SOURCE: The St. Petersburg Times
DATE: Issue #1279 (45), Wednesday, June 13, 2007
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TITLE: City Hosts Forum, Dissenters
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: During the 11th St. Petersburg Economic Forum held in the city last weekend, President Vladimir Putin confidently played the role of host and the leader of a world energy superpower. But the aftershocks of the political warnings sounded at the G8 summit held in Germany immediately before the forum got underway — where the Russian president was received as the head of what U.S. president George Bush called “a derailed democracy” — were still felt in Putin’s home town. 
Andrei Illarionov, Putin’s rebellious former economic advisor, speaking at a Dissenters’ March on Saturday, which he attended instead of the prestigious forum, warned that Russia’s economic success would be short-lived if it is not supported by coherent political reform aimed at developing its fledgling democracy.
In Illarionov’s opinion, the rally, which was attended by about 2,000 activists — around one third of the number of registered participants of the economic forum — was more important for Russia than the business event.
“Trust in a country is not built during forums,” he said. “And no matter how often you hold such business gatherings trust is effectively ruined by things like the destruction of Yukos and the country using its laws as a club against political opponents.”
“Yes, foreign investment may flow to Russia but respect will not come with it and investors will not stay,” he added. “What Russia needs is a long-term partnership, but what it will get is a smash-and-grab raid, quick rip-off deals, and it will earn as little trust as Zimbabwe or Libya. These countries can hold as many forums as they like but unless they build democracy at home and demonstrate a commitment to it, investors will not make long-term decisions.”
Illarionov’s concerns were echoed at the forum itself, where some Russian CEOs argued that political pressure interferes with Russia’s business with the EU and the U.S. 
Many foreign participants competed with each other in trying to assure the hosts that upon return to their home countries they will dispel stereotypes about Russia as an unstable and investor-unfriendly place.
Former German chancellor Gerhard Schroeder said that Russia “is no longer a weak partner in negotiations as the West had used to see it back in the 1990s.”
“Today Russia is self-confident both in economic and political terms.
“This, however, is a good, not a bad thing for Europe,” Schroeder said.
The former German leader now works for Russian state energy monopoly Gazprom.
However, Viktor Vekselberg, CEO of Russian metals and engineering company Renova cited Russian steelmaker Severstal’s failure to seal a deal with major European steel producer Arcelcor in 2006 as a compelling recent example of a decision that had been based on political bias.
“I am not even talking about Gazprom, which faces a stop signal wherever it goes,” Vekselberg said. “It is a vicious combination of politics and bureaucracy.”
Vekselberg recalled his own negative experience of what he called a prejudiced reception. 
“When Renova bought a stake in Swiss engineering giant Sulzer, the local media reacted with an avalanche of angry articles, which all related to Russian politics rather than our company,” he added. “There then followed a string of audits and financial assessments of us. Such treatment affects the international reputation of the company because everyone starts to think there must be something wrong with us.”
References to the forum featured prominently in the speeches of opposition leaders during the June 9 protest event, which began at 5 p.m. with a march from the Oktyabrsky Concert Hall to the Alexander Suvorov Museum on Kirochnaya Ulitsa. A two-hour rally was then held. 
Former chess champion Garry Kasparov, one of the leaders of the opposition coalition that organized the demonstration, was inspired by the meeting.
“I am encouraged to see more than 2,000 people here, especially after the excruciating police violence and intimidation campaign during the last rally in April,” he said. “The most difficult thing is to overcome a fear, and I am proud to see that my compatriots do not give in to their fears.”
Similar marches in Moscow, St. Petersburg and Nizhny Novogorod earlier this year were broken up by riot police, with marchers being arreste.
The June 9 event concluded peacefully but was held under massive police surveillance, with additional riot police from other regions drafted in to keep an eye on protesters.
National TV ignored the June 9 rally, and focused exclusively on various aspects of the forum. Opposition leaders therefore find it nearly impossible to make their cause known to the general public.
Speaking to foreign businessmen at a round-table on Sunday, Russia’s first deputy prime minister Sergei Ivanov expressed his “surprise” over the Western European and American coverage of the forum, when “20-second footage from the economic forum was followed by a three-minute report about the so-called march of dissenters that only managed to attract a few hundred people.”

TITLE: Awards Ceremony
Celebrates Russia Day
AUTHOR: Steve Gutterman
PUBLISHER: The Associated Press
TEXT: MOSCOW — President Vladimir Putin celebrated Russia’s profound cultural wealth and resurgent military might Tuesday at a pomp-filled awards ceremony on a holiday initially created to mark the country’s emergence from the crumbling Soviet Union.
Putin, who strode through a massive golden doorway into a soaring Kremlin hall, handed medals to a dozen recipients for their contributions to science, technology, literature and the arts in an annual awards ceremony he has made the centerpiece of the Day of Russia holiday.
Putin, due to step down in less than a year because of constitutional term limits, said the recipients — rewarded for work ranging from nuclear-armed atomic submarine designs to film restoration — have helped increase Russia’s spiritual wealth, global prestige and competitiveness.
He also honored Alexander Solzhenitsyn, the Nobel laureate and longtime exile who documented the murderous Soviet prison camp system, with an award for “humanitarian activity” — a kind of lifetime achievement award for the ailing 88-year-old author.
It was accepted by Solzhenitsyn’s wife Natalya, but Putin later visited the writer at his home on the outskirts of Moscow, thanking him in a brief televised portion of the meeting for “all your work for the good of Russia.”
Solzhenitsyn, in a wheelchair, thanked Putin for coming. “You are very busy, and I can’t imagine how you found time to pay me a visit,” he said.
In a taped message televised during the award ceremony, Solzhenitsyn said he hoped Russians’ rough experience during the “cruel and troubled years” he wrote about would help them avoid new upheaval.
“Our bitter and national experience can yet help us in a possible repeat of unstable social conditions. It will forewarn and protect us from destructive breakdowns,” he said, speaking haltingly and looking frail beneath a gray suit and tie.
Solzhenitsyn, who was harshly critical of post-Soviet Russia’s government when he returned from the United States in 1994, has had little but praise for Putin. But he has warned of the possibility of a repeat of the turbulence that plunged Tsarist Russia into chaos and led to the 1917 Bolshevik Revolution.
Putin said that “common moral values” were crucial to maintaining unity in multiethnic Russia, which has been plagued by a rise in hate crimes as well as years of devastating conflict with separatists in mostly Muslim Chechnya and other parts of the troubled North Caucasus.
Putin has repeatedly spoken of morality and spiritual life as his two-term presidency winds down. He has also underlined Russia’s military might, and the awards ceremony was no exception. Goose-stepping guards evoking Tsarist-era armies carried the medals into the vast room where the ceremony was held, and five of the 12 recipients were honored for work related to the military.
In addition, Putin announced a special award for the developers of the Iskander-M cruise-missile system, who were not named because their identity is a state secret. 
New missiles were tested last month, officials said, along with a new long-range missile that can carry multiple warheads, in what Putin at the time called a response to U.S. plans to deploy a missile-defense system in Eastern Europe.
The June 12 holiday is one of several that have been shifted or renamed as Putin’s Kremlin seeks to shape Russians’ perception of their country and its history.
It was introduced by Putin’s predecessor, Boris Yeltsin, to commemorate Russian lawmakers’ 1990 declaration of sovereignty and was long known to most Russians as Independence Day. However, millions of Russians regret the 1991 collapse of the Soviet Union — which was dominated by Russia — and blame Yeltsin for its disintegration.

TITLE: Kasparov Group Holds Anti-Putin Rally
AUTHOR: By Douglas Birch
PUBLISHER: The Associated Press
TEXT: MOSCOW — A protest in Moscow led by chess champion Garry Kasparov and other critics of President Vladimir Putin ended peacefully Monday in marked contrast to their last demonstration in the capital which culminated in beatings and arrests.
During the rally, protesters encountered mild harassment. A white truck stacked with loudspeakers repeatedly drove by the square blaring maniacal laughter that sometimes drowned out those addressing the crowd.
At one point, people on a nearby rooftop threw leaflets and unfurled a banner labeling the protesters political “prostitutes” — echoing authorities’ claims that opponents pay people to protest and that Kremlin critics have support from the West.
Interior Ministry troops stood by quietly as the crowd swelled to about 2,000. Authorities did not intervene, despite warnings by officials that no more than 500 protesters could gather at the site, near Moscow’s Pushkin Square.
It was only the second time that a demonstration led by Kasparov and his allies in a major Russian city has ended without police violence or other interference. The protest site was ringed by metal barriers and troops in fatigues, rather than the riot police in full protective gear that greeted would-be protesters who showed up for an unauthorized rally in April. 
That effort was crushed when riot police began rounding up demonstrators.
On Monday, protesters waved the flags of opposition groups ranging from liberal to nationalist and chanted slogans such as “Russia without Putin!” and “Our Fight Continues!”
Members of the coalition accuse Putin of silencing dissent and rolling back democracy ahead of parliamentary and presidential elections in the coming year.
Kasparov’s United Civil Front and others in the Other Russia movement began a series of rallies in December, and authorities repeatedly moved to break them up.
That changed during a recent Russian-EU summit in Samara, after the EU asked that protests planned for May 18 be allowed to proceed. They did, but protest leaders — including Kasparov — were harassed or detained on their way to the demonstration. Police at Sheremetyevo airport prevented Kasparov from boarding a flight to the city.
Western criticism mounted. On Saturday, authorities permitted an Other Russia march that drew some 1,500 people in St. Petersburg to proceed unmolested.
Moscow authorities had granted a permit for Monday’s protest, but not to a planned parade down the capital’s main street. Organizers had considered defying the restriction, but Kasparov said as he left the square that they had decided against it.
“We had to make a choice between pushing the crowd into police lines” or leaving quietly and refraining from an attempt to march down Moscow’s main street, Kasparov said as he walked through a corridor set up by police to funnel protesters to a subway station.
Responding to criticism from Europe and the U.S., Putin has said that sometimes Western nations find the need to take preventative measures with demonstrators.

TITLE: Hermitage Museum Looks Toward Modern Art Future
AUTHOR: By Evgenia Ivanova
PUBLISHER: Staff Writer
TEXT: Video-installations, performance art, and interactive shows will soon be available for the public in one of Russia’s most conservative institutions, the State Hermitage Museum. 
“To make art accessible to all, closer to ordinary people and a pleasurable experience” is the guiding principle for developing a new exhibition space in the Hermitage’s General Staff Building, its director Mikhail Piotrovsky said at a news conference earlier this month.
“[In the contemporary section of the new museum] we will focus not on the collections, but on ways of showing them. In the 21st century the word ‘ownership’ has somewhat lost its meaning as art belongs to the people. So it’s tremendously important how it is shown,” Piotrovsky said.
 “We will have a series of different projects, permanent displays, exhibitions borrowed from artists and collectors, small and large exhibitions: in this way we will gradually form our own collections [of modern art],” he added.
Although the reconstruction of the Eastern Wing of the General Staff Building, which is opposite the Winter Palace on Palace Square, will not be completed until 2014 — the year the Hermitage celebrates its 250th anniversary — it has already hosted a number of modern and contemporary art exhibitions, and will host a new show this fall.
According to the website of the Saatchi Gallery, one of the most influential galleries of contemporary art in Britain, the building, which housed Russian imperial ministries before the Bolshevik Revolution of 1917, will exhibit its “USA Today” show from Oct. 24.
The display of new American art was shown in the Royal Academy of Arts in London last year and was widely publicized. 
“At a moment when international opinion of U.S. politics and customs is at an all time low, these young artists show that not all Americans or American culture is myopic, separatist and paranoid,” wrote the Independent newspaper in its review on the exhibition.

TITLE: New Holland Building Begins
AUTHOR: By Angelina Davydova
PUBLISHER: Special to The St. Petersburg Times
TEXT: Sunday evening marked the beginning of the reconstruction of New Holland Island and the closing ceremony of the St. Petersburg International Economic Forum with an extravaganza, featuring music and theater on a scale the city hasn’t seen since it celebrated its 300th anniversary in 2003. 
An architectural monument, the buildings of New Holland Island are set to be redeveloped as a “multi-functional cultural and business center,” with a Festival Palace, three theaters, an art-gallery and hotel, apartment and retail facilities. The $320 million project is set for completion in 2010. 
The celebration of the start of the project, which attracted several hundred guests including first deputy prime minister Sergei Ivanov, Governor Valentina Matviyenko and the British architect in charge of the redevelopment, Lord Norman Foster, allowed many to visit the inner premises and yards of the island which were previously closed to the public. 
The event featured a concert by the Mariinsky Theater orchestra, conducted by Valery Gergiev and with baritone Dmitry Hvorostovsky, followed by a firework display. More than 100 actors and dancers took part in a performance staged by St. Petersburg theater director Viktor Kramer that featured ballet dancers on scaffolding, seamen with paddles, and actors imitating amusements from the 18th and 19th centuries. 
Throughout its history since the early 1700s, New Holland Island was used for military purposes. During the Soviet era, the island remained a closed military zone. In December 2004 the island was finally turned over by the Russian Navy to the city of St. Petersburg, after which a tender for reconstruction was announced.

TITLE: Zhukov’s Son Gets 14 Months in Prison
AUTHOR: By David Nowak
PUBLISHER: Staff Writer
TEXT: MOSCOW — A London court sentenced the 24-year-old son of Deputy Prime Minister Alexander Zhukov to 14 months in prison Friday, one month after it convicted him of assault causing bodily harm.
Pyotr Zhukov, an associate director at UBS Investment Bank in London, was found guilty of beating up fellow investment banker Ben Ramsey, who showed up to what he believed was a party at a friend’s apartment, prosecutors said. Zhukov had pleaded innocent.
Artyom Dahko, who lives at the Whitechapel district apartment, was handed a sentence of 12 months on Friday on the same charge. A court spokesman said Dahko received a lighter sentence because he pleaded guilty to the charges.
Judge Nicholas Lorraine-Smith handed down the sentences at Southwark Crown Court late Friday.
Konstantin Voitsekhovich, an assistant to Deputy Prime Minister Zhukov, refused comment when contacted Friday.
There was no immediate word on whether Zhukov would appeal the sentence. A spokeswoman at the Russian Embassy in London said it had been informed of the sentence, but was unable to say whether there had been any discussion with British authorities over the possibility of turning Zhukov over to Russian custody.
Zhukov’s sentencing comes at a time when relations between Moscow and London are already strained by quarrels over a British request for the extradition of Andrei Lugovoi — the former Federal Security Services officer whom British prosecutors charged last month with the murder of Alexander Litvinenko — and criticism of the state of democracy in Russia.
A clerk at Southwark Crown Court, speaking on condition of anonymity, said by phone Friday that people sentenced to prison terms were usually driven straight from the court building to a cell at Wandsworth, a London holding facility. They stay there for up to two days while awaiting transfer to prison.
Voitsekhovich said last month that the minister’s only child had been involved in the incident “by chance.” On Friday, Zhukov’s secretary at UBS said that her boss had gone “on long-term leave.”
Ramsey, a banker with a London-based Japanese investment firm, suffered a broken cheekbone, cuts to the back of his head, two cracked ribs, a swollen jaw and bruises to much of his body, British media reported.
Police found Ramsey on the pavement outside the apartment building, covered in blood. He was taken to a local hospital and required five stitches to his cheek and 20 to his lower lip.
Ramsey and some friends left the Whitechapel apartment when they realized there was no party there. The altercation occurred, prosecutors said, after Dahko requested that they leave behind the beer they had brought with them. Dahko fell on Ramsey and punched him several times without warning, they added.
After initially trying to step in and restrain Dahko, Zhukov himself began punching Ramsey and continued beating him after he had fallen to the ground.

TITLE: 35 Officials Implicated In Siberian Mine Blast
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The country’s industrial safety watchdog Friday implicated dozens of officials in last month’s methane blast at the Yubileinaya mine in the Kemerovo region that killed 39 miners, but cited a short circuit as the main cause of the explosion.
Georgy Lavrik, general director of Yuzhkuzbassugol, which owns the mine, was one of 35 officials implicated in the report on the explosion, released Friday by the Federal Service for Ecological, Technological and Atomic Inspection.
Lavrik failed to provide sufficiently safe working conditions, thus violating the Labor Code and company policy, the report said, Interfax reported.
But the head of the watchdog, Konstantin Pulikovsky, said the primary cause of the blast was a faulty safety system to monitor the concentration of methane gas in the mine.
The explosion would not have happened “if the safety system had been effective and reliable,” Pulikovsky said, Interfax reported.
Pulikovsky said earlier this week that the safety system had been intentionally disabled by miners in “a rush for super-profits.”
Lavrik said Friday that operations would resume at the mine next month, Interfax said.
Following the accident, Steel giant Evraz Group announced that it would assume full control of Yuzhkuzbassugol, and Pulikovsky said Friday that Evraz chief Alexander Frolov had told him that the deal had gone through.
Evraz had held a 50 percent stake in Yuzhkuzbassugol, which owns Yubileinaya and other mines in the area and is valued by analysts at about $2 billion.
Evraz was expected to buy out the rest of the company at a steep discount.
Lavrik said on Friday, however, that the agreement was still in progress.
“Yuzhkuzbassugol’s board of directors will meet late next week” to discuss the deal, Lavrik told RIA-Novosti.
He added that about 150 million rubles ($6 million) in compensation had already been paid to the victims’ families.
The Ulyanovskaya mine, which is also owned by Yuzhkuzbassugol and where a blast killed 110 people in March, will be inspected by federal investigators in mid-June, company spokesman Sergei Gorbatov said Friday.
Meanwhile, Kemerovo Governor Aman Tuleyev said Friday that he had filed a libel lawsuit against Pulikovsky for statements the safety watchdog director made earlier that regional authorities were aware of safety violations at the mine before the accident, Interfax reported.

TITLE: Putin Sees Iraq, Turkey in Missile Shield
AUTHOR: By Simon Saradzhyan
PUBLISHER: Staff Writer
TEXT: MOSCOW — President Vladimir Putin said Friday that the United States could place interceptors in Turkey, Iraq or on the sea instead of setting up a missile defense shield out of eastern Europe.
The comments elaborated on his proposal Thursday for the United States to use the Gabala radar site, which Russia leases from Azerbaijan, rather than build a shield in the Czech Republic and Poland.
“They could be placed in the south, in U.S. NATO allies such as Turkey, or even Iraq,” Putin told reporters at a Group of Eight summit in Germany on Friday. “They could also be placed on sea platforms.”
He urged the United States not to act on its plans before concluding proposed talks over the alternative radar site in Azerbaijan.
“Gabala completely covers the whole region that worries the Americans,” Putin said in televised remarks.
“We will not be late because Iran does not have these rockets. If Iran starts working on them we will know about it in good time, and if we do not, we will see the first test-launch,” he said.
The United States and NATO are treating Putin’s offer with caution, but State Duma deputies warned Friday that Washington had no reason to reject the proposal. Konstantin Kosachyov, chairman of the Duma’s International Affairs Committee, warned that the future tenor of Russian-U.S. relations would depend on whether the United States accepted Putin’s proposal.
“If the American side under some pretext or other rejects this Russian proposal, it will be completely clear that the true aim of this project is not only a hypothetical Iranian or North Korean threat but to restrain the nuclear potential of Russia itself,” Kosachyov said, RIA-Novosti reported.
Washington’s reply would show its real objectives because the Azeri radar can track launches across a vast territory from Turkey to Pakistan and even parts of China and Africa but cannot track launches in Russia, another pro-Kremlin deputy said.
“If the planned deployment of missile defense elements in Europe is, as the U.S. says, not meant to target Russia, then Washington should support Vladimir Putin’s proposal,” said Nikolai Bezborodov, deputy chairman of the Duma’s Defense Committee, Interfax reported.
In Baku, Azeri Foreign Minister Elmar Mammadyarov said Friday that negotiations over the radar could start immediately.
“At this time, Azerbaijan’s position, which is supported by the United States and Russia, is that it is necessary to start consultations in a bilateral or trilateral format. I can say that Azerbaijan is ready for such consultations,” Mammadyarov told reporters, Interfax reported.
Azerbaijan’s position is likely to anger neighboring Iran, which has a large Azeri minority and has been wary about recent Azeri overtures toward the United States and NATO.
NATO’s secretary-general said it was too early to say whether the Azeri base could be the answer to the threat. “It’s a bit close to the rogue states we are discussing,” Jaap de Hoop Scheffer said at a conference in Brussels, news agencies reported. He also criticized Putin’s threat earlier this week to retarget Russian missiles at Europe if the U.S. plans materialized, calling it “unhelpful, unwelcome and frankly inadmissible.”
Bush said Putin’s proposal was interesting, while his national security adviser, Stephen Hadley, said it “had some elements we have heard before.”
Kommersant reported Friday that Russian and U.S. officials had been discussing the possible joint use of the Azeri radar for the past two weeks. The report, citing a source in the White House, said Putin proposed the radar during a telephone conversation with Bush on April 28.
The proposal, however, is unlikely to bear fruit, skeptics on both sides of the Atlantic said.
The Azeri radar is far less precise than the powerful radar, called X-band, that the United States military uses, Rick Lehner of the Pentagon’s Missile Defense Agency said Thursday, The Associated Press reported. The agency’s director, Lieutenant General Henry Obering said earlier, however, that placing a radar unit in the South Caucasus “would be very useful for the anti-missile system.”
A former Russian Air Force commander said he doubted that Putin’s proposal would convince the United States to abandon its plans. “It is, of course, an extraordinary step,” the commander, Anatoly Kornukov, said of Putin’s proposal. But “I think they will not abandon their plans, and there is no way we can hinder them,” he said, Interfax reported.
Poland said Friday that it had not received any indication from the United States that talks would stop on placing the missile shield in Central Europe.

TITLE: Berezovsky to Be Tried in Absentia for Theft
PUBLISHER: Reuters
TEXT: MOSCOW — Self-exiled businessman Boris Berezovsky will be tried in absentia in Moscow and could be jailed for up to 10 years if found guilty of theft from flagship carrier Aeroflot, prosecutors said Friday.
Once part of the country’s business and political elite, Berezovsky is now a vocal critic of President Vladimir Putin and a political emigre sheltered by Britain. London has rejected Moscow’s requests to extradite him.
“Berezovsky is charged with large-scale theft of company funds worth a total of 214 million rubles [$8.3 million] ... and laundering part of the sum stolen from Aeroflot worth over 16 million rubles [$620,000],” the Prosecutor General’s Office said in a statement.
Berezovsky’s lawyers said the case was a sham. “We have lodged a request to close the case because it contains no evidence of his guilt,” lawyer Andrei Borovkov was quoted by RIA-Novosti as saying.
The Prosecutor General’s Office said the investigation into the theft had been completed and, after Berezovsky’s lawyers had finished reading his criminal case, it would be sent to one of Moscow’s district courts and heard there.
“The articles of the Russian Federation’s Criminal Code with which Berezovsky is charged call for a maximum jail term of 10 years,” it added.

TITLE: Thousands of Babies Left in Limbo at Hospitals
AUTHOR: By Svetlana Osadchuk
PUBLISHER: Staff Writer
TEXT: MOSCOW — Seven hours after Kristina Smirnova, 17, gave birth to her son, the doctor came into her room and said she should hand the baby over to the state.
“The baby is ill. He will not live more than a week. I think signing rejection papers is the only wise thing for a girl like you to do,” the doctor said, Smirnova recalled.
Smirnova had the baby at the Motorshchiki maternity ward in the east Siberian city of Barnaul on the morning of Oct. 31, 2005. She had no identification papers, no relatives, no place to live and no money. She had spent the last year living with her boyfriend, the baby’s father, but he broke up with her when he learned that his son was ill.
But Smirnova refused to sign the rejection papers, sparking a 2 1/2-month struggle to prevent the boy from joining thousands of babies caught in a hospital limbo. The babies, usually referred to as otkazniki, live in almost every children’s hospital in the country. No accurate figures are kept because the babies themselves do not officially exist. The babies are only counted once they are moved to orphanages — a process that by law should take no more than four months but in practice can take several years. While they wait, they are often neglected and sometimes abused.
Hospital staff commonly advise mothers who are single, very young or struggling financially to give up their babies, even those who are healthy.
“If Beethoven’s mother had been in one of our hospitals, they would have told her to give him up because she was from a poor family and ill with tuberculosis,” said Igor Beloborodov, head of Maternity and Childhood Protection, a nongovernmental organization.
Mothers of sickly babies often heed the hospital staff’s advice, including about 85 percent of those whose children are diagnosed with Down Syndrome, said Sergei Koloskov, head of the Down Syndrome Association. His wife was told to leave their daughter, Vera, at the hospital when she was diagnosed with the genetic disorder. She refused.
Ten years ago, Moscow health officials advised city maternity wards not to discourage new mothers by telling them that they would be unable to care for their babies. But that has not changed what people say privately.
Smirnova was released from the Barnaul hospital after a week, but the baby was kept in intensive care. Each time she returned to check up on him, she was urged to sign the rejection papers.
“Doctors, nurses and even cleaning ladies told me that I was stupid to ask for my baby back,” Smirnova said during a recent visit to Moscow to get medical treatment for her 19-month-old son.
Even though she had never seen the baby, she gave him a name — Vladimir. The boy was the only relative she had in the world, she said. 
Her mother and grandmother died in her home village of Gordeyevo when she was 14. She tried for a few months to live with her father, who had divorced her mother and lived in another town with a new wife and their children. “I was a burden for them. I came back to my village and stayed with friends,” she said.
She met Vladimir’s father in the neighboring village of Belmesevo, and they fell in love. Smirnova said she thought he was a reward from heaven for the loneliness she had felt after her mother’s death.
Many young women who give up their babies share similar stories, Beloborodov said. They are from poor families and are in relationships where they sought a substitute for parental love. They often live with landlords who would evict them if they had a baby. In Moscow, many babies are given up by mothers who came to the city from the regions seeking a better life, Beloborodov said.
The procedure to give up a baby is simple, said a spokeswoman for the family, maternity and childhood department of the Health and Social Development Ministry. A married or single mother just needs to write a statement on a blank sheet of paper that she wants to put her child up for adoption for financial reasons or “difficult family circumstances,” the spokeswoman said.
After the statement is signed, the child usually is placed in the nearest children’s hospital until all bureaucratic procedures are completed.
Two cases of abuse have made national headlines this year. Yekaterinburg prosecutors opened a criminal investigation in January into a nurse suspected of taping babies’ mouths shut to stop them for crying at the city’s Infectious Diseases Hospital No. 15. In March, prosecutors in Orekhovo-Zuyevo, a town 85 kilometers east of Moscow, began investigating a hospital where children were tied to their beds with sheets. In both cases, hospital patients photographed the abuse with their cell phones and the pictures were shown on state television.
The rejected babies are a burden to the children’s hospitals, said Boris Altshuler, who advises ombudsmen Vladimir Lukin on the problem. Most hospitals do not allocate money to feed them or hire nurses to care for them. That means nurses typically visit their rooms three times a day — to feed them and change their diapers. Some hospitals don’t even have diapers, so the babies lie in wet sheets for hours, Altshuler said. Feeding is also a problem. Nurses rarely have time to hold a bottle of milk for each baby, so they put bottles into the babies’ mouths and leave them; if a bottle falls out, the baby goes hungry.
When mothers visiting their own children in the hospitals try to pick up the babies, they are often told, “Don’t touch them. They will then get used to being touched and will cry after you leave,” Altshuler said.
Since hospitals are closed institutions in Russia, volunteers are not welcome as they are in the West, said Nadezhda Davydova, who volunteers at several Moscow hospitals under a special agreement with administrators. “The administration has no right to let in sympathetic people,” she said.
Davydova said she, other volunteers and children’s rights activists were lobbying the government to place the babies in foster families and get them adopted. “It is naive to think that the problem is bad nurses all around the country,” Davydova said.
In a rare exception, a Christian charity is paying for a new hospital ward for 40 rejected babies in the city of Pskov, about 20 kilometers east of the Estonian border. Initiative Pskov, a Protestant-sponsored group, is also covering the salaries of a team of specialists to care for the babies and help place them in families.
By law, the babies can be adopted while still in the hospital. But information about them is entered into a national adoption database very slowly and is often incomplete. 
Two years ago, prosecutors in the Altai republic fined a social services official for failing file information about a baby who had lived at a hospital for 18 months.
Some children never recover from their months in the hospital without someone to walk them, talk with them and hug them, Altshuler said.
“When the time comes to decide whether to place them in a regular orphanage or one for the mentally disabled, they are at risk of being placed in the second. This means they will never go to a regular school,” Altshuler said.
Smirnova only got her son, Vladimir, out of the hospital when a friend helped her obtain a passport and rent an apartment. She receives 3,000 rubles ($115)) per month from the state to care for the boy, who has neurological and heart problems. Doctors still advise her to give him up.
Smirnova recently invited another young woman, Nastya, to move into the rented apartment with her. Nastya’s sad story mirrors her own. She is expecting her child in August.

TITLE: Hospitality Beyond The Means of the Economy
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: The 11th St. Petersburg International Economic Forum was expected to be an outstanding event in Russian economic life. The city has never welcomed so many world leaders and CEOs in hunt of investment opportunities and assurances about life post-Putin. As such it was a real challenge for the organizers and the city’s infrastructure, a challenge that they did not quite meet.
“According to our polls, most corporations that operate in Russia think this country to be one of the best places to do business,” Daniel Thorniley, senior vice president of the Economist Group, said at the forum.
He listed higher profitability, double digit sales growth and the opportunity to charge higher premiums for high-quality products as the main advantages Russia offers to foreign companies.
However, according to Thorniley, 98.6 percent of information about Russia in the foreign media is “garbage” based on skepticism, ignorance and prejudices.
The forum aimed at refuting these prejudices. “Countries that together generate over 50 percent of the world’s GDP are represented at this forum,” President Vladimir Putin said when opening the second day of the forum.
“Foreign investment is not always considered an advantage, especially in infrastructure, energy and communications. Russia, on the contrary, is open for foreign investment and that includes its power industry,” Putin said.
In economic terms the forum was an unquestionable success. Spending just 500 million rubles ($19.25 million) on the event, the organizers said $13.5 billion worth of investment was announced over the three days — that compares to $1 billion at last year’s event.
About 30 prior agreements and protocols of intention were signed. Direct private investment is estimated at $7.5 billion, agreements on private public partnerships at $6 billion.
Among the major agreements were the Volvo plant in Kaluzhskaya Oblast, the PepsiCo plant in Rostovskaya Oblast, a Lukoil plant in Kalmykia, a Peugeot Citroen plant and a Samsung plant as well as a Suzuki plant in St. Petersburg.
The European Bank for Reconstruction and Development will invest about $5 billion into infrastructure projects in Russia by 2010.
Boeing signed an agreement with Unified Aviation Corporation and Sukhoi Civil Jets on participation in the Sukhoi Superjet project and also received an order of 22 long-haul jets from Aeroflot.
In terms of the quality of guests this year’s forum also surpassed its predecessor with guests representing a total of 65 countries in all. Nine presidents, four prime ministers and 44 ministers, 54 official delegations and over 500 top executives of multinationals visited the Lenexpo exhibition complex.
And it was the number of guests that ultimately resulted in the difficulties.
“We received twice as many applications as we expected,” St. Petersburg Governor Valentina Matviyenko said on opening the forum.
Minister for Economic Development and Trade German Gref claimed that about 9,000 guests took part in the forum this year. The new congress hall built specially for the event can accommodate only 2,800 people. It was by no means obvious how all the guests might get into the pavilion at the same time.
Gref did admit that the forum had had “a number of disadvantages.”
“We’ve made some mistakes. For instance, we booked an insufficient number of hotel rooms. St. Petersburg’s infrastructure in general requires improvement, the airport in particular. The airport managed to welcome a huge number of flights but there was some overlap between them,” Gref said.
Foreign journalists faced even more extravagant “overlaps.” About 1,400 representatives of Russian and foreign media registered at the forum this year. During the plenary sessions some of them had to work sitting on the floor of the press center with their notebooks on their knees since there was not enough space for all the journalists. Only a select group of twenty to thirty journalists were allowed more than a televised relay of events in a pavilion well away from the guests.
However, Gref said he wants the next forum to cover an “even wider range of topics.”
“We have a number of ideas how to make the St. Petersburg forum even more informative,” he said.

TITLE: Official Talk of Open Integration
AUTHOR: By Yekaterina Dranitsyna
PUBLISHER: Staff Writer
TEXT: Government officials at the St. Petersburg International Economic forum made great efforts to assure foreign investors that Russia would diversify its economy and stick to a policy of openness. At the same time, experts made forecasts for 2020 and listed the major risks facing the country.
“In a globalizing world we have no choice other than a strategy of openness and integration into the world economy. Zones protected from competition are not good for the national economy,” said Sergei Ivanov, the first deputy prime-minister of the Russian government.
On joining the WTO, Russia will restructure its natural monopolies and remove existing trade barriers, Ivanov said. Diversification of the economy will be based on developing human resources and innovative technologies.
Two billion rubles will be spent on techno parks this year. Three venture companies with a total capital of eight billion rubles have been selected, and the government is to select eight to 12 other venture companies with a total capital of 30 billion rubles. “They will provide financing for about 200 innovative companies,” Ivanov said.
Russia will continue to create unified state corporations in a number of industries, including shipbuilding and aircraft, in an effort to compete globally. “At the same time we plan to privatize non-core state assets including financial, transport and logistical companies,” he said.
“The Russian economy is still too dependent on oil exports. The gap between power generation and power consumption keeps widening. Today we are behind other countries in terms of high value added products,” Ivanov admitted.
Among more positive trends he listed a budget surplus and capital inflow. By the end of last year Russia accumulated $150 billion in foreign investment. Net capital inflow was reported at $41 billion last year and $60 billion this year.
As a result of what he proposes, Ivanov expects a breakthrough in four to six high-tech industries so that Russia occupies up to 10 percent of the world market. Among the target industries he listed nuclear energy, shipbuilding, aircraft and rocket production and space rocket launching services as well as software and nanotechnology.
He expects the telecoms market to grow 14 times and the IT market to double in the next 15 years.
Ivanov predicted that by 2020 the Russian economy would be among the five largest economies in the world and per capita GDP will increase to $30,000 estimated at 2005 prices.
His views received support from a number of foreign experts. Citigroup chairman Michael Klein expects the Russian economy to increase from $1.3 trillion to $3 trillion by 2020. According to a Goldman Sachs report, by 2050 the Russian economy will exceed those of Germany and France.
President of VTB bank Andrei Kostin predicted banking industry assets would triple by 2020.
Russia will strengthen its currency, banking and financial system, said President Vladimir Putin. He did not rule out that Russia will start exporting oil for rubles.
“About 50 percent of Russians by 2020 should become a part of the middle class and the quality of their life will be comparable to the western middle class,” Ivanov said.
To achieve that goal Russia has to reduce the gap in incomes of different social classes and solve infrastructure and housing problems, “which prevent Russians from migrating for better education and more attractive job opportunities.”
Ivanov called for the reorganization of the education system and creation of new educational institutions — business schools and state administration schools.
Finance minister Alexei Kudrin described the Russian economy as “outdated.” The share of industrial production at 30 percent of the GDP and agriculture at 5.4 percent cannot be compared to European levels, he said.
“A World Bank report says that state support is not directly related to the growth of particular industries. It is more important how they develop in the free market. Success of the emerging markets by 2020 will depend on observing economic regulations and rules,” he said.
Kudrin called for inflation to be lowered to three percent a year, which should stimulate the “long-term investment and development of capital-intensive scientific industries.”
“Dependence on gas and oil is risky. Oil prices could fluctuate by over 10 times upwards and downwards, and nobody knows how to predict it,” said Yegor Gaidar, head of the Institute of Transition Economies, recalling that the Soviet Union collapsed because of the fall in oil prices.
Gaidar did not expect any instability in the Russian economy by 2010. However, in the long-term, considering the demographic environment Russia will face a deficit in the pension fund amounting to four percent of GDP, Gaidar said.
To cover this shortage Russia will have to either increase taxes to a level that provokes mass unemployment and deviation from taxes or accumulate a stabilization fund equal to 70 percent of GDP. At the moment this fund accounts for 10 percent of GDP, Gaidar said.
State assets account for 55 percent of GDP, Gaidar indicated, suggesting that they could be privatized in view of the ineffectiveness of state management.
“It’s an important reserve that can solve the problem of pension fund stability,” he said.

TITLE: In Brief
TEXT: <b>Troika Plans</b>
ST. PETERSBURG (SPT) — Troika Dialog will hold 10 percent of the market for asset management by 2012, Ruben Vardanyan, president and shareholder of the investment company, said in St. Petersburg on Friday.
“According to a conservative forecast, $45 billion to $50 billion will be in trust management in Russia by 2012,” Vardanyan said. However he did not exclude that in a favorable environment the market could grow to $150 billion and Troika Dialog would have $15 billion in asset management.

<b>Indian Abrasives</b>
CHENNAI (Bloomberg) — Carborundum Universal, an Indian maker of coated and bonded abrasives, said it agreed to buy an 84.1 percent stake in Russia’s Volzhsky Abrasive Works.
The deal is expected to be completed by July, Carborundum said in an statement Saturday. The Indian company didn’t say how much it will pay for Volzhsky, which has the capacity to make 65,000 metric tons of abrasives a year. The Russian company had sales of $54 million in 2006, Carborundum said.

<b>Alrosa Gold</b>
MOSCOW (Bloomberg) —Alrosa, Russia’s diamond monopoly, is interested in buying into Polyus Gold, the country’s largest miner of the precious metal, Interfax reported Saturday, citing Sergei Vybornov, Alrosa’s head.
Alrosa hasn’t started talks with the shareholders, who include billionaires Vladimir Potanin and Mikhail Prokhorov, Interfax reported. The news service said earlier this month that talks are in a preliminary stage, citing an unidentified person with knowledge of the matter.

<b>Rail Unit</b>
ST. PETERSBURG (Bloomberg) — Russian Railways plans to sell 10 percent of its Transcontainer cargo unit to the public next year, Interfax reported Saturday.
The state-run monopoly will eventually sell 39 percent more shares in the unit after the first sale, the news service cited Chief Executive Officer Vladimir Yakunin as saying in St. Petersburg.

<b>Orkla Help</b>
ST. PETERSBURG (Bloomberg) — Orkla ASA, a Norwegian company that makes goods ranging from metals to detergents, plans to provide United Co. Rusal, the world’s biggest aluminum producer, with technology to boost efficiency and cut down greenhouse-gas emissions.
In a deal valued at $20 million, Orkla’s Elkem aluminum unit will work with Rusal for two years on technology that reduced greenhouse gases by 67 percent and increased efficiency by 15 percent at a Norwegian plant, Chief Executive Officer Dag Opedal told reporters Saturday in St. Petersburg.

<b>Aeroflot in Serbia</b>
ST. PETERSBURG (Bloomberg) — Aeroflot, Russia’s largest carrier, applied to buy into Serbian carrier JAT Airways, as it looks to expand services into Europe.
State-controlled Aeroflot applied to the Serbian government a few days ago, Aeroflot Chief Executive Officer Valery Okulov said Saturday on the sidelines of the St. Petersburg International Economic Forum.

<b>Detsky Mir</b>
ST. PETERSBURG (Bloomberg) — AFK Sistema, Russian billionaire Vladimir Yevtushenkov’s holding company, will spend $150 million on reconstructing central Moscow’s Detsky Mir children’s store to tap a growing market.
Sistema will start building work this summer and will take two years to complete it, Yevtushenkov told reporters Saturday at the St. Petersburg International Economic Forum.

<b>Reserve Fund</b>
ST. PETERSBURG (Bloomberg) — Russia won’t use money from its Reserve Fund, which collects part of the nation’s profits from duties on oil and natural gas, unless the price for crude falls below $40 a barrel, Finance Minister Alexei Kudrin said.
The country’s budget for next year is based on crude costing $45 a barrel, Kudrin said Sunday at the St. Petersburg International Economic Forum.
Capital inflow into Russia reached $60 billion in the first four months and the government will attain its inflation-rate target for this year of 8 percent, Kudrin said. 
Inflation will fall to 5.6 percent by 2010, he said.

TITLE: NYMEX Will Assist Exchange
AUTHOR: By Simon Shuster
PUBLISHER: Staff Writer
TEXT: The government inked a deal Friday with the New York Mercantile Exchange to set up an oil exchange in St. Petersburg by year’s end to better control the prices at which Russian oil is sold.
Russian crude — specifically the blend known as Russian export blend crude oil, or REBCO — is underpriced by $7 per barrel when sold at $60 per barrel, said Economic Development and Trade Minister German Gref, who signed the agreement Friday.
“These are huge losses not only for Russian oil companies but for our federal budget,” he said. “The state is now moving toward real market mechanisms for trading oil.”
President Vladimir Putin approved a proposal Tuesday allowing state agencies to organize the sale of oil and oil products on exchanges from Aug. 1. Such exchanges so far operate only in London, New York, Dubai and Tehran.
“Right now there is not a market place that is concentrating on Russian products,” said NYMEX chairman James Newsome on Friday. “We’ll now have a marketplace that will concentrate on Russian products flowing primarily into Europe.”
Newsome offered the use of his exchange’s clearing and trading infrastructure in setting up oil trading in St. Petersburg. Trading could be up and running “very quickly,” he said.
He added that the traditional Brent-based pricing mechanism now used for REBCO was “not a perfect catch,” and that local trading could displace it.
Media reports, citing Gref’s ministry, have said that it would take at least two years to set up an oil exchange. But Kremlin backing and NYMEX’s cooperation will likely speed up the project. 
Tax and customs law is already in place for the sale and delivery of the oil futures to be sold in St. Petersburg, Gref said, adding that he hoped oil products would also be traded on the exchange by 2009.

TITLE: Suzuki to Build St. Pete Plant
AUTHOR: By Anna Smolchenko
PUBLISHER: Staff Writer
TEXT: Suzuki Motor Corporation signed an agreement Friday to build a $115 million plant in St. Petersburg that will produce its popular Grand Vitara and SX4 models. 
The deal, signed by Suzuki chairman Osamu Suzuki and St. Petersburg Governor Valentina Matviyenko, reconfirms the city’s status as the country’s automotive hub.
The Japanese carmaker and the Itochu Corporation will jointly invest 14 billion Japanese yen ($115 million) to produce the Grand Vitara, a sports utility vehicle and Suzuki’s bestseller in Russia, and the SX4, a crossover.
Employing 500 people, the plant will start production in late 2009 and will have an output of 30,000 cars per year.
“We think there is a big potential,” Suzuki told reporters after a signing ceremony in the Smolny Palace attended by Japanese and Russian officials, including Economic Development and Trade Minister German Gref and Takanobu Furuta, managing director of Itochu.
The company had planned to sell 20,000 to 21,000 cars in Russia this year, but it has exceeded this target in the first five months, Suzuki said, adding that he hoped the country would continue to post strong economic growth. Last year, Suzuki sold 16,118 vehicles, including 9,161 Grand Vitara models.
Friday’s agreement is another victory for Matviyenko’s administration, which has actively courted foreign carmakers in recent years. Suzuki’s plant will be located on a 23-hectare plot south of Toyota’s future plant in Shushary, just outside St. Petersburg. General Motors and Nissan are also building plants in the vicinity. Construction of the plant is slated to begin in the first half of next year.
Suzuki told reporters that the company had chosen St. Petersburg because of its proximity to Europe and the fact that other carmakers had set up shop here. South Korea’s Hyundai plans to hold negotiations about building a plant in St. Petersburg, Vedomosti reported Friday. French carmaker PSA Peugeot Citroen is in talks over a 300 million euro plant but has yet to decide on a location, the newspaper said. 
A PSA Peugeot Citroen spokesman said last week that the carmaker would sign an agreement for the import of car parts Saturday with the Economic Development and Trade Ministry at the St. Petersburg International Economic Forum, Reuters reported. 
At Friday’s ceremony, Matviyenko said her administration was holding talks about several automotive assembly plants but declined to describe them before final agreements were reached.
Nissan signed a $200 million agreement to build a plant in the city during the St. Petersburg forum last year.
Some 30 Japanese companies currently work in St. Petersburg, and Jetro, a Japanese government business lobby, is planning to open a branch in the city next month, Japanese Ambassador Yasuo Saito said. 
“Russia is one of the best and most dynamic markets in the world,” Saito said at the ceremony. 
“Political relations are also moving forward,” he added.

TITLE: Boeing Wins $3 Billion Aeroflot Dream Order
AUTHOR: By Lyubov Pronina
PUBLISHER: Bloomberg
TEXT: MOSCOW — Boeing Co., the world’s second-largest maker of commercial aircraft, won an order valued at about $3 billion from Aeroflot for 22 Dreamliners in a possible sign of better relations between the U.S. and Russia. 
Boeing and state-run Aeroflot signed a contract Saturday at the St. Petersburg International Economic Forum, which brought together more than 200 companies. The first of the 787-8 Dreamliners will be delivered to Aeroflot in 2014, Chief Executive Officer Valery Okulov said after the ceremony. 
The Boeing sale was delayed as relations between the U.S. and Russia worsened after American officials accused President Vladimir Putin of impeding democracy. Airbus SAS won a pledge in March from Aeroflot to buy 22 A350s valued at $4.4 billion after competing with Boeing for more than a year. 
“For Boeing, it’s hardly a prestigious number, (and) it’s hardly a big order, but Airbus needed those numbers,’’ said aviation analyst Richard Aboulafia, of Teal Group Corp. in Fairfax, Virginia. “So to deprive Airbus from being the customer is far more important to Airbus than Boeing.’’ 

Financing 
Aeroflot expects to sign a contract for the Airbus jets at the air show in June in Paris or in August in Moscow. “They complement each other well,’’ Okulov said of the U.S. and European aircraft, adding that delivery of the A350s will begin at the end of 2014 and stretch to 2017. 
Aeroflot will seek guarantees from U.S. Export-Import Bank for a syndicated loan to finance the Boeing deal. The Russian carrier declined to provide details. Okulov said Aeroflot, which is already seeking $1 billion to buy a stake in Alitalia SpA, can afford to borrow more because it has no debt at present. 
Separately, Boeing signed an agreement with Russia’s OAO Unified Aircraft Corp. to study cooperation in research, design and development of commercial planes. 

Second Customer 
Boeing also agreed to boost cooperation with OAO Sukhoi Aviation Holding’s commercial airplane unit. Boeing has consulted Sukhoi Civil Aircraft Co. on its SuperJet-100 family of mid-range passenger jets. Boeing will help Sukhoi in post-sale support, it said today. 
Aeroflot is the second Russian customer for the Dreamliner. S7 Airlines, Russia’s second-largest carrier, agreed on May 29 to buy 15 of the aircraft with options for another 10. S7 and Aeroflot are expanding their fleets as Russian air travel is expected to double by 2015. Russian airlines carried 38 million passengers last year, up 8.3 percent from 2005. 
Russia spans 11 time zones and travel to more than 60 percent of its territory is feasible only by plane. Locally made aircraft are becoming outdated and are constraining the country’s growth, the Transport Ministry said in March. 
Russia’s aviation industry manufactured hundreds of aircraft every year during Soviet times. 
Since the early 1990s, the industry has only produced 36 airliners and carriers have imported more than 120 foreign-produced planes to replace aging Russian-made aircraft.

TITLE: SABMiller to Boost Russia Output 50 Percent With New Brewery
PUBLISHER: Bloomberg
TEXT: SABMiller will increase beer production in Russia by 50 percent with a second brewery and may double output should the demand exist, said James Wilson, chief of operations in Russia. The new plant in the Ulyanovsk region will produce an annual 3 million hectoliters of beer and will be able to brew more than double that, equaling SABMiller’s current Russian output, Wilson said in an interview Saturday at the St. Petersburg International Economic Forum. The brewery, which will cost 170 million euros ($227 million) to build, should begin operations in 2009.
“Russia is an important market,’’ Wilson said before signing a construction agreement with Ulyanovsk Governor Sergei Morozov.  “We’ve continued to expand the existing brewery and now it’s the right time to choose the second one.’’

TITLE: Russian North African Zone Unveiled
AUTHOR: By Simon Shuster
PUBLISHER: Staff Writer
TEXT: Plans for a Russian economic zone in Egypt moved a step closer Friday as the Economic Development and Trade Ministry named the first wave of companies setting up shop there, including Gaz Group, MiG, Soyuzmedprom and St. Petersburg Aviation.
The ministry handed over the list of companies to visiting Egyptian Trade and Industry Minister Rachid Mohamed Rachid, who was in St. Petersburg for the city’s international economic forum.
Carmaker AvtoVAZ was conspicuously absent from the list, despite widespread speculation that it would lead the way.
In a memorandum of understanding penned in April, Egypt is providing these firms with land in the so-called Russian Industrial Zone, in a small town near the port of Alexandria, as well as 80 percent of the cost of training workers there.
Cairo’s basket of preferential trade agreements would also allow these firms to export duty free to Europe, Africa and the Middle East any products made in Egypt. By 2012, Rachid expects them to bring in some $700 million in export revenues, saving up to 30 percent on manufacturing and labor costs.
Rachid said he was attending the St. Petersburg forum to “get to know these companies better,” and hammer out the logistics of their move into Borg El Arab, the site of the industrial zone. “The zone is being set up in a barren desert — cold in winter as it is near the sea, and scorchingly hot in summer,” he said.
The Russian firms are expected to set up operations in the zone over the next 12 to 18 months, Rachid said.
The deal is part of burgeoning ties with Egypt as Russia seeks to diversify its export markets.
The main hurdle to Russian exports is the delay in a final multilateral deal on Russia joining the World Trade Organization, Rachid said.
“That is why we are pursuing these other projects ... like the [Russian Industrial Zone],” Rachid said. “We are still having negotiations, but we cannot move ahead with a bilateral free trade agreement with Russia until it joins the WTO.”
As the leader of the WTO faction representing Africa and the Arab states, he has been one of the main lobbyists for Russia’s accession. He said the chances of Russia joining this year were “quite high.” 
Russia’s partnerships with Egypt have not always been welcomed in the West. During a visit to Egypt in April, Industry and Energy Minister Viktor Khristenko discussed the idea of a gas equivalent to the Organization of Petroleum Exporting Countries. Russia also looks to be a top contender for building four nuclear reactors in Egypt. The idea of nuclear proliferation in the volatile Middle East, even on a civilian level, has aroused concern in the West.
Rachid said a deal was being finalized that would allow Russia to take part in the tender for Egypt’s turnkey reactor project.

TITLE: Celebrating 50 Years of Lucrative Maritime Links
AUTHOR: By Yelena Andreyeva
PUBLISHER: Special to The St. Petersburg Times
TEXT: From June 3rd-5th, Dr. Karl Joachim Dreyer and Dr. Hans-JUrg Schmidt-Trenz, respectively president and chief executive officer of the Hamburg Chamber of Commerce visited St. Petersburg. Dreyer shared his views about cooperation between the two cities. 
What were the main purposes of your visit and are you satisfied with the results?
We have come here on the 50th anniversary of the twinning of Hamburg and St. Petersburg. From May 30th through June 5th Hamburg hosted a delegation from St. Petersburg headed by governor Valentina Matviyenko who went in honor of “The Days of St. Petersburg” then being held in Hamburg.
Now in cooperation with the St. Petersburg Chamber of Commerce and Industry we are involved in the participation of German businessmen at an economic forum that takes place during “The Days of Hamburg” in St. Petersburg in October. 
We have also recently celebrated the fifth anniversary of the German and international economic law course that has been run by the House of German Economy in St. Petersburg since 2002. It was launched by the Hamburg Chamber of Commerce in cooperation with Hamburg University and the law department of St. Petersburg State University. Yesterday. we presented diplomas to the new graduates. 
What kind of people graduate from the program? Are they mostly professional  lawyers?
The course is run only in German and most of the students are young Russian lawyers. However, there are some exceptions. For example, one graduate this year is a young lady, a musician by profession, who has worked at the Swiss Consulate and there became interested in law. Most of the graduates are aiming to work for German companies or German-Russian joint ventures. 
Are there any other educational programs supported by the Hamburg Chamber of Commerce or the House of German Economy in St. Petersburg?
In 1993, we launched an internship program for fluent German speakers among those graduates of Russian universities who wanted to get an internship or continue their education in Hamburg. The program was founded by the Hamburg Trade Chamber and the Senate of Hamburg. Since then, 750 Russian graduates have studied in Hamburg as part of the program. Such success has encouraged us to run a law course. The internship covers spheres such as economy, logistics, tourism, hotel management and banking.
What are the main problems that face German companies operating in St. Petersburg?
It is crucial to understand that big and small German businesses face a variety of problems in St. Petersburg. The larger German companies need to have branches in the city to keep contact with Russian authorities and significantly facilitate their work. The House of German Economy was opened in order to help German businessmen to deal with such issues. Its director, Dr. Stephan Stein, works with it on a daily basis. 
Dr. Stein, do you think that bureaucracy is still the main problem in Russia?
Although bureaucracy in Germany is also a problem, in Russia it is really a much bigger issue. At the moment, the other main problem in Russia is a poorly developed infrastructure, lack of power supply and well-developed industrial sectors. 
I think it is possible to solve the problems related to bureaucracy. It is true that for big companies it is easier to deal with than for smaller ones. Although we support small German business in Russia, this is not enough. Potentially, Russia has a very large market that is interesting for lots of German companies, such as the ones operating in car assembly, logistics, warehousing and informational technologies.
What is the secret of such a long and successful cooperation between St. Petersburg and Hamburg?
Dr. Stein: St. Petersburg and Hamburg have a very close relationship. Partly this is because of their similarity. They are both port cities but they also have their own particularities. There are many service companies in Hamburg, while St. Petersburg has many industrial plants. That is why cooperation between two cities can be very useful and produce interesting projects as well as attracting to St. Petersburg many investors from Hamburg, which is a very rich city. 
In the process of project realization, planning is very important. Hamburg is very experienced in planning and is eager to share its experience with its twin city St. Petersburg. 
Dr. Dreyer: The strong connections between Hamburg and St. Petersburg have developed over the last 50 years. They started at the time of the Cold War when the USSR and the West were enemies. However, Hamburg and Leningrad felt that mutual cooperation was crucial for both cities and over the years have built relations of confidence and stimulated the further development of trade between Germany and Russia. It is remarkable that there are over 800 German companies working in Russia, most of which are from Hamburg. Over 100 Russian companies work in Hamburg and closely cooperate with their German colleagues who work in St. Petersburg. 
What kind of companies do most German investors start in St. Petersburg – joint ventures, Russian companies or branches of their German companies?
Dr. Stein: Now most German investors start new Russian companies but not joint ventures. Partly this is because of the negative experience of some German entrepreneurs who earlier invested money into German-Russian joint ventures and saw their Russian partners escape with their money. 
In comparison to other cities or countries, in what part of Hamburg’s economy does the cooperation with St. Petersburg take place?
Dr. Dreyer: The transportation load of Hamburg and St. Petersburg grew by up to 40 per cent which is a very big number. During her visit to Hamburg, Matviyenko was right to mention another statistical fact that St. Petersburg takes the third place after Singapore and Shanghai among the biggest sea port partners of Hamburg.

TITLE: The Big Eye Smaller Solutions to Resource Planning
AUTHOR: By Alexander Yankevich
PUBLISHER: Special to The St. Petersburg Times
TEXT: Major changes are underway on the Russian business integration market, with solutions for the automation of business processes being of increasing interest to representatives of small and medium-size businesses. This process has been largely unnoticed on the part of major vendors forming comprehensive Enterprise Resource Planning (ERP) systems. For example, with regard to St. Petersburg, a series of IT companies, including SAP and Oracle, have presented their initiatives oriented toward this segment. Previously, the latter would only have worked directly with major clients. 
A specific feature of Small and Medium Enterprises (SMEs) in the sphere of automation is that, to a large extent, companies within these categories have already gone through the process of implementing basic management systems, such as for accounting and personnel programming. 
Now, many of them are thinking about using management instruments of a qualitatively superior level. These instruments would allow them to more effectively control the activities of their organization and better carry out planning, including long-term planning, as well as provide for the effective working of business processes. As we know, western ERP systems are particularly strong in this field. There, the processes of formalization are fairly strict, having been grounded in experience developed over decades. 
Over here, however, for a long time such systems weren’t accessible to small and medium-sized businesses, first and foremost due to the high cost of both implementing and acquiring them. It was only two or three years ago that western vendors such as Microsoft, SAP and Oracle began promoting such systems for the SME segment on these shores. The St. Petersburg market for a long time remained inert for these offers, although the situation has begun to go through significant changes over the last few months. In any event, several IT companies working on the local market have announced plans to promote these systems. 
The link between the changes in the economic situation in the North-West region that have occurred over the last two to three years and the growth in demand for solutions in the automation of business from major suppliers (Microsoft, Oracle, SAP) is noted by the director of the applications implementation department of Open Technologies, Sergei Koshelev. “The situation in St. Petersburg now is reminiscent of the situation in Moscow five years ago: investment is arriving, competition is getting stiffer, preparations are being made for takeovers. But these processes are taking place a lot faster, as the solutions for business aren’t being developed from scratch and the most appropriate are being selected,” says Koshelev. 
Koshelev added that the term “solutions for the automation of business in the SMB segment” is no longer new to anyone and that market participants understand perfectly well what the phrase covers. “First and foremost, it refers to the low prices for the product and the cost of its implementation, which runs from $50,000 to $250,000. To use the finance terminology, a high return on investment (ROI) indicator is needed. On the SMB market that can be expressed in absolutely concrete terms. Accordingly, if the suppliers of ERP solutions can provide products at prices acceptable to the SMB market, there will be development in the market,” says Koshelev. 
In the opinion of the head of ERP at Reksoft, Sergei Stepanov, the fact that companies in the SMB segment need to automate their processes demonstrates a certain level of maturity and the implementation of the management systems will give the companies involved significant competitive advantages. “Over the last year the demand for ERP solutions coming from the SME sector has grown significantly,”  Stepanov says. “What’s more, the client has changed significantly, having ‘grown up’ in his or her approach to the formalization and automation of business processes,” he says. 
It’s worth remembering that for a long time, of the solutions offered by western vendors, only those from the SAP corporation were available in the Russian Northwest for the SME segment, and even then they were only offered through its partner, the SSBS integrator, which began working in this field back in 2004. This company works in the promotion of out-of-the-box products, such as SAP Business One, as well as SAP All-in-One, which is analogous to the mySAP Business Suite ERP systems but with a much lower degree of functionality. Plans for the development of “small” SAP systems were then announced by Moscow’s systems integrators Ai-Teko and NC Consulting, though they subsequently didn’t show much activity in the sector, the latter leaving it altogether. 
Now the situation has become more competitive. In 2006, two Petersburg players, Lenvendo Soft and USB (United Solutions for Business) announced their plans for “small” SAPs. Recently, similar announcements followed from the local branch of the Moscow company Softline. The local branch of the federal IT company Microtest has also said that this will be a field of development in the future. In addition, another player, Aksoft, has announced the beginning of a partnership program for the promotion of Oracle infrastructure solutions for the SME segment which will also cover the North-West region. Previously, Oracle solutions for this segment of the local market were totally absent. 
The most active among the new players are Softline and Lenvendo Soft. The latter has focused on the SAP Business One solution, though it has, as yet, not completed any projects involving the implementation of this system. On completion of the project, it is possible that it will become one of a range of SAP products offered by the firm. 
As far as Softline is concerned, its main competence as an integrator in this field was focused in its office in Moscow. The Petersburg Softline office plans to create a locate support team and promote all the systems in the SAP range and, in particular, applications for the SME segment. 
It’s worth noting that in Russia at present there are about 100 implemented SAP Business One solutions on record. As the statistics show, they came at a cost of between 10,000 and 100,000 euros. Both vendors and integrators are working on the issue of cost, a thorny topic for SME companies. From the middle of 2006, for example, SAP Financing began work in Russia – a joint SAP and Siemens Financial Service program offering financial resources for the crediting of SAP customers. In Russia, the program will work through an agent bank, International Moscow Bank (MMB). In 2006, SAP also introduced new packaged offers, a special feature of which was readymade descriptions of the implementation concept, a standardized selection of function solutions and a fixed price. Softline has also launched a series of marketing initiatives to promote SAP Business One.  
Other players have received the appearance of competitors on the local market for SAP solutions for SME companies with a healthy enthusiasm, believing that there is good potential for growth and that, in this case, competition will serve as a catalyst. 
“An increase in the number of partners with large PR budgets on the regional market will make potential clients more informed, which will increase the number of enquiries from those potential clients,” notes Natalya Buris, the head of Lenvendo’s SAP Business One department. “At present, the market for SAP solutions in the SME segment in St. Petersburg is already prepared, partly through the efforts of the SSBS company, which, at an early stage took on the role of pathfinder, focusing its marketing policy on getting information on SAP solutions to the managers of small and medium-sized, developing companies,” Buris says. 
“We’re confident that the SAP Business One and mySAP All-in-One solutions are familiar to the St. Petersburg business world,” says Tatyana Ivanova, head of the marketing and PR department at SSBS.
The products of SAP’s traditional competitor – the Oracle corporation – arrived in the North-West’s SME sector later. Only this year did Aksoft, an Oracle distributor, begin to carry out deliveries of the Oracle Database and Oracle Fusion Middleware ranges of products through its partners across the whole of Russia, rather than just in Moscow and the Moscow region. According to the company’s representatives, possessing the Oracle Value-Added Distributor status, Aksoft is planning to form a broad regional partnership network which will help IT companies in the regions of Russia to develop competence and build up expertise in its work with Oracle technologies for the automation of SME enterprises. 
It’s planned that particular attention will be paid to technological products within Oracle’s Standard Edition One range which is aimed specifically at this segment. 
Admittedly, the concrete steps to be taken in this direction have not yet been announced.

TITLE: Unprepared For The Crowded Hour
AUTHOR: By Anna Shcherbakova
TEXT: A couple of words from the Russian president was enough to make the St. Petersburg Economic Forum something quite sensational. 
After a leak that Putin “does not recommend” participation at the London Economic Forum only the most independent entrepreneurs and bravest top-managers dared to attend the London event, while crowds of businesspeople and politicians flew in to the president’s home town at an especially romantic time of year. Add to that the wide range of high state officials the event was unmissable for those with any plans for significant business in Russia. 
CEOs of the biggest Russian and international companies were literally queuing up to register for the event. It was something of a surprise then that only a few of them were admitted to the sessions. 
A yellow badge only allowed journalists to watch live transmissions on large screens in a segregated pavilion. But even those who had registered and paid in advance for red badges had to wait. The line of smartly attired people swearing into their mobile phones at the entrance to Lenexpo, where the forum took place, lasted literally hours. There is probably only one other place where they’d feel like this — on the same level as everyone else — and that’s in prison. Many of those who paid in advance were told that their money had not been received and that they should pay again in cash while the extra money would be transferred back to them after the forum was over. 
As for the cost of attending, that was 140 000 rubles (about $5000) — admission to the London Economic Forum costs 2300 euros.  It is important for the image of every big company or bank that they send several executives to the forum and so people with bags and cases filled with cash were flooding in to Lenexpo.  
It was not by chance or a lack of organization that those who registered and paid for participation could not attend the forum. For me it all works well as a metaphor. The authorities want to show the business people they invited who’s boss. The message being that you may be rich and willing but we will select those we want to work with. 
Unlike the London forum, St. Petersburg’s is a purely bureaucratic creation. It is organized by the Ministry for Economic Development and Trade along with the city’s oldest and largest exhibition complex Lenexpo. The businesses that paid to be served met people not used to a customer-oriented attitude. The coordinators did not care about making the environment cozy or in the least bit welcoming for their guests. But why should they? They have no competition. 
The forum ended and contracts and agreements worth more than $13 billion had been signed. 
Lenexpo and the Ministry for Economic Development and Trade might say they had not expected such a favorable response to their invitations. But now they have enough time to prepare for the 12th St. Petersburg Economic Forum — if there is as much demand after next year’s presidential election. 

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

TITLE:  The Three Imperatives of Integration
AUTHOR: By Samuel J. Palmisano
TEXT: Russia’s economic development in recent years has been extraordinary.  Last year Russia’s real gross domestic product (GDP) grew by 6.7 percent, surpassing average growth rates in all other G8 countries and marking the country’s seventh consecutive year of economic expansion. This growth has led to rapid increases in real wages, disposable income, and a tripling of private consumption between 2002 and 2006.  Today, across many sectors, Russia is booming. 
An increasingly integrated and global economy has been an important driver during this period of change in Russia, and will no doubt continue to play a central role in transforming Russian businesses and the lives of the Russian people. But even if this transformation continues, the question “How should it happen?” remains not just here in Russia but around the world. 
How should leaders deal with the disruptions that this shift is causing to established institutions and ways of life? How should we change existing approaches, or create entirely new ones, to help global integration occur in the most sustainable, equitable, and socially beneficial way? What must we do to ensure that it benefits small companies as well as large ones; the developing world as well as the developed? Perhaps most importantly, how can we build trust – indeed, expand it – in an open, fluid and interconnected world?
These are among the questions we will consider at the fifth IBM Business Leadership Forum this week in St. Petersburg. IBM will host more than 500 global leaders of business, government, higher education and technology. Together, we’ll consider how every part of the world, every area of society, and every enterprise and institution will need to react to a new imperative – what I call the Principle of Global Integration.
It is this: When everything is connected, work moves. And today, for the first time in human history, everything is connected. 
After just one decade, there are a billion people, millions of businesses and perhaps a trillion devices connected to the World Wide Web. Almost 20% of Russians currently use the Internet: a population that is growing at double-digit rates every year. It is estimated that by 2010 more than 70 million Russians will be online. Technology networks are enabling businesses large and small across the Russian Federation to play an increasing role in the global economy and to sell their products and services around the world. For example, IBM just recently signed an agreement with the Tatarstan authorities to help design and build a global information technology R&D center in the country. 
Meanwhile, we’ve seen the expansion of free trade agreements, shifting attention to the importance of services-based economies and the emergence of highly skilled labor forces in India, China, Korea, Latin America, Eastern Europe, and beyond. This combination of technology, demographics, expanding education, regulatory change and business model evolution has produced something genuinely new: a global platform for work where business increasingly flows to the places where it will be done best (that is, most efficiently and with the highest quality). It’s like water finding its own level. 
So the practical question facing businesses and societies today is not “What will globalization do to me?” but rather, “What will cause work to flow to me?” And the answer to that question depends, I believe, on three drivers.
The first is Economics – the one most commonly talked about in the media. Clearly, cost and profit potential are important determiners of where and how work will move. But low cost is not the only factor of success.
Why, for instance, are European biotech and pharmaceutical companies such as Roche and Eppendorf building manufacturing and R&D centers in the U.S.? Why does Hyundai Motors manufacture cars in the U.S. state of Alabama? Why did IBM’s annual survey of foreign direct investment trends in manufacturing, services and R&D last year reveal that Europe regained its position as number one in 2005 – attracting 39% of all projects, vs. Asia’s 31%? In all these cases, companies are not moving solely to low-cost environments. What they’re doing is obeying the second imperative of global integration: Expertise. In a world that is placing an ever-greater premium on innovation, the obvious way to win is by having better skills, better ideas and more unique solutions. 
I believe that expertise is Russia’s key differentiator in the globalized and networked world. According to the Russian government, exports of Russian programming products and services increased by 80% to $1.8 billion in 2006 compared to $1 billion in 2005. The government expects this to rise 10 times by 2010. Russian companies are competitive in the global IT services market not simply because they have lower costs but because of their ability to tackle non-standard tasks essential for product development, and to manage high-end, complex projects. 
That’s why IBM has collaborated for years with Russian companies like Luxoft and Axmor on important areas of our own global product development. Russia’s large pool of highly skilled professionals with mathematics and science backgrounds is also what led IBM to open a product development lab in Moscow in 2006. 
The last of the three drivers of global integration is Openness: in trade, technology, and commerce. Since the economic problems of the mid-1990s, Russia has come a long way. Foreign trade has grown significantly, and there has been strong foreign investment from many global companies that regard Russia as a good place to do business. Membership in the WTO, I believe, will bring further benefits to Russia, its trading partners and investors.
As a practical matter, how does a company pursue global integration? IBM’s own experience may provide some useful lessons. 
When I joined IBM in 1973, the company was a classic ‘multinational.’  To gain access to local markets, the multinational created smaller versions of itself in country after country around the world, and made heavy local investments. At the time, this was a very reliable way to grow. However, once global networking and changes in trade policy set in during the 1980s and 1990s, the multinational model of separate supply chains, procurement, finance, HR — even manufacturing and R&D — became expensive and inefficient. Today, it just gets in the way of speed, responsiveness and innovation. 
Businesses around the world are moving to the next model. The globally integrated enterprise shapes its strategy, management and operations in a truly global way. It locates operations and functions anywhere in the world, based on the right cost, the right skills and the right business environment. It focuses on what it does best, and it partners with other specialized companies and organizations as part of a diverse ecosystem.
In part, this is a question of how your company organizes itself. And in part, it relates to your processes, culture, and values. In the end, it is shared values that must form the foundation for a globally integrated enterprise in a radically more fluid and integrated world. Being much more open, collaborative, and trusting is, at times, messy, uncontrollable, and uncertain – by definition. You have to accept a measure of that. But we’ve found that delegating to our people – having confidence that they will behave in a manner consistent with our values – is itself a demonstration of trust, and ultimately the most pragmatic approach. It’s how we are building a values-based culture and a values-based management system at IBM.
As the world flattens more every day, companies, nations and even individuals must ask themselves on what basis they will differentiate and compete: economics? expertise? openness? What are their unique capabilities and skills? These are big questions, over which most CEOs, heads of government and academic leaders are scratching their heads. 
After a good deal of thought IBM has decided to compete on the basis of expertise and openness, and we are moving from a multinational to a globally integrated model as fast as we can. With Russia’s large talent pool and rapidly growing IT and services market, I am encouraged that this country will continue to play an important role in IBM’s strategy.
While I believe that Russian companies and the Russian government can and must make the same kinds of decisions for their own enterprises and institutions, I also firmly believe that the benefits will be substantial for Russia and its people.

By Samuel J. Palmisano, Chairman, President and Chief Executive Officer of IBM.

TITLE: A Weak Link
AUTHOR: By Alexei Bayer
TEXT: The web site of the St. Petersburg International Economic Forum proclaimed without any false modesty, that the city would be the world’s economic capital from June 8 to June 10.
With growing frequency and a waning sense of reality, Russian leaders have been demanding that it be accorded its proper place in the global pecking order — as a military power, a historic victor over Nazism, an energy superpower, a hockey powerhouse and even a cradle of democracy. That St. Petersburg has merely assumed the title of economic capital of the world should not be a big surprise.
In fact, it wouldn’t have even deserved mention, had not Russia been turning into exactly the opposite — a weak link in the global financial system.
Even though the bull market in global equities continues, it is starting to fray around its most vulnerable fringes. Russia, along with Turkey and other exotic markets, is starting to feel investor jitters. The dollar-based RTS index in Moscow — although it set a record above 2,000 this year — has actually been range-bound and has now declined by nearly 10 percent from its early-April peaks.
Being a weak link is nothing new for Russia over the past century. In 1905, it became the first European power to take a licking from an Asian nation when it lost a naval war to Japan. During World War I, Russia suffered the most calamitous social, political and economic collapse of all the warring parties. It was the first to blink in the Cold War, too.
It suffered an economic crash in 1998, and its default and devaluation triggered a chain reaction that nearly brought down the world financial system. Back then, however, Russia was not a weak link. It actually held out for a year after the onset of the Asian financial crisis. Moreover, Russia’s subsequent recovery was remarkably swift, taking most observers by surprise.
Integration into the world economy was a painful process, which required a root-and-branch restructuring of the vicious-cycle Soviet economy that used all the coal and iron ore it mined to build machines to mine more coal and iron ore. It also entailed bringing the ruble down to its market value — which took the exchange rate from 90 kopeks per dollar to over 6,000 old rubles over the 10-year period ending in 1998. There is no question that record prices for oil, gas and other commodities have provided Russia’s current wealth. But Russia earned plenty of hard currency in the early 1980s too. Integration into the world economy explains the difference in the level of prosperity then and now and the wide availability of food and consumer goods.
Russia has now begun to extricate itself from the world economy once more, and this alarming process is accelerating and broadening. Its political and economic systems, instead of becoming more institutional and predictable, are growing more “voluntarist”— as Soviet leader Nikita Khrushchev’s style of government was labeled after his ouster. President Vladimir Putin is becoming more and more pivotal in making managerial decisions, and his deeds appear increasingly erratic.
Clandestinely or not, most rich Russian entrepreneurs and bureaucrats hold foreign passports or residency permits and have family members residing abroad. Is it hard to understand why investors with money in Russian financial markets are starting to put one foot on the sidelines as well? 

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

TITLE: Competitiveness at the Crossroads
AUTHOR: By Margareta Drzeniek
TEXT: Russia’s economic history over the past decade and a half has been characterized by erratic reform progress and some important setbacks, such as the 1998 crisis. Lacking a clear policy anchor, as European Union enlargement was for the East European countries, for example, efforts have been more dispersed. Despite the country’s undeniable potential, economic development has not kept up with expectations, as gross domestic product even declined in the earlier phase of transition and has recovered only slowly. Despite the country’s enormous wealth in natural resources, the standard of living has fallen for much of the population, leaving the country with worse human development indicators, such as primary education levels, average life expectancy and infant mortality rates, than witnessed toward the end of the Soviet era.
Over the past few years, with rising demand for energy resources, Russia has benefited from robust growth. And as in many other energy-exporting countries, policymakers are faced with the challenge of providing this growth with a sound footing to make it sustainable should energy prices fall in the future. This requires the establishment of solid foundations for the domestic economy that will allow businesses to prosper and attract investment in areas other than energy. Current conditions of high growth can help provide a cushion during reforms, but the state reforms aimed at creating and maintain broader competitiveness are still an important question.
A country’s level of competitiveness, understood as the ability to put in place policies and institutions that contribute to economic growth, is an indicator of how prepared it is for the future. In the most recent Global Competitiveness Report from the World Economic Forum, Russia ranks 62nd out of 125 countries, nine spots lower than in the last report, for 2005. Although it finished ahead of Brazil and all of the other CIS countries, with the exception of Kazakhstan, it trails India, China, Turkey and the EU members in Central and Eastern Europe.
A closer look at the results reveals both strengths and weaknesses. Given high oil prices, it is not surprising that Russia ranks 33rd in terms of macroeconomic stability. Labor markets are also relatively efficient and flexible, and transport, energy and telecommunications infrastructure is improving gradually. The country also continues its tradition of scoring well on educational indicators, and in particular with regard to higher education. Russia still benefits from the capacity for innovation built up during the Soviet period and from cultural factors that support strong activity in this direction.
Despite these competitive advantages, however, the index points to other areas in which enormous potential for growth remains unrealized. The most important leap toward improving competitiveness involves a thorough reform of the institutional environment, and particularly in the public sector, which lacks transparency and is still ill adapted to the functioning of a market economy. The comprehensive public sector reform program adopted in October 2005 represents progress toward realizing where the institutional difficulties lie. But although the issues to be addressed are well known, implementation of these reforms is progressing too slowly and too erratically to result in real progress. Not surprisingly, the worsening institutional environment was one of the main reasons for the fall in Russia’s competitiveness ratings over the past year.
At the same time, the past year shows that Russia’s particular strength, the capacity for innovation, is being undermined by deteriorating higher education and human development indicators. Although the institutional environment is clearly the most important weakness, business leaders view the economy as overregulated and markets as highly concentrated. The country’s financial markets, although developing slowly, clearly do not yet serve as efficient financial intermediaries, and the penetration of most advanced technologies, such as the use of computers and Internet, is not on par with other countries that are at the same level of development.
The question is why progress on reforms has slowed when high growth rates and increasing budget revenues from oil and gas exports should be providing an ideal setting for putting them in place. The problem is that periods of high growth tend to relieve the pressure to institute reforms, creating the danger that progress will stall. In Russia, as in many other energy-exporting countries, this has contributed to a slowing down in the implementation of painful reforms instead of facilitating a reorganization of the economy. Even though Russia has seen improvement in some indicators relative to its own history, other countries have made better use of current conditions to improve at a greater pace, thus moving ahead of Russia in the rankings.
The political will to continue and speed up current reforms, therefore, is going to be crucial for future development. In particular, efforts related to the institutional environment and the health and deregulation of markets will allow the country to develop the small enterprise sector — something that has become an important engine of growth in most post-communist countries. Improvements in the overall business environment will also contribute to the attraction of foreign investment to sectors not related to energy, and thereby to the diversification of the economy. A continuation of the reform of the banking sector will be equally beneficial. While upgrading these basics, Russia should also continue to develop its already strong system of higher education and enhance its competitive strengths in the field of innovation. Both areas are going to be increasingly important in both current development and as the country moves toward the next stage.

Margareta Drzeniek is senior economist at the World Economic Forum.

TITLE: Meeting Amid Shifting Priorities
AUTHOR: By Boris Kagarlitsky
TEXT: Since the 2001 Group of Eight summit in Genoa, Italy, which drew an estimated 200,000 protesters, one of whom was killed in the violence, no meeting has been accompanied by the level of violence and confrontation at this year’s meeting in the German city of Heiligendamm. It seems as if we are seeing a return to conditions at the beginning of the decade, when G8 leaders could not cope with the wave of protests or produce convincing arguments to support their policies.
The Sept. 11 terrorist attacks on the United States provided at least partial justification for the group’s policies for a time, but that argument has definitely played itself out now. The increasingly severe anti-terrorist measures implemented by member countries and the attendant restraints on personal freedoms have not only been opposed by many in the West, but also provoked discontent and mistrust in contemporary government in general.
This has been accompanied by a sharp increase in the number of young people resorting to violence to express their anti-establishment views. And if there were hundreds of agitators in Seattle and Prague who instigated battles with police and smashed shop windows, they number in the thousands for the summit in Germany. The majority are young men and women in their late teens and early 20s. The growing Black Bloc movement, in which different anti-globalization and anarchist groups unite on the streets at international events like these, is not only a negative reaction to governments in which the new generation has lost faith, but also a sign of frustration with the “new left’s” failure to implement its moderate policies over the last decade.
The attitude of the press toward the protesters has changed. Journalists previously focused on shattered storefronts, and reports from the scene tended to focus only on the violence. When more moderate leaders of the movement tried to express their views, the press ignored them. But in Rostock the situation is reversed. German newspapers and television stations in particular have emphasized the peaceful nature of the majority of demonstrators and provided a forum for their opinions.
The public mood has also changed. The German leadership has trouble explaining why there is no money for social programs when funding can be found for hosting the G8 summit and other dubious activities. And the question of global warming has morphed from a subject of concern only for scientists and environmentalists into a major political issue, with the European Union announcing a course toward sharp reductions in greenhouse gas emissions, which are considered the primary cause of rising temperatures and the threats they pose. They believe that the West’s environmental program will not deliver results until new technologies to reduce emissions are distributed at no cost to developing nations in Asia and Africa. Otherwise, countries operating on global capitalism’s periphery will be unable to protect the environment without stifling growth, allowing wealthier nations to exploit these technologies in a sort of environmental colonialism.
The immediate goal of the movement, however, is to force the United States to recognize the international community’s ecological priorities. China is another problem on this front, but it is a mistake to believe that Beijing’s authoritarian regime can remain immune to outside pressure in today’s changing political climate. In the end, the West could threaten an embargo of Chinese goods if Beijing refuses to fall in line with environmental programs — a move the rest of Asia would greet with enthusiasm. Understandably, such measures run counter to the principles of the World Trade Organization, and one of China’s motivations for joining the WTO was probably to gain protection in such an instance. This means only one thing: The WTO, like other organizations of global capitalism, does not meet the needs of today’s world. Therefore, it should either change or disappear into obsolescence.

Boris Kagarlitsky is the director of the Institute of Globalization Studies.

TITLE: G8 Membership as an Exercise in Legitimacy
AUTHOR: By Fyodor Lukyanov
TEXT: Last week marked the 10th time a Russian president has attended a Group of Eight summit as a full-fledged member of the club. The first meeting to consist of eight members of equal status, and not just seven members plus Russia, came in May 1998 in Birmingham, England. Just three months before Russia’s default crisis, President Boris Yeltsin convinced his colleagues that Russia had entered an epoch of economic stability. One major theme during the summit was that of rising tensions in Kosovo and clashes there between Yugoslav army units and separatists. The G8 members called for peace. Before the next summit in Koln, Germany, however, NATO took military action in Yugoslavia, and the same members found themselves looking for ways to end the bloodshed.
Russia’s presence in the G8 caused disagreements right from the start. There are no criteria for membership, but the club has traditionally been an informal alliance of nations with leading economies and democracies. For the first few years, Russia clearly did not meet the economic requirements. But once its economy gained strength, doubts appeared as to Moscow’s fulfillment of the necessary political prerequisites.
Having gained membership, it’s unlikely that Russia would ever surrender this status of its own accord. Given that there is no formal procedure governing how countries join the G8, there is also no mechanism for determining how a member can be removed. Discussions about the state of the country’s democracy are generally conducted before and after the summit, as it is considered impolitic to discuss the internal affairs of member nations during the event itself. The leaders gather not to criticize one another, but to emphasize their global leadership role.
That role, however, is increasingly being questioned. Other countries have emerged as centers of rapid growth and influence, and there is decreasing confidence that the traditional superpowers can alone resolve global problems.
Nevertheless, the recent summit in Heiligendamm, Germany, provided an excellent opportunity to sum up Russia’s first decade in the world’s most prestigious club.
What has the G8 gained from taking Russia aboard?
Perhaps the main thing the European powers, the United States, Canada and Japan have gained by inviting Russia to join is increased legitimacy for the organization. This was not clear immediately, but has become more so as Moscow departed from its exclusively pro-Western orientation and started to act as an individual “player” in relations with both developed and developing nations.
Despite questions about whether a country with Russia’s political system and worldview belongs, its presence refutes charges that the G8 is merely a “club of rich colonizers.” For the international community, which is increasingly divided into northern and southern camps, Russia’s swings between pro-Western and anti-Western stances are the only sign of a degree of diversification in the G8. Interestingly, neither China nor India, the rising economic stars of the 21st century, seems to need membership in this club as confirmation of their new status and have not made a serious effort to join.
What, in turn, has Russia gained over the decade since it became a member?
Moscow’s original desire to join was clearly based on considerations of prestige. After the fall of the Soviet Union, Moscow was in dire need of confirmation of its status as a major power. Once Yeltsin had put down the parliament in 1993 and ushered in a constitution that settled the question of who would run the country, his attention turned to what was then the G7. Yeltsin first attended a G7 summit in Naples, Italy, in the summer of 1994. The organization represented the same kind of validation for Yeltsin in 1994 as the WTO seems to for President Vladimir Putin today.
But there is more to the story than the issue of prestige. The G8 is, perhaps, the only forum in which Moscow is called on to consider seriously questions of global development beyond the scope of its own immediate national interests.
The country’s current foreign policy is extremely pragmatic and focused on a narrow, almost exclusively materialistic understanding of its national interests. Despite the fact that it is relatively wealthy by global standards, Russia has not quite overcome the perception it acquired of itself in the 1990s as a “poor cousin” among the family of nations. Russia is also wary of repeating the experience of the Soviet Union, which doled out money around the world with little concern for any financial return — an approach that played a significant part in the country’s disintegration.
Left to its own devices, Moscow takes part actively in discussions directly related to issues it sees as affecting its national interests, including energy security, nuclear nonproliferation, geostrategic stability and the territorial integrity of states. But only through its participation as a member of the G8 does it see the need to become involved in addressing global issues. Great power status not only provides Russia with greater opportunities to pursue its own interests, but also entails responsibility for maintaining international stability, even if this occasionally means limiting its own agenda.
After the catastrophic affects of the tsunami that hit Southeast Asia in December 2004, Beijing, as the natural leader in the hard-hit Pacific region, announced the allocation of a mere $2.6 million in aid. The reaction among the industrialized was immediate, questioning whether the emerging economic giant understood the international responsibilities its new stature entailed. China’s leadership quickly got the point and within weeks had upped the pledge to $83 million — a record sum for Beijing, but still insignificant given the size of its economy.
The fact that Russia offered only technical assistance in dealing with the catastrophe demonstrated that it is still only learning to mesh its national interests with a more global approach. Membership in the G8 is useful in this regard. This forum forces Russia to do more than fall back into endless opposition and negotiations, as we see today regarding the status of Kosovo, but instead to put forward its own alternative solutions.
Unfortunately, the G8 is still not a very effective mechanism for resolving international conflicts. The regulation of the conflict in Kosovo was considered a major success in 1999, when Germany last held the group’s rotating presidency. Today it is clear that what was achieved was merely a postponement of the problem. Germany played host to G8 discussions of the issue once again.
At the 2003 summit in Evian, France, the group somehow managed to heal the internal rift that had formed over the war in Iraq. At last year’s summit in St. Petersburg the leaders announced a common position regarding the war in Lebanon, although it was essentially a policy of noninterference. Russian involvement gave greater legitimacy to all of these talks.
But this legitimacy faced an even stiffer test in Heiligendamm. For the first time within the organization’s current framework there is talk of a return to the Cold War and an arms race, as Putin warned before heading for Germany. This was the first time the G8 was called on to maintain the international strategic balance as an internal matter.

Fyodor Lukyanov is editor of Russia in Global Affairs.

TITLE: Hamas PM Comes Under Grenade Attack
AUTHOR: By Diaa Hadid
PUBLISHER: The Associated Press
TEXT: GAZA CITY, Gaza Strip — A rocket-propelled grenade hit the home of the Hamas prime minister Tuesday, while his fighters captured several positions from the rival Fatah movement and threatened to step up the offensive. Palestinian President Mahmoud Abbas accused his Hamas rivals of staging a coup and called for a cease-fire.
There were no injuries in the attack on Prime Minister Ismail Haniyeh’s home — the second in two days. But it underscored the increasingly ruthless nature of the fighting, which has killed 18 people in recent days. Exasperated Egyptian mediators said the bitter rivals turned down an appeal to meet for truce talks.
Heavy gunbattles erupted in what security officials described as a Hamas assault on positions of the Fatah-allied security forces.
Hamas-affiliated radio stations said the group took over security installations in northern and central Gaza, as well as the southern Gaza town of Khan Younis.
Hamas gunmen attacked the headquarters of the security forces in northern Gaza, a key prize in the bloody power struggle between the two sides. About 200 Hamas fighters surrounded the compound, where some 500 Fatah gunmen were holed up, and fired mortars and RPGs at the building in the Jebaliya refugee camp.
Hamas also demanded that Fatah-allied security forces abandon their positions, threatening to attack those who remained.
“The warning which we have given you to surrender has ended, and we will attack this position of Zionist collaborators,” Hamas warned over a mosque loudspeaker in Gaza City, shortly before taking up positions near the headquarters of the pro-Fatah Preventive Security Service. Later, there were heavy exchanges of fire.
In the West Bank, where Fatah forces are much stronger, Fatah gunmen threatened to retaliate by killing Hamas leaders. Hamas said its deputy transportation minister was seized by Fatah gunmen.
Abbas called for an immediate end to fighting.
“In order to protect the higher national interests of our people, and to try stop the bloodshed, I, in my position as the head of the Palestinian Authority and the head of all security forces call for an immediate halt to fire,” Abbas said after meeting with Fatah leaders at his West Bank headquarters. His statement also called for a joint meeting with Egyptian mediators to end the fighting, which has killed 80 people in the past month.
Col. Nasser Khaldi, a Fatah commander in southern Gaza, confirmed his men were on the defensive. “There is a weakness of our leaders,” he said. “Hamas is just taking over our positions. There are no orders.”
Streets were deserted in the southern town of Khan Younis. A member of the Fatah-allied forces there said Hamas took several smaller Fatah positions, but that the main compound was still under Fatah control. The officer said Hamas took over an adjacent building. “Our orders are to defend ourselves if they come, but not to attack,” he said.
Hamas and Fatah have been locked in a violent power struggle since Hamas defeated Fatah in January 2006 legislative elections, ending four decades of Fatah rule.
The sides agreed to share power in an uneasy coalition three months ago, but put off key disputes, including control of the security forces. Most of the forces are dominated by Fatah loyalists, while Hamas formed its own militia in the past year in addition to the thousands of gunmen at its command.
In the past two days, 18 Palestinians have been killed in increasingly brutal violence. Some people were shot execution-style or were hit in shootouts that turned hospitals into battle grounds, while others were thrown from rooftops. Residents huddled indoors, and students’ exams were canceled or moved.
Both sides described the fighting as all-out civil war and used web sites and text messages to call for the death of the other’s military and political leaders.
The head of the Egyptian mediation team, Lt. Col. Burhan Hamad, said neither side responded to his call for truce talks.
“It seems they don’t want to come. We must make them ashamed of themselves. They have killed all hope. They have killed the future,” said Hamad, who brokered several previous short-lived cease-fires.
Hamad said both sides were about equal in firepower, with neither able to have “a decisive victory. To be decisive, they need weapons that neither side has.” He said he would call civilians into the streets to protest if the rivals did not agree to stand down.
Islam Shahwan, a spokesman for the Hamas militia, brushed aside the latest truce efforts. “It’s all talk. It’s not serious,” he said.
A gunbattle erupted at the European Hospital in Khan Younis when Hamas gunmen controlling the rooftop traded fire with Fatah-allied security forces. Fifteen children attending a kindergarten in the line of fire were rushed into the hospital.
The RPG hit Haniyeh’s home in the Shati refugee camp on the outskirts of Gaza City while the family was inside, said his son, Abdel Salam. A Hamas web site described the incident as an assassination attempt by Fatah. “They crossed all the red lines,” said Hamas spokesman Fawzi Barhoum.
Elsewhere, a member of the Hamas military wing was kidnapped and killed by Fatah gunmen. The victim was identified as a cousin of Abdel Aziz Rantisi, a Hamas leader Israel assassinated in 2004.
Hamas gunmen attacked the home of a senior Fatah security official with mortars and grenades, killing his 14-year-old son and three women, security officials said. Other Fatah gunmen stormed the house of a Hamas lawmaker and burned it down.
The fighting also spilled into the West Bank, with Palestinian security forces seizing two employees of the Hamas-linked Al Aqsa TV station in Ramallah. Fatah gunmen said Hamas leaders in the West Bank, a Fatah stronghold, would be targeted if Hamas doesn’t halt its attacks in Gaza.

TITLE: Cleveland Faces Uphill Struggle in Finals
PUBLISHER: The Associated Press
TEXT: CLEVELAND — Time to bust out the hiking boots, grab some sturdy ropes and maybe even hire a Sherpa.
The Cleveland Cavaliers have some serious climbing to do.
Right now, the San Antonio Spurs tower over them.
Deep in the heart of the Texas, the Cavs dug themselves a canyonesque hole. Looking like lost tourists in their first NBA finals, they dropped Games 1 and 2 to the playoff-polished Spurs, who with the exception of a fourth-quarter letdown on Sunday night, have mastered Cleveland. The Cavs will host a finals game for the first time in their 37-year history on Tuesday night, and they’re hoping to turn around this lopsided series in boisterous Quicken Loans Arena, where the ear-splitting crowd noise and fire-spewing swords on their scoreboard will be a welcomed sight.
“It’s going to be electrifying,” LeBron James said.
Shocking the Spurs won’t be so easy.
Creeping toward their fourth title, and third championship in five years, the league’s best defensive team unleashed its offensive fury on the Cavs in Game 2 as Tim Duncan, Tony Parker and Manu Ginobili combined for 78 points.
The awesome threesome helped the Spurs bolt to a 25-point lead after two quarters—the third-largest halftime lead in finals history—and by the end of the third it was: Big 3 68, Cavaliers 62.
Pride kicked in and Cleveland frantically rallied in the fourth, trimming a 29-point deficit to eight in the final minutes before the Spurs stopped giggling, made a few more clutch plays, and finally put the Cavs away.
“It was irresponsible from us,” Ginobili said of the Spurs’ near collapse. “We’ve got to learn from that and we’ve got to finish games.”
The Spurs are mindful Cleveland can come back. They’ve seen it before.
In the 2005 finals, San Antonio destroyed Detroit in the first two games, winning by a combined 46 points, but when the series shifted to Auburn Hills, Michighan, the Pistons won by 17 points in Game 3 and 31 in Game 4.
They remember more than the Alamo in San Antonio.
While the Spurs are concerned about finishing games, starting them has been Cleveland’s problem.
Despite having three days to prepare, the Cavs came out flatter than a tortilla in the first half for the second straight game. They failed to match the Spurs’ intensity and were continually outhustled to loose balls, something they’ve routinely done to opponents. They also made mental errors early on and costly turnovers, mistakes the experienced Spurs made them pay for each time.
There was a lack of championship-caliber effort, and following the loss, coach Mike Brown and several of Cleveland’s players candidly assessed what has been a disappointing showing thus far by the Eastern Conference’s top team.
“We’ve got to play harder than we’re playing right now,” Brown said. “There’s nothing magical that’s going to help us. No magic play, no magic defense. We’ve got to bring the juice, and right now we’re not.”
Instead of flying back immediately after the game, the Cavs recharged in San Antonio overnight, hoping the added rest will give them fresh legs for Game 3. The Spurs opted to stay home and awoke in their own beds Monday morning before flying to Ohio.
Though new to the finals, the Cavaliers are in a familiar place: down 0-2 in a playoff series. They lost the first two games to Detroit in the conference finals before winning four in a row over the Pistons.
The difference this time, however, is that the Spurs are superior to the Pistons and while the Cavs could have easily won both games in Detroit—they lost by three each time—they had little chance in San Antonio.
The comforts of home will help, but nothing’s guaranteed.
“We can not rely on because we’re going home, that our games are going to improve and our shots are going to fall,” center Zydrunas Ilgauskas said. “Yeah, we’re going to have our crowd and the energy and stuff. But we have to make some adjustments. They’re just playing harder than us — simple as that.”
The Cavs have a been a different team at home, where the baskets seem wider, the rims softer and the crowds have been crazed. Cleveland went 30-11 at “The Q” during the regular season and are 7-1 in the playoffs. Still, the Spurs are good enough to overcome any team and 20,000 towel-waving enemies.
“We’ve been a good home team all season long,” Ilgauskas said. “But if we’re going to think that way, before we know it it’s going to be 0-3, and then it’s over. We have to bring the energy right at the beginning.”
Especially James.
As he promised, Cleveland’s 22-year-old All-Star was in attack mode at the outset of Game 2, but two quick fouls forced him to the bench and doomed the Cavs, who were still within 16-13 without James on the floor when the Spurs ripped off 12 consecutive points to close the first quarter.
Only three teams have overcome an 0-2 deficit in the finals to win the title, but one of them was the 2006 Miami Heat, who looked as bad as Cleveland did in Games 1 and 2 at Dallas before winning four straight.
Last year, the Heat jumped on the shoulders of their star, James’ good buddy, Dwyane Wade, in Games 3, 4 and 5, and stunned the Mavericks. As James showed against the Pistons, he’s capable of a similar one-man spectacle.
Before Game 3 of the Detroit series in Cleveland, James showed up at his home arena three hours early to work on his game, something he hadn’t done all year. “It’s the biggest game of my life,” he declared before scoring 32 points with nine rebounds and nine assists to revive his team.
The Cavaliers barely have a pulse now, and it’s up to James to get them beating again.
“I’ve been in this situation before,” he said while walking to the team bus late Sunday night.
“It’s going to be tough, but we can still do it.

TITLE: Hamilton Hailed A New Hero
PUBLISHER: Reuters
TEXT: LONDON — Ticket sales for next month’s British Formula One Grand Prix have rocketed since Lewis Hamilton’s first win in Canada on Sunday, organisers said.
“The reaction to his win in Canada has been amazing,” Silverstone Circuits managing director Richard Phillips said in a statement.
“We haven’t seen this level of interest since Mansell-mania in the late 80s and early 90s,” he added, referring to former British world champion Nigel Mansell.
Briton Hamilton is leading the championship by eight points just six races into his Formula One career after finishing every one on the podium.
The 22-year-old, who is also Formula One’s first black driver, won from pole position in Montreal after finishing runner-up in his four previous races.
“Ticket sales have been selling steadily since the start of the season, but demand has gone through the roof in recent weeks,” Phillips said of the July 6-8 event.
Organisers said the last general access tickets had sold out on Monday, 95 percent of race day corporate packages had gone and just a few grandstand seats remained available.
The last Briton to win his home grand prix was David Coulthard with McLaren in 2000. Mansell, the 1992 world champion, won the race four times with Williams.
No Briton has won at home in his debut season, however.
Britain’s last Formula One world champion Damon Hill sang the praises of Hamilton after the rookie’s stunning first win on Sunday.
The front pages of most of the country’s newspapers also hailed the McLaren driver.
“What an unbelievable win for Lewis,” Hill, the 1996 world champion said in a statement from the British Racing Drivers’ Club (BRDC) on Monday.
“People should not underestimate what he has achieved in an incredibly short space of time. Yes, he’s with a good team, and yes, he’s got a good car, but to be winning Grands Prix and be putting in performances like that race after race takes something special.”
Next to a photograph of Hamilton spraying champagne the Times declared “King of the road and a new British hero”.
“Lewis, Britain’s new hero, roars to victory at 22,” said the Daily Mail over a picture of the sport’s first black driver holding aloft the trophy.
The Express said the McLaren driver was on the road to earning millions as a man standing “on the threshold of becoming a 21st-century icon” in the same vein as U.S. golfer Tiger Woods.
Hill predicted a frenzy of support for Hamilton at the British Grand Prix at Silverstone on July 8 and believes the rookie can go on to win the title in his first season.
“He may be young and in his first season but this guy is the real deal,” said Hill.
“He’s leading the world championship and winning races, so his confidence will be sky-high. He’s now got a great chance of winning the British Grand Prix, in front of his home crowd at Silverstone.”

TITLE: Hague Rules On War Crime
AUTHOR: By Alexandra Hudson
PUBLISHER: Reuters
TEXT: THE HAGUE — The UN war crimes tribunal sentenced the former leader of rebel Serbs in Croatia, Milan Martic, to 35 years in jail for ordering atrocities committed when rebel Serbs set up a breakaway state in Croatia.
Martic, 52, was found guilty on Tuesday of criminal responsibility for 16 counts of war crimes and crimes against humanity including the murder, persecution, torture and deportation of Croats, Muslims and other non Serb civilians during the early 1990s.
Judges found Martic, acting in league with then Yugoslav President Slobodan Milosevic had sought to create a greater Serbia, encompassing part of Croatia and large parts of Bosnia, by deporting tens of thousands of non-Serbs and igniting a systematic campaign against them.
In campaigning to be president of the breakaway province of Krajina, Martic said he would “pass on the baton to our all Serbian leader Slobodan Milosevic.”
He was also convicted for the unlawful shelling of the Croatian capital Zagreb in 1995, in which 7 people died and more than 200 were wounded.
“That order was given by me, personally...” Martic had said in a 1995 radio interview used as evidence during the trial.
However, Martic was cleared of extermination, as judges found it could not be proven that there had been an accumulation of separate and unrelated killings.
“The majority of the crimes for which Milan Martic has been found guilty were committed against elderly people, persons held in detention and civilians. The special vulnerability of these groups of victims adds to the gravity of the crimes,” said Judge Bakone Moloto.
Special forces set up by Martic looted and destroyed properties to ensure non-Serbs had no homes to return to.
Martic led the opposition to Croatian independence from Yugoslavia in the largely Serb Krajina region. Rebel Serbs seized control of the area, effectively cutting Croatia in half, blocking transport links and ruining tourism.
Martic, formerly a policeman, was appointed president of a self-proclaimed Serb republic in Croatia in 1994.
He surrendered to the UN tribunal in 2002 and pleaded not guilty to all charges, but Judge Moloto said his surrender would be given only minimum weight in setting his sentence as he had knowingly evaded justice for seven years.
During the trial, which began in December 2005 and continued until January 2007, Martic said all he did was to protect the citizens of Serb Krajina regardless of where they were from.
Another former leader of rebel Serbs in Croatia, Milan Babic, had testified against Martic before committing suicide in detention in The Hague in 2006.

TITLE: U.S. Voters Risk ‘Campaign Fatigue’ in Presidential Election
AUTHOR: By Ellen Wulfhorst
PUBLISHER: Reuters
TEXT: NEW YORK — Inundated with politics long before the 2008 presidential election, U.S. voters are in danger of suffering wearying bouts of the uniquely American affliction of “campaign fatigue” in coming months.
Experts say voters who follow the news closely are most at risk of the condition striking this year earlier than ever. It takes its toll with information overload, long hitches of unpaid work for campaign volunteers and the all-important undecided voters on the fence longer than usual.
Voter attention tends to wane in between the early debates, major primaries and conventions and, in a contest so long this time it includes two summer hiatuses before the November 2008 vote, fatigue is practically unavoidable, many of the experts said.
“It’s a reality. There’s going to be a lot of fatigue, come summer,” said Thomas Patterson, a professor specializing in government and the press at the John F. Kennedy School of Government at Harvard University. “People are thinking this has been going on a long time already.”
Eighteen months before the election, the race for the White House has a cast of 18 declared Republican and Democratic contenders, not to mention a handful of potential late entries.
Even some political junkies feel tired.
“I follow this stuff pretty closely and it’s starting to wear me out,” said Thomas Holbrook, political science professor at the University of Wisconsin.
“Here we are, in June 2007, nobody’s going to cast a vote for another six months, and I’m still having to check the election blogs every morning to find out what’s been going on,” he said.
Campaign fatigue will tend to hit the type of voter who likes to pay attention early, absorb the news and follow the issues, said John Aldrich, political science professor at Duke University in Durham, North Carolina.
“They’re the people who are going to fade out. That kind of worries me,” said Aldrich, who conceded he had not watched any of the season’s half-dozen presidential debates.
“It’s 90 degrees (32 C) here,” he said. “It’s not time for campaigning.”

‘GO AWAY. IT’S SUMMER’
He’s not alone. The debates have reached fewer than 3 million people, on average, so far. That’s a far cry from the 70 million viewers who watched the first-ever televised debate in 1960 between then-Senator John Kennedy and then-Vice President Richard Nixon.
Fatigue tends to hit hard on campaign volunteers, Patterson said.
“It’s one thing to be active when people are excited and glad to see you on the street or knocking on their door. It’s another thing when they say, ‘Go away. It’s summer,”’ he said. “I think we’re going to lose some of that impulse, some of that energy. I think it’s flagging already.”
Not all experts agree on a looming fatigue. “There are lots of viable candidates ... and there is a lot of uncertainty about who will win. This has the makings of a race that can hold voters’ interest,” said John Sides, political science professor at the George Washington University in Washington.
Those in the thick of politics may sense a fatigue that voters may not feel, said television news veteran Sam Donaldson, who hosts a daily “Politics Live” show on an online arm of the ABC News network.
“I don’t think the general public is fatigued,” Donaldson said. “They’re concentrating on Paris Hilton.”
Besides, the question of fatigue gives political experts a topic of conversation on slow days, said Douglas Muzzio, Baruch College professor of public affairs at the City University of New York.
“It allows us to talk about being tired of talking about it,” he said.

TITLE: Federer Looks to Bounce Back at Wimbledon
AUTHOR: By Pritha Sarkar
PUBLISHER: Reuters
TEXT: PARIS — In all likelihood, the second Sunday in July cannot come soon enough for Roger Federer.
For pundits agree there is a good chance he will be holding aloft the Wimbledon trophy for a fifth successive time on July 8.
It would be a feat to equal Bjorn Borg’s record, and would prompt fans and aficionados alike to once again debate the Swiss maestro’s place among the tennis greats.
That day is still four weeks away, however, and until then Federer will carry the ‘loser’ tag after yet another French Open campaign ended in defeat.
“Disappointment goes away after a short time. I’m an experienced guy. That’s not going to kill me, so it’s okay,” Federer said after his morale-sapping 6-3 4-6 6-3 6-4 defeat by Rafael Nadal in the Paris final.
No matter how much he sugar coats his second consecutive Roland Garros final loss to the Spaniard, Federer’s pained expression during the presentation ceremony on Philippe Chatrier Court told its own tale.
Here was a man who was chasing history and came up short.
A winner of 10 of the last 15 grand slam titles, Federer was bidding to become only the third man after Don Budge and his hero Rod Laver to hold all four majors at the same time.
After trading baseline punches for 106 minutes with Nadal on Sunday, Federer was just two sets away from cementing his place on top of the list of all-time greats. Then Nadal went for the jugular and killed off the dream for at least another 12 months.

MIGHTY HEADACHE
It handed the 21-year-old a hat-trick of French Open titles and Federer a mighty headache as he tried to digest a third defeat, including a 2005 semi-final loss, by the Spaniard at the traditional home of claycourt tennis.
Ever the optimist, he tried to put a positive spin on his nightmare.
“If I had won today, I would have not had many other goals to chase in my career,” Federer said. “Eventually, if I get it, the sweeter it’s going to taste.”
Instead of seeing his name alongside Budge and Laver, Federer will have to make do this year with again being recognised as one of the best players to have failed to triumph at Roland Garros.
He is in good company. Pete Sampras, Jimmy Connors, Boris Becker and Stefan Edberg all flopped in Paris.
Aged 25, at least Federer still has time to crack his French jinx. Unfortunately for the Swiss, Nadal is four years younger and expected to outlast Federer on the competitive circuit.
QUESTION MARKS
Having won three slams in a row twice in his career, Federer felt his place in history should not rest on his ability to win in Paris.
“[Winning] the French might put me in another atmosphere in terms of being a legend, because nowadays people want you to win all four otherwise you’ve not quite done it, which I don’t think is quite right,” Federer said in January after his Australian Open triumph.
If question marks do exist, Federer has a right to feel aggrieved because like Budge and Laver, he has already won majors on two different surfaces. When Budge (in 1938) and Laver (1962 and 1969) completed their calendar slams, with the exception of Roland Garros the other three were played on grass.
Nadal, however, has no doubt about Federer’s achievements.
“What Federer has done is something that almost nobody has done in history,” said Nadal.

TITLE: U.S. Nuremburg Prosecutor Slams Guantanamo Policy
AUTHOR: By Jane Sutton
PUBLISHER: Reuters
TEXT: The U.S. war crimes tribunals at Guantanamo have betrayed the principles of fairness that made the Nazi war crimes trials at Nuremberg a judicial landmark, one of the U.S. Nuremberg prosecutors said on Monday.
“I think Robert Jackson, who’s the architect of Nuremberg, would turn over in his grave if he knew what was going on at Guantanamo,” Nuremberg prosecutor Henry King Jr. said in a telephone interview.
“It violates the Nuremberg principles, what they’re doing, as well as the spirit of the Geneva Conventions of 1949.”
King, 88, served under Jackson, the U.S. Supreme Court justice who was the chief prosecutor at the trials created by the Allied powers to try Nazi military and political leaders after World War Two in Nuremberg, Germany.
“The concept of a fair trial is part of our tradition, our heritage,” King said from Ohio, where he lives. “That’s what made Nuremberg so immortal — fairness, a presumption of innocence, adequate defense counsel, opportunities to see the documents that they’re being tried with.”
King, who interrogated Nuremberg defendant Albert Speer, was incredulous that the Guantanamo rules left open the possibility of using evidence obtained through coercion.
“To torture people and then you can bring evidence you obtained into court? Hearsay evidence is allowed? Some evidence is available to the prosecution and not to the defendants? This is a type of ‘justice’ that Jackson didn’t dream of,” King said.
He said the Guantanamo prisoners should be tried in the court-martial system or the U.S. federal courts, under fair rules that leave open the possibility of acquittal. Three Nuremberg defendants were acquitted, King noted.
The Bush administration has said it needs to hold the special tribunals at Guantanamo in order to protect national security. Last year the U.S. Supreme Court struck down the first version of the Guantanamo trials as illegal.
The 2006 Military Commissions Act, which set revised rules for trying suspected terrorists at the U.S. naval base at Guantanamo Bay, Cuba, “sort of turns its back on Nuremberg,” King said. “I don’t think it’s a credit to us to have this thing.”
“The United States has always stood for fairness. That’s the important thing. We were the ones who started war crimes tribunals and we’re the architects. I don’t think we should turn our back on that architecture.”
King, who teaches law at Case Western Reserve University in Ohio, also questioned whether former Guantanamo prisoner David Hicks deserved to be tried as a war criminal. After being held at Guantanamo for more than five years, the Australian pleaded guilty in March to a charge of providing material support for terrorism and was sent home to serve the rest of his nine-month sentence.
“He’s not an arch-criminal type, just a guy who was disaffected from the system,” King said.
Hicks, who admitted training with al Qaeda and briefly fighting on its side in Afghanistan, is the only person convicted in the Guantanamo war crimes tribunals.

TITLE: Europe Set to Shake Up Soccer
AUTHOR: By Darren Ennis
PUBLISHER: Reuters
TEXT: BRUSSELS — The European Commission is on a collision course with UEFA, other sports lawmakers and European Union governments as it finalises reforms on how sport should be run in its 27 member states.
The EU executive is due to unveil the proposals for new laws on July 4 and its findings could have a massive impact on the way soccer and other sports are governed throughout the EU.
Sports bodies such as UEFA, which governs European soccer, and diverse politicians have criticised a draft of a white paper as too vague on key points such as multibillion-euro television rights and nurturing young players, and potentially creating more court cases rather than less—one of its chief aims.
Following a number of court cases in recent years in soccer and other sports, politicians and sports chiefs want more legal certainty from the strategy paper which will also cover areas such as doping, security, racism, gambling, players’ agents and ownership.
Sport was given informal “specificity”—or special exemption from EU rules—by ministers under an EU treaty signed in Nice in 2000. But that status was not made legally binding. The lack of definition has been central to many court challenges in recent years, most notably soccer’s “Bosman ruling” in 1995 which gave all sports professionals within the EU more freedom to change clubs.
The politicians and sports organisations say they want the issue clarified once and for all, stress they are not seeking a full exemption from EU rules but want sporting criteria, such as benefits for society, to be weighed alongside economic issues. In the United States, baseball has an exception to antitrust rules. But this exception is considered by most legal commentators to be an anomaly from a virtually obsolete court ruling and courts say the problem must be resolved by Congress.

KEY POINTS
The latest draft of EU proposals, obtained by Reuters, does not give sport’s ruling bodies the extra powers they are seeking to tighten their grip on their sports.
Britain’s sports minister, Richard Caborn, who launched the review during Britain’s EU presidency in 2005, told Reuters: “The draft does not go far enough, we expected something more robust. It will leave sport in the hands of the courts.”
The key points of dispute involve TV rights and rules for soccer and other sports that require a quota of local, “homegrown” players which are being introduced gradually.
Politicians and the major sports bodies wanted the paper to recommend central marketing and collective TV rights as the fairest model, rather than individual selling by clubs which allows the big names to dominate the revenues.
The paper says “collective selling is important for the redistribution of income” before stating “the Commission...recommends...alternatively a system of individual selling by clubs linked to a robust solidarity mechanism”.

GRASSROOTS BENEFITS
An official with European soccer body UEFA said the ambiguity left open the possibility of court challenges against its collective rights system for Europe’s Champions League television revenues, which UEFA says it uses to fund grassroots football.
“We need it to be clearer,” the official said.
On the issue of homegrown players—not necessarily of the same nationality of the parent club, but nurtured by that club through its youth development programme—the draft says: “The Commission will analyse so-called home-grown players rules to assess whether they present a risk of indirect discrimination, and if so, whether their objective is legitimate.”
A British Conservative member of the European Parliament and former soccer referee Chris Heaton-Harris said the majority of politicians see the benefit of quotas as a way to boost local talent as the world’s best players are drawn to Europe.
“The politicians, whom the Commission answers to, accept that these rules are good for sport in the long term, so why analyse it now?” he said.

COMPLAINTS EXPECTED
The European Parliament will have a say in the final shape of the reform and several members are due to complain about the draft on Monday to Commission President Jose Manuel Barroso.
William Gaillard, advisor to UEFA boss Michel Platini, said it “could gravely damage all sports across Europe.”
EU Competition Commissioner Neelie Kroes wants sports disputes to be decided purely on economic not social grounds, like any other business.
“The majority of the Commission sees the value of giving sport a greater say of its own. But she is not interested and could be headed for a showdown,” a Commission source said.
A spokesman for Kroes declined to comment.

TITLE: Skateboarding Mulled For Olympics
PUBLISHER: The Associated Press
TEXT: LONDON — Skateboarding could make its Olympic debut at the 2012 London Games.
The International Olympic Committee said Friday it has held discussions with cycling’s world governing body about introducing skateboarding as a discipline for the London program.
Skateboarding events are part of the X Games, and the IOC is eager to modernize the Olympic program with sports and disciplines that appeal to youth. It has already added snowboarding to the Winter Games and BMX cycling for next year’s Beijing Olympics.
“The IOC wants to make the program relevant for young people,” IOC spokeswoman Emmanuelle Moreau said.
Moreau said officials of the International Cycling Union met with the IOC sports department this week to discuss their proposal for adding skateboarding to the London Games.
The IOC does not recognize an international skateboarding federation, so the sport would first need to be adopted as a discipline under the UCI umbrella. 
After that, the UCI could make a formal proposal to the IOC for its inclusion in the Olympics. The proposed venue for skateboarding in London is the velodrome in the Olympic Park.
“We are doing our best to introduce skateboarding for 2012,” UCI sports director Olivier Quejuiner told the London Evening Standard. “We have a clear strategy... The venue could be wonderful. All we need now is the green light from the IOC. Technically, logistically and in terms of cost, it would not be a problem to stage the event in 2012.”
Twenty-six sports are on the London Olympic program. While it is too late to add any sports, new disciplines can still be brought in.
The X Games feature skateboarding “vert,” “street” and “big air” events.

TITLE: U.S. Kills Seven in ‘Friendly Fire’
AUTHOR: By Amir Shah
PUBLISHER: The Associated Press
TEXT: KABUL, Afghanistan — Afghan police mistook U.S. troops on a nighttime mission for Taliban fighters and opened fire on them early Tuesday, prompting U.S. forces to return fire and call in attack aircraft. Seven Afghan police were killed.
Gunmen on motorbikes, meanwhile, killed two schoolgirls Tuesday in central Afghanistan, as U.S.-led coalition and Afghan troops killed more than 24 suspected Taliban fighters during a battle in the south on Monday, officials said.
President Hamid Karzai’s spokesman said the deaths of the Afghan police were “a tragic incident” caused by a lack of communication.
“The police forces were not aware of the coalition’s operation,” said spokesman Karim Rahimi. “The police checkpoint in the area thought that they were the enemy, so police opened fire on the coalition, and then the coalition thought that the enemies were firing on them, so they returned fire back.”
The commander at the remote checkpoint in the eastern province of Nangarhar, who goes by one name, Esanullah, said U.S. gunfire and helicopter rockets killed seven policemen and wounded four.
Major Chris Belcher, a spokesman for the U.S.-led coalition, said a combined coalition-Afghan force was ambushed by small arms fire and rocket-propelled grenades from two sides while on the way to conduct an operation against a suspected Taliban safe house.
“Afghan and coalition forces took incoming fire and they responded to it,” Belcher said. The forces called in air support, he said.
A policeman at the remote checkpoint said police called out for the approaching U.S. forces to halt.
“I thought they were Taliban, and we shouted at them to stop, but they came closer and they opened fire,” said Khan Mohammad, one of the policemen at the post. “I’m very angry. We are here to protect the Afghan government and help serve the Afghan government, but the Americans have come to kill us.”
Rahimi said the incident was being investigated and showed why Karzai has repeatedly called for increased cooperation and communication between Afghan and international troops, which would also help solve the ongoing problem of civilian casualties in Afghanistan.
In Nangarhar province in March — the same province of Tuesday’s police shootings — 19 civilians were killed and 50 wounded by U.S. Marines Special Operations Forces who fired on civilians while speeding away from the site of a suicide bomb attack, casualties that sparked angry protests and denunciations of the U.S. presence there.
A U.S. military commander later determined that the Marines used excessive force.
The International Committee of the Red Cross on Tuesday said the impact of violence on civilians in Afghanistan is worse now than it was a year ago.
Pierre Kraehenbuehl, the ICRC’s director of operations, said fighting between armed opposition groups and the Afghan army supported by international forces had intensified significantly in the south and east of the country since 2006 and was spreading to the north and west.
“Civilians suffer horribly from mounting threats to their security,” such as increasing numbers of roadside bombs, suicide attacks and airstrikes, he said in a statement.
In central Logar province, gunmen on two motorbikes opened fire on students leaving an all-girls school, killing two schoolgirls and wounding six others, said Education Minister Mohammad Hanif Atmar.
In the southern Kandahar province, U.S.-led coalition and Afghan troops killed more than 24 suspected Taliban fighters during an eight-hour battle in Shah Wali Kot in southern Kandahar province, the coalition said Tuesday.
The troops were ambushed by militants, who retreated after several of their fighters were killed. A force of some 30 Taliban later attacked the same coalition convoy, who called in airstrikes on a compound and a vehicle, killing “over two dozen enemy fighters,” the coalition said.
Violence has spiked in Afghanistan in recent weeks. More than 2,300 people have died in insurgency-related violence this year, according to an Associated Press count based on U.S., NATO and Afghan figures.

TITLE: Blair Lashes Out at Media, Defends Iraq Intervention
PUBLISHER: Agence France Presse
TEXT: LONDON — Prime Minister Tony Blair defended the conflicts in Iraq and Afghanistan and rounded on the media Tuesday for acting like a “feral beast” ripping reputations apart.
Blair insisted he would not apologize for his backing of U.S. military actions after the September 11, 2001 attacks on the United States.
“I don’t mean to sound obstinately unapologetic, but I do remain of the view that an internationalist foreign policy in today’s world is the only sensible one for us,” he told reporters.
The Labour leader — due to stand down on June 27 — has seen his poll ratings seriously hit by the war in Iraq and his close alliance with U.S. President George W. Bush.
Blair said he would leave historians to work out whether Iraq would forever cloud his legacy. “We will debate this and I will debate our foreign policy for a long time,” he said.
But in outspoken comments on the media, he warned of a “dangerous” trend towards sensationalism which he said was a consequence of the media’s growing competitiveness .
“Today’s media more than ever before hunts in a pack. In these modes it is like a feral beast, just tearing people and reputations to bits. No-one dares miss out,” he said.
“It is rare today to find balance in the media. Things, people, issues, stories are all black and white,” he said, lamenting the “increasingly shrill tenor” of the traditional media.
“Is it becoming worse?” he asked. “Yes. In my 10 years I’ve noticed all these elements evolve with ever greater momentum.”
And he said: “I do believe this relationship between public life and media is now damaged in a manner that requires repair.
“The damage saps the country’s confidence and self-belief; it undermines its assessment of itself, its institutions; and above all it reduces our capacity to take the right decisions, in the right spirit for our future.”

TITLE: China Probes Child Worker Report
PUBLISHER: Reuters
TEXT: BEIJING — China said on Tuesday it was looking into allegations that Chinese factories used children to produce merchandising for next year’s Beijing Olympics.
The Playfair Alliance said in a report released in London on Monday that children as young as 12 were involved in packaging licensed stationery products for the Games at a factory in southern China.
“The Beijing Organising Committee for the Games (BOCOG) has been contacting the factories cited in the report to verify [the accusations],” Chinese Foreign Ministry spokesman Qin Gang said.Qin said BOCOG had “very strict” labor rights and social responsibility requirements when contracting factories to make licensed Olympic merchandise.
“If there were indeed violations of relevant employment regulations, BOCOG will deal with them seriously,” Qin told a regular news conference.
Child labor is illegal and minimal wages are stipulated by law in China, which has signed and ratified several international conventions on labor rights, Qin added.
The Playfair Alliance, represented in Britain by the Trades Union Congress (TUC) and labor Behind the Label, researched working conditions at four factories in southern China making 2008 Olympic bags, headgear, stationery and other products.
Researchers found some of the workers earned half the legal minimum wage in China and were made to work up to 15 hours per day, seven days a week, in what they called “gross exploitation.”
Vice Chairman of BOCOG Jiang Xiaoyu said on Monday that he took such issues seriously and sought “to protect the reputation of the Olympic movement and the Beijing Olympic Games.”
The four cited factories were all based in the coastal province of Guangdong, a booming manufacturing hub which has absorbed some 20 million migrant peasant workers from China’s underdeveloped inland areas.
Among the growing army are teenagers who swarm to Guangdong after middle school or even elementary school for an annual earning as little as $900, meager by Western standards but about twice the average farming income of a rural China family.

TITLE: Rebel Kurds Announce Cease-Fire in Turkey
AUTHOR: By Selcan Hacaoglu
PUBLISHER: The Associated Press
TEXT: ANKARA, Turkey — Kurdish separatists declared a “unilateral cease-fire” in attacks against Turkey on Tuesday and said they were ready for peace negotiations, but the group maintained the right to defend itself.
The statement came as the Turkish military has intensified operations against the separatist Kurdistan Workers’ Party, also known as PKK, in the country’s southeast, at the border with Iraq. The guerrillas have been fighting for autonomy in Turkey for more than two decades.
“We are renewing our declaration to halt attacks against the Turkish army,” Abdul Rahman Chaderchi, the PKK official in charge of foreign affairs, said in northern Iraq, where the rebels have several bases.
“We want peace and we are ready for negotiations, but if Turkey decides to attack our bases inside Turkey or inside Iraqi Kurdistan, then this unilateral cease-fire will be meaningless. If we are attacked, we will fight back and we have the ability to confront any Turkish aggression,” he added.
Turkish troops have massed at the frontier and shelled Iraqi territory while pursuing rebels, drawing criticism from the Iraqi government and raising fears that the conflict could draw in its NATO ally, the United States.
The Turkish government had no immediate response to the PKK statement, but has ignored several past cease-fires declared by the group, ruling out negotiations with “terrorists.”
It was unclear if the rebel announcement reflected a desire to ease pressure from the Turkish armed forces, or was a public relations effort to portray the rebels as peace-seeking, and the military as the aggressor. The rebels might also want to give Kurdish candidates in Turkish parliamentary elections next month a chance to make gains at the polls without being accused of links to rebel violence.
The PKK has accused the Turkish military of engineering the collapse of a unilateral rebel cease-fire declared on Oct. 1, 2006.
Turkey’s prime minister said Tuesday that the country needs to focus on fighting the PKK inside its borders amid a debate over whether Turkey should pursue rebels in a cross-border operation into northern Iraq.
“There are 500 terrorists in Iraq; there are 5,000 terrorists inside Turkey. Has terrorism inside Turkey ended for us to think about an operation in northern Iraq?” Prime Minister Recep Tayyip Erdogan told reporters.
Rebels of the PKK have bases in the mountainous north of Iraq.
Turkey’s army chief has said an incursion into northern Iraq is necessary, but said he needed political approval to act. The government pledged to hunt down rebels, but Erdogan has not called for the parliamentary approval required for a cross-border operation.
PKK guerrillas took up arms in 1984, and tens of thousand of people have died in the conflict. The United States and European Union brand the PKK a terrorist organization.
NATO Secretary-General Jaap de Hoop Scheffer, in Turkey on Tuesday, said the alliance hoped Turkey’s conflict with the PKK could be resolved “with the maximum of restraint.”