a visa-free regime Friday by simplifying the process for businesspeople and waiving fees altogether for some travelers.
“This is one of the components of the long-term goal of a visa-free regime,” Mark Franco, head of the European Commission’s delegation to Russia, said at a news conference.
Friday’s change, which was approved at a Russian-EU summit in Sochi in May 2006, waives visa fees for members of official delegations, close relatives, students, disabled people, participants of exchange programs, some researchers, and children under 6, a statement from the European Commission’s Russia office said. The waiver also applies to people who need urgent medical treatment or want to visit an ill relative or attend the funeral of a close relative, it said.
For tourists, short-stay visas will not cost more than 35 euros ($48), although travelers who apply less than 72 hours before entry will have to pay 70 euros.
Businesspeople, reporters, truck drivers and others should find it easier to obtain visas. The number of documents needed to apply for visas has been reduced significantly, and the processing time has been shortened to a maximum of 10 working days.
The new regime applies to a total of 25 countries, including Russia and EU members that have not joined the Schengen zone. But it excludes Britain, Ireland and Denmark, which are currently negotiating similar bilateral agreements with Russia, a spokeswoman for the European Commission’s delegation said. Norway, Iceland and Switzerland, which are not in the European Union but are members of the Schengen zone, also have not negotiated a deal with Russia yet. Andrei Podelyshev, deputy head of the Foreign Ministry’s consular section, said at the news conference that Moscow was close to striking a deal with Denmark, but talks with Britain and Ireland had just begun.
While liberalization of visa procedures is welcome news for many Europeans and Russians, it will cause a problem for residents of the Kaliningrad exclave. Some residents had been issued free visas by Poland and Lithuania, but now they have to pay. Kaliningrad’s regional legislature has appealed to the Kremlin, Interfax reported Friday.
Also Friday, the Spanish Embassy announced that its consular service had outsourced the acceptance and initial processing of visa applications to the Moscow-based company VF Services.

TITLE: Report Gives Russia Poor Mark for Peacefulness
PUBLISHER: The St. Petersburg Times
TEXT: Moscow — Russia is one of the least peaceful countries in the world, according to a new study that uses levels of violence, organized crime and military expenditure to measure unrest.
The Global Peace Index listed Russia at 118th place out of 121 countries surveyed by researchers of the Intelligence Unit of British magazine The Economist.
Russia fared particularly poorly on conventional weapons exports and deployments to United Nations peacekeeping missions, securing the worst possible score of five.
Some analysts find those results arbitrary. “The method of the analysis is not clear,” said Alexander Khramchikhin from the Institute of Political and Military Analysis. “If they had chosen other indicators, the result would have been quite different.”
On levels of distrust in other people, internal conflict and respect for human rights, Russia scored a four.
The same low mark was given for the ratio of security officers and police per 100,000 people and the ratio of homicides and inmates per 100,000 people.
Only Israel, Sudan and Iraq had a record worse than Russia, which is ranked the least peaceful country in Europe, the report said.
Overall, Western Europe was ranked the most peaceful region in the world. In Central and Eastern Europe, the Czech Republic led the way, in 13th place.
The United States was ranked 96th, followed by Iran at 97th.
About 80 countries, including Afghanistan and North Korea, were not in the report due to a lack of reliable information, the authors said.

TITLE: United Opposition Divided on Candidate
AUTHOR: By Natalya Krainova
PUBLISHER: Staff Writer
TEXT: MOSCOW — With the presidential election less than a year away and two pro-Kremlin candidates’ unofficial campaigns in full swing, the liberal opposition remains as divided as ever over whom to support.
Until recently, key figures in opposition coalition The Other Russia had been floating the idea of holding informal primaries to pick the strongest person to challenge the candidate designated by President Vladimir Putin as his successor.
But this Saturday, supporters of former Prime Minister Mikhail Kasyanov will officially endorse his candidacy — raising the specter that he and other opposition leaders will end up running independently and ruining whatever slim chances the opposition had of winning the March election.
Kasyanov assessed his chances of becoming the next president as “very high.” “If I make it into the second round of the election, I will win 100 percent,” Kasyanov said in a telephone interview.
But he isn’t the only opposition hopeful. “Of course I am hoping to win. Otherwise I would not have volunteered,” said Viktor Gerashchenko, the former Central Bank chief and current Yukos chairman.
A third candidate, Soviet-era dissident Vladimir Bukovsky, was less sure but still determined to run. “It is highly improbable that I will be registered,” Bukovsky said by telephone from Cambridge, where he has lived for years. Under Russian law, a presidential candidate must have lived in Russia for at least 10 years.
In all, four people have announced plans to run for president. The fourth is Vladimir Zhirinovsky, head of the Liberal Democratic Party, which tends to toe the Kremlin line.
For an opposition leader to have a chance at winning, he would have to run unrivaled, several candidates and political analysts said. The popularity ratings of opposition leaders are falling, from an average of 11 percent in January to 6 percent in May, according to the Levada Center. First Deputy Prime Ministers Dmitry Medvedev and Sergei Ivanov — both seen as competing to be Putin’s designated successor — received more than 30 percent each in May.
“If the goal of the opposition is a real political fight, then they should elect one candidate,” said Dmitry Oreshkin, a public relations consultant with Mercator, a think tank. “If they just want to create a long-lasting PR effect, they may try to register many candidates.”
About 900 delegates from 60 regions are expected to gather at noon Saturday in Moscow’s Kosmos Hotel to nominate Kasyanov on behalf of his political movement, the Russian People’s Democratic Union. Also invited to the conference is a veritable who’s who list of the opposition: former chess champion Garry Kasparov; Eduard Limonov, a founder of the banned National Bolshevik Party; Vladimir Ryzhkov, leader of the Republican Party, which has been ordered disbanded by the Supreme Court; Yabloko leader Grigory Yavlinsky; Union of Right Forces co-founder Boris Nemtsov; and Gerashchenko.
While opposition leaders officially voice support for a common candidate, they seem to be at odds over who that might be and how and when to select the candidate.
While Kasyanov is pushing ahead with his own bid, Kasparov and Limonov said this week that they would not run, Obshchaya Gazeta reported.
Ryzhkov said by telephone that he also had no desire to run as the common candidate. “What we see happening now is wrong. Instead of nominating a common candidate, everyone is nominating himself,” he said. “As a result, everyone will fight against one another.”
Asked who The Other Russia might support as a common candidate, Ryzhkov said he had no idea. Kasyanov said no candidacies had been discussed.
Kasparov suggested in a telephone interview that the coalition might support Kasyanov or Gerashchenko.
As for the method of selecting a united candidate, leaders of The Other Russia did not have a united opinion either.
Kasparov said nationwide primaries, such as those held in the United States, would be an “ideal option” but “almost impossible” to carry out given the limited resources of the opposition. He said “different methods” were currently being discussed, without elaborating.
Ryzhkov suggested bringing delegates representing the populations of their home regions to Moscow for a large opposition nomination conference.
Kasyanov said he did not think the method was important.
Asked when The Other Russia would come up with a common candidate, Ryzhkov said probably never, Kasparov said by fall, and Kasyanov sidestepped the question.
Gerashchenko, speaking by telephone, said the opposition’s participation in the election would be useless without a common candidate, and that if the opposition did not support him, he would withdraw.
Gerashchenko said multiple candidacies would benefit the Kremlin. “The Kremlin will be trying to achieve that by all means,” he said. “It will say [to each opposition group]: If you want to get into the State Duma, propose your own candidate for president.”
Bukovsky, who was deported from the Soviet Union in 1976, said his first step toward being registered as a candidate would be to seek permission to return to Russia.
“The opposition in Russia has fallen apart. … I offer a clear democratic alternative for Russian society,” he said.
A number of political analysts, including Oreshkin, Stanislav Belkovsky and Alexander Konovalov, president of the Institute of Strategic Studies and Analysis, expressed doubt that Bukovsky would be able to garner public support, saying few people remembered him.
Self-exiled businessman Boris Berezovsky was quoted in the Financial Times on Thursday as saying that he was funding The Other Russia. Berezovsky, who has said he wants to topple Putin’s government, denied making the statement. Kasparov denied that the group had accepted Berezovsky’s money, telling Ekho Moskvy radio, “There isn’t a single piece of evidence confirming any connection between The Other Russia and Berezovsky.”

TITLE: Putin Slams Extradition Request
PUBLISHER: Combined Reports
TEXT: MOSCOW — President Vladimir Putin said in an interview published Sunday that Britain’s request for the extradition of former agent Andrei Lugovoi was politically motivated and was not backed up by enough evidence.
British prosecutors have said they want to bring Lugovoi before a British court for the murder of Alexander Litvinenko, a former Federal Security Service officer, in London last November.
Putin said the request for Lugovoi’s extradition was politically motivated and hit back at Britain for granting political asylum to Chechen rebel envoy Akhmed Zakayev and tycoon Boris Berezovsky, both wanted in Russia.
“The suspicion arises that this is a political move made by those who hide terrorists and thieves on their own territory,” Putin told the Italian newspaper Corriere della Sera.
Putin’s comments echoed those of Foreign Minister Sergei Lavrov, who said Friday that Britain was politicizing the investigation into Litvinenko.      
Reuters, AP

TITLE: Channeling a Children’s World
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: Russia’s first chidren’s television channel Telenyanya was launched on Friday in 66 Russian cities. In St. Petersburg, programs are broadcast across 14 districts by local cable operator TKT.
The project is funded by state-owned Channel One — one of the largest free to air television channels in Russia. The company has spent the last two years preparing for the launch of Telenyanya. 
Last September, satellite company NTV+ and certain other cable operators began airing the channel in a test format.
“We built a new production studio in Ostankino specifically with this channel in mind,” Alexei Yefimov, Director for International Broadcasting at Channel One, said at a press conference Friday.
“Running a high-quality television channel like this is an expensive luxury. It’s impossible to make money from a children’s channel,” Yefimov said.
The Law on Advertisement prohibits interrupting television programs for children with adverts. Advertising is only allowed during breaks between programs. Yefimov claimed that this scares off advertisers.
For the next two to three years Telenyanya will lose money, he said. “We are fully aware that this will happen. The children’s channel will be funded using proceeds from Channel One. When the market changes and makes it possible to earn a profit, we’ll have an established and popular children’s channel,” Yefimov said.
Yefimov expects that with the growth of the Russian advertising market the channel will still cover production expenses despite the existing limitations. “The advertising market in Russia is growing faster than anywhere else in the world while the cost of production stays much the same,” he said.
“At the moment most of the cost comes from the broadcasting process. When digital television is introduced, these costs will fall several times,” Yefimov said.
The company also plans to sell popular toys and other accessories. The web site www.telenyanya.ru has already been launched. A Telenyanya magazine is also planned.
“Telenyanya is not only a television channel. It’s a broad concept,” said Alexander Nechayev, marketing director at Channel One.
Channel One chose to broadcast on cable because getting a license for free to air broadcasting would have taken several years and more money, Yefimov said. St. Petersburg is of special significance because the city has a far-reaching cable network that can compete with the free to air channels.
Telenyanya will broadcast 24 hours a day, repeating programs four times taking into account different time zones. By the end of 2007 the channel will be available all across Russia.
“This project is socially important. As an official I constantly hear complaints concerning the content of television programs and the lack of programs for children. Now about one million households in St. Petersburg will have access to these programs,” said Lyudmila Kostkina, St. Petersburg Vice-Governor. She called for creating a similar channel for teenagers.
Telenyanya focuses on children from three to eight years old. Most programs last no more than 15 to 20 minutes. The producers consulted sociologists and psychologists, said Vera Obolonkina, chief producer of Telenyanya.
“At the moment we have three regular programs produced at the new studio, and we are to launch one more program. By the end of the year up to 30 percent of our programs will be produced at the new studio,” Obolonkina said.
The remaining 70 percent of programs will come from the Channel One archive. The best children’s programs of the last 10 to 15 years will be broadcasted, including entertainment programs, educational programs and music as well as animation and films.
This fall the company will hold a festival of children’s programs to find new producers and content, Obolonkina said. At the moment a joint project is being realized together with the St. Petersburg-based Smeshariki company for the production of music videos.

TITLE: Complex Auditing In Shadow of ‘Big Four’
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: The Energy Consulting group of companies and Roedl&Partner international audit company have set up a joint venture they believe will rival the “Big Four” audit companies and offer Russian clients a more personal and “complex” approach.
“We see every client as a complex of interrelated business processes and offer complex solutions. We can provide whole cycle services for any business process,” said Svetlana Ivanova, Deputy Director for Strategic Planning and Development at Energy Consulting.
Founded six years ago as an audit and consulting company, Energy Consulting later introduced IT services, system integration and outsourcing. Most of its clients come from the power and metals industry and the banking sector. Energy Consulting is the official auditor of Gazprom. The company employs over 400 specialists.
Roedl&Partner was founded in 1977 in Germany. The company has 22 offices in Germany and 71 offices worldwide operating in over 30 countries and employing 2550 specialists.
This is their first joint venture in the Russian audit market. Energy Consulting Roedl will focus on Russian clients that plan to use foreign capital markets, offering them audit and consulting services. “Many of our clients have international partners and ventures abroad,” Ivanova said.
According to Jens Jungmann, partner of Roedl&Partner in Eastern Europe and Russia, both companies will benefit from this 50-50 venture.
Energy Consulting will provide “excellent knowledge of the local market, good contacts and good relationships with decision makers.” Roedl&Partner, in its turn, will bring “profound knowledge of international accounting standards and wide experience in auditing,” he said.
According to Christian Roedl the competitive advantages of Roedl&Partner include its interdisciplinary teamwork, which allows them to realize international projects, and its orientation on clients.
“Each client has a person in the company who knows this client very well. Our clients appreciate that we can speak to them on an entrepreneurial level. What makes us different from American audit companies is that we are really one firm and not a loose network of companies,” Roedl said.
“The ‘Big Four’ do not acknowledge the specific features of the Russian market and impose their standards on Russian companies,” Ivanova said. As for other competitors, she claimed that audit companies working on brand license agreements often fail to observe the audit methodology.
“We are sure that by gaining experience working with medium-size companies for a year we will also get the larger clients,” Ivanova said. Using local personnel the company would offer competitive prices, she said.
However it could be difficult to sell the new brand to Russian business people.
“Each of the ‘Big Four’ has an established reputation and image. That’s why we work with them. We tried other auditors and organized a number of tenders. But each time we found out that these companies were unknown to some foreign banks,” said Konstantin Kovalyov, deputy director of Okhta Group.
He did not consider price a competitive advantage for an audit company. “As a rule, serious audit reports are required for large projects, where spending on auditing is insignificant compared to the total cost of the project. And investors do not economize. That’s why the “Big Four” do not and will not have problems finding clients,” Kovalyov said.
Among the advantages of the “Big Four” and other large international networks Zorina Myskova, general director of BDO Unicon Northwest, indicated “international resources in the field of methodology, contacts, knowledge of national and international specifics of accounting and requirements of both trade floors and investors, as well as network internal coordination and cooperation.”
“One of the most important factors is the status of a consultant’s international brand which is comprised of reputation, image and professionalism. Not one of the non-network companies will be able to act as a long-term and significant competitor to either the Big Four or any other substantial international group in the world financial market in the near future,” she said.
In St. Petersburg, the market for services has been completely formed, Myskova said. 
At the same time, only a certain kind of Russian company needs audited financial reports.
“Financial reports audited according to IFRS are very important for companies that intend to sell their business,” said Alexander Dymov, CEO of Aditum company.
However, he said, companies wanting to develop, for example, will need a “solid business plan that will make investors believe in the rationality of the venture and this is much more important than an audited financial report.”

TITLE: In Brief
TEXT: <b>Lenta Opening</b>
ST. PETERSBURG (SPT) — St. Petersburg-based retailer Lenta opened two more hypermarkets in the city Saturday, the company said in a press release Monday.
The hypermarkets are located in the Northern part of the city, in Pargolovo on Vyborg Highway and on Ul. Rustaveli respectively.
Each consists of 12,000 square meters of which 7,500 square meters is retail trade space. Investment into each complex is approximately $20 million.
Lenta now has 12 hypermarkets in St. Petersburg. In July, Lenta plans to open another store on Ul. Khasanskaya, in the eastern part of the city. 

<b>Coal Unit</b>
WARSAW (Bloomberg) — Siberian Coal Energy Co., Russia’s biggest coal producer, will open a unit in Poland to boost sales in the country, Polish daily newspaper Puls Biznesu reported Monday without citing anyone.
Russia boosted coal sales to Poland by more than a third last year to 3.3 million tons, the newspaper said.


<b>Wimm-Bill-Dann Profit</b>
MOSCOW (Bloomberg) — Wimm-Bill-Dann, Russia’s biggest dairy producer and juice maker, may say profit climbed in the first quarter as the company expanded production capacity and rising incomes boosted demand for milk and baby-food products.
Net income rose 67 percent to $29 million from $17.4 million a year earlier, according to the median estimate of seven analysts surveyed by Bloomberg. Revenue increased to $537.7 million from $385.7 million, the median estimate shows.
The company is due to report results Tuesday between 2 p.m. and 3 p.m. local time.

<b>Crash Survivor</b>
MOSCOW (Bloomberg) — Mikhail Shamolin, a vice president of mobile-phone operator Mobile Telesystems, is in hospital after the helicopter he was traveling in crashed outside Moscow, Kommersant said.
Shamolin suffered an injury to the head, three broken ribs and bruises, the Moscow-based newspaper reported Monday, citing an unidentified doctor.
The pilot was killed in the accident, which happened during a training flight, and another passenger is also in hospital, Kommersant said.

<b>Scania Sales</b>
MOSCOW (Bloomberg) — Scania AB, Sweden’s second-largest truckmaker, said deliveries in Russia last month exceeded 500 vehicles for the first time as a booming economy pushes demand for freight transport.
“In May, we finally reached that delivery level,’’ Raimo Lehtio, Scania Russia Group president and chief executive officer, said in an interview Friday in Moscow. “The market in terms of demand is actually stronger than what we can get from the factory.’’
Scania, the biggest Western commercial-vehicle brand in Russia with 31 percent of new truck sales in 2006, this year has sold about 450 trucks a month on average in the country, up from 400 vehicles monthly last year, Lehtio said.

<b>Oil Production</b>
MOSCOW (Bloomberg) — Russia, the world’s largest oil producer this year, pumped 1.9 percent more crude in May than in the same month last year as Exxon Mobil Corp.’s Sakhalin-1 project increased production almost sixfold.
Russia produced 9.81 million barrels of oil a day (41.5 million tons) in May, according to preliminary data from CDU TEK, the Energy Ministry’s dispatch center. Output changed little from April.

<b>Sistema Films</b>
MOSCOW (Bloomberg) — Sistema Mass-Media, a unit of billionaire Vladimir Yevtushenkov’s AFK Sistema holding, may form a film company with Karo, a Russian movie theater and film distributor, Vedomosti reported.
Sistema Mass-Media’s Thema Production unit will combine with the film-related assets of Karo under the proposal, the Moscow-based newspaper said Monday, citing an unidentified person familiar with the negotiations between the two companies.
Karo would control the venture, valued at as much as $200 million, Vedomosti said. The deal would create Russia’s first integrated film company, from film production to movie theaters, the newspaper said.

<b>OGK-1 Income</b>
MOSCOW (Bloomberg) — OGK-1 Group, a Russian power generator, reported 2006 net income of 5.79 billion rubles ($224 million). OGK-1 posted revenue of 30.1 billion rubles, almost all from electricity sales, the Tyumen-based company said in an e-mailed statement Monday.
OGK-1’s earnings, which includes OGK-1 and its units, were released in accordance with International Financial Reporting Standards.
Pretax profit for the period amounted to 8.4 million rubles, according to the company, which was formed in 2005 during a nationwide reorganization of Russia’s power utilities.

TITLE: Agency Puts Off Its 
Decision 
On Kovykta
PUBLISHER: Reuters
TEXT: MOSCOW — The Natural Resources Ministry’s subsoil agency put off a decision Friday on stripping TNK-BP of its Kovykta gas field license by two weeks, allowing the government to sail peacefully through the Group of Eight summit and avoid upsets at next weekend’s economic forum in St. Petersburg. 
A committee of the subsoil agency had been widely expected to revoke the license Friday, but held off. 
“The committee will submit its recommendations on the Kovykta project to the head [of the agency] and the final decision will be taken within two weeks,” a ministry spokesman said. 
TNK-BP confirmed that the decision had been postponed, but declined to comment further. Interfax quoted a source as saying the agency had postponed the decision “due to the complexity of the issue.” 
President Vladimir Putin confirmed that TNK-BP could lose the license, Germany’s Der Spiegel cited him as saying in an interview published Saturday.
The company’s failure to produce as much gas as stipulated in the agreement “poses the question whether one should revoke the license,’’ Putin was cited as saying.
Analysts said the committee’s delay was not unexpected, but it was unlikely to change the final outcome. 
“Ultimately the license is likely to be recalled,” said Steven Dashevsky from Aton brokerage. 
Russian media on Friday quoted sources close to TNK-BP as saying the agency might postpone the decision until the end of the St. Petersburg International Economic Forum on June 10. The Kovykta project might have emerged also on the agenda of the G8 summit to be held June 6 to 8 in Germany. 
The ministry’s environmental agency earlier this year accused TNK-BP of underproduction at the field. The firm had hoped to use the field for gas exports to China but was forced to trim production to cover only local needs after Gazprom banned the plan as it has its own rival project to supply China. 
Gazprom CEO Alexei Miller and BP CEO Tony Hayward met in Moscow on Thursday but gave little information other than to say they discussed working together in the European, U.S. and Russian energy markets. 
TNK-BP has tried to rescue the project by ceding control to Gazprom, but the latter has said it is not interested in the field as the project is risky. 
“Even though the chances for a precedent-setting license repeal … are high, we still hope that TNK-BP and Gazprom can find a last-minute solution,” said Oleg Maximov from Troika Dialog. 
Analysts have said Kovykta could become part of a broader deal between the two companies, under which Russian billionaire shareholders would sell half their share in TNK-BP to Gazprom. 
“We believe that in the next six to nine months, a potential deal with a Russian state-owned major, a campaign to raise the company’s capital markets profile, or a combination of the above are likely to release significant value to TNK-BP’s investors,” Dashevsky said. 
* The licensing committee also reviewed compliance by other oil firms, including Sweden’s Lundin Petroleum and Imperial Energy. 
It revoked Lundin’s license to develop an offshore Caspian Sea deposit and gave Imperial Energy’s units three months to put violations right at its Siberian field.

TITLE: Norilsk Surges on RusAl Buy-In
AUTHOR: By Tai Adelaja
PUBLISHER: Staff Writer
TEXT: MOSCOW — Shares in Norilsk Nickel surged 8.5 percent Friday on unconfirmed reports that United Company RusAl was seeking to buy into it.
“RusAl has approached the authorities for clearance for a potential acquisition of assets on the traded base metals market. Norilsk Nickel is a priority asset for RusAl,” Interfax cited sources as saying Friday.
“We are indeed reviewing the possibilities of diversifying our business, but to speak of any concrete projects or acquisitions plans is preliminary,’’ RusAl spokeswoman Larissa Belyayeva said in an e-mailed statement.
RusAl, majority-owned by billionaire Oleg Deripaska, produces some 12 percent of all aluminum manufactured worldwide.
Last year, the company said it wanted to diversify into other metals to rival BHP Billiton, the world’s largest mining company.
Kommersant reported Friday that Norilsk Nickel was “an optimal asset for acquisition” for RusAl.
The paper said that both Deripaska and his biggest partner in RusAl, billionaire investor Viktor Vekselberg, have on various occasions expressed interest in acquiring more domestic metals and mining assets.
Norilsk said Friday that it would not comment on the speculation. 
Billionaire Mikhail Prokhorov, Norilsk’s CEO until March, told reporters Thursday that he might consider selling his 22 percent stake in the miner next year. 
Norilsk, which has a market capitalization of $38 billion, mines one-fifth of the world’s nickel and more than half of its palladium, a precious metal used in jewelry and car exhausts.
Analysts said RusAl was unlikely to acquire Norilsk given the high cost involved and RusAl’s own commitments.
“Norilsk Nickel’s stock price shot up on the expectation that something substantial was about to happen,” said Rob Edwards, an analyst with Renaissance Capital. “The excitement is going to be temporary because this is going to be difficult to pull off.”
Industry watchers said at play could be Prokhorov’s 22 percent stake in Norilsk, worth about $10 billion. 
But Dmitry Razumov, CEO of Onexim Group, Prokhorov’s new private fund, said there had been no talks of a sale.
“We have not held any negotiation whatsoever about the sale of our share in Norilsk Nickel,” Dmitry Razumov said Friday in an e-mailed statement. “We have not received any offer about the sale of our share of Norilsk Nickel from RusAl or any other company.”
Analysts said the next logical step for RusAl would be to acquire a diversified metals portfolio, starting with copper and zinc.
“At the present market price, such an acquisition would make good economic sense for RusAl, which would like to control a stake in Norilsk Nickel,” said Sergei Donskoi, a metals analyst with Troika Dialog. 
“The aggressive behavior of Norilsk shares today was only partly due to speculation about RusAl’s incursion,” said Andrei Kukk, chief trader at UralSib. “It is more a reflection of the general mood in the market.”

TITLE: U.S. WTO Negotiator Heading To Forum
PUBLISHER: Reuters
TEXT: WASHINGTON — U.S. Trade Representative Susan Schwab is heading to Russia this week for talks on Moscow’s bid to join the World Trade Organization and other issues, a U.S. trade official said Friday.
Schwab is scheduled to participate in a panel on June 10 at the St. Petersburg International Economic Forum.
While in the country, she will likely meet with Economic Development and Trade Minister German Gref to discuss what additional steps Moscow needs to take to join the WTO, a spokesman for the U.S. Trade Representative’s office said.
Schwab will head to Russia after attending the Group of Eight summit meeting this week in Germany. 
A continued ban on U.S. beef imports may be an issue on the bilateral agenda.
Karen Batra, a spokeswoman for the National Cattlemen’s Beef Association said the U.S. industry was anxious to see a resumption of beef exports to Russia, which have been on hold since mad cow disease surfaced in the United States in 2003.
The industry has been waiting for months for Russian officials to arrive to inspect U.S. beef plants — a move they say is long overdue under last year’s bilateral agreement.
The U.S. case for renewed trade, Batra said, may well be strengthened by a new “controlled risk” safety rating for U.S. beef from the World Organization for Animal Health.
“So [Schwab] is probably going with that in her back pocket as well,” Batra said.
 In other news, WTO talks between Russia and Georgia ended Thursday without agreement on disputed border crossings between the two countries.
Russian trade negotiator Maxim Medvedkov said the border question was not a WTO issue and that the trade it allows across its borders with these provinces is not illegal.

TITLE: LionOre Goes to Norilsk
AUTHOR: By Brett Foley
PUBLISHER: Bloomberg
TEXT: LONDON — Norilsk Nickel was cleared to buy LionOre Mining International for 6.8 billion Canadian dollars ($6.41 billion) after Xstrata said Sunday that it would not increase its offer price for the Canadian miner.
Xstrata notified LionOre’s board of directors that it would not match Norilsk’s latest offer, Swiss-based Xstrata said in an e-mailed statement.
Norilsk bid 27.50 Canadian dollars per share on May 23 to trump Xstrata’s offer of 25 Canadian dollars per share of May 15, 28 percent more than Norilsk’s original bid of 21.50 Canadian dollars, made on May 3. Xstrata CEO Mick Davis opened the bidding with an offer of 18.50 Canadian dollars on March 26.
Buying Toronto-based LionOre will give Norilsk, led by CEO Denis Morozov, access to mines in countries such as Australia, South Africa and Botswana. 
It will also help Norilsk compensate for stalling production growth at home, where its output rose less than 0.5 percent last year and was unchanged in 2005.
Nickel is the best-performing metal this year on the London Metal Exchange, more than doubling in price in the past year on rising Chinese demand for the ingredient used in stainless steel.
LionOre trimmed its forecast for 2007 nickel output by 2.9 percent on May 26 after delays at an Australian mine. The group will produce 43,000 tons, down from an earlier estimate of 44,300 tons. Production will rise to 80,000 tons by 2012, LionOre said in its 2006 annual report.
Buying LionOre would have made Xstrata the third-largest nickel producer, after Norilsk and Brazil’s Vale do Rio Doce, based on last year’s production, according to London-based metals consultant CRU.
Claire Divver, a London-based spokeswoman for Xstrata, declined to comment on the statement by telephone Sunday.
Global nickel production will rise 5 percent to about 1.48 million tons in 2007, according to the Lisbon-based International Nickel Study Group. 
Norilsk produced 224,000 tons in 2006.

TITLE: Hilton Signs Property Deals
PUBLISHER: Reuters
TEXT: NEW YORK — Hilton Hotels Corp. has signed deals with three real-estate groups to develop more than 55 properties in Russia, Britain and parts of Central America, the Wall Street Journal reported on Sunday.
The report said the partners were projected to cover the full construction costs estimated at $1.7 billion, as part of Hilton’s plan to accelerate its drive to franchise new hotels and expand its brands outside the United States.
The newspaper cited President and Chief Operating Officer Matthew Hart, who will become the hotel group’s chief executive on January 1, when current CEO Stephen Bollenbach retires.
Hart was quoted as saying the latest ventures underscore Hilton’s determination to pick partners with deep pockets and a strong track record of local development. “We want to roll these (projects) out as quickly as we can,” the newspaper quoted him as saying.
In Russia, Hilton said it linked up with a long-standing partner, closely held London & Regional Properties Ltd., that already owns marquee hotels in London and Frankfurt. The aim is to focus not only on Moscow and St. Petersburg, but to develop properties in large regional centers with few foreign hotels.

TITLE: PIK Raises $1.8 Billion in Lowball IPO
AUTHOR: By Dmitry Zhdannikov
PUBLISHER: Reuters
TEXT: MOSCOW — Property developer PIK Group said Friday that it had raised $1.8 billion in an initial public offering, pricing the placement at the bottom of the range.
The IPO helps PIK to become the country’s top developer with a market value of $11.4 billion.
PIK said the offering was Europe’s largest-ever IPO by a real estate firm and the largest placement by a private sector company in the former Soviet Union.
The firm said Friday that it had priced its Moscow and London IPO at $25 per share, at the bottom of its guidance of $25 to $31, signaling a fading appetite for Russian developers and IPOs in general after a flurry of placements.
“We believe that after this IPO, investors’ appetite for real estate investments may be nearly sated, making any further placements in the sector more challenging,” said Rustam Botashev from Aton brokerage.
Kommersant quoted banking sources as saying the offering was rescued at the last minute by two large Asian funds, which committed $500 million each.
“It was a tough placement,” one source told Kommersant newspaper.
PIK said four investors would each buy more than 5 percent of the offering, together accounting for approximately 62.9 percent of the offering.
PIK Group is one of the leaders of Moscow’s booming property development market. Deutsche Bank, Morgan Stanley, Nomura and Merrill Lynch organized the offering.
Shares in another Russia-focused real estate company AFI Development slid 20 percent since it raised $1.4 billion last month, becoming the country’s most valuable developer, with a market capitalization of $7.3 billion.
The PIK and AFI offerings dwarf previous placements by other Russian construction and real estate firms Open Investments and Sistema-Hals.
PIK’s record IPO will also produce a reshuffle on the list of richest Russians after it disclosed its major owners.
The firm said CEO Kirill Pisarev and chairman Yury Zhukov would each hold 42.5 percent in the firm post-IPO and prior to the over-allotment, while 15 percent would be freely traded.
It means the two men will be worth $4.85 billion each, putting them among the 25 richest people in Russia, compared to No. 76 and No. 77 in the latest Russian rich list published by Forbes magazine.
The Russian real estate sector has boomed in recent years, offering returns of more than 100 percent a year, though there are signs that prices have begun to stagnate in the past few months.
Dozens of Russian firms have announced plans to list at home and abroad against a background of booming markets and an explosion in corporate finance, debt and equity deals.
Many analysts say Russian firms are rushing their IPOs to cash out before the presidential election in March 2008.
One of PIK’s main focuses is production and assembly of concrete panel housing in Moscow as a subcontractor for the Moscow city government. 
Mayor Yury Luzhkov is due to step down in December after 15 years in office.

TITLE: Rosinter  Priced At Low End
PUBLISHER: Bloomberg
TEXT: MOSCOW — Rosinter Restaurants, which operates the Planet Sushi, Il Patio, TGI Friday’s and Benihana chains in Russia, raised a smaller-than-expected $100 million in the first initial public offering by a restaurant company in a former Soviet country.
A total of 3.13 million shares were sold by the restaurateur and its owners for $32 apiece, the low end of the $31 to $43 price range, Rosinter said Friday in a statement. The company had planned to raise about $125 million by selling as many as 4.1 million shares. The sale values the Moscow-based company at $380 million.
Rosinter’s shares will trade on the RTS index under the ticker ROST, and about 26 percent of the equity will trade freely after the IPO, the company said.
Some of the money raised will be used for acquisitions and to buy out minority investors in subsidiaries.
The country’s top five dining chains control only 8.3 percent of the casual restaurants market, leaving room for consolidation, Rosinter said in the IPO prospectus, citing data by In-Depth, a research organization. Casual restaurants are defined as those with an average check of $20 to $70 per table.

TITLE: Wealth Divides Two Arctic Mining Towns
AUTHOR: By Alister Doyle
PUBLISHER: Reuters
TEXT: LONGYEARBYEN, Norway — Working down a coal mine on an Arctic island does not sound like a dream job for anyone, let alone a 21-year-old woman. 
But Norwegian Guro Oydgard says she enjoys the life despite long shifts, choking dust and bone-numbing cold on the archipelago of Svalbard, where Norway and Russia have mines in a former Cold War outpost that has outlived the Soviet Union. 
“It’s exciting. It’s a physical job, not just sitting in an office,” Oydgard said in her apartment in Longyearbyen, the world’s most northerly village, with 1,800 inhabitants and founded by an American miner a century ago. 
“Of course the risks are greater than working in an office, but it’s not as dangerous as people think,” she said. Oydgard is one of six women working in the modern Svea mine, operated by Store Norske, alongside about 300 men. 
The Russian and Norwegian miners and their families live on the same island 40 kilometers apart, separated by a snow-covered mountain range that marks one of the greatest wage divides in the world for doing the same job. 
Norwegian miners can earn up to $100,000 per year, more than 10 times the pay of a Russian miner, Norwegian officials say. Norway administers Svalbard, but other nations can exploit natural resources under a 1920 treaty. 
Russian miners in the village of Barentsburg, which boasts a big, heated indoor swimming pool and a bust of Lenin on the main square, declined to say precisely how much they earned. 
Still, miners in Barentsburg, operated by state firm Arktikugol, say they also enjoy Arctic life, even if expectations are lower. The islands are bathed in the midnight sun for almost half the year, with darkness for most of the rest.
“The pay is higher here than at home. I can make twice what I could in Almaty. Here you can save money,” said Vitaly Steganov, a miner from Kazakhstan who worked in the Russian mine. 
“It was my childhood dream to live in the north,” said another man, who declined to give his name. “You get used to everything. Life always has problems — you can’t live without problems.” 
Several hundred people live in Barentsburg, where some Soviet-era buildings lie abandoned with snow piled up outside. Some snow is blackened by soot from a coal-fired power plant. 
And mine accidents happen. About 20 Russian miners died in an explosion in 1997, in the worst recent accident.
The islands have lost strategic importance for the Soviet Union and the United States since the Cold War. But global warming might make the region more attractive for oil and gas exploration, shipping and tourism. 
Still, everything in the economies of both Barentsburg and Longyearbyen is built on coal. Wooden pit props for the Barentsburg mine are imported — no trees grow on Svalbard. 
The Svea mine is a short flight away, where miners work 10 1/2-hour shifts seven days in a row, then have a week off. In Barentsburg, where the mine is under the town, miners work six-hour shifts five days a week. 
The Svea mine produces about 3 million tons of coal, mostly for export to Germany and Denmark. Barentsburg’s mine produces about 100,000 tons, according to Norwegian estimates. 
To most people it would be a hardship posting, but it seems many miners like it that way. 
“Life is good here,” said one Russian man in Barentsburg walking with his wife, whose smile flashed several gold teeth.

TITLE: Arctic Nuclear Dump Unstable
PUBLISHER: The Associated Press
TEXT: OSLO — A nuclear waste dump on the Kola Peninsula may be in danger of exploding because of corrosion caused by salt water in enormous storage tanks, the Norwegian environmental group Bellona warned Friday.
The three tanks are used to store spent nuclear fuel rods at Andreyeva Bay in northwestern Russia, just 45 kilometers from the Norwegian border, Oslo-based Bellona said in a statement.
“We discover now that we are sitting on a powder keg, with a fuse that is burning, but we don’t know how long that fuse is,” said Alexander Nikitin, a former Russian Navy officer who is now one of Bellona’s nuclear experts.
The group cited a report from the Federal Atomic Energy Agency, describing the danger. Bellona said the storage tanks were long believed to be dry inside, but that recent studies show corrosive salt water. 
“Ongoing degradation is causing fuel to split into small granules. Calculations show that the creation of a homogenous mixture of these particles with water can cause an uncontrolled chain reaction,” the report said.

TITLE: Making A Real Fight Of Growth
PUBLISHER: Vedomosti
TEXT: Officials from the world’s anti-monopoly agencies shared their experience in Moscow last week at the Sixth International Competition Network conference. Russian participants would have done well to listen to their colleagues. Burdened by giant monopolies, heavy regulation and endless bureaucracy, the level of competition in the economy remains underdeveloped.
Prime Minister Fradkov told the conference that the last seven years of growth in the economy are the result of increased competition and that new anti-monopoly measures that came into effect May 13 would help continue this trend. Perhaps the Federal Anti-Monopoly Service will be stronger, but the barrier to competition is based not on the laws on the books, but on the rules of the game as it is really played. In 2003, 1,200 companies combined to account for 80 percent of gross domestic product, according to Delovaya Rossia. In 2006, this was a mere 500 companies.
The anti-monopoly service is unable to deal with national champions, whose monopoly position is sanctified from above. On Wednesday, for example, service chief Igor Artemyev promised to open an investigation into Gazprom’s purchase of Salavatnefteorgsintez without approval from his service. But it’s doubtful that anyone at the state-owned energy giant is worried, as it generally wins these battles in court.
The anti-monopoly service expressed concern this week over the likelihood that Gazprom would snap up almost 20 percent of the country’s energy generation capacity as a result of the planned breakup of Unified Energy Systems. 
In the oil sector, the number of companies continues to shrink while the state’s role continues to grow. Only in electricity is there a real attempt to buck the trend, but significant generating assets are likely to end up in Gazprom’s hands all the same. 
In a study carried out from 2005 to 2006 by the World Bank and the Higher School of Economics, about 40 percent of business leaders surveyed said they had no competitors. First Deputy Prime Minister Dmitry Medvedev has cited the lack of competition in the construction industry as a barrier to the government’s national housing project. Protecting meat producers from outside competition has led to shortages and higher prices. The list goes on.
The economy is growing not because of competition, but despite increasing monopolization. Thanks to rising consumption and imports, energy dependency is falling. But the energy sector remains the main engine of growth, and without the development of greater competition, there is no point in waiting for genuine diversification.

This appeared as an editorial in Vedomosti.

TITLE: New Budget Code a Non-Starter
AUTHOR: By Alexei Kuzmin and Mikhail Zorin
TEXT: The federal budget for 2008 to 2010, the first to cover a three-year period, was recently passed in first reading by the State Duma, thus setting in motion a reform that the Finance Ministry has long described as necessary.
In trying to achieve their objectives in switching to the new system — converting the budget into an instrument of strategic planning and increasing transparency in the budgetary process — reformers are likely to run into certain problems at the federal, regional and municipal levels.
The actual start of the budget process reforms came in April, when the State Duma passed a new Budget Code, calling for medium-range planning targets that will transform the budget into a document orientated toward achieving specific, well-defined goals.
The immediate question that arises is what is meant by “goals” and what criteria will be used to determine whether they have been achieved. Politicians, bureaucrats and the general public are all likely to have different views on whether a particular state policy has been successful, so the question is vital both for strategic planning and for increasing transparency in the way the government manages its finances.
The main shortcoming of the new Budget Code, one that threatens the success of the whole project, is the absence of institutional consolidation mechanisms allowing the legislative branch to create methods for determining the effectiveness of government spending. This represents a severe limitation of taxpayers’ ability to influence governmental policy through their representatives in parliament, which is unlikely to increase the level of transparency in the process.
An example taken from Britain provides insight into just how important this kind of public involvement is. The British government chose the average length of hospitalization as an indicator of the effectiveness of the country’s medical institutions — the shorter the better. This put many doctors in an uncomfortable position: They could either do their ethical duty and provide quality treatment, regardless of the length of the time it would take, or they could focus on keeping hospital stays as short as possible. The association representing the country’s oncologists finally convinced the government to switch to more effective indicators, but only after making its case in Parliament. Such an outcome would be unlikely in Russia, as the Duma has no role in setting criteria.
There are two already-existing problems that the new code failed to address that will continue to hinder reforms of the budget system.
The first problem is interdepartmental wrangling between the Audit Chamber and the Federal Financial Monitoring Service, which has fueled skepticism that the new system will be able to tighten controls over state spending. Neither the Audit Chamber nor the Federal Financial Monitoring Service, or any other agency for that matter, has been given sufficient auditing authority to move past the basic tracking of expenditures and on to making recommendations to ensure that programs are actually achieving federal policy targets. Agencies performing this function are in place, for example, in Canada. All the same, the fact that criteria have at least been introduced to gauge the effectiveness of government spending will make the Audit Chamber’s life easier.
Another difficulty for the Finance Ministry in switching to a system of targeted medium-range budget planning is the human factor. The problem is that not enough has been done to provide standards in the job descriptions and contracts of bureaucrats that could be used to measure their performance. As a result, there is no way to put in place a system of bonuses that could be used to help increase productivity.
All of this said, the biggest risks and contradictions generated by the new Budget Code are related to the treatment of regions and municipalities.
One risk is generated by the fact that there will be a transition period during which the regions and municipalities will switch over to the targeted budget-creation system, even though the federal government will already be operating according to this standard. During this period two different systems will be in operation at the same time: One oriented toward results at the federal level and another, in most regions and municipalities, focusing on spending. If the budgets at lower levels are formulated according to a different rationale, then the federal budget becomes more of a strategic declaration than an instrument of strategic planning. Any relatively competent administrator at a lower level is going to focus on the spending estimates and not worry about the logic of the targets. 
Meanwhile, at both the regional and municipal levels there is already significant experience in drawing up budgets based on targets and results, as well as existing mechanisms for their adoption.
One region that could provide a useful example for other regions (and possibly at the federal level as well) is that of Chuvashia. The republic not only involves legislative bodies in the establishment of criteria to judge the socio-economic effectiveness of different expenditures, providing for a transfer of information between government and society, but provides for competition between proposals from different agencies. There have been 40 of these competitions so far this year alone, which provides the executive branch in the republic real alternatives in achieving its strategic objectives.
At the municipal level a good example can be found in Surgut’s gradual implementation of so-called service budgeting. The main advantage of this approach is that it is based on the services provided by the government. Given that municipalities deal directly with the people who benefit from such services, this model is considered optimal for local government. As the Surgut case shows, the main difficulty in implementing this model is apportioning the results of city agencies in a way that conforms to the traditional concept of one agency, one service. If this isn’t done, the responsibilities of individual city officials become unclear and the whole point of going over to a result-oriented budget is lost. For this reason, Surgut is pursuing administrative reform as it introduces the new budget rules.
The second problem with establishing the new system in the regions and municipalities is the new code’s lack of provision for a working group to improve coordination between the federal, regional and municipal levels. This complicates procedures for reaching agreement between the government and various bodies in the State Duma and the Federation Council, in particular on interbudgetary transfers. This is vital for preventing inappropriate decisions made at the federal level from generating harmful results in the regions and municipalities.
It is clear that the latest version of the Budget Code falls short of many of the expectations people had for it. Thus, it shouldn’t come as a surprise that the Federation Council passed amendments to the code on April 18, and at the same time created a working group under Budget Committee deputy head Vladimir Petrov to formulate further amendments. Judging by the questions raised by a number of senators, including those touching on the lack of clarity in expenditure indicators and the unclear legal status of state expenditures not covered in the budget, what we are seeing is the beginning of work on the next new Budget Code.

Alexei Kuzmin is prorector and Mikhail Zorin a researcher at the Higher School of Management. This comment appeared in Vedomosti.

TITLE: The State of Trust in Markets
PUBLISHER: Vedomosti
TEXT: President Vladimir Putin likes the idea of domestic initial public offerings for state-owned companies, and for good reason. On Thursday, VTB-24 president Mikhail Zadornov announced that 130,000 Russians had purchased shares in VTB in May, spending 40 billion rubles ($1.45 billion). This was higher than the 115,000 who bought shares in Rosneft’s domestic offering to the tune of 20.3 billion rubles last July.
If Russians don’t become disillusioned with these new financial options, then companies can depend on a convenient domestic source of financing. Experience in developed countries shows that individual savings tend to be split almost evenly between banks and investments. Personal savings in Russian banks have reached about 4 trillion rubles ($154 billion), so the further development of securities markets and a continued trend toward domestic IPOs could net tens of billions of dollars from individual investors. This source of funding is advantageous for companies in three ways. 
Besides an immediate infusion of capital, companies also end up with attractive shareholders. That the shareholders are essentially isolated from one another and have relatively small investments insulates management from interference in running the company. Finally, the same large number of individual shareholders provides the company with additional insurance: If everything goes badly at this kind of “people’s” company, the government will have no option but to step in and help.
But people don’t just invest because life is good. People have to protect their money against inflation, and there simply isn’t enough real estate to go around. The only options are to increase personal consumption or to invest. Another factor underpinning investment preferences, as identified in a number of studies by the FOM polling agency and the Salvador D consulting agency is an itch for entrepreneurial action. According to their studies, about 20 percent of Russians would like to be involved in entrepreneurial activities but are prevented from doing so by a lack of funds or administrative barriers to getting into business.
But if these are the motives, taking part in IPOs isn’t the most attractive option. The impressive growth in domestic share prices seen last year (the RTS index rose by 70 percent for the year) is unlikely to repeat itself. Analysts’ projections are for a period of measured growth for the country’s markets.
Domestic investment is a positive thing, of course, but the instruments available to investors should be more secure and profitable. Unlike direct investment in a particular stock, putting money in investment funds allows for the diversification of risk, as the money is placed in different assets and managed by professionals. But Russians don’t yet fully see the point, as 60 percent of those surveyed by FOM weren’t even familiar with the term “investment fund.” Last year, according to a study by the National League of Managers, a mere 220,000 Russians had holdings in these funds. In developed countries, this figure is as high as 50 percent.
And the picture isn’t any brighter when it comes to pension funds. At the end of last year, total pension fund reserves totaled 286 billion rubles ($11.4 billion), of which only about 10 billion rubles were deposited in private pension funds. A bit more than 9 billion rubles had been trusted to management companies, while the remaining 267 billion rubles remained in state hands.
So, with encouragement from the government, Russians end up opting for the riskiest and most speculative options when it comes to investing their money. The results of domestic IPOs serve as a kind of indicator of the general mood of the population and a reflection of the nature of the times. Apparently, if it’s run by the state, you can trust it. The fact that people are holding on to their shares in Rosneft, despite the absence of profits, demonstrates that Russians judged the dependability of a certain instrument not on financial data, but on some other factor.
This appeared as an editorial in 
Vedomosti.

TITLE: Merkel Won’t Bend at the Summit
AUTHOR: By Bertrand Benoit
TEXT: The consensus among Berlin’s foreign policy pundits is that Angela Merkel has finally met her nemesis. This week, U.S. President George W. Bush, the man she tried to make into a friend, will topple the German chancellor from her pedestal. She will be queen of Europe no more. By rejecting Berlin’s climate proposals at the  Group of Eight summit, which Merkel is hosting in Heiligendamm, Bush will end the chancellor’s long string of foreign policy successes, they say. 
Bizarrely, she is being compared both to Tony Blair, who embraced Bush and got scorn in return, and to Gerhard Schröder, her predecessor, who pledged “unlimited solidarity” with the United States after Sept. 11, only to take the lead in Europe’s opposition to the Iraq war. 
Some of the praise that has greeted Merkel’s skillful steps on the world stage over the past six months was hyperbolic, if not patronizing. But conversely, it seems she is now being buried too hastily, for in some significant respects she may return strengthened from Heiligendamm. 
There are sizeable caveats: If the yardstick of Germany’s diplomatic success is its ability to rally others to its views while it holds the rotating G8 presidency, then the summit is shaping up as a flop.
In the past few weeks, U.S. negotiators have rejected all of Berlin’s suggestions for the G8’s climate communique. There is to be no recognition that global warming should be limited to 2 degrees Celsius and no commitment to reduce greenhouse gas emissions to 50 percent of their 1990 level by 2050. In fact, there are to be no quantifiable targets for temperature, emissions or anything else. 
Worse, Bush’s apparent U-turn on climate last week landed on Merkel like a slap in the face. By calling on the world’s biggest polluters to discuss emission targets, Bush not only crossed the German chancellor’s only red line on the matter — her insistence that all such international initiatives should remain embedded in the United Nations-led Kyoto process, not compete with it — but he did so knowingly, since U.S. negotiators had already floated his idea in Berlin and met with a German rebuke two weeks ago. 
Although the summit looks likely to deliver a fudged communique on climate, Merkel may in fact emerge reinforced because of the coincidence of timing that put her in the chair of both the G8 and the European Union this year — the EU six-month presidency ends next month. 
At the next quarterly EU summit, starting on June 21, she will seek to craft an agreement among the EU’s 27 member states on reviving the union’s constitutional treaty. Reconciling their contradictory views will require feats of diplomatic acrobatics and great authority, and this is where Bush can help. 
Consider the Russian-EU summit three weeks ago. On paper, it was a pathetic failure. Negotiations about renewing a partnership agreement between the two could not even begin, and Merkel and President Vladimir Putin ended up curtly swapping accusations and counteraccusations on camera over human rights. 
As a result, however, Germany saw its credit with the Baltic states, Poland and the Czech Republic soar. This was a big change from a week earlier — when the Lithuanian and German ambassadors to the EU swapped angry words over Russia — and one achieved without sacrificing the fundamentals of Germany’s Russia policy. 
Do not expect a similar exchange with Bush at Heiligendamm. Merkel will bend over backward not to humiliate the U.S. president. But she will stick to her climate proposals as agreed at the last European summit in March. She will not get her original communique, but she will use the chair’s conclusions, a separate document, to restate her, and the EU’s, original goals. Like the Russian-EU summit, the G8 summit, though a failure, would thus have boosted Merkel’s credibility vis-a-vis her EU counterparts as a loyal, reliable partner. 
This does not make the constitution a done deal, but it is hard to imagine how it could damage her: Something similar is bound to take place in Germany itself. 
The ultimate goal of any elected ruler is to be reelected. This is particularly true of Merkel, who heads an unwieldy grand coalition with her rival Social Democrats, which she never wanted and is hoping to ditch for a more natural alliance with the free-market Free Democratic Party after the next general election.
 In Germany, as nearly everywhere in the world, nothing can boost a politician’s ratings like a dispute with Bush. Merkel will not return from Heiligendamm a victor, but she will have expanded her territory. The economic reformer, the champion of climate protection, the advocate of globalization with a human face, and now the courageous leader who will neither kowtow to Putin nor bend before Bush, she is quietly pushing the Social Democrats toward the edge of the political terrain. 
By September 2009, at the very latest, Merkel will have to run for re-election. She can hardly expect to maintain her approval ratings — well into the 70s, a figure unheard of for a chancellor — that long, but hers is no bad position from which to start. And by the time she runs, a new U.S. president will have taken his or her oath. And there will be just enough time left to clinch a deal on a post-Kyoto protocol. 

Bertrand Benoit is Berlin bureau chief for the Financial Times, where this comment appeared.

TITLE: The State of Trust in Markets
PUBLISHER: Vedomosti
TEXT: President Vladimir Putin likes the idea of domestic initial public offerings for state-owned companies, and for good reason. On Thursday, VTB-24 president Mikhail Zadornov announced that 130,000 Russians had purchased shares in VTB in May, spending 40 billion rubles ($1.45 billion). This was higher than the 115,000 who bought shares in Rosneft's domestic offering to the tune of 20.3 billion rubles last July.
If Russians don’t become disillusioned with these new financial options, then companies can depend on a convenient domestic source of financing. 
Experience in developed countries shows that individual savings tend to be split almost evenly between banks and investments. Personal savings in Russian banks have reached about 4 trillion rubles ($154 billion), so the further development of securities markets and a continued trend toward domestic IPOs could net tens of billions of dollars from individual investors. This source of funding is advantageous for companies in three ways.
Besides an immediate infusion of capital, companies also end up with attractive shareholders. That the shareholders are essentially isolated from one another and have relatively small investments insulates management from interference in running the company. 
Finally, the same large number of individual shareholders provides the company with additional insurance: If everything goes badly at this kind of “people's” company, the government will have no option but to step in and help.
But people don't just invest because life is good. People have to shelter their money against inflation, and there simply isn't enough real estate to go around. 
The only options are to increase personal consumption or to invest. Another factor underpinning investment preferences, as identified in a number of studies by the FOM polling agency and the Salvador D consulting agency is an itch for entrepreneurial action. 
According to their studies, about 20 percent of Russians would like to be involved in entrepreneurial activities but are prevented from doing so by a lack of funds or administrative barriers to getting into business.
But if these are the motives, taking part in IPOs isn't the most attractive option. The impressive growth in domestic share prices seen last year (the RTS index rose by 70 percent for the year) is unlikely to repeat itself. Analysts’ projections are for a period of measured growth for the country's markets.
Domestic investment is a positive thing, of course, but the instruments available to investors should be more secure and profitable. Unlike direct investment in a particular stock, putting money in investment funds allows for the diversification of risk, as the money is placed in different assets and managed by professionals. But Russians don't yet fully see the point, as 60 percent of those surveyed by FOM weren't even familiar with the term “investment fund.” Last year, according to a study by the National League of Managers, a mere 220,000 Russians had holdings in these funds. In developed countries, this figure is as high as 50 percent.
And the picture isn’t any brighter when it comes to pension funds. At the end of last year, total pension fund reserves totaled 286 billion rubles ($11.4 billion), of which only about 10 billion rubles were deposited in private pension funds. A bit more than 9 billion rubles had been trusted to management companies, while the remaining 267 billion rubles remained in state hands.
So, with encouragement from the government, Russians end up opting for the riskiest and most speculative options when it comes to investing their money. The results of domestic IPOs serve as a kind of indicator of the general mood of the population and a reflection of the nature of the times. Apparently, if it's run by the state, you can trust it. The fact that people are holding on to their shares in Rosneft, despite the absence of profits, demonstrates that Russians judged the dependability of a certain instrument not on financial, but on some other factor.

This appeared as an editorial in Vedomosti.

TITLE: Relatively Peaceful Days With Shooting at Night
AUTHOR: By Matthew Collin
TEXT: The Georgian soldiers on the de facto border of the South Ossetian conflict zone seemed concerned for my welfare. “Don’t go in,” they advised, “it’s dangerous there.” Inside separatist territory, spring blooms brightened up the Soviet drabness of the capital, Tskhinvali, but the mood was edgy and paranoid. The siege mentality seemed to have hardened in the six months since I last visited.
A couple of days beforehand, roads had been blocked when the separatists set up checkpoints, and there were reports of nocturnal shootouts, which each side blamed on the other, as usual. The beefy separatist president, Eduard Kokoity, claimed Georgia was pushing South Ossetia into war.
The cause of the rise in tensions over the past month is the rival local administration set up by the Georgian government in the part of South Ossetia it controls to undermine the separatists. It claims to represent the entire region and is headed by a former separatist prime minister who defected to the other side. He now says South Ossetia can only have a peaceful, prosperous future if it remains part of Georgia. For the separatists, this is heresy: They see their destiny within Russia.
Part of their problem is that although many young Ossetians think the same way, they want their future now, and they’re leaving for Vladikavkaz because job opportunities in South Ossetia are limited if you don’t fancy risking your life serving with the security forces. An Ossetian friend suggested that the conflict could resolve itself demographically within a generation because there wouldn’t be enough people left in the separatist zone to carry on the dispute. I’m not sure he was joking.
In Tskhinvali’s central market, I heard a similar story; traders spoke of their children who had emigrated to find wealth and happiness. “What kind of life is this?” one demanded. “We say tomorrow will be better, but in the night the shooting starts again. We are waiting to join Russia and then life will be better.”
Despite the conflict, there were still Georgian women selling their wares at the market. “We like them,” said an Ossetian fruit seller, “but sometimes when there’s shooting we ask them why they come here.”
The new, pro-Georgian administration, with its headquarters almost within shelling range of Tskhinvali, blames the recent violence on what it describes as a desperate and doomed separatist regime, lashing out in panic. But the market vendors, like the separatist president, insisted that Georgians were the aggressors. “Of course we are afraid,” said one, “but we stand our ground.”
I left before nightfall, and then the shooting started again.

Matthew Collin is a Tbilisi-based journalist.

TITLE: One Nation, Under Song
AUTHOR: By Mark H. Teeter
TEXT: Quick-marching my way through a metro underpass rife with medal-bedecked veterans on Victory Day last month, I suddenly found my undefended left eardrum under attack from a spirited chorus of “Katyusha,” an up-tempo ballad from World War II. My surprise at the assault came not from the song but the singers: They were kids, somewhere in the 13-to-15 age range, and they sang the whole song with the gusto of troops just back from taking Berlin.
American kids would not do this, of course. Indeed, they couldn’t if they tried, since they don’t have any common songs to sing together, about World War II or anything else. Neither do their parents. Try this simple test: Approach a random group of 10 to 15 U.S. citizens and ask them to sing two verses of some song they all know. They will fail; there is no such song. Now, approach a random group of 10 to 15 Russians with the same request. An hour later you will be begging them to stop, to which they will reply, “Wait, wait, just one more” approximately 10 times.
I first encountered this “song gap” in 1975, as a member of a U.S. student exchange group in Leningrad. Shepherded around to various youth-oriented peace-and-friendship functions, we were often favored with a song (or two or three) by our hosts and asked to sing something American in return. We were flummoxed. Repeatedly. Beyond advertising jingles, Beatles tunes and one verse of “Home on the Range,” our group had nothing in common. The same anomie prevailed among four disparate tour groups I brought to Moscow in the 1980s and 1990s, and among my high school-aged nephew and his friends when polled in 2003.
It’s not that Americans don’t like popular music. The United States gave the world jazz and rock and roll. And Americans used to have songs in common, too, some learned at home, some at school and some in church. The progenitors of rock and roll and mainstream country music surely proved the point: When the young Elvis Presley, Jerry Lee Lewis, Johnny Cash and Carl Perkins turned up by chance one day in 1956 at a studio in Memphis, they naturally struck up the folk music they all had in common — gospel songs.
That’s now history, literally and figuratively. Americans still make music, of course, but tend to do it individually. Two Russians will hand a third a guitar and start singing together before it’s tuned. They like to sing together as much as they like to drink and curse together — and, not surprisingly, they frequently do all three.
The first inkling of how much Russians take songs to heart surely comes to many outsiders from Turgenev’s classic story “The Singers.” 
Watching an impromptu singing contest at a village tavern, the narrator quickly succumbs to advanced, third-degree Russianness: “He sang, and in every sound of his voice one seemed to feel something dear and close to us, as though the familiar steppes were unfolding before our eyes.” 
The assembled locals begin to sing along, of course, the room is soon awash in tears and the contest over — everybody wins. “Ah, beautiful it was, by God!” says one character. “Damn me for a son of a bitch, but that was fine!”
The Russian tradition of group songfests is such that the wartime generation cannot imagine a reunion without them. Total strangers will also sing together, as we students noted in the 1975 film “Afonya”: chance acquaintances get so blitzed that one can’t recall his name, yet they go on singing. Drunks and holiday revelers are not the only public singers, either: Last Tuesday afternoon, an apparently sober man boarded a Red Line metro car singing a sentimental ballad — and nobody shushed him. Which was annoying, since at least one American was trying to read.
Granted, Russians warble a lot of awful junk-pop tunes and wallow collectively in the low-end mediocrity of the annual Eurovision song competition. And yet they haven’t abandoned a common heritage: Three or even four generations will sing along with Iosif Kobzon, Vladimir Vysotsky of Bulat Okudzhava because doing so means something to them, as substance, ritual or both.
Meanwhile, U.S. teens enjoy the latest hit from Avril Lavigne, a chart-topping song-and-video featuring the observation “She’s, like, so whatever,” and the chorus “Hey, you, I don’t like your girlfriend.” How these lyrics could mean much as substance or ritual to anyone besides Paul Wolfowitz is beyond me. And they’re a long way from “Katyusha,” too.

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

TITLE: Japanese Expansion
AUTHOR: By Lily Nonomiya
PUBLISHER: Bloomberg
TEXT: TOKYO — Japan’s economy probably grew more than the government initially estimated in the first quarter after a report Monday showed business investment rose to a record. 
The economy expanded at an annual 3.2 percent pace in the three months ended March 31, faster than the 2.4 percent preliminary number, according to the median estimate of 15 economists surveyed by Bloomberg News. The Cabinet Office will release revised GDP on June 11 at 8:50 a.m. 
Capital spending surged 13.6 percent to the highest ever in the first quarter, the Finance Ministry said, prompting economists to say corporate outlays were stronger than the initial GDP report suggested. Toyota Motor Corp. and TDK Corp. unveiled plans last month to build factories. 
“We’re going to see a considerable revision to GDP,’’ said Katsuhiro Oshima, an economist at Mitsubishi Research Institute in Tokyo. “The economy will keep growing steadily this year, thanks to solid domestic and overseas demand.’’ 
The yen traded at 122.03 per dollar at 6:12 p.m. in Tokyo from 122.08 before the report. The yield on Japan’s benchmark 10-year bond rose 2 basis points to 1.79 percent. 
Monday’s spending numbers account for about 60 percent of the corporate outlays portion of revised GDP. Machinery makers, construction companies and transport equipment makers led the increase, the report showed. 
“Capital spending wasn’t as weak as we initially thought,’’ said Yasukazu Shimizu, a senior market economist at Mizuho Securities Co. in Tokyo. “Capital spending strength reflects companies’ optimism about demand.’’ 
Both domestic and overseas demand may boost business investment in coming months. A report this week is expected to show that machinery orders, a key indicator of future spending plans, rose 5 percent in April, halting two months of declines. 
The U.S. economy may be rebounding after growing at the slowest pace in four years last quarter. Manufacturing in Japan’s largest market grew more than expected in May. An index of non-manufacturing will show service industries also expanded last month, according to economists surveyed by Bloomberg News. 
A recovery in spending by Japan’s consumers may gain momentum. The jobless rate fell to 3.8 percent in April, the lowest level in nine years, and household spending rose for a fourth month, the longest winning streak in three years. 
“Japan’s economic recovery will continue, based on solid domestic demand,’’ Vice Finance Minister Hideto Fujii said at a news conference in Tokyo. “The corporate sector’s strength will spread to households.’’ 
Sales and earnings surged to a record in the first quarter as companies benefited from the economy’s longest postwar expansion, Monday’s report showed. Sales rose 6.3 percent and profits climbed 7.4 percent. 
The GDP report on May 17 showed corporate spending, which is measured by capital goods shipments in preliminary calculations, fell 0.9 percent from the fourth quarter. Inventories subtracted 0.1 percentage point from growth. 
Companies reduced inventories last quarter, the first decrease in almost three years, the ministry said Monday. Those figures probably won’t have a major impact on GDP because the initial report already showed companies are cutting back stockpiles, according to Mizuho’s Shimizu.

TITLE: Palm Sells 25% Stake To Elevation, Revamps
AUTHOR: By Lars Klemming
PUBLISHER: Bloomberg
TEXT: SUNNYVALE, Califoronia — Palm Inc., maker of the Treo mobile phone and e-mail device, agreed to sell a 25 percent stake to private-equity firm Elevation Partners for $325 million and announced an overhaul of its board. Palm shares surged. 
Palm will pay $940 million in cash, or about $9 a share, to existing shareholders, financing that with the $325 million from Elevation, $400 million of new debt and existing cash on its balance sheet, the Sunnyvale, California-based company said in a statement on Business Wire Monday. The transaction will bring former Apple Inc. executives into Palm, the company said. 
“As a result of this transaction, we will strengthen the Palm leadership team and create a more effective capital structure, which puts us in a great position to attract new talent, significantly strengthen our execution capabilities, and deliver long-term shareholder value,’’ Chief Executive Officer Ed Colligan said in the statement. 
Palm wants to reduce its reliance on the Treo as Research In Motion Ltd. is taking market share with new BlackBerry designs, and Apple Inc. plans to enter the market in June with its iPhone. Palm also faces growing competition from mobile-phone makers Motorola Inc. and Nokia Oyj. Palm, which has increased spending at the expense of profit, hired Morgan Stanley to help evaluate options including a sale of all or part of the company. 
Shares of Palm surged $2.08, or 13 percent, to the equivalent of $18.17 at 1:15 p.m. Monday in Germany, from the close of $16.09 on the Nasdaq Stock Market on June 1. 
Jon Rubinstein, Apple’s former hardware chief, will become Palm’s executive chairman. Fred Anderson, a partner at Elevation and a former Apple finance chief, and Roger McNamee, another Elevation partner, will also join Palm’s board. Palm Chairman Eric Benhamou and board director Scott Mercer will step down. 
Under the terms of the recapitalization plan, Elevation will purchase $325 million of a new series of convertible preferred stock with a conversion price of $8.50 a share. 
“This is by far the largest investment that Elevation has ever made, which reflects our enthusiasm for Palm and its opportunity,’’ McNamee said in the statement.

TITLE: Virgin Gets Down To Transatlantic Business
PUBLISHER: Reuters
TEXT: LONDON — Virgin Group founder Richard Branson plans business class-only flights with a fleet of up to 15 new planes, in a move which could spell trouble for upstart rivals in the competitive transatlantic market.
“In the next 12 to 18 months we will start a business-only airline,” a Virgin spokesman said on Monday. “We’ll serve New York initially and then other U.S. cities.”
Newly created EOS, MAXjet and Silverjet all use business-class-only aircraft and offer competitive fares in the lucrative business-class market linking London to the United States.
But heavyweights Virgin Atlantic and British Airways are looking to fight back, spurred by an Open Skies pact between Europe and the United States which is to come into effect on March 30, 2008, and threatens to bring more competition to their London home market.
Virgin plans flights to New York from Paris, Amsterdam, Frankfurt, Milan and Zurich, as well as from London, though Virgin is staying mum about which London airport it will use.
Frequent flyer programmes and the ability to tap into U.S. domestic flights operated by Virgin America due to begin next month would be advantages over small, upstart carriers, the Virgin spokesman said. 
British Airways, which makes the bulk of its profits on business flights across the Atlantic, is also studying the idea of business-only services.

TITLE: China Shows Its Teeth
PUBLISHER: The Associated Press
TEXT: BEIJING — China posted a statement on a government Web site over the weekend saying that a Food and Drug Administration warning to American consumers to avoid potentially harmful Chinese toothpaste was “unscientific, irresponsible and contradictory.”
The American warning was issued because of reports that the products might contain diethylene glycol, a thickening agent used in antifreeze.
In a statement released late Saturday, the General Administration of Quality Supervision, Inspection and Quarantine said that low levels of the chemical had been deemed safe for consumption and that the ingredients list was made available to the F.D.A.
The Chinese agency said European Union standards allowed for a certain amount of the chemical and cited a 2000 Chinese study that found toothpaste containing less than 15.6 percent diethylene glycol was not harmful.  The F.D.A. said the toothpaste had 3 to 4 percent.

TITLE: Democrats Spar Over Iraq War
AUTHOR: By Beth Fouhy
PUBLISHER: The Associated Press
TEXT: MANCHESTER, New Hampshire — Questions of courage and political leadership emerged at the latest Democratic debate, as John Edwards forcefully challenged front-runners Hillary Rodham Clinton and Barack Obama over whether they had demonstrated leadership on key issues. 
Two long-shot hopefuls — Mike Gravel and Dennis Kucinich — denounced what they called the lack of leadership by congressional Democrats after voters returned them to power last November.
With a new Washington Post/ABC News poll showing Clinton far ahead of her rivals nationally, the former first lady projected an air of confidence and a mastery of the subject matter at Sunday’s forum. 
She also insisted Democrats should focus their policy critiques on Republicans, especially President Bush.
“The differences among us are minor. The differences between us and Republicans are major, and we don’t want anybody in America to be confused,” she said.
She chuckled as her rivals were quizzed over what role her husband, former President Bill Clinton, would play in a Democratic administration. The consensus: He’d be a roving global ambassador.
Obama, who in the first debate in late April appeared nervous and insufficiently prepared, had a smoother delivery this time and a more detailed grasp of policy issues.
So it was left to Edwards, struggling to catch up to Clinton and Obama in most national polls, to throw the sharpest elbows, accusing them of being passive and cautious on urgent issues, like Iraq, health care and gay rights.
“The job of the president of the United States is not to legislate but to lead,” he said — a point he repeated several times.
One strategist said Edwards’ approach was bold but potentially dangerous.
“John Edwards clearly has a new strategy to isolate Senator Clinton and defuse Senator Obama on the war and other key issues,” Democratic strategist Stephanie Cutter said. 
“It’s a smart but risky strategy to differentiate from others to maintain top-tier status, but it’s a fine line between aggressive and desperate.”
Edwards applauded Clinton and Obama for voting last week against legislation to fund military operations in Iraq after a timeline for removing troops was stripped from the bill. 
But he said the votes didn’t demonstrate the level of political leadership voters expect.
His rivals, Edwards said, “did not say anything about how they were going to vote ... they were among the last people to vote,” Edwards said. “I think all of us have a responsibility to lead on these issues.”
Edwards, a former North Carolina senator, voted in 2002 to authorize military action in Iraq and was a forceful defender of the war during his first presidential bid in 2004.
That led Obama, who as an Illinois state senator opposed the war before it started, to jab back at Edwards.
“You’re about four and a half years late on leadership on this issue,” Obama said.
Obama and Edwards also tangled over details of their respective health care plans, with Edwards arguing that Obama’s proposal would not provide universal coverage. Obama said his plan focused primarily on bringing down costs and said that mandatory health coverage was meaningless if consumers couldn’t afford to pay for it.
Clinton stood quietly between the two as they bickered, letting through an occasional bemused smile for the cameras.
Edwards had tough words for the former first lady, too, batting back her contention that the differences among the candidates were unimportant. 
“There are differences between us, and I think Democratic voters deserve to know the differences between us,” he said. 
Clinton lobbed back at Edwards over his contention that the war on terror is little more than a “bumper sticker” slogan. 
“I am a senator from New York. I have lived with the aftermath of 9/11, and I have seen firsthand the terrible damage that can be inflicted on our country by a small band of terrorists,” she said.

TITLE: Sharapova Fights Back to Beat Schnyder
AUTHOR: By Pritha Sarkar
PUBLISHER: Reuters
TEXT: PARIS — A competitive streak as hard as a diamond gave Maria Sharapova the strength to stage a great escape at the French Open on Sunday.
The Russian second seed looked to be dead and buried when she faced two match points — 20 minutes apart — but each time her survival instincts kicked in.
After two hours 37 minutes of high drama she squeezed past Switzerland’s Patty Schnyder 3-6 6-4 9-7 and greeted her triumph by blowing a kiss skywards. 
“Today is what I play for. I’m a huge competitor. Don’t count on me giving up. If I lose the match, I want to be able to lose it on my terms,” said Sharapova.
Justine Henin and Serena Williams lined up a grudge re-match when they hurtled into the last eight.
Four years after Williams was booed off court following an acrimonious semi-final, the duo will face each other across the net at Roland Garros for the first time since that day.
Australian Open champion Williams darted past Dinara Safina 6-2 6-3, while Henin ousted Austrian Sybille Bammer 6-2 6-4.
Roger Federer’s charge towards an elusive French Open title gathered momentum as he silenced roaring Russian Mikhail Youzhny 7-6 6-4 6-4. 
Next up for the top seed will be Tommy Robredo. 
The Swiss maestro, who is bidding to become only the third man to win all four majors in a row, has now won a record-equalling 35 successive sets at grand slams dating back to his triumph at the 2006 U.S. Open.
“If I can win in three sets so much the better but I’m not looking for these types of records,” was Federer’s verdict on matching John McEnroe’s 1984 feat.
“I got enough shirts for five-set matches in the bag. I only used one today.”
For once Federer’s majestic performance was not the talking point amongst Parisians.
It was the forthcoming duel between Henin and Williams that had tongues wagging.
Williams was left an emotional wreck after her reign as champion was ended in 2003 by Henin and she went on to accuse the Belgian of “lying and fabricating” following a controversial point in the match.
Despite the passage of time, some things cannot be forgotten.
“I wasn’t at fault in any way and I guess she was doing everything to win. Who knows? I don’t know,” said Williams.
Playing with a painful shoulder, Sharapova had been hoping for a quick workout against an opponent she had beaten in each of their last three meetings.
But Schnyder had other ideas and served for the match three times in the decider but each time was left floundering. A match point at 5-4 flashed by, as did another one at 7-6.
Sharapova eventually snapped a run of six successive breaks and after incurring a violation for time wasting, for choosing to change her racket when Schnyder was 40-15 up in the final game, she won the next four points to seal the Swiss’s fate.
Booed off court, Sharapova said: “It’s pretty hard being a tennis player and Mother Theresa at the same time. It’s just the way it is.”
The Russian will hope an easier outing will be on the cards when she comes up against compatriot Anna Chakvetadze.
While Williams was the only U.S. survivor out of the 10 who had entered the women’s draw, Jelena Jankovic and Ana Ivanovic highlighted the changing boundaries in the world tennis map.
They were the only Serbs to enter the field and remain on course for a final date. Before she can look that far ahead, Ivanovic will have to overcome 2006 runner-up Svetlana Kuznetsova.
The Russian foiled Shahar Peer’s bid to become the first Israeli woman to reach the Paris quarter-finals with a brisk 6-4 6-3 victory.
Fourth seed Jankovic ended French interest with a brutal 6-1 6-1 thrashing of Marion Bartoli and will take on Nicole Vaidisova.

TITLE: Bush Due in Europe for G8
PUBLISHER: Reuters
TEXT: WASHINGTON — U.S. President George W. Bush left for Europe on Monday with his popularity at home at a low point over the Iraq war and tensions abroad over global warming and missile defense. 
Built around the Group of Eight summit in Germany where his host, Chancellor Angela Merkel, had hoped to forge an agreement on climate change, Bush’s trip includes stops in Eastern Europe to bolster developing democracies.
The presidential plane, Air Force One, took off with Bush and his staff aboard shortly after 7 a.m. from Andrews Air Force Base near Washington.
With many Americans clamoring for an end to the Iraq war, the Republican president focused on a softer agenda before the meeting.
Laying out his goals last week, Bush asked Congress to double funds for combating AIDS, primarily in Africa, to $30 billion over five years and tried to dispel criticism by proposing a new global warming strategy. He also slapped sanctions on Sudan for what he called the genocide in Darfur.
“If you couple Bush’s weak position at home with this unpopularity in much of Western Europe, Bush is probably not relishing this trip,” said Charles Kupchan, director of Europe Studies at the Council on Foreign Relations.
“Particularly on the question of climate change, he will find himself isolated.”
Europeans gave a cool reception to Bush’s plan to bring together the world’s biggest polluting countries by year-end to explore ways of limiting emissions and agree on a long-term goal by the end of 2008.
Some portrayed it as a defeat for Merkel, who wants the G8 to agree now on a need for cutting emissions of greenhouse gases about 50 percent by 2050.
“The general view in Europe is: let’s be patient, November 2008 is coming,” Kupchan said, referring to the next U.S. presidential election. “It’s fair to say every European government is looking expectantly to the post-Bush era.”
The weeklong tour, with additional stops in the Czech Republic, Poland, Italy, Albania and Bulgaria, includes several firsts. Bush will meet new French President Nicolas Sarkozy in Germany and Pope Benedict at the Vatican.
One of the most watched meetings during the summit will be with Russian President Vladimir Putin, whose escalating criticism of the United States has raised concerns about the deterioration of U.S.-Russian ties.
Putin vehemently opposes U.S. plans for a missile defense shield in the Czech Republic and Poland, seeing it as a threat to Russia. Bush has asked Russia to join in the defense system, saying it is intended as protection from potential threats from other states such as Iran.
In a pre-emptive move that could take some of the tension out of the session, Bush has invited Putin to his family’s retreat in Maine next month for two days of talks.
In Prague, Bush will talk about the need to advance democracy at an international conference organized by human rights and pro-democracy activists, including former Czech President Vaclav Havel, who was a leader in the “Velvet Revolution” that ended communism in the former Czechoslovakia.
“The president also appreciates the Czech Republic’s leadership in promoting freedom in some of the world’s most tyrannical societies, such as Burma, Belarus and Cuba,” White House national security adviser Stephen Hadley said.
Bush will thank Poland for cooperating in the missile defense system, promoting freedom in Belarus and helping young democracies such as Ukraine, Hadley said. 
His visit to Albania, the first by a sitting U.S. president, comes as the United States locks horns with Russia over the issue of statehood for Kosovo, which is majority ethnic Albanian. 
The United States supports a plan proposed by UN mediator Martti Ahtisaari which offers Kosovo independence under international supervision. Russia opposes the plan.

TITLE: UEFA Fan Report Slammed
AUTHOR: By Darren Ennis
PUBLISHER: Reuters
TEXT: BRUSSELS — UEFA should stop “playing the blame game” and take responsibility themselves, British sports minister Richard Caborn said as he waited to receive a report on trouble involving Liverpool fans. UEFA president Michel Platini will submit a report to Caborn which names Liverpool as Europe’s most troublesome club based on statistics compiled from international police undercover agents for the past four years. 
Problems occurred at the May 23 Champions League final in Athens when fans with forged tickets or no ticket gained entry to the Olympic Stadium for the match against AC Milan, while dozens of fans with genuine tickets were refused entry. 
When Liverpool fans tried to enter, the situation threatened to escalate out of control and Greek police fired tear gas and used batons. 
“There have been over 25 incidents involving Liverpool supporters since 2003, some of them small, some more worrisome,” UEFA spokesman William Gaillard told Reuters on Monday. 
Caborn told Reuters: “This is not about UEFA versus Liverpool or UEFA versus England fans but UEFA must stop playing the blame game and stop pointing fingers at people. 
“What we need to do is look at the evidence of the last season and the evidence in the report which I’m due to get tomorrow and move forward. 
“This is about finding solutions, not looking back and saying what has happened but more about how to stop this happening in the future. 
“I have given this message to (Liverpool chief executive) Rick Parry this morning in a phone call and I will be giving the very same message to Michel Platini when I see him tomorrow.” 
Parry, in a statement on Liverpool’s web site (www.liverpoolfc.tv) responded to Gaillard’s comments by saying: “The shortcomings in the management of the situation in Athens were apparent to anyone who was there. 
“These latest comments from UEFA should not deflect attention from that reality. What is most surprising about (them) is that on the eve of the final, Mr Gaillard quite rightly commented that Liverpool supporters ‘have a tradition of good behavior’.” 
Parry added: “These same supporters, who Mr Gaillard is claiming are now the worst in Europe, were praised by UEFA President Michel Platini after our semi-final victory against Chelsea only last month, commended for their behavior in Istanbul in 2005 and actually honored by UEFA at a gala dinner in Monte Carlo in 2001.”

TITLE: Polish Man Wakes Up After 19-Year Coma
PUBLISHER: The Associated Press
TEXT: WARSAW, Poland — A railway worker who emerged from a 19-year coma woke to a radically altered Poland and thinks “the world is prettier now” than it was under communism, his wife said Sunday. 
Gertruda Grzebska, 63, said that for years she fed her husband Jan carefully with a spoon and moved his body to prevent bed sores.
“For 19 years he did not move or say anything,” Grzebska told The Associated Press by phone. “He tried to say things but it couldn’t be understood. Sometimes we pretended we understood.”
“Now he spends his days sitting in a wheelchair and last weekend we took him out for a walk in his wheelchair,” she said.
“He was so amazed to see the colorful streets, the goods,” she said. “He says the world is prettier now” than it was 19 years ago, when Poland was still under communist rule.
“I could not talk or do anything, now it’s much better,” Jan Grzebski, 65, told TVN24 Television in a weak but clear voice, lying in bed at his home in the northern city of Dzialdowo.
“I wake up at 7 a.m. and I watch TV,” he said, smiling slightly.
Wojciech Pstragowski, a rehabilitation specialist, said Grzebski was shocked at the changes in Poland — especially its stores: “He remembered shelves filled with mustard and vinegar only” under communism. Poland shed communism in 1989 and has developed democracy and a market economy.
Despite doctors’ predictions that he would not live, his wife never gave up hope and took care of him at home.
“I would fly into a rage every time someone would say that people like him should be euthanized, so they don’t suffer,” she told local daily Gazeta Dzialdowska. “I believed Janek would recover,” she said, using an affectionate version of his name.
“This is my great reward for all the care, faith and love,” she told the AP, weeping.
“He remembers everything that was going on around him,” she said. “He talks about it and remembers the weddings of our children. He had fever around the time of the weddings, so he knew something big was taking place.”
In 1988, when Poland was still run by a communist government, Grzebski fell into a coma after sustaining head injuries as he was attaching two train carriages. Doctors also found cancer in his brain and said he would not live. Grzebski’s wife took him home.
Last October he fell sick with pneumonia and had to be hospitalized again, Grzebska said.
Doctors’ efforts led to the first signs of recovery.
“He began to move and his speech was becoming clearer, although I was the only one to understand him,” she said. Intensive rehabilitation brought more effects.
“At the start, his speech was very unclear, now it is improving daily,” said Pstragowski, who predicted his patient would soon walk. “I am sure that without the dedication of his wife, the patient would not have reached us in the [good] shape that he did.”

TITLE: Kerzhakov Hat Trick Eases Russia Past Andorra in Group E
AUTHOR: By Mike Collett
PUBLISHER: Reuters
TEXT: LONDON — Russia maintained its unbeaten record in Group E as expected when it defeated Andorra 4-0 in a one-sided Euro 2008 qualifying match on a busy day of action around the continent on Saturday. 
Alexander Kerzhakov notched a hat trick at St. Petersburg’s Petrovsky Stadium while substitute Dmitry Sychev added the fourth to steer Russia to the top of the group, at least until Saturday’s later matches between Estonia and Croatia and Macedonia and Israel were completed. 
“Scoring a quick goal is always very important against a team like Andorra and today we did just that,” said Kerzhakov, who has scored five goals in Russia’s last two qualifiers after notching a double in the 2-0 win over Estonia in March. 
Andorra, missing eight first-team players through injury and suspension, slumped to its sixth successive defeat. 
Germany was the biggest winner in the early matches, crushing San Marino 6-0 in Nuremburg to move clear on points ahead of the Czech Republic at the top of Group D. 
The only surprise was that Germany, who beat San Marino 13-0 in the first match between the teams in September, took 45 minutes to open the scoring through Kevin Kuranyi before dominating the second half. 
Marcell Jansen, Torsten Frings, Mario Gomez (2) and Clemens Fritz added the others while San Marino had Davide Simoncini sent off. 
Germany moved on to 16 points from six matches, two ahead of the Czechs, who were held to a 0-0 draw in Cardiff by Wales with Ryan Giggs making his 64th and last appearance for the home side. 
Poland strengthened its position at the top of Group A but had to come from behind to beat Azerbaijan 3-1 away with goals by Euzebiusz Smolarek (63) and Jacek Krzynowek (66, 90) to record its sixth win from eight matches. 
Serbia won 2-0 in Finland in another Group A match to move to 14 points and, temporarily at least, above Portugal, who was playing in Belgium in a later kick-off. 
A total of 22 qualifiers took place on Saturday with another full round scheduled for Wednesday, the last day of action before the summer break.

TITLE: James Crowned King of Cavs
AUTHOR: By Tom Withers
PUBLISHER: The Associated Press
TEXT: CLEVELAND — As confetti danced in the electrified air around him and a feverish hometown crowd rocked and rolled the night away, LeBron James was handed a new baseball cap and T-shirt. Perhaps a tasseled cap and gown would have been more appropriate. Four years after skipping college to play in the pros, James earned his NBA degree in superstardom. 
On Saturday, with a ravenous city placing its hopes for a championship in his able hands, the Cavaliers’ seemingly unguardable forward delivered his fourth straight clutch performance as Cleveland eliminated the Detroit Pistons 98-82 in Game 6 and advanced to the finals for the first time in its 37-year history.
“This is the first step to greatness,” a dazed James said during a quiet moment sitting in front of his locker. “It feels like a fantasy.”
But Sunday dawned with a startling reality: Cleveland, where kids learn at an early age that rooting for the local sports teams can lead to a lifetime of pain and suffering, is finally on top.
At least until Thursday, when the Cavaliers will face the San Antonio Spurs in Game 1 of the finals.
For now, James has given Cleveland a moment to savor just as he promised he would when the Akron high school prodigy was drafted by the Cavaliers with the No. 1 overall pick in the 2003 draft.
“I said I was going to light it up like Las Vegas in Cleveland,” James recalled following Game 6 of the Eastern Conference finals.
There are no casinos or dancing water fountains dotting Ontario Street, which will never be mistaken for the Vegas Strip. But the wild scene of delirium — strangers high-fiving strangers and sidewalks overflowing with joyful Clevelanders — outside Quicken Loans Arena could rival almost any happening on a Saturday night in the Nevada desert.
Four years ago, it would have been impossible to imagine the Cavs, a 17-win team the season before James’ hyped arrival, playing for a title. But the 22-year-old, whose multimillion dollar endorsement deals and rising celebrity have made him a dribbling, dunking American Idol, decided it was time to begin fulfilling his destiny by taking his teammates to new heights.
The Cavaliers became just the third team to overcome an 0-2 deficit to win the conference finals, a stunning turnaround after what happened in Games 1 and 2 at the Palace in Auburn Hills, Michigan.
The opener ended with James deferring to teammate Donyell Marshall for the final shot, a wide-open 3-pointer that rimmed out and gave Detroit a 79-76 win. The Pistons won Game 2 by the identical score after James, criticized for not shooting after Game 1, failed to get a call or get off a clean shot in the closing seconds.
But in the final three games, James, who dropped 48 on the Pistons in a transcendent Game 5 performance, showcased his diverse and abundant skills, averaging 33.3 points, 10.6 rebounds and 8.0 assists as the Cavaliers closed out their Central Division rivals one year after losing a seven-game series.
Did he just grow up?
“I don’t know why people say that,” he said. “I’m still the same player. If I get double-teamed and the game is close, I’m going to pass it again. If we make the shot, I’m on top of the world. If not, then I’m under a lot of trees and leaves. It’s fine with me. I’ll take the criticism that comes with it.
“I’m the leader of this team.”
Unlike in Game 5 when he took over and carved up the Pistons by scoring Cleveland’s final 25 points, James was patient in the series clincher. He attempted just two shots in the first half, but had five assists, seven rebounds and made 9-of-11 free throws.
After halftime, James seemed to toy with the Pistons. They sent one, two and three defenders to try and stop him, and James made them pay by feeding rookie Daniel Gibson, who made 5-of-5 3-pointers and scored a season-high 31 points — 22 of them in a 27-10 spurt.
“I told Daniel before the game, ‘Detroit is going to double-team me, triple-team me before I cross halfcourt, so get that gun and get it locked and loaded and just shoot it,” said James, who had 20 points, 14 rebounds and eight assists. “Don’t second-guess yourself. Just shoot it.’ And when they closed out on him, he drove the ball to the rim and made free throws.” 
Gibson finished 12-of-15 from the line, and his emergence as a dependable scorer will give the heavily favored Spurs more to consider as they plan for James. 
“LeBron told me to step into my shot and shoot it with confidence,” Gibson said. 
When the King orders, you obey. 
In James’ second trip to the playoffs, he came of age. 
In the biggest games of his life, he dominated. 
In a city without a major sports championship since 1964, he has given hope. 
If he had been like any other teenager and enrolled at Ohio State or North Carolina after getting his diploma from St. Vincent-St. Mary High School, James would be winding down his final semester of college. 
It’s a time for 21- and 22-year-olds to let loose, a final blowout before beginning careers and the rest of their lives. 
James seems to have his mapped out nicely. 
“It’s another chapter in my book, I guess,” he said.

TITLE: In Brief
TEXT: <b>Dog-Eating Artist</b>
LONDON (Reuters)  — An artist who last week ate a meal of meatballs made from a dead corgi dog in a protest against animal cruelty said on Sunday his next project involved being buried in a box under a mountain of mashed potato. 
Performance artist Mark McGowan, 37, said the corgi, which died from natural causes, tasted terrible.
Corgis are the favored dogs of the Queen, who has owned more than 30 of them during her reign.
McGowan said he ate the dog because he was angry that the Royal Society for the Prevention of Cruelty to Animals, of which the royal family is a patron, had not prosecuted Prince Philip, the Queen’s husband, for hunting and killing a fox. The RSPCA said the fox did not suffer.
Now McGowan is switching his attention from animals to vegetables. He told Sky News television that his next project would be an interpretation of the work of American illusionist David Blaine.
“I am being buried in a box — a David Blaine type thing — in Dublin underneath a meter of mashed potato,” he said. 
He did not explain why.

<b>Finnish Vampire Moths</b>
HELSINKI (Reuters) — Global warming is bringing more warmer-climate creatures to Finland, including moths that feast on human blood, according to nature researchers. 
Insect-watchers are spotting more and more calpe moths in the Nordic country, which used to be considered too cold for the insects from southeast Asia, Finnish nature magazine “Suomen Luonto” reported in its June edition.
The journal published what it said were the first pictures showing the moths — calyptra thalictri — sucking human blood.
The species was first sighted in Finland in 2000, but more than 100 of them have been counted since then, the journal said.

<b>Dutch Nude Photograph</b>
AMSTERDAM, Netherlands (AP) — Dozens of women posed naked on their bicycles on a bridge over one of Amsterdam’s historic canals Sunday — a unique sight even in a city famed for its relaxed attitude toward nudity and sex. 
They were among 2,000 men and women who participated in a series of four nude group photos in the city in the early hours of the morning as part of the latest project of U.S. photographer Spencer Tunick.
The first and largest composition was in a decidedly prosaic location: a parking garage on the outer ring road of the city.
But what the location lacked in romance, it made up for in style. Participants lined the railings of the garage’s twin circular towers, creating a pattern of multicolor stripes against the white building and an overcast sky.

TITLE: Incredulous Kuznetsova Happy at Federer Praise
AUTHOR: By Pritha Sarkar
PUBLISHER: Reuters
TEXT: PARIS —Thinking people were making it up, St. Petersburg tennis ace Svetlana Kuznetsova logged on to the Internet to read the evidence herself. 
When she saw it written in plain English, she had to pinch herself — Roger Federer had picked out the Russian as his favorite player on the women’s tour.
“I like her game, she plays well,” Federer declared earlier in the week. 
It sent Kuznetsova into a spin. 
“The Russian press told me and I thought ‘No, it was a joke’. So I wanted to check it myself and read this on the Internet,” the third seed said after reaching the quarter-finals at Roland Garros. 
“If I would have to choose a compliment from anybody, it’s definitely the best I ever heard. Roger is a legend and to hear him say that is almost a dream. 
“It’s unbelievable to hear my hero say this about my tennis.” 
A runner-up in Paris 12 months ago, Kuznetsova is now eager to back up Federer’s endorsement by winning the title on Saturday. 
“If he likes my game, I would like to prove it more,” she said. 
She will next face rising Serb Ana Ivanovic for a place in the semi-finals.

TITLE: China Blocks  Net Cafes
PUBLISHER: The Associated Press
TEXT: BEIJING — China will license no new Internet cafes this year while regulators carry out an industry-wide inspection, the government says, amid official concern that online material is harming young people. 
Investigators will look into whether Internet cafes are improperly renting out their licenses or failing to register their customers’ identities, the State Administration for Industry and Commerce said on its web site.
“Industry and commerce bureaus at all levels must not license any new Internet cafes in 2007,” said the notice, dated May 30.
The communist government encourages web use for business and education, but authorities are worried it gives children access to violent games, sexually explicit material and gambling Web sites.
President Hu Jintao has ordered Chinese authorities to clean up “Internet culture,” and the government launched a crackdown in April on online pornography.
China has the world’s second-largest population of Internet users, with 137 million people online, and is on track to surpass the United States as the largest online population in two years.
The government tries to block access to online material deemed obscene or subversive.
Internet cafes are hugely popular with customers who spend hours playing online games that link multiple competitors.

TITLE: Paris Hilton Goes Straight to Jail in L.A.
AUTHOR: By Sandy Cohen
PUBLISHER: The Associated Press
TEXT: LOS ANGELES — Hours after strolling the red carpet in a strapless black dress, Paris Hilton traded her designer duds for a jail-issued jumpsuit.
The 26-year-old heiress checked into the Century Regional Detention Facility in Lynwood just after 11:30 p.m. Sunday. She’s expected to serve three weeks for violating her probation in an alcohol-related reckless driving case.
Hilton surrendered to sheriff’s deputies after making a surprise visit to the MTV Movie Awards in the afternoon.
“I am trying to be strong right now,” she told reporters on the red carpet. “I’m ready to face my sentence. Even though this is a really hard time, I have my family, my friends and my fans to support me, and that’s really helpful.”
Sheriff’s spokesman Steve Whitmore said Hilton was easy to work with.
“Her demeanor was helpful. She was focused, she was cooperative,” he said.
Hilton turned herself in at the Men’s Central Jail in downtown Los Angeles just after 10:30 p.m., then was escorted to the all women’s facility in Lynwood, where she was booked, fingerprinted, photographed, medically screened and issued an orange top and pants, Whitmore said.
Hilton’s booking photo showed the heiress wearing what appeared to be a V-neck shirt, eye makeup and lip gloss that highlighted a slight smile. Her long blond hair was draped over one shoulder.
After checking in, Hilton was given her first meal: cereal, bread and juice.
The “Simple Life” star will be housed in the “special needs” unit of the 13-year-old jail, separate from most of its 2,200 inmates. The unit contains 12 two-person cells reserved for police officers, public officials, celebrities and other high-profile inmates. Hilton’s cell has two bunks, a table, a sink, a toilet and a small window. She does not have a cellmate.
Like other inmates in that unit, Hilton will take her meals in her cell and will be allowed outside the 12-by-8-foot space for at least an hour each day to shower, watch TV in the day room, participate in outdoor recreation or talk on the telephone. No cell phones or BlackBerrys are permitted in the facility, even for visitors.
The jail, a two-story concrete building next to train tracks and beneath a bustling freeway, has been an all-female facility since March 2006. It’s located in an industrial area about 12 miles southeast of downtown Los Angeles.
“I did have a choice to go to a pay jail,” Hilton said Sunday, without giving details. “But I declined because I feel like the media portrays me in a way that I’m not and that’s why I wanted to go to county, to show that I can do it and I’m going to be treated like everyone else. I’m going to do the time, I’m going to do it the right way.”
When she was sentenced May 4, Superior Court Judge Michael T. Sauer ruled that she would not be allowed any work release, furloughs or use of an alternative jail or electronic monitoring in lieu of jail.
Sometimes stars are allowed to do their time in a jail of their choosing. In such cases, they pay a daily room-and-board fee to the smaller jails, which afford them more privacy and comfort.
Zsa Zsa Gabor, for example, served three days behind bars in 1990 at the El Segundo jail near the Los Angeles International Airport. She paid $85 a day.
On Saturday, about 15 photographers, reporters and television crews staked out the entrances to the jail waiting for Hilton’s arrival. Authorities had also cordoned off a grassy area outside the facility for the media. She had until Tuesday to report.
On Sunday, about a dozen photographers and television crews were at the Lynwood facility when she arrived in an unmarked sport utility vehicle. Video captured by celebrity news site TMZ.com showed Hilton inside the vehicle with her mother, Kathy. 
Hilton’s publicist, Elliot Mintz, said he spoke with Kathy Hilton after she returned from the jail. 
“She told me it was very emotional,” Mintz said. 
“She also said that she feels this will be a time when Paris will be able to think and reflect and to spend time alone to learn from the experience because in Paris’ life she’s never alone — there’s always a constant chatter around her.” 
Officers arrested Hilton in Hollywood on Sept. 7. In January, she pleaded no contest to the reckless-driving charge and was sentenced to 36 months’ probation, alcohol education and $1,500 in fines. 
She was pulled over by California Highway Patrol on Jan. 15. Officers informed Hilton she was driving on a suspended license and she signed a document acknowledging she was not to drive.

TITLE: Castro Well in New Video
PUBLISHER: The Associated Press
TEXT: HAVANA — Talking at length, grinning for cameras and cracking jokes, Fidel Castro appeared stronger and more vibrant Sunday in the first TV images of the ailing Cuban leader in four months.
The 2 1/2 -minute clip appeared to show Castro in the same red tracksuit with black and white trim that he wore in past official images. At times, Castro, 80, shook his fist and waggled a finger for effect while talking to Vietnamese Communist Party chief Nong Duc Manh, who met with him on Saturday.
The two leaders were later shown smiling and embracing warmly. An upbeat Castro even drew laughs when he complimented an interpreter on how well he spoke Vietnamese and Spanish.
Toward the end of the meeting, Manh said: “I don’t want to go, but I want you to rest to get better.” Manh also invited the convalescing leader to visit Vietnam’s capital, Hanoi. Castro had visited the country in 1973, when the United States was backing South Vietnam in a war with the communist North, which eventually won.
The clip ends with a round of applause from those accompanying Castro and Manh.
Photos of Castro standing with Manh also appeared on the front page of the Communist Youth newspaper Juventud Rebelde on Sunday. Some Cubans lined up at newsstands to buy a copy.
“He’s always animated but now he’s healthier,” said Marvis Lescay, a Havana resident. “It is very satisfying for me to see him getting better.”
It was the first official videotape of Castro released since he met in Havana with his friend and ally, Venezuelan President Hugo Chávez, in January, and the first still photos of him since he met with Chinese Communist Party leader Wu Guanzheng in April.

TITLE: Caribbean Becomes Focus of Terror Network
AUTHOR: By Tony Fraser
PUBLISHER: The Associated Press
TEXT: PORT-OF-SPAIN, Trinidad — A radical Islamic group known for launching a bloody 1990 coup attempt in Trinidad faced growing scrutiny at home and abroad well before an alleged U.S. terrorist plot focused new attention on it. 
The four suspects named on Saturday in a plot to attack John F. Kennedy International Airport in New York tried to enlist the help of Jamaat al Muslimeen, according to U.S. court documents.
But the group, whose followers are largely black converts to Sunni Islam, has faded as a political force in Trinidad as its charismatic leader, Yasin Abu Bakr, fends off criminal charges of inciting violence.
In 1990, Abu Bakr’s group stormed Parliament and took the prime minister and his Cabinet hostage in a rebellion that left 24 dead — the only Islamic revolt in the Western Hemisphere. The rebels eventually surrendered and were later pardoned.
Though they did have contact, Jamaat al Muslimeen is not accused of offering any support to the men involved in the plot to blow up the New York airport, its fuel tanks and a jet fuel artery.
Analysts are not surprised.
“They haven’t identified themselves as a terrorist group,” said Anthony Bryan, a senior associate at the Washington-based Center for Strategic and International Studies.
“They’re identified more in terms of protection rackets in Trinidad and Tobago,” said Bryan, who was doing research in Trinidad.
The suspects allegedly traveled to this twin-island Caribbean nation off the coast of Venezuela to lobby Abu Bakr, but only one met with him. Heavy surveillance of the group and its leaders apparently made communication difficult.
One suspect, Abdul Kadir, allegedly told an informant that he expected difficulty reaching out to Bakr because of the security.
“Everybody is zooming in on him. So I don’t know if he’ll be available,” Kadir said.
Kadir, a former member of Guyana’s parliament, and a second suspect were arrested on Friday in Trinidad, where police were searching for a third member of the alleged Muslim terrorist cell that planned to kill thousands by blowing up a jet fuel artery. A fourth suspect, a U.S. citizen native to Guyana, was arrested in New York.
Trinidad and Tobago Police Commissioner Trevor Paul said Sunday that he had “no new information” to report on the search for the suspect at large, Abdel Nur of Guyana. In Guyana, an official and acquaintances of Nur said he had been deported from the U.S. in the late 1980s after a drug violation and called Americans “oppressors.”
Inspired by black nationalist movements in the United States and elsewhere, Jamaat al Muslimeen formed in the 1970s and built a private compound including a mosque and school. It has drawn followers among poor urban blacks but remained underground and the number of members is unknown.
Abu Bakr, a former police officer who converted to Islam, blamed the government for widespread poverty that followed the collapse of world oil prices.
Nur, the suspect at large, said Abu Bakr suggested during their meeting in Trinidad that he return later with others involved “to discuss the plan in detail,” according to the U.S. court documents. He reportedly said he also wanted to conduct “checks” on the other plotters.
Phone calls to Abu Bakr’s office seeking comment went unanswered Sunday.
Bakr’s group, often accused of aiming to create an Islamic state in Trinidad, describes itself simply as a religious organization. It is not known to have international reach, although a member was convicted of trying to smuggle 70 assault rifles to Trinidad from Florida in 2005. 
Abu Bakr faces charges stemming from a 2005 sermon in which he called for war against all rich Muslims who refuse to pay zakaat, an Islamic tithe used to alleviate poverty. The following week, he was arrested by police who razed the group’s compound and charged with sedition and incitement to violence. 
He was questioned but not prosecuted in connection with a 2005 series of at least four bombings in the capital Port-of-Spain. 
The FBI opened a permanent office in Trinidad in 2005, partially to investigate the unsolved bombings. At the time, FBI chief Robert Mueller said he had no reason to believe there were terrorist cells in Trinidad or Tobago, but said there are “persons of interest” living in the Caribbean nation. 
Nur was detained Feb. 13 by Guyanese detectives at the request of the FBI, fingerprinted, and released, according to a police commander in Guyana who spoke on condition of anonymity because he was not authorized to release the information. 
After he was named as a suspect, police went to his house and seized Islamic books and documents including receipts from international money transfers, the commander said.