SOURCE: The St. Petersburg Times
DATE: Issue #1388 (52), Tuesday, July 8, 2008
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TITLE: New Bill Targets Graft At Customs
AUTHOR: By Matt Siegel
PUBLISHER: Staff Writer
TEXT: MOSCOW — A group of State Duma deputies on Friday proposed a major overhaul of the Customs Code aimed at simplifying the Byzantine process of importing goods into the country and stamping out corruption.
Should the legislation be approved in the fall, authorized consignees such as customs carriers, brokers and warehouse owners will be able to clear goods at their own facilities, rather than the murky state customs warehouses.
No provision, however, is made in the draft bill for the creation of a centralized electronic database, which exporters say is sorely needed to speed up clearance and root out corruption.
The amendments, drafted after extensive input from more than 65 companies, will improve customs administration, risk control and the quality of post-auditing procedures, Valery Draganov, the Duma deputy leading the initiative, told reporters after presenting the legislation to the Duma’s council on customs and tariffs on Friday, the last day of the Duma’s spring session.
“What we intend to do is not just tighten the screws but to make customs clearance of goods as easy as possible and speed up the turnover of goods,” Draganov said in a separate e-mailed statement. 
The reform should also help boost the economy and increase the amount of customs tariffs collected by the government, said Draganov, a former chief of the Federal Customs Service.
Clearing up corruption in customs clearance has a clear economic benefit. Russia is a net importer of products, bringing in 81 percent of its manufactured consumer goods in 2006, the latest year for which figures are available, according to the World Trade Organization. 
“The economic effect for Russia is quite significant. Over 50 percent of the federal budget is generated from customs revenues,” said Dmitry Tchelstov, chairman of the customs and transport committee of the Association of European Businesses in Russia.
“The main problem with the current situation ... is that the procedures are quite clear, but they are a little bit complicated on implementation and not very logical from a business perspective,” he said. 
The problem with current legislation is that its extreme complexity almost seems designed specifically to encourage corruption, said Geritt Spaas, who worked in the Soviet Union and Russia for 18 years as the former owner and operator of Consulate Cargo International, a leading importer.
He recounted with frustration the schemes he said he saw, in which customs officials reduced or avoided duties entirely in exchange for bribes.
“You could have a truck full of video equipment, and they would declare it paper or potatoes or something,” he said. “So, instead of $3 million, they would declare $100,000 of value. And so this became a big business.”
A call to the Federal Customs Service for comment went unanswered after office hours Friday. 
Vladmir Efremov, a lawyer specializing in customs issues at Baker & McKenzie in Moscow, said the new legislation would help ease corruption, but he expressed regret that it did not address some of his clients’ key issues, such as the wild discrepancies in the customs valuation of imported goods.
The key element of the new legislation is the ability of consignees to clear their own goods, said several people familiar with the document. By removing a layer of bureaucracy, importers can mitigate the risks posed by unchecked corruption in the customs service.
“You will not be obligated to collect as many documents as possible, so you will be required to give only the documents that are listed in the Customs Code and in the decrees of the Russian Federal Customs Service,” Efremov said. “From this point of view, it will be better.”
Spaas was less optimistic. He said that the new legislation would not address the problem until there was a true will for change from above to eliminate corruption.
He urged the adoption of an electronic database like those in Europe and the United States as a means of going around corrupt customs officials who are incapable, he said, of changing.
“It’s too late,” he said. “These guys are used to driving a Mercedes and are used to going on holiday four times a year, and you aren’t going to change this.”

TITLE: Bush Says Medvedev Is ‘Smart Guy’
AUTHOR: By Deb Riechmann
PUBLISHER: The Associated Press
TEXT: TOYAKO, Japan — President Bush and new Russian President Dmitry Medvedev stood united Monday on issues like Iran and North Korea. But for all their handshakes and smiles, it is clear that thorny issues like missile defense are in a holding pattern until a new U.S. president takes office.
In their first sit-down as heads of state, Bush called Medvedev a “smart” guy who is well versed in foreign policy. Medvedev casually referred to Bush as “George.” Yet they inched no closer on the missile defense issue during their more than hour-long discussion on the sidelines of a summit here.
A Kremlin aide described the private meeting as open and constructive, but said it led to no progress on the missile-defense issue.
The public comments by the two presidents only glossed over Russia’s anger about the topic. And they both brushed off the fact that their official relationship will expire in fewer than 200 days when the Bush presidency ends.
“We will build on the relationship with the new American administration,” said Medvedev. “But we still have six months with the effective administration and we’ll try to intensify our dialogue with this administration.”
The Russian leader said he and Bush agreed on curtailing the nuclear weapon capability of Iran and North Korea.
“But then certainly there are others with respect to European affairs and missile defense where we have differences,” Medvedev said. “We would like to agree on these matters, as well, and we also feel very comfortable in our dealings with George.”
Like former Russian President Vladimir Putin, still the top powerbroker in Moscow, Medvedev remains critical of the West, in particular the United States. He has shown no sign of softening opposition to U.S. plans for missile defense facilities in Europe or to NATO’s promise to eventually invite Georgia and Ukraine in.
Personal relations between the two appear warm, but Bush didn’t go as far as to repeat what he said about Putin when he first met him in June 2001. Then, Bush said he looked into Putin’s eyes and “was able to get a sense of his soul.”
“I’m not going to sit here and psychoanalyze the man, but I will tell you that he’s very comfortable, he’s confident, and that I believe that when he tells me something, he means it,” Bush said.
The two, however, are at opposite ends of their political lives. Bush is on his way out and Medvedev just took office in May. This is Bush’s eighth and final G-8. This is Medvedev’s freshman year at the summit.
The two leaders, who also are united in their fight against international terrorism and want to see a Middle East peace accord and a future for Afghanistan, talked on the sidelines of the Group of Eight summit of industrialized nations. Japan is hosting the event at a heavily guarded luxury resort atop Poromoi Mountain in Hokkaido, an island in northern Japan.
From there, visitors normally can see the doughnut-shaped Lake Toya, formed in a crater of a collapsed volcano. Not Monday. Sheets of rain pelted the scenic mountain and the weather offered a metaphor for the contentious U.S.-Russia discussions on missile defense: Fogged in.
U.S. and Polish officials are negotiating to base American missiles in Poland for a future missile shield against Iran. Still, there is no guarantee the shield will ever be built or would work as advertised. Negotiations over the 10 missile interceptors are proving more contentious than the U.S. had anticipated.
The site would be linked to a missile-tracking radar that Washington wants to place in the Czech Republic. The Czech government has agreed in principle to the plan, but parliament’s approval is still needed.
Russia is staunchly against the U.S. plans, arguing that U.S. military installations in former Soviet satellites so close to its borders would pose a threat Russian security. Moscow has threatened to aim its own missiles at any eventual base in Poland or the Czech Republic.
The U.S. maintains that the plan poses no threat to the Kremlin’s vast nuclear arsenal.
After the talks, a Kremlin aide accentuated the positive in U.S.-Russian relations, but said Bush and Medvedev made no progress on the missile-defense issue — the major point of disagreement between them.
Sergei Prikhodko said the talks were “exclusively well-intentioned, constructive, and open, but at times critical.”
Bush and Medvedev met on the opening day of the summit, a day focused on aid to Africa and on whether the world’s economic powers were providing enough financial assistance to fight disease and improve health care.
Bush is calling on G-8 nations to write checks to make good on their pledges to help battle HIV-AIDS, malaria and other diseases. He and other G-8 heads met with leaders of seven African nations to discuss aid to the continent, but the election crisis in Zimbabwe also was high on their agenda.
Bush backs U.N. sanctions against Zimbabwe, whose president, Robert Mugabe, is accused of using violence and intimidation to win a runoff election last month. “I am extremely disappointed in the elections, which I labeled a sham,” Bush said alongside Tanzanian President Jakaya Kikwete.
Many African nations, though, are reluctant to pursue sanctions. Kikwete, the current head of the African Union, said that African leaders share U.S. concerns about Zimbabwe. But he told the U.S. president, “the only area that we may differ is on the way forward.”
Meanwhile, a consensus still appeared elusive on a statement on climate change, said Jim Connaughton, chairman of the White House Council on Environmental Quality. The Group of Eight takes up the divisive issue on Tuesday.
At issue is an agreement from last year’s G-8 summit in Germany to seriously consider a goal of halving emissions by 2050.
But coming up with a more detailed target for cutting emissions is proving difficult. The Bush administration is unwilling to consider such a target unless developing economies that are also big polluters, like China and India, are included.
“The president has made clear that we believe a long-term goal is useful and necessary,” Connaughton said Monday. “The president has also made clear that it’s a goal that must be shared by all countries.”

TITLE: Security Services To Be Sued Over Murder Plot
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Three men who where acquitted of plotting to assassinate Governor Valentina Matviyenko, one of who was under 21 at the time, are planning to sue St. Petersburg law enforcement agencies for at least 1 million rubles ($42.5 million) in damages.
“My client was a juvenile who was forced to suspend his studies and spend a year behind bars instead,” said lawyer Maxim Gafarov, who represents Vladislav Baranov, the youngest of the wrongly accused men. “We expect to file the suit by the end of August after we have received the official ruling of the Supreme Court which earlier upheld the acquittal.” 
In May 2007, Matviyenko was reported to have been targeted in the assassination plot. News leaked out that security forces had detained two suspects for allegedly planning to kill her. In a joint raid carried out by the FSB and the Interior Ministry’s investigative unit, two grenades and more than 0.5 kilograms of plastic explosives were confiscated and the suspects arrested. In April this year, a local jury ruled that the alleged plotters were not guilty.
Two other former defendants, Ravil Muratov and Timur Saidgareyev, are also considering seeking financial compensation, Gafarov said.
Matviyenko told Moscow Echo radio station on Monday she has been following the trial but refrained from commenting on the verdict. 
“The verdict is not within my competence; it is the job of the law enforcement agencies,” the governor said. “I did not intervene with the investigation at any stage and never intended to.”
Matviyenko originally appeared unworried by the incident.
She told reporters the day the news broke that she felt “secure and confident,” and that she wouldn’t ask for her personal security detail to stepped up. The day after the suspects were arrested, TV channels showed Matviyenko — dressed in a fashionable pink sports suit — taking part in roller skating competition in central St. Petersburg.
Opposition politicians openly questioned the veracity of the case. 
“The acquittal was predictable as the whole thing was fishy,” said Boris Vishnevsky, a member of the political council of the local branch of liberal party Yabloko. “The three young men sounded like unlucky scapegoats. On a more general scale, I do not find it even remotely credible that neither any serious political force, nor a group of fanatics would contemplate such a murder plot.” 
Critics said the assassination scenario was at the very least an exaggeration.
“The assassination of Matviyenko, an official appointed directly by the president, is a pointless and absurd enterprise,” said Sergei Gulyayev, the leader of The People movement. “It looks like the security services attempted to artificially inflate the event to earn top marks with their bosses.”
Matviyenko had received a death threat a few years earlier. It was posted on the Internet in an opinion forum run by the local online newspaper Fontanka.ru, in July 2004.
The threat was deleted by the website’s moderators within minutes. It had taken the form of a court “sentence” denouncing Matviyenko for “anti-Russian policy and populating the city with immigrants from Asia and the Caucasus.”
The man behind the threat, Alexander Vtulkin, an extremist with the nationalist Russian Republic movement, was sentenced in 2005 to 18 months in prison for inciting national, racial and religious hatred.

TITLE: New Group To Fight For Cancer Patients
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: A new cancer patient advocacy group that held its founding conference in St. Petersburg last month has launched a campaign against the restricted access to effective and innovative cancer treatment available in Russia. 
The Movement Against Cancer “was created with the aim of defending patients’ rights to access anti-cancer treatments, to campaign for an increase in the state budget covering the purchase of medicines, equipment and organization of public screenings,” said Anna Larionova, a cancer patient and the leader of the St. Petersburg branch of the organization.
Doctors across the country welcomed the patients’ initiative.
“Similar movements have proved effective in Europe and the U.S.A.,” said Vladimir Semiglazov, director of the St. Petersburg Oncology Institute.
Earlier this year a number of Russia’s top oncologists admitted at a conference in Moscow that Russia’s current healthcare system cannot cope with the scale of what they see as a cancer epidemic in the country.
Each year in Russia, 300,000 people die of cancer. Around 2.5 million Russians suffer from cancer, and more than 450,000 new cases are registered annually. The average age of cancer patients in Russia is 63.3 years old for men and 62.9 for women. 
Mikhail Davydov, the president of the Russian Academy of Sciences, called for a special service aimed at combating cancer to be created that would be directly responsible to the government and parliament. 
Both Russian and international pressure groups dealing with the rights of cancer patients stress that not only access to medicines is often restricted for sufferers but they remain in the dark about the range of treatment methods and medicines.
The movement is collecting appeals from patients that are being denied adequate treatment.
In the meantime many pressure groups have criticized the government for making careless decisions in the field of healthcare.
In theory, drugs for certain illnesses — including some forms of cancer — are free with a prescription. According to government estimates, about 5 million people can technically benefit from the free drug system. But the government divides cancer patients into categories eligible and not eligible for the free prescriptions, depending on doctors’ estimates of their condition. And even with a free prescription in hand, many patients are unable to get the medicines because pharmacies do not have the drugs.
The government does not pay the suppliers on time, which creates shortages of vital medicines.
Pressure groups also accuse government officials of irresponsibility when signing contracts to import medicines. In October 2007, Russia replaced a Swiss-made kidney medicine Mycophenolate mofetil with a cheap generic alternative from India.
Irina Khristova, the chairwoman of the The Right To Live non-governmental organization that unites kidney patients on a nationwide level, said her organization this year polled 350 kidney specialists and transplant surgeons worldwide about the drug. Only one specialist said he was familiar with it.
“Our organization sent information requests about the effects of the medicine to hundreds of clinics in the EU, the U.S., Canada and the Commonwealth of Independent States [of former Soviet nations] and none of them neither knows or uses the generic drug,” Khristova said. “Why is it being tested on the Russian patients? Why has the efficient Swiss medicine been replaced? Wrong decisions made within government may claim many human lives.”
“Why on earth do people have to risk or even pay with their lives to prove to the Health Ministry that the officials made a mistake,” Khristova said. “Even from a purely economic point of view it is cheaper for the government to buy the medicines that have already proved effective than to take the risk of a patient losing a kidney after inefficient treatment and then requiring dialysis.”
For cancer sufferers the market price of drugs can be far greater and well beyond the reach of all but the wealthy. A course of the anti-cancer drug Avastin can cost as much as $10,000. 
The late Russian writer Igor Alexeyev, a resident of the southwestern city of Saratov who suffered from advanced intestinal cancer and died in March, chronicled his illness in a weekly blog. He described insomnia and intense pain as he endured endless journeys along rutted provincial roads trying to get treatment and medicines. 
Many readers of the blog responded by sending Alexeyev donations, which he used to pay for his Avastin courses. The drug had been prescribed to him but it was never available at pharmacies. On one occasion Alexeyev reported his amazement at actually being able to get the medicine from his local pharmacy.

TITLE: In Brief
TEXT: <b>Brits Feel Threatened</b>
MOSCOW (SPT) — British security services have identified Russia as the greatest threat to Britain after al-Qaida terrorism and Iranian nuclear proliferation, the Times of London reported Friday.
British security officials fear that agents from the Federal Security Service, the Foreign Intelligence Service and the Main Intelligence Directorate of the General Staff of the Armed Forces have flooded Britain, forcing authorities there to divert valuable resources to battle Russian espionage, the newspaper said. 

<b>Shootout in Ingushetia</b>
NAZRAN, Ingushetia (AP) — A seven-hour shootout Saturday between Russian soldiers and suspected militants holed up in a house in the republic of Ingushetia left two dead on each side, the Interior Ministry there said.

TITLE: Bombing at Minsk Concert Injures 50
PUBLISHER: Reuters
TEXT: LINIYA STALINA, Belarus — Belarussian President Alexander Lukashenko said there would be no general clampdown on his opponents on Saturday after a bomb explosion wounded about 50 people at a concert he attended the day before. No one has claimed responsibility for the blast, the authorities have played it down, and Lukashenko, who was nearby but unhurt, said he did not see it as an assassination attempt.
He also said the United States had offered technical help in investigating the explosion. Washington has criticized his government for human rights abuses and has been involved in a diplomatic spat with Minsk in recent months.
There was no immediate comment from U.S. officials.
On Friday, as dozens of people were being treated mainly for leg injuries from nuts and bolts in the homemade bomb, the opposition asked the authorities not to start a “crusade” against them ahead of a parliamentary poll in September.
“Why should we tighten the screw? What has happened that we should tighten the screw?” Lukashenko said in answer to a journalist’s question about the opposition plea.
“We will turn the screw on those responsible for this,” he said after visiting the open air Liniya Stalina war museum about 40 kilometers west of Minsk.
Officials on Friday said the blast was an act of hooliganism. There have been no known attempts on the long-term ruler’s life.
Lukashenko is banned from entry by the United States and the European Union, both of which accuse him of rigging his 2006 re-election, gagging the media, jailing opponents and stopping protests.
Relations with Washington have been strained since March, when the U.S. ambassador left Belarus and embassy staff were drastically cut at the behest of Minsk over sanctions placed on Belarussian state oil products firm, Belneftekhim.
But Lukashenko said the United States had offered to help investigate the blast, and Russian specialists had already arrived.

TITLE: Abkhaz Blasts Draw Dueling Accusations
PUBLISHER: Combined Reports
TEXT: MOSCOW — Georgian officials said there were five explosions near the de facto border between Georgia and its breakaway region of Abkhazia on Sunday, in the latest sign of growing tensions between Tbilisi and separatists.
A series of incidents in the past week, involving bombs, mortar shelling and shootouts, have been matched by sharp condemnations from Moscow and Tbilisi, as both sides blame each other for thawing what had been frozen conflicts.
Georgia’s rebel regions of Abkhazia and South Ossetia broke away from central rule during wars in the 1990s and are flash points for tensions with Russia, which provides financial support and has peacekeepers in both.
“Four mines exploded today in the morning near a village called Rukhi, in Georgia’s Zugdidi region,” Georgian Interior Ministry official Shota Utiashvili said.
The fourth explosion went off under a police car when local officers were investigating the site after the initial blasts, though no one was injured, Utiashvili said.
Georgian television showed the bomb-damaged car and policemen standing nearby.
The fifth bomb went off at another village, also close to the de facto frontier with Abkhazia, with no injuries there either, Utiashvili said.
President Dmitry Medvedev urged Georgian President Mikheil Saakashvili on Saturday to refrain from “stoking tensions” in the separatist provinces of Abkhazia and South Ossetia.
Medvedev met Saakashvili in Astana, the capital of Kazakhstan, where both were attending observances of the capital’s 10th anniversary.
The Kremlin press service said Medvedev “called attention to the impermissibility of inflaming conditions in the region and underlined the necessity of continuing talks.”
Medvedev’s warning to Saakashvili followed a shootout in South Ossetia.
Ossetia blames Georgian forces for starting a shelling barrage on Friday. South Ossetia’s government said two South Ossetian policemen were killed and 11 more people were wounded in shelling of several towns by Georgian forces, Kommersant reported Saturday.
In addition to exchanging fire with South Ossetians, the Georgian military also seized control of a strategic commanding position near the local village of Sarabuk, Kommersant reported. 
From the heights, the Georgian troops could target most of South Ossetia, according to the daily. The paper said loss of the heights “is unacceptable” for the South Ossetians and they could launch an attack to recover it. 
Georgia said its troops fired because separatists attacked them.
Georgian Prime Minister Vladimir Gurgenidze said Saturday that “we must not rise to provocations,” RIA-Novosti reported.
Tbilisi accuses Moscow of seeking to annex the regions, where the majority of the population holds Russian passports. Moscow denies such plans and, in turn, accuses Tbilisi of seeking to restore control over the provinces by force.
Georgia, which seeks membership of NATO and the European Union, has said it wants to replace Russian peacekeepers currently stationed there with an international force.
The region where the latest explosions took place is under Georgian control but very close to the frontier with the breakaway region of Abkhazia.
A Russian commander in Abkhazia said the uniform of a member of the Georgian special forces was found wrapped around the remains of a shell that had been the source of the blasts, RIA-Novosti reported.
“In the place of the explosion, there remained the uniform,” deputy commander Alexander Novitsky said, the agency reported.
AP, Reuters, MT

TITLE: European Court Proceedings Over Dubrovka To Be Closed
AUTHOR: By Nabi Abdullaev
PUBLISHER: Staff Writer
TEXT: MOSCOW — Pending hearings at Europe’s top human rights court into the 2002 hostage crisis at Moscow’s Dubrovka theater will be closed to the public at the request of Russian authorities.
The European Court of Human Rights in Strasbourg has granted Russia’s request to hold the proceedings in the case, in which dozens of plaintiffs have accused Russia of violating their right to life, behind closed doors, a court spokeswoman said Friday.
“Still, any decision by the court will be made public,” she said.
Chechen terrorists seized the theater on Oct. 23, 2002, leading to a 56-hour siege that ended with the deaths of 129 hostages, many killed after a botched rescue operation in which special forces pumped a knockout gas into the building.
Eighty plaintiffs from Russia, Ukraine, the Netherlands and Kazakhstan appealed to the court in August 2003, claiming that their right to life was violated by Russian authorities’ handling of the standoff.
The plaintiffs, whose case was accepted by the court in December 2007, are seeking 50,000 euros each in damages from the government. The court has yet to set a date for the hearings.
On June 17, the court granted Russia’s request to hear the case behind closed doors, the court spokeswoman said, though she declined to specify Russia’s grounds for the petition.
The European Court of Human Rights can close the hearings to the media in cases relating to the national security of the states in question or to protect the privacy and interests of minors.
Igor Trunov, a lawyer for one group of plaintiffs, said the court’s decision was aimed at protecting the lives of law enforcement agents who participated in the operation to free the hostages, because Russian authorities have promised full disclosure on how they handled the crisis.
“I believe this ... played the decisive role for the court, because such disclosures might endanger the lives of these people,” Trunov said.
Russian authorities have also agreed to disclose the makeup of the knockout gas used in the storming of the theater by commandoes, Trunov said.
The court’s decision means that no media will be allowed to attend the hearings, and case participants will have to promise in writing not to disclose information about the proceedings, Trunov said.
The court will also not post case materials on its web site, as it does in other hearings, he said.
Trunov added that consideration of his clients’ complaints does not require disclosure of classified information.
The European Court of Human Rights this year has ordered Russia to pay 4.3 million euros ($6.7 million) to Russian citizens who filed complaints to the Strasbourg court for violations of human rights back home, Prosecutor General Yury Chaika said in May.
President Dmitry Medvedev has dismissed Veronika Milinchuk, Russia’s envoy to the Strasbourg court, the Kremlin press service said Thursday.

TITLE: Couple Charged With Murder 
Of  Norwegian
AUTHOR: By Yelena Shuster
PUBLISHER: Special to The St. Petersburg Times
TEXT: MOSCOW — A married couple has been charged with the murder of a Norwegian man and his Russian wife in the southern city of Astrakhan, a top regional investigator said Friday.
The suspects, a 27-year-old man and his 23-year-old wife, were friends of Norwegian engineer Staale Helseth and his wife, Svetlana, and stand accused of shooting the couple dead last week after partying with them at a local nightclub, said Alexei Bessonov, chief investigator at the Astrakhan regional branch of the Investigative Committee.
The suspects have been charged with premeditated murder and intent to rob, Bessonov said in a telephone interview. If convicted, they face up to life in prison.
Helseth, 40, and his wife Svetlana, 23, were discovered dead with gunshot wounds in their Astrakhan apartment Tuesday, though they were murdered a day earlier, investigators said.
Helseth was shot three times in the head and chest, while Svetlana was shot once in the head.
A Norwegian Embassy official on Friday called the crime “very sad and regrettable.” 
“We are helping all those associated with the family,” he said.

TITLE: Higher Education Fastest Growing Area of Bribery
AUTHOR: By Boris Kamchev
PUBLISHER: Special to The St. Petersburg Times
TEXT: A temporary residency permit under the counter without waiting for months in line costs from $4,500, and Russian citizenship can be obtained for the same figure. 
“I paid nine thousand dollars and I didn’t even stand in line for a single hour. You just go to the Federal Immigration Service office on Ligovsky Prospekt, give them your documents with the money, and they’ll hand over your new Russian passport after one week,” said a Ukrainian woman to her Tajik interlocutor.  They were preparing to enter the packed hall of the Federal Immigration Service for St. Petersburg’s Primorsky district for another visit to OVIR —  the district department of the Russian Ministry of Internal Affairs. 
Sky-high corruption in Russia’s jurisdictional and administrative apparatus has often been the focus of investigations and reports, but according to INDEM, a democracy-orientated research group headed by Georgy Satarov, who was an advisor to former president Boris Yeltsin, corruption and bribery in the Russian educational system are increasing rapidly year after year. 
A four-year study tracking corruption in Russian society carried out by INDEM between 2001 and 2005 revealed that corruption across the higher education sector accounts for around 21 percent of the total market for that period. Two in every three students and their parents were willing to resort to paying education officials, administrators and tutors to secure places, exam results or other benefits.
The study coincided with most of former president Vladimir Putin’s first term and the first year of his second term. The growth of corruption in this period has also been recorded by numerous other studies. President Dmitry Medvedev, a trained lawyer, has vowed to root out corruption and launch a campaign against what he termed “Russia’s legal nihilism.”  His most recent comment, made during the presentation of an anti-graft program to federal officials and lawmakers, is that corruption in Russia has become a “way of life.”
Researchers confirmed that in 2007, corruption in higher educational establishments moved up to second place, overtaking political parties and courts of law.
Approximately $520 million was paid in bribes by parents last year for their children to be accepted into one of the many universities across the country, according to recent research conducted by the Russian School of Economics and Public Opinion Foundation.
During the course of the year, parents paid out an additional $100 million to university professors to enable their offspring to pass regular tests and forthcoming exams “more easily.” 
Yefim Galicki, the author of the research, says the figures are “approximate and probably higher.” One quarter of all bribes are paid at Moscow universities. It is rare for senior lecturers to take bribes personally; usually it is done via an intermediary.
“Three thousand rubles ($130) is the price that a student may pay to pass a subject without showing up for any lectures during the semester,” said Sveta, a final-year student at the State University of Service and Economics in St. Petersburg on condition that her surname was not revealed for fear of recognition by her professors.  Research into corruption in Russian universities claims that inflation has boosted the size of bribes paid, which are now 150 percent higher than they were four years ago. The cost of passing a colloquium in Moscow is higher —  up to $200, depending on the complexity of the subject.
In some institutions, bribe-paying is more formalized. An administrator at the Moscow Aviation Institute said that a student who fails to pass an exam in the traditional way can pay 2,000 rubles and attend a couple of lessons in order to obtain a favorable mark. 
A Gallup survey in 2006 showed that one third of respondents considered it morally acceptable to pay a bribe in order to get their child admitted to college or university. Among Russians aged 15 to 24, 42 percent considered such bribes to be morally acceptable, according to the survey.  
“I was hoping that I could pay a much more smaller sum in advance for my daughter to study for a total of five years at Nizny Novgorod State University, but I found out that legally I have to pay almost the same price,” said Galina Andreyeva, a resident of the Primorsky district. 
She added that the total sum named by an intermediary was $8,600 for five years of graduate specialization studies with a guaranteed diploma. Legally, she has to pay $2,200 for each year of her daughter’s university course.
Many experts link Russia’s booming post-Soviet corruption to the rapid increase in state bureaucrats, who now number five million. 
Many senior bureaucrats are powerful figures, and a study last year by Olga Kryshtanovskaya, a leading Russian researcher into post-Soviet power elites, found that four out of five political leaders and state administrators in Russia are active or former members of the KGB or its successor security service, the FSB.

TITLE: Public Sports Centers Planned
AUTHOR: By Yevgeny Rozhkov
PUBLISHER: Special to The St. Petersburg Times
TEXT: Red Fox Company, one of the Russian leaders in the production and sale of sports equipment, is to create a swimming pool network in St. Petersburg’s bedroom communities. Basseiny (Swimming Pools) Ltd., Red Fox’s affiliate, has already been allocated eight land plots in the Frunzensky, Krasnogvardeysky and Primorsky districts for planning and will begin construction this fall.  The total cost of the program is estimated by experts at $120 to $150 million in borrowed and existing capital investments, and the project should be completed by 2010.
A company source told RBC Daily newspaper that the investor will construct at least 20 complexes, including three swimming pools, one of which will be a 25-meter pool with up to 12 lanes, as well as pools for children and for aqua aerobics.  
The amount of investment has not been disclosed by Red Fox’s representatives, but according to Advecs Real Estate Corporation CEO Vladimir Gavrilchuk, it may total $150 million. 
Red Fox should not expect to make a quick buck with this business project, market analysts say, emphasizing that the turnover of sports facilities is long-term and the profitability is normally less than average.   
“The payback in this sector will be reached in about ten years, with estimated profitability fluctuating at around eight percent,” said Andrei Tetysh, head of the board of directors at the Real Estate Research and Development Agency. 
St. Petersburg City Hall is now turning to sports facilities developers and even favoring some of the projects. According to statistics from City Hall’s sports committee, of ten companies that are currently involved in the construction of swimming pools in St. Petersburg, three are city contractors with state investments, and the other seven developers raise funds themselves.  Many land plots are now allocated on the condition that a sports facility is to be completed, says Anton Vikharev, chief consultant of the sales department at Maris Properties in association with CB Richard Ellis, who is positive on the trend. 
“Mid-range and economy-class sales spaces with low profits are in surplus now, and the owners will most likely turn to providing sports services.” 
In Vikharev’s opinion, Red Fox’s CEOs should consider several factors, including competition, pricing and demand in the target market to ensure the success of the swimming pool network project and minimize losses. “The concept should be 110 percent customer-oriented. Since the capital investments are considerable and the turnover is long-term, the company should leave no margin for error,” he said. 
Growing wealth is fuelling the demand of Russians to keep fit, but the sports infrastructure remains underdeveloped. According to Konstantin Zheludkov, deputy head of City Hall’s sports committee, there are 80 public and private swimming pools operating in St. Petersburg which meet just 25 percent of customer demand. “In three years, when most of the planned projects are complete, we intend to match European standards,” he said. 
Some experts suggest that the extra financial support from City Hall for sports projects may be due to more than concern about the health of the city’s residents. If the city were to launch a successful bid to host the Summer Olympics in the future as has been suggested, unprecedented sums of investment would pour in, which may explain the boom in construction of sports facilities.

TITLE: Vyborg Drilling Rigs Begun
PUBLISHER: Bloomberg
TEXT: VYBORG, Leningrad Oblast — Vyborg Shipyard on Friday began building the first of two drilling rigs for Gazprom’s Shtokman project in the Barents Sea as the country seeks to develop Arctic energy deposits. 
The first platform will be delivered in October 2010 and the second the following March, said Valery Levchenko, general director of Vyborg Shipyard. 
The Vyborg plant, on the Gulf of Finland, won a 59 billion-ruble ($2.5 billion) contract from Gazprom in August to build the two rigs. The shipyard may bid for another contract with Gazprom. 
“The company will announce a competition for two more drilling rigs in spring 2009 and announce the results within three months,” Yury Shamalov, general director of Gazprom shipping unit Gazflot, said Friday. 
Vyborg is building the rigs with Samsung Heavy Industries which won a $1 billion order in January to deliver the above-water sections for the two semi-submersible rigs.

TITLE: Exports Via Baltics To End by ‘15
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russia must stop exports of oil products and coal via its Baltic Sea neighbors by 2015, Interfax reported, citing Deputy Prime Minister Sergei Ivanov, who spoke at a maritime meeting in St. Petersburg on Saturday.
Russia currently exports about 80 percent of its oil products through ports in the Baltic states, the news service quoted Transportation Minister Igor Levitin as saying at the event.
The country will have enough capacity by 2015 to send all exports from its own terminals, Levitin said.
Estonia, Latvia and Lithuania, all members of the European Union, are connected to Russia by a network of communist-era pipelines. Russia is seeking to eliminate its reliance on former Soviet republics as transit countries for its oil and gas.

TITLE: In Brief
TEXT: <b>No Superjets This Year</b>
ZHUKOVSKY (Reuters)  — Russian plane maker Sukhoi expects to make the first deliveries of its Superjet 100 aircraft no earlier than the third quarter of 2009, a source close to Sukhoi told Reuters on Monday. 
“The certification testing of the plane is expected to finish in the third quarter of 2009. We will begin deliveries after that,” the source said. Russia’s flagship airline Aeroflot had expected delivery of 30 planes this year. 
Aeroflot has already said it would fill the temporary gap in its fleet by signing short-term leases on other planes until its Superjets are delivered. 

<b>Steelmakers in Probe</b>
MOSCOW (Bloomberg) — Russian steelmakers agreed to switch to long-term contracts with domestic consumers “as soon as possible” at a meeting Thursday with the Russian antitrust watchdog, Kommersant reported.
The contracts will be for at least a year, while prices will be adjusted quarterly, the newspaper reported, citing Alexei Ulyanov, head of industrial supervision at the Federal Antimonopoly Service.
The watchdog probed Russian steelmakers after pipe producers and oil companies complained metal prices rose about 82 percent since the start of the year, the newspaper said. It found steel prices climbed less than raw material costs, the newspaper said, citing Ulyanov.

<b>Tax Cuts Pass 3rd Stage</b>
MOSCOW (Bloomberg) — Russia’s lower house of parliament approved tax cuts for oil producers Friday, Interfax reported.
The State Duma passed changes to the tax code in the third and final reading, the Moscow-based news service said. The tax bill must pass a single vote in the upper house, the Federation Council, and be signed by President Dmitry Medvedev to become law.
The level where the oil-extraction tax kicks in will increase to $15 a barrel from $9 a barrel, according to the bill. The changes also include extending so-called tax holidays for new deposits in the far northern Timan-Pechora region, the Arctic peninsula of Yamal, the Caspian and Azov seas and the offshore continental shelf.

<b>Ukrainian IPOs Lead</b>
MOSCOW (Bloomberg) — Ukrainian companies raised $594 million dollars in initial public offerings of shares in the second quarter, outpacing their Russian counterparts for the first time, according to PBN, a consulting company.
Mironovskiy Hleboproduct, Ukraine’s biggest poultry producer, sold shares for $323 million in May and Cadogan Petroleum, a U.K. oil and natural gas producer that operates in Ukraine, raised a net $271 million in June. Russia’s GlobalTrans raised $449 million in April.

<b>Comstar Expands</b>
ST. PETERSBURG (Bloomberg) — Comstar United Telesystems, a telecommunications company owned by Russian billionaire Vladimir Yevtushenkov, acquired Ural Telephone Company as it expands in Russia’s regions.
Comstar bought Strategy, which owned all the shares in Yekaterinburg, Russia-based UTC, for 1.02 billion rubles ($43 million), the Moscow-based company said Monday in a statement distributed by Business Wire.
Ural Telephone Company provides telecommunications services in Yekaterinburg and the largest towns of the surrounding Sverdlovsk region, according to the statement.

TITLE: Flextronics, Elcoteq Contract Called Off
AUTHOR: By Yevgeny Rozhkov
PUBLISHER: Special to The St. Petersburg Times
TEXT: Flextronics International GmbH has exercised its right to terminate an agreement signed late February 2008 with Finland’s Elcoteq to purchase its subsidiary company and plant in St. Petersburg. According a statement on Elcoteq’s web site, the prospective purchaser, Flextronics, has paid Elcoteq non-refundable compensation of one million euros ($1,562,636) in accordance with the terms of the transaction agreement relating to non-completion, which is regarded by some experts as the result of red tape and failure by some Russian authorities to meet the deadlines.
Telecommunication manufacturer Elcoteq’s operations in Russia were established in 1998. In October 2005, a new plant was inaugurated in the southwest industrial zone of St. Petersburg with investment of 25 million euros ($39,085,000) and a production area of about 15,000 square meters, employing about 600 people in St. Petersburg, only to close in 2007 when the venture proved to be unsuccessful. 
Singapore’s Flextronics International GmbH intended to purchase the Elcoteq plant to start production of LCD televisions in 2009. The agreement, worth $31.5 million, was signed on February 25 this year.
Among the conditions set out in the agreement were that the purchaser would obtain approval of the transaction from the Russian anti-monopoly service, and that the purchaser would be able to end negotiations related to specific issues with the Russian customs authorities’ plans to lessen the duty paid on Flextronics’ imported commodities.
The deputy director of the foreign trade control department at Russia’s Ministry of Economic Development, Vitaly Gudin, said that preliminary paperwork was quickly completed and the necessary approvals obtained. “But leading television producers from the Kaliningrad Oblast, who manufacture 80 percent of all TV sets in the country, became concerned about the prospective competition and sent a letter to the ministry requesting “fair play and just conditions,” said Gudin.
One of the conditions of the planned purchase was reaching an agreement with Russian customs authorities on lowering duties for importing electronics parts, and when the monopoly and customs authorities failed to meet the deadline stipulated in the agreement, Flextronics decided to exercise its right to terminate the transaction and paid Elcoteq one million euros for non-completion. Flextronics vice-president, Misha Rosenberg, declined to comment on the losses and prospective manufacturing in St. Petersburg. 
Elcoteq is continuing with its plan to sell the St. Petersburg plant and is in talks with new parties. According to the company’s official statement, “Elcoteq is continuing negotiations with the Russian authorities concerning certain customs practices, and will reassess its long-term strategy in Russia based on these discussions. Demand for home communications-related electronics manufacturing services on the Russian market is promising, provided that the customs practices change.”  
St. Petersburg City Hall officials remain optimistic and are willing to allocate other land plots to Flextronics International if it is still interested. The first deputy head of City Hall’s Economics, Industry and Trade Department, Sergei Fiveisky, said, “It is up to the company whether or not to purchase the plant. Flextronics will probably go on negotiating with Elcoteq, the owner of the plot. But if they look for other opportunities, there are land plots and even industrial zones that are ready for use available in the city.”

TITLE: Court’s Comments Offend Deripaska
AUTHOR: By Nadia Popova
PUBLISHER: Staff Writer
TEXT: MOSCOW — Oleg Deripaska defended the Russian judiciary on Friday, saying he was “offended” by comments from a London High Court judge who ruled that possible dangers in Russia meant a $4 billion lawsuit against him could proceed in Britain. 
Justice Christopher Clarke said Thursday that Michael Cherney, a figure in 1990s privatizations of the Russian aluminum industry, could sue Deripaska in London because he made a “good arguable case” of the risks of holding the proceedings in Russia, such as “assassination, arrest on trumped-up charges, and lack of a fair trial.” 
Deripaska, Russia’s richest man, blasted the judge’s characterization of the Russian legal system and said he was “seeking leave to appeal,” according to a statement from the supervisory board of his investment company, Basic Element. 
“As a Russian citizen, Mr. Deripaska is offended by the pejorative claims made by the English court about the Russian judicial system,” the statement said.  
Another hearing will be held this month, Cherney spokeswoman Jennifer Morgan said in an e-mail. 
“The timing is not yet fixed for the case progressing, and it will depend on future procedural hearings. The next such hearing is expected later in July.” 
Cherney, born as Mikhail Chernoi, first filed the suit in November 2006. Now he claims that Deripaska owes him at least $4 billion for a 13.2 percent stake in United Company RusAl, the world’s biggest aluminum producer. 
He says he helped Deripaska’s business and opened doors for him into the murky world of the just-privatized aluminum industry in the 1990s. 
Deripaska said in a witness statement in April that Cherney had never been his business partner in the “commercial and legal sense of the word.” 
Cherney says he met Deripaska in 1993 and soon after helped him get a job as an executive at a smelter in Sayanogorsk, in the republic of Khakasia. Fearing violence, Cherney moved to Israel in 1994, where he still lives. 
Deripaska and Cherney each owned 50 percent in Siberian Aluminum, or SibAl, until 1998, when they both diminished their stakes to 40 percent. Anton Malevsky and Sergei Popov acquired 10 percent stakes, according to a copy of the court’s ruling. 
SibAl then merged with the aluminum assets of Sibneft, owned by Roman Abramovich, Boris Berezovsky and Badri Patarkatsishvili, to form Russian Aluminum, or RusAl. SibAl and Sibneft each took 50 percent stakes in the new company. Cherney said he was entitled to 20 percent of RusAl after the deal. 
After RusAl merged with coal miner SUAL and the alumina assets of Glencore in March 2007, Cherney claimed 13.2 percent in the resulting firm, United Company RusAl. That stake now amounts to $4.35 billion. 
At the heart of the conflict are several agreements made in a London hotel in 2001. 
According to the court documents, Deripaska says he agreed to pay Cherney $250 million up front for his stake in SibAl. Cherney says Deripaska was also obligated to hold 20 percent of RusAl’s shares for him and sell them in a two-year window from 2005 to 2007 on his behalf. Deripaska says the shares were entitled to Malevsky, not Cherney. 
Deripaska paid the $250 million, later saying Cherney and Malevsky were running a protection racket for his business. Malevsky died in 2001.

TITLE: BP to Sue AAR for $365 Mln Paid in Russian Back Taxes
PUBLISHER: Reuters
TEXT: MOSCOW — BP said Saturday that it was suing its partners in TNK-BP in London for 8.4 billion rubles ($365 million), money it believes should not have been paid out as back tax claims in Russia. 
The move comes on top of other problems at TNK-BP, a 50-50 joint venture whose owners, BP and four Russian billionaires, are locked in a dispute over strategy and management control. 
“It relates to our initial shareholder agreement signed in 2003, which said all back tax claims prior to the creation of the TNK-BP venture must be paid by the Russians,” said Vladimir Buyanov, BP’s Moscow-based spokesman. “It has nothing to do with the current dispute.” 
TNK-BP has had to pay more than $2 billion in back tax claims over the past few years, with some claims relating to the period prior to 2003, before the current venture was created. 
BP has already turned down a demand by the Russian shareholders — known as AAR after Mikhail Fridman and German Khan’s Alfa Bank, Len Blavatnik’s Access Industries and Viktor Vekselberg’s Renova Group — for TNK-BP chief executive Robert Dudley to resign. AAR has said it will seek other legal means to limit BP’s influence on the company. 
Mounting state pressure on the firm in recent months, including tax claims, office raids and the arrest of an employee on espionage charges, are signs that the Kremlin is pushing either BP or AAR to sell out to a state-controlled company, analysts say.

TITLE: New Rules Boost Sales of Breathalizers
AUTHOR: By Maria Ermakova
PUBLISHER: Bloomberg
TEXT: MOSCOW — Electronics giant Eldorado said Friday that sales of devices enabling users to test their blood’s alcohol content surged 28-fold after the government eased rules on drinking for drivers. 
Shoppers bought 20,000 of the testers over the past week, up from 700 a week in May, the Moscow-based company said in an e-mailed statement. 
The devices give a readout indicating the amount of alcohol in the blood based on an exhalation of breath. 
“We knew about the liberalization and prepared for it,” Alexei Serdyuchenko, head of purchasing at Eldorado, said in the statement. 
The retailer studied the market for alcohol testers and stocked up on the devices, he said. 
The driving rules are being loosened less than two months after Prime Minister Vladimir Putin called alcoholism and smoking a “disaster” for the country. 
More than two-fifths of deaths among working-age Russian men stem from excessive drinking of beer and wine and use of products including colognes as cheaper alcohol sources, medical journal The Lancet has reported. 
As of July 1, Russian drivers were free to drink alcoholic beverages about equal to a glass of wine, a half-liter bottle of beer or 50 grams of vodka for a man weighing about 80 kilograms, Eldorado spokesman Anton Panteleyev said. 
By changing the rules the government most likely aimed to bring them into line with international standards “rather than liberalize them,” said Viktor Dima, an analyst at Renaissance Capital. 
“It’s harsher penalties that are making people more responsible,” he added. 
Eldorado is selling five types of testers at prices starting from 499 rubles ($21.20) and plans to introduce four more models. 
Russia’s spirits market, the world’s third-largest after those of the United States and China, swelled to $18.2 billion last year, according to research company Euromonitor International.

TITLE: OGK-1 CEO Hints at New Bid
PUBLISHER: Bloomberg
TEXT: MOSCOW — OGK-1 Chief Executive Officer Vladimir Khlebnikov said Dubai World and its partner may face competition for the Russian power generator as another group of investors is preparing a bid.
Dubai World and Moscow-based Roskommunenergo have until Oct. 1 to structure the purchase of a controlling stake, Khlebnikov said Monday at a company presentation in Moscow. The Dubai state-owned investment group sent OGK-1 a letter stating plans to start “serious” due diligence soon, he said.
“A Russian investor and foreign partner are looking at us very seriously, although they're not ready to make an offer at this point,” Khlebnikov said, without elaborating.
Roskommunenergo, an energy trader chaired by Igor Kozhin, last month offered $5.3 billion for about 75 percent of OGK-1.

TITLE: No Deadline Set for EU-Russia Partnership
PUBLISHER: Reuters
TEXT: BRUSSELS — The European Union and Russia will set no deadline for agreeing on a wide-ranging partnership pact, negotiators said Friday, despite pressure from countries such as Germany for a quick deal. 
Speaking after the first negotiating round in Brussels, the two sides said they had agreed on what areas should be covered by the new pact, due to replace an agreement signed in 1997. 
But they left open how long the talks would take, and what structure any deal encompassing trade, energy cooperation, joint justice initiatives and cultural dialogue would have. 
“There is nothing more harmful for any negotiating process than a deadline,” Russia’s envoy to the EU, Vladimir Chizhov, said at a news conference with his EU counterpart, EU Commission external relations chief Eneko Landaburu. 
Landaburu said he shared Chizhov’s assessment. 
German Foreign Minister Frank-Walter Steinmeier said in May that he hoped the new partnership agreement would be negotiated “within a clear time frame,” insisting Russia needed to provide reliable business conditions for foreign investors. 
Russian and EU leaders gave the green light for the negotiations to go ahead at a summit in Khanty-Mansiisk last month. The talks were already delayed by 18 months by wrangling within the EU over the negotiating mandate. 
The shape of any future agreement remains unclear. Chizhov reaffirmed Russia’s preference for drafting a concise, legally binding framework with separate sectoral pacts, but Landaburu said the EU did not see the question as a priority. 
“What is important is to have something which in substance will be better than the Partnership and Cooperation Agreement which we have so far. ... At the end of the day we will see whether it is short or long, this is not a priority,” Landaburu said. 
He said he would next meet Chizhov in September.

TITLE: Medvedev Talks Pipelines in Central Asia
PUBLISHER: Combined Reports
TEXT: MOSCOW — President Dmitry Medvedev wound up a three-state energy tour with talks in Kazakhstan on Saturday and Sunday, meeting with several regional leaders to consolidate his country’s monopoly on transiting Central Asian gas. 
The trip to Astana, which was celebrating its 10th anniversary as the Kazakh capital and the 68th birthday of President Nursultan Nazarbayev on Sunday, came after Medvedev visited Turkmenistan and Azerbaijan to seek additional gas supplies for Gazprom, which he recently left as chairman. 
Medvedev and Nazarbayev on Sunday discussed the construction of a pipeline for Caspian Sea gas through Turkmenistan and Kazakhstan and increasing the capacity of an existing line, according to a statement on the Kremlin web site. They also discussed cooperation in “nuclear energy, peaceful projects in space, and matters of CIS integration,” the statement said. 
Medvedev also held talks Sunday in Astana with several visiting dignitaries, including Turkish President Abdullah Gul and Jordan’s King Abdullah II. 
The talks followed a similar course to those held Friday in the Turkmen capital of Ashgabat. Speaking after talks with Turkmen President Gurbanguly Berdymukhammedov, Medvedev underlined the need to quickly build the pipeline, which would consolidate Moscow’s hold on energy transit from the region. 
Russia has sought to undercut the Western push for the region’s rich energy resources by buying most of its natural gas and selling it on to Europe. 
Medvedev and Berdymukhammedov also issued a joint statement underlining the importance of the new pipeline along the Caspian. An agreement, Medvedev said, would be implemented “in the near future” after Russia, Kazakhstan and Turkmenistan complete the necessary formalities. 
The Kremlin reached a deal with Kazakhstan and Turkmenistan in December to build a new gas line along the Caspian Sea coast to Russia. 
But Turkmenistan has irritated Russia by hinting that it wants to take part in the rival Nabucco pipeline to deliver gas to Europe while bypassing Russia. 
But the thorny issue did not crop up in Friday’s talks. “The word ‘Nabucco’ was not mentioned in the talks,” a source in the Russian delegation said. 
Speaking after his meeting with Medvedev, Berdymukhammedov said his country was committed to its gas-delivery agreement with Russia through 2025 but gave no details. Turkmenistan sells about 50 billion cubic meters of gas to Gazprom annually. Gazprom CEO Alexei Miller said Russia planned to increase its purchases of Turkmen gas. 
“It was a candid, constructive and friendly conversation. ... We did not aim to sign any concrete deals today,” Medvedev’s chief foreign policy adviser, Sergei Prikhodko, told reporters. 
AP, Reuters, SPT

TITLE: Bankers Talk About Their Fears
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Amid a worldwide banking crunch, Russian bankers and their counterparts abroad view liquidity shortage as their biggest risk, according to a new report by PricewaterhouseCoopers. 
But the similarities stop there, with the Russians ranking other main risks differently from the rest of the world. 
Russian bankers are more concerned about equity risks and interest rate risks than their foreign colleagues, who ranked credit risks and the widening of the credit spread higher, according to the report, which surveyed 376 banks, including 25 medium-size and large banks in Russia. 
“In general, Russian banks emphasized market risks and were less concerned about the quality of risk management and regulation,” said Chris Barrett, head of PwC’s financial services department for Central and Eastern Europe. 
Russians’ increasing appetite for loans, and a decrease in deposits, make banks increasingly dependent on capital markets to fill their portfolios, while the interest rate is expected to change as the Central Bank grapples with rising inflation, the report said. 
The country’s bankers also view currency exchange risks as more important because they have large shares in foreign currencies, rather than rubles, it said.

TITLE: Will Stock Exchange 
Set Example?
AUTHOR: By Anna Shcherbakova
TEXT: The new 67-meter tall building of the St. Petersburg Stock Exchange seems to be jinxed. In the middle of June, just before it opened, the city’s town-planning council slammed the project for spoiling one of the best views in the city. Its height is 63.4 meters, in line with an agreement made with City Hall in 2002, while the latest legislation limits construction in this part of the city to a height of 48 meters.
The town-planning council is known for its critical remarks on modern art, but has never before discussed a building that has already been built. Furthermore, its rulings have no legal power and are more like recommendations. For instance, it did not approve the project for the 396-meter tall Gazprom Tower, but it did not make any difference. 
It should be said, however, that the council has never been as insistent as this time. The week before last it discussed four ways of reducing the height of the stock exchange building by 3.68 meters to save the historic view of Vasilievsky Island. Architects remained dissatisfied with the options proposed by the contractor of the Stock Exchange, which has estimated its losses at several million dollars, but the decision has been made —  the excessive part of the building should be terminated. 
There have been cases when completed buildings have been reduced in height, in both St. Petersburg and Moscow, though construction companies are not eager to publish such incidents. This time will be different, as the city and the rest of the world look set to watch the long saga of the stock exchange unfold. 
In the wake of criticism over the stock exchange, St. Petersburg Governor Valentina Matviyenko has admitted several tall buildings in different areas of the city to be  “architectural mistakes” and has asked officials to check whether they were built against the permission of the authorities, and reduce their height if they lack the necessary documentation. 
Development and construction are some of the most profitable and fast-growing industries in St. Petersburg. New buildings, some of them extremely ugly, are shooting up everywhere like mushrooms after the rain. The shortage of land is particularly acute in the districts of the historic center. Entrepreneurs will always find a way to make new buildings a bit higher and wider than permitted, so many of them have cause for concern in light of Matviyenko’s promise. 
At the same time, many people who are alarmed by the destruction of the old St. Petersburg were encouraged. For the first time, the political movement against this nightmare has been expressed. 
What prompted Matviyenko to speak out in this manner? According to unconfirmed rumors, one of the state’s top officials said he was shocked by the new image of his hometown. If that is true, builders will have long-term problems and the city will keep a lot of its historic buildings and landscapes. 
Another version was offered by the president of the stock exchange, who said he is suffering as a result of the competition to accommodate the newly-established exchange, which received another proposal after it had already agreed to occupy the new building. 
The ruling on the other buildings seems to suggest that the case of the ill-fated stock exchange is ultimately a one-off incident, rather than the change in City Hall policy for which many locals had hoped. 

Anna Shcherbakova is the St. Petersburg bureau head of business daily Vedomosti.

TITLE: Greatest Investor Risk
AUTHOR: By James Beadle
TEXT: Investor sentiment was rather mixed as we entered 2008. Bullish hopes lingered in developed markets, based on the naive assumption that 2007 credit woes would magically evaporate on New Year’s Day, and emerging markets danced to the dream of decoupling. Optimism is a basic human characteristic, but on this occasion it didn’t last long, as the United States traded down throughout early January and Russia soon capitulated to global risk aversion. 
Down by 13.5 percent, the RTS had its worst January since 1998, although the selling was mostly a catch-up trade, closing the gap on developed markets that had been sliding more protractedly. Such a negative start set a volatile tone for the entire first half of the year. 
The first six months of this year have been a testing time for all investors. Developed markets are today sending more shivers of risk aversion around the globe, primarily as investors belatedly grasp that there is no quick fix to the credit crisis and that the economic outlook is troubled. Earnings expectations are being rapidly downgraded, and equities prices are adjusting accordingly. 
Meanwhile, inflation has returned globally with a vengeance. If a recession doesn’t kill U.S. earnings expectations, inflation certainly will. It is an underappreciated fact that inflation causes far more harm to equities than negative growth in gross domestic product. 
Nonetheless, Russia can be pleased with its overall economic performance during the first two quarters of 2008. Soaring commodity prices have again sustained the trade balance, despite the continuing growth of imports, and economic expansion has continued. Anemic equity market returns dramatically understate the relative safe haven that Russia has proved to be. Yet, as the wheels of globalization continue turning, Russia’s fate becomes ever more complicated. Few doubted that the economy would withstand the U.S. credit crisis, but inflation is a far greater threat, one that is expanding by the day. 
Putting aside acute episodes of the 1990s, inflation is a new phenomenon in post-Soviet Russia. Economic capacity plummeted as the Soviet Union collapsed, a depressing reality that facilitated years of rapid growth even as inflation declined. By now, though, the easy gains are over, evidenced by the sudden rebound of inflation in the last year. The problem has accelerated in 2008. Today, with the consumer price index up more than 15 percent on a 12-month basis, the population is already suffering. This is the clearest risk to all Russia investors. 
Russia’s inflation is a function of global demand, local demand and general economic inefficiency. Even if prices ease back globally —  a somewhat optimistic outlook —  the country’s problem will not likely abate. The Central Bank is tackling the problem, but it is acting gradually. 
What tactics can we expect to see in the inflation battle over the second half of the year? We can expect the ruble to continue strengthening on a relative basis, but this does not mean one should blindly buy rubles. The Central Bank is carefully using market fluctuations to contain speculation and strengthening the rate at opportunistic junctures so as not to upset the industrial lobby. Other monetary tools include mandatory reserve levels and interest rates. 
The tendency to reduce the money supply is well-established and should reap inflationary rewards toward the end of the year. But the trend is clear —  Russia now faces a trade-off between growth and inflation. With this in mind, successful strategies for the second half of the year will be those that align themselves with an inflationary reality. 
The rise of inflation and commodities makes investing a risky proposition. But it also reduces the need to change tactics substantially from winning first-half formulas. By midyear, investors are usually thinking about taking profits and switching to newly rising sectors, but in the current market, continuing to hold looks like the safest bet. 
Inflation favors hard assets. The further up the value chain you can move, the better. Buy agriculture over food distributors and raw materials over products. 
Russia’s hydrocarbon sector is the nation’s motor, and it is in danger of stalling. Further tax changes can be expected to stimulate hydrocarbon extraction, but the country needs to reverse declining output to sustain growth. When oil prices do plateau or decline, it will need to stimulate further output to achieve the same objective. 
Which stocks, then, are less favorable? The banking sector has been hit hard during the credit crisis for no good reason. Yet, it now faces the headwind of inflation, especially if liquidity continues to decline. The same tendencies weigh against consumer stocks, which will face margin pressures from rising costs and slowing real-income growth. The tail end of the value chain is now the least attractive. 
Inflation is the greatest risk that Russia’s economy has faced for many years, but predominantly it is a consequence of the country’s successful development. Opportunities always accompany risks, and so for the remainder of the year investors will be focusing on Russia’s fundamental strengths. 

James Beadle is a portfolio manager for Pilgrim Asset Management.

TITLE: It’s Time To Float The Ruble
AUTHOR: By Dieter Wermuth
TEXT: It is often argued that Russia should quote its oil price in rubles because it would reduce oil companies’ volatility of revenues and thus facilitate investment planning. Perhaps it would also strengthen the ruble exchange rate and promote its status as an international transaction currency. 
This is a misconception. It is more or less irrelevant whether the oil price is denominated in dollars, rubles, euros or, for instance, the International Monetary Fund’s Special Drawing Rights, or SDRs. 
Will the ruble appreciate? As we all know, it would actually appreciate quite significantly if the country’s Central Bank stopped buying almost all the dollars offered to it. The surplus in Russia’s current account, which mostly reflects the trade surplus, plus private capital inflows create a strong demand for rubles by foreigners. This would normally make the ruble more expensive vis-a-vis the dollar, euro and yen. 
As it is, the Central Bank sells rubles at more or less fixed prices against these currencies. This drives up the country’s foreign exchange reserves —  presently at $550 billion —  and also increases ruble deposits at banks. This is one of the main reasons why inflation has been accelerating to more than 15 percent on an annual basis. 
The ruble is undervalued at this point. To restrain inflation, the Central Bank would probably love to stop creating all these ruble deposits and let the free market decide which ruble/dollar or ruble/euro exchange rate is appropriate. Since the appreciation would be in the order of 20 percent, it is obvious that imports would become correspondingly cheaper and make Russian products outside of commodities —  which have world market prices —  uncompetitive. 
But markets cannot be kept down forever. The steep increase of inflation —  and wages —  makes Russian products less and less competitive in any case, regardless of all of the attempts to manipulate or manage the exchange rate. The result is almost the same as letting the ruble float, but it is more expensive because there are economic costs of letting inflation rip. The costs are seen mainly in an unfair income distribution and an inefficient allocation of resources since too much spending is aimed at hedging against inflation —  and therefore wasted. 
We are approaching the day when the government will be forced to stop intervening. After all, Russia’s goal is to make the ruble a regional reserve currency. Only currencies that are not pegged to some other currency (or currencies) qualify for such a status. My guess is that the ruble has a 20 percent upside potential against the dollar. 
The timing of the ruble appreciation is hard to predict. If it does not take place within the next two years, inflation will accelerate even more and thus become a genuine problem for policy makers. It would lead to social unrest or a serious decline of the administration’s popularity. 
The main downside risks for the ruble exchange rate are a steep decline of export prices and, at the same time, an ongoing import boom. Both would wipe out, or reduce significantly, the country’s balance on current account surplus. This, in turn, would reduce the demand for rubles and lead to its depreciation. 
For now, these risks look remote. The current account surplus so far this year has been in the order of 8.5 percent of gross national product and rising. In relative as well as in absolute terms, it is one of the world’s largest. 

Dieter Wermuth is an economist and partner with Wermuth Asset Management in Frankfurt.

TITLE: PR Not Enough For Russia’s Image
AUTHOR: By Richard Lourie
TEXT: Some countries have better reputations than they deserve. The Netherlands, for example, emerged from World War II with a nobler image than they warranted. In Poland, however, just the opposite held true. Russia today also seems to be a place whose image is worse than the reality. 
Part of the problem, as always in Russia, is the weight of the past. The country can’t seem to shake off the legacy of its brutality and injustice in the 19th and 20th centuries, which can be summed up in two words — pogrom and Gulag. And so it didn’t help that Vladimir Putin’s presidency was littered with corpses in Shakespearean profusion. Spin and hype can’t do much for that. 
But what can turn things around are dramatic acts of enlightened clemency. It is an ideal time to free former Yukos CEO Mikhail Khodorkovsky. Having served half his sentence, he has the right to appeal for early release. Releasing him would win great good will for the new presidency of Dmitry Medvedev without necessarily reflecting badly on his predecessor. On the other hand, piling more years onto Khodorkovsky’s sentence will only make Medvedev look weak and malicious, at best. 
In a smaller gesture of enlightened largesse, the government waived the visa requirements for British fans attending a football match in Moscow in late May; a valid ticket and a passport were enough to get through the border. After something of a false start, a similar quick-footed intelligence seems to be behind the recent relaxation in issuing visas to BP employees, conveniently timed on the eve of the Group of Eight meeting in Japan. Smart moves win respect. 
With some time lag, actual changes in reality bring changes in perception. Not that long ago, Moscow was known as a grim and dreary city where dumpy women stood in long lines for potatoes that would make them even dumpier. Now its image is of a rich and flashy city, resplendent with beauties and billionaires. What changed? Moscow itself.
New leaders and new policies change images. The European leaders who met with Medvedev lately sensed in him someone who has moved past the humiliations of the 1990s and the aggressive posturings it engendered in the second half of Putin’s administration. Let’s hope that Medvedev’s recent America-bashing was intended mostly for domestic consumption, to prove he is a tough leader able to stand up to Washington. 
For foreign business people, the image of Russia is a corrupt society. Medvedev’s idea to use the Internet to fight corruption is, at first glance anyway, inspiring. Still, the country’s appetite for graft is age-old and enormous, as Medvedev has acknowledged many times. Hackers and con artists are no doubt already busy figuring out how to siphon money out of any new online anti-corruption campaign. 
Culture can improve image. A film about the Battle of Kursk — the largest tank battle in history fought by Nazi Germany and Soviet Russia in July 1943 — could remind the United States that it no more won World War II single-handedly than it did the Cold War. And it could make money.
A feature length animation based on Russian fairy tales using the Art Nouveau style of the great illustrator Ivan Bilibin could bring Russian culture to a new generation of children worldwide. And it could make money.
On the lighter side, I once took part in a blind taste test of various vodkas. Interestingly, Stolichnaya Krystal was the unanimous winner, proving that quality will out. Maybe some sort of Vodka Olympics could be organized with Stoli, Belvedere and Ketel competing in various capitals. And it could make money.
In the end, the real problem is that post-Soviet Russia still isn’t sure what it wants to be. For that reason no obvious adjective like tsarist or Soviet has yet been affixed to its name. Russia is ambivalent about its own past and about which elements of the 21st-century mix it wants and in what proportion. When Russia’s self-image is in sharper focus, it will be easier to burnish its image in the world. 

Richard Lourie is the author of “A Hatred For Tulips” and “Sakharov: A Biography.”

TITLE: Less Is More
AUTHOR: By Jim Hoagland
TEXT: John McCain would kick Russia out of the Group of Eight economic powers, but this is no time to think small. The G8 leaders themselves should declare surrender and disband their high-profile huddle on the state of the world.
Think of it as global shock therapy. Using the G8 summit on Hokkaido Island, which starts on Monday, to abandon the organization’s bloated and unwieldy format would be a first step toward acknowledging and rethinking — at the highest level — these important international realities:
• The world that these leaders and their predecessors have promised for the past three decades is not today’s world of energy and food-price shocks, global financial irresponsibility, menacing climate change and terrorist networks seeking weapons of mass destruction. The G8 leaders — most of them disdained by their publics in these hard times — have failed, and they should accept responsibility.
• The illusion of control that they seek to impose through this summit has become self-defeating. Increasingly it appears to people in nation after nation that no one is in control of events and institutions at the global level. Asserting otherwise without providing tangible relief simply increases popular cynicism and anger.
“This is a crisis in legitimacy and world leadership,” a senior French official told me a few weeks ago in Paris. When I countered that the world had similarly undergone a lengthy period of anxiety and uncertainly in the 1970s and recovered, he responded:
“The problems then were the problems of the rich, who worried about their oil supplies and financial imbalances. Because of globalization, today everything is connected and hits everyone at the same moment. Price surges in oil and food, which are connected, exacerbate the subprime financial mess. Iran uses its oil revenue to pursue a nuclear weapon and to direct revolutionary warfare in Lebanon and Gaza. Governments are overwhelmed.”
Even so, my Swiftian proposal to blow up the G8 and start over will find no favor with Japanese Prime Minister Yasuo Fukuda, the summit host. Hoping to buy time to improve his political fortunes at home, he wants to persuade Britain, Canada, France, Germany, Italy, Russia and the United States to accept a new climate-change agreement with a Japanese imprimatur.
The prime minister also told me in Tokyo in May that he wants the summit to act to stem “the precipitous rise in commodity prices ... which today do not reflect the real world economy” because they involve far too much “financial speculation.” But he offered no specific remedies.
From Fukuda’s standpoint, the summit’s most important moment could be its closing “outreach” session when the eight meet with China and other invited developing countries to discuss economic growth and global warming. Fukuda will spotlight this gathering as a step in what he calls “the internationalization of China” and Japan’s guiding role in that process. Getting China and India to sign up to cut carbon emissions might also spur Japanese exports of energy-efficient technology.
The self-interest of host nations and their penchant to outshine each other is enough to keep this bunch in business. I can claim no headway with Italy, the next G8 host nation, either. Foreign Minister Franco Frattini proudly told me in Venice last month that Italy has already added Egypt to the list of core “outreach” countries for next year’s gathering.
The G8 long ago proved that bigger is not always better. The intimate gathering of just six leaders that French President Valery Giscard d’Estaing convoked in 1975 has been transmogrified into a giant public relations exercise with little real point. And the admission of Russia in 1998 — despite its lack of qualifications as an established democratic industrial power — further diluted the process.
Predictable suggestions that this body be expanded to a G13 or a G20 go in the absolute wrong direction. More expansion will destroy any opportunity for informal, effective consultation by world leaders. They will be talking for the press releases, not for each other. Such proposals should be put forward only as cover for a more sensible proposition. The United States, the European Union and Japan should quietly form a G3 that would operate in the shadows of the much larger talk shop. A G3 would get back to Giscard’s original idea.
It would also get McCain off the hook for his unworkable idea to exclude just Russia. And it would get us back to the wisdom of less being more, an idea that sadly went out of vogue in the we-can-have-it-all euphoria of globalization.

James Hoagland is a columnist for The Washington Post, where this comment appeared.

TITLE: Ending Prison Abuse, Brutality
TEXT: Eight employees at a Chelyabinsk region prison have been arrested in connection with a riot at the institution in May that ultimately led to the deaths of four inmates.
The employees, whose arrests were authorized by a local court, were on duty when the riot broke out at Prison No. 1 in the city of Kopeisk on May 31, regional Investigative Committee official Yelena Kalinina said last week, Interfax reported.
Prosecutors said that four inmates had attacked employees with razors and makeshift blades, and that they were ultimately subdued by prison guards with rubber truncheons.
A doctor examined the four shortly after the beatings and said that none of the inmates’ lives was in danger due to the injuries, Gazeta.ru reported.
The inmates, who were then placed in separate cells, all died later that same day, the regional Investigative Committee said.
The arrested guards’ colleagues pleaded with the Investigative Committee that none of the suspects was a flight risk and that there was no need to hold them. Interestingly, the initial reaction of the Federal Prison Service leadership to the events surrounding the riots and the deaths of the four prisoners was to defend the guards, and their immediate commanders even considered rewarding them with apartments, national press reported.
In contrast, local human rights activists welcomed the arrest, noting that they had long received complaints from inmates at Prison No.1 about brutality on the part of the guards.
The regional Investigative Committee should take this investigation seriously and prosecute the guards if evidence is found of wrongdoing. It should also investigate the doctor, who somehow deemed the inmates fit to remain in cells. With no access to medical treatment, the prisoners died hours later.
This incident is one of the few cases in which so many prison guards have been charged with brutality. Rather than maintaining corporate solidarity by rewarding excessive use of force against inmates, those in charge of the prison service would do well to enhance oversight of the conduct of their personnel.
The same goes for law-enforcement agencies whose personnel use force illegally against suspects and witnesses. In one case reported by the national media last year, police officers even beat up a doctor who refused to agree that a suspect they had assaulted was fit to remain in his cell. 
Unless such horrendous abuses stop, Russia will never become the rule-based state of law-abiding citizens about which new President Dmitry Medvedev constantly speaks, no matter how many times he repeats this mantra.

This comment first appeared in The Moscow Times.

TITLE: Dozens Killed in Kabul Car Bomb Attack
PUBLISHER: Reuters
TEXT: KABUL — A Taliban suicide car bomb hit the Indian Embassy in Kabul on Monday, killing 41 people and wounding 141, in an attack Afghan authorities said was coordinated with foreign agents in the region, a likely reference to Pakistan.
Afghanistan has accused Pakistani agents of being behind a number of attacks in recent weeks and Afghan President Hamid Karzai last month threatened to send troops across the border to attack militants there if Pakistan does not take action.
The bomber rammed his car into the embassy just as two diplomatic vehicles were entering the compound.
“I saw wounded and dead people everywhere on the road,” said Danish Karokhil, the head of the independent Pajhwok news agency, whose offices are close by.
“The target was the diplomatic vehicles. They were trying to get inside the embassy when the suicide car bomber attacked them,” he said.
India’s military attache was killed, the Indian Defense Ministry said. Two vehicles were destroyed, the embassy gates blown off and buildings inside the compound were badly damaged by the force of the blast, an Indian diplomat said.
“The Interior Ministry believes this attack was carried out in coordination and consultation with an active intelligence service in the region,” the Afghan Interior Ministry said.
A Taliban spokesman claimed responsibility for the attack.
The Islamist militia have vowed to step up their campaign of suicide bombings this year, demonstrating that despite the increase in foreign troops in Afghanistan and more trained Afghan forces on patrol, the militants are far from defeated.
The Health Ministry said 28 people were killed and 141 wounded, but a senior police official said the death toll was 41.
“More than 10 people are in a very critical condition. At least one woman and one baby were killed. At least three babies were wounded,” said Health Ministry spokesman Abdullah Fahim.

INDIA CONDEMNS
India has close relations with the Afghan government and is funding a number of large infrastructure projects, but had no diplomatic ties to the Taliban when they ruled the country which was backed by its rival Pakistan.
“The government of India strongly condemns this cowardly terrorist attack on its diplomatic mission in Afghanistan. Such acts of terror will not deter us from fulfilling our commitments to the government and people of Afghanistan,” the Indian Foreign Ministry said in a statement.
Pakistan officially dropped support for the Taliban after intense U.S. pressure in the wake of the September 11, 2001 attacks, ordered by al Qaeda leaders hosted by the Taliban.
Pakistan denies Afghan accusations it is still secretly backing the Taliban and strongly condemned Monday’s attack.
Security guards, a line of people waiting for visas and those shopping at a nearby market were likely the main victims.
Two women were among five dead at Kabul’s Emergency Hospital. One of the dead women had a baby with her at the time of the blast, the woman’s sister said. The baby is now missing.
Grey smoke and dust poured from the scene of the blast. Police cordoned off the area as ambulance crews raced the wounded to hospital. Several U.S. soldiers were also at the scene.
U.S. troops later shot dead the driver of another car and wounded a passenger, witnesses said.

TITLE: Tour De France Off  To Competitive Start
PUBLISHER: The Associated Press
TEXT: SAINT-BRIEUC, France — Alejandro Valverde is getting rather fond of the yellow jersey, although his rivals are waiting patiently for the right moment to take it off the Spaniard’s shoulders.
The 28-year-old has thrown down an early marker for Tour victory, and with defending champion Alberto Contador not competing in the three-week race — his Astana team is banned — Valverde could prove another tough Spaniard to stop.
“It was an incredible thing to spend today with the yellow jersey on my shoulders,” Valverde said after Sunday’s second stage. “Every time that we passed through a village, people recognized me and shouted my name.”
Having won Saturday’s first stage with a dashing sprint, Valverde was content to roll along during the second stage — won by Norwegian Thor Hushovd — and will likely do the same in Monday’s flat third stage.
“It’s the dream scenario for him,” veteran British rider David Millar said. “It kind up screws up [race organizer] ASO’s plan of making the race interesting. He’s just shut down the race completely.”
Making a big early dent in his rivals’ confidence was a hallmark of seven-time winner Lance Armstrong — who three years ago earmarked Valverde as a future Tour winner after conceding a rare loss to him in a thrilling mountaintop finish.
As Armstrong did during his unbroken winning run from 1999-2005, Valverde will need a strong team to fend off his challengers — the most dangerous of those being Australia’s Cadel Evans.
Evans, runner-up last year to Contador, is only 1 second behind Valverde. Both will look to stay safe in stage 3 to save energy for Tuesday’s time trial, which favors Evans as the quicker, bulkier rider.
“If Cadel gets the jersey on he’s going to need good guys [to support him],” said Millar.
Evans knows this and has shored up his Silence-Lotto team considerably after being left isolated in last year’s tougher climbs, where he was unable to fend off attacks from Contador and Michael Rasmussen.
Perhaps crucially, he has added a rider who knows what it takes to help the leader win: Armstrong’s former teammate at U.S. Postal and Discovery Channel, Yaroslav Popovych.
“Popo will come in handy,” Millar said.
Former mountain ace Richard Virenque thinks Evans can win providing he rides aggressively, as Armstrong did.
“He will be my favorite for the Tour,” said Virenque, who has won the King of the Mountains jersey — awarded to the Tour’s best climber — a record seven times. “He has changed his style over the past two years.
“His way of riding has changed from before, when he did not dare to follow the likes of Lance Armstrong and did not take initiative,” Virenque added. “I have noticed this year that he has started to attack more.”
Hushovd won the 102.2-mile ride Sunday from Auray to Saint-Brieuc with a well-timed sprint as heavy winds and swirling rain made life difficult, with several riders showing patched-up knees and elbows after crashing Saturday.
These treacherous conditions, and the need to rest for Tuesday, were key factors in Valverde’s decision not to try for another stage win and risk a fall that could jeopardize his whole race.
“This was really a stage for the pure sprinters,” said Valverde, who will need to store all the spare energy he can for the grueling mountain stages later on in the Pyrenees and Alps that follow.
His Caisse d’Epargne teammate Oscar Pereiro knows what it takes to sustain a challenge — he won the Tour two years ago — and his experience will be as crucial to Valverde as Popovych’s time spent with Armstrong is to Evans.
“At the moment, this team is very, very strong, but the Tour is three weeks long and it’s very hard,” said Pereiro, who won the 2006 Tour when Floyd Landis was stripped of the title after testing positive for synthetic testosterone.
Hushovd is not in contention for the overall title, but could challenge again for the green jersey, especially as one of his main rivals — Australia’s Robbie McEwen — has orders to drop his own personal goals and help Evans to victory.
With the final dash looming, Hushovd hugged the wheel of his teammate Mark Renshaw of Australia, who then peeled away to let the muscular Norwegian cross alone for his sixth career Tour stage win.
“I knew this was a sprint that played to my strengths, but it was difficult with the wind and a little hill at the end,” said Hushovd.

TITLE: Madonna ‘Not To  Divorce’
PUBLISHER: Reuters
TEXT: NEW YORK — Pop star Madonna denied having an affair with Yankee slugger Alex Rodriguez and said in a statement to People magazine on Sunday she is not planning to get divorced from her British husband Guy Ritchie.
Rumors that the London-based couple planned to split have been circulating for months, fueled most recently by reports that she had hired a lawyer to divorce filmmaker Ritchie.
“My husband and I are not planning on getting a divorce,” the singer said in a statement to People.
“I brought my kids to a Yankee game. I am not romantically involved in any way with Alex Rodriguez. I have nothing to do with the state of his marriage or what spiritual path he may choose to study,” she said.
People magazine reported on Sunday that Rodriguez’s wife, Cynthia, had left the Yankee baseball star over the alleged affair with Madonna, citing sources close to the situation.
The speculation about Madonna’s marriage reached a fever pitch in the last two weeks in London, where the Daily Mirror newspaper dedicated two front pages to the plight of the couple’s relationship.
Madonna brushed off the rumors as media fabrication.
“I have learned over the years not to take accusations and the many false reports about me very seriously,” she told People.

TITLE: Hamilton Wins 1st British Grand Prix
AUTHOR: By Alan Baldwin
PUBLISHER: Reuters
TEXT: SILVERSTONE, England — McLaren’s Lewis Hamilton blew away his rivals to win a wet and chaotic British Grand Prix on Sunday and storm back to the top of the Formula One standings.
Hamilton, the first British winner at Silverstone since David Coulthard in 2000, was utterly dominant as he lapped all but second-placed Nick Heidfeld in a BMW Sauber and the Honda of Brazilian Rubens Barrichello.
The 23-year-old’s third win of the season put him level on 48 points with Ferrari’s Brazilian Felipe Massa, who was 13th and last after spinning five times on the sodden track, and world champion Kimi Raikkonen.
To the delight of the home fans, Hamilton took the chequered flag a staggering 68.5 seconds ahead of Heidfeld, an age in Formula One terms.
Adding to the sense of astonishment, the evergreen Barrichello clambered on to the podium for the first time since 2005 to almost double Honda’s season points tally.
In the most intense title battle in years, BMW Sauber’s Polish title contender Robert Kubica failed to finish but was still only two points behind the top trio at the halfway stage of the season.
Hamilton’s seventh win in just 26 starts was the perfect riposte to the critics who had suggested he was feeling the pressure of fame and fortune after two error-laden races in Canada and France.
“It s definitely by far the best victory I’ve ever had, it was one of the toughest races I’ve ever done,” Hamilton said.
“When I was out there I was thinking this would definitely go down as the best race I’ve ever won. I could see the crowd beginning to stand up and I was praying ‘just keep it on the track, just finish.’ I just wanted to get it round.”
Raikkonen, last year’s winner at Silverstone, finished fourth.
McLaren’s Heikki Kovalainen had a disappointing race after starting on pole for the first time and came home fifth ahead of Renault’s double world champion Fernando Alonso.
Italian Jarno Trulli was seventh for Toyota with Kazuki Nakajima taking the final point for Williams.
Hamilton and Raikkonen pitted together at the end of lap 21, a stop that proved decisive for the Briton and devastating for the champion.
While Hamilton refuelled and switched to a fresh set of intermediates, Ferrari kept Raikkonen on his existing tyres in the mistaken expectation that the rain would ease off.
The two had been nose-to-tail leaving the pits but the McLaren driver vanished into the spray, lapping nearly five seconds quicker than Raikkonen to build up a lead of 29 seconds by lap 27.
With Raikkonen struggling, the BMW Saubers seized the chance with Heidfeld taking two Finns in one go as Kovalainen passed Raikkonen and left the door open for the German to sweep past both on lap 27.
Team mate Kubica passed Renault’s Nelson Piquet, Raikkonen and Kovalainen in quick succession to move into third place.
The Pole’s hopes of regaining the championship lead evaporated 20 laps from the end when he spun into the gravel.
Red Bull’s Coulthard retired from his last home appearance after skidding off without completing a lap.

TITLE: Platini: Ukraine Must Show Progress Toward Euro 2012
PUBLISHER: Reuters
TEXT: KIEV — Ukraine has three months to prove its preparations for hosting the 2012 European championship with Poland are on track, UEFA president Michel Platini said on Thursday, adding he felt confident of their success.
Platini said last weekend that Poland and Ukraine risked losing the right to host the tournament if stadiums in their capitals were not ready. He said UEFA would make a decision on that at a meeting in Bordeaux in late September.
Arriving in Ukraine after a visit to Poland, Platini met with Prime Minister Yulia Tymoshenko and President Viktor Yushchenko — whose personal backing for the joint bid to host Euro 2012 helped convince UEFA officials.
“You have three months to work together to give Poland and Ukraine a way of hosting a fantastic Euro,” Platini said at a meeting with Yushchenko. “I am confident. But I need just a little guarantee.”
Platini warned Ukraine about slow preparations in January, saying that the next few months were crucial. On Thursday, the head of European soccer’s ruling body said those comments were meant to “wake up” Ukraine.
“We had some questions to ask you because not everything was exactly clear concerning many things in Ukraine—the stadiums, the airports, etc,” he said, addressing Yushchenko.
“You have answered straight away, and madame prime minister has also answered.”
Both Yushchenko and Tymoshenko pledged to step up efforts.
“We will do everything, even the impossible, so that there will be a fantastic celebration for the entire world,” Tymoshenko said at her meeting with Platini.
Ex-Communist Poland and former Soviet Ukraine face a colossal task in upgrading stadiums, building hotels and overhauling infrastructure including roads and airports if they want to stage their biggest event yet.

TITLE: New President’s Children Will Find White House Life an Adventure
AUTHOR: By Jocelyn Noveck
PUBLISHER: The Associated Press
TEXT: Young Tad Lincoln herded goats into a White House sitting room. Quentin Roosevelt rammed his wagon into a historic painting. John Kennedy Jr. had to be scooped out of a hiding place in his father’s desk. Amy Carter famously brought a book to a state dinner.
And teenager Susan Ford, in a mini-revolt, dodged the Secret Service for a brief taste of freedom on the streets of Washington.
Malia Obama turned 10 last week, and her sister Sasha is 6. Should their father, Barack, win the election, they’d be the youngest kids in the White House since Amy Carter arrived at age 9. They, too, would become the subjects of anecdotes that wind up in history books.
They’d have challenges that face few children. Their fashion faux pas, the first braces on their teeth, even their first boyfriends might be documented forever. Their parents’ choice of school — public or private? — would be debated. They could even find themselves, like Chelsea Clinton at 13, the subject of an unkind reference on “Saturday Night Live” to her adolescent looks.
But whether it’s the Obama girls or the older children of John McCain — 16-year-old Bridget is the youngest of his seven — the next presidential progeny will also have an unparalleled view of history in the making, and worldly experiences other children can only dream of.
“Sure, maybe a few times I wished my father was just a congressman,” Susan Ford Bales, now chairman of the Betty Ford Center, said in an interview. “But in fact I wouldn’t trade it for anything. The travels, the people you meet. From movie stars to heads of state. It was like, ‘Oh my gosh, look who I’m meeting now!’”
Her advice to the next president and his wife: “Keep being a parent. Keep loving your children and keep being available to them.” She notes that when she needed something from her parents, she could interrupt them at any time — and did.
She recalled a meeting her dad was having with Henry Kissinger, then secretary of state. “I walked in and said: ‘Hi, Mr. Secretary. Dad, I need my allowance and Mom doesn’t have any cash.’“ The leader of the free world obliged.
The most pressing issue concerning White House children would surely be security. “Way back into the earliest days, the children of presidents have been targeted,” says Doug Wead, a former aide to President George H.W. Bush and author of “All the President’s Children.” Jackie Kennedy, he notes, was so concerned about keeping her kids safe and out of view that she organized kindergarten for Caroline inside the White House. And when President Kennedy allowed those famous photos of Caroline and John in the Oval Office to be taken, Wead says, it was against his wife’s edict. Conveniently, she was out of town.
The kids of presidents have constant Secret Service protection. Susan Ford had it even as a vice president’s daughter after it was discovered the Symbionese Liberation Army, the group that kidnapped newspaper heiress Patty Hearst, had listed her as a target.
One day she popped out of the security bubble. The White House gates were open for her mother to drive in, and Susan whizzed out in her own car, unchaperoned. “Everybody tries it. It becomes a challenge and you want to succeed,” she says. She picked up a friend, drove to a supermarket parking lot and called to say she was all right.
But there were plenty of perks. Ford had the unique privilege of holding her senior prom in the East Room. Malia and Sasha Obama have a ways to go before their proms. First, their parents would need to decide: Public school, or private?
Jimmy Carter famously sent Amy to public school. The choice was again debated when Chelsea Clinton came to the White House at 13. What better way, some argued, for the new president to learn about the state of public education than through his daughter? Ultimately, Bill and Hillary Clinton chose an elite private school, Sidwell Friends, where tuition now runs about $27,000.
Malia and Sasha Obama currently attend the private University of Chicago Laboratory Schools, where Michelle Obama is on the board. The Obamas haven’t said where they would send their children should he win. “I try not to be obsessive about it,” Michelle Obama said recently on “The View” when asked what her kids’ lives would be like, “because we’ve got a lot of work before it’s a reality.”
Thus far, the Obamas haven’t been shy about including the girls in their public life. Their photos have been in campaign ads, and they’ve been on stage for some rallies and speeches. Malia had an especially sanguine answer when asked how she deals with the crowds: “Those people aren’t there to see me,” she said, according to her mother. “They just think I’m cute. So I just wave and smile, and then I’m out of there.”
McCain, by contrast, is reticent about discussing his seven children from two marriages, especially his son Jimmy, a Marine corporal who returned from Iraq earlier this year. The public sees little of the McCain kids except for Meghan, 23, who blogs from the campaign trail on McCain Blogette.
The senator’s older three children — two sons of his first wife, Douglas and Andrew, whom he adopted, and a daughter they had together, Sidney — are in their 40s. With Cindy McCain, he has Meghan, Jack, Jimmy, and their youngest, Bridget, adopted from Bangladesh as an infant. She told a young reporter for Scholastic News in December that her favorite subject at her private school in Phoenix is history, and that she loves playing sports.
“We are a normal family just like everyone else,” she said.
Like the 71-year-old McCain, many presidents haven’t been young enough to have small children in the White House, and so a young family like the Kennedys or Obamas is rare. “A young family creates a whole different atmosphere,” says Betty Monkman, who was a White House curator for 30 years until 2001 and wrote “The Living White House.”
Monkman remembers Amy Carter having friends over to carve pumpkins on Halloween, playing in her special tree house designed by Dad, or collecting money around the White House for the March of Dimes. She also recalls a historical scavenger hunt that her staff designed for Chelsea and her friends from Little Rock on the night of the Clintons’ inaugural ball.
“These were normal, active kids,” she says of both Amy and Chelsea. “They were able to come and go and have a life.” Chelsea, she notes, was active in ballet and with her church youth group, and the media generally left her alone.
Jenna and Barbara Bush, 19 when their father became president, have been known to chafe at their Secret Service protection. However burdensome, all that security didn’t prevent Jenna, now 26 and married, from having brushes with the law against underage drinking.
Caroline Kennedy, now vetting vice presidential prospects for Obama, is clearly much more tightlipped at 50 than she was as a child, when, asked by reporters what her father was doing one day, she replied, “Oh, he’s upstairs with his shoes and socks off, not doing anything.”

TITLE: Nadal Floors Federer in ‘Best-Ever’ Final
PUBLISHER: The Associated Press
TEXT: WIMBLEDON, England — With darkness enveloping Centre Court and the clock showing 9:15 p.m., Rafael Nadal watched as Roger Federer’s errant forehand settled into the net, ending what might have been the greatest men’s final on the greatest stage in tennis.
With that, Nadal flopped onto his back on the worn-out lawn as champion of Wimbledon for the first time and conqueror of the five-time winner and grass-court master.
After five riveting sets and 4 hours, 48 minutes of play, there was a changing of the guard at Wimbledon on Sunday when Nadal held off Federer’s stirring comeback to win 6-4, 6-4, 6-7 (5), 6-7 (8), 9-7.
“It’s impossible to explain what I felt in that moment,” Nadal said after receiving the winner’s trophy from the Duke of Kent. “Just very, very happy to win this title. For me, [it] is a dream to play in this tournament. But to win, I never imagined something like this.”
Nadal, winner of four straight French Open championships, is no longer just the King of Clay.
He’s the first Spanish man to win at the All England Club since Manolo Santana in 1966 and, more significantly, the first player to sweep the French Open and Wimbledon men’s titles in the same year since Bjorn Borg in 1980.
Federer, who converted only one of 13 break points but saved two match points in the fourth set tiebreaker, fell short in his bid to set two landmarks: He failed to surpass Borg by winning a sixth consecutive title or equal Willie Renshaw’s record of six in a row from 1881-86.
Both Borg and Santana were in the Royal Box for the occasion, the longest singles final in Wimbledon history and one that many rated as an epic for the ages.
“This is the greatest match I’ve ever seen,” said John McEnroe, a three-time Wimbledon champion and a television commentator at the tournament.
Nadal, who snapped Federer’s Wimbledon winning streak at 40 matches and overall grass-court run at 65, climbed into the players’ guest box to embrace his entourage. He grabbed a Spanish flag and walked across the television commentators’ booth to the edge of the Royal Box to shake hands with Prince Felipe and Princess Letizia of Spain.
Was this Nadal’s greatest match?
“Probably the best, yes,” said the 22-year-old Spaniard from Mallorca. “When I won for the first time the French Open [it] was unbelievable, too. I don’t want to compare Grand Slams, but Wimbledon is special for everybody. Tradition, everything. For me, it’s more [of a] surprise to win here than [at] the French.”
As for Federer, he called it “probably my hardest loss, by far.”
Federer said he thought the match, which started late due to rain and was interrupted twice by showers, should have been suspended and carried over to Monday because of the fading light.
“It’s rough on me now, obviously, to lose the biggest tournament in the world over maybe a bit of light,” he said.
Nadal, too, wasn’t sure the match could go on any longer.
“In the last game, I didn’t see nothing, it’s true,” he said. “It was unbelievable. I thought we have to stop. If I lose that game, we have to stop.”
Nadal won his fifth Grand Slam title, adding to his four consecutive French Open championships. Federer, meanwhile, remains two shy of Pete Sampras’ record of 14 Grand Slam wins.
“He’s still No. 1,” Nadal said. “He’s still the best. He’s still five-time champion here and I only have one, so for me it is very, very important.”
Nadal, who has won 24 straight matches, extended his career record against Federer to 11-6, but it was only his third win in six against him on a surface other than clay. Nadal had lost in the last two Wimbledon finals to Federer.
Sunday’s victory was Nadal’s second straight over Federer in a Grand Slam final — and this time on the champion’s favorite court and surface. Nadal crushed Federer in last month’s French Open final, losing only four games.
As Nadal and Federer battled through the fifth set in the fading light, they were like two heavyweight prize fighters going toe-to-toe in the late rounds of a title fight. The overall intensity and quality of the match recalled the 1980 final between Borg and McEnroe, which the Swede won in the fifth set after losing an 18-16 tiebreaker.
Federer had mixed feelings about being part of a classic.
“It’s sort of always nice to be part of them,” he said. “Probably later in life, I’ll go, ‘That was a great match.’ But right now, it’s not much of a feel-good thing. It’s not up to us to judge if it was the best ever.”
Federer lost despite serving 25 aces and smacking 89 winners, 29 more than Nadal. But he was more erratic than his opponent, committing 52 unforced errors, compared to 27 for Nadal.
Federer came close to becoming the first player to overcome a two-set deficit in a Wimbledon men’s final since 1927, when Henri Cochet beat Jean Borotra.
The fourth-set tiebreaker featured brilliant winners by both players, sudden changes of momentum — and two missed match points for Nadal.
The Spaniard was serving at 5-2 in the tiebreaker, two points from victory, when he let Federer off the hook with a double-fault and a backhand error. After saving a set point at 6-5, Nadal earned match points at 7-6 and 8-7 but couldn’t convert. Federer erased the first with a 127 miles-per-hour service winner and the second with a backhand pass down the line.
“I was hoping with the momentum going into the fifth set, that it was going to be enough, that I would play a little bit better,” Federer said. “But I couldn’t play my best when I really had to.”

TITLE: Stellar Venus  Claims Fifth Wimbledon
PUBLISHER: The Associated Press
TEXT: WIMBLEDON, England — Forget the wins, the losses, the struggles. Everything changes when Venus Williams steps onto the manicured lawns of the All England Club.
The 28-year-old American won her fifth Wimbledon singles title Saturday, showing once again that she seems able to unleash something special in herself at key moments during the grass-court Grand Slam tournament.
“When I get here I feel like it’s a different ball game, no matter what my results were, good or bad, in the beginning,” Williams said Sunday in an interview at the All England Club. “This is Wimbledon. No matter what, I’m going to play good here. That’s really how I felt about it.”
Williams entered the tournament with a 14-7 record in 2008 and not a single appearance in a final, but she excelled over the last two weeks, rolling through six matches in straight sets before coming up against younger sister Serena in the final. Despite a 1-5 record against her sibling in previous Grand Slam finals, Williams won her second straight Wimbledon title 7-5, 6-4 on Centre Court.
Her next challenge will be trying — again — to maintain that momentum heading into the U.S. Open.
“I definitely want to build on this and keep playing great,” Williams said. “That’s always the goal. Doesn’t always happen.”
She has won seven Grand Slam titles, the last three coming the past four years at Wimbledon. From 2001-03, it had looked as though she would win dozens, playing her sister in six major tournament finals but losing five of them.
The Williamses’ dominance on the circuit ended after the death of their older half-sister, Yetunde Price, in September 2003.
“There were times when I just felt very discouraged about some of my results, but ultimately the standard that I set for myself is extremely high,” Williams said. “The results that I didn’t like were great results for other players. I just had to put everything in perspective and come through those times.”
She certainly has come through at Wimbledon, and she wouldn’t trade a single Venus Rosewater dish for a title at either the Australian Open or French Open, two majors she has never won.
“People remember Wimbledon,” Williams said. “The French Open and the Australian, they’re unbelievable Slams, but they can get a little lost on the wayside. Wimbledon will never get lost.”
Her next challenge at the All England Club would be trying to match Billie Jean King’s six titles, then Steffi Graf’s seven, and then Martina Navratilova’s nine — the most won at Wimbledon since the 1930s.
Her resume now includes a second win over Serena in a major final after five straight losses. Surely, their years of playing together and against each other gave the older Williams an idea of what she needed to do to win Saturday.
A few hours after that match ended, the sisters joined up to win the doubles title, beating Lisa Raymond of the United States and Samantha Stosur of Australia 6-2, 6-2 for their seventh Grand Slam title as a team.