SOURCE: The St. Petersburg Times
DATE: Issue #1394 (58), Tuesday, July 29, 2008
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TITLE: TNK-BP Fallout Hits Russian Stocks
AUTHOR: By Miriam Elder
PUBLISHER: Staff Writer
TEXT: MOSCOW — With its chief executive scuttling off to a secret location, dozens of foreign employees flooding out of the country and the threat of impending court battles, TNK-BP’s messy shareholder dispute has helped push Russia’s indexes into a downward spin.
The location of CEO Robert Dudley remained unknown over the weekend to some of his closest colleagues, who insisted that the veil of secrecy would be lifted once he had succeeded in setting up the logistics to run Russia’s third-largest oil company from abroad.
“No one is pretending it’s going to be perfect,” said one source inside the company. “But it was way less than perfect when he was here.”
Faced with a protracted battle with migration authorities in attempts to renew his visa, inspections by labor agencies and a prosecutors’ campaign that continued into the weekend, Dudley fled the country on Thursday citing “sustained harassment.”
The British Foreign Office weighed into the dispute on Friday, saying in a statement issued by its embassy in Moscow: “We will continue to stress to the Russian government the importance of a resolution between the shareholders in full accordance with the rule of law.”
Yet a spokesman for Prime Minister Vladimir Putin, who blessed the signing of the TNK-BP deal as president in 2003, said the state would not intervene in the dispute.
“The state remains aside from this dispute and doesn’t see itself as a part of this dispute,” Dmitry Peskov said by telephone Sunday. “It still doesn’t have the slightest intention to interfere in this.”
Analysts continue to believe that the clashes inside TNK-BP, 50-50 owned by BP and the AAR consortium that groups a team of billionaire Russian shareholders, will be resolved when a state-run firm is ready to buy into the venture.
“Just as TNK-BP’s creation was only possible with the Kremlin’s indirect participation, so it is likely that the current dispute over ownership will only be resolved with the Kremlin’s intervention,” Roland Nash, chief strategist at Renaissance Capital, said in a research note Friday.
Peskov, Putin’s spokesman, dismissed claims by the British Foreign Office that the dispute was “detrimental to the British and Russian economies and to the global energy market.”
“I don’t see any way it could harm Russia’s economy,” Peskov said, noting that the firm, which released stellar first-half results last week, was continuing its operations.
The slide in Russia’s markets on Friday, prompted foremost by Putin’s harsh dressing-down of mining giant Mechel late Thursday, was “temporary,” Peskov added.
Yet investors and analysts appeared to think otherwise. Nash, of RenCap, made some of the harshest statements, arguing that the scandal around Mechel and TNK-BP, as well as a slide in oil prices, “has finished the equity market’s reputation as a safe haven.”
William Browder, the head of Hermitage Capital Management, once the biggest Russia-focused investment fund until he was denied entry into the country in November 2005, said in an interview with the BBC over the weekend that the country was no longer safe for investment.
“At this point, you have no rule of law, no property rights and the prices are high — that’s kind of a sucker’s bet,” he said.
Analysts were split on whether Dudley’s departure from the country would force BP and AAR into broaching the possibility of compromise.
One source inside TNK-BP acknowledged the difficulty Dudley would face in running the firm from abroad. “Operationally, logistically, we don’t know yet how it will work,” the source said.
Another source said Dudley would issue directives by e-mail, despite a wide-ranging spyware campaign that has forced some TNK-BP employees to regularly switch mobile phone numbers and limit their use of e-mail.
“It was happening when he was in the company,” the source said. “Everything was overheard, screened and listened to — and it still is.”
Upon leaving Russia on Thursday, Dudley went to an interim location known to some inside the company, before leaving for an undisclosed location that remains secret to most, the source said.
Dudley would not work from London, BP and TNK-BP officials said Sunday.
“Bob’s decision to leave Moscow was a personal decision,” BP spokesman David Nichols said by telephone from London.
“He’s not in the BP office, he doesn’t work for BP.”
BP is due to release its first-half results on Tuesday. TNK-BP accounts for one-quarter of BP production and one-fifth of its reserves.
AAR, the consortium that groups Mikhail Fridman’s and German Khan’s Alfa Group, Viktor Vekselberg’s Renova and Len Blavatnik’s Access Industries, has been seeking Dudley’s ouster arguing that he has run the firm in the interests of BP.
AAR CEO Stan Polovets said he believed that BP was behind the decision to evacuate Dudley. “This is all theatrics. Bob Dudley has not spontaneously gotten up and left,” Polovets said. “It was well orchestrated and planned.”
AAR would continue to push for an “independent CEO” who represents both sides’ interests in TNK-BP, Polovets said.
“We are prepared to have Viktor Vekselberg and German Khan step down when the new CEO joins the company. Does this sound like an attempt to usurp control?” he added.
TITLE: Prime Minister’s $6Bln Lecture Tames Mechel
AUTHOR: By Nadia Popova
PUBLISHER: Staff Writer
TEXT: MOSCOW — Embattled coal and steel major Mechel, which had $6 billion wiped off its stock price after being accused by Prime Minister Vladimir Putin of price-fixing, on Friday said it was ready to cooperate with the government.
In a terse, conciliatory statement, the company said it agreed to help the government in combating rising prices, though it stopped short of promising to cut its coking-coal prices outright.
“Mechel is ready for cooperation with federal authorities of the Russian Federation and, if required, will provide complete information on any arising questions,” the statement said. “Mechel shares the [government’s and industry’s] concerns ... in regard to the recent growth in prices for steel products and raw materials.”
Putin’s comments, in which he called for a special investigation of Mechel and appeared to chastise the company’s owner, billionaire Igor Zyuzin, for his absence from a metals industry meeting, led some observers to draw parallels with the case of Mikhail Khodorkovsky’s oil firm, Yukos. The company was bankrupted, and Khodorkovsky jailed after he publicly challenged Putin over corruption and pipeline routes.
But Putin’s spokesman, Dmitry Peskov, on Sunday dismissed the comparison, saying the government was satisfied with Mechel’s conciliatory stance and had no conflict with the company beyond wishing to see it fix anti-monopoly violations.
“No Yukos parallels are relevant with Mechel,” Peskov said. “Yukos was charged with lots of criminal cases. … [The] measures against Mechel are taken not because it is Mechel as a concrete company, but just because the company committed violations.
“We are satisfied with Mechel’s intentions to cooperate with the state,” Peskov said. “But everything will depend on how this cooperation will develop in practice now.”
Government ministers said Putin’s comments on fighting price-fixing would lead to changes in the metals industry.
Deputy Economic Development Minister Andrei Klepach on Friday said: “Serious decisions would follow. … This is a turning point for the development of Russia’s metals market.”
On Saturday, Industry and Trade Minister Viktor Khristenko said he hoped that the dispute would be settled soon.
“I think the situation will be solved soon, after all the participants of this chain — suppliers and consumers — have built normal relationships based on long-term contracts,” Khristenko told Channel One television. “It is not politics, it is just a situation in which the anti-monopoly bodies had to react on the statements of the metal producers about the incompetent actions of a resources supplier.”
In Moscow on Friday, Mechel’s shares on the RTS plunged 33 percent as both local bourses fell more than 5 percent.
Putin’s comments on Thursday, which came amid soaring metals prices, inflation and demand for construction materials, sent Mechel’s New York-listed American Depositary Receipts down 38 percent, as jittery investors feared that the company could face further sanctions.
At his meeting with metals tycoons on Thursday, Putin said the Federal Anti-Monopoly Service and maybe the Investigative Committee at the Prosecutor General’s Office should look closely into Mechel’s pricing policies.
TITLE: Press Institute Ordered by Court to Leave Premises
AUTHOR: By Ali Nassor
PUBLISHER: Special to The St. Petersburg Times
TEXT: The Regional Press Institute (RPI) was ordered to leave its premises in the House of Journalists by the St. Petersburg Arbitration Court last Tuesday, after ruling in favor of City Hall’s Property Committee (KUGI).
KUGI originally sued RPI over non-payment of rent in November, but the case hinged on a disputed lease. RPI has vowed to appeal the eviction order and has said it is being attacked for political reasons.
KUGI had sued the independent media training and monitoring organization for what it initially said was more than 1.7 million rubles ($73,000) worth of unpaid rent for an office in the House of Journalists on 70 Nevsky Prospekt.
The claim was not only reduced to about 700,000 rubles ($30,000) in the middle of the case, but it was also determined that it is the Moscow-based commercial organization, the Press Development Institute (PDI), that formerly rented offices in the building, which is obliged to make the payments.
Other defendants in the dispute include the St. Petersburg Association of Publishers and Rossiiskaya Gazeta newpaper, both of which occupy space vacated by PDI.
“They rushed to court and had no time to get their records in order and so ended up suing the wrong party using the wrong evidence,” said RPI’s lawyer Yury Novolovsky, adding “it’s more than just a rent dispute.”
“We are going to appeal the eviction ruling anyway… We will base our arguments on evidence proving malice and the prevalence of political and commercial interests against the outspoken non-commercial media organization occupying a space in a commercially viable building in the city center,” said Novolovsky.
RPI rents a 50 square-meter office in the 3,000 square-meter building. It occupies a room which is only one of the three formerly leased to Moscow’s PDI, leaving the other two for the St. Petersburg Association of Publishers and Rossiiskaya Gazeta.
RPI director Anna Sharogradskaya said that the institute used to pay rent to the House of Journalists until it was established that the institute should make direct payments to KUGI.
“The House of Journalists returned all last year’s 8-month payments to us, which in turn we paid directly to KUGI,” she said.
“We have been making direct payments to KUGI ever since, and the records show that we did not owe anyone anything in the past,” she said.
“I look at the ruling as nothing more than a slander on us, tarnishing our image as people who failed to pay rent.” Sharogradskaya said,
“In fact, Smolny [City Hall] want to get rid of us because as a platform for the liberal media and human rights organizations we are a thorn on their side,” she said, backing her assertion by citing the fact that the other defendants were not mentioned in the final ruling.
“We almost know nothing about the fate of other defendants, as their case seemed to have been overshadowed by my client’s,” said Novolosvky. “Professional ethics bar me from talking about them.”
The building has been home to RPI since 1995, on the invitation of the House of Journalists, after a two-year stint at Dom Kino on 12 Karavannaya Ulitsa. It was founded as the Russian-American Press and Information Center in 1993, but latter changed its name to the North-West Institute of Press Development.
It has repeatedly crossed swords with Governor Valentina Matviyenko’s administration over democracy, human rights violations and the freedom of press.
“Before Matviyenko came to power [in 2003], everything was relatively calm for us,” said Sharogradskaya.
TITLE: Navy Announces Plans For 6 New Carriers on Navy Day
AUTHOR: By Simon Saradzhyan
PUBLISHER: Staff Writer
TEXT: MOSCOW — Russian armed forces will commission half a dozen aircraft carriers and the necessary support ships, a senior commander said Sunday during Navy Day celebrations.
Six aircraft-carrier groups would be deployed for operations with the Northern and Pacific fleets, Admiral Vladimir Vysotsky told reporters in Moscow.
“Everything should be included in the system, including aircraft carriers,” Vysotsky said before a Navy Day parade in St. Petersburg. “We have designated this a maritime aircraft-carrying system.”
Vysotsky said the planned systems would be different from the current aircraft-carrier groups as “they would operate in close interaction” with Russia’s military-satellite system as well as Air Force and air-defense assets.
He said construction would begin sometime after 2012. The Navy has not taken delivery of an aircraft carrier since the breakup of the Soviet Union, and the shipyard that produced the carriers in Soviet times is now located in Ukraine.
The Navy currently operates one aircraft carrier, the Admiral Kuznetsov. The vessel, which was initially designed to carry vertical takeoff and landing Yak fighters but was then refitted to allow it to operate heavier and longer-range Su-33 warplanes, is currently deployed with the Northern Fleet.
Over the shorter term, the Navy plans to modernize the Borey-class strategic nuclear submarines, the commander said. The Sevmash shipyard in Severodvinsk, in the Arkhangelsk region, is currently building three such submarines, but their completion has been delayed by test failures of the Bulava ballistic missile, its main weapon.
Vysotsky said the first three submarines would be commissioned without significant changes to the initial design, but the fourth will undergo upgrades. He said the Borey class submarines would be the mainstay of the naval component of Russia’s strategic nuclear forces until 2040.
Veterans took to the streets across the country Sunday to celebrate the Navy holiday. In Moscow, some 3,000 police officers were deployed to areas popular with the celebrating sailors, many of whom drank their share before going for swims in the city’s fountains.
Vysotsky and other senior commanders were on hand for a couple of parades of naval units in St. Petersburg, one on land and the second involving a line of warships on the Neva River.
Elsewhere, warships lined up for sail-bys at the ports of Vladivostok and Petrovopavlovsk-Kamchatsky. Salutes were fired in St. Petersburg, near which a major Baltic Sea fleet facility is located, and in Severomorsk, where the command of the Navy’s most powerful fleet, the Northern Fleet, is located.
The country’s Black Sea Fleet fired a salute in the port of Sevastopol in Crimea, which Russia leases from Ukraine, drawing an angry response from the local city administration.
The Ukrainian government has repeatedly said it will not renew Russia’s lease when it expires in 2017. On Sunday, Vysotsky repeated earlier statements from the Russian side that it will seek an extension on the lease.
A number of activists from Russia’s nationalist Eurasian Union of the Youth staged a rally outside the Ukrainian Embassy in Moscow to protest Ukraine’s resolve to end the Black Sea Fleet’s stay in Crimea, Interfax reported.
TITLE: Zenit Fined For Racism
TEXT: NYON, Switzerland (AP) — UEFA Cup champion Zenit St. Petersburg was fined $58,000 by UEFA on Thursday for racist behavior by its fans.
The fine was for racist chants directed at players from Marseille during a UEFA Cup match in Russia in March.
Zenit fans also broke UEFA rules by unveiling a political banner and setting off fireworks.
The Russian champions won the UEFA Cup in May, beating the Rangers 2-0 in the final at Manchester, England.
UEFA was considering further charges against Zenit after some of its fans invaded the field at City of Manchester Stadium at the end of the match.
TITLE: Hunger Strike
Continues
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Eight local investors who have been cheated out of their properties are continuing a hunger strike aimed at getting City Hall to intervene, as city officials remain adamant that disputes should be settled in court.
The hunger strike is already taking a physical and emotional toll on its participants, who have begun to faint and display other dangerous symptoms.
Since the start of the strike on July 21, five people have been sent to local clinics, with two investors confined to hospital. One of the hunger strikers, whose weight dropped by 7 kilograms over the course of the protest, has begun to eat on doctor’s orders but has stayed with the protestors at the local offices of the opposition Yabloko party.
The investors’ main demand is a face-to-face meeting with Governor Valentina Matviyenko, who so far has made it clear that she is not going to get involved. No representative of City Hall has met with the hunger strikers.
St. Petersburg ombudsman Igor Mikhailov urged Matviyenko last week to visit the hunger strikers but the governor ignored the plea.
Natalya Yevdokimova, an advisor to Sergei Mironov, head of the Federation Council, and former head of the Social Affairs Commission of the St. Petersburg Legislative Assembly, said the scam schemes that were used to fool the investors had very much in common and argued that such scams would never have existed if City Hall had possessed the political will to prevent them.
“The city holds a tender and awards the winning construction company with a plot of land; the investor signs a contract with the City Property Management Committee that allows to attract the private investors’ money,” Yevdokimova explains. “Then, as construction begins, these investors are asked for more money after it suddenly turns out that the costs have greatly increased. Those who agree pay double in the end, while those who do not end up losing everything, and their properties are then sold to a third party.”
Investors complain that even on the occasions when they win court cases and are awarded financial compensation, the sums of money are insignificant.
“We are offered something similar to what we paid five or seven years ago, without factors like inflation and the rapid increase of market prices for real estate being taken into account,” said hunger striker Svetlana Fait, who shares a room in a communal apartment with her mother and daughter.
In 2003, Fait sold her parents’ flat in another town, and used the 802,000 rubles (now $35,0000) she made on the sale to pay for a one-room apartment in a building that was being built at the time.
“This money had covered the whole cost but I never received the keys for my apartment,” Fait said. “In 2007, the price of an identical one-room apartment exceeded 2 million rubles ($85,000), as estimated by independent experts. Finally, this year, when the prices went up again, vice-governor Lyudmila Kostkina, [who chairs a special commission that is supposed to deal with such cases], ruled that I should get this money.”
But, Fait said, the promising-sounding ruling is useless.
“It does not say who has to pay me; neither does it say when and how should I be paid. Perhaps they mean that with this paper in my hands I can go round begging in the hope that somebody feels generous.”
TITLE: Alexy Leads Anniversary Service in Kiev
PUBLISHER: Combined Reports
TEXT: MOSCOW — Police blocked hundreds of Orthodox believers from attending a service led by Russian Orthodox Church Patriarch Alexy II at a monument to St. Vladimir on the banks of the Dnepr River in Kiev on Sunday.
The service was a part of the celebrations of the 1,020th anniversary of the conversion of Kievan Rus to Christianity by Vladimir.
Ukrainian law enforcement officers told RIA-Novosti on Sunday that the believers were cordoned off to avoid a stampede, but the news agency reported that there appeared to have been enough free space near the monument.
The celebration again highlighted growing tensions with Ukraine, which declared a pro-Western course after the 2004 Orange Revolution.
Ukrainian President Viktor Yushchenko, who has called for the establishment of an independent Ukrainian Orthodox Church, did not come to meet Alexy as he arrived at Borispol Airport on Saturday.
Yushchenko appealed on Saturday to the leader of the world’s Orthodox believers, Patriarch Bartholomew of Constantinople (now Istanbul), to allow the creation of a Ukrainian church, a move Bartholomew suggested that he was ready to consider.
On Sunday, Alexy warned that the move was an attempt to drive a wedge between the Orthodox believers in Russia and Ukraine.
“By raising doubts about what has been undisputable for centuries, we endanger our common future,” he said, Interfax reported.
He added that the “unity of Russian Orthodox Christianity does not interfere with the full-fledged lives of sovereign states that are heirs of Kievan Rus.”
An independent Orthodox church was formed in Ukraine after the 1991 collapse of Soviet rule, but it remains unrecognized by any other Orthodox church. The Ukrainian branch within the Russian Orthodox Church remains its sole representative.
On Sunday, Alexy said the Russian Orthodox Church “had created all conditions” necessary for its Ukrainian branch to minister to local believers.
The tension surrounding church divisions has unfolded against the backdrop of disputes between Moscow and Kiev over gas prices, Ukraine’s drive to join NATO and steps to remove Russia’s Black Sea Fleet from Crimea by 2017.
Yushchenko has long declared a single, independent and fully recognized Ukrainian Orthodox Church as vital to forming the country’s national identity.
“I believe any sort of division among Ukrainian believers will be short-lived. I believe we will achieve our dream,” Yushchenko told tens of thousands of clerics, parishioners and officials in the rain outside Kiev’s 11th-century St. Sofia Cathedral on Saturday.
In his remarks, Bartholomew referred to the historical difficulties of Orthodoxy in Ukraine, including the “annexation” of both the Ukrainian Church and state by Russia under Peter the Great in the late 17th century.
On Sunday, Russian television showed dozens of people shouting “Alexy is our patriarch” in Kiev.
Alexy only agreed to attend after securing an agreement that the independent, Kiev-based church would not take part in the ceremonies.
SPT, Reuters
TITLE: Russia Plans Version Of ‘The Office’
AUTHOR: By Anna Malpas
PUBLISHER: Staff Writer
TEXT: MOSCOW — Slimy boss David Brent and his beleaguered staff are set to move to Russia after Channel One signed a deal with BBC Worldwide to make a local version of hit comedy-drama “The Office.”
BBC Worldwide announced Thursday that Channel One would produce 24 episodes of the show with its affiliated production company Krasny Kvadrat, or Red Square. The original show was only 12 episodes long, plus two Christmas specials, so Channel One has the right to develop new story lines.
The statement did not say how much the deal was worth, and a Channel One spokeswoman said no one was available to comment Friday. The channel is currently airing the U.S. version of “The Office” in a late-night slot.
BBC Worldwide spokeswoman Cristina Dunn said in e-mailed comments that it was “far too early to talk about the production itself.”
The BBC has previously sold entertainment show formats to Russian television channels, including “Strictly Come Dancing” and “Great Britons,” which has been adapted by Rossia television as “Name of Russia.”
The Office, whose first series aired in Britain in 2001, has already been remade in the United States, France and Canada. A Chilean version is due to air next month. The original show has been sold to more than 70 countries but has never been broadcast in Russia.
TITLE: A Balance Between Growth and Environment
AUTHOR: By Maria Antonova
PUBLISHER: Staff Writer
TEXT: MOSCOW — Every summer, the 15,000 residents of Nikel worry about the wind.
The wind blows southward for most of the year, carrying toxic fumes from the local nickel smelter away from the Murmansk region town, just seven kilometers from the Norwegian border. As a result, the countryside south of the town is a brown moonscape of bald hills, barren of plant life for kilometers around.
But summertime atmospheric conditions sometimes push the sulfur dioxide fumes to the north instead, toward Nikel’s homes. Then it is not just the plant life that suffers.
“Last summer, Nikel residents called us to complain that it was difficult to breathe and that the rain was burning holes in their umbrellas,” said Nina Lesikhina of Bellona, an environmental organization with a branch in Murmansk.
This year, the situation is not much different. “Every time the wind blows north or northeast, it brings sulphur dioxide into town,” said local resident Denis Shershov. “In the summertime, that’s about once every three days.”
The nickel-producing Pechenganickel plant, which belongs to Norilsk Nickel affiliate Kola GMK, emitted 108,000 tons of sulfur dioxide in 2006, or more than four times the emissions of all Norway, according to Bellona.
Nikel’s proximity to Norway makes the plant, which is the lifeblood of the town, an increasingly sore point between the two countries. Last July, when atmospheric conditions were unfavorable, a scientist from the Norwegian Institute of Atmospheric studies said on Norwegian television that the sulfur dioxide concentrations in Nikel were so high that residents in the entire region would have to be evacuated under Norwegian standards. Norway has been asking Kola GMK for decades to bring down pollution levels.
In Nikel, people just keep going to work, hoping that the weather will keep the fumes blowing south.
Inefficient and Wasteful
One of the biggest causes of environmental degradation is that the Soviet legacy of inefficiency has finally caught up with Russia. As old infrastructure and production facilities are stretched to the limit, they use up more fuel and water. Few of those facilities have been updated to meet new environmental and efficiency standards, since the law that sets environmental regulations does not encourage it.
Russia has the least efficient economy in the world, the International Energy Agency said in its most recent study on the issue, conducted in 2006. To produce one unit of output, Russia uses almost double the amount of energy as China and up to four times as much as some industrial countries.
Forty percent of all energy consumption is lost, a third of which is lost in the housing sector, according to Greenpeace.
Losses from natural gas flaring at oil fields amount to more than 50 billion cubic meters a year, according to the IEA.
Russia’s water intake per gross domestic product unit is 50 times what it is in Britain, Natural Resources and Environment Minister Yury Trutnev told NTV on June 8.
At the same time as domestic demand for energy is soaring, Russia is trying to meet its export obligations, and inefficiency is becoming more costly. Carbon emissions and pollution are growing, nuclear power plants are operating past their planned life spans, and new energy projects that threaten to further contaminate the environment are being approved.
One example is the Turukhanskaya hydroelectric plant to be constructed by Hydro-OGK in the Krasnoyarsk region, starting in 2010. The project for what will be Russia’s most powerful hydroelectric plant was conceived in the Soviet period but was shelved in the late 1980s after a public outcry.
The proposed project involves building the plant by damming the Lower Tunguska River, flooding about a million hectares of forest and tundra, some of which contains buried nuclear waste, and displacing the indigenous Evenk population — all at a price tag of $13 billion. There is no local energy demand, and the electricity is to be channeled to European Russia via a 3,500-kilometer system of power lines. Critics have labeled the project as wasteful, dangerous and unnecessary.
Indigenous populations of Arctic regions like the Yamal peninsula are also threatened by new development. The peninsula is traditionally home to 34,000 people who lead a nomadic lifestyle based on deer herding. Yamal has been targeted by Gazprom as a “strategic resource base” for oil and gas. There are already 220 oil and gas fields in Yamal, including four new ones opened this year. The permafrost on which the infrastructure for the industry is built is likely to thaw out as global warming continues, threatening significant oil leakage onto the tundra.
But unless Russia’s energy strategy changes, the number of such projects will only grow, said Igor Bashmakov, director of the Center for Energy Efficiency. “Low-energy efficiency is a big factor in emissions of greenhouse gases and polluting chemicals,” he said.
Environmental degradation, though not factored into the budget, comes at a high price. A new report by the World Bank says Russia loses up to 6 percent of GDP to workers’ deteriorating health, with environmental factors like pollution causing about 40,000 deaths per year.
Air pollution is “high” or “extremely high” in 69 percent of Russian cities, affecting 55 percent of the Russian population, according to a 2007 report by the Natural Resources and Environment Ministry. Sixty-five percent of Russians view the environmental situation in their neighborhood as “bad” or “very bad,” a Levada Center survey found in April.
Six Russian cities are on the Blacksmith Institute’s list of the 30 dirtiest places in the world — Bratsk (Irkutsk region), Dzerzhinsk (Nizhny Novgorod region), Magnitogorsk (Chelyabinsk region), Norilsk (Krasnoyarsk region), Rudnaya Pristan and Dalnegorsk (both in the Primorye region).
Growth by Any Means
Many of the environmental problems have carried over from the Soviet era, when environmental impact was not something the rapidly industrializing country was concerned about. In the early 1990s, the environment was one of many issues to hit the public commission. The foundation of environmental legislation was laid with the 1992 law “On Environmental Protection.” Schoolchildren took environmental classes and a special Federal Ecological Fund was created to help municipalities modernize their aging equipment and infrastructure by using money from environmental-impact fines, foreign donors and the government.
But starting in 2000, the year Vladimir Putin became president, environmental legislation steadily weakened. The first step in the policy redirection was tacking the State Committee for Environmental Protection (then called Goskomekologia) onto what was then called the Natural Resources Ministry, which has always been primarily concerned with extracting resources rather than protecting them.
“There was a conscious choice made by the government, with the idea of lifting extra obstacles from economic growth,” said Igor Chestin, director of the World Wildlife Fund.
In 2001, the Federal Ecological Fund was closed after the passage of a new budget. The following year, a new version of the environmental law was passed that scrapped the “polluter pays” principle. Although the fines were later reinstated, they are now the lowest among CIS countries, according to World Bank data.
The practice of implementing the fines is extremely bureaucratic and prone to corruption. For example, the Federal Water Resources Agency calculates the norms for the concentration of polluting agents in sewage waste that a facility is allowed to dump into a certain river. The company then goes to the Federal Environmental, Technological and Atomic Inspection Service, or Rostekhnadzor, to submit their sewage discharge calculations for every chemical. Based on these calculations, Rostekhnadzor sets a “maximum allowable limit” for polluting above the norm. The idea behind this second limit is to give the company some slack while it is working on bringing down pollution to normal levels.
Nikolai Gudkov, spokesman for the Natural Resources and Environment Ministry, conceded that the system was problematic.
“In practice, companies overstate their calculations when they go to Rostekhnadzor in order to set the maximum levels higher and extend the limit agreements every time those run out,” Gudkov said.
Only 10 percent of all sewage waste disposed into Russia’s rivers and lakes goes through an adequate purifying process, a figure that has been shrinking over the years as sewage facilities age and become ineffective, according to a 2007 report by the Natural Resources and Environment Ministry. As a result, half of all surface water in Russia does not meet sanitary standards.
But total fines for environmental damage to water sources in all of Russia were only 5 billion rubles in 2006, according to Gudkov. Ninety percent of that amount comprised payments for exceeding the maximum allowable limit.
“That means that virtually nobody stays within the norm,” Gudkov said.
The system works the same way for air and soil pollution, he said.
Fines are so low that industries have little incentive to modernize their equipment and infrastructure instead of paying fines and polluting.
Nuclear Plants Nearby
In another move, a government system to assess environmental impact was scrapped in 2006 with the passage of a new Building Code, making it legally possible to develop a potentially dangerous project without first consulting with environmental experts or even the people living in the neighborhood.
“The weakness of the environmental assessment law was that it was excessive: even if you just had a shoe-repair shop, you had to have an expert conclusion of your environmental impact,” said Chestin of the WWF. “That argument was used to justify getting rid of it, but in the end, the baby was thrown out with the bath water.”
As a result, neither a state environmental assessment nor a public discussion are legally required for the Evenkiiskaya hydroelectric plant or planned nuclear power plants in St. Petersburg and Kaliningrad.
“The only tools we have today are public opinion and corporate responsibility,” Chestin said.
However, without clear and functional legislation, the effect of these tools is limited.
Public awareness of environmental issues has been low. “Information about pollution levels and the state of the environment has become a little bit more accessible since the Soviet period, but people don’t care enough to pay attention to these problems,” said Elena Armand, a representative of the United Nations Development Program in Russia. “Also, their awareness is largely shaped by television, so it’s up to the government to focus on environmental education.”
TITLE: Four Seasons to Manage ‘House With the Lions’
AUTHOR: By Yevgeny Rozhkov
PUBLISHER: Special to The St. Petersburg Times
TEXT: A luxurious five-star hotel complex is due to open in downtown St. Petersburg next year aiming to accommodate VIP guests, host international summits and meet the growing demand for hotel facilities in the city, which continues to enjoy a boom in tourism.
A contract was signed on Wednesday between Mikhail Masalov, CEO of Tristar Investment Holdings Ltd. (TIH), and Isadore Sharp, director of the board of Four Seasons Hotels and Resorts, which will manage the five-star hotel, to be completed in 2009 and located on Voznesensky Prospekt.
The building, which was originally the palace of Prince Lobanov-Rostovsky and is also known as “The House with the Lions,” was designed in 1817 by Auguste Ricard de Montferrand, who is best known for designing the nearby St. Isaac’s Cathedral. The palace is under federal protection and in 2004 TIH was chosen as a contractor to manage the redevelopment of the building and handle investments.
“We were looking for a company that would meet the requirements and standards set for a first-class hotel facility,” said Viktoria Sobolevskaya, deputy CEO of TIH.
The renovation has seen a lot of criticism recently, after an extra attic level was added to the building and a wing in the courtyard was demolished. Concerned local residents applied to Rosokhrankultura, the supervisory body in charge of the protection of historical monuments and buildings, which initiated an investigation. Kirill Zaitsev of Rosokhrankultura told Fontanka.ru news agency that according to the project approved in Moscow, no changes to the attic level resulting in changes to the building’s external appearance are to be carried out.
“TIH is acting in accordance with the terms that we are obliged to follow. On Wednesday, Rosokhrankultura is due to open the investigation into whether the House with the Lions has suffered any unauthorized damage, and is expected to reach a verdict a month later,” said Sobolevskaya by telephone on Monday.
In 2006, according to the protocol of intention, Four Seasons Hotels & Resort was approved as a partner in the project, marking the company’s entrance into the Russian market. Four Seasons Hotels & Resorts manages about 80 hotels in five continents, with about 30 projects currently in progress.
TIH’s Masalov said that the hotel’s investors of $135 million expect to see profits in five to seven years.
“TIH is credited by Uralsib Financial Corporation and the subsequent agreement will be signed soon,” Masalov told Russia’s RBK Daily newspaper last week.
Beverly Hills-based Cheryl Rowley Design (CRD), which has collaborated with Four Seasons Hotels & Resorts on several projects, including hotels and resorts in Buenos Aires, Philadelphia, Carlsbad and Palm Beach, has been hired as the interior design firm to carry out a $125-million renovation of the federally significant historic monument.
Due to start operating by the end of 2009, two of the three existing open-air courtyards in the neo-classical building will be enclosed to create additional public areas on the first floor, including a large ballroom and spa and fitness facilities. The glass and steel enclosures will be modern in design, but the geometry is designed to reflect the “winter garden” enclosures popular during the period in which the building was built. The hotel will also include state-of-the-art meeting and conference facilities, several restaurants and 183 guest rooms and suites covering a total of approximately 19,000 square meters.
Alexander Krapin, CEO of RWAY Information and Analysis Agency, said that first-rate hotels are always in demand in every city. “Conferences, summits and forums are generally hosted by hotels of at a least four-star level. And if there are such facilities, business tourism sees growth.”
“Russia’s Northern Capital will improve its international image as soon as this type of hotel opens,” predicted Oleg Repchenko, head of analysis at Real Estate Market Indicators.
St. Petersburg is now often chosen over Moscow for hosting international events, such as the annual Economic Forum and Group of Eight leaders summit in 2005. Andrei Beketov, supervisor of the Real Estate Market Analysis Project, said that the city currently lacks suitable accommodation for VIPs who usually insist on high levels of security and comfort during visits.
“This by no means imply that luxurious hotels should be abundant in St. Petersburg as it is wrong in terms of economics. But at least one first-class hotel is a must,” said Beketov.
TITLE: RICO Author Says BONY Lawsuit is Valid
AUTHOR: By Alex Nicholson
PUBLISHER: Bloomberg
TEXT: MOSCOW — The author of a U.S. anti-racketeering law told a Moscow judge that Russian courts have the right to hear a lawsuit seeking $22.5 billion from Bank of New York Mellon Corp., the world’s biggest custodian of financial assets.
G. Robert Blakely, the professor of law who drafted the U.S. Racketeer Influenced and Corrupt Organizations Act, said the suit can be tried in the Moscow Arbitration Court as long as Russian customs authorities do not use the law to seek criminal penalties. The case stems from claims that the bank failed to stop a money-laundering scheme in the 1990s.
The Russian Customs Service sued Bank of New York last year, accusing it of helping to transfer more than $7 billion out of the country illegally in the 1990s.
The bank is seeking to dismiss the case on the grounds that the Moscow Arbitration Court does not have jurisdiction to hear the dispute.
“They’re not asking for criminal sanctions,” Blakely, a professor of law at the University of Notre Dame in Indiana, told the court on Monday. “If they were asking for criminal sanctions they couldn’t get them.”
Bank of New York spokesman Kevin Heine said the claim was “invalid under U.S. and Russian law.” Blakely has said in the past that foreign application of RICO was not appropriate, Heine said.
The Bank of New York said in 2005 that it failed to report suspicious transactions and paid $14 million to end two criminal probes in the U.S. Lucy Edwards, a former Bank of New York vice president in London, and her husband, Peter Berlin, who ran companies with accounts at the bank, told U.S. officials in 2000 that they conspired to use the bank to move more than $7 billion out of Russia. They were sentenced to five years’ probation.
The customs service argues that the 2005 agreement, in which the bank acknowledged that its employees acted illegally, is sufficient to prove in a civil case that the bank harmed Russia when government coffers were running low.
“That would amount in our system to an admission of liability,” Blakely said.
Customs lawyers argue that a civil RICO case entails a “lower burden of proof” and does not require exhaustive evidence that a crime was committed.
“It is a total misrepresentation of the facts,” Heine said. “The bank was never charged with any crime and did not admit or accept responsibility for a crime.”
TITLE: Stocks Plunge To 2-Year Low
AUTHOR: By Tai Adelaja
PUBLISHER: Staff Writer
TEXT: The RTS Index plunged into bear-market territory Friday and the Micex Index fell to the lowest since 2006 on Monday as investors took fright after Prime Minister Vladimir Putin’s stinging censure of coal and steel producer Mechel’s pricing policies.
Adding to the nervousness were the hurried departure from Russia of TNK-BP chief Robert Dudley on Thursday, prompting fears that BP’s investment in the country could be in jeopardy, and further falls in global oil prices.
Russian stock indexes were hit hardest of all global markets Friday, with the RTS falling 5.6 percent to close at 1,951.29 — a drop of 22 percent since May 19 — and the MICEX falling 5.5 percent to 1,487.10, its lowest level since November 2006.
Mechel, the country’s largest coking coal producer, fell 33 percent Friday on the RTS, adding to its 38 percent fall that wiped $6 billion off of its New York-traded American Depositary Receipts on Thursday. In his criticism of the company and its majority shareholder, billionaire Igor Zyuzin, Putin called for the authorities to probe purported price-fixing on domestic coking coal prices, which he said were higher than export prices in the first quarter.
Analysts saw worries for the investment case in the country in Thursday’s events.
In a note to investors Friday, Roland Nash, head of research at Renaissance Capital, said the TNK-BP and Mechel events, combined with the falling oil price, had “finished” Russian equities’ “reputation as a safe haven.”
A cautiously worded statement by Mechel late Friday promising cooperation with the government helped to lift its ADRs in New York by $3.36 to close at $26.20, but earlier in the day other Russian steelmakers and coal producers felt the effects of the fallout.
Evraz, the country’s second-biggest steelmaker, part-owned by former Chukotka Governor Roman Abramovich, dropped 14 percent to $78 in London trading, while Severstal, the biggest steelmaker, owned by another Putin ally, Alexei Mordashov, fell 53 rubles, or 12 percent, to 405.60 rubles on the MICEX exchange.
Putin’s comments compounded an already lackluster trading week, battered by falling oil prices and the dismal situation in global markets.
“Investors confidence was shaken if not shattered,” said Marat Gabitov, a metals analyst at Aton UniCredit. “The mood out there is quite negative, and the expectation is that Mechel’s slumping stocks would drag down the whole market.”
Analysts said Mechel’s pricing policies and the worsening TNK-BP saga could trigger a decline in investor confidence and destabilize the stock market.
The falling global oil prices made their mark on Rosneft, which declined 4.9 percent Friday to 228.20 rubles, making for a weekly loss of 9.9 percent.
Global banking stocks bounced temporarily on the positive news that the U.S. Congress agreed to bail out the embattled U.S. mortgage giants Fannie Mae and Freddie Mac. President George W. Bush waived his veto over the weekend, allowing the rescue package to be put into effect.
In Russia, Sberbank slid 8.9 percent. The bank said net income in the first quarter climbed to $1.33 billion.
TITLE: GAZ Plans $1Bln Auto Joint Venture
PUBLISHER: Combined Reports
TEXT: GAZ hopes to create a $1 billion joint venture with General Motors but is also looking at Daimler as a partner in the project, GAZ executives said Friday.
The venture will produce around 300,000 cars per year, allowing GAZ and its western partner to compete with French rival Renault in Russia, said Leonid Dolgov, head of GAZ’s light vehicles division.
Foreign automobile giants have been pouring into Russia with joint ventures, car factories and imports as surging personal incomes created unprecedented demand. In the first half of 2008, Russia overtook Germany to become the largest car market in Europe.
Renault’s Logan has been a huge success in the small-sedan segment, and the joint venture will seek to compete with it by pricing its sedans in the $12,000 to $20,000 range.
“One needs a factory to build a car such as [Renault’s] Logan. It will cost $800 million to $1 billion. [The car] will be the size of the Logan. That is what we’re interested in,” Dolgov said.
A partnership deal will be closed by the end of the year, he said.
GAZ chief Sergei Zanozin said the company was also actively negotiating with Daimler as a partner in the venture.
“Our position in the negotiations will be tough. The market doesn’t wait,” Zanozin said.
GAZ, controlled by billionaire Oleg Deripaska, has a deal with Chrysler to produce a version of the U.S. auto giant’s Sebring model, which will be called Volga Siber on the Russian market.
Prime Minister Vladimir Putin test drove one of the cars at a plant in Nizhny Novgorod, news agencies reported Friday. “The suspension is a bit tough, but the car can accelerate,” Putin said, Interfax reported.
Reuters, SPT
TITLE: Daimler Announces Talks With KamAZ
AUTHOR: By John Wendle
PUBLISHER: Staff Writer
TEXT: MOSCOW — German auto giant Daimler on Friday announced that it was in talks to buy a 42 percent stake in truck maker KamAZ in a potential deal valued at $1.7 billion.
Part of the group that produces Mercedes-Benz cars, Daimler Trucks, said it is now the exclusive negotiating partner for the shares, which are held by investment bank Troika Dialog, Daimler said in a statement.
“Along with the option of building a new factory for local assembly of Daimler Trucks, the division is also studying the possibility of acquiring a stake in ... KamAZ that would enable the two companies to combine their development, production and sales expertise,” the company said in a statement.
Daimler said it was interested in KamAZ, which builds nearly three-quarters of the country’s large trucks and about half of its other large cargo vehicles, because the firm has “production facilities, sales structures and a good network in Russia,” it said.
KamAZ has a market capitalization of nearly $4 billion.
Sergei Chemezov’s state corporation, Russian Technologies, which owns 37.8 percent of KamAZ, announced that it was looking at the possible deal “very positively.”
Troika Dialog said that in June it had invited potential buyers including Volvo of Sweden, Fiat unit Iveco and Daimler to bid for its minority stake in KamAZ.
KamAZ reported that its 2007 revenue rose by about 23 percent to 85.25 billion rubles ($3.65 billion) on the back of truck sales increasing by 20 percent.
The firm sold 52,648 trucks last year, around three quarters of which were sold in Russia. Last year, Daimler sold 467,700 trucks.
“With its potential for dynamic growth, the Russian truck market is widely considered to be one of the top future sales markets for commercial vehicles,” Daimler said in a statement.
The firm noted that Russia is Europe’s largest truck market, 154,000 trucks of more than 6 tons sold in 2007.
“Sales of new trucks in Russia are expected to increase by about 20 percent over the next two years. This development is being driven by the demand for heavy-duty trucks in particular,” it said.
Heinz Gottwick, chief spokesman for Daimler in Germany, said he believed that negotiations would be completed by the end of the year.
Gottwick said Daimler was always looking for “different opportunities out there, and we will choose the optimal one.” He added, “It is unlikely that we will buy a stake in the company and also build a factory at the same time.”
Daimler shares, which fell nearly 10 percent Thursday after it cut its earnings outlook for this year, closed up 1.1 percent Friday at 38.88 euros.
On the MICEX exchange, KamAZ shares dropped 2.3 percent Friday.
No one at KamAZ was immediately available for comment Friday.
Another leading European truck manufacturer, Scania, on Friday said sales in Russia had surged.
Scania, Sweden’s second-largest truck maker after Volvo, said profits in the second quarter rose the most in almost two years because of higher demand in Russia, even with dropping sales in Western Europe.
TITLE: Road Agency Official Orders Bridge Built Before 2012 APEC Summit
PUBLISHER: Combined Reports
TEXT: VLADIVOSTOK — A Federal Road Agency official said Friday that a three-kilometer bridge intended to demonstrate the country’s economic revival to a 2012 summit must be built at all costs, warning far eastern officials that no delay would be tolerated.
In his final live-television broadcast as president, Vladimir Putin in October promised to build the bridge joining the Pacific port of Vladivostok to Russky Island, the isolated and impoverish locale where most events of the Asia-Pacific Economic Cooperation summit will be held.
Primorye Governor Sergei Darkin and Vladivostok Mayor Igor Pushkaryov were on hand Friday to oversee the beginning of construction of a different bridge, Interfax reported. Construction of the bridge to Russky Island will start in the next few days, the report said.
“In a few days — just as soon as we get the necessary documents — we’ll begin building the bridge across the Bosfor Vostochny channel,” Darkin said, adding that “only Russian companies” would be involved in the work.
This month, the director of a bridge-building company in Vladivostok said it might not be possible to complete the $640 million structure in time for the summit. A contractor for the bridge has not yet been chosen.
On Friday, however, Sergei Poleshchuk, deputy director of the Federal Road Agency, told officials in the Primorye region that the project could not be delayed.
“The project must be built by the APEC summit, whatever it takes,” Poleshchuk said.
The country plans to spend more than $8 billion on APEC summit organization and preparation in infrastructure projects, treating the meeting as a rehearsal for the 2014 Winter Olympics in Sochi. APEC groups 21 nations in Asia and the Pacific region.
Reuters, SPT
TITLE: Facebook Fails to Attract VKontakte Users
AUTHOR: By Paul Sonne
PUBLISHER: The Associated Press
TEXT: MOSCOW — In its bid to go global, Facebook is facing off against itself.
Clones of the wunderkind social-networking web site — some of which resemble Facebook right down to color, font and layout — have popped up in local languages around the world. These competitor sites offer identical core services, letting users post pictures, make groups and choose their friends.
All are complicating Facebook Inc.’s global campaign, which began in February and has since rolled out 18 foreign-language editions, including Norwegian and Czech, with plans for 54 more.
Facebook’s international challenges illustrate just some of the ways global expansion can bedevil major U.S. web companies as they seek swarms of users and advertising dollars in new markets.
Facebook’s particular problem is winning over people who are already hooked on local-language sites hocking similar services with a similar look.
In Russia, where Facebook launched last month, the entrenched social-networking engine online is VKontakte, a Russian-language Facebook clone that boasts more than 14 million users.
Facebook officials predict they will eventually triumph, partly because they can spend more resources on improving their site than upstarts can. Facebook also has a strong network of outside programmers who write web applications for the site, and the company said last week it would extend its translation tools to those developers, to make Facebook even more compelling for overseas markets.
Plus, its users can connect with friends from other countries, something local sites can’t offer.
“They can gain traction in individual countries but they are not going to be able to compete on a global scale,” Facebook spokeswoman Jaime Schopflin said.
But social-networking sites mirror real life, and many Russians dread moving to a neighborhood where they have no friends.
“All of my Russian friends are on VKontakte,” said Moscow resident Galina Ryazanova, 21, a recent college graduate who uses both web sites. “I don’t think they’ll switch to Facebook because everyone is already established on VKontakte.”
Ryazanova visits Facebook about once a month to keep up with her non-Russian friends, she said, but uses VKontakte three or four times a week. She criticized Facebook for adding too many distracting applications, and for allowing users to translate part of the site — producing what she called poor-quality Russian.
Facebook dominates the social-networking market in many English-language countries and is growing quickly elsewhere. It is the most popular social-networking site in Britain and one of the top three in France, tracking company comScore reported.
But in countries like Germany and Russia, where competitor sites have taken root, Facebook seems to be gaining ground more slowly. According to comScore, Germany’s StudiVZ and Russia’s VKontakte are widely outdrawing Facebook.
Facebook software engineer Alex Moskalyuk said his company has no direct strategy to attract users from competitor sites.
“You can spend your time worrying about the competitors or you can spend your time innovating your product,” he said. “We chose to do the latter and not the former.”
That strategy apparently changed this month, when Facebook filed an intellectual-property lawsuit against German clone StudiVZ in a federal court in California.
Though Facebook claims StudiVZ unfairly copied its content, StudiVZ says Facebook is trying to stifle the competition as it pursues the global market. The faceoff has fueled speculation that a string of lawsuits against clone sites could begin.
The stakes are high. Microsoft snared 1.6 percent of Facebook for $240 million in 2007, valuing Facebook at roughly $15 billion. Investors poured $430 million this year into the parent company behind China’s Facebook-like Xiaonei. Der Spiegel reported that a publishing company bought StudiVZ for $132 million in 2007.
In Russia, VKontakte dominates the market.
With the sites looking so similar, Russia’s renewed sense of national pride might be enough to give VKontakte an edge.
“Facebook is American and VKontakte is Russian — that’s the main difference,” Ryazanova said. “It’s going to be tough for Facebook to displace VKontakte.”
TITLE: More Than Half Kuzbass Mines Closed Down
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Work at more than half the coal mines in the Kuznetsk Basin has been suspended after officials said they uncovered a series of “gross violations of industrial safety.”
The Federal Service for Environmental, Technological and Atomic Inspection checked 72 mines over a five-week period in the basin, primarily in the Kemerovo region. Some work has been suspended at 40 mines because of inadequate work safety, the service said. Work was completely stopped at three mines.
The service set strict timelines for mine owners and managers to remove all safety violations, the service said. There were 6,566 violations revealed in the course of 1,127 checks, resulting in fines totaling 2.5 million rubles ($107,000), the service said.
The stoppage period varies from seven to 90 days, said Yevgeny Anoshin, a spokesman for the service.
Last year, 215 people died in coal mines in the basin, also known as the Kuzbass, RIA-Novosti said Friday.
TITLE: China, Russia To Increase Projects
PUBLISHER: Combined Reports
TEXT: BEIJING — China and Russia on Saturday agreed to strengthen a strategic partnership by expanding their cooperation in projects including oil trading, pipeline construction, explorations and nuclear power.
“The first round of talks have achieved some positive results,” Chinese Vice Premier Wang Qishang said Saturday during his meeting with visiting Deputy Prime Minister Igor Sechin, the official Xinhua news agency reported.
Premier Wen Jiabao, who also met with Sechin, is boosting ties with Russia in order to meet his country’s energy needs.
Sechin told a meeting of Russian and Chinese business people Sunday that the two sides had agreed to use the ruble and the yuan in bilateral trade and economic transactions, Interfax reported. The move, he said, would “decrease the dependence of trade operations on the situation on world economic markets.”
A Russian source said Saturday that China had reconfirmed its interest in obtaining from Russia a fast-neutron nuclear reactor, Interfax reported. The source said that talks were stalled, however, on the price for the reactor.
The negotiations for the reactors have centered on pricing and technical issues, Yury Ivanov, China project manager of state-run nuclear-reactor builder Atomstroiexport, said last month.
Bloomberg, SPT
TITLE: In Brief
TEXT: Ring Road in Sight
ST. PETERSBURG (SPT) — Construction of the St. Petersburg ring road will be completed in spring 2010, Boris Murashov, CEO of the St. Petersburg Ring Road Construction Company, which is supervising the project, announced during a press conference on Friday at Interfax. Two Moscow-based contractors — Flora and Inzhtransstroi — have been assigned to build the final 32-kilometer western part of the road, connecting Pionerstroi Ulitsa and Bronka Station.
Of the initial construction budget of 28.7 billion rubles ($1.23 billion), 3.6 billion rubles ($154 million) will be spent on expanding the road from two lanes to three in both directions.
Murashov has expressed concern over whether Flora, which has previously been involved in construction of the ring road, would meet the project deadline. But Flora’s CEO, Alexander Korostovtsev, denied that there was cause for concern and insisted that no violations of the terms had ever taken place.
Mechel Date Given
MOSCOW (Bloomberg) — Russia’s Federal Anti-Monopoly Service will hold on August 26 the first proceedings against Mechel Trading House, Yuzhny Kuzbass and Yakutugol (Mechel subsidiaries) on account of abuse of a dominant market position, Timofei Nizhegorodtsev, the head of the regulator’s social sector and trade control department, told RBC TV on Monday.
The case was opened on July 11, due to signs of violations of Russia’s anti-monopoly legislation, such as economically and technologically unreasonable suspension of supplies of coal concentrate to Novolipetsk Steel (NLMK). Among other claims made by the antitrust watchdog against Mechel is selling on external markets at prices that are less than the true cost. If the violations are confirmed, the company will have to pay a penalty in the amount of 1 to 15 percent of its coking coal sales, but not more than 2 percent of its total sales, Nizhegorodtsev said.
RT Seeking Fuel Stake
ST. PETERSBURG (Bloomberg) — Russian Technologies is in talks to buy a stake in jet fuel supplier Airport Fuel Supply Trading House, Vedomosti reported, citing the state-owned holding company’s Deputy Chief Executive Officer Igor Zavyalov.
A merger with Russian Technologies will enable the fuel provider, known by its Russian acronym TOAP, to implement projects including starting regional airlines and creating a bourse to trade in jet fuel, the newspaper said, citing Yevgeny Ostrovsky, the supplier’s owner and CEO.
Ostrovsky plans to retain a blocking stake in the company, according to Vedomosti. TOAP controls 35 percent of Russia’s market in jet-fuel trading and has operated a unit in the U.K. since 2006, the newspaper said.
Tsvetkov Plans Studio
MOSOW (Bloomberg) — Russian billionaire Nikolai Tsvetkov plans to build a $300 million film and television studio outside of Moscow, Kommersant reported.
The project will include a shopping and entertainment center, residential buildings, a hotel and offices, according to the newspaper. Fyodor Bondarchuk, a Russian film director, will co-own the studio, Kommersant said.
Bankruptcy Warnings
ST. PETERSBURG (Bloomberg) — Rising jet fuel costs may bankrupt some Russian airlines, Vedomosti reported, citing Yevgeny Bachurin, the head of Russia’s Federal Air Transport Agency.
The first bankruptcies may happen by next summer, and the total number of airlines in the country may be halved, the newspaper said, citing VTB Group analyst Elena Sakhnova.
Jet fuel prices have climbed 40 percent in the last six months, according to Vedomosti. The most vulnerable airlines are those serving fewer than a million passengers a year, which includes all but 11 of Russia’s 150 carriers, the newspaper said, citing Sakhnova.
Forecasts Adjusted
MOSCOW (Bloomberg) — Russia’s Economy Ministry increased its forecasts for the pace of economic growth and inflation this year, Deputy Economy Minister Andrei Klepach said.
The economy will probably expand an annual 7.8 percent, above the previous estimate of 7.6 percent, Klepach told reporters in Moscow on Monday. Inflation is set to reach 11.8 percent, more than the previous forecast of 10.5 percent, he said.
“Inflation is the biggest short-term risk,” presidential aide Arkady Dvorkovich said Monday. “The pace of economic growth shows that there are no fundamental reasons for serious concerns about the development of the market, the development of any economic sectors,” he said.
Oil Output Set to Fall
MOSCOW (Bloomberg) — The Russian Economy Ministry cut its forecast for 2008 oil production as output declined at older fields in Siberia.
The ministry now forecasts annual production of 492 million tons, 3 million tons less than previously predicted, Deputy Economy Minister Andrei Klepach told reporters in Moscow on Monday.
Russia, which produced 491.3 million tons of oil last year, will have the smallest growth in production since 1998 should the ministry’s forecast prove accurate. Prime Minister Vladimir Putin’s government has approved tax breaks to encourage new projects in challenging environments and is considering additional measures to boost output.
The government has raised its estimate of the average Urals price for 2008 to $112 a barrel, up from $92, Klepach said, citing record energy prices worldwide.
$50Bln in U.S. Bonds
MOSCOW (Bloomberg) — Russia has about $50 billion of its currency reserves invested in Fannie Mae and Freddie Mac bonds, the Interfax newswire reported, citing Alexei Ulyukayev, first deputy central bank chairman.
The central bank had reduced its investment in the agencies’ bonds, he said, according to the Moscow-based agency.
TITLE: Residential Construction Sees Inevitable Slowdown
AUTHOR: By Anna Shcherbakova
TEXT: The good times are most likely over in the construction of residential property. The total area of apartment space completed in the first half of this year was 821,000 square meters — 20 percent less than a year ago. Companies are slowing down building work because they are afraid they will not be able to sell the new property as quickly as before.
Another obstacle, according to developers, has been the introduction of new rules that make realizing projects take about a year longer than before.
Construction companies will remember the good old times with nostalgia. After the financial crisis of 1998, sales decreased but soon recovered and then boomed. Due to high demand, developers were able to sell apartments at $600 per square meter, even though prime costs were about three times lower. The market for new apartments grew steadily except in 2004, several years after the market was affected by a land deficit. Now we are seeing the results of that stagnation, experts say.
But the market situation is looking more dangerous. There were about 1.5 million square meters sold in the first half of 2006, but only one million square meters from January to June 2008, according to analysts from Peterburgskaya Nedvizhimost real estate company. It is not surprising, since average prices rocketed from $2,500 per square meter at the end of 2007 to $3,300 at the beginning of this year. At the same time, most Russian banks, which have felt the shortage of western money, introduced stricter mortgage conditions. Interest rates grew by a few percent, and borrowers must now confirm their income officially. Subprimes are currently highly undesirable for banks. In other words, construction companies have felt people’s purchasing power decrease. At the same time, banks are also stricter with corporate borrowers. Developers, with their unstable incomes and unclear rights to half-built properties, were never favored in the best of times. Now it’s even more difficult for them to get financing from banks.
Consumers hope that apartments will become more affordable. Unfortunately, things do not look so promising. Companies need money for new projects, so they are unable to lower their prices. Their managers will find any reason to explain away “difficulties” rather than admit “problems.” Along with decreasing sales, another sign of the growing bubble is advertising. According to industry researchers, developers and realtors spent about $26.5 million promoting their products from January to May, compared to $7.5 million in the same period last year. Real estate is the second-largest sector by advertising expenses after retail stores.
Prices may decrease in a few years, when huge projects like Baltic Pearl or Northern Valley enter the market. Until then, the weaker companies will be aquired by the giants, who have enough resources to wait until people’s purchasing power increases once again.
Anna Shcherbakova is the St. Petersburg bureau head of business daily Vedomosti.
TITLE: Not Yet Time to Hit the Brakes
AUTHOR: By James Beadle
TEXT: Investors across Russia could be excused for missing the controversial economic data that came out last Monday. Unlike its Western counterparts, the State Statistics Service prefers not to preannounce release times.
This idiosyncrasy, which is hard to justify in a nation that aspires to become a global financial center, is not usually a problem, since Russian economic data rarely spark much interest. Most growth indicators have long been boringly stable and positive.
But things are beginning to change now as the economy advances relentlessly toward bottleneck constraints in its production capacity. Inflation numbers had already been capturing the nation’s attention for months, but last week they were superseded by a broader set of economic data. June growth rates for wages, incomes, retail sales and capacity investment all remained double digit year-on-year, but all significantly missed market expectations. Is domestic economics about to become a relevant factor for investment planning?
With the benefit of hindsight, the sharp declines in these economic parameters, which constitute some of Russia’s key economic drivers, are not surprising. It has long been recognized that President Dmitry Medvedev faces far greater development challenges than his predecessor ever did. Even if the global backdrop remains benign, the country faces economic constraints that cannot be resolved with easy money. Economics is becoming both more interesting and important, and investors are increasingly assessing the sustainability of growth in their sector-allocation decisions. What, if anything, can we understand from this latest data?
June’s economic performance combines two seemingly contradictory characteristics: high growth rates and a sharp growth-rate decline. With real wage growth and investment in productive capacity growth both around 11 percent year-on-year, Russia is still expanding at a healthy rate. This is reassuring, but it is necessary to understand whether one month of cooler data is the start of a more serious trend.
Monetary and fiscal policies are both helping to slow the country’s economic growth. The state overspent aggressively during the electoral period, and these economic data reflect an impressively sharp return to more normal state spending levels, as can be observed in reported budget spending. For its part, the Central Bank is acting steadily against inflation, easing back money supply and keeping ruble speculators on their toes. In the postelection period, an era of cooler growth is to be expected.
The slowdown in the private sector is more concerning, however. Initial public offerings have slowed substantially and May industrial production data were also weaker, as they showed manufacturing growth of less than one percent over the year. Cooling growth dynamics point to a possible shift in confidence.
It is easy to believe that weaker global confidence, election uncertainty, higher state spending and subsequent inflation might have caused private businesses to pause. Should this be the case, gross domestic product projections will remain on target as state and business spending normalize again.
In reality, it is too early to determine clearly the drivers and full impact of June’s surprising economic data. The market will certainly be watching to see whether this is a healthy return to more sustainable growth rates or a sharper slowdown. We may see continued slowing in the year-on-year statistics, as election spending set such a high benchmark for the second half of 2008. And there are clear risks, most notably ongoing weakness in global sentiment, tighter liquidity and inflation. But the expansionary path will likely continue.
Should the economy show more serious signs of weakness, however, Prime Minister Vladimir Putin has indicated that his cabinet will put growth before inflation. It certainly has plenty of fiscal ammunition available, but how will it manage to drive expansion without fueling inflation? The only clear answer is to target the supply side. No surprise, then, that infrastructure and construction remain among the hottest investment themes. In this inflationary world, related commodities trades are also luring smart money. The consumer sector remains healthy, but the current dynamic reflects a top-down shift toward the supply-side of the economy.
June’s economic data caught the market by surprise and serve to remind that the path ahead is less clear. But investors will for now continue to assume that the government is just gradually lifting its foot off the gas pedal in terms of economic growth, although no one is touching the brakes quite yet.
James Beadle is a portfolio manager for Pilgrim Asset Management.
TITLE: Separating Church, State and History
AUTHOR: By Masha Lipman
TEXT: The Russian Orthodox Church called on government authorities this month to condemn the Soviet communist regime. It’s odd that the church should think about this now. It’s been two decades since Mikhail Gorbachev initiated an avalanche of public disclosures about the horrors of the gulag and the masterminds of the bloody communist dictatorship — Lenin, Stalin, their accomplices and their followers.
That national journey into history was followed by the collapse of communism and then the collapse of the Soviet Union. Russia’s first president, Boris Yeltsin, evolved as a passionate anti-communist and banished the rule of fear and repression that had plagued the nation for seven decades. In the following years, the government and public organizations sought to restore the historical record.
But Russia’s next president, Vladimir Putin, distanced himself from his predecessor’s outlook. During his presidency, anti-communism was strongly played down. Some Communist symbols, including Stalin’s national anthem, were brought back, and references to Stalin’s crimes all but disappeared from official discourse. Government rhetoric promoting Russia as a strong state and warning of a hostile Western world seeking to harm the country boosted admiration for Stalin, which never quite died out during the post-communist years, and a general nostalgia for Soviet times.
The church’s initiative may serve the interests of the Russian leadership, which appears to be looking for ways to denounce communism while avoiding raising questions about today’s regime and its association with the Soviet past.
The interest in a denunciation of communism may have to do with appeals by former Soviet states for an international condemnation of the massacres and other crimes committed on their territories by the Soviet regime. Ukraine, for instance, seeks to hold Russia responsible for the mass famine of its peasants during Stalin’s collectivization. Russian officials may be enraged, but they’re not in a position to say the death toll estimate is false, not least since Russian peasants fell victim to the same villainy. So the trick for Russia would be to admit crimes but not to take the blame for them, lest Ukraine or other nations seek compensation.
The church, the state’s traditional ally, is an appropriate candidate for this mission. Because of its notorious collaboration with the Soviet regime, it has its own reason not to go too deep in denouncing the communist past. In several statements over the past couple of weeks, a church spokesman urged the government, in very general terms, to honor the memory of victims; to change the names of cities, streets and metro stations associated with prominent communist figures of the past; to remove “statues of bloody leaders from central squares”; and more. This “de-communization lite” made no mention of Stalin or other perpetrators of the Great Terror, or of the monstrous state security forces that tortured and executed millions on the orders of the Communist Party.
The church’s call for de-communization helps the state further marginalize the public effort led by Memorial, the Russian human rights group that, since the late 1980s, has researched and published information on communist crimes. Unlike the Russian Orthodox Church, Memorial wouldn’t keep denunciations within “reasonable limits.” Little wonder that the church’s campaign conveys the impression that the church is the only organization concerned with confronting Soviet horrors.
Putin’s Kremlin consistently sought to sideline organizations that wouldn’t compromise their autonomy and that pursued agendas that did not conform with the official line.
Lately, Memorial may have raised more concerns. As Memorial’s board chairman, Arseny Roginsky, told me, public support for his organization has increased. Backing anti-Stalin initiatives, he explains, may be seen as a mild form of opposition by people who regard overt political activity as risky and pointless. For example, construction of a national memorial to gulag victims is again the subject of public discussion. Gorbachev and other prominent public figures are taking an active role. And Novaya Gazeta, which Gorbachev co-owns, has published a series this year devoted to the victims of and participants in the Great Terror.
Interest in the dark side of Soviet history is modest now compared with the nationwide yearning in the late 1980s for the truth about the Soviet regime’s crimes. But it may be enough to make the Kremlin want to preempt or control such interest. If its plan is indeed to enlist the church in a mild anti-communist campaign while marginalizing Memorial, the government has abundant power and resources to do so. Of course, even a limited condemnation is better than nothing, but these political half-measures cannot supersede a national effort to come to terms with Russia’s history.
Masha Lipman, editor of the Carnegie Moscow Center’s Pro et Contra journal, writes a monthly column for The Washington Post, where this comment appeared.
TITLE: Traffic Police Reflect Russia’s Value System
AUTHOR: By Alexei Bayer
TEXT: My cousin once took her husband, a New York City narcotics detective, to her native Moscow. Late one night, as they chatted with friends on a boulevard, her husband took a walk to a nearby bush to answer the call of nature. There, he was promptly detained by a group of three police officers.
Seeing that he was a foreigner, they demanded a sizeable bribe. My cousin, acting as a translator, explained that he was a cop and that his ponytail, beard and tattoos were a disguise for his undercover work. When he produced his badge, the Russians recognized him as a brother officer and wanted to shake hands with him.
He refused. “I didn’t want to have anything to do with them,” he explains. “They’re corrupt bribe-takers.”
My Russian friends no longer shake their heads in disbelief at this story. They have traveled enough to know that cops in civilized countries don’t shake down citizens. Nevertheless, this knowledge does not alter their behavior at home. Casually settling a traffic violation with a bribe remains a normal part of everyday life in Russia, scarcely worth mentioning.
Very few Russians are alert to the implications of what pervasive bribery does to them individually and what it means to society.
First, bribery is a felony for both participants, the one who pays and the one who takes a bribe. Casual law breaking perpetuates the twisted system of relative morality that was imposed on Russia by the communist regime. Just as the Soviet state proclaimed that moral taboos against stealing, lying, killing, etc. were obsolete bourgeois precepts and that true morality is class-based, when Soviet citizens stole from the state, they were never considered even remotely unethical.
Most governments in the world are highly sensitive about police corruption. My cousin’s policeman husband says he “dreams of being offered a bribe.” But he is being facetious, of course, because he would never take a bribe under any circumstances. In fact, zero-tolerance for corruption is ingrained within the New York Police Department, which goes out of its way to encourage its officers to turn in those who try to corrupt them.
Bribe taking is only part of the problem. Russian police effectively work for themselves, not the government. They don’t care if they allow a drunk to keep driving as long as he pays them, which doubtless contributes to the carnage on Russian roads. Likewise, unregistered foreigners are free to walk the streets as long as they have enough money to pay off the cops.
The government has not only failed to root out police corruption, but its rules, regulations and laws seem designed to find new ways for cops to stuff their pockets rather then do the job for which they were ostensibly hired. Interior Minister Rashid Nurgaliyev, for example, recently proposed registration for bicycles — a great way for traffic cops to fleece a new group of people using the roads.
Clearly, the modus operandi of the Russian police is the rule rather than the exception in the way the state functions. There are, no doubt, dedicated and honest doctors, teachers and government officials, but they are rare. Those Russians who pay a few hundred dollars to a police officer when they are stopped for drunk driving should realize that the way roads are policed by cops is also the way their kids are taught at school and their loved ones are cared for in hospitals. It is also how fire inspectors inspect buildings, how construction workers build bridges and how the glorious military protects the country.
Is there any surprise, then, that those who run the government seem to view it as their private domain and use their positions of power to enrich themselves and their cronies rather than think of the good of the nation?
Alexei Bayer, a native Muscovite, is a New York-based economist.
TITLE: 17 Dead, 150 Injured in Istanbul Bombing
AUTHOR: By Christopher Torchia
PUBLISHER: The Associated Press
TEXT: ISTANBUL, Turkey — Investigators were trying to determine Monday who was behind the deadliest attack against here civilians in nearly five years, a bombing that killed 17 people and injured more than 150 others in a crowded residential square.
The blasts appeared to be linked to a Kurdish rebel group, though the investigation is continuing, said Istanbul Governor Muammer Guler.
“There appears to be a link with the separatist organization. We are working on that. We hope to get a result at the first opportunity,” Guler told reporters Monday.
Officials described the blasts as a terrorist attack, though nobody has claimed responsibility for the attack. Turkey is home to a variety of militant groups, including Kurdish rebels, Islamic extremists and alleged coup plotters with ties to the secular establishment.
“I feel deep grief from this cowardly attack that targeted innocent citizens and I curse them with hatred,” said General Yasar Buyukanit, the military chief. “The fact that the attack was carried out in a vibrant street at a time when there were crowds once again shows the savagery, the desperation and the bloody face of terrorism.”
CNN-Turk television, citing security sources, said police suspect Kurdish rebels may be behind the blasts. An opposition leader, Deniz Baykal, said security officials told him that the type of bombs used were similar to those used in attacks in Ankara and the mostly Kurdish city of Diyarbakir that were blamed on the rebel Kurdistan Workers’ Party, or PKK.
But the pro-Kurdish news agency Firat reported that Zubeyir Aydar of the PKK has denied involvement and blamed the attack on what he described as “dark forces.”
Turkish police, following a tip from residents, detained three teenagers who were found late Sunday in the basement of an apartment near the scene of the explosions, Milliyet newspaper reported on its web site Monday.
The three, ages 16 and 17, claimed they hid in the basement because they were frightened from the explosions, the paper reported.
Guler would not confirm the newspaper’s report.
The attack happened on the eve of a court’s deliberations on whether to ban the Islamic-oriented ruling party for allegedly trying to undermine secularism, and the timing raised questions about whether there was a link.
The attack and the legal challenge to the government highlight a growing mood of uncertainty in Turkey, where an Islamic-oriented government that won a strong mandate in elections last year is locked in a power struggle with secular circles that have backing in the military and judiciary.
The bombs went off in the residential neighborhood of Gungoren in a busy square closed to traffic where people congregate at night, witnesses said.
They appeared to be designed to inflict maximum casualties among civilians. Authorities said the vast majority of the 17 deaths and 150 injuries occurred when a curious crowd gathered after an initial, small blast.
“First, they exploded a percussion bomb to grab attention. Then, 10 minutes later, in another trash can, they exploded a fragmentation bomb,” said Deputy Prime Minister Hayati Yazici.
Cihan news agency said the second bomb consisted of a plastic explosive of the same kind that was used in a suicide attack in a shopping thoroughfare in Ankara in May 2007 that killed 7 people. That attack was blamed on the PKK.
Two of the dead were children. Cihan said. Anatolia news agency said one victim was a 12-year-old girl who rushed with her parents onto the balcony of their fourth floor apartment to see what was going on after the first explosion.
An Associated Press reporter who arrived shortly after the explosions saw at least 12 people lying on the ground. Broken glass, clothing, shop mannequins and other debris were strewn on the ground and bomb squads in white overalls were inspecting the scene.
TITLE: Sastre Claims 3rd Straight Tour For Spain
PUBLISHER: The Associated Press
TEXT: PARIS — Race director Christian Prudhomme proclaimed the 2008 Tour de France will eventually be seen as a victory against doping because cyclists were caught cheating.
However, even after some were snared, at least one other still tried to beat the system.
Sunday’s glitzy, ceremonial end to the Tour tasted rather like flat Champagne when news of the fourth rider to test positive broke at about the same time Spanish rider Carlos Sastre was sipping from his glass while doing victory laps around the Champs-Elysees.
The day before, Prudhomme proclaimed that in the near future this year’s Tour will be seen as the year “when the balance shifted the other way” in the fight against doping.
But the four doping tests revealed—thus far—from the 2008 Tour suggest this message has not hit home—despite Pierre Bordry’s French Anti-Doping Agency operating with the kind of ruthless efficiency seldom shown in previous years.
“This Tour for me absolutely shows that this sport has one foot in the future and one foot in the past,” said Team Columbia manager Bob Stapleton, adding that “methods and conduct that are not acceptable in sports and not acceptable in cycling” are still prevalent.
Sastre, whose Team CSC boss Bjarne Riis admitted to doping during his 1996 Tour win, became the third Spaniard to win the showcase event, while Cadel Evans of Australia finished 58 seconds behind. For the second straight year Evans has lost the Tour by less than a minute after conceding defeat to Alberto Contador of Spain by 23 seconds in 2007.
“It’s very moving,” Sastre said, hugging his two children as he savored his win.
While Sastre, Evans and third-place Bernhard Kohl of Austria mounted the podium steps, attentions were drawn elsewhere when it was announced that Kazakh rider Dmitriy Fofonov tested positive for the banned stimulant heptaminol after stage 18.
Fofonov, who said he bought the product off the Internet to treat cramps but forgot to tell the team’s doctor, was immediately fired by his Credit Agricole team.
Nevertheless, Prudhomme has a case—the fight against doping is more efficient than ever, and the benefit of the doubt is going away from suspected cheats rather than backing them up like in previous years of angry denials.
Stringent testing and targeting from Bordry’s AFLD makes France arguably the leading country in anti-doping controls.
“The difference between those who cheat and those who chase after them has narrowed considerably,” Prudhomme said. “I hope that the organizations that are in charge of this fight have the same determination as the AFLD.”
That was a clear message to the World Anti-Doping Agency to impose the same testing pressures on other sports that cycling has to contend with, and which ultimately leaves some cyclists feeling disillusioned.
TITLE: Confident Nadal Wins In Toronto
PUBLISHER: The Associated Press
TEXT: TORONTO — Rafael Nadal beat Nicolas Kiefer 6-3, 6-2 on Sunday to win the Rogers Cup, his fifth straight tournament victory.
The second-seeded Spaniard has won 29 consecutive matches and seven tournaments —including the French Open and Wimbledon — this year. This was his first win on hard court this season.
“I win on every surface, no? I win on grass, on hard, on indoor, and on clay, too,” Nadal said. “So if I am playing my best tennis I can win on every surface, no?”
Kiefer, of Germany, was unseeded and ranks 37th in the world. He was playing in his first ATP final since 2005. It was Nadal’s second Rogers Cup title.
Nadal first broke Kiefer in the fifth game when Kiefer, down 15-40, had Nadal far out of position but gently laid his drop shot into the net.
The players held serve until the ninth game, when Kiefer’s double fault gave Nadal the set point.
Kiefer had a chance to break Nadal in the fifth game of the second set, but after going to deuce six times, Kiefer hit a backhand well wide.
That’s when Kiefer came unraveled. He double-faulted twice in the next game, then launched a forehand 40 feet into the air and long before Nadal’s forehand winner gave him the break.
“I don’t know — I mean, if I would have the solution, I would change it, but so far I didn’t find a little thing,” Kiefer said.
Nadal took seven of the next nine points to clinch his 30th career title, spreading his arms out and looking to the sky in celebration.
Nadal was the last seed standing in a tournament that saw top-ranked Roger Federer, No. 4 seed Nikolai Davydenko, No. 5 David Ferrer and No. 6 Andy Roddick get bounced in the third round, and defending champion Novak Djokovic exit in the quarterfinals.
On the woman’s tour in California, Dinara Safina beat Flavia Pennetta 6-4, 6-2 to win the East West Bank Classic singles Sunday.
The 22-year-old Russian closed out the 70-minute match with a crosscourt backhand return for her sixth straight service break to win her second title this season.
Safina was the third player this year to win a tournament after facing a match point, though Pennetta didn’t come close to pressing her that hard.
Qualifier Alla Kudryavtseva nearly eliminated Safina in the third round before she won in a third-set tiebreaker. Safina followed that cliffhanger by bumping off Victoria Azarenka 6-3, 6-1, and Jelena Jankovic 7-6 (3), 6-1, to reach her fourth final in five tournaments.
“It happens like that sometime,” Safina said. “One match, you pull it out somehow and you start the next day to play better. That’s what happened. I was just playing better and better.”
Safina wasn’t as sharp in the final on a warm, breezy afternoon. But she said that considering how badly she wanted the title and how nervous she was, she “played a pretty good match.”
TITLE: $40Mln Wasted On Empty Iraq Prison
PUBLISHER: The Associated Press
TEXT: BAGHDAD — In the flatlands north of Baghdad sits a prison with no prisoners. It holds something else: a chronicle of U.S. government waste, misguided planning and construction shortcuts costing $40 million and stretching back to the American overseers who replaced Saddam Hussein.
“It’s a bit of a monument in the desert right now because it’s not going to be used as a prison,” said Stuart Bowen, the special inspector general for Iraq reconstruction, whose office was due to release a report on Monday detailing the litany of problems at the vacant detention center in Khan Bani Saad.
The pages also add another narrative to the wider probes into the billions lost so far on scrubbed or substandard projects in Iraq and one of the main contractors accused of failing to deliver, the Parsons construction group of Pasadena, California.
“This is $40 million invested in a project with very little return,” Bowen told The Associated Press in Washington. “A couple of buildings are useful. Other than that, it’s a failure.”
In the pecking order of corruption in Iraq, the dead-end prison project at Khan Bani Saad is nowhere near the biggest or most tangled.
Bowen estimated up to 20 percent “waste” — or more than $4 billion — from the $21 billion spent so far in the U.S.-bankrolled Iraq Relief and Reconstruction Fund. It’s just one piece of a recovery effort that swelled beyond $112 billion in U.S., Iraqi and international contributions.
But the empty prison compound — in the shadows of more than two dozen watchtowers now dotted by birds’ nests — is an open sore for both American watchdogs and local Iraqi politicians who had counted on the prison as an economic boost.
The head of the municipal council in Khan Bani Saad, Sayyed Rasoul al-Husseini, called it “a big monster that’s swallowed money and hopes” — including those for more than 1,200 new jobs.
He sometimes drives out to the site, near groves of date palms and a former Saddam-era military training camp about 12 miles northeast of Baghdad and just over the border in the tense Diyala Province.
Al-Husseini says he walks the perimeter and wonders what can be salvaged. A housing development is not possible, he said. Many concrete walls lack proper iron reinforcements and “can collapse at anytime,” he said. Birds and small animals have found homes in the towers and crannies.
“But some of the cell blocks are good,” he suggested. “So maybe it can become a factory. I don’t know. It’s depressing.”
The idea for the modern-style prison began with the Coalition Provisional Authority running Iraq after Saddam’s fall.
On behalf of the authority, the U.S. Army Corps of Engineers awarded a $40 million contract in March 2004 to global construction and engineering firm Parsons to design and build a 1,800-inmate lockup to include educational and vocational facilities. Work was set to begin May 2004 and finish November 2005.
TITLE: Lundberg Wins Russian Open, Beating Lara By Two Strokes
PUBLISHER: Reuters
TEXT: NAKHABINO, Russia — Sweden’s Mikael Lundberg birdied two of his last three holes to clinch the Russian Open on Sunday for his second European Tour title.
The 34-year-old, who won his maiden tour title at the Moscow Country Club three years ago in a sudden-death playoff on the fourth extra hole, shot a four-under-par 68 in the final round to finish on 21-under 267, beating Spain’s Jose Manuel Lara by two strokes.
“This victory means so much to me. We are halfway through the season now and I felt like the most important thing for me was to keep my card for next season,” Lundberg, who spent last year on the Challenge Tour, told a news conference.
“The first one was great because it was my first victory but this one means even more because the money is a lot more and I get a two year exemption instead of one. It feels amazing,” he said after collecting 210,237 euros ($330,000) compared to the 67,599 euros ($106,100) he won in 2005.
Lundberg, who was tied with Lara on 19-under with three holes to play, made a 27-feet birdie putt on the par-three 16th to charge ahead, then birdied the par-five 17th to move two up on the Spaniard.
Britain’s Benn Barham finished third, another stroke back after carding a 68 on Sunday.
Lara, who trailed Lundberg by six strokes after three rounds, was on fire on Sunday, making eight birdies on his first 14 holes to catch up with the Swede.
But a bogey on the par-five 15th threw the Spaniard off and not even another birdie on 17 could make a difference.
Lundberg, who described the course in Nakhabino, about 15 km north-west of Moscow, as “just for me,” said he was lucky to make a par on the 15th after hitting his tee shot into the trees.
“I was in real trouble on the 15th when I hit a very bad drive to the left,” he said.
“I couldn’t even get the ball out of the trees with the first shot and on the second try I had to take a big risk to hit it out. Luckily it was a good week for me and I made a par, I just don’t know how,” he added.
Norway’s Jan-Are Larsen was fourth on 271, a stroke ahead of 2006 runner-up David Drysdale of Scotland, who along with Lara had the best score for the final round, a 64.
Britain’s Jamie Moul, who started the final round in second place, one stroke behind Lundberg, could not sustain his momentum on Sunday. The 23-year-old former amateur world number one made three bogeys on the back nine to finish tied for sixth, six strokes back.
TITLE: Europe Falls For Obama But Policy Choices Remain Hard
AUTHOR: By Gregory Katz
PUBLISHER: The Associated Press
TEXT: LONDON — There is little question that Barack Obama captured Europe’s heart during the tumultuous visit that ended Saturday evening, but hard questions remain about whether Obama, if he wins, could transform that enthusiasm into concrete policy gains.
After the harsh anti-Americanism that has thrived in Europe for most of this decade, it was jarring to see a U.S. politician receive such adoration from the public, press, and the continent’s leaders, who seemed almost to swoon in his presence.
Polls show not only that a strong majority in countries like Britain would choose Obama over Republican rival John McCain if they could, but also that the general distaste for the United States has softened somewhat as Obama’s White House bid gathers pace.
“Since the race has been going on, we’ve found a slight movement toward the U.S.,” said Anthony Wells, research chief for PoliticsHome in Britain. “I’m confident this is the Obama influence. The anti-Americanism of recent years seems closely tied to George Bush. The people love Obama.”
But many analysts believe that if Obama completes his march to the Oval Office, this backing will dissipate the first time he presses Europe to send more troops to Afghanistan or to support an aggressive U.S. military stance at odds with Europe’s strong preference for diplomacy over cruise missiles.
They also believe that complex long-standing disputes over issues like trade tariffs and the use of genetically modified food would not be solved more easily just because of the new president’s evident popularity in Europe.
Germano Dottori, an analyst at Rome’s Center for Strategic Studies, said the enthusiasm for Obama is likely to “cool down at the first real test” because he does not reflect a fundamental policy change.
“Everyone is ready to clap their hands when Obama talks about ‘tearing down the walls,’ but when he asks Europe to pay the price for it I am sure the doubts will resurface,” Dottori said. “Obama is not calling for a demilitarization of U.S. foreign policy and when European audiences realize this, their enthusiasm will fade away.”
This dynamic can already be seen in Germany. Chancellor Angela Merkel, through her spokesman, showered Obama with praise for his stated desire to work with Europe, but pointed out that Germany cannot accede to his desire to place more troops in Afghanistan for the battle against the Taliban and al-Qaida.
Writing in Germany’s mass-circulation Bild newspaper, commentator Hugo Mueller-Vogg also praised Obama’s “let’s try it together” message to Europe. But he cautioned that it would come with a price. “He will demand a stronger German commitment to international hot spots, more German soldiers too,” Mueller-Vogg wrote.
Even some in the crowd who cheered Obama’s emotional speech in Berlin anticipated conflicts should Obama become president.
“I thought it was important, his concentration on cooperation with Europe, but I can also say sometimes that cooperation would be difficult,” said Pablo Guaneme, a 23-year-old who was in the crowd.
Eric Frey, managing editor of Der Standard newspaper in Vienna, said that an Obama presidency, if it happens, would not mean a complete end to conflicts between Europe and the United States but would bring the two closer together.
“Many of the trans-Atlantic conflicts under Bush were atmospheric, so a change in the White House should pave the way for a new partnership,” Frey said. “Concrete disputes will continue in dozens of areas, but the general feeling of drifting apart could be reversed.”
Others caution that Europeans expecting a 180-degree change in American foreign policy should Obama triumph will be let down.
Inderjeet Parma, head of the politics department at the University of Manchester in England, said he read every Obama speech since 2002 before concluding that Obama would not represent a basic change in U.S. policy. This would inevitably lead to a serious loss of popularity in Europe, he said.
“Obama hasn’t said too much of great substance yet, he’s made a lot of friendly overtures, but he’ll be asking for commitments and burden sharing, and that’s when other countries might find it hard to go along,” Parma said.
He said the next president — be it Obama or McCain — will immediately face a number of pressing crises, particularly the dispute with Iran over its possible development of nuclear weapons. He said America is likely to believe these crises can best be solved with a military approach, which may well alienate much of Europe.
Political analysts also believe that Obama’s trade policies, as spelled out during the primary campaign, are more protectionist than McCain’s and more likely to lead to a confrontation with Europe.
TITLE: Cotto Knocked Out By Relentless ‘Tijuana Terminator’ Margarito
PUBLISHER: The Associated Press
TEXT: LAS VEGAS — By the sixth round, Miguel Cotto had thrown every ounce of his power at Antonio Margarito, and he hadn’t made a dent.
The Tijuana Tornado was more of a Terminator, Cotto was discovering. Margarito mercilessly moved forward through every punch with little more than a flinch, and Cotto realized he would spend this fight on his heels.
Margarito just won’t back down, not even from an unbeaten champion—and that’s why every welterweight in the world should be even more afraid of their division’s new king.
Margarito stopped Cotto in the 11th round Saturday night with a masterpiece of relentlessness, capping a dramatic bout at the MGM Grand Garden by claiming the WBA 147-pound title with two knockdowns.
“I told my corner I would wear him down and then knock him out,” said Margarito, who won his third welterweight belt. “He never hurt me, but that was the game plan, to come out early strong and to wear him down and knock him out. I got him with body shots, and then I hit him in the head, and then I knocked him out.”
Though Cotto (32-1) fought admirably, Margarito (37-5, 27 KOs)—so often ducked by the division’s best fighters in recent years—seemed to expend all the bottled-up energy he had from several years of waiting to be a Vegas headliner.
Cotto controlled the early rounds but gradually lost faith in his ability to slow down the taller Mexican star with the stone chin, leading to a major momentum swing in the middle rounds. Cotto rallied in the 10th, but he was spitting blood, and another barrage from Margarito dropped him to one knee 80 seconds into the 11th.
Margarito chased him until the Puerto Rican star finally went down again. With Cotto bleeding and woozy, the champion’s corner stopped the fight with 55 seconds left, sending Margarito’s team into a delirious celebration of a long-awaited victory.
“I told you I was a great fighter, just like Cotto is a great fighter,” said Margarito, who was ahead on two of the three judges’ scorecards when it ended. “He showed how tough he is. I felt I hurt Cotto in the sixth round. I felt he was going down. I told my trainer, ‘I’m going to knock him out.’ He said, ‘I’m sure you are, but don’t get overconfident. Be careful.”’
Caution isn’t a specialty of Margarito, who has long been a looming nightmare for the division’s top fighters because of his heedless style and tough chin. Among the many slights Margarito has received, Floyd Mayweather Jr. turned down an $8 million payday to avoid facing him in 2006—a dodge that resonated with Cotto, who also couldn’t get the Pretty Boy to return his promoters’ calls.