SOURCE: The St. Petersburg Times
DATE: Issue #1390 (54), Tuesday, July 15, 2008
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TITLE: Putin Slams Miller Over Access To Pipeline
AUTHOR: By Anatoly Medetsky
PUBLISHER: Staff Writer
TEXT: SEVERODVINSK, Arkhangelsk Region — A Gazprom-commissioned oil rig destined for the Arctic dwarfed the black hulks of diesel- and nuclear-powered submarines docked for maintenance Friday at the Sevmash shipyard, but its dimensions apparently left Prime Minister Vladimir Putin unimpressed.
After being shown the towering structure, Putin walked with Cabinet members, industry executives, local officials and representatives of the shipyard to a nearby, freshly painted building to open a meeting on the future of the oil and gas industry. And he began with harsh words for Gazprom chief Alexei Miller.
“I would like to draw the attention of ... Miller to the fact that oil and gas companies still experience certain problems with access to your pipelines,” Putin said, looking at the Gazprom chief executive. “They do, don’t shake your head.”
The salvo at Gazprom looked like a sign of support for the country’s oil companies — and for Deputy Prime Minister Igor Sechin, who oversees the energy industry — that want the gas giant to make its pipelines more accessible. The companies, including Rosneft, where Sechin is chairman, need the pipelines to utilize associated gas, a by-product of oil production, most of which they currently flare, or burn off.
Putin said Gazprom, which has set itself the ambitious goal of having a market capitalization of $1 trillion by 2014, should equally, if not to a greater extent, honor the state’s plans to reduce flaring, which would bring more gas to the market and improve the environment.
“If this situation continues, we will continue to burn associated gas in huge volumes. And you will spend huge resources to increase the output of your own company,” Putin said. “This is in the corporate interest. Controlling the pipelines, you must keep in mind that it is necessary to defend state interests.
“Please, act based on this as well. Perhaps, primarily based on this,” he said.
Sechin, in a meeting earlier this month, gave Gazprom and several government offices until Aug. 11 to come up with proposals for how the monopoly could transport more associated gas from oil producers.
The Natural Resources Ministry is asking the government to delay by a year its target of having 95 percent of associated gas used by power stations and the chemical industry, Putin said. The current deadline is 2011.
No details were released on whether a decision on a postponement was reached. Except for Putin’s speech, the meeting was closed to the press, and no addition details came to light on steps planned by the government or the oil and gas industry for the development of the sector.
Emerging from the closed talks, Miller did not look particularly upset by the criticism. He agreed to answer questions only briefly, however, and wrapped up an impromptu news conference before anyone asked about Gazprom’s relations with other gas-producing companies.
He then stepped off with a reporter from Kommersant, which is owned by Gazprom-connected businessman Alisher Usmanov, to speak about the issue. He said Gazprom was ready to cooperate but that it was not technologically feasible for some independent gas producers to access Gazprom’s pipelines, the newspaper reported.
Putin, in his opening speech, said the Federation Council had that same day approved a raft of tax breaks for the oil industry, which will save it up to 140 billion rubles ($6.14 billion) annually, starting next year. An earlier estimate by the Finance Ministry put the figure at slightly more than 100 billion rubles.
President Dmitry Medvedev is expected to sign the bills, possibly later this month.
The Cabinet is also looking at tax breaks that would stimulate development of offshore oil fields in the Black Sea, the Sea of Okhotsk, as well as on the Yamal Peninsula, Putin said.
In return for the favor, Putin said, he had received reports that oil companies would at least keep production at last year’s level, despite the current downward trend. Oil output has dropped 0.3 percent in the first quarter of 2008, compared with the same period last year.
Speaking after the meeting, the chiefs of Rosneft and LUKoil, the country’s largest and second-largest oil producers, respectively, sounded optimistic about maintaining or increasing production, although they did not say how soon it would happen.
“We’ve been set the task of achieving stabilization, and I’m sure it will be fulfilled,” Rosneft chief executive Sergei Bogdanchikov said.
LUKoil chief executive Vagit Alekperov said the tax measures would “not only allow us to stabilize production levels, but also to increase production.”
As the executives spoke to reporters, Putin met with another audience. Smiling, he shook hands with several people in a crowd that had been waiting to catch a glimpse of him for the more than two hours. In response to one of their questions, he said the government was working to depend less on imports.
Alekperov said the government was putting together another package of tax-relief measures that could bring the total annual savings by oil companies to 400 billion rubles ($17.55 billion). The package will be finalized by August, he said, apparently referring to the measures Putin mentioned for Yamal and the Okhotsk and Black seas.
One thing in Severodvinsk, however, stood as a testament to how plans can fall short.
The giant oil rig, intended for the Prirazlomnoye offshore oil field in the Pechora Sea, will begin operation in 2011, one year later than the most recent plan, Miller said at the meeting, Interfax reported. Originally, the $2.3 billion rig was scheduled to start work in 2004.
TITLE: Medvedev Accused of Breaking G8 Promise
AUTHOR: By Miriam Elder
PUBLISHER: Staff Writer
TEXT: MOSCOW — The Kremlin entered a new battlefield with the West over the weekend, with Washington and London accusing President Dmitry Medvedev of reneging on a promise with Russia’s decision to block United Nations sanctions against Zimbabwe.
Moscow and Beijing both used their veto power Friday in the UN Security Council to derail an arms embargo and financial and travel restrictions on President Robert Mugabe, recently sworn in for a new term after conducting what his country’s opposition called a campaign of intimidation that killed dozens of people.
While Zimbabwe welcomed the veto as just, Washington and London attacked Moscow’s credibility as a G8 partner.
In an unusually harsh statement, Zalmay Khalilzad, the U.S. ambassador to the United Nations, accused Medvedev of going back on an earlier promise and “standing with Mugabe against the people of Zimbabwe.”
“The U-turn in the Russian position is particularly surprising and disturbing ... [and] raises questions about its reliability as a G8 partner,” Khalilzad said in a statement published on his mission’s web site.
He said Medvedev had supported a G8 decision on Tuesday “to take further steps inter alia introducing financial and other measures” against those responsible for the violence in Zimbabwe only a few days earlier.
Russia made no commitment at last week’s Group of Eight summit to back United Nations sanctions on Zimbabwe so it cannot be accused of a U-turn, a senior Russian diplomat said on Monday, Reuters reported.
“There was indeed a discussion on Zimbabwe at the (G8) summit,” Russian Deputy Foreign Minister Sergei Kislyak told a news conference.
“During the discussion ideas were put forward that the UN Security Council should adopt a resolution on sanctions. The sanctions were not named. There were such ideas. We listened to them and explained why that is not right,” Kislyak said.
“This does not mean that we do not have concerns about the situation in Zimbabwe. We have different methods for addressing it,” he told reporters.
He rejected the comment by Khalilzad.
Kislyak said: “Accusations against Russia that it is not a reliable partner are, we believe, not only unfounded but also irresponsible.”
British Foreign Secretary David Miliband said he was “very disappointed” about the veto.
“It will appear incomprehensible to the people of Zimbabwe that Russia, which committed itself at the G8 only a few days ago to take further steps, including introducing financial and other sanctions, should today stand in the way of timely and decisive Security Council action,” he said in a statement.
In Moscow, the Foreign Ministry retorted Saturday that it was “impermissible” to doubt Russia’s worthiness as a G8 partner.
“The American and British UN representatives in the best-case scenario are totally uninformed about the discussion of the G8 leaders in Toyako, and in the worst case they are deliberately distorting the facts,” it said in a terse statement.
During the G8 summit in the Japanese resort town of Toyako, Medvedev voiced considerable hesitancy about U.S. and British calls to impose sanctions on Zimbabwe. After much deliberation, he joined in a summit declaration Tuesday that called for “financial and other measures” against the Zimbabwean officials responsible for violence, but he said the measures would not necessarily be sanctions.
A Kremlin spokesman declined immediate comment Sunday and pointed to the Foreign Ministry’s statement.
Russia’s stance appeared to reflect an unwillingness to go after governments for elections criticized by the West. Medvedev’s own election in March has faced criticism.
At the UN Security Council, however, Russia adopted the stance that Zimbabwe’s situation was an internal affair and outside the mandate of the UN. Russia’s G8 envoy, Alexander Pankin, had warned at the G8 summit that meddling in Zimbabwe’s internal affairs might trigger an unpredictable outcome.
Britain’s UN ambassador suggested that Russia had worked to bring the Chinese along on the veto. Beijing would not have used its veto if Russia had supported the resolution because it does not want to court international controversy ahead of next month’s Olympic Games, the ambassador, John Sawers, told Britain’s The Daily Telegraph newspaper.
China has become a huge investor in Africa in recent years, pouring billions of dollars into its fast-growing economy.
But analysts said Moscow’s veto seemed be motivated by political rather than business interests. “The Russians do not want to part company with members of the non-Western world,” said Dmitry Trenin from the Carnegie Moscow Center. “The Russians see themselves as a leader of the opposition inside the UN.”
Roland Nash, head of research at Renaissance Capital, said that while Russia has some business interests in Africa, policy overrode any business angle in the Security Council vote. “While there are a lot of opportunities in the region, there is not much business taking place in Zimbabwe because of the politics there,” he said.
Yet Russian businesses have been quietly exploring opportunities in the country, casting aside concerns about an official inflation rate that has surpassed 300,000 percent as the country endures its 10th year of recession.
Billionaire Roman Abramovich visited the country in March. Zimbabwe’s state media reported at the time that he was interested in the Hwange Colliery coal mine, which he visited. Tourism officials seized upon the visit as a sign that the country was safe for tourists and open for business. Abramovich’s spokesman insisted that the trip was a private one, made for tourism only.
Renaissance Capital has sent teams of specialists to Zimbabwe over the past year to explore investment opportunities.
The bank started an Africa fund last year and has set up offices in Nairobi, Kenya, and Lagos, Nigeria, all the while keeping quiet about the fact that it has its eyes trained on Zimbabwe. “The [investment situation] is so mispriced,” said a source inside the bank. “It’s an educated society. You can trust people, despite the fact that there is runaway inflation, the judicial system doesn’t function, and [there is] no democracy.”
Human rights activists also expressed dismay at Russia’s veto.
“The actions of Russia show yet again how certain members of the international community continue to let down the people of Zimbabwe who courageously voted for change in the elections,” Georgette Gagnon, Africa director at Human Rights Watch, said Sunday by telephone from New York.
TITLE: Sports Event Planned for Gulag Island Slammed
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: A sports contest planned to take place next month near to where thousands of political prisoners met their deaths during the Soviet Union has angered human rights campaigners across the country.
The multi-disciplinary athletics event, to take place in August on the Solovetsky Islands in the White Sea in Russia’s Far North, has been organized by the Ministry of Emergency Situations.
The first political prisoners were sent to the remote islands during the reign of Ivan the Terrible but it was not until the Bolsheviks seized power in 1917 that the Solovetsky Islands, also known as Solovki, became synonymous with torture and brutal executions.
The sports contest, which will double up as a training exercise for local rescue staff, has been scheduled to take place on Sekirnaya Mountain, near to where mass graves of political prisoners are located.
The international human rights group Memorial has written an open letter to Emergency Situations Minister Sergei Shoigu in protest.
“For the entire world, Sekirnaya Mountain is a tragic symbol of Stalin’s Gulags; this place is inseparably connected to the memory of the victims of Communist terror,” reads the letter.
“The Solovki was home to the first concentration camp created by the Bolsheviks, and Sekirnaya Mountain was the most horrifying spot: this is where isolation cells, ‘a prison within a prison,’ were located.”
Arseny Roginsky, chairman of Memorial, branded the plan as sacrilegious.
“The slopes of Sekirnaya Mountain are covered with dozens of mass graves,” Roginsky said. “Anyone who has read Alexander Solzhenitsyn’s ‘The Gulag Archipelago’ can never forget the description of devilish torture techniques used against prisoners here.”
The Ministry of Emergency Situations is adamant that there is nothing wrong with using the spot for the planned events.
“Naturally, nobody is going to run across the graves of the repressed,” Irina Andrianova, head of the ministry’s press office, told reporters on Monday.
“Every year, we set up training sessions for our staff in various parts of Russia to ensure that they can adapt to and flawlessly perform in a variety of environments and conditions.”
The location was selected out of practicality, and history was not considered a crucial factor, she added.
Each year, the islands attract thousands of tourists and religious pilgrims, and the local branch of the ministry has to be well trained to come to their rescue if necessary, she added.
The events, if they take place, would coincide with the traditional memorial days that are held on the islands each year to commemorate those who perished in Communist purges.
Many human rights advocates see the officials’ behavior over the conflict as insensitive, insulting and shortsighted.
Irina Flige, head of the historical branch of Memorial in St. Petersburg, warned that Russia has yet to come to terms with its totalitarian past.
“Despite Russia’s bloody history and the Bolshevik legacy, Russia still has not learned the lesson; too many people are comfortable turning a blind eye on the darkest parts of our country’s history,” she said.
“The ridiculous idea [of holding the Ministry of Emergency Situations’ events on the Solovki] is revealing indeed. We’ll never overcome our past if we don’t learn to face it.”
Memorial called for Shoigu to lecture his subordinates about the ethics of running a sports competition in the proximity of mass graves.
The Solovki, as the islands are colloquially known, are the site of the Solovetsky Monastery, one of the country’s holiest sites.
The monastery was founded in the 15th century as a spiritual retreat on the edge of the world, just 160 kilometers from the Arctic Circle.
Earlier this summer a group of Orthodox priests asked Prime Minister Vladimir Putin to end what they regard as the “commercialization” of the islands.
As well as becoming a tourist magnet, the beautiful archipelago also plays host to an annual international yacht competition that has become hugely popular.
TITLE: Ravers Blinded By Light Show
AUTHOR: By Chris Baldwin
PUBLISHER: Reuters
TEXT: MOSCOW — Dozens of partygoers at an outdoor rave near Moscow last week have lost partial vision after a laser light show burned their retinas, Russian health officials said on Monday.
Moscow city health department officials confirmed 12 cases of laser-blindness at the Central Ophthalmological Clinic, and daily newspaper Kommersant said another 17 were registered at City Hospital 32 in the centre of the capital.
Attendees at the July 5 Aquamarine Open Air Festival in Kirzhach, 80 km northeast of Moscow, began seeking medical help days after the show, complaining of eye and vision problems, health officials told Reuters.
“They all have retinal burns, scarring is visible on them. Loss of vision in individual cases is as high as 80 percent, and regaining it is already impossible,” Kommersant quoted a treating ophthalmologist as saying.
Attendees said heavy rains forced organizers to erect massive tents for the all-night dance party, and lasers that normally illuminate upwards into the sky were instead partially refracted into the ravers’ eyes.
“I immediately had a spot like when you stare into the sun,” rave-attendee Dmitry told Kommersant.
“After three days I decided to go to the hospital. They examined me, asked if I had been at Open Air, and then put me straight in the hospital. I didn’t even get to go home and get my stuff,” he said.
Cosmic Connection, promoters of the Aquamarine rave, were unreachable and did not list contact numbers on their Web site.
Industry Web site www.laserfx.com said focused laser light can cause eye damage almost instantly.
The owner of a Moscow laser rental company told Reuters the accidental blindings were due to “illiteracy on the part of technicians.”
“It was partly the rain, but also partly the size of the laser. Somebody set up an extremely powerful laser for such a small space,” said Valentin Vasiliev, who said his company did not provide the Aquamarine lasers.
TITLE: Business Threatened by Spy Claims
AUTHOR: By Nikolaus von Twickel
PUBLISHER: Staff Writer
TEXT: MOSCOW — Last week’s allegations of cloak-and-dagger activities between Moscow and London have raised fears of a deterioration in British-Russian ties that could spill over into business.
Chris Bowers, director of the British Embassy’s Trade and Investment Section, a position just below that of counselor, was implicated in spying by a source in the Russian security forces on Thursday. He is London’s most senior diplomat dealing exclusively with trade ties, sources familiar with the matter said over the weekend.
This would make Bowers Britain’s point man in the TNK-BP affair. The Russian-British joint venture has come under increasing pressure in recent months, beginning with raids by the Federal Security Service and allegations of spying.
A Russian security services source said last week that Bowers was suspected of spying, Interfax reported. The accusation followed a BBC television report in which an unidentified British security agent said London had evidence implicating the Russian government in the murder of Alexander Litvinenko.
Officials at the British Embassy and London’s Foreign Office on Friday refused to confirm a report that cited a source in the Foreign Office as confirming that Bowers was the officer accused.
“We are not sure where the reports came from and are looking into the matter,” a Foreign Office spokeswoman said by telephone from London.
The counselor position at the embassy was vacated last year when Andrew Levi, along with four other British diplomats, was expelled in response to Britain’s expulsion of four Russian diplomats.
The expulsion came in answer to Russia’s refusal to extradite Andrei Lugovoi to face charges in the murder of Alexander Litvinenko, a former security services officer granted British asylum.
TITLE: Georgian Threatens To Shoot Down Jets
AUTHOR: By Matt Siegel
PUBLISHER: Staff Writer
TEXT: MOSCOW — Georgia will shoot down any Russian fighter jets that violate its airspace, two senior Georgian officials said Friday, a day after Russia’s admission that it had flown sorties over the breakaway republic of South Ossetia.
Georgian Reintegration Minister Temur Iakobashvili said his country had the right to shoot down flights that violated its territorial integrity.
“It’s the first time, probably, since Saddam Hussein invaded Kuwait that we see these sorts of violations,” Iakobashvili said by telephone from Tbilisi. “Obviously, Georgia has a sovereign right to defend its territory and airspace.”
Georgia would nonetheless prefer to settle the dispute via diplomacy, Iakobashvili said.
Nika Rurua, deputy head of the Georgian parliament’s defense and national security committee, accused Russia of trying to provoke a military confrontation with the flights and said Georgia would respond to such actions with force.
“If Russian warplanes infringe again into Georgian airspace, they will have to return to pick up the wreckage,” Rurua told reporters in Tbilisi, Interfax reported.
The remarks came as Georgia recalled its ambassador to Russia, Erosi Kitsmarishvili, for consultations over the brewing conflict over South Ossetia and another breakaway region, Abkhazia. Kitsmarishvili arrived in Tbilisi on Friday afternoon.
In a sharply worded statement, the Georgian Foreign Ministry said it had recalled Kitsmarishvili “in connection with an endless series of provocations and acts of military aggression carried out recently by the Russian Federation.”
Russian fighter jets flew over South Ossetia on Tuesday in what the Russian Foreign Ministry called a response to reports that Georgian forces were preparing a military incursion into the region. Georgia accused Russia of carrying out the mission to spoil a visit by U.S. Secretary of State Condoleezza Rice.
During her visit, Rice on Thursday called for a group of senior diplomats from Britain, France, Germany, Russia and the United States to meet to find a solution over the Georgia dispute.
Moscow will reject the call, Interfax reported Friday, citing a Russian diplomatic source. “We don’t see any reason for anyone’s mediation in settling relations,” the source said. “We have direct dialogue with Georgia and contacts are continuing.”
Foreign Minister Sergei Lavrov, who met Thursday with Abkhaz leader Sergei Bagapsh, repeated Russia’s position Friday that Georgian aggression is stoking the crisis.
“Moscow and Sukhumi believe that an exit from this complicated situation can only be found through an immediate cessation of provocations and the signing of documents about the suspension of force in both conflicts,” Lavrov said in a statement on his ministry’s web site.
Repeated calls to the ministry for comment went unanswered Friday.
Georgia has long accused Russia of violating its airspace, but until Thursday, Moscow had repeatedly denied crossing the border. It was the first admission by Russia in at least a decade that it had sent warplanes into Georgia’s internationally recognized territory.
TITLE: Senator’s Embezzlement Case Closed After Time Runs Out
AUTHOR: By Nabi Abdullaev
PUBLISHER: Staff Writer
TEXT: MOSCOW — A decade-old embezzlement case involving Federation Council Senator Andrei Vavilov has been closed for good because the statute of limitations has expired, an Investigative Committee spokeswoman said Friday.
Vavilov, a Penza senator whose name has surfaced in numerous high-profile graft cases over the past decade, had been investigated on suspicion of embezzling $231 million in 1997.
Citing case materials, Kommersant reported Friday that investigators had fully proved Vavilov’s guilt but that, because of the statute of limitations, he would not face any charges.
The Investigative Committee spokeswoman reached by telephone Friday declined to discuss the specifics of the case but said the Kommersant report was accurate. She confirmed that the statute of limitations had expired.
In 1997, then-Deputy Finance Minister Vavilov ordered federal funds transferred to buy bonds that were then to be deposited in a Unikombank account held by MAPO, which manufactures MiG fighter jets and was renamed MiG in 1999.
The money never arrived in MAPO’s account, then-Central Bank Chairman Sergei Dubinin said at the time. Instead, Dubinin said, it was diverted into other commercial accounts, including one at MFK, a Uneximbank affiliate.
Vavilov, who became a senator in 2002, faced up to 20 years behind bars if convicted on both charges. The missing millions ended up in offshore accounts in Antigua and Latvia, Kommersant reported Friday, citing case materials.
Reached by telephone, Alexander Muranov, Vavilov’s lawyer, declined to comment on the expired charges.
Vavilov insisted Friday that the accusations against him were “total nonsense,” RIA-Novosti reported.
A Federation Council spokesman said the chamber would not seek to expel Vavilov because investigators did not insist on it, Kommersant reported.
TITLE: Scientists Rescued From Arctic
PUBLISHER: The Associated Press
TEXT: MOSCOW — Russian scientists are evacuating a research station built on an Arctic ice floe because global warming has melted the ice to a fraction of its original size, a spokesman said.
The North Pole-35 station, where 21 researchers and two dogs live in huts, will be taken off the floe in the western Arctic Ocean this week instead of in late August as had originally been planned, said Sergei Balyasnikov of the Arctic and Antarctic Research Institute in St. Petersburg.
The research crew landed in early September on the 1.2- by 2.5-mile floe near the Severnaya Zemlya archipelago. During its westward drift of more than 1,550 miles, the floe shrank to just 1,000 by 2,000 feet.
“The evacuation is ahead of schedule because of global warming,” Balyasnikov said.
The nuclear-powered icebreaker Arktika will escort the research vessel Mikhail Somov to the station.
TITLE: Global Credit Crunch Affects Russian Loans
AUTHOR: By Yevgeny Rozhkov
PUBLISHER: Special to The St. Petersburg Times
TEXT: The rise in people taking out mortgages in Russia has come crashing down from a 167-percent leap in 2007 to 19 percent in the first quarter of 2008. The number of banks and agencies offering mortgage services has also dropped, and experts predict growth will reach no more than 50 percent by the end of the year.
“The Russian mortgage market is experiencing hard times,” says Vladimir Lopatin, president of the National League of Certified Mortgage Brokers. During the last twelve months, the number of credit institutions entitled to issue mortgage loans has declined from 700 to 500 due to problems with funding. According to Lopatin, by the end of the year Russia’s state-supported financial giants such as Sberbank and VTB, or Home Credit with monetary inflow from the West will dominate the mortgage market at the expense of smaller, regional institutions.
St. Petersburg is seeing the same slowdown in mortgage rate growth. According to Igor Zhigunov, deputy chairman of the board at St. Petersburg City Mortgage Bank, the northwest’s impressive 180 percent leap in the first quarter of 2007 has given way to a far more modest increase of 19 percent in 2008.
Alexander Grebenko, CEO of the Credit and Financial Consultant brokerage company, reports that in August 2007, half of the company’s clients were interested in taking out a mortgage, whereas figures have now dropped to 20 percent of clients.
This is natural when initial excitement is followed by a more tranquil period, says Sergei Spasennov, head of the St. Petersburg practice of Pepeliaev, Goltsblat & Partners.
“Land plots are generally bought as the result of long-term, well thought-out business forecasts,” he said.
“There are fewer deals concluded at speculative prices as it now takes longer and is much more expensive to treat real estate like that.”
Spasennov said the demand for real estate may fall even further, because much of it is purchased as an investment rather than for accommodation.
Spasennov’s colleague, Maya Petrova, considers investing in real estate to be one of the most risky areas. “In spite of federal legislation from 2004 that protects the rights of investors and shareholders and insures against re-sales or violations of construction deadlines, there are numerous sites in St. Petersburg to which these regulations do not apply, because the permits for construction were obtained before April 1, 2005 [when the law became effective],” she said.
As a result of this loophole, shareholders and investor have to undergo time-consuming legal procedures to claim their rights to the property or at least to receive compensation for their losses, Petrova added.
The mortgage loan liability has doubled in Russia, while in St. Petersburg, the liability rate of 16 percent at the beginning of 2008 saw a 30-percent increase by April.
According to experts, the decline in mortgages may be explained by stricter requirements set by banks, including a flawless credit history and higher interest rates.
“Before the turmoil in the mortgage market, a person applying for a loan was granted approval in 90 percent of cases; now the probability seldom exceeds 60 percent,” said Maxim Yeltsov, CEO of The First Mortgage Agency. He forecasts that it will take two or three years to overcome the difficulties.
In the meantime, Russia is facing a macro-risk and may also want to seek compensation as the government is close to losing 20 percent of the country’s gold reserves ($100 billion) invested in the U.S. mortgage giants Fannie Mae and Freddie Mac, which have been regressing continuously for weeks. Since the beginning of this year Freddie Mac’s share pricing has dropped by more than 75 percent, with Fannie Mae going neck to neck with a 64-percent decline. Russia, one of the major shareholders in both of the agencies, is suffering subsequent considerable losses.
The U.S. Government has refused to acquire the assets of the companies to keep them afloat and experts predict that Fannie Mae and Freddie Mac will soon be declared bankrupt, the New York Times reported.
TITLE: Control Battle Erupts Over Premises
AUTHOR: By Yevgeny Rozhkov
PUBLISHER: Special to The St. Petersburg Times
TEXT: Police intervened in an ownership conflict in St. Petersburg on Monday when a group of security guards attempted to take over a building occupied by Avtobaltservice, an affiliate of Arne Larsson and Partners, one of the first Russian-Swedish joint ventures in the city.
At 9 a.m., a group of uniformed men from the Klyon security firm arrived at the building at 5 Nakhimova Ulitsa on Vasilyevsky Island, and blocked Avtobaltservice’s entrances, saying they had been authorized to take control of the building by its new owners, who had purchased it for $11 million at an auction in March, less than six months after Avtobaltservice failed to privatize the building at another auction.
Avtobaltservice, which used the consultancy services of President Dmitry Medvedev when he was a young lawyer, sells automobiles and provides repair and warehouse services from the low, concrete building, according to a right-of-use contract signed with City Hall in 1992 for a period of 20 years.
“The agreement is valid until 2012, but the new owners of the building do not care and insist they want it right away,” said Alexander Poznyakhovsky, general manager of Avtobaltservice, who wants the case to follow the law instead of facing acts of what he sees as arbitrariness.
Avtobaltservice’s managers called the police to get rid of the security guards, but the future of the company’s relationship with the building’s owners is still unclear.
The current owner is a commercial structure affiliated to the nearby Mining Institute, The Center of People’s Public Service, which has been constructing a multistory apartment building near the new property. Poznyakhovsky claims that the company sees the spot as a prospective location for building another real estate complex.
Poznyakhovsky said in an interview with The St. Petersburg Times on Monday that as soon as Avtobaltservice’s Swedish co-owner and shareholder, Arne Larsson, arrives in the city this week, the company’s representatives intend to settle the issue by suing its opponents and forcing them to adhere to the terms of the contract.
TITLE: Finance Ministry Says Reserves in No Danger
AUTHOR: By Max Delany and Jeremy Ventuso
PUBLISHER: Special to The St. Petersburg Times
TEXT: MOSCOW — The Finance Ministry has moved to stave off worries that the troubles at U.S. mortgage giants Fannie Mae and Freddie Mac pose a threat to the country’s gold and foreign currency reserves or the more than $157 billion it has salted away from taxes on energy exports.
The ministry said none of the oil funds had been invested in the mortgage firms and that the United States had issued assurances for any portion of Russian gold and currency reserves invested, out of a total of as much as $100 billion invested in three major U.S. mortgage companies, according to some sources.
Fears that the U.S. government might have to bail out the country’s two largest mortgage finance companies sent their shares tumbling last week and spurred a broader slump on the U.S. stock market.
Shares in the companies ping-ponged around Friday, rebounding slightly by close after initial drops of around 50 percent. On the Russian markets, MICEX slipped by 2.7 percent for the week, with the RTS also declining.
Buyers flocked to Freddie Mac’s $3 billion debt sale on Monday, just hours after the U.S. government pledged support for the nation's top mortgage finance agencies, but the steps failed to stem growing panic on Wall Street.
European and Asian stock markets rallied after the Treasury Department and Federal Reserve stepped in on Sunday with offers of richer credit lines, equity purchases and direct access to central bank coffers should Freddie and its sister agency Fannie Mae run into deeper financial trouble.
However, U.S. stocks quickly shed initial gains as investors feared the steps will do little stem the losses spreading through the financial sector in the wake of a deflating housing market and stalling economy.
The $100 billion reportedly invested by Russia in the U.S. mortgage market would account for about 20 percent of gold and foreign currency reserves, so the Finance Ministry moved quickly to report the U.S. assurances.
A contingency plan is in place by which the U.S. government would create a conservatorship to take over one or both of the mortgage companies, reports in the U.S. media said.
In February, Russian Central Bank deputy head Alexei Ulyukayev said that “a few percent” of the country’s $476 billion gold reserves were invested in the U.S. firms.
But the Central Bank upped its foreign currency holdings in Freddie Mac, Fannie Mae and U.S. Federal Home Loan Banks to 2.48 trillion rubles ($101 billion) last year, Vedomosti reported Friday, citing the Central Bank’s year-end results for 2007.
The allocation of the country’s gold reserves for last year was approved by the National Banking Council, the reserves’ governing body, on July 10, the Finance Ministry statement said.
Despite reports in February that the rules for managing the National Reserve Fund or the National Welfare Fund — created in February when the stabilization fund was split between them — would allow the purchase of bonds from Fannie Mae or Freddie Mac, the ministry’s statement said its current investment policy meant that it had no exposure to securities in the companies.
TITLE: In Brief
TEXT: CEOs As Diplomats
ST. PETERSBURG (Bloom-berg) — Russia’s upper house of parliament on Friday approved a legislative proposal to issue diplomatic passports to heads of state corporations, Interfax reported.
As many as six chiefs of state-run groups will be eligible for the passports, the Moscow-based news service said, citing Vladimir Pligin, the head of the constitutional committee in the lower house of parliament, or State Duma, and one of the bill’s sponsors.
The corporation chiefs are effectively tasked with carrying out state functions and will require frequent trips abroad, Interfax said, citing government documents.
Aviation Fuel Cap
ST. PETERSBURG (Bloom-berg) — The Russian government will set limits on fees jet-fuel filling stations can charge at airports in an effort to cap rising prices for aviation fuel, Interfax reported.
Russia’s Federal Financial Markets Services also proposed that producers sell jet fuel on commodities exchanges, the Moscow-based news service said, citing Deputy Prime Minister Sergei Ivanov.
Test trading of jet fuel will begin this month at the St. Petersburg commodities exchange, Interfax said, citing Ivanov.
Saudi Power Play
MOSCOW (Bloomberg) — United Co. RusAl is in talks with Saudi Arabia on a possible joint venture to build an energy and metals complex, Interfax reported Monday.
The project includes a 600,000 ton-a-year aluminum plant and a 1,500-megawatt power plant, the news agency said, citing “documents distributed in Moscow.” It didn’t give the location of the plant.
High Spirits
ST. PETERSBURG (Bloom-berg) — Synergy, Russia’s only publicly traded distiller, said liquor sales rose 18 percent in the first half of 2008 after the purchase of a Ukrainian producer in March. Sales reached 4.48 million decaliters, Synergy said in an e-mailed statement Monday. Without the acquired Myagkov brand, revenue climbed 28 percent, according to the statement.
Synergy, Russia’s second-largest private vodka producer, held an initial public offering in November to fund expansion.
Visa Free Cruising
HELSINKI (Bloomberg) — The St. Petersburg city parliament has approved a proposal to allow tourists arriving on cruise boats to spend up to three days in the city without a visa, the Finnish daily newspaper Kauppalehti said, without citing anyone.
The Russian parliament will consider the proposal in the autumn, the newspaper said. About 400,000 cruise ship tourists are expected to visit St. Petersburg this year, according to Kauppalehti.
Finland’s Stella Lines will start overnight ferry runs to St. Petersburg from Helsinki in August, the newspaper said. Kim Sjoeblom, who manages the ferry line’s Russian business, expects the majority of early passengers to be Russians and says removal of the visa requirement would significantly increase the number of Finnish passengers, according to Kauppalehti.
BP Permits Ready
MOSCOW (Bloomberg) —Russia’s Federal Migration Service has prepared a total of 48 work permits for foreign staff at BP’s Russian venture, TNK-BP, as shareholders vie for control of the Moscow-based company.
TNK-BP itself declined to extend the contract of one employee who wasn’t issued a work permit, spokesman Konstantin Poltaranin said by phone in Moscow on Monday. The service said July 2 it planned to issue 49 work permits. Poltaranin said he was unsure whether the employees had picked up the documents.
TNK-BP CEO Robert Dudley said in May that he asked for a quota of 150 foreign work permits after TNK-BP shareholder and Executive Director German Khan submitted an “unauthorized” request for 63 slots in April.
Farmland in Focus
MOSCOW (Bloomberg) —Russia’s government is concerned about foreign businesses buying up farmland and offering shares to investors, Agriculture Minister Alexei Gordeyev said.
“We will look into foreign capital buying up farmland” in the country, he said in a meeting Monday, according to a statement on the ministry’s web site. “Somebody will earn billions of dollars on their initial public offerings, but this won’t bring money into agriculture.”
Cheap Russian land and high commodity prices have encouraged farmers to offer shares to the public to boost acreage.
TITLE: Sukhoi to Announce 30 Superjet Orders at Air Show
PUBLISHER: Combined Reports
TEXT: LONDON — Sukhoi will announce 30 orders for its Superjet-100 regional aircraft at the Farnborough air show, a spokeswoman said Saturday.
But with industry losses of $2.3 billion forecast worldwide this year and 25 airlines ceasing operations in the past six months, many carriers who usually use the event to trumpet new plane orders are expected to keep their wallets firmly shut.
The Superjet orders will be unveiled at a news conference on Tuesday, the Sukhoi spokeswoman said, without elaborating on who was buying.
Sukhoi pre-sold 73 of the aircraft, designed to seat 78 to 98 passengers, mainly to Russian airlines. But it has embarked on an export campaign together with Italian partner Alenia Aeronautica. That puts Sukhoi in direct competition with Brazil’s Embraer and Bombardier of Canada, which dominate the 70- to 100-seat aircraft market and will be touting their plans at the air show.
Aeroflot said this month that it had been informed that Sukhoi would delay the first deliveries of the jet by a year to third-quarter 2009. Aeroflot had expected delivery of 30 of the planes this year.
The Farnborough air show will offer Sukhoi a chance to show off the jet. The Superjet’s first flight, initially planned for 2007, was delayed by several months, and the aircraft took off for the first time in May.
But with headwinds buffeting the aviation industry from high fuel prices and the credit crisis, the question is whether airlines will be looking to buy aircraft at all.
“There are going to be some orders, but the overall state of play is going to be quite downbeat,” said Evolution Securities analyst Nick Cunningham. “Everybody’s too nervous to order airplanes and also rather concerned that they ordered too many last year and the year before.”
Farnborough is still a key date on the industry’s calendar, with more than 300,000 people expected to attend the show outside London beginning Monday, where almost 1,500 exhibitors from 35 countries will show off the latest in aviation technology, including flight simulators and surveillance aircraft.
The show, which alternates years with an event in Le Bourget in France, is also traditionally the host of a duel played out between U.S.-based Boeing and its European rival, Airbus, for customers, but questions this time around are instead likely to focus on how many orders the pair may have to cancel later this year.
Airbus has booked 487 net orders for aircraft so far this year, besting Boeing’s total by 12 aircraft, but both expect their 2008 order totals to fall far short of their record 2007 total of 2,754 orders.
The only clear buyers for commercial aircraft so far at Farnborough are from oil-rich Gulf states, who can rely on sovereign wealth funds to back their purchases.
Purchasing activity from U.S. or European carriers is almost certain to be subdued in the face of surging oil prices.
Kerosene, the fuel used to power planes and distilled from crude oil, now accounts for around 40 percent of airline costs, up from 13 percent five years ago, according to IATA.
Airlines in Western countries are also coping with inflation, the credit squeeze and slowing economic growth — all factors that are expected to reduce demand for flying.
Among the 25 carriers that have already succumbed to the adverse conditions and ceased flying include business-class airlines Silverjet and MAXjet, Cameroon Airlines and U.S.-based Frontier Airlines. In comparison, only eight airlines folded in the six months after the 9/11 terror attacks.
Aircraft makers have been pushing the line that crude prices could be a driver for airlines to fast-track investment in more fuel-efficient planes, such as the Airbus A380 and A350, as well as Boeing’s 787.
Boeing last week raised its outlook for spending on commercial airplanes by all plane makers, including Airbus, over the next 20 years by 14 percent, helped in part by an expected 5 percent rise in worldwide air travel and the demand for new, more fuel-efficient planes.
However, Cunningham said plane makers were still not manufacturing the new narrow body, fuel efficient aircraft desired by carriers.
“Ironically, the market’s crying out for it, but the product’s not there,” he said.
AP, Reuters
TITLE: TNK-BP Fails to Resolve Dispute
PUBLISHER: Combined Reports
TEXT: MOSCOW — Russian billionaire shareholders are unhappy with the management of TNK-BP, their joint venture oil company with BP Plc, as the two sides battle for control.
“We have not seen the value of TNK-BP grow in the last couple of years,” Stan Polovets, chief executive officer of AAR, as the Russian shareholders group is known, said in an interview Monday in New York. “We are not happy with the way it's being run.”
The Russian shareholders group, comprising billionaires Viktor Vekselberg, Mikhail Fridman, German Khan and Len Blavatnik, is fighting for control of TNK-BP with London-based BP, Europe's second-largest oil company.
The billionaires, who own 50 percent of TNK-BP, have sought the ouster of CEO Robert Dudley, saying he has put BP's interests ahead of their own. TNK-BP accounts for a quarter of BP's total output and a fifth of proved reserves.
The removal of Dudley “is an unconditional demand,” Polovets said Monday. “It's not a question of if he will be dismissed but when. When a shareholder who owns 50 percent of the company asks for the CEO to leave he should step down.”
The Russian shareholders tried to strengthen their influence through four resolutions proposed at a meeting of TNK-BP's board on Friday in Limassol, Cyprus. BP rejected all four resolutions, AAR said in a statement Sunday.
Asked on Monday what progress was made in Cyprus, Polovets said “almost none.”
The AAR proposals included replacing Dudley as CEO, rehiring most of the BP staff at TNK-BP as direct employees of the joint venture and restoring the power of attorney to senior Russian managers that had such authority at the end of 2007. The last proposal was to give BP and AAR an equal number of representatives of the boards of TNK-BP subsidiaries.
The next board meeting will be in September, Polovets said.
“Hopefully between now and September there will be discussions between the partners and we come up with a resolution before then.”
A source who attended the meeting of TNK-BP Ltd., a holding company which controls 95 percent of the listed entity TNK-BP Holding, said the dispute between the rival shareholders over the future of Russia’s No. 3 oil producer would not be decided soon.
The remaining 5 percent of TNK-BP Holding is owned by minority shareholders.
“I don’t think soon. Not soon,” the source said on condition of anonymity, when asked whether the dispute at TNK-BP would soon be resolved.
“The shareholders discussed the company’s operations rather than focusing on differences,” said a second source close to the consultations, who also asked not to be identified.
The fact that the meeting took place at all could be seen as a sign of progress. AAR boycotted a previous meeting in Cyprus in late May, shortly after the two sides publicly aired their differences over strategy.
On that occasion, some of the Russian quartet flew in the previous evening for informal discussions but then decided to stay away from the formal board meeting.
Reuters, Bloomberg
TITLE: United Airlines Delays New Moscow Route by 5 Months
PUBLISHER: Combined Reports
TEXT: United Airlines, the world’s second-largest carrier, has won U.S. permission to delay the start of its flights between Washington and Moscow by five months because of high fuel costs.
The airline may start the service no later than March 29, the U.S. Transportation Department said in a decision released Friday.
United originally planned to begin the flights from Washington’s Dulles Airport on Oct. 26.
United sought the delay earlier this month as U.S. carriers cut flights in response to soaring oil prices. United needed permission to postpone the service to Moscow or risk the losing the route to a competitor. United won the right to serve the route in May.
U.S. airlines are studying Russia, whose economy is soaring on the back of oil prices. American Airlines started nonstop service between Chicago and Moscow in June.
Before that, the only U.S. airline with service to Moscow was Delta Air Lines, with flights from New York and Atlanta.
Bloomberg, MT
TITLE: Czech Oils Cuts ‘Punishment’ From Russia
PUBLISHER: Bloomberg
TEXT: An agreement being negotiated between Poland and the U.S. to host part of a missile-defense system in the eastern European country may prompt Russia to reduce oil supplies to Polish refineries, BRE Bank analysts said Monday.
The Czech Republic agreed with the U.S. last Tuesday to allow the deployment of a radar tracking site in its territory. Russian President Dmitry Medvedev said the following day he was “extremely disappointed” by the agreement.
On Friday, Russia lowered oil supplies to a Czech refinery controlled by Poland’s largest oil company, PKN Orlen. Orlen’s Czech unit Unipetrol said the reduction was because of “technical organizational problems.”
“The cutback was probably a reaction to the Czech-U.S. agreement,” BRE Bank oil analyst Kamil Kliszcz wrote in a report published Monday. “We can guess that, by making a similar deal with the U.S., Poland faces a similar ‘punishment’ from Russia.”
Transneft Vice President Mikhail Barkov said that Russian oil supplies to the Czech Republic were reduced for commercial and not political reasons, Interfax reported Monday.
Two oil companies cut supplies in this direction because they could refine crude in Russia more profitably, the Moscow-based news agency cited Barkov as saying.
The reduction had no relation whatsoever to politics, he said, according to Interfax.
Poland, which gets about 90 percent of its oil and almost half its natural gas from Russia via pipelines, is negotiating with the U.S. on a similar agreement to host part of the missile- defense system.
Foreign Minister Radoslaw Sikorski told reporters in Warsaw on Monday the government “has no sufficient information on the extent to which the fluctuations” in Czech oil supplies “are related to international security.”
TITLE: 36.6 Posts First Annual Loss After Disruption of Supplies
PUBLISHER: Bloomberg
TEXT: MOSCOW — Pharmacy Chain 36.6, the country’s largest drugstore company, reported its first annual loss Friday after a new distribution system caused stores in Moscow to run short of some products last year.
The loss of $99.4 million compares with a profit of $34.5 million in 2006, the company said in a statement. Sales increased 65 percent to $871.1 million.
The retailer is seeking to reverse five consecutive quarters of losses after profitability was hurt by costs related to store openings and an outflow of customers from Moscow outlets when their supplies were disrupted.
This year the company is “focusing on a turnaround of its Moscow operations, executing a direct-to-manufacturer purchasing strategy, ramping up our private-label initiative and strengthening the management team,” president Jere Calmes said in the statement.
36.6 fell 1.7 percent to 921.11 rubles in Moscow trading. The shares have slid 48 percent this year, cutting the company’s market value to 7.4 billion rubles.
“There may be a turnaround this year” as the management has set a goal to return to profit on an EBITDA basis at the retail division, said Maxim Isayev, an analyst at RMG Securities. He cited a July 7 meeting with chief financial officer Dmitry Anisimov.
This year’s steps include reducing staff and closing about 100 unprofitable outlets, Isayev said, citing Anisimov.
TITLE: Step Made to Replace State Board Members
AUTHOR: By Anna Yukhananov
PUBLISHER: Special to The St. Petersburg Times
TEXT: MOSCOW — First Deputy Prime Minister Igor Shuvalov on Friday presented President Dmitry Medvedev with a list of independent directors to replace state officials on the boards of 11 fully state-owned companies, following through on a campaign pledge made by Medvedev earlier this year.
By November, the government will also compile a roster of potential nominees for the boards of at least 50 other majority state-controlled companies, Shuvalov and Deputy Economic Development Minister Alexandra Levitskaya said at a Moscow conference on independent directors later Friday, according to the ministry’s web site.
Those nominations would be put forward to companies’ annual shareholders meetings from January, Shuvalov said, Interfax reported.
“We have introduced independent directors who will vote not according to the state’s instructions but according to what they think will be best for the development of the company,” Shuvalov said in televised remarks Friday.
A number of the directors nominated for wholly state-owned companies are former government officials or former directors of other state-controlled companies, Interfax reported.
The 11 state companies whose boards will be reorganized include oil pipeline operator Transneft, oil firm Zarubezhneft, Russian Railways, Sheremetyevo International Airport and the Mortgage Housing Loan Agency.
High-profile names on the list include Rair Simonyan, chief executive of Morgan Stanley in Russia, nominated for Transneft; Vladimir Rashevsky, CEO of Siberian Coal Energy Company, nominated for Russian Railways; and Surgutneftegaz general director Vladimir Bogdanov, nominated for Zarubezhneft, according to materials prepared for the conference, Interfax reported.
Medvedev’s pledge to reduce the influence of state officials on state-run companies’ boards came in a major speech at the Krasnoyarsk Economic Forum in February, where he also pledged to fight corruption.
“I think that the majority of state officials in these companies’ boards of directors have no real reason to be there. They should be replaced by genuinely independent directors hired by the state to realize its interests,” Medvedev said, according to a transcript of his speech posted on the Kremlin web site.
At the time, Medvedev was serving as first deputy prime minister and Gazprom board chairman. Medvedev formally stepped down as Gazprom chairman last month and was replaced by Deputy Prime Minister Viktor Zubkov.
Last month, Medvedev said that state-controlled companies should retain at least one government official, who should serve as board chairman.
Replacing government officials with independent directors is a “big change” for Russia, said Andrew Somers, president of the American Chamber of Commerce in Russia.
“States tend to think that it’s natural that a state-owned body should do what the state says. However, historically and around the world, state-owned companies are much less efficient,” Somers said.
Independent directors can make state-run companies more efficient and transparent as long as they are listened to and fully engaged in the companies’ operations, Somers said.
Replacing government officials with independent directors could reduce suspicions of conflicts of interest, said Vladimir Yuzhakov, an analyst at think tank the Center for Strategic Research. Yuzhakov emphasized, however, that such a step was not enough for meaningful reform.
“If it’s a company with 100 percent government ownership, then everyone is hired with the government’s involvement. How can you talk about independent directors?” Yuzhakov said.
TITLE: Gazprom To Help Tehran
PUBLISHER: Agence France Presse
TEXT: TEHRAN — Iran and Gazprom Sunday signed an agreement for the Russian energy giant to help Tehran develop its oil and gas fields.
“The Iranian National Oil Company and Gazprom signed an agreement in which the two sides will cooperate in the development of Iran's oil and gas fields,” the oil ministry's Shana news agency said.
No financial details were given but the agreement signals Iran's determination to secure Russian help for exploiting its energy resources as Western countries pull out due to political pressure.
The head of French energy giant Total last week said it was dropping out of a multi-billion-dollar investment to develop phase 11 of the South Pars gas field, saying it was currently too risky politically to invest in Iran.
Western governments have pressured firms to cut their ties with Iran over the country's controversial nuclear programme, which world powers fear could be aimed at seeking atomic weapons — a charge vehemently denied by Tehran.
The United States has also been urging global energy giants to cut their ties with Tehran, saying that doing business sends the wrong message at a time of growing tensions in the nuclear crisis.
"Gazprom will be a cooperative partner for the Islamic Republic of Iran," Iranian state television quoted Alexei Miller, CEO of the Russian state-controlled firm, as telling President Mahmoud Ahmadinejad in a meeting.
Other issues covered in the cooperation agreement include possible participation of Gazprom in the planned peace pipeline that would deliver Iranian gas to India and Pakistan.
TITLE: Gref Sees Sberbank In Top 10 by 2013
AUTHOR: By David Schlesinger and Anastasia Onegina
PUBLISHER: Reuters
TEXT: MOSCOW — Global financial turmoil will help Sberbank join the ranks of the world’s top 10 banks by market capitalization in the next five years, CEO German Gref said in an interview.
Gref, a former economic development and trade minister, has brought in international consultants to turn around the former monopoly savings bank and make it a global player.
“The task that we have set for ourselves and that our consultants confirmed to us as realistic is to enter the world’s top 10 banks by market capitalization,” Gref said in an interview last week at Sberbank’s head office.
Sberbank, with a market capitalization of $71 billion, is ranked in the top 20 global banks now.
Gref said Sberbank, which employs a quarter of a million people and runs 22,000 offices in 10 time zones, was a unique institution that could use global market turbulence to its advantage.
“During the crisis, we feel much better, people place their savings with us because our bank enjoys the highest credibility, while firms entrust us their money to hedge against their liquidity risks,” Gref said.
Underlining the differences between Sberbank and its West European competitors, Gref said the bank held no risky mortgage-backed securities, only 3 percent of its liabilities were foreign loans and retail deposits were its main funding base.
“The bad economic situation in the world helps us because it becomes impossible for Russian firms to borrow in dollars or in euros,” he said.
“For us it is a plus because clients come to us.”
Consulting firms McKinsey and Bain plan to unveil the new strategy for a reinvigorated Sberbank in midfall. After that, Sberbank will hold a strategy roadshow for international investors with its updated operational performance targets.
Gref said the state no longer exerted pressure on Sberbank.
“We have 52 percent of all deposits in the country. No one wants to play politics with us,” Gref said.
He said Sberbank was looking at both acquisitions and organic growth to achieve its goals and was considering acquisitions in Eastern Europe and former Soviet countries as well as in Asia in the longer term.
Gref said the bank had no plans to acquire an investment banking business and would instead grow it organically. The bank will also introduce a stock option program for managers to attract and keep top talent in the country’s hot job market.
Gref, who publicly criticized the former management for issuing loans to large Sberbank shareholders who used shares in the bank as collateral for new loans, said the shareholding structure became “healthier” after some minorities sold out.
He said billionaire Suleiman Kerimov still owned 1.5 percent to 2 percent of Sberbank after selling a stake of about 4 percent in the last six months. He remained the largest single holder after the Central Bank, which has more than 60 percent.
Sberbank shares are down 26 percent since the start of the year compared with 48 percent for its main rival, VTB.
TITLE: Central Bank Boosts Interest Rates
PUBLISHER: Bloomberg
TEXT: MOSCOW — The Central Bank raised its key interest rates by a quarter of a percentage point for the fourth time this year to subdue inflation.
The refinancing rate, which is seen as a ceiling for borrowing money and as a benchmark for calculating tax payments, will be lifted to a 1 1/2-year high of 11 percent beginning Monday. The minimum rate for taking out one-day loans from the Central Bank in repurchase auctions was increased to 7 percent, the Central Bank said Friday in a statement on its web site.
The Central Bank raised borrowing costs in February, April and June to control price growth after inflation rose to a 5 1/2-year high of 15.1 percent in June, fueled by oil and gas prices and capital inflows during a decade of economic growth. The government’s 10.5 percent target will be “very difficult” to meet, Finance Minister Alexei Kudrin said last month, and the Economic Development Ministry plans to raise its forecast, Interfax reported Thursday.
“It’s another window-dressing measure to show they’re reacting to the strong inflation numbers,” said Tatyana Orlova, an economist at ING. “It’s just to give a signal to the market that they are doing something.”
Monetary policy is not effective in Russia because the country has not developed a full-fledged consumer-credit market and mortgages and credit cards are little used outside of the big cities, Orlova said. “Raising rates doesn’t have as much impact here as it does in the U.S. or the U.K.,” she added.
TITLE: Oligarchs Compete for Control of Udokan Copper Field
AUTHOR: By Nadia Popova
PUBLISHER: Staff Writer
TEXT: MOSCOW — Billionaire Alisher Usmanov’s Metalloinvest on Friday joined the race for the Udokan copper field, the country’s largest untapped source of the metal, just a few hours ahead of a bids deadline.
The stakes in the fight for Udokan in eastern Siberia, estimated to hold 20 million tons of copper reserves, are high as the country’s richest oligarchs vie to win the rights to the lucrative field in a Sept. 14 tender.
The tender will likely become another key metals battleground as Metalloinvest, half-owned by Usmanov, and Oleg Deripaska’s Basic Element, another Udokan bidder, could use the field’s assets as leverage in the multiplayer struggle for control of the country’s biggest mining firm, Norilsk Nickel.
Usmanov and Potanin, who was last week elected chairman of Norilsk, in May formed an alliance to create a global metals and mining giant on the basis of their assets in Metalloinvest, the country’s biggest iron-ore producer, and Norilsk. They also agreed to team up on Udokan.
Deripaska and Potanin’s former business partner Mikhail Prokhorov, who are also Norilsk board members, are pushing a rival merger plan with Norilsk.
Metalloinvest, whose Mikhailovsky GOK ore processing plant put in the bid, declined to provide further details Friday.
If Metalloinvest’s bid succeeds, it could join forces with state corporation Russian Technologies, which holds steel and titanium assets, a source close to Russian Technologies said, Interfax reported Friday.
Russian Technologies, led by Sergei Chemezov, a longtime ally of Prime Minister Vladimir Putin, has said it is teaming up with Potanin and Usmanov to develop Udokan as part of their plans to create a metals giant.
Analysts said that while Metalloinvest had no previous experience of copper extraction, it had access to vast financial resources.
“Metalloinvest wants to diversify its assets to avoid overexposure on iron ore,” said Alexei Morozov, a metals analyst at UBS.
Russian Technologies, which was formed last year on the basis of state arms trader Rosoboronexport, would also bring synergies to the Udokan field, in the Chita region, through its interest in neighboring Mongolia’s Erdenet copper mining project, Morozov said.
Russian Technologies said Friday that it expected to take control soon of the government’s 49 percent stake in Erdenet.
Udokan is estimated to require investment of at least $1.6 billion. The starting price for the 20-year license up for grabs has been set at $192 million.
The deposit could annually produce 187,000 tons of copper, equivalent to 15 percent of Russia’s current copper production, according to the Natural Resources Ministry.
The first tender to develop Udokan, originally discovered by Soviet geologist Yelizaveta Burova in 1949, was won by a U.S.-controlled company, Udokan Mining, in 1992. The company lost the license six years later, however, and in 2005, Udokan was declared a strategic field, excluding foreign companies from bidding for the field.
In the current tender, Morozov said the strongest bids were those from Norilsk, already the country’s biggest copper producer, and from the Russian Copper consortium, which comprises Urals Mining and Metal Company, the country’s second-biggest copper producer, state-owned Russian Railways and the government’s Development Bank.
As well as Ural Metals and Mining’s industry experience, the Russian Copper bid would be able to rely on Russian Railways for transportation infrastructure and the Development Bank for finance, Morozov said.
Norilsk already has experience with Udokan through its exploration work on the field for the State Nonferrous Metals Engineering Institute and plans to build copper smelters in the Chita region capable of processing 35 million tons of ore per year.
“Norilsk Nickel has also got one of the best credit histories among Russian companies, so it would not have any problems with money,” said Vladimir Zhukov, metals and mining analyst at Lehman Brothers.
Olga Mitrofanova, a metals analyst at Aton UniCredit, said the cost of developing Udokan could rise to as high as $2.5 billion, given the difficulties of extraction and a lack of infrastructure in the area.
Temperatures in the area where Udokan is located go as low as minus 50 degrees Celsius, at which point the cold can damage both mining machinery and the quality of the extracted ore.
The field’s developers will also face the challenge of processing both oxidized and sulfide ore, which will necessitate the building of twice as many copper smelters, and a lack in Russian companies of some of the modern technologies needed to develop the field.
Zhukov of Lehman Brothers noted that Norilsk had an advantage in technology as it has a cooperation agreement with global mining giants BHP Billiton and Rio Tinto.
If Deripaska won the bid, he would have to recruit a partner with a similar level of international mining expertise, as the Udokan field would otherwise be too difficult to explore, Morozov said.
The game afoot is also bigger than the Udokan field itself, the analysts said.
Deripaska, who controls a majority in RusAl, could get a bigger stake in a possible merger with Norilsk if he also had Udokan.
Conversely, if Usmanov won the Udokan tender, it would give him a potential trump card in pushing his merger plans for Norilsk. Usmanov and Potanin have said they would welcome a three-way merger in Norilsk with Deripaska, currently a 25 percent shareholder, while Deripaska has said he is looking to complete a two-way RusAl-Norilsk merger within a year.
A source in Interros, Potanin’s investment vehicle, said Friday that Metalloinvest’s bid for Udokan would not be a breach of the agreement between Usmanov and Potanin.
“Applying for the tender is like buying an entrance ticket, nothing more,” the Interros source said. “Our agreements are all still in force.”
Zhukov warned that whoever won the tender would be taking on quite a commitment at a time of uncertainty over future commodity prices.
“The winners will be assuming [considerable] risk, and that is why it won’t be possible to develop the field without a partnership,” Zhukov said.
Global copper prices have more than quadrupled since 2002, from $1,600 per ton to more than $8,000 this year.
TITLE: A Louis Vuitton Democracy
AUTHOR: By Garry Kasparov
TEXT: Recently we have witnessed a flurry of high-profile and contradictory statements on Russia. In a role reversal, the country’s leaders have been abnormally candid while several prominent Western politicians and pundits have lavished undeserved praise.
In an interview with a group of foreign journalists on July 1 and in response to a question about Senator John McCain’s call to exclude Russia from the Group of Eight because of Moscow’s questionable record on democracy, President Dmitry Medvedev said the issue of democracy is irrelevant to the G8. It is sad to see that some of Europe’s leaders seem to agree with him. He also accidentally told the truth by saying that while political competition could be a good thing, it must be “competition correctly built” — a phrase of which George Orwell would have been proud.
Despite broad acknowledgement that our March presidential elections were neither free nor fair, Terry Davis, the Council of Europe secretary-general, recently expressed his admiration for Prime Minister Vladimir Putin and Medvedev. His comments about “growth” and “progress” make it clear that, to the council, the importance of liberty and democracy in Russia is inversely correlated with the prices of oil and gas. Such behavior helps legitimize fraudulent elections and the dictatorial regime that runs them.
It is a pity for Robert Mugabe that Zimbabwe does not enjoy a surplus of oil and natural gas. Without those assets, his election victory is denounced as a sham and nations around the world call for him to be ousted. At last week’s G8 summit, U.S. President George W. Bush denounced Mugabe while sitting next to Medvedev, whose hold on power is similarly counterfeit. The Russian security services’ methods are more subtle than machetes, but our democracy is no more real than Zimbabwe’s. The European fantasy appears to be that oil revenue and designer boutiques will magically turn Russia into a real democracy. Oil wealth is nearly always a curse on human rights, not a blessing. Louis Vuitton and Cartier are not going to do the job that the so-called leaders of the free world have abdicated.
In a recent opinion article, former U.S. Secretary of State Henry Kissinger asked that the United States “give Russia some space.” Did he mean space to create a new class of political prisoners, to loot the country, to bully our neighbors? Is that what brought down the Berlin Wall and ended the Cold War? Is it only my dictionary that fails to distinguish between “appeasement” and Kissinger’s use of the word “engagement”?
After eight years of being given plenty of space, Putin and his team of well-trained oligarchs have assembled an efficient machine to move the wealth from every corner of Russia into private hands. While I hope and believe that the people are capable of standing up for our rights, it is unhelpful to our cause when the West provides the Putin regime with democratic credentials or acts as though democracy is, to use Medvedev’s word, irrelevant.
Instead of listening to those who are eager to stay in the good graces of the Kremlin, listen to Russia’s leaders after eight years of Putin’s total control, years in which the price of oil rose 700 percent. They speak with the candor of impunity. Medvedev has said the biggest problems facing Russia are “endemic corruption and a dysfunctional legal system.” Just days ago, Finance Minister Alexei Kudrin shared the thought that “a growth spurt in the economy of central Russia would lead to the collapse of the railway and transportation infrastructure.” These statements do not come from opposition “extremists” such as myself — “extremist” being the Kremlin’s tried-and-true label of choice for anyone who disagrees with the regime.
One glance at the headlines is enough to separate Western fantasies from Russian reality. Savva Terentyev, a musician from Syktyvkar, in the Komi republic, just received a one-year suspended sentence for a sarcastic blog post saying local police officers should be “periodically set on fire” in city squares, “like in Auschwitz.” The Russian security matrix is moving into the virtual world.
Or take this note about our vaunted new middle class. A EU-Russia Centre survey has found that 50 percent of Russia’s best-educated and most prosperous citizens would emigrate if they could. The top reasons were instability and danger from law enforcement. Some 83 percent said they did not believe they had the ability to influence the political direction of the country. It seems I am not the only one who would like to live in the Russia of which Davis and Kissinger speak so fondly. It is a shame it does not exist.
Garry Kasparov is leader of the Other Russia pro-democracy coalition and a former world chess champion. This comment appeared in the Financial Times.
TITLE: U.S. Decline Gives Moscow a Golden Chance
AUTHOR: By Alexei Bayer
TEXT: Victory Day is the only true national holiday in Russia. The pride in the country’s role in defeating Adolf Hitler is shared by Russians across social, economic and generational boundaries.
History has gone beyond the black-and-white vision of the Great Patriotic War. Its origins were murky, and both sides committed unspeakable atrocities. In war as in peace, communism was just as murderous and ruthless as Nazism — sometimes more so. Since the fall of the Berlin Wall, the full picture of the Soviet liberation of Eastern Europe has come out — and it is not a pretty one.
It may be morally untenable to condemn one side while finding excuses for the other, but it still seems that Nazi Germany presented a greater danger to the world than the Soviet Union ever did. It may be because Germany lay in the heart of Europe and was an integral part of its history, culture and civilization.
But aside from debates about which regime was more evil, a fundamental issue underlay two world wars in the first half of the 20th century — the need to contain Germany. With Germany’s rapid economic development after the 1870 unification, one state came close to establishing hegemony over Europe and upsetting the balance of power on which the modern world was based. Britain, France and Russia went to war in 1914 to cut the Kaiser’s Germany down to size, and the same nations formed an alliance to oppose Hitler by 1941, even though by then they had even less in common.
We instinctively know that for all the crimes of Stalin’s regime, in World War II, Russia struck a blow for all of humankind. It may have to do it again.
At the end of the Cold War, the United States emerged as the world’s only superpower. For the first time, the world came under the domination of a single nation. Despite a burst of prosperity following the collapse of communism, there are signs that Washington is overreaching and the system is starting to crack.
Even excluding spending on wars in Iraq and Afghanistan, the U.S. military budget is larger than the rest of the world’s combined. The Pentagon has a presence in over 100 countries. It can project military force to every corner on the globe and fight two major wars simultaneously. Its military doctrine, drafted in 1992 when U.S. Vice President Dick Cheney was defense secretary, requires the United States to fight pre-emptive wars against any rival threatening its military superiority.
For the past eight years, Washington has tried to impose its will to other nations. It has been a failure, reducing, not enhancing, U.S. influence and alarming not only former foes but even close allies. In the process, it has veered away from its own vaunted principles of democracy and freedom, as well as from its conservative, isolationist roots. It has violated international rules and laws it helped put in place after World War II and undermined its own economy, producing anger, resentment and a nasty anti-foreigner backlash. This has created a rift with the international community, which the next president may not be able heal, whichever candidate is elected.
Russia is the only nation with a nuclear arsenal to rival that of the United States. However distasteful many aspects of the tandem of Prime Minister Vladimir Putin and President Dmitry Medvedev may be for the rest of the world, Russia may yet again become a pivotal piece in the next global strategic realignment.
Russian generals are presiding over a ramshackle, corrupt force, barely able to pacify Chechnya and in no way ready to fight a modern foe.
Yet Russia’s political and military leaders should pay serious attention to alarming signals emanating from Washington since the start of the 21st century.
Alexei Bayer, a native Muscovite, is a New York-based economist.
TITLE: Town On Geopolitical Divide Seeks Solutions
AUTHOR: By Yuras Karmanau
PUBLISHER: The Associated Press
TEXT: PYATSKUNY, Belarus — When Stanislava Subach wants to lay flowers on her husband’s grave, she puts them in a plastic shopping bag and adds some stones for weight.
The package is then tossed over a metal fence and into what is now another country, to be picked up by former neighbors and placed on the grave.
The border between Belarus and Lithuania, two countries that were part of the Soviet Union, was once little more than a line on a map.
Now a fence runs along the border, representing a new version of the Iron Curtain that separated Eastern and Western Europe until communism collapsed. The autocratic regime of Belarus portrays this heavily policed border as the last line of defense against an encroaching West, represented by Lithuania, now a member of the European Union and NATO.
Here the fence cuts right through the village, separating Pyatskuny on the Belarus side from its Lithuanian half, Norviliskes. Villagers are cut off from the neighbors, the parish church and the cemetery, just a few steps but a whole world away.
People living across the fence can travel visa-free throughout Europe and work there. Those who stay in Norviliskes are paid by the EU to farm their land, and have money to fix up their homes and buy new clothes.
Those on the Belarusian side have little choice but to work on the local collective farm, and they depend on their gardens for food.
Belarus’ President Alexander Lukashenko, who permits no real economic or political reform, uses the fortified border much as the Soviet bloc once did: as a way to keep people in as much as keep them out.
The Lithuanian border police operate as any in Europe: guarding the frontier with patrol cars and video cameras, chiefly to catch smugglers and illegal immigrants. But on the Belarus side, armed guards patrol with dogs and are authorized to shoot, though they never have. Anyone trying to climb over the fence can be imprisoned for up to two years.
Villagers cannot even walk to the fence to talk to neighbors or pass parcels. Just leaving a footprint in the 10-foot-wide raked dirt track along the fence can mean a fine or 10 days in jail.
“Our hearts were left on the other side of the fence,” said Subach, 67, as she sat on the border watching a service through the open door of the Catholic church and joining in the prayers. She has not visited her husband’s grave for more than two years, nor can she attend Mass in her church on Easter and Christmas.
To travel there, she would have to journey 90 miles to the nearest Lithuanian consulate, wait in line for several days, pay about $90 for a visa (almost her entire monthly pension), travel 60 miles north to a border checkpoint and another 60 miles south before finally arriving in Norviliskes.
This is the only border village that is cut in two. As under Soviet rule, border guards and secret service agents keep tabs on everyone in the border region, and those traveling here from elsewhere in Belarus need permission.
Three men in leather jackets who introduced themselves as border guards accompanied two journalists throughout a recent visit. Some villagers said they were afraid to speak in the men’s presence.
Anton Alyantsynovich, 68, has taken the precaution of hanging a large portrait of Lukashenko, torn from a newspaper, in the entryway of his home.
“The division of the village was a tragedy for us,” said Alyantsynovich, whose home sits on the border.
Elderly villagers joke that they have lived in three countries without ever leaving home. Once part of Poland, the village was taken over by the Soviet Union in 1939, which gave one half to Belarus and the other to Lithuania.
After the Soviet collapse in 1991, the border with Lithuania became an international one, but travel rules remained relatively lax and Belarusian villagers were able to cross over to the Lithuanian side on religious holidays.
Then, in 2004, Lithuania joined the EU and NATO, and required visiting Belarusians to have visas, since it had become part of the EU’s border-free zone.
Many Belarusians would like to travel West, but the European Union says it will ease travel restrictions only after Lukashenko frees political prisoners and holds free elections.
Yanina Yanovich, 61, says she shouts across the border to communicate with her nephew, Stanislav, who lives in the first house on the Lithuanian side.
“This is one thing the government can’t stop us from doing,” said Yanovich, wearing old rubber boots and a darned sweater with the lettering U.S.A.
In Norviliskes, many of the 35 inhabitants have cell phones. Pyatskuny’s 50 people have only the phone in the grocery.
The store’s clerk, Tereza Turkevich, says she often sells food to villagers on credit. “Some survive on bread and water so they can save enough money to travel to Lithuania,” she said.
Norviliskes has a recently restored a 16th century castle that draws tourists year-round, and a summer music festival that attracts thousands.
Marja Dudowicz, 68, who lives next to the castle, sells milk to tourists to supplement her monthly pension of about $275. She also receives more than double that sum from the EU for sowing wheat, rapeseed and oats on her 37 acres of land, some of which she rents out.
“We have problems, but I can’t complain after looking across the fence at our Belarusian neighbors,” said Dudowicz. She has renovated her house and has groceries delivered to her door.
For Leokadija Gordiewicz, living in the EU means being able to serve visitors Brazilian coffee, Belgian amaretto, ham, homemade sausage and fresh brown bread. It also means being able to talk politics without fear.
Her dog is named Landsbergis, after Lithuanian independence leader Vytautas Landsbergis. She named her cat name Lukashenko, even though “I could be jailed for this in Belarus.”
Despite Norviliskes’ relative prosperity, most of the young Lithuanian villagers have left, either for Vilnius, the capital, about 50 miles away, or farther afield.
Yan Mikul, 24, grew up in the village but for the past two years has been working in Dublin, Ireland as a plumber, where, he says, he earns up to $4,500 a month.
“Only a fool would not take advantage of the opportunities of a Europe without borders,” said Mikul. He had driven back to Norviliskes in his used BMW to tend his grandparents’ graves, and was also helping to collect the flowers thrown across the fence and placing them on the graves.
Giedrius Klimkevicius, the Lithuanian businessman who restored the village’s castle with EU help, would have liked to place the stage for the music festival right on the border as a gesture of unity, but says the Belarusian authorities forbade it.
“The iron fence on the border has become a symbol of the division of two civilizations, to our deep regret,” he said.
TITLE: Finnish Wine? Yes, With Global Warming. No, With EU Rules
AUTHOR: By John Tagliabue
PUBLISHER: The New York Times
TEXT: MARIEHAMN, Finland — In spring and fall, when temperatures are erratic, Fredrik Slotte sprinkles his vineyard with water. The water freezes, encasing the vines in thin tubes of ice that protect them from temperatures far lower than freezing.
Is this Burgundy? The Napa Valley? No, it is the Aland Islands, a cluster of wooded islands in the Baltic Sea between Finland and Sweden, roughly 1,000 miles northeast of Burgundy.
Dr. Slotte, a 29-year-old physician, is one of a growing number of people in Finland and some neighboring countries who, as global temperatures climb, are turning to winemaking. The grapes he plants are hardy, weather-resistant varieties, including a cross between a Latvian and a Siberian strain.
Within a couple of years, Dr. Slotte expects to produce about 110 bottles a year — hardly a threat to the French — including a frothy, pink blush sparkling wine, what the French call vin gris, and a robust white.
But a wine business must sell what it produces, which is where Dr. Slotte has run into a problem.
The Aland (pronounced OH-lund) Islands, with a population of 27,000 Swedish speakers, are an autonomous region of Finland. And since Finland, which entered the European Union in 1995, is not considered a wine-growing country under European rules, Dr. Slotte may not sell his wine. “I give it to my family and friends,” he said.
The prohibition has to do with farm subsidies. When Finland entered the European Union, the country was divided into several zones. While farmers in northern Finland are entitled to large subsidies because of the severe weather conditions there, those in the milder south, including the Alands, receive less. But the European Union contends that the southern Finland subsidies are still too much, and it has been seeking for years to justify eliminating them.
That is where Dr. Slotte entered the picture.
No one really knows how the European Commission, the European Union’s executive body, got wind of Dr. Slotte and his vineyard, although it could have been through an article about him three years ago in Alandstidningen, the local newspaper of the islands, which featured a photo of a smiling Dr. Slotte on its front page, happily clutching a bunch of grapes.
“Finland has always had agriculture, but with an Arctic climate, it’s limited,” said Niklas Lampi, the paper’s editor. “But a commissioner suddenly said: ‘You people are growing wine, just like in France. Why do you need subsidies?’”
Being entangled in the wrangling over subsidies has taken its toll on Dr. Slotte and his neighbors.
“It was a tough time,” said Michaela Slotte, whose husband, Niklas, is Dr. Slotte’s older brother and also grows grapes. Most of the neighbors around their family farmstead, called Mattas, receive subsidies. “This is a small village. They didn’t like Fredrik being used to get rid of their subsidies,” she said.
In the meantime, Helsinki, the Finnish capital, and Brussels, where the European Commission has its headquarters, have agreed on a formula to scale back the farm aid without changing Finland’s status as a non wine-growing country, and the tempest around Dr. Slotte’s vineyard has subsided. “We used to be a fishing and farming people,” said Lampi, 33. “But no more.”
The Alands, with their sandy inlets and green fields dotted with pastel-colored wood houses and barn-red outbuildings, seem to be doing just fine as the old pursuits like farming and fishing wither away.
“We import fish from Norway nowadays,” said Daniel Dahlen, managing director of the Aland Chamber of Commerce.
Their economy is increasingly based on services linked to the ferry and shipping companies that use the Alands’ harbors to benefit from the islands’ tax-free status — a perquisite, based on the Alands’ autonomy, that was negotiated when Finland joined the European Union.
Dr. Slotte insists he is not in the wine business for the money. “It’s only a hobby,” he said. But some say he is too modest. His sparkling wine, while no Veuve Clicquot, is tasty. “It’s a shame,” said Dahlen. “It would be something for the local restaurants.”
To protect his vines from the cold, Dr. Slotte employs other tricks besides spraying them with water, as orange growers do in Florida to beat the occasional freeze. He lays insulation boards over the plants in winter and prunes the vines so that in summer the grapes lie close to the ground, where they can absorb warmth from the soil. One of his varieties, a Latvian vine, can survive temperatures as low as 22 below.
Yet Dr. Slotte’s passion has been borne aloft in part by increasingly mild winters. After studying temperatures on the Alands over the last 20 years, he found “a curve pointing upward,” he said.
“It looks like it’s becoming a more suitable climate for wine-growing,” he said, “better certainly than in the 1980s.”
So is global warming on Dr. Slotte’s side? Ingmar Eriksson is not so sure. Eriksson, 70, makes apple wine, apple brandy and apple liqueur on his 25-acre farm with its 14,000 apple trees, a short drive from Dr. Slotte’s vineyard. Apple wine is permitted under European Union rules, and Eriksson sells about 7,900 gallons of it a year, much of it tax free on the ferries and boats that ply the waters around the Alands.
Winters have been more erratic lately. This year, he said, it was warmer in January than in March, when the temperature dropped to 7 degrees one night. “If you look at history, ice ages came and went,” he said. “It’s premature to say if it’s global warming.”
He will not grow grapes, he said, and when asked whether the islands had a future as a wine-growing region, he replied: “No. Perhaps if you grew the grapes indoors.”
TITLE: Isinbayeva Vaults For New World Record
PUBLISHER: Reuters
TEXT: ROME — Russia’s world and Olympic pole vault champion Yelena Isinbayeva set a world record of 5.03 meters at Rome’s Golden Gala.
The 26-year-old cleared the bar with ease to surpass the record of 5.01 she set at the 2005 Helsinki world championships.
Her nearest rival on Friday was Poland’s Monica Pyrek, who vaulted 4.75.
Olympic and world champion Jeremy Wariner edged LaShawn Merritt to win the 400 meters and strike a blow against his American rival ahead of next month’s Beijing Games.
Wariner had a big lead in the final straight but had to hold off a strong late surge from Merritt to win in 44.36, just a hundredth of a second ahead of the 22-year-old.
Wariner gained revenge after losing to Merritt at the U.S. Olympic trials last week and at the Berlin Golden League meeting in June although his dominance of the event clearly remains under threat.
“I got out good, better than at the trials and in Berlin,” Wariner told reporters. “I knew he’d be there at the end. I had to stay relaxed and hang in there. I’ve got to work hard and cut out the mistakes from here on in.”
Merritt was not too disappointed about the defeat.
“I did what I had to do and I feel good,” he said. “I lost by one tick. You run this sort of race to get the problems out and be ready for the main ones.”
Jamaican sprinter Asafa Powell’s Olympic preparations suffered a setback when he pulled up with a groin strain at the end of his 100 meters heat although his manager told reporters that the problem was not serious.
Portugal’s Francis Obikwelu beat Derrick Atkins of the Bahamas on a photo decision in the 100m final after both athletes finished with a time of 10.04.
South African double amputee Oscar Pistorius finished seventh in the 400 meters B race with a time of 46.62 seconds, still short of the Beijing qualifying mark of 45.55.
It was his second attempt after being cleared to compete with able-boded athletes by the Court of Arbitration for Sport (CAS) in May.
Kenyan teenager Pamela Jelimo stayed on course for the Golden League jackpot by beating world champion Janeth Jepkosgei in the 800 meters.
Jelimo, 18, clocked 1:55.69 to beat fellow Kenyan Jepkosgei by over three seconds and claim the third of the six series wins needed for a share of the $1 million prize.
Croatia’s Blanka Vlasic is the only other person still in with a chance of the big prize after she won the women’s high jump with a leap of two meters.
Cuban 110 meters hurdles world record holder Dayron Robles, who last month ran 12.87 seconds to beat the previous mark set by Chinese Olympic champion Liu Xiang, blew away the field in his event with a 13.08 run.
Panama’s Irving Saladino, the world long jump champion, leapt 8.3m to top the field in his comeback from a knee injury.
Finland’s javelin world champion Tero Pitkamaki, who accidentally speared French long jumper Salim Sdiri here last year, triumphed too with a 87.7-meter throw.
Allyson Felix, the twice 200m world champion, cruised to victory in the women’s 400m race with a time of 50.25.
The next Golden League meeting is in Paris on July 18.
TITLE: Sarkozy Scores Diplomatic Coup in Paris
AUTHOR: By John Leicester
PUBLISHER: The Associated Press
TEXT: PARIS — The leaders of Syria and Israel, countries with a bitter enmity, as well as the Palestinian and Lebanese presidents together marked France’s Bastille Day on Monday in a diplomatic coup for French President Nicolas Sarkozy.
Other leaders from Europe, the Middle East and North Africa, and U.N. Secretary-General Ban Ki-moon, also attended the traditional Bastille Day parade where troops in their finery marched down the tree-lined Champs-Elysees, and jets trailing smoke of red, white and blue roared overhead.
Syrian President Bashar Assad, Israeli Prime Minister Ehud Olmert and the more than a dozen other leaders stood on the official grandstand, looking up the Champs-Elysees toward the Arch of Triumph. The leaders had stayed over following a summit Sunday that launched an unprecedented Union for the Mediterranean, a brainchild of Sarkozy’s aimed at securing peace across the restive region.
Forty-three nations, including Israel and Arab states, agreed at the summit to work for a Middle East free of weapons of mass destruction in launching the Mediterranean Union.
Deep divisions still slice through the region and its population of 800 million people, and surfaced during Sunday’s summit, highlighting how hard it will be to parlay the meeting’s good will and words into real progress.
Assad refused to shake Olmert’s hand, and Morocco’s king snubbed the meeting attended by the president of rival Algeria. It was also unclear how the countries would enforce their pledge to “pursue a mutually and effectively verifiable Middle East Zone free of weapons of mass destruction.”
Still, Sarkozy reveled at having brought so many leaders to the same table for the first time. His office brushed off critics’ complaints that Assad should not have been allowed to stay for Monday’s military ceremonies because of Syrian human rights failings and suspicions that Syria was implicated in a 1983 bombing in Lebanon that killed 58 French soldiers.
Campaign group Reporters Without Borders called Assad an “enemy of press freedom” whose government is guilty of “ruthless censorship.”
Assad, in dark glasses, showed no emotion as French actor Kad Merad read aloud an extract from the Universal Declaration of Human Rights in front of the grandstand where the leaders were seated.
TITLE: Brewers of Budweiser, Stella Artois Become New Beer Buddies
PUBLISHER: The Associated Press
TEXT: ST. LOUIS — Anheuser-Busch, the maker of Budweiser and Bud Light, has agreed to a takeover by a giant Belgian brewer, a union that creates a global beer leader and brings to an end one of the most iconic names in American business.
The board of directors of Anheuser-Busch on Sunday accepted a sweetened $52 billion takeover offer from Belgian brewer InBev, according to a joint press release. The deal, which is subject to shareholders’ and regulators’ approval, would create the world’s largest brewer and create the fourth-largest consumer product company worldwide.
“This combination will create a stronger, more competitive global company with an unrivaled worldwide brand portfolio and distribution network, with great potential for growth all over the world,” Carlos Brito, CEO of InBev, said in the statement.
For InBev, the maker of Stella Artois and Beck’s, the deal gives the company an iconic beer brand — Budweiser — to sell into emerging markets where it is already established.
TITLE: Pele Rejects ‘Slave’ Tag For Today’s Footballers
PUBLISHER: The Associated Press
TEXT: STOKE, England — Pele dismissed FIFA president Sepp Blatter’s comment that soccer players are often bound to teams in a form of “modern slavery.”
Blatter spoke in response to Cristiano Ronaldo’s standoff with Manchester United over a move to Real Madrid, saying players seeking a transfer should be allowed to leave. Blatter told Sky News that “in football there is too much modern slavery.”
“You are a slave if you work without a contract or you don’t get paid,” said Pele, a three-time World Cup winner with Brazil. “If you have a contract then in any job you have to finish the contract. I think that when he finishes his contract, then he should be free to go wherever he wants to go.”
Ronaldo has almost four years left on his contract. While no transfer request has been submitted, the 23-year-old player of the year in England has said he would like a transfer to Madrid.
Pele was in Stoke on Saturday for a charity game in support of a foundation by former England goalkeeper Gordon Banks.
At the 1970 World Cup in Mexico, Banks stopped a shot by Pele that is considered one of the greatest saves in soccer history.
TITLE: Jolie Gives Birth To Twins
PUBLISHER: Reuters
TEXT: NICE, France — Hollywood actress Angelina Jolie has given birth to twins, a boy and a girl, her doctor at a hospital in southern France said on Sunday.
Oscar winner Jolie, 33, had the twins by caesarean section on Saturday evening at the Lenval hospital on the glamorous Promenade des Anglais waterfront drive in Nice. Actor Brad Pitt, the twins’ father, was at her side.
The girl, named Vivienne Marcheline, weighed 2.27 kilograms while her brother, Knox Leon, weighed 2.28 kg. Marcheline was the first name of Jolie’s mother, also an actress, who died of cancer last year.
“The parents and the babies are in excellent health. Everything is fine,” Jolie’s doctor, Michel Sussmann, told Reuters. He said the c-section had been planned for a long time but the date was brought forward “for medical reasons.”
The doctor said Jolie was under epidural and was able to speak to a “perfectly calm” Pitt, 44, during the birth.
“They were very happy,” Sussmann said. Asked what Pitt was doing during the birth, he said: “He was looking at what I was doing. He was my assistant. No, that’s a joke.”
Jolie arrived at the Lenval hospital in late June by helicopter from the Provence villa where she and Pitt had been staying with their four other children: Maddox, Pax, Zahara and Shiloh.
TITLE: Facing Unenviable Choice, Swimmer Puts Olympics Before Cancer Surgery
AUTHOR: By Paul Newberry
PUBLISHER: The Associated Press
TEXT: ATLANTA — When Eric Shanteau touched the wall second at the U.S. Olympic trials, he was overcome by the joy of reaching a lifelong goal.
The celebration didn’t last long.
Shanteau had barely locked up his trip to Beijing when he was forced to deal with a gut-wrenching choice: Should he have surgery for the testicular cancer hardly anyone knew about? Or, should he put it off for another month so he could swim at his first Olympics?
Shanteau chose the Olympics. Surgery will have to wait.
In an exclusive interview with The Associated Press, Shanteau said he learned just a week before leaving for the U.S. Olympic trials that he has cancer.
“I was sort of like, ‘This isn’t real. There’s no way this is happening to me right now,’” he said by telephone from the team’s pre-Beijing training camp in California. “You’re trying to get ready for the Olympics, and you just get this huge bomb dropped on you.”
His doctors cleared him to compete at the trials in Omaha, Neb., determining he wouldn’t be at great risk to delay treatment. Then, Shanteau surprisingly made the team in the 200-meter breaststroke, finishing second ahead of former world-record holder and heavy favorite Brendan Hansen.
He’s putting off surgery until after the Olympics because it would keep him out of the water for at least two weeks, ruining his Beijing preparations. The 24-year-old Georgia native will be monitored closely over the next month by U.S. Olympic team doctors and vows to withdraw if there’s any sign his cancer is spreading.
“If I didn’t make the team, the decision would have been easy: Go home and have the surgery,” said Shanteau, who grew up in suburban Atlanta. “I made the team, so I had a hard decision. But, by no means am I being stupid about this.”
Still, there are no guarantees.
“With any cancer, you want to find it early and treat it early for the best outcome,” Dr. Brett Baker, the Austin, Texas-based urologist who delivered the news to Shanteau, said Friday. “That was my recommendation. It’s difficult to say in his scenario what to expect. The risk, of course, is that time is an opportunity for disease progression.”
Seeking out advice from team doctors and other outside experts, Shanteau came up with his own plan. He will have his blood tested once a week and a CT scan done every two weeks through the Olympics, hoping that will be enough to keep a handle on the disease.
“If something comes up abnormal,” he said, “then that’s kind of a barrier I shouldn’t cross.”
In most cases of this type, Baker said it’s impossible to know for sure exactly what type of testicular cancer the patient has — or, even the very slight chance that it’s not cancer at all — until the tumor is removed surgically for a biopsy.
“Sometimes, the best decisions are not always exactly the way the doctor sees it,” Baker said. “I don’t consider him crazy at all. I think if he’s happy and content with playing it out this way, that’s the most important thing.”
If Shanteau can’t compete, the Americans would add Scott Usher as their second swimmer in the 200 breast. The third-place finisher in Omaha was told of Shanteau’s condition the day after the race and encouraged to keep training.
“I’ve been trying to play in my head what I would do in his situation,” Usher said Friday before heading to a solo training session at Purdue University. “I don’t know if I would have taken the same route he has, to be honest. ... Cancer is not something you want to mess around with.”
It was found after Shanteau noticed an abnormality and was finally persuaded by his girlfriend to see a doctor in Austin, where he trains on a star-studded team that includes Hansen, Ian Crocker and Aaron Peirsol.
On June 19, exactly one week before he was scheduled to leave for the trials, Shanteau heard that awful word.
Cancer.
“It almost numbed me,” he said. “I’ll remember that day for the rest of my life. Talk about a life-changing experience. That’s as big a one as you can have, I think. You’re changed for the rest of your life.”
If everything had gone according to the expected script in Omaha, Shanteau would have already gone through surgery and be on the road to recovery. But the improbable happened in the 200 breaststroke, where Hansen — considered a lock to make the team — faded badly on the final lap. Scott Spann powered by to win the race, and Shanteau passed Hansen as well to claim the second spot on the team.
Shanteau was going to the Olympics.
But his thoughts quickly shifted to the cancer.
“A lot of people kept asking me after that race, ‘What was going on? We thought we would get a little more reaction out of you,’” he said. “That kind of made it a little bittersweet. It went well. I made the team. Then I had to go back and deal with reality.”
Only a few close friends and family knew about Shanteau’s condition before the Olympic trials. He decided to go public with his story because he hopes to inspire others with cancer.
According to the National Cancer Institute, testicular cancer is relatively rare, accounting for 1 percent of male cancer cases in the U.S. It’s often diagnosed in younger men. About 8,000 men are diagnosed and 390 die from the disease each year.
The cancer is usually slow to spread and highly treatable, but follow-up care is extremely important because of the risk of recurrence, the NCI said. Surgery to remove the affected testicle is the most common form of treatment.
Mark Schubert, head coach and general manager of the U.S. team, supports Shanteau’s decision to swim in Beijing.
“Eric is handling this situation with courage and poise, and his decisions to compete at the Olympics and to share his story for the benefit of others, are evidence of that courage,” Schubert said. “While we are hopeful that he will be able to compete, Eric’s heath remains the absolute top priority.”
Shanteau’s camp already has heard from the agent of Lance Armstrong, who overcame the same disease and won the Tour de France seven straight times.
TITLE: Miss Venezuela Wins Miss Universe
PUBLISHER: The Associated Press
TEXT: NHA TRANG, Vietnam — Miss Venezuela was crowned Miss Universe 2008 on Monday in a contest marked by the spectacle of Miss USA falling down during the evening gown competition for the second year in a row.
An elated Dayana Mendoza received the crown from her predecessor, Riyo Mori of Japan, and then prepared to meet a gaggle of reporters. Miss Venezuela, 22, was once kidnapped in her homeland and says the experience taught her to remain poised under pressure.
Tension got under the skin of Crystle Steward of Texas, the second Miss USA in a row to fall down during the Miss Universe pageant. She tripped on the train of her bejeweled evening gown as she made her entrance.
During the 2007 Miss Universe contest in Mexico City, Miss USA Rachel Smith also tumbled during the evening gown competition and became an unintended star on YouTube.
TITLE: Sudan’s President Charged With Genocide
PUBLISHER: Reuters
TEXT: THE HAGUE — The International Criminal Court’s (ICC) prosecutor on Monday charged Sudan’s president with genocide and crimes against humanity in Darfur in a move Khartoum warns could set fire to the region. ICC Prosecutor Luis Moreno-Ocampo asked the court for an arrest warrant for President Omar Hassan al-Bashir, the first sitting head of state to be indicted by an international court since Liberia’s Charles Taylor and before that Yugoslavia’s Slobodan Milosevic.
“Moreno-Ocampo has presented evidence today showing that... Bashir committed the crimes of genocide, crimes against humanity and war crimes in Darfur,” the prosecutor said in a statement.
Fearing an upsurge in violence from an enraged Bashir and emboldened rebels in Darfur, aid organizations have tightened security in Sudan in recent days.
Khartoum, which is not a party to the court, said it did not recognize the move, but pledged to continue with peace moves in Darfur and said it would protect United Nations staff in Africa’s largest country.
Fearing an upsurge in violence from an enraged Bashir and emboldened rebels in Darfur, aid organizations have tightened security in Sudan in recent days.
Sudan looks set to seek Chinese, Russian and African support at the United Nations to help block any warrant.
The new Darfur case could embarrass China — Khartoum’s biggest arms supplier and a major investor in its oil industry — just weeks before the start of the Beijing Olympics.
Darfur is home to the world’s largest humanitarian operation and officials have also expressed concern an indictment could further stall the deployment of a U.N.-funded peacekeeping operation.
Washington accuses the Khartoum government of genocide in Darfur, a charge it flatly denies.
Thousands of protesters chanted anti-American slogans as they rallied in Khartoum on Sunday to protest against a potential arrest warrant, which Sudanese Justice Minister Abdel Basit Sabderat told the crowd would ignite his country.
“This indictment may well shut off the last remaining hope for a peaceful settlement for the country,” said Andrew Natsios, former U.S. special envoy for Sudan.
The ICC was set up in 2002 as the world’s first permanent war crimes court. As well as Darfur, it is investigating Uganda, Central African Republic and the Democratic Republic of Congo but has no police force and only has four suspects in custody.