SOURCE: The St. Petersburg Times
DATE: Issue #1398 (62), Tuesday, August 12, 2008
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TITLE: South Ossetians Flee Cellars For Russia
AUTHOR: By Dmitry Solovyov
PUBLISHER: Reuters
TEXT: JAVA, Georgia — A safe haven in Russia was almost within sight for refugees from South Ossetia’s besieged capital on Monday as they waited in parched streets for buses to ferry them over the border.
Java, between South Ossetian capital Tskhinvali and the border with Russian North Ossetia, has become a staging area for people fleeing cellars where they hid from Georgian shelling that Moscow says has nearly destroyed their city.
Some wearing only dressing gowns and sneakers, they fled Tskhinvali and surrounding villages carrying plastic bags of clothes and documents, and some scant food supplies.
Some had walked down through the mountains and slept in forests to get to Java, where buses collected them for the journey to the North Ossetian capital Vladikavkaz. Russian artillery fired from Java’s outskirts as columns of tanks, armoured vehicles, howitzers and rocket launchers flowed in. South Ossetian men wielding Kalashnikov assault rifles and wearing flip-flops loitered in the shade.
“There is so much machinery flowing in from both sides. I am afraid the fighting will be so fierce there won’t be a house left standing,” said Zaira Slanova, aged 70, a retired engineer from Tskhinvali.
She was waiting for her sister, aged 77, to join her in Java for the short ride to Vladikavkaz. Her children, who live in Moscow, had arranged transport over the border, she said.
Slanova said she had spent four days hiding in a cellar as Georgian troops shelled Tskhinvali. Two days into the siege, an elderly man was killed by a mortar on the street outside.
“We all suffered two days from the terrible stench of putrefaction as he was decomposing in the scorching heat,” Slanova said. “So we just buried him on the spot where he died.”
South Ossetia, which fought to break free from Georgian rule in 1991-92, maintains close ties with its Russian North Ossetia. Most of South Ossetia’s 70,000 people hold Russian citizenship, entitling them to Russian state benefits.
South Ossetia’s affinity with Russia has been a thorn in the side of Georgian President Mikheil Saakashvili, who took power in a 2006 grassroots revolution. His aspirations to join NATO and promises to ensure territorial integrity have won support from Western governments.
“If Saakashvili stood in front of me, I would wish him eternal hell after what we have been through,” an elderly woman said, weeping in a Tskhinvali street as she recounted how she hid from the Georgian bombardment in a cellar with her two terrified grandchildren.
“Why is he trying to kill Ossetians? He should see with his own eyes what he has done with us. He would be ripped to bits on the streets if he ever came here.”
As Georgian troops shelled the city, she said, her grandson screamed for “Uncle Putin” to save him. “Thank God the Russians have come,” she said. “It is getting better.”
Russian Prime Minister Vladimir Putin on Monday criticised the West, saying it had mistaken the aggressors for victims in the conflict over South Ossetia.
“Putin is our golden leader. He defends us and gives us food,” said 73-year-old Nadezhda Pliyeva, waiting in Java for a bus to Vladikavkaz after fleeing the village of Prinevi, 12 kilometers from Tskhinvali.
Tengiz Khugayev, aged 45, a member of the South Ossetian rebel contingent dressed in camouflage uniform, was shuttling refugees between Java and the North Ossetian capital.
“One should understand that if we are cut off from Russia, we will have no future,” Khugayev said.
“If Russia withdraws its troops from here, we won’t be able to do anything. Look, the Georgians laid waste to Tskhinvali in just one day. We will not survive without Russia.”

TITLE: Russia Takes Georgian Base, Opens 2nd Front
AUTHOR: By Misha Dzhindzhikhashvili
PUBLISHER: Associated Press Writer
TEXT: TBILISI, Georgia — Russia opened a second front of fighting in Georgia on Monday, sending armored vehicles beyond two breakaway provinces and seizing a military base and police stations in the country’s west, officials said.
The new forays into Georgia — even after Georgian President Mikhail Saakashvili signed a cease-fire pledge — appeared to show Russian determination to subdue the small, U.S.-backed country, which has been pressing for NATO membership.
The latest developments indicate that Russian troops have invaded Georgia proper from the separatist province of Abkhazia while most Georgian forces are locked up in fighting around South Ossetia.
The West has sharply criticized Russia’s military response to Georgia’s attack on South Ossetia as disproportionate, and the Group of Seven leading industrialized nations urged Russia on Monday to accept an immediate cease-fire and agree to international mediation.
“We want to see the Russians stand down,” deputy State Department spokesman Robert Wood told reporters in Washington.
With Europe depending on Russia for a quarter of the oil it consumes — and half of its gas needs — the conflict serves as a vivid demonstration of Russian power in the Caspian region.
Russian armored personnel carriers rolled into the base in Senaki, a town in Western Georgia about 20 miles inland from the Black Sea port of Poti, Georgian Security Council secretary Alexander Lomaia said. In Moscow, a government official who spoke on condition of anonymity because he wasn’t authorized to give his name, said the move into Senaki was intended to end Georgian resistance.
Russian forces also seized police stations in the town of Zugdidi and allied separatist forces took over a nearby village, Georgian Interior Ministry spokesman Shota Utiashvili said.
U.S. Secretary of State Condoleezza Rice and the foreign ministers of Britain, Canada, France, Germany, Italy and Japan called on Russia to respect Georgia’s borders and expressed deep concern for civilian casualties, Wood said, adding that the call was one of more than 50 Rice made over the weekend on the matter.
Russia’s move to open a second front came hours after a senior Russian general insisted that Russia has no plans to press into Georgian territory beyond the breakaway regions.
The United States is campaigning to get Russia to halt its retaliation and American officials have accused Russia of using the fighting to try to overthrow the Georgian government. President Bush, who has encouraged Georgia’s efforts to join NATO, said he spoke with Russian Prime Minister Vladimir Putin and the Russian president.
“I’ve expressed my grave concern about the disproportionate response of Russia and that we strongly condemn the bombing outside of South Ossetia,” Bush said in an interview with NBC Sports.
In turn, Putin criticized the United States for airlifting Georgian troops back home from Iraq on Sunday at Georgia’s request.
“It’s a pity that some of our partners instead of helping are in fact trying to get in the way,” Putin said at a Cabinet meeting. “I mean among other things the United States airlifting Georgia’s military contingent from Iraq effectively into the conflict zone.”
Putin’s comments reflected Russia’s growing irritation with Western condemnation.
“The scale of their cynicism causes surprise,” Putin said. “It’s the ability to cast white as black and black as white which is surprising, the ability to cast the aggressor as the victim and blame the victims for the consequences.”
Putin and other Russian officials have accused Georgian forces of committing atrocities against civilians in South Ossetia — claims that could not be independently verified.

TITLE: St. Petersburg Rallies to Relieve Suffering of South Ossetians
AUTHOR: By Irina Titova
PUBLISHER: Staff Writer
TEXT: St. Petersburg will collect blood, clothes and money for South Ossetia and will help it to restore its destroyed infrastructure, the city administration said. South Ossetia is at the center of a fast-moving military conflict between Russia and Georgia that began on Friday.
“St. Petersburg will join the work to reconstruct the destroyed communal and social infrastructure of South Ossetia. There are already several construction companies who came up with the initiative to do so,” said St. Petersburg Governor Valentina Matviyenko, Interfax said.
The city will also open a center for gathering clothes and other things needed by South Ossetian residents and refugees, as well as a blood drive for those injured in the conflict.
St. Petersburg is also opening a bank account to collect money for those who have suffered in South Ossetia, she said.
“St. Petersburg is also ready to receive children from South Ossetia and to place them in children’s summer camps. City hospitals are also ready to receive the republic’s residents for rehabilitation,” Matviyenko said.
Matviyenko, who also met with members of the city’s Abkhazian and Ossetian diaspora on Monday, said that city authorities did not fear any conflict between local Georgians, Abkhazians and Ossetians. 
Abkhazia, like South Ossetia, is also a separatist republic in Georgia supported financially by Russia.
“The police will watch not to allow any provocations,” she said.
Meanwhile, non-profit organization Sodruzhestvo is planning to bring about 100 children from South Ossetia to St. Petersburg. 
“Before the end of August we want to bring to St. Petersburg about 100 children with their mothers, place them in resorts or in summer camps, organize psychological help for them and organize a cultural program,” said Lora Velikaya, vice-president of the organization.
The fund also organized a petition of St. Petersburg residents in support of the South Ossetian people, and by Monday it had gathered about 10,000 signatures. They plan to pass the lists to the authorities of South Ossetia, Interfax said.
The North West regions of Karelia, Petrozavodsk, Kalinigrad and Pskov have also offered South Ossetia their help.
All Pskov’s churches prayed for an end to the conflict and held a service for the Orthodox people who have died in South Ossetia.
“We pray for both Ossetian and Georgian people. In the Orthodox religion we don’t divide people by nationality,” said Andrei Taskayev, spokesman of Pskov church region, Interfax said.
On Friday, representatives of the city’s South Ossetian diaspora organized a meeting against the attack by Georgia on South Ossetia. 
The meeting continued for a few hours but police, who usually break up such actions, did not interfere.
Alan Pukhayev, representative of the president of South Ossetia in St. Petersburg, said that Georgia’s attack did not surprise anyone, Nezavisimaya Gazeta said.
“Georgia continues the tradition of attacks on festival days, such as the opening of the Olympics.  In 1992, South Ossetia was attacked on Christmas night,” Pukhayev said.
Valery Takazov, a member of the Ossetian community, said Ossetians living in St. Petersburg would provide help to their compatriots, including humanitarian help and receiving refugees, Nezavisimaya Gazeta said. 
There are about 4,500 Ossetians living in St. Petersburg. About 100 have already gone to South Ossetia to volunteer help, Nezavisimaya Gazeta said.
On Saturday, in a sign that Russia may open a second front against Georgia, representatives of the Abhazian community joined the city’s South Ossetians.
Meanwhile, representatives of the Georgian diaspora in the city hope for a fast end to the conflict.
“Both Georgians and Ossetians need to stop firing and begin negotiations,” said Boris Berulava, vice-president of the Georgian diaspora, Nezavisimaya Gazeta said.
There are about 50,000 Georgians living in St. Petersburg. Georgians have a wide presence in the city’s construction, health, food and high-technology fields.

TITLE: Man Killed in Fight at Local Bar Sochi
PUBLISHER: The St. Petersburg Times
TEXT: A customer at Sochi bar died on Sunday after a fight with a guard that had taken place in the early hours of Thursday morning, local news website Fontanka.ru reported.
The bar’s management, however, denied the site’s report that it was the guard who started the fight, after the customer, Stanislav Kolegov, 25, and his several friends, refused to stop smoking in the lobby outside the bar, where smoking is banned.
Fontanka.ru said that it was the guard, whom it identified as an ethnic Dagestani, who started the fight after receiving a rude answer from Kolegov and then beat him. The site also suggested the guard’s reaction was caused by “his southern blood.”
According to art director Denis Rubin, it was Kolegov who attacked the guard who attempted to escort  Kolegov out of the venue after a series of verbal exchanges. 
“The guard had his face all beaten, I saw him the next morning, with a broken nose,” he said by phone on Monday, adding that Kolegov was with three or four friends.
“[The guard] was punched, and he punched back in defense, it was just one blow; the man died because he fell with his head on the stone floor.”
Although Rubin admitted he was not present when the fight took place, the bar has a video recording of the incident and staff witnessed what happened.
“The guard’s main fault was that he should not have responded by hitting back, but to push a button to call the police,” he said.
“He’s a young guy, he’s only 22, so he chose to hit back, that’s all. But what they write about a guard beating somebody to death is nonsense.” 
The guard is now under investigation in custody.
Kolegov was the leader of SF (Snake Firm), a group of Zenit football fans. 
Sochi bar was launched in June and has become a popular hangout for foreigners.

TITLE: VOX POPULI
TEXT: <i>As the conflict between Russia and Georgia intensified Monday, the people of St. Petersburg told Irina Titova what they thought of the situation and how Russia’s government-controlled media have portrayed the Western media response. Photographs by Alexander Belenky.</i>

<b>Lyudmila Shkrylyova</b>, <i>19, journalist student</i>.
As a person from a military family I’m absolutely against the war and I want it to be over as soon as possible.
However, I think Russia was right to sends its troops to help South Ossetia and Russian peacekeepers in the region to deal with the Georgian aggression. It was done legally.
As for the Georgian attack on South Ossetia, I think it was a very well-planned provocation, and as a journalism student I’m very disappointed by the misinformation in the Western media about the conflict.
The experts I heard say that such misinformation is in the interest of the Republican candidate for the American presidency [John McCain]. Therefore they [Western media] support [Georgian President Mikheil] Saakashvilli in all possible ways.

<b>Irina Arsentyeva</b>, <i>35, manager</i>.
I think it’s very hard to know objectively what is happening in South Ossetia.  In order to be 100 percent sure about it, one probably has to go there.
On the whole it was Georgia who attacked first but honestly I don’t know the reasons why.  I think Georgia was wrong. At the same time I can entertain the thought that the Russian side could also be doing something not correctly enough. But knowing that most of the South Ossetian population has Russian passports, we can say that Russia was defending its citizens. I think in this situation Russia was also standing up for its status on the global level.
As for Russia sending its troops to South Ossetia, I think Russia just didn’t have any other choice, in both military and diplomatic terms.
As for the way the Western mass media covers the conflict, it’s the usual story, as the Western media usually covers the events in Russia not objectively but from one point of view. This is because a strong Russia is not in the interests of the West.

<b>Nikolai Voznyuk</b>, <i>67, pensioner</i>.
It’s very sad what’s happening in South Ossetia.  I’m very sorry for South Ossetia’s people.
Russia was right to send its troops to South Ossetia because it needed to defend its peacekeepers and civilians, who are mainly Russian citizens.
As for the Western media coverage of the conflict, it’s a part of the information war, and a part of the attack on Russia. This conflict is in the interests not only of Georgia but also of the United States, who want to surround Russia with radars, dictate its policy, and want to have a unipolar world.

<b>Anastasiya Drozdova</b>, <i>17, student</i>
I think most people do not have much knowledge about politics. For instance, I don’t. I don’t understand what Georgia wants.
However, I’m still more inclined to think that Russia was right to send its troops to South Ossetia, if they think it can help civilians there.
As for Western coverage of the conflict, I think for instance the American media has its reasons for that. Those reasons have to do with the hidden opposition between the two countries, who on the surface have ‘friendly’ relations. It is now in the interest of the U.S. to show Russia as “an aggressor.”

TITLE: Conflict Opens Up Front  In Mass Media Coverage
AUTHOR: By Anatoly Medetsky
PUBLISHER: Staff Writer
TEXT: MOSCOW — Russian television is flush with footage of misery left by the Georgian assault in the separatist district of South Ossetia, but over the weekend few, if any, reports mentioned Russia’s bombing of Georgia.
William Dunbar, a correspondent in Georgia for English-language state channel Russia Today, mentioned the bombing in a report Saturday, and he has not gone on air for the station since.
“I had a series of live, video satellite links scheduled for later that day, and they were canceled by Russia Today,” he said by telephone from Tbilisi on Sunday. “The real news, the real facts of the matter, didn’t conform to what they were trying to report, and therefore, they wouldn’t let me report it.
“I felt that I had no choice but to resign,” he added.
A Russia Today spokeswoman said Dunbar resigned when a producer called to arrange a broadcast. She provided a copy of a Georgian media report saying Dunbar protested Russia’s “aggression” against Georgia and said the channel assumed that was why he quit.
In an online story dated Saturday, the channel mentions Georgian statements about the Russian bombing raids but says its correspondents in Tbilisi “could not substantiate the reports.”
In a further twist of the information flow, Georgia on Saturday terminated broadcasts of Russian news channels Channel One, Rossia and NTV and blocked web sites in the .ru domain.
Meanwhile, Georgian President Mikheil Saakashvili said hackers had crashed many web sites, including those of state agencies. His own site was not loading Sunday, with an Internet browser saying the server stopped responding. Before it went offline, the site was tampered with to show Saakashvili with the kind of mustache sported by Hitler, Interfax reported Saturday.
Russian officials and state media, meanwhile, criticized Western media, saying they had taken Georgia’s side and were misinforming their audiences.
Deputy Foreign Minister Grigory Karasin said Sunday that Western media had failed to show the plight of Ossetians and what was left of their capital after it was almost razed by Georgian troops.
Rossia’s news program, “Vesti,” complained about coverage in U.S. and British media, pointing to an editorial in The Washington Post. The editorial said Russia’s military campaign could hinder former Soviet republics and Warsaw Pact countries in their pursuit of independent policies and that the United States and its NATO allies should “impose a price on Russia if it does not promptly change course.”
“Vesti” said such attitudes were misleading. “Not many viewers and readers suspect that their minds are being bombed out the same way as the Ossetian villages, but with words and sentences instead of shells,” it said.
It said continental Europe’s news organizations had been more objective.
At least nine reporters have been reported injured in the hostilities. An NTV producer was shot and wounded Sunday, Interfax reported. The others include members of a “Vesti” crew, a Komsomolskaya Pravda reporter, an editor and reporter of a Georgian English-language newspaper, and two Turkish reporters for Kanalturk television.
Two other reporters may have been killed, Zaza Gachechiladze, editor-in-chief of Georgian newspaper Messenger, said by phone Sunday.
In Moscow, pro-Kremlin youth rallied Sunday at the Georgian Embassy to protest Georgia’s “military operation,” receiving wide coverage on state TV.

TITLE: Analysts: No Proxy War With West
AUTHOR: By Nabi Abdullaev
PUBLISHER: Staff Writer
TEXT: MOSCOW — Having forcefully reclaimed South Ossetia for its loyal separatist regime, Moscow has sent the strongest possible signal of how far it is ready to go to retain influence in other former Soviet republics.
The conflict is unlikely to escalate into a war by proxy with the West, however, and the situation will eventually return to the pre-conflict status quo, political analysts said Sunday.
President Dmitry Medvedev, Prime Minister Vladimir Putin and Foreign Minister Sergei Lavrov have labeled Georgia’s attack on the South Ossetian capital, Tskhinvali, as “genocide” and said Tbilisi has lost the right to ever govern the separatist region. 
Major Western powers have strongly urged Moscow to respect Georgia’s territorial integrity and to avoid the excessive use of force — which analysts said suggests that after a lengthy period of gradual military disengagement and negotiations, Georgia will have to accept continued Moscow-backed separatism on its territory.
The South Ossetian conflict was a foreign policy trap for Russia from the start, and the trap slammed shut after the Georgian troops started shelling Tskhinvali late last week and its residents pleaded for Moscow to intervene, said Alexander Khramchikhin, a senior researcher with the Institute of Political and Military Analysis.
“Russia was left with the choice of either becoming a traitor or an aggressor,” he said.
This apparently was a tough choice for a country that feels encircled and humiliated as former vassal regimes turn to the West. The fact that Georgia is a close ally of the United States, which strongly backs its bid to join NATO, promises to further complicate the bigger, geopolitical ramifications of the violence in South Ossetia.
Washington and West European governments criticized Russia for its overwhelming use of force but did not place the full blame for the conflict on it.
The main reason for this was probably Georgian President Mikheil Saakashvili attempt’s to reintegrate South Ossetia by force without first winning approval from the West, said Alexei Malashenko, a Caucasus analyst with the Carnegie Moscow Center. 
Now, much will depend on how Georgia and Russia portray the conflict to the rest of the world, said Monica Duffy Toft, a Harvard specialist on ethnic conflicts in the former Soviet Union.
“Georgia’s best plan at this point is to make it clear that Russia is the aggressor here, that its sovereignty has been violated and that Russia has violated international law and is threatening interstate war and global peace,” she said.
Saakashvili has labeled Russia’s actions “war” and called on Washington to intervene, saying on CNN television that Moscow’s assault against Georgia was also an assault against the United States and its values.
“We on our own cannot fight with Russia,” Saakashvili told the BBC on Sunday.
As Medvedev, Putin and Lavrov described the Georgian attack on Tskhinvali as “genocide,” most Russian officials are portraying the Russian invasion as legitimate and limited. Saakashvili “cannot even imagine what being in a state of war with Russia would be like,” said Russia’s envoy to NATO, Dmitry Rogozin, Regnum news agency reported.
“Our actions are limited in time, territory and mission,” he said.
A senior U.S. official, speaking on condition of anonymity in Washington on Saturday, also described the fighting in the South Ossetia as “a very localized conflict,” adding that “there is not a danger of regional conflict at all in our minds,” The Associated Press reported.
NATO and U.S. officials said they would not be drawn into the conflict militarily.
Several international and Russian media outlets suggested that Moscow was pushing to absorb South Ossetia into Russia. 
But it would be counterproductive for Russian troops to move into Georgia beyond the border of South Ossetia, analysts said. “It would be most unpleasant for [President Dmitry] Medvedev at the beginning of his presidential term to be viewed around the world as the aggressor,” Malashenko said.
Russia’s decisions to reject Saakashvili’s offer of a cease-fire late last week, carry out attacks against Georgian targets outside South Ossetia, establish a naval blockade of the Georgian coast and reject international mediation do not mean that Moscow has embraced a head-on confrontation with the West but instead is striving to strengthen its position ahead of imminent negotiations, analysts said.

TITLE: Georgia Acts to Cool Fears Among Western Investors
AUTHOR: By Simon Shuster, Chris Baldwin
PUBLISHER: Reuters
TEXT: MOSCOW — Georgia, whose credit ratings were cut on Friday after military clashes with Russia, was praised on Saturday by foreign investors, who contrasted its efforts to reassure them over the crisis with those of Russia.
Western bankers said that since fighting began in South Ossetia on Thursday, they had received numerous phone calls and e-mails from Georgian leaders including Prime Minister Lado Gurgenidze.
They said Russia had made no similar effort, despite a plunge in its stock market on Friday.
Gurgenidze even held a private conference call with two major Western banks on Friday, as towns in South Ossetia were under heavy fire from Georgian artillery.
“His main message was that the stock market is safe and there will be no bond defaults. ... He’s really great with investors, really great at reassuring us,” said one banker who participated, asking not to be identified, as the call was not meant for public consumption.
The call, first reported on the web site of U.S. political journal The Nation, focused on risks surrounding Georgia’s only eurobond, sold in April. The $500 million five-year bond was three times oversubscribed at the launch.
Participants in the conference call then received several e-mails from Gurgenidze’s office.
“The prime minister has held throughout the day calls with investors and rating agencies and remains in touch with the investor community,” said one e-mail obtained by Reuters. Its subject line was: “No unusual economic activities or interruptions in Georgia today.”
But the public relations blitz could not stop Fitch Ratings and Standard & Poor’s from downgrading the country, with Fitch saying the situation in South Ossetia had “materially increased downside risks to Georgia’s sovereign creditworthiness.”
Georgia’s 2012 eurobond dropped five points in price, to close at 90.50 percent of face value bid on Friday.
None of the three big ratings agencies has altered Russia’s ratings, and Moody’s Investors Service said the conflict should not change its rating of Russia’s sovereign debt.
Analysts nevertheless said the conflict was destroying enthusiasm for Russian assets, which had looked promising weeks earlier, given high oil prices.
“Russia’s not as concerned about western investor interest,” said the banker who spoke with Gurgenidze. 
“Georgia is very interested in western investment, and the prime minister, in particular, is very concerned about what investors think. 
“If anything, Russia seems against  that approach.”

TITLE: Apple Retail Outlet Opens on Nevsky Prospekt
AUTHOR: By Yevgeny Rozhkov
PUBLISHER: Special to The St. Petersburg Times
TEXT: The computer industry leader Apple is increasing its presence on the local market with the opening of one of its Russian Premium Resellers re:Stores on Nevsky Prospekt. The new store, which opened Saturday, is the seventh re:Store in the city, but the first to be located on the high street. The costs of opening a retail outlet on Nevsky Prospekt are estimated at around $100,000. 
“The high street store is a new format,” said Svetlana Ivanova, re:Store’s PR-manager, emphasizing the difference between the 90-square-meter store and the 49 stores previously opened across Russia, which mainly operate within larger shopping malls. “The groundbreaking experiment of the re:Store at Nevsky Prospekt 32/34, which does not share the premises with any other retailers, will provide us with experience in whether such an approach is effective.”
According to Ivanova, St. Petersburg is viewed by computer retailers as a prospective market which is not yet saturated by Apple products. 
“Russia’s northwest region traditionally ranks second place in computer software and hardware sales volumes,” said Gagik Khachatryan, sales manager of the Moscow-based MacZone company which entered St. Petersburg last month with its first Z-Store, aimed at becoming the leading retailer of Apple products on the market.
“Although market research and analysis are still in progress, the targeted sales rates have been achieved and we are seeing almost the same demand for Apple products as in Moscow,” said Andrei Shcherbakov, branch manager of the Z-Store, when discussing the results of the company’s first month in the city.
  In late July, Apple reported record financial results for its fiscal 2008 third quarter, posting revenue of $7.46 billion and net quarterly profit of $1.07 billion. The gross margin was 34.8 percent, down from 36.9 percent in same quarter last year, according to an official press release. International sales accounted for 42 percent of the quarter’s revenue. Apple shipped almost 2.5 million Macintosh computers worldwide during the quarter, representing 41 percent unit growth and 43 percent revenue growth from a year ago. The company sold more than 11 million iPods during the quarter, representing 12 percent unit growth and seven percent revenue growth from the previous year, while iPhone sales amounted to 717,000, compared to 270,000 in the same period last year. 
“We’re proud to report the best June quarter for both revenue and earnings in Apple’s history,” said Steve Jobs, Apple’s CEO. “We set a new record for Mac sales, we think we have a real winner with our new iPhone 3G, and we’re busy finishing several more wonderful new products to launch in the coming months.” 
Peter Oppenheimer, Apple’s CFO, said he was pleased with the growth of the business and the generation of almost $5.4 billion in cash in the first three quarters of fiscal 2008. “Looking ahead to the fourth quarter of fiscal 2008, we expect revenue of about $7.8 billion,” he said. 
Re:Store company, Apple’s only Premium Reseller in St. Petersburg, is expected to survive longer on Nevsky Prospekt than its predecessor at the address, Le Futur — a branch of executive gift chain stores in Russia — which was launched in fall 2007 and closed after six months due to low sales and limited parking space, according to various sources.    
“The Apple retail store on Nevsky is a leader store which will mainly contribute to the company’s image rather than to sales rates,” said Roman Evstratov, deputy manager of the sales real estate department at Colliers International.
Also located on Nevsky Prospekt, the newly opened Z-Store is focusing both on its image and on sales, which generally leap in the fall after stagnating during the summer. 
“We have chosen this street [Nevsky Prospekt] as it is the mainstream and fashionable route of the city. Yet at our store every customer is treated on an individual basis, therefore the location should not be overcrowded,” said Shcherbakov.   
Astera St. Petersburg acted as a real estate broker for re:Store, which has not declared the rent rates for the premises, Vedomosti reported last week. 
Re:Store’s location will cost an estimated average of 550 euros ($822) per month per square meter, according to experts at Colliers International, who said that St. Petersburg ranks sixth in the world’s most expensive cities, behind New York, Paris, Moscow, London and Dublin. Some retail premises on Nevsky Prospekt are rented out at up to $10,000 per square meter per year.

TITLE: Christian Dior Store Set To Join Local Retailers
AUTHOR: By Gleb Krampets and Anatoly Tyomkin
PUBLISHER: Vedomosti
TEXT: Bolshaya Konushennaya Ulitsa is gradually becoming St. Petersburg’s main street for top fashion, with a Christian Dior boutique set to join the Louis Vuitton and Maison Martin Margiela stores already located there.
Christian Dior already has two boutiques in Moscow, and has now decided to open in the northern capital, said Christian Dior’s Russia director, Pierre de Magre. He did not say where or when the store would open, but Vedomosti has discovered that the store will open at 13, Bolshaya Konushennaya Ulitsa. At present the site is occupied by the Solo furniture store, but it is due to move out of the premises this week, and will later house the Christian Dior store, said Yekaterina Faukatdinova, the shop’s manager.
The new store will open at the end of 2008 or during the first half of 2009, said Dmitry Fedosov, a managing partner at Ralph Inc — the agency representing the interests of Louis Vuitton, which also has a store in the same building. (Louis Vuitton belongs to LVMH group, which is owned by Christian Dior). Irina Gorid, the press director of Vanity gallery where Christian Dior merchandise is also sold, said that she was aware of the opening of the Dior store, and that her company would continue to cooperate with the French fashion house after the opening of the new store.
Arina Sender, head of the retail real estate department at Knight Frank St. Petersburg, said that the location would suit Christian Dior, due to the neighboring Louis Vuitton store.
The total area of the local Christian Dior store will be about 350 square meters, said Sender. She estimated the rental rates for the boutique at $3,200-$3,500 per square meter per year. Investment into the opening of a store of that size was estimated at $1 million - $2 million by the general director of Machiavelli, Denis Belov, and the marketing vice president of Kaligula fashion label, Roman Filimonov.
Nikolai Merenkov, development director for Day and Night fashion stores, said that the demand for such labels is lower than in Moscow. “There are hardly any events here that could be attended in a Dior dress,” he said. The general director of SPB Fashion, Nikita Kondrushenko, said that designer label stores do not bring in great profits, but serve as an advertisement for the label.  Vanity’s Gorid said that in her shopping gallery, Christian Dior is one of the best-selling labels. 
Exclusive boutiques continue to open around the city center.  In March, a Ralph Lauren furniture store opened on Bolshaya Morskaya Ulitsa.

TITLE: In Brief
TEXT: <b>FDI in Russia Rises</b>
LONDON (Bloomberg) — European companies cut investments in China drastically in 2007 because of rising labor and transport costs, while expanding in Eastern Europe and Russia, the Financial Times reported, citing RSM International, a tax and audit adviser.
Foreign direct investment from the European Union in China fell to 1.8 billion euros ($2.7 billion), from 6 billion euros in 2006, the newspaper said, adding that investment in Russia rose to 17.1 billion euros, from 10.6 billion the previous year.

<b>Gazprom Buys LNG</b>
SINGAPORE (Bloomberg) — Gazprom will buy 500,000 metric tons of liquefied natural gas from Abu Dhabi Gas Liquefaction to meet the demand of customers of the delayed Sakhalin-2 project, Platts said, citing Frederic Barnaud, director of Gazprom Marketing & Trading.
The first LNG tanker Energy Advance left Abu Dhabi for Japan on July 26, and the contract with the Middle Eastern supplier will end in March 2009, Platts said. 
Deliveries from the Sakhalin-2 project to customers in Japan and South Korea were postponed to early next year from the middle of 2008, Platts said.

<b>Bank Stops Lending</b>
MOSCOW (Bloomberg) — Georgia’s financial regulators ordered the nation’s banks to halt lending as a response to the fighting with Russia.
Bank of Georgia, the biggest bank in the former Soviet republic, suspended all lending as well as its internet banking service until next Monday, according to a statement from the Tbilisi-based bank distributed by Business Wire on Monday. The bank said it is acting in line with instructions from the Financial Monitoring Service of Georgia.

<b>X5 to Keep Karusel</b>
MOSCOW (Bloomberg) — X5 Retail Group, Russia’s largest food retailer, will adopt the Karusel name for its own superstores after buying the company.
New outlets will carry the name, and existing stores will be renamed at a gradual pace, Moscow-based X5 said Monday in a Regulatory News Service statement. The retailer completed the takeover of St. Petersburg-based Karusel, whose stores will retain the name, this year.
The use of the Mercado brand, which some of its superstores carry, is under consideration, according to X5. 

<b>Linik Set for Upgrade</b>
KIEV (Bloomberg) — TNK-BP, BP’s Russian venture, will close its Linik oil refinery in Ukraine on Sept. 15 for a planned upgrade.
The plant in Lisichansk, eastern Ukraine, will resume operations within 1 1/2 months, TNK-BP’s Ukrainian unit said Monday in an e-mailed statement. The refinery, the country’s largest, can process 8 million tons of oil a year, according to the company’s web site.
“TNK-BP will invest more than $40 million in the plant this year,” the unit’s CEO Serhiy Lizunov said in the statement.

TITLE: Baltika Heads Investment Into Beer Market Niches
AUTHOR: By John Wendle
PUBLISHER: Staff Writer
TEXT: Andrei, a blond professional in his mid-30s, was lying in his berth on the Moscow-St. Petersburg overnight train.
“What about Slavutich?” he said.
“Baltika,” replied Andrei Chervonsky, a PR representative at Pleon, a firm that represents Baltika.
“Tuborg?” asked Andrei.
“Baltika,” said Chervonsky.
“Asahi?” asked Andrei, with confidence.
“Baltika,” said Chervonsky, with a mixture of boredom and pride in his voice.
Andrei, who shared a compartment with a reporter on a Baltika-sponsored trip to its St. Petersburg brewery this week, may not be alone in being unaware that Baltika is behind all these brands and more. Baltika, the country’s largest brewer, is investing heavily into niche beverages as it tries to grab a bigger slice of the ever-growing beer market, and other brewers are following suit.
“The beer industry is now trying to find niches in the market,” said Daniil Briman, Baltika’s vice president for corporate communications.
This is in sharp contrast to Soviet times, he said, when “we had two kinds of beer: piva nyet [there is no beer] and pivo yest [there is beer].”
The whirl of beer bottle shapes, colors, gimmicks and prices now weighing down shop shelves from St. Petersburg to Sakhalin belies the consolidated nature of the market and shows that this is no longer the case in Russia.
Today, besides the Baltika standards running from Zero to Nine, the firm also manufactures Baltika Lite and Baltika Cooler, as well as licensing and producing foreign beers such as Asahi, Tuborg, Carlsberg and Kronenbourg 1664. The company also produces regional Russian beers such as Yarpivo and Samara.
One of Baltika’s main competitors, Sun InBev, whose best-known brand is perhaps Klinskoye, has a range of brands just as broad, encompassing everything from the Russian Sibirskaya Korona and Tolstyak to licensed brands like Stella Artois, Beck’s, Hoegaarden, Staropramen, Tinkoff and Lowenbrau.
“The market is open for new innovations and varieties. The Russian man likes to try new innovations and flavors,” said Alexei Shavenzov, corporate affairs manager at Sun InBev.
The profusion is a mirror of the growth of microbrews and niche products in the West and seems to be an effective strategy.
During the first half of 2008, Baltika reported that brand sales grew by 25.2 percent, particularly because of the growth of sub-brands Baltika 7, Baltika Cooler and Baltika Lite.
Sales of Tuborg grew 33 percent in the first half and increased their market share in the segment up to 19.3 percent. Kronenbourg 1664 saw sales grow 55 percent. The brewer reported that its share in the licensed beer segment reached 28.4 percent.
“The development of new brands and new tastes of beer is one of the main trends of the market,” said Olga Samarets, a retail and consumer analyst at Prospect Investment Company.
This “makes sense because the beer market in Russia is highly competitive. Companies need to maintain the loyalty of customers and win new ones, and one way to do it is to introduce new products,” she said.
Besides a wide assortment of flavors and licensed beers, beer makers also use price and functionality to get more out of the market.
“The beer market is segmented by both price and functionality,” said Maria Shevtsova, an analyst at MDM Bank.
Functionality is the tactic of attaching gimmicks to kinds of beers — like the “no-label look” on Baltika Lite, the pop-off top for Tuborg Green and the bottle opener cast into the bottom of Carlsberg — in other words, the gadgets. 
Functionality, like niche beers, is another of the tactics used to get more out of the market.
“You have the low-end target consumers who are only price sensitive, and on the other end you have a rising sophistication from consumers who seek value-added qualities in what they purchase,” Shevtsova said. “Consequently, to satisfy the latter’s demands, producers like Baltika are offering spinoffs such as Lite and brands that offer both taste and the look.” 
For example, expensive imports such as Corona, make up just 0.4 percent of the market, Briman said. Premium labels, such as Baltika’s Nevskaya and Sun InBev’s Hoegaarden, make up 18.4 percent of the market. Around one-quarter of the market is controlled by “mainstream” beers, such as Klinskoye and Yarpivo. “Discount” or “economic” beers make up between 18 percent and 20 percent.
“We are trying to find added value in an already strong market,” Briman said.
The strong market is a result of changing drinking habits in Russia as the way of life in Russia changes. 
“The middle class is growing, and they are spending more free time relaxing — bowling, or billiards, going to restaurants,” Briman said. “The new generation has been faced with a choice between vodka and beer, and they have chosen beer.”

TITLE: BP Pipeline Fire Put Out After PKK Attack
AUTHOR: By Steve Bryant and Eduard Gismatullin
PUBLISHER: Bloomberg
TEXT: ANKARA — A fire on BP ’s oil pipeline in eastern Turkey was extinguished on Monday, enabling officials to assess damage to the link within 12 hours, a spokesman for the Baku-Tbilisi-Ceyhan line said.
“The fire’s out and now we’re in the cool-down period which usually takes some time,” Murat Lecompte, external affairs director for pipeline operator BTC, said in a telephone interview. “It’s still too hot to touch and we need it to cool before we can see what the damage is.”
The fire broke out on the pipe linking Azerbaijan through Georgia with the Turkish port of Ceyhan after a blast in the Erzincan province late last Tuesday. The Kurdistan Workers’ Party, or PKK, said it bombed the link as part of its campaign for autonomy in southeast Turkey.
BP, StatoilHydro ASA and other partners have cut crude production at the Azeri-Chirag-Gunashli and Shah Deniz fields in the Azeri part of the Caspian Sea. The producers are exporting some output through the Baku-Supsa pipeline to the Georgian Black Sea coast. Oil is also being transported through the Baku-Novorossiysk link to the Russian Black Sea coast and in rail cars across Georgia to the Black Sea ports.
The five days of fighting between Russian and Georgian troops in the region of South Ossetia have also raised concern among shippers and traders over possible disruption of crude transportation through Georgia.
The fighting “has grown more intense, and threatens to endanger the Baku-Tblisi-Ceyhan pipeline, the most prominent of several pipelines that crisscross the region,” Edward Meir, MF Global Ltd. analyst, wrote in an e-mailed report Monday. “If the Turks resume pipeline operations from their end, it remains to be seen what will happen on the Georgia side, where continued fighting could easily imperil a restart and halt the flow of potentially 1 million barrels of oil [a day].” 
Oil tankers collecting cargoes from the Georgian port of Batumi moved farther out to sea after the town was bombed on Sunday night, Garsevan Jorbenadze, a local ship agent at TeRo Co. who arranges for ships to dock and load, said by phone on Monday.
BTC runs about 100 kilometers south of the South Ossetian capital, Tskhinvali.
“We are closely monitoring the situation” in Georgia, BTC’s Akdogan said. No damages to the BTC pipeline have been reported so far, she said.
About 100,000 barrels of crude oil have been burning in the damaged stretch of the BTC link, Akif Sam, a spokesman for the Turkey’s Energy Ministry, said on Friday. The pipeline contains 10 million barrels of oil at any one time, through its 1,768-kilometer length.
BP and partners spent $3.9 billion to build BTC.

TITLE: TNK-BP Chief Ordered To Pay $21, Escapes Ban
PUBLISHER: Reuters
TEXT: MOSCOW — TNK-BP chief executive Robert Dudley escaped a possible three-year ban from doing his job on Friday in a Moscow court that said he broke the Labor Code.
The ruling came as Fitch Ratings agency became the third major international ratings agency to downgrade its expectations for TNK-BP over the oil firm’s fierce shareholder dispute.
Dudley is managing TNK-BP from abroad after he left Russia last month amid the dispute between the British major and a quartet of Soviet-born billionaires, who own the other half of Russia’s No. 3 oil producer.
“The court ... has confirmed the fact that TNK-BP’s Robert Dudley has committed a violation and has been fined,” TNK-BP said in an e-mailed statement.
Dudley was fined 500 rubles ($21), a court official told reporters after the hearing.
The court case over labor violations could have ultimately seen the BP-nominated chief executive barred for three years.
The case, initiated by the State Labor Inspectorate, raised questions about TNK-BP’s use of foreign employees. BP’s local partners have also complained about the use of foreign workers and secondees from BP.
TNK-BP’s shareholders are locked in a public battle over strategy and management at the firm.
The Russian side of the firm has demanded Dudley’s resignation, accusing him of poor performance and favoritism toward BP.
Dudley, who left Russia after failing to receive his visa and saying he and the company were subject to a campaign of harassment, has not disclosed his whereabouts. 
Reviewing its outlook for TNK-BP, Fitch Ratings agency said in a statement that it had placed TNK-BP on rating watch negative and may cut its BBB- rating on corporate governance concerns and the shareholder conflict.
“The [rating watch negative] reflects Fitch’s concern over continued deterioration in TNK-BP’s corporate governance, resulting from the ongoing major shareholder conflict, as well as its potential credit impact,” it said.
Last week, Moody’s downgraded its outlook for TNK-BP to “developing” and Standard & Poor’s lowered its long-term corporate credit and unsecured debt ratings.

TITLE: Top Gas Exporters to Discuss Energy Charter in Moscow
PUBLISHER: Reuters
TEXT: MOSCOW —The world’s top gas-exporting countries will send ministers to a high-level forum in Moscow on Nov. 17 to discuss the possible creation of a gas charter, a source in the Energy Ministry said Friday.
“The main issue of the forum is to steadily turn into an organization,” the source said on condition of anonymity.
Russia has hinted at its interest in the creation of an OPEC-style gas group, working with Iran, Qatar, Venezuela, Nigeria, Algeria, Egypt, Indonesia and Libya, who will meet at the forum.
Iran wants to turn the forum into a more formal organization akin to OPEC, the 13-member grouping that makes output decisions that can sway the global oil price.
Europe and the United States have warned against such a grouping, saying it could pose a danger to global energy security and create room for price manipulation.
While the Energy Ministry source said a gas charter was in the works, he dismissed talk of an OPEC-style grouping.
“We’re not talking about a cartel. This is not part of the picture,” he said.
Experts have said a “gas OPEC” could be a reality, with the formation of a charter being the first step, but would have to wait at least 10 years before coming to market, once the gas market changes its management and supply structure, and when gas becomes commoditized. In early June, Russia hosted a working group from the major gas-exporting countries, a meeting largely seen as a talking shop.

TITLE: Norilsk Nickel Chooses Strzhalkovsky As New CEO
AUTHOR: By Nadia Popova
PUBLISHER: Staff Writer
TEXT: MOSCOW — Norilsk Nickel’s board of directors elected Vladimir Strzhalkovsky, a former KGB officer and longtime friend of Prime Minister Vladimir Putin’s, as chief executive on Friday.
The move was seen as an attempt by the government to settle a lengthy dispute between the company’s shareholders. Strzhalkovsky, who until recently headed the Federal Tourism Agency, replaced Sergei Batekhin, who occupied the post for less than a month and became deputy chairman of the management board in the shakeup. 
“The company’s task [under Strzhalkovsky] is to act as a consolidation leader in the industry,” Vladimir Potanin, Norilsk’s chairman and a 30 percent shareholder, said at a news conference after the meeting.
United Company RusAl — a 25 percent shareholder in Norilsk with three representatives on its nine-member board, including billionaires Oleg Deripaska and Mikhail Prokhorov — had questioned Strzhalkovsky’s candidacy, saying he lacked managerial and metals-industry experience, and voted against him.
Strzhalkovsky served as a KGB officer with the Leningrad branch of the Soviet security agency from 1980 to 1991, according to the government’s web site. 
“The consolidation effort will require cooperation with the state,” Potanin said. “We will also need the state’s help in international expansion and improving relations between shareholders.”
Deripaska, who controls RusAl through his Basic Element holding company, told reporters Thursday that the miner was “not ready to merge with Norilsk at present.” He also ruled out a three-way merger with iron ore giant Metalloinvest, a move that had been actively supported by Potanin.
Potanin said Friday that he would consider any partners for the merger and was even ready to cut his stake in Norilsk to achieve such a deal. “We are not considering RusAl as a sole partner,” Potanin said after being asked to comment on Deripaska’s statement.
Strzhalkovsky told reporters after his election that he saw his primary task as increasing the company’s profit, but he also gave a nod to what investors consider his main purpose at the Norilsk. “Any large company should be interested in good relations with the government,” he said.
Investors, however, were unenthusiastic about the move. “A private company should be managed by a private businessman,” said Alexander Branis, chief executive of Prosperity Capital Management, which manages $5 billion in assets in the former Soviet Union.
Potanin’s and Strzhalkovsky’s statements were harshly criticized by RusAl chief executive Alexander Bulygin, also a Norilsk board member, who held a conference call with reporters late Friday. He was RusAl’s only representative who attended the meeting.
“Potanin talked about the international projects after the board meeting, which looks like absolute nonsense to me,” Bulygin said. “He should first of all concentrate on the company’s problems, as the company is in crisis.
“People are fleeing the company en masse, the production of all metals fell 8 to 11 percent last year and there are huge environmental problems in Norilsk,” Bulygin said, blaming Potanin’s Interros holding for the problems.
Interros was not immediately available to respond to Bulygin’s claims.
Bulygin said RusAl was going to call an extraordinary shareholders meeting to re-elect the Norilsk board and that it did not plan to sell its Norilsk stake “at any price.” He added that he did not think his company’s opposition to Strzhalkovsky’s candidacy was going against the state’s interests. “I don’t think RusAl’s opposition to Strzhalkovsky’s candidacy contradicts the government’s interests,” Bulygin said. “Strzhalkovsky is a man fully affiliated with Potanin. He has known him since 2001.”
The Norilsk board also decided Friday not to bid independently for Udokan, Russia’s largest untapped copper field, Potanin said. “Norilsk will only take part in the auction of Udokan with a partner,” he said.
The company had filed an application for the tender, which is to take place Sept. 14. The list of bidders included Metalloinvest, Basic Element and the Russian Copper consortium, which comprised Urals Mining and Metal Company, Russian Railways and the Development Bank.
Bulygin criticized that decision. “I was the only board member to vote for Norilsk Nickel’s independent participation in the Udokan tender,” he said. “I think the company is perfectly competent to develop the project on its own.
“Udokan would be a very good example of a public-private partnership, and Strzhalkovsky said he would be responsible for interaction with the government,” Bulygin said. “Then the new chief executive gave up on Udokan, and I don’t see any logic to it.”

TITLE: Russia-Georgia Conflict Wreaks Havoc on Markets
AUTHOR: By William Mauldin
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russia’s Micex Index rose slightly on Monday, having plunged last week amid the Russia-Georgia conflict, but any rebound in Russian equity prices may be short-lived on concern the conflict raises the risk of investing in the country’s equities, according to brokerage analysts.
The RTS fell 6.5 percent on Friday as the conflict with Georgia over the breakaway region South Ossetia escalated into what Prime Minister Vladimir Putin called “war.” The gauge slid as much as 4.3 percent on Monday before rebounding to 1,742.96 at 6:09 p.m. in Moscow, up 1.2 percent from the previous close.
“While the fighting continues, we expect the market to remain under pressure as investors seek safer opportunities,” JPMorgan Chase & Co. strategist Peter Westin wrote in a note to investors on Monday. “The armed conflict with Georgia has damaged investor confidence, and a drawn-out war would likely fuel the debate about political risk.”
The brokerage reiterated its “underweight” recommendation on Russian stocks.
“A protracted stand-off” in the conflict “looks more likely” than the possibility of a quick resolution, Deutsche Bank wrote in a note to investors dated Monday. “The effect on the equity market will likely be seen in the higher equity risk premium associated with geopolitical tension.”
Russian warplanes dropped several bombs on a radar station for Tbilisi airport on Sunday night, and artillery and planes pounded the central town of Gori on Monday, Georgian officials said.
The conflict “has serious long-lasting negative implications for Russian markets as it seems to be evolving into a major diplomatic standoff between major Western countries and Russia,” UniCredit SpA analyst Vladimir Osakovsky wrote in a note to investors. “The conflict raises political risks and deteriorates sentiment toward the Russian market.”
U.S. President George W. Bush has condemned the Russian bombings as the European Union intensified diplomatic efforts to end the violence in South Ossetia and fighting threatened to engulf a second breakaway region.
The RTS and Micex Index rebounded on Monday after President Dmitry Medvedev said the military had completed a “significant” part of its operations in the breakaway Georgia republic of South Ossetia.
A cessation to the hostilities would create a “bounce back” from the “oversold position of last week,” according to Russian UrablSib Financial Corp. analyst Chris Weafer. Still, any rebound would be “limited as investor sentiment has been shaken.”
He cited economic data, the drop in the oil price and government consideration of “mechanisms” to control the cost of materials and inflation.
For weeks, Russian stock indexes have been hit by a double whammy of global factors, such as sliding oil prices and the continuing global credit crunch, and domestic factors, such as investors’ fears over the TNK-BP dispute and an anti-monopoly prices crackdown, of which coal and steel firm Mechel has borne the brunt. 
Mechel, which has faced strong criticism of its pricing policies from Prime Minister Vladimir Putin, on Friday postponed indefinitely a preferred-share offering planned for Monday, citing the slumping financial markets. (See story, this page.)
Putin’s attacks on Mechel last month shaved almost $63 billion off the Russian stock market in a week. 
While many investors were plainly shocked by the escalation of the conflict with Georgia, some said those courageous enough to buy Russian stocks at a time of increased political risk could cash in.
“This is a time for everyone with money to buy and for everyone with shares to hold tightly to them,” said Alexander Branis, chief investment officer at Prosperity Capital, which manages about $5 billion in Russian and CIS equities. “I’m sure that, within six to 12 months from now, prices are going to be much higher than where they were today.”
Investors should buy shares of Gapzrom and Rosneft because Russia’s stock market may rise if there is a “lasting cease-fire” in the conflict with Georgia, Credit Suisse Group said.
”The Russian market has been punished excessively over the last couple of weeks,” Credit Suisse analyst Vladimir Savov wrote in a note to investors on Monday.
The 50-stock RTS Index has fallen to 2006 levels even though Russia’s gross domestic product will rise to $1.64 trillion this year, compared with only $986 billion in 2006, the Swiss bank said.

TITLE: Mechel Puts Back Sale Amid Market Turmoil
PUBLISHER: Combined Reports
TEXT: MOSCOW — Troubled coal and steel firm Mechel on Friday postponed a preferred share offering indefinitely, citing slumping financial markets. 
Mechel’s New York-listed stock fell 1.5 percent to $23.70 on Friday, the latest drop as the company struggles to recover from a massive selloff following government criticism.
“We have postponed the sale until markets recover and we see a more suitable time to go for an offering,” Mechel spokesman Alexander Tolkach said.
Mechel plunged 38 percent on June 24 in New York, the most since it began trading there in 2004, after Prime Minister Vladimir Putin attacked its pricing policy earlier that day. Four days later, Putin accused the miner of tax evasion, prompting another fall. The comments erased $8 billion, or half of Mechel’s value, in the space of three trading days.
Mechel, controlled by billionaire Igor Zyuzin, had planned to conduct the placement of 55 million preferred shares Monday, or around 12 percent of the company, in Moscow and Frankfurt to help fund a planned $5.2 billion upgrade and expansion of its production through 2012. The sale had originally been planned for late July, but was postponed just before Putin’s first comments.
Mechel had set a price of $50.50 to 60.50 per share for the offering. Even at the lower end, this was 38 percent higher than its closing price July 23, the day before Putin’s first public criticism.

(Reuters, Bloomberg)

TITLE: Requests for More Cash Hold Up State Budget
AUTHOR: By Gleb Bryanski
PUBLISHER: Reuters
TEXT: MOSCOW — The Finance Ministry said Friday that it needed to discuss fiscal strategy with the country’s top leaders after security-related agencies asked for more funds.
The news came as Russian forces took control of part of the capital of breakaway South Ossetia, the Georgian Interior Ministry said Friday. Russia sent forces over its border to repel a Georgian assault on separatists. 
The Finance Ministry said in a statement that it would not submit the new federal budget strategy and tax reform proposals to the government until after discussions with President Dmitry Medvedev and Prime Minister Vladimir Putin.
“This related to the fact that many ministries, including security-related ones, submitted proposals to significantly increase state spending,” the statement said. The draft strategy and tax reform proposals were due to be submitted Friday.
The statement did not give a detailed breakdown of the funding requests or specify the agencies making them.
Rating agencies and investors watch government fiscal policy for any signs of weakness that may fuel inflationary pressures. The budget surplus is projected at 4.6 percent of gross domestic product in 2008.
Lavish spending to raise wages and pensions ahead of State Duma elections in December and a March vote to elect a successor to then-President Putin led to a spike in inflation rates to around 15 percent.
“In order to balance the budget, the Finance Ministry will propose to limit spending growth while staying within the existing tax burden,” said the ministry, which is fighting plans by rival agencies to boost economic growth through tax cuts.
The ministry said it saw financing health care and pension systems as fiscal priorities. It said the proposals to limit state spending would affect defense funding and thus required preliminary discussions with Medvedev and Putin.
The country has one of the world’s biggest armies in terms of troop numbers, and it inherited from the Soviet Union the world’s second-biggest nuclear arsenal.
Neglected after the Soviet collapse, the military is once again the focus of international attention as the Kremlin takes a more assertive stance abroad.
The government is using some of the state’s windfall from oil exports to increase defense spending. The military budget for last year was 22 percent higher than in 2006, and the government plans to spend $189 billion on new hardware by 2015. But many analysts say the cash is being soaked up by bureaucracy.
¦ Russia will increase by thirty times the funds available at its weekly auction of budget money in a bid to support financial market liquidity as clashes between Russia and neighboring Georgia continued, Bloomberg reported Monday.
The Finance Ministry was due on Tuesday to offer a maximum of 300 billion rubles ($12 billion) for four weeks at a minimum interest rate of eight percent, it said in a statement on its web site Monday. Banks put in bids for $860 million at the previous auction last Tuesday, more than double the 10 billion rubles of unspent budget money offered, the news agency reported.

TITLE: Central Bank Says Ruble No Longer a One-Way Bet
PUBLISHER: Reuters
TEXT: MOSCOW — The ruble is no longer a one-way appreciation bet for investors, a senior Central Bank official said Friday after the currency fell 1 percent against the dollar-euro basket.
The ruble fell as low as 29.75 versus the basket of 55 cents and 45 euro cents, and the RTS Index fell to a 14-month low, as the conflict between Russia and Georgia over South Ossetia dented market sentiment.
“The period of one-way ruble movement is finishing, risks [of opening long positions in the ruble] have obviously grown,” Central Bank Deputy Chairman Konstantin Korishchenko said.
The Central Bank said in a statement Friday that it had carried out only planned interventions in the domestic foreign exchange market in July, which amounted to $24.3 billion and 1.41 billion euros.
Korishchenko said July interventions were carried out at market prices and were not aimed at preventing ruble appreciation or weakening. He said the Central Bank bought foreign currency in July only to replenish the government’s oil wealth funds. “The situation in the economy is such that current account currency flows are now comparable with amounts transferred to the budget funds on average during a certain period,” Korishchenko said.
The current account flows reflect transactions linked mainly to foreign trade, which in Russia’s case is dominated by energy exports.

TITLE: Caucasus Fighting Highlights Concerns Over Oil, Gas Transport in Region
PUBLISHER: Bloomberg
TEXT: LONDON — The conflict in Georgia and South Ossetia has highlighted risks for crude oil and natural gas transportation across the Caucasus, according to Troika Dialog.
Fighting between Georgian and Russian troops may disrupt about 1.6 million barrels of oil equivalent a day from the Caspian Sea region to world markets, analysts Oleg Maximov and Valery Nesterov wrote on Monday in an e-mailed report by the brokerage.
“The conflict may cause second thoughts about the transit-related risks associated with Georgia for some international oil and gas projects intended to bypass Russia, such as Odessa-Brody,” they wrote. “Kazakhstan should also be concerned about the reliability of exporting its petroleum through Azerbaijan and Georgia.”
Georgia is a key link in a U.S.-backed “southern energy corridor” that connects the Caspian Sea region with world markets and bypasses Russia. Poland’s PKN Orlen is leading the so-called Odessa-Brody pipeline to pump Azeri crude into Central Europe, while Austria’s OMV is behind the Nabucco pipeline to bring gas from Central Asia and possibly Iran to Europe.
Georgia has two BP Plc-led pipelines stretching across its territory. One is the Baku-Tbilisi-Ceyhan line, from Azerbaijan to the Turkish port of Ceyhan. The other is the Baku-Supsa pipeline, also from Azerbaijan to the port of Supsa on the Georgian Black Sea coast.

TITLE: Nadal, Federer, Serena, Venus All Win at Olympics
PUBLISHER: The Associated Press
TEXT: BEIJING — Rafael Nadal, Roger Federer, Serena and Venus Williams were all winners yesterday at Olympic tennis. Nadal made a successful debut in Olympic singles Monday, overcoming numerous missed chances by sweeping the final four games to beat Potito Starace of Italy 6-2, 3-6, 6-2.
Top-seeded Federer had an easier time. He began a bid for his first Olympic medal by beating Dmitry Tursunov 6-4, 6-2, then received congratulations from one of the spectators, U.S. basketball star LeBron James.
Venus and Serena Williams also advanced to the second round, as did Novak Djokovic, the biggest threat to a Nadal-Federer final.
Nadal played doubles but not singles at the Athens Olympics in 2004. He’s playing both in Beijing, staying in the athletes’ village and hoping to sustain a summer surge that has assured him of the No. 1 ranking next week.
“I am very happy to be here,” Nadal said. “Just trying to enjoy 100 percent the experience, and later try my best on court.”
Seventh-seeded Venus Williams, playing her first match since winning Wimbledon for the fifth time, beat Switzerland’s Timea Bacsinszky 6-3, 6-2. Williams, who swept the gold medals in singles and doubles in 2000, showed no sign of the knee injury that has sidelined her in recent weeks.
“I feel really good about the match — not a lot of unforced errors, no service breaks,” Williams said. “I did the right things to come out on top.”
Her sister, seeded fourth, won all four games when her match resumed after an overnight rain interruption, and she beat Olga Govortsova of Belarus, 6-3, 6-1.
Like Nadal, Serena Williams was playing her first singles match at the Olympics. She won a gold medal in doubles in 2000 with sister Venus.
“It’s a great thing going out there playing for your country,” Serena said.
She said she skipped Beijing’s opening ceremonies because she goes to bed early, and she decided against staying in the athletes’ village because she likes privacy. Last week, she visited the village, where she was a popular subject for those seeking photos and autographs.
“I was bombarded with lots of people,” she said. “It was a lot. I can’t count. But it was cool, I guess.”
The third-seeded Djokovic beat Robby Ginepri of the United States 6-4, 6-4, and Igor Andreev of Russia defeated Sam Querrey of the United States 6-4, 6-4, leaving James Blake as the only American male to reach the second round of the singles.
Later, Andreev and Nikolay Davydenko eliminated Blake and Querrey 6-3, 6-4 in doubles.
Nicolas Massu of Chile opened his bid to defend his Olympic championship by beating Steve Darcis of Belgium 6-4, 7-5. But Massu and Fernando Gonzalez, who won the gold medal in doubles at Athens, were beaten by Tursunov and Mikhail Youzhny 7-6 (5), 6-4.
Federer and Stanislas Wawrinka teamed up to win their opening doubles match, beating Simone Bolelli and Andreas Seppi of Italy 7-5, 6-1. No. 5 David Ferrer and No. 6 Andy Murray lost in the singles.
On the women’s side, Jelena Jankovic of Serbia began her reign as the world’s No. 1 player by beating Zimbabwe’s Cara Black 6-3, 6-3. Jankovic, seeded second in Beijing, supplanted Ana Ivanovic atop the rankings Monday.
Ivanovic withdrew from the tournament Sunday because of a thumb injury.
It was a good day for the Chinese women. Li Na delighted the center-court crowd by upsetting third-seeded Svetlana Kuznetsova of Russia 7-6 (5), 6-4. Also advancing were Zheng Jie, a semifinalist this year at Wimbledon, and Peng Shuai.
No. 13 Patty Schnyder of Switzerland won 6-3, 6-2 over Jill Craybas, who learned only Wednesday she had made the American team.
Nadal played the 10:30 a.m. match on center court, and at times it appeared he needed a wake-up call. He struggled on the backhand side, and shook his head or rolled his eyes when usually reliable strokes misfired. Because of Beijing’s oppressive humidity, Nadal said, he was changing his shirt every 10 minutes.
The Spaniard hit his final shot of the day more than 11 hours later, teaming up with Tommy Robredo to beat Jonas Bjorkman and Robin Soderling of Sweden 6-3, 6-3 in the doubles.
A highlight-reel rally got him going in the third set. Nadal sprinted into the alley near the net in pursuit of a ball and scooped a forehand winner cross-court as he braked to avoid running into the post, then fell to his back. He rose and threw a jubilant fist, leaving behind a wet patch on the court.

TITLE: Spitz, Once the Star, Upset Over Olympian Omission
AUTHOR: By Polly Hui
PUBLISHER: Agence France Presse
TEXT: HONG KONG — U.S. swim legend Mark Spitz will not be on hand in Beijing if Michael Phelps breaks his record of seven gold medals at a single Olympics — because, he says, no one bothered to invite him.
Spitz said the International Olympic Committee, a US television network, or FINA — the international body that governs world swimming — should have brought him to the Games this year, with Phelps making a go at his record.
“I never got invited. You don’t go to the Olympics just to say, I am going to go. Especially because of who I am,” Spitz told AFP in Hong Kong.
“I am going to sit there and watch Michael Phelps break my record anonymously? That’s almost demeaning to me. It is not almost — it is.”
Spitz became one of the most famous athletes in the world at the 1972 Munich Olympics, winning seven gold medals — with seven world records — in what many consider to be one of the greatest achievements in all of sport.
Phelps is aiming to better that mark in Beijing, hoping to bring home eight golds. And Spitz, now 58, grey and without his trademark moustache, cannot understand why he was not asked along to see the show.
“They voted me one of the top five Olympians in all time. Some of them are dead. But they invited the other ones to go to the Olympics, but not me,” he said. “Yes, I am a bit upset about it.”
Now a stockbroker and motivational speaker, Spitz also thinks he could have won eight golds himself in Munich if only he had had the chance.
“I won seven events. If they had the 50m freestyle back then, which they do now, I probably would have won that too,” he said.
Spitz, whose brief stint in show business in the 1970s never quite matched his success in the pool, said he attended the Athens Olympics four years ago — when Phelps also tried to break the record.
“They did not once put my face on television,” he recalled. “But as soon as the swimming was over, and Michael Phelps didn’t break my record, every time I went to beach volley, they put my face on the volleyballs.”
Spitz said it would have been a great idea if he could be the one presenting the gold medals to Phelps, who has for years been candid about his ambition to eclipse the mark of seven golds.
And Spitz thinks Phelps will succeed — for one very good reason.
“He’s almost identical to me. He’s a world-record holder in all these events, so he is dominating the events just like I did,” Spitz said. “He reminds me of myself.”

TITLE: Condition of Knife Attack Victim Improves
AUTHOR: By Cara Anna
PUBLISHER: The Associated Press
TEXT: BEIJING — The condition of the American mother of a former Olympian who was stabbed on the opening day of Olympics competition was improving Monday, a spokesman for the U.S. Olympics Committee said.
USOC spokesman Darryl Seibel said Barbara Bachman’s condition had been upgraded from critical to serious but stable.
Mrs. Bachman was with her husband, Todd Bachman, both 62, when they were attacked by a Chinese man at an ancient monument in the heart of the Chinese capital on Saturday.
Todd Bachman was killed in the attack. The couple, from Lakeville, Minnesota, are parents of 2004 volleyball Olympian Elisabeth “Wiz” Bachman and in-laws of U.S. men’s volleyball coach Hugh McCutcheon.
Elisabeth Bachman was with her parents at the time of the attack, but was not uninjured. Their Chinese tour guide was injured, but Beijing authorities have declined to release any details about her condition.
Shortly after the attack, which took place at midday, the assailant, Tang Yongming, 47, leapt to his death from a 130-foot high balcony on the Drum Tower, just five miles from the main Olympics site, the Xinhua News Agency reported.
Dale Bachman, Todd’s second cousin, told a news conference in Minneapolis that Todd Bachman was walking a few steps behind his wife and daughter at the Drum Tower when Barbara Bachman heard the commotion and turned to help her husband.
“That’s when she was attacked,” Dale Bachman said Saturday. “To me, that was a strong indication of her love. She is a fabulous person.”
The assault came only hours after China’s jubilant opening ceremony of the Summer Games and stunned the athletic community and embarrassed Chinese officials hosting President Bush.
Seibel said Monday that the Bachman family and the U.S. Olympics Committee members were “very, very, very happy to report her condition is upgraded.” He said family members, including two daughters who flew in from their home in Minneapolis, were at the hospital with her.
“They’re not at the point where they want to discuss the specific nature of the injuries,” Seibel said of the Bachman family.
In an open letter released Monday by the U.S. Olympics Committee, Elisabeth and Hugh McCutcheon thanked friends, family, U.S. and Chinese officials and Olympic officials for their help during a “tremendously difficult time.”
“We are extremely grateful for the outpouring of assistance and generosity that we have received and hope to convey our appreciation to everyone who has supported us and kept us in their thoughts and prayers,” the letter said.
AP reporters at Peking Union Medical College Hospital, also called Beijing Xiehe Yiyuan, were not allowed onto the eighth floor of the facility, a section of the hospital that has been designated for the Olympics.
The committee said Sunday that Mrs. Bachman suffered multiple lacerations and stab wounds. She underwent eight hours of surgery and initially was in a life-threatening, critical condition.
McCutcheon sat out the U.S. men’s volleyball team’s opening game against Venezuela on Sunday — a match that the Americans won 3-2 — to be with his wife at the hospital.
Police investigating the stabbing have said the suspect was distraught over family problems. Chinese authorities unsettled by an attack during the Olympics tightened security at tourist spots around the city.
Wang Wei, vice president of the Beijing Olympic organizing committee, said Sunday that security in and around Olympic venues was already sufficient but would be increased at scenic spots in the capital.
He said Chinese investigators and U.S. Embassy officials believe Saturday’s attack was “an isolated incident” and suggested such random acts are difficult to prevent. There was no indication the assailant knew his victims or had any connection to the games, according to Olympic and Chinese authorities.
“Beijing is a safe city, but unfortunately we are not immune to violent acts,” Wang told reporters.
Bush, in the Chinese capital to attend some Olympic events and meet with Chinese leaders, thanked President Hu Jintao on Sunday for his government’s handling of the attack.
“Your government has been very attentive, very sympathetic, and I appreciate that a lot,” Bush said.
Hu said his government took the incident “very seriously” and pledged to keep Washington apprised of the investigation.
Violent crime against foreigners is rare in tightly controlled China, and the assault occurred despite major security measures that have blanketed the capital city during the Olympics. A 100,000-strong security force plus countless volunteers have been deployed to protect against any trouble.
Police said Tang went through his second divorce in 2006 and grew increasingly despondent when his 21-year-old son started getting into trouble, Xinhua reported. The son was detained in May 2007 on suspicion of fraud, then received a suspended prison sentence in March this year for theft.

TITLE: In Search of a Free Georgia and South Ossetia
AUTHOR: By Lincoln Mitchell
TEXT: Last week, tension between Russia and Georgia, which had been growing since the Rose Revolution brought Georgia’s reformist, pro-U.S. President Mikheil Saakashvili to power in 2004, finally led to open hostility between the two countries. On Thursday, the Georgian government sent troops into the disputed territory of South Ossetia to pacify that region and restore it to Georgian control. Russia waited a day before sending its tanks into South Ossetia and demonstrating its dominance of the air by bombing various places in Georgia, including two Georgian bases near Tbilisi. If the hostilities continue and the conflicts are prolonged for more than a few days, Georgia’s future and sovereignty may well be jeopardized. This is precisely what Russia has wanted since Saakashvili committed to building a strong, independent and Western orientated Georgia in 2004.
The Georgian government has made its desire clear to bring South Ossetia — as well as the other breakaway region, Abkhazia — back into Tbilisi’s control for several years now. But the decision to send in troops on Thursday surprised many. Georgia’s decision, although not altogether unjustified, was a bizarre strategic mistake. South Ossetian forces had been provoking Georgia, but by escalating the conflict and announcing that Georgian troops controlled most of South Ossetia, Tbilisi all but ensured a Russian military response. Perhaps some in the Georgian government thought that if they moved quickly, when the world was focusing on the Olympics in Beijing, they could get away with no Russian response, but that was clearly an unrealistic hope.
Russia’s response, however, was way beyond what was necessary to, according to its initial explanation, “protect Russian citizens.” It is worth noting that the “Russian citizens” in question here are actually residents of South Ossetia to whom Moscow gave Russian passports. Similarly, while Russian planes have flown over Georgian airspace and dropped bombs on its territory, Georgian troops have only fought on their own territory or that of the breakaway regions. It has been a long time since a Georgian has fired a shot in anger on Russian soil. Contrary to Russian propaganda, the threat Georgia represents to Russia is trivial. The reverse is not true.
Most of the Western media outlets have focused on the skirmishes between Russian and Georgian troops in South Ossetia, while paying less attention to the equally important story that Russian planes have bombed military and civilian targets throughout Georgia. The Russian bombing campaign, buoyed by far superior air forces, threatens to weaken, divide or even destroy the Georgian state. If this bombing continues for even a few more days, it is easy to imagine a scenario where Georgia’s infrastructure and economy could be set back a decade or more. It is also easy to imagine far worse scenarios. 
The immediate goal of the West should now be to find a way to stop Russia’s bombing campaign over Georgia right away. There is, however, no easy way to achieve this goal, particularly as quickly as is needed. Strongly worded statements from Western leaders are necessary but far from sufficient. But doing something more than this is a daunting task for the United States and others who would like to help Georgia. 
The Georgian government has made a strong appeal to Washington to intervene and support Georgia, urging the United States to stand up for its ideals and its friends. Although U.S. President George W. Bush would like to help Georgia in its moment of need, the United States is bound by several realities, including being overcommitted militarily in other parts of the globe and the dubious wisdom  of risking a broader U.S. conflict with Russia. Other options include NATO planes protecting Georgian airspace, but this also involves a risk of a broader conflict between NATO and Russia.
A military response is not the only option facing the United States and Europe, but it seems to be the one its Georgian allies would most like to see. Nonetheless, in the next days, the West must find a way to stop Russia from routing Georgia. If this attack continues for even a few more days, Georgian civilian casualties will mount, infrastructure will be destroyed and the government will be destabilized. 
All of this will be disastrous for Georgia, and the future of that country will become uncertain. Even if Russia stops this aggression reasonably soon, the West will have to determine how best to both help rebuild Georgia, politically and physically as well as to how to address the tensions between Georgia and Russia, which will only become stronger after these events.
The bigger challenge for the United States and its European allies is to address the real reasons behind the conflict between Georgia and Russia, which have been festering for over a decade. 
The United States should acknowledge that the Georgian government is capable of saber-rattling and that the people of South Ossetia and Abkhazia do not want to be a part of Georgia. 
At the same time, Bush and his successor should understand that the broad threat faced by Georgia from Russia is real and caused largely by the desire of the Georgian people and their leaders to be free, independent and pro-West. 

Lincoln A. Mitchell, the Arnold A. Saltzman assistant professor of international politics at Columbia University’s School of International and Public Affairs, is the author of the forthcoming book “Uncertain Democracy: U.S. Foreign Policy and Georgia’s Rose Revolution.”

TITLE: Georgia Set the Perfect Trap
AUTHOR: By Vladimir Frolov
TEXT: This week will mark the first 100 days of Dmitry Medvedev’s presidency, and foreign policy is unlikely to be counted as one of his major successes during this period.
Apart from an ill-prepared initiative of an all-European security treaty that did not go very far, he now has a war on his hands — one that he did not choose and one that can now spin out of his control.
Georgian President Mikheil Saakashvili is testing the resolve of Russia’s new leader, who has been drawn into a complicated conflict that could easily distract him from his modernizing agenda. 
After several weeks of building tensions in South Ossetia, Saakashvili initiated a full-scale military attack on the breakaway republic. By Friday afternoon, after heavy shelling, Georgian forces captured most of the South Ossetian capital, Tskhinvali. Georgian forces also appear to have attacked and killed at least 10 Russian peacekeepers. 
Saakashvili’s bet — perhaps with tacit U.S. encouragement — might have been to reclaim South Ossetia by force, if Russia did not get involved militarily. Another strategy may have been to provoke Moscow to respond militarily and then retreat under Russian fire, claiming an act of aggression against Georgia. In either case, it seems that Saakashvili’s intention was to bolster his domestic support by appearing strong and standing up to the Russian bear, while making a serious move to restore Georgia’s sovereignty over South Ossetia. He achieved most of his objectives. It was a win-win for Saakashvili and a perfect trap for Medvedev.
Moscow had no other choice than to respond firmly to Tbilisi’s military incursion into South Ossetia. The alternative of allowing Saakashvili to destroy South Ossetia’s autonomy and get away with killing Russian soldiers would have been humiliating for the Kremlin. 
Medvedev did not have any good options. Allowing Saakashvili to claim victory would have destroyed Medvedev’s credibility at home. On the other hand, repelling Georgia’s attack using tanks and air attacks would expose Russia to international criticism as an aggressor, and it would make international investors flee the Russian market. 
Medvedev chose to roll back Saakashvili. He made a calculated decision that now was not the time to appear as a weak and indecisive leader, which would have done more damage to Russia and his modernization agenda than the short-lived difficulties and complications that Moscow may incur in its relations with the United States and its European allies.
Moscow sent several infantry and tank battalions of the 58th Army into South Ossetia, which in a matter of hours rolled back most of the gains made by Georgian forces. Russian combat planes also attacked military airfields and other military targets in Georgia. Based on the speed with which Russian forces were able to enter South Ossetia, it is clear that Moscow had already taken preventative steps by concentrating troops and armor near the border. 
Saakashvili misjudged Medvedev’s resolve to respond with overwhelming military force. But he may have won the propaganda battle by making Russia appear as the aggressor. Most of the international media portray Russia’s response as an unprovoked attack against Georgia, while completely ignoring Saakashvili’s concerted efforts in the past two weeks to provoke military tensions in the region, including the killing of Russian peacekeepers by Georgian forces.
It is not clear how the conflict will develop. Russia could pull out from South Ossetia if an agreement to restore the status quo is reached. On the other hand, it can increase its military presence in the breakaway republic to deter Georgia from attacking it again, in which case this could be called annexation. 
The war could have been prevented. Russia could have forced a settlement by pushing South Ossetian leader Eduard Kokoity to negotiate a broad autonomy within Georgia. But, as Prime Minister Vladimir Putin suggested on Saturday at a news conference in North Ossetia, that option is now closed: “It is hard to imagine how South Ossetia can ever be persuaded to reintegrate with Georgia after this,” Putin said.
I’m afraid Russia might end up owning the place without the legal title to it. 

Vladimir Frolov is president of LEFF Group, a government relations and PR company.

TITLE: Bolivia Result Highlights Social, Class Divisions
AUTHOR: By Frank Bajak
PUBLISHER: The Associated Press
TEXT: LA PAZ, Bolivia — Voters vigorously endorsed President Evo Morales on Sunday in a recall referendum he devised to try to break a political stalemate and revive his leftist crusade, partial unofficial results showed.
More than 62 percent of voters in this bitterly divided Andean nation ratified the mandate of Morales and his vice president, Alvaro Garcia, according to a private quick count of votes from 900 of the country’s 22,700 polling stations.
The 53.7 percent by which Bolivia’s first indigenous president won election in December 2005 had been the previous best electoral showing for a Bolivian leader.
Morales had proposed Sunday’s recall in a bold gamble to topple governors who have frustrated his bid to redress historical inequities in favor of Bolivia’s long-suppressed indigenous majority and extend his time in office.
Eight of the country’s nine governors were also subject to recall — and two Morales foes were among the three ousted, according to the quick count, which was conducted by the Ipsos-Apoyo firm for the ATB television network. First official results were not expected until late Sunday.
Morales’ leftist agenda has met with bitter opposition in the unabashedly capitalistic eastern half of the country, where protesters who accuse him of being a lackey of Venezuelan President Hugo Chavez last week blockaded airports to keep Morales from touching down for campaign visits.
All four governors there easily survived Sunday’s plebiscite, as expected.
But Morales did score gains with the defeat of opposition governors in the highland province of La Paz and in Cochabamba, seat of his coca-growers movement. The recently elected governor of central Chuquisaca province was exempt from the referendum.
Cochabamba Governor Manfred Reyes, a conservative three-time presidential candidate, promptly refused to recognize the results and called the referendum unconstitutional.
Under the law that set the referendum’s rules, politicians whose “no” votes exceed the percentage by which they were elected are ousted. It also lets Morales name temporary replacements pending provincial elections.
More than 100 international observers, mostly from the Organization of American States, monitored the vote. A few irregularities were reported, including the pre-dawn theft of ballots in the small pro-Morales town of Yucumo in eastern Beni state. Replacement ballots were later flown in.
Victor Hugo Cardenas — an Aymara native like Morales who was vice president from 1993-97 — predicted Sunday’s vote would only make South America’s poorest nation “even more difficult to govern.”
But on the wind-swept shores of Lake Titicaca, from where Cardenas hails, other Aymaras were steadfast in their support of the president.
“For more than 500 years we’ve lived in slavery,” said Rolando Choque, a 25-year-old elementary school teacher voting in Achacachi. “Change doesn’t come overnight. It’s a long road.”
Indeed, Sunday’s outcome clearly defined Bolivia’s growing divisions: In Chuquisaca and each of the four eastern provinces, majorities voted in favor of recalling Morales.
Political analyst Kathryn Ledebur of the Andean Information Network said Sunday’s results could be used by Morales “to try to go ahead with the fight against poverty... or it could just entrench the situation further.”
Morales has been unable to get a date set for a nationwide vote on a new constitution that would give indigenous groups more power and allow him to be re-elected to a second five-year term. The opposition walked out of the constituent assembly that wrote the document.
The battle for Bolivia hinges on land ownership and natural gas income. The four eastern lowland provinces — Beni, Pando, Santa Cruz and Tarija - have resisted Morales’ insistence that the central government control energy profits and decide how to distribute them.

TITLE: Phelps’ Dream Kept Alive by Fingertip Win
AUTHOR: By Simon Denyer
PUBLISHER: Reuters
TEXT: BEIJING — India celebrated the first individual gold in its history on Monday and American swimmers kept Michael Phelps’ Olympic dream alive by a fingertip.
The usually cool Phelps screamed and pumped the air with joy as his U.S. team mates helped maintain his charge for an unprecedented eight golds in the pool, pipping France in the 4x100 meters freestyle relay.
And Indians banged drums and danced in the streets after the world’s second most populous nation won their first ever Olympic title with Abhinav Bindra’s gold in the men’s 10-meter air rifle.
“Now I have lots of work ahead as he is the country’s most eligible bachelor,” joked his mother Babli Bindra, speaking to Reuters from the family home in Chandigarh.
Like many winners in Beijing on Monday, Bindra needed a remarkable comeback, shooting a near perfect hit at the end.
“It’s the thrill of my life. That’s about it. I just went for it. I knew I was lying fourth,” he said after a win that left China’s defending champion Zhu Qinan sobbing with only silver.
While sporting records tumbled in state-of-the-art venues, a familiar shadow fell over the Games’ when a Spanish cyclist became the first competitor to fail a drugs test in China.
China had so far avoided the doping scandals that so tarnished the Athens Olympics four years ago. But the International Olympic Committee (IOC) announced Maria Isabel Moreno, 29, was caught taking the endurance-boosting EPO drug.
Moreno, who could now face a two-year ban and also miss the 2012 London Olympics, went home after the test that was taken before the Games’ opening. The IOC plans 4,500 tests in Beijing.
Phelps is counting off the golds in world records as he bids to surpass Mark Spitz’s record of seven golds in 1972.
Again watched by U.S. President George Bush in the Water Cube, he left the U.S. team second after the first leg, trailing to a French team who had vowed to “smash” them.
With just a lap to go, France’s former record holder Alain Bernard led by half a body length, but an astonishing comeback from Jason Lezak took the gold by a fingertip.
“Jason finished that race better than we could even ask for,” Phelps said. “I was so fired up.”
The Americans took nearly four seconds off the world record, a big margin in swimming. In all, five relay teams beat it.
“Experience prevailed over talent today, and I regret that,” lamented Frederick Bousquet on a deflated French team.
Making yet more swimming history in the same race, Eamon Sullivan claimed the individual world record from Bernard when he led the Australian team off on the first lap.
The event left Phelps with two golds, after he destroyed his own world record on Sunday to win the 400 individual medley.
And after six in Athens, Phelps needs only two more to have the most golds of any Olympian.
Also bringing the crowd to their feet in the shimmering pool venue, the most decorated Asian swimmer of all time, Japan’s Kosuke Kitajima, justified his pre-race hype by shaving 0.22 seconds off the world record to win the 100 breaststroke.
Women swimmers were not to be outdone.
Rebecca Adlington won Britain’s first Olympic women’s swimming title in nearly half a century with a last-gasp victory in the 400 freestyle after being fourth at the final turn.
“I am so proud to be British,” she enthused afterwards.
Australia’s Libby Trickett was told by coaches to do what some woman hate — build up her backside — before Beijing due to a weakness in gluteal muscles. That paid off when she won gold in the women’s 100 butterfly.
Zimbabwe’s Kirsty Coventry had vowed to show her nation in a positive light in China despite its economic and political crisis. She did just that by shaving 0.20 seconds off the world record for the 100 backstroke during her semi-final.
The pressure of expectations may be getting to China’s shooters, another gold hopeful failing in the women’s trap to add to a string of disappointments.
But it was a happier story for the hosts in the diving competition, with a second gold in two days thanks to a near-perfect performance by world champions Lin Yue and Huo Liang in the men’s synchronised 10m platform diving.

TITLE: TV Billions Glued To
Ceremony
AUTHOR: By Belinda Goldsmith
PUBLISHER: Reuters
TEXT: BEIJING — As China hoped, the world did tune in for the start of the Beijing Olympics with various polls on Monday estimating about one billion people, or 15 percent of the world’s population, watched the opening ceremony.
The four-and-a-half-hour spectacular drew a record audience for an Olympics opening because it was watched by a majority of Chinese viewers, fired up after seven years of preparation and campaigns about the national importance of hosting the Games.
Various pollsters issued different viewer estimates but suggested about 842 million of China’s 1.3 billion population watched the ceremony and were joined by other audiences around the world to take total viewer numbers to around one billion.
British broadcaster the BBC said the Olympics opening attracted an impressive audience of about five million in Britain and forecast about 30 million would watch some of the Games.
“The many millions who tuned in for the opening ceremony are a good omen for that; and the encouraging news continued with the audience figures for the first full day of action,” wrote the director of BBC Sport, Roger Mosey, in a blog.
Viewer interest is key for Britain as London is hosting the next Summer Olympics in 2012 and high viewer numbers will led to stronger sponsorship and advertising interest.
These numbers looked set to put Beijing’s viewer figures way ahead of the Athens Games in 2004 which attracted 3.9 billion viewers in total and Sydney in 2000 with 3.6 billion.
The huge Chinese interest ensured record viewer numbers for the opening ceremony that involved 10,000 performers, 2,008 drummers and a dramatic sky-walking finale as former gymnast Ni Ling lit the Olympic cauldron.
Competing poll data showed that between 63 and 69 percent of China’s total audience watched the opening, beating the 51-58 percent of viewers who watch the Chinese New Year gala each year.
Market researcher, The Nielsen Company, said 63 percent, or 393 million of Chinese it polls in 14 TV markets, watched the opening ceremony designed by film director Zhang Yimou.
But data from CSM Media Research, a leading market research company in China, found the event drew a market share of 69 percent, representing 842 million of China’s population.
U.S. network NBC, which paid nearly $900 million for exclusive U.S. broadcasting rights, held off showing the event for 12 hours to reach a primetime audience.
But the gamble paid off, as word of the spectacular show saturated U.S. media on Friday and lured 34.2 million viewers.
“The Olympic Opening Ceremony captivated the American public in unprecedented numbers for a non-U.S. Olympics,” said Dick Ebersol, chairman of NBC Universal Sports & Olympics, in a statement. “It was a magical and memorable spectacle and a great way to start the Beijing Olympics.”

TITLE: Mugabe Edges Towards Power Deal
AUTHOR: By Cris Chinaka
PUBLISHER: Reuters
TEXT: HARARE — Zimbabwean President Robert Mugabe was set to resume talks with opposition leaders on Monday on a power-sharing deal that could end a post-election political crisis and raise hopes of economic recovery.
Asked if there had been any progress at 14 hours of talks as he emerged early on Monday, Mugabe said: “Not yet. We are not through yet. There are always sticky points, of course, in any such dialogue. But we are overcoming.”
The talks, mediated by South African President Thabo Mbeki, are between Mugabe, Movement for Democratic Change (MDC) opposition leader Morgan Tsvangirai and MDC breakaway faction leader Arthur Mutambara.
Tsvangirai declined to comment after the last session of talks, saying he expected Mbeki to release a statement on the negotiations.
Mbeki’s spokesman, Mukoni Ratshitanga, said the South African leader was returning home on Monday. But he declined to say whether a deal was imminent or whether the talks could fail.
The discussions are seen as the clearest sign yet that an agreement could be within reach to end a crisis that has intensified Zimbabwe’s economic collapse and spread fears in the region of a total meltdown.
Mugabe was due to deliver a speech on Heroes’ Day to honor those who died fighting in Zimbabwe’s liberation war. He has been in power since independence from Britain in 1980.
Talks began last month in the aftermath of Mugabe’s unopposed re-election in June in a poll condemned throughout the world and boycotted by Tsvangirai because of attacks on his supporters.
Mutambara and other officials in his smaller MDC faction were present at the site where the Heroes’ Day event will take place, a Reuters witness said. The opposition has in the past accused Mugabe’s government of using such gatherings to attack its leaders, so that could be a sign of progress in talks.
A deal could mean Mugabe has survived elections that posed the biggest challenge to his rule, but might also remove some of the power that has allowed him to govern with an iron hand.
Both sides are under pressure to reach a deal.
Zimbabweans and neighboring countries hope an agreement could end years of political turmoil and revive an economy whose collapse has led millions of people to leave Zimbabwe.
Investors are nevertheless likely to remain cautious about making financial commitments, seeking tangible signs of long-term political stability and a government with the credentials to rebuild the country.
A deal would require approval from security and military chiefs, powerful figures with broad influence over Mugabe who want to make sure they are not vulnerable to international prosecution when the political dust settles, analysts say.

TITLE: Palestinian ‘Poet of Conscience’ Dies at 67
AUTHOR: By Diaa Hadid
PUBLISHER: The Associated Press
TEXT: GAZA CITY, Gaza Strip — Mahmoud Darwish, a Palestinian cultural icon whose poetry eloquently told of his people’s experiences of exile, occupation and infighting, died Saturday in Houston. He was 67.
The predominant Palestinian poet, whose work has been translated into more than 20 languages and won numerous international awards, died following open heart surgery at a Houston hospital, said Nabil Abu Rdeneh, a spokesman for Palestinian President Mahmoud Abbas.
Born to a large Muslim family in historical Palestine — now modern-day Israel - he described his people’s struggle for independence while also criticizing both the Israeli occupation and the Palestinian leadership. He gave voice to the Palestinian dreams of statehood, crafted their declaration of independence and helped forge a Palestinian national identity.
“He felt the pulse of Palestinians in beautiful poetry. He was a mirror of the Palestinian society,” said Ali Qleibo, a Palestinian anthropologist and lecturer in cultural studies at Al Quds University in Jerusalem.
Darwish first gained prominence in the 1960s with the publication of his first poetry collection, “Bird without Wings.” It included the poem “Identity Card” that defiantly spoke in the first person of an Arab man giving his identity number — a common practice among Palestinians when dealing with Israeli authorities and Arab governments — and vowing to return to his land.
Many of his poems have been put into music — most notably “Rita,” “Birds of Galilee” and “I yearn for my mother’s bread” — and have become anthems for at least two generations of Arabs.
He wrote another 21 collections, the last, “The Impression of Butterflies,” in 2008.
Qleibo described Darwish’s poetry as “the easy impossible,” for Darwish’s ability to condense the Palestinian narrative into simple, evocative language — breaking away from the more traditional heavy, emotive and rhythmic verse of other Arab poets.
Darwish wrote the Palestinian Declaration of Independence in 1988, read by the late Palestinian leader Yasser Arafat when he unilaterally declared statehood. The declaration was symbolic and had no concrete significance.
Darwish’s influence was keenly felt among Palestinians, serving as a powerful voice for many.
“He started out as a poet of resistance and then he became a poet of conscience,” said Palestinian lawmaker Hanan Ashrawi. “He embodied the best in Palestinians ... even though he became iconic he never lost his sense of humanity. We have lost part of our essence, the essence of the Palestinian being.”
Last year, Darwish recited a poem damning the deadly infighting between rival Palestinian groups Hamas and Fatah, describing it as “a public attempt at suicide in the streets.”
Darwish was born in the Palestinian village of Birweh near Haifa, which was destroyed in the 1948 Mideast war that led to Israel’s independence. He joined the Israeli Communist Party after high school and began writing poems for leftist newspapers.
“When we think of Darwish ... he is our heart, and our tongue,” said Issam Makhoul, an Arab lawmaker and veteran member of the Israeli Communist Party.
Darwish left Israel in the early 1970s to study in the former Soviet Union, and from there he traveled to Egypt and Lebanon. He joined the Palestine Liberation Organization, but resigned in 1993 in protest over the interim peace accords that the late Palestinian leader Yasser Arafat signed with Israel. Darwish moved to the West Bank city of Ramallah in 1996.

TITLE: Russian, Georgian Rivals Embrace on Podium Amid War
AUTHOR: By Erik Kirschbaum
PUBLISHER: Reuters
TEXT: BEIJING — Nino Salukvadze of Georgia embraced her Russian rival and made a moving appeal for peace after winning an Olympic bronze medal in shooting on Sunday.
Salukvadze, who competed only after the 35-member Georgian team were told by their president to remain at the Games in the “best interest of the country” despite Russian military attacks on its territory, finished behind Russia’s Natalia Paderina.
“If the world were to draw any lessons from what I did there would never be any wars,” Salukvadze said.
The two rival shooters — who were once team mates in the Soviet Union — hugged and kissed each other on the cheeks after the dramatic final in the Beijing shooting range hall, where China’s Guo Wenjung came from behind to win the gold medal.
“We live in the 21st Century, after all,” said Salukvadze, who wiped tears from her eyes when she put her pistol down after her final shot and the crowd applauded. “We shouldn’t really stoop so low to wage wars against each other.”
Russian bombers have widened an offensive to force back Georgian troops seeking control over the breakaway region of South Ossetia.
Salukvadze was asked about her moving post-match handshake and embrace with Paderina — who had led Guo going into the finals but appeared to be rattled when the crowd of 2,000 did not applaud her introduction before the finals.
“As far as the hugging and kissing goes, I do that with many friends. I have many friends around the world and will always do that. There should be no hatred among athletes and people,” she said.
“Politicians should straighten out the situation today and if they don’t, we’ll have to get involved,” added Salukvadze, who won a silver medal in this event in the 1988 Olympics. She also won gold in 1988 in the 25-meter pistol event.
She said her medal was a victory for all of Georgia.
“It’s a small victory for my people,” she said, before looking across to Paderina and adding: “When it comes to sports we will always remain friends and nothing will affect our friendship — even in such a scary event as shooting.”
Silver medal winner Paderina confirmed her friendship with Salukvadze, sitting to her right: “We are friends indeed. We’ve been shooting together for a long time. She used to shoot for [the Soviet Union]. We are really friends and don’t get mixed up in political things. Sports is not politics.”
Salukvadze and her Georgian teammates had offered to withdraw over the conflict with Russia in South Ossetia.
But President Mikheil Saakashvili sent a message overnight instructing them to stay.

TITLE: Mauritania General Ousted President ‘To Save Country’
PUBLISHER: Agence France Presse
TEXT: NOUAKCHOTT — Mohamed Ould Abdel Aziz, the Mauritanian general who toppled the country’s president in last week’s coup, insisted Sunday he had acted to save the country.
In an interview with AFP, Ould Aziz said the coup was aimed at “avoiding a catastrophe in the country” and eliminating the regime of “an elected president who acted in an irrational manner.”
The 52-year-old former head of the presidential guards staged a coup on Wednesday, overthrowing Mauritania’s first democratically elected president, Sidi Ould Cheikh Abdallahi, after he tried to sack senior military officers.
“I believe that the international community is not looking to destabilize Mauritania,” he said. “When it has all the information, it will turn in a positive direction.”
The leader of the coup said the ousted president and other top officials were under house arrest, “for their security and the security of the country.”
He added: “Justice exists in Mauritania and there is also a parliament which could be called on to judge them if necessary.”
Over the weekend Ould Aziz said he had warned Abdallahi before the coup of the consequences if he went through with plans to revamp the military.
“I telephoned him [Abdallahi] personally to explain to him the gravity of his decree and suggest he postpone it to avoid the worst,” Ould Aziz said in an interview on the Al-Jazeera television channel.
But the president of Mauritania’s national assembly, Messoud Ould Boulkheir, on Sunday pledged his full support to the deposed president.
In statement he said he recognized no one except Abdallahi and said he would not agree to any presidential elections staged by the coup leaders.
But 67 out of 95 Mauritanian members of Parliament later rejected his statement in a joint declaration saying he was only speaking for himself.
“The changes of Aug. 6 [the day of the coup] are the logical and indisputable result of President Sidi Ould Cheikh Abdallahi’s behavior to stall the republic’s institutions,” their text said.
On Friday the African Union suspended Mauritania from the pan-African organization until it had restored constitutional government.