SOURCE: The St. Petersburg Times
DATE: Issue #1406 (70), Tuesday, September 9, 2008
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TITLE: City Hall, Marchers Wrangle Over Demo
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: City Hall is pressuring the organizers of the Second March for the Preservation of the Historical Center of St. Petersburg — the liberal opposition party Yabloko and pressure groups Living City and Okhtinskaya Duga — to hold a meeting instead of a demonstration.
The event had been scheduled to start at midday on Saturday.
Leonid Bogdanov, head of City Hall’s Committee on Legal Issues and Security, has turned down the preservationists’ request to hold a short march from Sportivnaya metro station to Andrei Sakharov Square. 
Bogdanov said the march would have disturbed the shooting of a historical TV series, “Ligovka,” and an outdoor theatrical festival.
“As an alternative we suggest that the organizers of the event hold a meeting outside the Griboyedov monument on Pionerskaya Square,” reads the statement issued by Bogdanov on Monday.
Rights groups that have joined forces to set up the demonstration say the increasing number of new buildings in the historical center of St. Petersburg is threatening its integrity and risks disfiguring the architectural landscape.
A leaflet distributed on the streets of St. Petersburg inviting locals to join the protest event reads: “The ‘new vandals’ that rule the city today regard the streets of St. Petersburg as their own territory, as something that belongs exclusively to them and can be sold to investors… In such a context, any historical monument and the residents of St. Petersburg themselves appear to be nothing but a nuisance.”
Mikhail Amosov, former head of the Town Planning Commission of the St. Petersburg Legislative Assembly, and the driving force behind St. Petersburg’s building code, said the regulations he helped write in December 2006 are largely ignored.
“Numerous examples illustrate that some companies are allowed to exceed the existing maximum height limits; the process of how these companies obtain permission to go ahead with their construction projects is not transparent,” Amosov said. “More detailed legislation and a transparent scheme would have put an end to such practices.”
Pressure groups say the problem is exacerbating by the day. 
“The list of wonderful historical buildings that get wiped out to vacate space for gigantic business centers made of concrete and glass is getting longer as we speak,” said Yevgeny Kozlov of the Movement for Citizens’ Initiatives, one of the organizers.
“Monstrous constructions that are hypocritically being referred to as ‘city planning mistakes’ by City Hall bureaucrats are all in fact the result of the irresponsible policies of Smolny.”
Historian Yelena Malysheva, head of the Okhtinskaya Duga movement, the demonstration’s co-organizer, said St. Petersburg is “besieged by construction vandals.” 
She accused the city of violating citizens’ rights in order to placate deep-pocketed investors.
“Governor Matviyenko seems to believe that the city that she governs is just one big bank account that must grow at any cost —and, importantly, for the benefit of the officials,” Malysheva said. “But any city is first and foremost about its people. It is a real shame that the governor just creates an unfriendly environment for those who live here.”
The focus of the last year’s March for the Preservation of St. Petersburg, which then attracted about 5,000 people according to verious media reports, was the construction of the 396-meter, $2.3 billion Okhta Center tower for Gazprom. City Hall had pledged to cover half of the construction costs that it has said it will recoup from taxes to be paid by the Gazprom subsidiary company that will relocate to the city. During that event protestors carried posters with slogans that included “Authorities, You Stink,” “Gazprom’s Paunch Won Over Its Spirit,” and chanted “City For the Residents,” and “Gazprom, Go Home!” as well as calling for the resignation of Matviyenko.

TITLE: Medvedev: European Monitors to  Georgia
AUTHOR: By Jamey Keaten
PUBLISHER: Associated Press Writer
TEXT: MOSCOW — European Union monitors will deploy to regions surrounding South Ossetia and Abkhazia by next month and Russian troops will pull out after that, President Dmitry Medvedev said Monday.
After talks with visiting French President Nicolas Sarkozy, Medvedev said that 200 EU monitors will be deployed to South Ossetia no later than Oct. 1. International talks on the conflict in Georgia would be held beginning Oct. 15 in Geneva.
Medvedev also alleged that Georgia’s leader, Mikhail Saakashvili, had received “a blessing, either in the form of a direct order or silent approval” from the United States to launch an “idiotic action” against the other breakaway province of South Ossetia.
“People died and now all of Georgia must pay for that,” Medvedev said.
Russian tanks and troops entered South Ossetia after Georgian forces began an offensive to gain control of the pro-Russian territory, which has had de-facto independence for more than 15 years. The Russians quickly repelled the soldiers and drove further into Georgia.
Nearly a month after the five-day war, Russian troops remain entrenched deep inside Georgian territory. Georgia and the West have accused Russia of failing to honor its pledge to withdraw its troops to positions held before the fighting broke out Aug. 7. The dispute has plunged relations between Moscow and the West to near Cold War levels of animosity.
But Russia says those troops are peacekeepers and that they are allowed under the accord to help maintain security around Georgia’s breakaway provinces of Abkhazia and South Ossetia.
Moscow has recognized the two regions as independent states, a move denounced in Georgia and abroad. The regions make up roughly 20 percent of Georgia’s territory — and include miles of prime coastline along the Black Sea.
Medvedev said Russia would not revisit that decision.
“Our decision is irrevocable, the two new states have come to existence,” Medvedev said. “This is a reality which all our partners, including our EU partners, will have to reckon with.”
He insisted that Russia is complying with terms of the cease-fire that Sarkozy negotiated last month. He said Russian troops would pull out of the Black Sea port of Poti and nearby areas in the next seven days, but only if Georgia signed a pledge to not use force against Abkhazia.
Sarkozy suggested that the talks Monday were difficult but “what was accomplished today, it was rather significant” — referring in particular to the decision to send European observers.
Sarkozy was slated to fly to the Georgian capital later Monday to meet with Saakashvili and present the update to the cease-fire plan.
Earlier Monday, Russian soldiers prevented international aid convoys from visiting Georgian villages in a tense zone around the breakaway province of South Ossetia.
The convoy of four vehicles from UN aid agencies waited for about an hour at the Karaleti checkpoint — located on the main road between the central Georgian city of Gori and the South Ossetian city of Tskhinvali. 
The convoy was later turned away after a brief discussion with a Russian general.
The three aid agencies’ SUVs and a World Food Program truck loaded with wheat flour, pasta, sugar and other staples were headed to Georgian villages near South Ossetia. David Carden, who was leading the interagency mission, said the group’s had been trying to assess the situation in the village.
“It didn’t work out today as we would have hoped, and we will make every effort to continue to conduct such missions in the future,” Carden said.
The general, identified by servicemen as Major General Marat Kulakhmetov, head of the Russian peacekeeping forces in South Ossetia, left immediately after the exchange.
An official at the headquarters of the Russian forces said later by telephone that no official request for passage had been submitted by the UN agencies. 
The official, who said he was not authorized to give his name to the media, said aid deliveries must be escorted by peacekeeping forces.
Carden, however, said UN humanitarian authorities had told the Russians of their plans in advance.
Also Friday, Russian forces barred the ambassadors of Sweden, Latvia and Estonia from villages beyond Russian checkpoints where they wanted to deliver aid, the ambassadors said in a statement. 
The diplomats said that they also wanted to assess the situation in the villages and verify allegations of ethnic cleansing.

TITLE: Markets Plunge During Painful ‘Triple-Whammy’ Week
AUTHOR: By Tim Wall, Courtney Weaver
PUBLISHER: Special to The St. Petersburg Times
TEXT: MOSCOW — The MICEX Index on Friday fell to its lowest level since June 2006, deepening Russian markets’ biggest slump since the 1998 financial crisis.
Friday’s fall — by as much as 9 percent in midafternoon trading — came after the Central Bank confirmed that it had stepped in to prop up the ruble amid a strengthening dollar and falling oil prices.
Russian markets were caught in a “triple whammy” of a global financial crisis, a sharp drop in commodity prices and a flow of bad political news, said Roland Nash, head of research at Renaissance Capital.
The markets enjoyed a measure of relief later Friday, recovering on a report that the Energy Ministry planned to propose raising the oil-extraction tax threshold from $15 to $25 per barrel, a step that would help to give oil companies an annual tax cut of up to $16 billion from 2010.
Ending a week in which the more liquid, ruble-denominated MICEX fell 8.5 percent and the dollar-denominated RTS Index dropped 11 percent, the MICEX closed down 3.7 percent for the day on Friday, at 1,234.71 points, while the RTS closed down 3.8 percent, at 1,469.15 points.
The 41 percent fall in the RTS since its May 19 high — when the index came within a whisker of breaking through the 2,500 mark — represents the market’s biggest collapse since the infamous sovereign debt default and ruble devaluation of August 1998.
Nash said that of the triple whammy factors, global financial woes and falling commodities prices were much more significant than recent Russia-specific events, such as the war in Georgia and the TNK-BP conflict.
“There’s a real panic out there on the international market, and Russia’s just reflecting that,” Nash said.
“If you look across emerging markets, Brazil, Turkey, all of these markets have seen 50 percent swings in valuations over the past 10 years,” Nash said. “Russia periodically reminds people it’s an emerging market.”
The ruble fell by 3.3 percent against the dollar in the week to Friday, reaching 25.48 — almost a one-year low — as the dollar also strengthened against the euro.
The slide prompted the Central Bank to sell what first deputy chairman Alexei Ulyukayev described on Friday as a “significant” amount of foreign currency to stem the decline.
Dealers estimate that the Central Bank sold about $5 billion Thursday and Friday, Reuters reported.
Matthew Vogel, an emerging markets analyst at Barclays in London, said Friday that many investors who were sticking with the ruble would be forced out of their positions.
“Until we have the dollar establishing some stability, I would expect that the ruble would remain under some pressure against the [dollar-euro] basket,” Vogel said.
Metals and mining companies were among some of the worst-hit Russian stocks, amid fears that falling commodity prices and government-led price caps in the wake of the Mechel affair could scare off investment funds.
Norilsk Nickel, where boardroom battles are expected to continue between Vladimir Potanin’s Interros and Oleg Deripaska’s United Company RusAl, fell 9.6 percent on the MICEX on Friday, ending the week down 20.3 percent. On the RTS, Norilsk’s weekly fall was 23.2 percent.
Merrill Lynch on Thursday cut its recommendation on Norilsk to “underperform” from “neutral,” citing “ongoing uncertainty about the eventual ownership structure of the company.”
Commodity price worries also hit Severstal, which on Thursday reported a 69 percent jump in first-half profits. Severstal’s London shares ended the week down 12.5 percent, while its shares on the MICEX fell 8.6 percent.
Among other losers was state-run VTB, the country’s second-biggest bank, which continued its long-term slide, ending the week down 12.1 percent after shedding 7.9 percent Friday.
One of the week’s few glimmers of hope came from the tentative deal on Thursday between BP and its billionaire partners in TNK-BP, under which BP will keep a 50 percent stake in the joint venture and replace chief executive Robert Dudley by year’s end. Shares in TNK-BP, which has a 5 percent free float on the RTS, ended the week up 6 percent.
In last week’s falls, Russian markets were broadly in line with the MSCI Emerging Markets Index, which dropped 8.6 percent, and Brent crude oil, which fell 8.7 percent, UralSib said in a preview of a note to investors to be released Monday.
“Falling commodities and worries over a contagion of slowing global growth are pushing investors away from any risk assets,” UralSib said in the note.
Key factors determining sentiment toward emerging markets this week will be the reaction to the expected nationalization of troubled mortgage lenders Freddie Mac and Fannie Mae by the U.S. government and the fear that hedge funds will be forced to sell assets to meet a rise in redemptions, the note said. 
Investor sentiment could also worsen after worse-than-expected U.S. job figures Friday heightened fears of a global recession. U.S. unemployment rose to 6.1 percent in August, its highest level in more than 4 1/2 years.
Funds investing in Russia recorded a 10th straight week of outflows from the country — a relatively modest $46 million in the week to Wednesday — according to EPRF Global, which tracks fund flows into emerging markets.
The continuing outflows, while small compared with the weekly losses of approximately $250 million when Prime Minister Vladimir Putin attacked coal and steel firm Mechel and following the outbreak of war with Georgia, means that Russia fund managers had to find about $120 million from cash or equity sales last week, UralSib said.
Eric Kraus, special adviser for global strategy at financial company Otkritie, said the falls on Russian markets had “very little to do with domestic factors,” but noted that it was “very difficult to differentiate between what flowed out because of the credit crunch and what flew out because of political issues.”
“Now you have a bit of political noise, which is the Russians just drawing their line in the sand, and everyone runs for the door,” Kraus said. “If it was the first time I’d be pretty freaked out. But I’ve been [covering] Russia since 1995. Nothing surprises me anymore.”

TITLE: In Brief
TEXT: <b>Gay Taxi Service?</b>
Taxis for gay people may be set to appear on the streets of St. Petersburg, Interfax reported Monday.
Although there are no concrete plans as yet, a representative of a Petersburg taxi firm told Interfax that they believe there is a market for this service. 
He added that the cars, driven by heterosexual women, would be “normal” taxis, and not painted pink or light blue.
Openly homophobic attacks and abuse are increasingly considered acceptable in Russia, with Moscow mayor Yury Luzhkov repeatedly banning Gay Pride events and last year calling gay people “Satanic.”

<b>Sennaya Shoot-out</b>
One man was killed and two injured in an exchange of fire on Thursday near Sennaya Market, Interfax reported. 
The shoot-out, in which one of the shooters died and the other was injured, is believed to have been the result of a longstanding conflict between two criminal groups whose members are natives of Tajikistan. 
It appears that the other injured party was a bystander.

<b>Soldier Death Enquiry</b>
The military prosecutor’s office is to carry out an inquiry into the death of a professional soldier from the North Petersburg military unit. 
The cause of death, which Interfax reports as having happened Sept. 2, is not yet known. 
The unnamed soldier, from the Komi Republic, had 18 months left of his contract.

TITLE: Bush Set to Back Out of Nuclear Deal
PUBLISHER: Combined Reports
TEXT: ALGIERS, Algeria — Now is not the right time for the United States to move forward on a once-celebrated deal for civilian nuclear cooperation with Russia, U.S. Secretary of State Condoleezza Rice said Saturday.
Her comment increased speculation that U.S. President George W. Bush is planning to punish Moscow for invading Georgia by canceling the agreement. Such a move is being planned, according to senior Bush administration officials, but is not yet final.
“The time isn’t right for the Russia agreement,” Rice told reporters while flying from Tunisia to Algeria during a visit to North Africa. “We’ll be making an announcement about that later.”
A U.S. State Department official, speaking on condition of anonymity, said Friday that he did not know the exact timing of the announcement but that “It’s probably going to happen next week.”
“We made very clear that Russia’s behavior has to be condemned, and there have to be consequences that flow from what it has done in Georgia,” the State Department official said. “This will be an example of that.”
U.S.-Russian relations have cooled considerably since last month’s military standoff between Russia and Georgia and Moscow’s subsequent recognition of independence for Georgia’s breakaway republics of South Ossetia and Abkhazia.
The nuclear cooperation agreement was signed by the United States and Russia in May and sent by Bush to Congress, which can still disapprove of the pact. Bush or his successor, who takes office in January, could later decide to resubmit the deal to Congress.
The agreement would give the United States access to modern Russian nuclear technology and clear the way for Russia to establish itself as a lucrative center for the import and storage of spent nuclear fuel from American-supplied reactors around the world.
Such a deal was seen as crucial to boosting relations with Russia and to fulfilling Bush’s vision of increasing civilian nuclear energy use worldwide as a way to combat rising energy demands and climate change.
Withdrawing the agreement from Congress would likely have little effect. The deal probably would not have been approved before Bush’s term ends and key U.S. lawmakers have said the accord is probably dead anyway in the wake of the war over South Ossetia.
But pulling it would send a message to Russia that its actions in Georgia are not acceptable and will not go unanswered.
The nuclear pact would have gone into force if Congress did not pass a joint resolution of disapproval or adjourned for the year before lawmakers had 90 legislative days to review it.
Some members of Congress were already troubled by the nuclear pact even before Russia and Georgia went to war last month. They said they did not trust Russia enough to expand nuclear cooperation because it supplied fuel to Iran’s Bushehr nuclear power plant. Washington believes Iran harbors ambitions to build a nuclear bomb.
(AP, Reuters)

TITLE: Russia To Send Ships, Planes to Venezuela
AUTHOR: By Vladimir Isachenkov
PUBLISHER: The Associated Press
TEXT: MOSCOW — Russia said Monday it will send a naval squadron and anti-submarine patrol planes to Venezuela this year for a joint military exercise in the Caribbean, a deployment that comes amid increasingly tense relations with the United States.
Russia’s Foreign Ministry spokesman Andrei Nesterenko said the exercise was planned before Russia’s war last month with Georgia “and it’s unrelated to the current political situation and the developments in the Caucasus.”
“If this exercise takes place, it won’t be directed against interests of any third party,” Nesterenko said at a briefing.
The announcement was made just a week after Prime Minister Vladimir Putin had warned that Russia intended to mount an unspecified response to recent U.S. aid shipments to Georgia.
Nesterenko said the Peter the Great missile cruiser and three other Russian navy ships would visit Venezuela before the year’s end, and would be joined by a unit of long-range anti-submarine patrol aircraft.
He said planes would be “temporarily based at one of Venezuela’s air bases.”
Venezuelan President Hugo Chavez had announced the maneuvers in his Sunday television and radio program, saying the Russian vessels would call on Venezuelan ports in late November or December.
Chavez, who has cultivated close ties with Moscow and placed big orders for Russian jets, helicopters and other weapons, has repeatedly warned that the U.S. Navy poses a threat to Venezuela.
Diplomatic relations between Caracas and Washington have been tense for years. 
U.S. officials have warned that Chavez poses a threat to democracy, while Chavez has emerged as Latin America’s most outspoken critic of U.S. foreign policy.
The socialist leader ridiculed any U.S. concerns over the joint exercise with the Russian forces, saying, “Go ahead and squeal, Yankees.”
Russia has been angered, however, over the recent deployment of U.S. Navy ships to the Black Sea to deliver humanitarian aid to Georgia, which was ravaged by a five-day war with Russia last month.
Russian officials said past U.S. military assistance for Georgia had encouraged the Caucasus country to launch its offensive in South Ossetia, and argued that the new shipments could be a cover for weapons deliveries.
U.S. officials have dismissed those accusations, saying the ships are carrying only humanitarian supplies such as blankets and powered milk.
Putin last week warned that Russia would respond to the U.S. aid shipments to Georgia, but he did not say how.
“We don’t understand what American ships are doing on the Georgian shores, but this is a question of taste, it’s a decision by our American colleagues,” Putin said. 
“The second question is why the humanitarian aid is being delivered on naval vessels armed with the newest rocket systems,” Putin said.

TITLE: Bribe to Illegally Seize Firm Put at $30,000
AUTHOR: By Svetlana Osadchuk
PUBLISHER: Staff Writer
TEXT: MOSCOW — Need to ensnare a senior executive of a rival company in a criminal investigation? Be prepared to fork out $30,000 to an official. Tack on another $35,000 if you want a court to rule in your favor.
These are just some of the estimated fees that so-called “raiders” pay corrupt officials to help them illegally seize businesses, according to a new report on how to battle such seizures.
Based on interviews with more than 100 businessmen and lawyers in Russia, the report, released last week by the National Anti-corruption Committee and the Phoenix Group, gives the going market rates for giving a veneer of legality to criminal raiders, whom President Dmitry Medvedev has described as the “shame” of the country.
It costs $5,000 to obtain copies of a company’s real estate documents — acquiring prime real estate is often raiders’ key aim — while altering a company’s charter to replace the CEO or founders costs around $10,000, according to the report. Securing a delay of court proceedings also costs $10,000, but getting a court to close a criminal investigation costs $50,000.
The report gives only the minimal rates, while the prices can run higher depending on the size of the company’s assets, said Kirill Kabanov, head of the National Anti-corruption Committee.
“Usually it costs raiders no more than 40 to 45 percent of this amount to seize the company” Kabanov said, adding that the report “demonstrates that corruption plays a key role in the raiding phenomenon in Russia,” Kabanov said. 
Since taking office, Medvedev has ordered the introduction of anti-corruption measures to protect small and medium-size businesses, and at the end of June, Kremlin chief of staff Sergei Naryshkin submitted a plan for tackling the problem to the president.
The report proposes an amendment to the Criminal Code defining “raiding” as a separate statute. Criminal investigations of suspected raiders are complicated by the fact that the crime intersects with several statutes, including extortion and fraud, Panfilova said.

TITLE: Pipers Fall Victim to U.K. Diplomacy
PUBLISHER: The Associated Press
TEXT: EDINBURGH, Scotland — The sound of bagpipes has fallen victim to frosty relations between the West and Russia. British officials have banned three military bands from attending a tattoo in Moscow.
More than 40 musicians have been told that they won’t be allowed to take part in the Kremlin Zoria in Red Square because of Russia’s invasion of Georgia.
The Foreign Office said Friday that the decision was a demonstration that it is not “business as usual” between Britain and Russia.
The ban affects army pipe bands from the 2nd Scots Regiment, the Irish Guards and the 1st Royal Gurkha Rifles.
Brigadier Mel Jameson, former head of the Edinburgh Military Tattoo, helped found the Kremlin Zoria. He said the action “just shows that music apparently does not cross all boundaries.”
“This is an outrage. The organizers of the event have no direct links with the Russian military,” Jameson said Friday. “This is wrong-headed by the British government.”

TITLE: MTS Seeks Stake in Troubled Yevroset
AUTHOR: By John Wendle
PUBLISHER: Staff Writer
TEXT: MOSCOW — Mobile TeleSystems confirmed on Friday that it was interested in buying a stake in mobile phone retailer Yevroset, which last week had its office raided and two of its employees detained over smuggling and kidnapping allegations.
The sale of a stake in the country’s largest handset outlet to its biggest cell phone operator could signal the beginning of a trend toward the U.S. model of contract-based mobile phone service, although analysts cast doubt on whether that would happen soon, citing ingrained behavior patterns and a lack of infrastructure.
“Theoretically, we can admit that we are interested in buying a stake. Not a controlling stake,” MTS spokeswoman Irina Osadchaya said. “We’re just in a very early stage.” 
MTS has been looking at the deal “for a while,” she added. 
Her comments were an about-face from the day before, when Osadchaya said MTS was not interested in buying into Yevroset. 
Yevgeny Chichvarkin, Yevroset’s co-owner and chairman, said Friday that the company had “not yet received a letter of interest from MTS. But if and when we do, we will begin the negotiating process.”
The announcement comes after the Prosecutor General’s Office last week said it was investigating whether Yevroset had smuggled handsets into Russia and whether an executive had been involved in kidnapping and extortion.
Chichvarkin and Yevroset co-owner Timur Artemyev have denied wrongdoing by the company or its executives.
“With our evolving strategy, we are looking at different growth opportunities. Yevroset has been in the market for a while and is a market leader, which could have an influence on the sales of our contracts,” Osadchaya said.
Yevgeny Golosnoi, telecoms analyst at Troika Dialog, said there was no reason MTS should not buy Yevroset, so long as the price is right.
“Given the current climate in the market, I’m not sure whether the $1.5 billion floated in the media is the right price. The market is changing. If the price is lowered to reflect changes, it would make sense.”
If MTS were to acquire a stake in Yevroset, the move could have a major impact on the sector, with mobile-service providers becoming more vertically integrated and selling handsets along with their contracts. 
The development would move the Russian mobile market toward that of the United States, where the biggest carriers generally sell discounted handsets together with fixed-length service packages.
“If MTS buys Yevroset or a stake in it, the market will be totally different in the near future,” said Eldar Murtazin, an analyst at Mobile Research Group.
He said the sector would evolve along one of two paths — with mobile providers either buying handset retailers or the providers and retailers signing agreements on exclusive contract sales.
“There’s no way one retailer would be bought and the other mobile-service providers would sit there,” said Yekaterina Balykina, telecoms analyst at Alfa Bank. “ It would be the end of independent retailers,” she said.
VimpelCom, the country’s second-largest provider, and No. 3 carrier MegaFon can be expected to make bids next, possibly for another big handset retailer like Svyaznoi, analysts said.
“VimpelCom and MegaFon will have to react to this. MegaFon will take the second way and create a contract, whereas VimpelCom could buy a chain,” Murtazin said.
VimpelCom and MegaFon were not available for comment after repeated calls.
Analysts said the integration of mobile-service providers with handset and contract retailers could pose problems, however. The service providers have no experience of selling phones, and Russians may not be willing to switch to legally binding usage contracts or fixed monthly bills.
“MTS and VimpelCom have said they’re not in the business of selling phones. That’s why their interest in a [retail] chain is such a surprise to me,” said Troika’s Golosnoi.
“I think it would be very hard to make people abide by their contracts. … Typically, people have searched for lower rates, and they could migrate freely. People even had multiple SIM cards,” he said. “I am very doubtful that they will be successful in converting people.”
Alfa’s Balykina, who said she had experience with both the pay-as-you-go approach and the U.S. contract-based system, agreed.
“As a consumer … I was happy with having one bill. But I was very unhappy with being locked into a contract for two years,” she said. “It’s kind of early to say whether it would be a good or bad market.”

TITLE: Broadband Market Close to Saturation
AUTHOR: By Yevgeny Rozhkov
PUBLISHER: Special to The St. Petersburg Times
TEXT: Severo-Zapadny Telekom (Northwest Telecommunications) has updated its Internet services, increasing connection speeds and reducing unlimited tariff prices by 40 percent — a move regarded by experts as an effective marketing tool which is expected to draw around 120,000 new customers by the end of this year. 
A spokesperson for the company said the marketing initiative is scheduled for the fall and winter of this year and next, and that the customer-friendly strategy will continue.    
Reducing tariffs is the only way to attract new customers, who generally prefer better tariffs and high-speed broadband Internet connections rather than new services, experts say. 
“For example, additional services like IP-TV [Internet Protocol Television — access to a digital television service via a network such as a broadband connection] are not in demand because potential clients enjoy various free content on the Internet, and IP-TV is not widely advertised,” said Denis Kuskov, CEO of the Week of Cellular Technology Agency. 
 “Tariffs have reached their maximum limits in terms of available speeds and traffic. Prices will not decrease until there is strong competition between St. Petersburg’s Internet providers,” said Dmitry Anchunov, CEO of Interzet Company, who predicts a rapid increase in competition on the telecommunications market in the northwest. 
In August, the St. Petersburg-based Internet provider TKT launched three new tariffs ranging from 790 rubles to 2,490 rubles a month, with average connection speeds of up to eight megabits per second. Ruslan Yevseyev, the company’s CEO, is expecting to acquire around 56,000 new clients. 
Web Plus is also reviewing its pricing, but company officials declined to comment on the expected changes and time periods. 
During September, Interzet is planning to launch a so-called “triple-play approach” in broadband connection services, switching from three separate tariffs to one, which will cost from 50 to 230 rubles per month. 
Korbina Telecom is to offer IP-TV by the end of this fall, but tariffs will not be altered until 2009, said the company’s CEO, Alexander Malis.
In St. Petersburg there are about 770,000 broadband Internet users, and figures are expected to leap by 100,000 by this December — an increase of 33 percent. Yet according to Comnews Research analysts, the market will soon see stagnation.
“Almost every potential client in St. Petersburg will have a broadband Internet connection by the end of 2008, and the annual increase is not expected to exceed one or two percent,” said Dmitry Yeremenko, a Comnews analyst. The saturation of households with Internet access in St. Petersburg will reach 70 percent by 2014.
Some companies are already launching advertisement campaigns to survive in the saturated market, due in part to the fact that cellular telephone service operators such as Vimpelkom and Megafon have become interested in entering the rapidly growing sector. 
In spring last year, Russia’s cell giants were licensed to provide 3G mobile connection services, including high-speed Internet access, and pioneering networks are to be launched in the largest Russian cities this year. According to estimates by experts, by 2012, Internet services will account for 10 percent of all revenues of cell phone network providers.

TITLE: Pension Fund Could Be Invested in Russia
PUBLISHER: Bloomberg
TEXT: MOSCOW — A “small amount” of Russia’s $32 billion National Wellbeing Fund, created to fund pensions, may be invested in local markets, said Alexei Ulyukayev, the central bank’s first deputy chairman.
 “A certain amount of funds from the National Wellbeing Fund can be invested in instruments on the Russian market, but this will be a comparatively small amount,” Ulyukayev said at a banking conference in Sochi. That money won’t be invested in local securities this year, he said.
Russia’s Finance Ministry is due to prepare by Oct. 1 proposals for investing about 40 percent of its oil funds less cautiously, in foreign shares and bonds. The Reserve Fund and National Wellbeing Fund are now invested in bonds, including those issued by 15 government-linked agencies from the U.S., the U.K., Germany, France, Austria, Canada and the Netherlands.
A total of 3.6 percent of the funds are invested in Fannie Mae and Freddie Mac bonds, Deputy Finance Minister Dmitry Pankin said on Aug. 20.
More than $100 billion of Russia’s currency reserves were held in Fannie Mae, Freddie Mac and Federal Home Loan Banks bonds at the start of the year. In July, Ulyukayev said the central bank’s holdings of Fannie Mae and Freddie Mac had been reduced to $50 billion, Interfax reported.
Since then, the bank has slightly reduced its investments in the three agencies’ bonds, Ulyukayev said Friday.

TITLE: In Brief
TEXT: <b>Raspadskaya Faces Fine</b>
MOSCOW (Bloomberg) — Russia will fine Raspadskaya, the country’s second-largest producer of coking coal, for “abusing its dominant position in the market,” the Federal Anti-Monopoly Service said.
The penalty can’t exceed two percent of annual revenue, the watchdog said on its web site, in a statement dated Friday. Raspadskaya cooperated with the investigation and agreed to lower prices, which “will be taken into account,” the regulator said.
The service will probably levy the minimum fine of one percent of coking coal sales for 2007, Vedomosti reported, citing an unidentified service official. The fine probably won’t exceed $8 million and the price cuts will cost the company about $60 million, the newspaper said Monday, citing UniCredit SpA analyst Marat Gabitov.

<b>Turkey Loses $500 Mln</b>
ANKARA (Bloomberg) — A trade dispute with Russia has cost Turkish companies $500 million, Milliyet newspaper reported, citing Foreign Trade Minister Kursad Tuzmen.
Lengthy customs procedures imposed by Russian authorities are delaying the arrival of Turkish-made goods, Tuzmen said in Ankara after meeting exporters. Clothing exporters risk missing the fall season and losing market share, he said, according to Milliyet.

<b>Sberbank Puts Up Rates</b>
MOSCOW (Bloomberg) — Sberbank, Russia’s biggest bank, increased the interest rates it charges for corporate loans after its own borrowing costs increased, Kommersant reported, citing unidentified customers of the state-run bank.
Moscow-based Sberbank, which has about 40 percent of Russia’s corporate lending market, raised rates by one percentage point to three percentage points, the newspaper reported.
The central bank raised its refinancing rate by 25 basis points four times between February and July, when it reached 11 percent a year, Kommersant said. Russian companies owed Russian banks 8.8 trillion rubles ($347 billion) on July 1, the newspaper said.

<b>Funds Snapped Up</b>
MOSCOW (Bloomberg) — Russian banks borrowed 60 billion rubles ($2.4 billion) in unspent budget funds, the entire amount offered at an auction aimed at supporting liquidity.
Banks submitted bids totaling 90.2 billion rubles, the Finance Ministry said in a statement on its web site. The funds were borrowed at an average interest rate of 8.43 percent for five weeks.
The ministry was due to offer as much as 160 billion rubles of one-week loans on Tuesday, the first time Russia has held two auctions in one week since starting the program in April.

<b>Carrefour Looks South</b>
MOSCOW (Bloomberg) — Carrefour, the world’s second-largest retailer, plans to open stores in Russia’s Krasnodar region, Vedomosti reported, citing Maxim Filandrov, an aide to Carrefour’s general director for Russia.
Chief Executive Officer Jose Luis Duran plans to sign a store-opening agreement with regional Governor Alexander Tkachev at an economic forum in Sochi on Sept. 18 and 19, Filandrov told the newspaper, without giving details. Carrefour will pledge to invest $100 million in the region over five years, Vedomosti said, citing an unidentified official of the regional administration.
The company plans to open its first two Russian stores in Moscow and Krasnodar in the period between November and January, Filandrov was cited as saying by the newspaper.

TITLE: TNK-BP Share Price Exceeds Value
PUBLISHER: Bloomberg
TEXT: MOSCOW — TNK-BP Holding’s planned share buyback may only benefit a limited number of minority stockholders because the offer price exceeds market value, reducing the volume available for repurchase, analysts said.
TNK-BP Holding, the traded unit of BP Plc’s Russian oil venture, offered 48.94 rubles ($1.92) a share to investors who vote against a plan to merge four divisions, or abstain from voting, at an extraordinary meeting on Oct. 8, the company said in Rossiyskaya Gazeta on Friday.
Should all minority investors seek to sell their shares, the Moscow-based unit will be able to buy back about 11 percent of the volume, Troika Dialog analysts Oleg Maximov, Valery Nesterov and Alex Fak said Monday in a note to clients. By law, Russian companies can spend only 10 percent of their net asset value on buyouts, which in TNK-BP’s case is about $180 million, according to the analysts, who recommend holding TNK-BP stock.
BP and its Russian partner, a group of companies controlled by billionaires Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik, are considering listing about 20 percent of a TNK-BP unit on an international exchange as part of an agreement to settle the conflict that threatened the development of the venture’s new projects.

TITLE: Official Declares AiRUnion Crisis ‘Over’
PUBLISHER: Combined Reports
TEXT: MOSCOW — Government officials said Friday that the country would create a state-controlled airline holding company as big as Aeroflot to rescue the cash-strapped AiRUnion airline alliance.
The new holding will be controlled by state-owned industrial group Russian Technologies, which has agreed to help the alliance pay off its debt.
AiRUnion last month fell behind on payments for jet fuel, grounding aircraft and stranding thousands of people at airports across the country.
“The crisis at AiRUnion is over,” Deputy Finance Minister Andrei Nedosekov was quoted as saying by Russian news agencies.
“The state understands that the crisis of one company could lead to the collapse of the whole sector. The state is ready to support the company and has the resources to do this.”
The news came as AiRUnion member KrasAir was charged Friday with large-scale fraud and could face charges over illegal actions during bankruptcy proceedings, said Oksana Gorbunova, spokeswoman for the west Siberian transportation prosecutor, Interfax reported.
AiRUnion is run by two Russian brothers — Boris and Alexander Abramovich — and the alliance’s members are mostly state-controlled. The brothers also have stakes in some of the alliance’s members.
Government officials on Thursday created a deal whereby AiRUnion’s assets will be folded into a new holding, together with Atlant-Soyuz, controlled by the Moscow city government, and several regional airlines.
Russian Technologies said it would take at least nine months to create the holding, which will include KrasAir, GTK Russia, Kavminvodyavia, Orenburg Airlines, Saratov Airlines, Domodedovo Airlines, Samara Airlines and Vladivostok Airlines. 
The state corporation will repay $100 million of AiRUnion’s estimated $800 million debt and plans to renegotiate the rest, Alexei Alyoshin, deputy chief executive of the holding, said Friday on state television.
The Moscow city government said it would not seek to bankrupt the companies in the alliance. “We are not yet rich enough to use bankruptcy procedures to get an improvement,” Deputy Mayor Yury Roslyak told reporters.
Sources close to the alliance said part of the debt was secured by stakes owned by the Abramovich brothers. They could not be reached for comment.
The Federal Reserves Agency has supplied the AiRUnion with state-owned fuel to help it fly passengers home, and the Transportation Ministry has said supplies will continue, after Prime Minister Vladimir Putin directed Russian Technologies to start working to resolve the problem.
The country’s airline officials say jet-fuel suppliers have been hiking prices and refuse to allow long-term pricing contracts. Aeroflot CEO Valery Okulov said Thursday that its profit would almost halve in 2008 because of soaring fuel prices.
No one answered phones at AiRUnion on Friday. But in a statement Aug. 20, the firm apologized to passengers, saying revenues did not cover fuel costs.
Starting Sunday, all of the alliance’s Moscow flights will move from Domodedovo Airport to Vnukovo Airport, said Vitaly Vantsev, deputy head of Vnukovo, Interfax reported Saturday. The flights will follow AiRUnion’s previous schedule, Vantsev said.
(Reuters, Bloomberg, SPT)

TITLE: Gazprom: Russia Is a Reliable Gas Supplier
AUTHOR: By Guy Faulconbridge and Michael Stott
PUBLISHER: Reuters
TEXT: MOSCOW — Europe has nothing to fear from dependence on Russian gas even though at least a third of its gas will come from Russia by 2015, Gazprom Deputy CEO Alexander Medvedev told Reuters on Monday.
Leaders in the European Union have long been worried by growing dependence on Russian gas supplied by Gazprom but the EU has come up with few solutions.
“In spite of the simple fact that Europe needs additional gas, some political circles are trying to play the card of the dependence of Europe on Russian gas as ...a threat to Western Europe, which is absolutely absurd, because we are mutually dependent,” Medvedev told the Reuters Russia Investment Summit.
Western politicians say the issue was highlighted last month when Russia fought a war against Georgia, which hosts the only oil and gas pipelines bringing supplies westwards from the Caspian without crossing Russia.
But Medvedev lashed out at what he termed “comic book” statements by some Western politicians that cooperation should be limited because of Russia’s actions in Georgia.
“To say ‘Let’s prevent Russian investments in Europe’ is like a comic book: If Russia invests somewhere, (it is suggested by some that it is doing so) just to switch off the gas, oil or water or whatever,” Medvedev told Reuters.
“Sometimes it looks like it was orchestrated. Some people, they are hostage to the wrong concept that a strong Russia is not good for international relations. I personally believe the opposite.”
Medvedev said European dependence on Russian gas will rise over the next decade, with Russian gas making up “at least” one third of European consumption by 2015 from 26 percent now.
But calls for limiting cooperation or creating barriers to Russian investment missed the point that Russia and Europe were mutually dependent and that there are massive investment opportunities for both sides, he said.
Medvedev accused Georgia of limiting Russian gas supplies to South Ossetia, the rebel region where the war with Georgia started early in August.
“We should not forget, and no-one wrote about this, that gas continued to flow to Georgia and continues to flow now,” he said. “Georgia is not allowing gas to be delivered to South Ossetia.”
Gazprom, Russia’s most powerful company, is at the center of the Kremlin’s drive to revive Moscow’s geopolitical clout as an energy superpower.
Created on the basis of the Soviet Gas Ministry, the Kremlin has transformed Gazprom into a company with a market capitalization of $205 billion. Gazprom is 51-percent state owned and private investors hold the rest.
President Dmitry Medvedev, who is no relation of the deputy CEO, served as Gazprom board chairman for five years while Prime Minister Vladimir Putin is closely involved in negotiations on Gazprom’s international expansion.
“Energy policy is inevitably on the agenda of the president and the prime minister,” Gazprom’s Medvedev said. “But it is a very naive idea that Gazprom is managed by a call from the Kremlin or from the White House.”
The Kremlin has been very sensitive to what it says are attempts to create barriers to Russian investment abroad, especially after the Georgia conflict.
“We hear these voices saying there should be barriers created for Russian both private and for such companies as Gazprom with mixed capital,” Medvedev said.
“We hope the answer of business will ... not go this way, because it will negatively influence not only economics but also politics.”
Medvedev singled out Canada for criticism, saying Gazprom had been surprised by statements from Canadian Prime Minister Stephen Harper that its commercial natural gas deals with Russia could be put at risk.
In May, Gazprom announced it was joining Enbridge Inc, Gaz Metro and Gaz de France GAZ.PA in developing an C$840 million ($792 million) liquefied natural gas project in Quebec.
“If there is a nightmare scenario that for some reason this project will be out of reach of realization based on a Canadian political decision, then for us it will be easy to find an alternative destination for our LNG.
“But it will not be good for Canada, because they will face a shortage of natural gas,” he said.

TITLE: Adidas for Russian Soccer Team
PUBLISHER: Bloomberg
TEXT: LONDON — Adidas, the world’s second-largest sporting-goods maker, has ousted competitor Nike as uniform supplier for Russia’s national soccer federation under a new 10-year agreement.
The accord took effect Sept. 1, Herzogenaurach, Germany-based Adidas said Monday in a statement without giving financial details. Russia’s national soccer team will wear its gear for the first time on Wednesday in a World Cup qualifying match against Wales, the company said.
“Our partnership with Adidas will help us to achieve our goals,” Vitaly Mutko, Russia’s minister for sports, tourism and youth policy, said in the statement.
The Russian Football Union represents 2.5 million players, 44,000 clubs, 156,000 teams and 37,000 referees, according to the statement.

TITLE: Finnish Cottages Snapped Up by Wealthy Russians
AUTHOR: By Kati Pohjanpalo
PUBLISHER: Bloomberg
TEXT: HELSINKI — Arja Viitikko agonized before selling her home and land to Russians. Then she took the money.
“I thought about it — am I selling piece by piece the land my grandfather fought for?” said Viitikko, 45, who in November 2006 sold a 21-hectare island and, later, a house in Savonlinna, north of Helsinki, to Russian buyers. “But these days, someone is going to sell anyway, so why wouldn’t it be me?”
Buoyed by rising oil wealth, Russians are snatching up lakeside cottages and building single-family houses in Finland, whose border lies just 200 kilometers from St. Petersburg. On the dirt roads of Eastern Finland, Jeeps and sport utility vehicles driven by the new buyers mix with Toyotas and Volkswagens owned by locals.
Russians spent 76 million euros ($111 million) on Finnish property last year, accounting for three-quarters of all property sales to foreigners, up from one-quarter four years ago.
The purchases illustrate the double-edged sword Finland faces as Russia, 50 times larger in land mass and 27 times larger in population, reasserts itself in European affairs. Finland enjoys Russia’s money while treading quietly on the political front. Finnish Prime Minister Matti Vanhanen, for instance, avoided condemnation of Russia’s invasion of Georgia this month, saying, “We aim to be as [equal-handed] as possible.”
“The more Russia engages in power politics either through economic, political or military means, the more cautious” Finland becomes, said Risto Penttilae, director of the Finnish Business and Policy Forum EVA in Helsinki.
Russia is one reason why Finland has stayed out of NATO, one of only six European Union members to do so. Finland supports Russia’s bid for membership in the World Trade Organization, as well as the Nord Stream gas pipeline being built under the Baltic Sea off Finland’s coast to connect Russian supplies with the German market, Vanhanen has said.
Finland depends on Russia for two-thirds of its energy imports by value, including all of the natural gas it uses, according to Statistics Finland. Russia became Finland’s biggest trading partner in the first quarter of 2008 for the first time since the collapse of the Soviet Union.
At the Finnish-Russian border, truck lines sometimes stretch for a few kilometers, angering locals sandwiched between large Russian transports.
“They’re dangerous. And it isn’t right that when we now finally have good roads, they’re being turned into parking lots for Russian trucks,” said Lappeenranta resident Reijo Litmanen, 55, who drives his van past the lines daily.
The surge in trade and property purchases comes six decades after two wars between the countries ended in the Paris Peace Treaty of 1947, which ordered Finland to surrender an area the size of Denmark to the Soviet Union and pay reparations of $300 million. Finland was neutral in the Cold War.
While Finland’s 1995 EU entry was a step toward the West and a security-policy statement, that goal was never openly spoken, said Liisa Jaakonsaari, a member of the Finnish parliament since 1979.
“We don’t react like that to any other country,” said Jaakonsaari, who chaired the parliament’s foreign affairs committee from 1999 to 2007. “There’s too much sensitivity” toward Russia, he said.
Finland’s strategy has been to curry favor by maintaining constructive and friendly relations, the EVA Forum’s Penttilae said. It doesn’t always work: Russia has imposed duties on the exports of timber from the country to help modernize its pulp and paper industry. For the Finnish forestry industry, which relies on Russia for 16 percent of its raw material, the tariffs will increase costs by about 150 million euros each year, Finland’s foreign ministry estimates.
“I think it’s clear that this strategy hasn’t produced results,” Penttilae added. “Finland is minuscule and insignificant from the Russian perspective.”
Not to Russian real estate buyers, though. In Savonlinna, 335 kilometers northeast of Helsinki, Russians bought 15 percent of all properties sold last year, according to the National Land Survey of Finland.
“I’m up to my neck in work now,” said Tatyana Ivanova, 37, who started a business in Imatra, in southeastern Finland, scouting for cottages and acting as an intermediary between Finnish real estate agents and Russian buyers. “Business has soared from absolutely no demand five years ago.”
Down the road in Taipalsaari, near the border, Mayor Jari Willman says the influx of Russians is a tricky business.
“The price level has gone up,” Willman said. And because the homes are only used in the summer, “the houses stay dark, snow isn’t plowed and the town gains no economic benefit.”
But in Imatra, St. Petersburg construction company owner Valery Kutakov relaxed on the lawn of his new cottage and said he couldn’t be happier.
“Finland’s so clean and safe,” said Kutakov, 52, as he looked at the pale green wooden house he had just renovated for his family. “Finns are law-abiding, and there is little crime.”

TITLE: Oil Firms Expected To Rally
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russian oil companies may rally after the Energy Ministry proposed to cut taxes for the industry, UniCredit Aton said.
The ministry is preparing a proposal to raise the threshold at which extraction taxes take effect to $25 a barrel from $15 a barrel starting in 2010, Deputy Energy Minister Stanislav Svetlitsky said on Friday, according to the Interfax news service. 
“The changes should provide strong support to the cash flows of Russian oil companies, even as the oil price rally subsides,” Moscow-based UniCredit analysts Artem Konchin and Pavel Sorokin wrote in an e-mailed note to investors on Monday.
Combined with other changes such as tax holidays for new regions, the change may help save Russian oil companies ($16 billion) a year, according the Energy Ministry’s press service. Svetlitsky also said the ministry will propose increasing export duties on heavy oil products and lowering them on light products, according to the Prime-Tass news service.
“We estimate the positive impact on valuations from refining tax changes to vary from 11 percent to 22 percent for best integrated oil names operating in Russia, while the proposed changes in the Mineral Production Tax formula would add another 9 percent to 11 percent to our current target prices,” UniCredit said.

TITLE: Central Bank Acts to Stem Ruble Freefall
PUBLISHER: Combined Reports
TEXT: MOSCOW — The ruble recovered on Friday from a historic trough after the Central Bank said it would not allow the currency’s trading band to widen, adding further weight to its market interventions.
Over the past month, investors have fled Russia, spooked by disputes over BP’s Russian venture TNK-BP and a government attack on coal miner Mechel as well as the military conflict with Georgia and the subsequent souring of relations with the West.
Dealers estimate that the Central Bank sold about $5 billion Thursday and Friday to prop up the ruble, and authorities hammered the message home verbally.
“We are not planning to further widen the boundaries of the corridor in the next few months. For now it suits us,” Alexei Ulyukayev, Central Bank first deputy chairman, told reporters at a banking conference in Sochi, adding that the ruble’s recent selloff was “not critical.”
The comments sent the ruble to 30.32 against its basket of 55 cents and 45 euro cents, off Thursday’s historic low of 30.41. That was the weakest level since the basket’s current composition was set 1 1/2 years ago, and also the boundary at which the Central Bank intervened.
The Central Bank has so far not allowed the ruble to strengthen beyond 29.26 to the basket, or to weaken beyond 30.41, although it does not disclose its focus corridor.
“[Ulyukayev’s] statement together with actual interventions suggest that the Central Bank is drawing a line ... and this may provide support for the basket in the near-term,” UniCredit Aton analysts said in a research note.
Total currency trading volumes reached a record $8.5 billion on Thursday, compared with average daily trading of about $3 billion to $4 billion, said Denis Uvchukhov, a currency trader at UralSib. At least half of the volume may have been nonresidents pulling money out of the market, he said.
“Interventions will probably continue for some time, given the situations in the global and domestic markets,” Uvchukhov said. “We’re seeing an active strengthening of the dollar in the global markets and continued withdrawal of money from the Russian market.” 
Ulyukayev estimated that Russia had net capital outflows of around $4.6 billion in August and that it would see zero inflows this month. Analysts’ outflows forecasts are higher.
Sergei Ignatyev, chairman of the Central Bank, said Friday during a meeting with Prime Minister Vladimir Putin that the outflow in August “wasn’t large, and I believe it didn’t affect the macroeconomic situation very much,” according to a transcript posted on the government’s web site. 
The Central Bank bought the equivalent of $100 billion in the first eight months of 2008 to manage the ruble, Ulyukayev said. And with $582.5 billion of foreign exchange and gold reserves as of Sept. 1, it has ample ammunition to support the ruble.
The big reserves mean “there is no risk of any currency crisis in Russia, and the Central Bank will do everything to preserve stability,” Kremlin economic aide Arkady Dvorkovich said Friday at an economics conference in Cernobbio, Italy.
“We do not expect any difficulties, even with the substantial capital outflow we’ve had over the last few weeks.” 
(Reuters, Bloomberg)

TITLE: Fannie, Freddie Rescue Boosts Confidence
AUTHOR: By Denis Maternovsky
PUBLISHER: Bloomberg
TEXT: MOSCOW — The cost of protecting Russian government bonds from default fell on Monday after the U.S. Treasury’s takeover of Fannie Mae and Freddie Mac boosted investor confidence the global credit crisis may ease.
Credit-default swaps on Russian debt fell from the highest since November 2004, dropping 22 basis points to 143, according to CMA Datavision in London. Contracts on Moscow-based Gazprom, the country’s biggest company and the world’s largest natural gas producer, fell 28 to 279.
Russian default risk surged last week when the central bank was forced to shore up the ruble after withdrawals by investors sent the currency to its lowest level in almost a year. The invasion of Georgia last month prompted investors to pull out a net $4.6 billion, contributing to the worst quarterly slump in stocks since the government’s debt default a decade ago.
“If the change in investor perception of risk spreads to the Russian market, we’ll soon see a significant rebound,” Vladimir Bragin, an analyst with Trust Bank in Moscow, wrote in a research note on Monday.
The cost of default protection fell around the world as the takeover of Fannie and Freddie, the largest providers of American mortgages, boosted investor confidence that major financial companies won’t be allowed to fail. Contracts on the Markit CDX North America Investment Grade index of 125 companies in the U.S. and Canada dropped 13 basis points to 132 in New York, according to broker Phoenix Partners Group.
The ruble snapped seven days of declines against the dollar, climbing to 25.4366 by 4:08 p.m. Monday in Moscow, from 25.4818 at the end of last week. It rose for a second day versus the euro.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company’s ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. An increase indicates a deterioration in the perception of credit quality; a decline, the opposite.
A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

TITLE: Georgian Inflation Accelerates Following Conflict
PUBLISHER: Bloomberg
TEXT: TBILISI, Georgia — Georgian inflation accelerated to 12.8 percent in August, the fastest pace in two years, after a conflict with Russia disrupted supplies and forced tens of thousands of people to abandon their homes. 
The inflation rate increased from an annual 9.8 percent in July, the central bank reported on its web site Friday. Consumer prices rose 3.4 percent from the month before, central bank spokesman Giorgi Kalandadze said. 
The U.S. on Wednesday pledged $1 billion for Georgian reconstruction and humanitarian aid. The International Monetary Fund agreed to lend Georgia $750 million to help it replenish its foreign currency reserves after the conflict. 
The economy suffered more than $1 billion in damage during the war, Prime Minister Lado Gurgenidze said. Growth is likely to slow in the second half to 5 percent or 6 percent and the country is “still hoping to see single-digit inflation,’’ said David Owen, head of the IMF delegation that visited Georgia this month. “Things are getting back to normal quite quickly and the national bank is strongly committed to achieve its target of 8 percent’’ inflation, Owen said.

TITLE: Cheney Thwarted in Quest for Support Over Nabucco
PUBLISHER: Bloomberg
TEXT: MOSCOW — U.S. Vice President Dick Cheney has failed to win Azerbaijan’s support for the construction of a new gas pipeline from the Caspian that would bypass Russia. 
Azeri President Ilham Aliyev indicated to Cheney during talks in Baku on Wednesday that he did not want to anger Russia in the wake of its invasion of neighboring Georgia, Kommersant reported, citing an official in Aliyev’s administration. Cheney was so disappointed that he did not attend an official dinner in his honor, the report said. 
Azerbaijan has also increased flows of oil through a pipeline to the Black Sea port of Novorossiisk, the newspaper reported, citing a Russian energy official. 
Azerbaijan is the starting point for the flow of Caspian oil and gas westward to Europe, bypassing Russia. The planned Nabucco pipeline, backed by the European Union, will bring gas from the Caspian region via Turkey to Austria and Western Europe by 2013. 
BP’s Baku-Tbilisi-Ceyhan pipeline can carry as much as 1 million barrels of Azeri crude a day through Georgia to Turkey’s Mediterranean coast. Another BP-led pipeline, the Baku-Supsa, moves crude from Azerbaijan to Georgia’s Black Sea coast. 
Kazakhstan, the holder of 3.2 percent of the world’s oil, is currently in talks with Azerbaijan and Georgia about the possible construction of a pipeline to send its oil across the Caspian Sea to the Black Sea port of Batumi, Timur Kulibayev, head of Kazenergy Association, said Friday. 
The new pipeline from Baku to Batumi, an oil terminal in which KazMunaiGaz has bought a stake, may carry 10 million tons of crude per year, said Kulibayev, who the Astana-based private association, which includes Chevron and BG Group as members. If Kazakhstan does not get access to Baku-Supsa, a new pipeline can be built “quite fast,” he said.

TITLE: Independent at Last
AUTHOR: By Ludwig Chibirov
TEXT: Aug. 26 was a day of historic importance for our people. On this day, all South Ossetians sat glued to their television sets and listened as President Dmitry Medvedev announced that he had signed a decree recognizing the independence of South Ossetia and Abkhazia. 
I am not overly sentimental by nature, but nothing has ever affected me the way those tumultuous days in August did. And I am not alone in these emotions. Everyone in South Ossetia is jubilant. 
Under the spell of these feelings, and reflecting upon the history of the Ossetian people’s centuries-old, painful struggle for independence, I asked myself: What is the reason for this truly historic victory? The answer can be found in one word — Russia. Our Russian friends have always come to our aid at critical moments, helping whenever and wherever it was needed.
All Ossetians, but especially the South Ossetians, have long dreamed of walking down a single road together with Russia. 
A simple man named Gedevan Gagloyev lived in the South Ossetian village of Vanel. He, like thousands of others, dreamed of seeing this road completed one day. Before his death, Gedevan called three of his sons to his side and made a unique request. “You can see that I won’t live to witness the completion of the road,” he said. “But I believe that it will be finished one day. And when that happens, come to my grave and yell out loudly, ‘Gedevan! The road has finally been built!’”
By the completion of the road, Gedevan meant the unification of the Ossetian people. His dream has come true. The road has been built, and the Ossetian people are unified at last. 
August 2008 will enter the annals of South Ossetian history as a month of epochal importance. For the first time in their history, Ossetians living beyond the Caucasus ridge gained their independence, giving official status to the Republic of South Ossetia. All of that has become a reality exclusively due to the efforts and decisive actions of Medvedev. Russia astounded the world with its magnificent military operations to repel Georgia’s aggression. 
Aug. 26 marked not only the independence of South Ossetia and Abkhazia, but it also gave birth to a more powerful Russia. The country went through a painful and debilitating transitional period under the two leaders who destroyed the Soviet Union — Mikhail Gorbachev and Boris Yeltsin — but it has become a new and more powerful nation thanks to then-President Vladimir Putin and now Medvedev. It was precisely Russia’s decision to project its power and take decisive action against Georgia that averted a greater tragedy in South Ossetia. 
During those August days, I met with many foreign journalists who knew in advance that Medvedev was planning to recognize the sovereignty of Abkhazia and South Ossetia. Their first questions were always, “What will you ask for — to join Russia or to be independent? Is Russia planning to reinstate the former Soviet borders?”
The unification of North and South Ossetia has been our eternal dream, and this is perfectly understandable. It is natural that people who are separated seek unification with their relatives and friends. This is especially true of the Ossetians, who are a single people in the fullest sense, sharing a common language, customs, holidays, kinship, contiguous territory and spiritual values. 
And I cannot restrain myself from saying how my heart overflows with happiness when I consider how Russia showed so much sincere empathy for the pain and suffering of the Ossetian people in this crisis. Humanitarian aid has been coming in from all over Russia. Moreover, South Ossetian refugees who fled the war zone have been received with sincere compassion and warmth in Dagestan, Krasnodar, Kabardino-Balkaria and other regions. 
We are also very pleased to see that Tskhinvali has been transformed into a huge construction site and that selfless people from all over Russia have come to help rebuild the city. This support will never be forgotten. Ossetia is eternally grateful to all those who responded to our distress. It warms the soul to see how the Russian nation and people have embraced us, and how they have greatly mitigated the wounds of war.
After violence devastated South Ossetia in the late 1980s and early 1990s, more than 25,000 people fled their homes and became refugees all over the southern Caucasus. Of those, many never returned to their ancestral home. The Georgian conflict in August resulted in even more refugees. But after Russia’s victory in the war against Georgia, it is clear that only Moscow can guarantee our safety. Refugees by the thousands can now return to their homes and believe in a future without war.

Ludwig Chibirov served as the first president of South Ossetia from 1993 to 2001.

TITLE: Overplaying the ‘Blame America’ Card
AUTHOR: By Alexei Bayer
TEXT: Last month’s blitzkrieg against Georgia unleashed a stunning wave of anti-Americanism in Russia. Russians obviously like to think that their country not only roughed up a small, poor neighbor but, more important, dealt a blow to U.S. efforts to encircle Russia with military bases. Superpower rivalry is back and, by extension, Russia is once more a superpower.
What is happening in Russia may indeed be Washington’s fault, but not in the way Russians believe. Back in the early 1990s, when U.S. President George H.W. Bush declared an end of the Cold War and proclaimed a “new world order,” many people hoped that the international system would henceforth be based on the Western principles of democracy, freedom, decency, international cooperation and the rule of law.
Indeed, over the past two decades the world has enjoyed a broadly based economic success. Many long-emerging economies have finally emerged, millions of people have been able to escape poverty, and many previously poor nations, including Russia and China, have become bankers to the world.
But the political picture has been far less bright. Over the past eight years — and especially since Sept.11, 2001 — the United States has been increasingly flouting the very principles it encouraged the world to adapt. As Russia slid toward authoritarianism under President Vladimir Putin, the United States under President George W. Bush effectively squandered its moral authority to judge other nations.
How can Washington criticize abolition of gubernatorial elections in Russia if the U.S. president was himself appointed by the Supreme Court? Or complain about human rights abuses when it kidnaps, tortures and indefinitely holds terror suspects in legal limbo? Or encourage Russia to open up if it is building a 3,200-kilometer fence on its Mexican border?
U.S. officials can declare that actions such as the Russian invasion of Georgia have no place in the 21st century only if they forget their own unprovoked attack on Iraq. And, of course, Russia’s recognition of breakaway South Ossetia and Abkhazia bring to mind the U.S.-inspired recognition of Kosovo.
An ascendant, angry and anti-U.S. Russia is likely to be a major headache for the next U.S. president, whoever he is. Perhaps when Republican candidate John McCain solemnly declared in August that “we’re now all Georgians,” he meant that the world would have to deal with George Bush’s disastrous legacy for a long time to come.
But blaming the United States can also be overdone. It is, after all, Russia’s future that is at stake. Russia may be overly reliant on oil and gas exports and its wealth extremely top-heavy, but the country is enjoying the kind of prosperity that was never seen under communism. Its free enterprise is flourishing and its economy is vibrant, with most people able to afford a variety of goods and services that only the elites could get access to in Soviet times. Similarly, Russia may no longer be as free as a decade ago, but its citizens can still travel, access information, express their opinions and practice whatever religion they choose. 
None of this came about by happenstance. It was the result of the country opening to the world after the Soviet collapse and its desire to adopt Western values. Conversely, whenever in its history Russia chose to isolate itself, it invariably suffered poverty, oppression and, worse, bloody state terror. 
The current burst of jingoism has already shown an ominous side. On state television, the “liberal intelligentsia” has been excoriated as unpatriotic and pro-Western — the fifth column in a looming struggle with foreign enemies.
Mark Twain remarked that history may not repeat itself, but it rhymes a lot. If so, recent events in Russia are starting to rhyme with some of the worst pages of the country’s history.

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

TITLE: Serena Back On Top After US Open Win
PUBLISHER: The Associated Press
TEXT: NEW YORK — On playing the very first point of the match, Serena Williams hit a backhand so hard that her earring flew off.
It turns out she was just getting warmed up.
Williams kept pounding away, her shots and shouts getting louder with every stroke. And when she finished off Jelena Jankovic 6-4, 7-5 Sunday night for the U.S. Open championship and a ninth Grand Slam title, Williams really went wild.
She flung her racket high into the sky, hollering and hopping in a celebration that even she thought might’ve been over the top.
“I’m sorry I got so excited,” she told Jankovic when they met at the net.
Williams’ father, Richard, jumped to his feet after the final point. He didn’t seem to expect his daughter to do the same.
“I never knew Serena to be very, very excited. I knew Serena to be very, very mean,” he said after it was over. “I describe her as being a combination of a pit bull dog, a young Mike Tyson and an alligator.”
The fourth-seeded Williams beat sister Venus in the quarterfinals and barreled through this tournament without losing a set. This win did more than earn Serena her third silver trophy at Flushing Meadows—it assured she will return to No. 1 in the rankings for the first time since August 2003, the longest gap at the top for a woman.
Pretty good for someone whose ranking once plummeted to No. 139.
“It’s been so long,” she said.
Given the way Roger Federer has played lately, it seems like it’s been a while since he’s been on top, too.
Federer was due to try for his first Grand Slam win this season — and fifth straight U.S. Open championship — on Monday against Andy Murray, who beat No. 1 Rafael Nadal 6-2, 7-6 (5), 4-6, 6-4 on Sunday in the completion of a match interrupted by rain.
Monday’s delayed final was played in the early hours of Tuesday morning in Russia after The St. Petersburg Times went to press.
The second-seeded Federer was set to aim for his 13th major title, which would put him one shy of Pete Sampras’ record. Murray, was hoping to become the first British man to win a major tennis title since Fred Perry at the 1936 U.S. Open, is making his first appearance in a Grand Slam final.
“He’s got loads of experience in these situations, and it’s something new for me,” Murray said on Sunday. “I know I’m going to have to play great to have a chance of winning, but I’ve played well the last couple of weeks.”
Plus this: Murray is 2-1 lifetime against Federer.
Williams calmed down in time for the on-court trophy presentation, and smiled when she received the winner’s check for $1.5 million. Still full of personality, Jankovic wondered aloud, “How much did I get?”
Jankovic earned $750,000 for her first showing in a Grand Slam final.
This was the 13th straight time that the women’s championship at the U.S. Open was decided in straight sets. The second-seeded Jankovic certainly had her chances — up 5-3 in the second set, she led 40-0 with Williams serving.
“I felt I had her. I had her, because she was really tired at the end of the second set,” Jankovic said. “Who knows what would have happened if I had got into a third set? I probably would have had the upper hand. But who knows?”
Jankovic won over fans with more than her determined play and her penchant for doing the splits to reach shots. She’s a crowd favorite, often talking to people in the stands and frequently watching herself on the giant video boards high above Arthur Ashe Stadium.
At one point, she saw herself on the screen and promptly fixed her hair.
“They should turn it off, because I keep looking,” she said. “You see your big face up there and you can’t help but look up.”
Venus Williams got ample air time, too. Sitting in the guest box, she cheered on the sister she teamed up with to win the Olympics doubles title.
Serena Williams won her first Grand Slam championship since the 2007 Australian Open, and took over the No. 1 ranking Jankovic held last month for exactly one week.
“I feel so young and I feel so energized,” Williams said. “Sometimes, I’d wake up at 6 in the morning to go practice and it was too dark.”
Williams and Jankovic originally were scheduled to play Saturday night, but rain from Tropical Storm Hanna delayed their match.
The sixth-seeded Murray beat Nadal in the first two sets and was down 3-2 in the third when they were postponed Saturday afternoon.

TITLE: New Pakistani President Faces Trouble
PUBLISHER: Reuters
TEXT: ISLAMABAD — With Pakistan’s economy tanking and a Taliban insurgency raging, new president Asif Ali Zardari must decide if the time is right to risk more instability by entering a confrontation with old rival Nawaz Sharif.
A new power struggle is about the last thing the West would want in a nuclear-armed Muslim state whose backing is central to defeating al-Qaeda and helping NATO stabilize Afghanistan.
Zardari and Sharif formed a coalition this year aimed at booting former army chief Pervez Musharraf out of the presidency, but after accomplishing that last month, their alliance collapsed and Sharif became leader of the opposition.
Sharif held the premiership twice in the 1990s, as did Zardari’s late wife, Benazir Bhutto, when their rivalry undermined democracy to a point that many people welcomed Musharraf’s coup in 1999.
Analysts fear vendettas from the past could haunt Pakistan.
If Zardari and others “have revenge in mind, then the game is lost before it is begun”, concluded Ardeshir Cowasjee, one of Pakistan’s most venerable columnists, in the Dawn newspaper on Sunday, a day after Zardari’s election.
International lenders won’t like giving billions of dollars to keep Pakistan afloat if they fear political battles will divert the government from putting finances in order.
“We don’t care who becomes the president,” Muhammad Hafiz, 70, told Reuters as he walked past a rally of celebrating Zardari supporters in the southern city of Hyderabad.
“What we care about is security problems, and rising prices.”
Inflation is running at nearly 25 percent, and government borrowing needs to be cut drastically.
Authorities have imposed limits to prevent a freefall in a stock market that has plunged 40 percent since peaking in April, the rupee is at all-time lows, and foreign currency reserves are so low, with $5.5 billion in central bank coffers, that the international bond market has priced in a possible default.
Ahsan Chishti, head of international institutional sales at Karachi-based brokerage house BMA Capital Ltd., saw a chance of better decision-making, with a president and a prime minister from the same party, but the right steps had to be taken quickly.
“Broader challenges will have to be subverted without delay for any sustainable market recovery,” Chishti said.
The margin of Zardari’s victory in Saturday’s vote by lawmakers from the upper and lower houses of parliament and four provincial assemblies should afford him some sense of security.
But analysts say Zardari needs a drastic image make-over.

TITLE: Hamilton Penalized for Maneuver
AUTHOR: By Alan Baldwin
PUBLISHER: Reuters
TEXT: SPA-FRANCORCHAMPS, Belgium — Formula One faced familiar accusations of shooting itself in the foot on Monday after McLaren’s Lewis Hamilton was stripped of a sensational Belgian Grand Prix win.
“This is the worst judgement in the history of F1,” fulminated former champion and television commentator Niki Lauda after race stewards handed McLaren’s championship leader a retrospective 25-second penalty that dropped him to third place.
“It’s absolutely unacceptable when three (stewards) influence the championship like this,” the Austrian told German reporters.
After a processional European Grand Prix in Valencia, and against a backdrop of concern about the lack of thrills and overtaking, Hamilton’s winner-takes-all duel with Ferrari’s Kimi Raikkonen in Spa had given the sport exactly what it wanted.
The fans left hailing a stirring Hamilton victory only to find out hours later that Ferrari’s Felipe Massa was the victor.
Britain’s tabloid newspapers bellowed an entirely predictable chorus of outrage, after what had been hailed as one of the greatest wins of the 23-year-old Briton’s career.
“Just when you thought F1 couldn’t get any more ridiculous..,” declared the Daily Mail in a back page headline.
“Instead of celebrating one of the greatest duels of recent times, revelling in true genius by Raikkonen and Hamilton and lauding a remarkable win, that same old stench emanated from Formula One,” said the Daily Mirror in a race report.
Hamilton was penalised after he cut the chicane in the heat of battle with Raikkonen and emerged ahead of the Finn. 
Although he let the Ferrari regain the lead on the straight, he then immediately emerged from its slipstream to overtake.
Raikkonen was struggling in the wet and Hamilton would undoubtedly have passed him further down the road had he waited longer, but stewards ruled nonetheless that he had gained an advantage in that incident.
McLaren have said they intend to appeal but whether or not they can do so remains to be decided by the governing International Automobile Federation (FIA) with a date yet to be set for any hearing.
That will mean Hamilton heading to Monza next weekend for Ferrari’s home grand prix, and the last race in Europe this year, with only a two-point lead over the Italian team’s Brazilian Massa.

TITLE: Ike Strikes In Wake Of Storms Gustav, Hanna
PUBLISHER: Reuters
TEXT: HAVANA — Hurricane Ike weakened into a Category 2 storm on Monday after roaring ashore in northeastern Cuba, but forecasters say it could regain intensity as it spins toward the U.S. oil hub in the Gulf of Mexico and possibly New Orleans.
Ike pounded northeastern Cuba with 165 kilometer-per-hour winds, torrential rains and massive waves, and it could slow further to a Category 1 storm on the five-step Saffir-Simpson intensity scale as it runs the 1,125 km island, the U.S. National Hurricane Center said.
Cuba’s state-run television showed angry waves slamming into the sea wall and surging as high as nearby five-story apartment buildings before flooding the streets of the city of Baracoa near the eastern tip of the communist-ruled island.
While a dangerous Category 3 storm, Ike had ripped through the southern Bahamas and added to the misery and death toll in storm-battered Haiti. Officials said at least 61 people had died in floods in impoverished Haiti on top of 500 killed last week by Tropical Storm Hanna.
The Cuban Meteorology Institute said the storm crashed into the coast near Punta Lucrecia in the state of Holguin, about 823 km southeast of Havana.
“There is lot of worry, windows are beginning to break,” a woman named Carmela said by telephone from the hotel where she works in the city of Holguin, 50 km from Punta Lucrecia. “There’s a lot of water, it’s raining very heavily.”
Officials said at least 1.1 million people were evacuated ahead of a storm expected to slash through the heart of Cuba, which is still reeling from Hurricane Gustav’s hard hit on the west side of the long, narrow island last week.
After traversing Cuba, Ike could regain Category 3 strength over the warm Gulf of Mexico waters and threaten the 4,000 platforms that produce 25 percent of U.S. oil and 15 percent of its natural gas, and point toward Louisiana and Texas.
Oil jumped $1.50 to above $107 a barrel on Monday on worries that Ike would tear through the Gulf and while traders awaited OPEC’s decision this week on output policy.
Ike may threaten New Orleans, the city swamped in 2005 by Hurricane Katrina, which killed 1,500 people and caused $80 billion in damage on the U.S. Gulf Coast. Gustav narrowly missed New Orleans last Monday.
As Ike roared through the Caribbean, residents of the Florida Keys, a 177-km island chain connected by bridges with only one road out, were told to evacuate as a precaution.
Ike ripped off roofs and knocked over trees and power lines as it passed over Great Inagua, the Bahamas’ southernmost island and Britain’s Turks and Caicos islands. No deaths were reported.
It hit Turks and Caicos as a Category 4 storm with 215 kph winds, damaging 80 percent of the houses on Grand Turk, home to about 2,500 of the islands’ 22,000 residents, government spokesman Courtney Robinson said.
Ike dumped more heavy rain on Haiti, where officials said 57 of the 61 victims on Sunday died in Cabaret, a town north of the capital, Port-au-Prince.
“The whole village is flooded,” civil protection official Moise Jean-Pierre said. “The death toll could go higher.”

TITLE: Bold Atomic Testing To Begin in Geneva
AUTHOR: By Alexander G. Higgins
PUBLISHER: The Associated Press
TEXT: GENEVA — It has been called an Alice in Wonderland investigation into the makeup of the universe — or dangerous tampering with nature that could spell doomsday.
Whatever the case, the most powerful atom-smasher ever built comes online Wednesday, eagerly anticipated by scientists worldwide who have awaited this moment for two decades.
The multibillion-dollar Large Hadron Collider will explore the tiniest particles and come ever closer to re-enacting the big bang, the theory that a colossal explosion created the universe.
The machine at CERN, the European Organization for Nuclear Research, promises scientists a closer look at the makeup of matter, filling in gaps in knowledge or possibly reshaping theories.
The first beams of protons will be fired around the 17-mile tunnel to test the controlling strength of the world’s largest superconducting magnets. It will still be about a month before beams traveling in opposite directions are brought together in collisions that some skeptics fear could create micro “black holes” and endanger the planet.
The project has attracted researchers of 80 nationalities, some 1,200 of them from the United States, which contributed $531 million of the project’s price tag of nearly $4 billion.
“This only happens once a generation,” said Katie Yurkewicz, spokeswoman for the U.S. contingent at the CERN project. “People are certainly very excited.”
The collider at Fermilab outside Chicago could beat CERN to some discoveries, but the Geneva equipment, generating seven times more energy than Fermilab, will give it big advantages.
The CERN collider is designed to push the proton beam close to the speed of light, whizzing 11,000 times a second around the tunnel 150 to 500 feet under the bucolic countryside on the French-Swiss border.
Once the beam is successfully fired counterclockwise, a clockwise test will follow. Then the scientists will aim the beams at each other so that protons collide, shattering into fragments and releasing energy under the gaze of detectors filling cathedral-sized caverns at points along the tunnel.
CERN dismisses the risk of micro black holes, subatomic versions of collapsed stars whose gravity is so strong they can suck in planets and other stars.
But the skeptics have filed suit in U.S. District Court in Hawaii and in the European Court of Human Rights to stop the project. They unsuccessfully mounted a similar action in 1999 to block the Relativistic Heavy Ion Collider at the Brookhaven National Laboratory in New York state.
CERN’s collider has been under construction since 2003, financed mostly by its 20 European member states. The United States and Japan are major contributors with observer status in CERN.
Scientists started colliding subatomic particles decades ago. As the machines grew more powerful, the experiments revealed that protons and neutrons — previously thought to be the smallest components of an atom — were made of still smaller quarks and gluons.
CERN hopes to recreate conditions in the laboratory a split-second after the big bang, teaching them more about “dark matter,” antimatter and possibly hidden dimensions of space and time.
Meanwhile, scientists have found innovative ways to explain the concept in layman’s terms.
The team working on one of the four major installations in the tunnel — the ALICE, or “A Large Ion Collider Experiment” — produced a comic book featuring Carlo the physicist and a girl called Alice to explain the machine’s investigation of matter a split second after the Big Bang.
“We create mini Big Bangs by bumping two nuclei into each other,” Carlo explains to Alice, who has just followed a rabbit down one of the hole-like shafts at CERN.

TITLE: 2 Russian Sumo Wrestlers Banned
PUBLISHER: The Associated Press
TEXT: TOKYO — Two popular Russian sumo wrestlers were slapped with lifetime bans from Japan’s ancient national sport for allegedly using marijuana, and the head of the Japan Sumo Association resigned Monday to take responsibility for the scandal.
The wrestlers, brothers Roho and Hakurozan, tested positive for the drug when the sport conducted its first drug tests following the arrest last month of another Russian wrestler, Wakanoho, for marijuana possession.
Roho, whose real name was listed by the association as Boradzov Soslan Feliksovich, is in sumo’s top division, while Hakurozan — who was listed as Baradzov Batraz Feliksovich — is in the next-highest tier.
The scandal has rocked the sumo world, which has its roots in religious ritual and tends to hold its athletes and officials to high moral standards. Marijuana possession is considered a serious offense in Japan, and the scandal has been front-page news.
The punishment was handed out at an emergency meeting of top sumo officials Monday, according to the Japan Sumo Association.
Kitanoumi, the association’s chairman and Hakurozan’s mentor, also told the meeting that he would resign to take responsibility. Kitanoumi is a former grand champion wrestler who is considered by many to have been one of the best ever.
Kitanoumi will be replaced by another former wrestler, Musashigawa.
Sumo wrestlers in Japan are usually known by a single fighting name.
Sumo’s current crisis began last month with the arrest and subsequent lifetime ban on Wakanoho, whom police said had a small amount of marijuana in his wallet. Wakanoho, whose real name is listed by the sumo association as Soslan Aleksandrovich Gagloev, was the first wrestler ever to be ejected from sumo for drug use.
The association then held tests on all 69 of its top two division wrestlers and found Roho and Hakurozan had tested positive for the drug.
A second test was done by a Japanese laboratory internationally certified to conduct doping tests. Results released Friday showed the two consumed the drug in amounts far beyond what could be inhaled from secondhand smoke, sumo association spokesman Yuichi Ida said.
Roho and Hakurozan have repeatedly denied using the drug.
Police have questioned the two wrestlers and searched their rooms. It was not immediately clear if any further legal action would be taken. Unlike possessing or selling the drug, it is not illegal to be found to have used it.

TITLE: In Brief
TEXT: <b>Was Jumper Drunk?</b>
LAUSANNE, Switzerland (AP) — Track and field’s ruling body wants Ivan Ukhov to explain his conduct at the Athletissima meet in which rival high jumpers said the Russian had been drinking vodka and Red Bull during the competition.
Ukhov failed with each attempt to clear the bar Tuesday before being asked to stop competing at the Swiss meet.
Meet organizers refused to pay Ukhov’s expenses and have been asked to supply video evidence to the International Association of Athletics Federations.
“We will for sure ask for an explanation from the athlete about his behavior and ask that it is not repeated in the future,” IAAF spokesman Nick Davies said in a statement, reported on Friday.
Alcohol is not classed as a performance-enhancing substance and is not formally prohibited in athletics competition.

<b>Khan KO’d in Seconds</b>
MANCHESTER, England (AP)—British lightweight hope Amir Khan suffered the first loss of his professional career when he was knocked out in 54 seconds by Breidis Prescott of Colombia at MEN Arena on Saturday night.
Khan was knocked down twice by left hooks, the second time for good.
He won the silver medal at the 2004 Olympics, and attracted high hopes of a title shot next year as he fashioned an 18-0 record in pro fights. But Prescott put those plans in disarray and improved his own undefeated record to 20-0 with 18 KOs.
On the undercard, Alex Arthur of Scotland lost the WBO super-featherweight title to Nicky Cook of England by unanimous decision, and British heavyweight Audley Harrison continued to struggle in his comeback with an unimpressive 10-round decision over George Arias of Brazil that was booed by the crowd.

<b>Tri-Nations Decider</b>
SYDNEY (Reuters) — New Zealand are bracing themselves for a torrid encounter against an Australia team desperate to restore their battered pride in Saturday’s Tri-Nations title decider.
New Zealand go into the rugby match as favorites after the Australians were thrashed 53-8 in their last game with South Africa but their players remain wary of a Wallaby backlash.
“From our point of view, that makes them pretty dangerous,” New Zealand flyhalf Stephen Donald told reporters in Brisbane on Monday.

<b>Best Cricketer Shortlist</b>
NEW DELHI (Reuters) — West Indies batsman Shivnarine Chanderpaul, Sri Lanka skipper Mahela Jayawardene and South African speedster Dale Steyn head the shortlist for this year’s International Cricket Council (ICC) awards announced on Monday.
The trio are in the running for the Cricketer of the Year and Test Player of the Year awards, which will be presented at a function in Dubai on Wednesday. 
Chanderpaul topped the test and one-day averages over the year since last August while Steyn captured 86 wickets in 14 tests at home, in India and England.

TITLE: ‘I am Agent of Change’ Says McCain, Palin Draws Crowds
PUBLISHER: Reuters
TEXT: ALBUQUERQUE, New Mexico — Republican nominee John McCain said in an interview aired on Sunday he would bring Democrats into his Cabinet and administration as part of his attempt to change the political atmosphere in Washington.
“I don’t know how many, but I can tell you, with all due respect to previous administrations, it is not going to be a single, ‘Well, we have a Democrat now,”’ McCain said on CBS’ “Face the Nation.”
“It’s going to be the best people in America, the smartest people in America,” he said in an interview taped on Saturday.
Both McCain and Barack Obama, his Democratic rival in the Nov. 4 presidential election, are claiming to be the agent of change needed to fix problems in Washington.
Obama has been running on the change theme for more than a year and a half while McCain, a four-term Arizona senator, has come it to it more recently after mostly campaigning on his experience.
Obama, in an interview also taped earlier and televised on Sunday on ABC’s “This Week,” said McCain spoke of reducing the rancor in Washington but the Republican convention that nominated him last week was a highly partisan affair.
“How you campaign I think foreshadows how you’re going to govern,” the first-term Illinois senator said.
With 58 days to go until the election, the two candidates took a rare day off on Sunday before plunging back into the fray.
Since he accepted the presidential nomination at his party’s convention Thursday, McCain had been campaigning with his choice for vice president, Alaska Governor Sarah Palin, and attracting enthusiastic crowds.

TITLE: Paralympics Off To Flying Start in China
PUBLISHER: The Associated Press
TEXT: BEIJING — Natalie Du Toit won the 100-meter butterfly gold medal at the Beijing Paralympics on Sunday, less than three weeks after her open-water Olympic swim in which she finished 16th in a race beset by problems.
The South African, who won five golds and a silver in the Athens Paralympics, finished in 1 minute, 6.74 seconds—a world record for her disability class.
A swimmer with Olympic promise, Du Toit lost her left leg above the knee in a 2001 motorcycle crash. She qualified for the Beijing Olympics in the 10-kilometer swim, a race in which her cap came off as she brushed the buoy on the first turn. Du Toit struggled the rest of the way with hair in her eyes, stopping at times to fix the cap.
“It’s been a bit of a rough ride from before the Olympics until now,” Du Toit said. “It’s awesome. Finally I’m swimming a bit faster, which is great.”
Du Toit will try for five golds in Beijing.
“Hopefully I’ll come back with five,” she said. “But there are going to be one or two races that are tight.”
Sixteen gold medals in swimming were up for grabs Sunday in the Paralympics, with 11 others awarded in shooting, judo and cycling.
The United States won four gold medals in swimming on the opening day, the most of any country. The winners were: Erin Popovich, Rudy Garcia-Tolson, Miranda Uhl and Jessica Long.
Veronika Vadovicova of Slovakia won the first gold medal of the Paralympics, taking the women’s 10-meter air rifle (standing position) early in the day. Manuela Schmermund of Germany won the silver and Nilda Gomez Lopez of Puerto Rico the bronze.
Britain won the first medal in cycling with gold for Simon Richardson in the 1-kilometer time trial. Masaki Fujita of Japan was second and defending Paralympic champion Greg Ball of Australia was third.
China won two of the four gold medals in judo with victories by Guo Huaping (women’s 48 kilograms) and Cui Na (women’s 52 kilos).
The Paralympic Games opened on Saturday with a burst of fireworks as China welcomed another chance to cement its role as a global player to an international audience.
Thousands of cheerleaders and dancers in puffy, rainbow-colored suits performed a dance routine in the center of the field at the National Stadium before athletes from 148 countries were introduced. The crowd cheered and waved flags as China’s Communist Party leaders and foreign dignitaries looked on.
The guest list included Iranian President Mahmoud Ahmadinejad, German President Horst Koehler and South Korean Prime Minister Han Seung-soo.
Earlier Saturday, they shook hands and posed for photos with Chinese President Hu Jintao at the Great Hall of the People, the seat of China’s legislature in the heart of Beijing. Hu gave a brief speech and toasted the games.
“Caring for the disabled is an important symbol for social civilization and progress,” Hu said before raising his glass.
“China’s people and government have always attached great importance to the cause of the disabled,” he said in remarks televised on state television. “We insist on putting people first, carrying forward a humanitarian spirit and advocating equality and opposing discrimination.”
Opening just two weeks after the Beijing Olympics ended, the Paralympics are designed to be a parallel games for athletes with a wide range of physical disabilities. The 10-day competition begins Sunday.
Some 4,000-plus athletes will use many of the same Olympic venues, with 148 countries represented and 472 medal events contested—170 more than the Olympics.
Hosting the Olympics and the Paralympics is a source of national pride for China and a way to showcase the country on the international stage. The Aug. 8-24 Olympics was overshadowed at times by human rights and censorship disputes surrounding the event.
China is keen to use the Paralympics to underscore what is says it has done for the country’s 83 million disabled citizens.

TITLE: Olmert May Face Criminal Charges
PUBLISHER: Agence France Presse
TEXT: JERUSALEM — Police recommendations that criminal charges be filed against Ehud Olmert dealt yet another harsh blow to the Israeli premier whose government has been battered by the corruption allegations.
While a final decision is not expected for weeks or even months, the Israeli media is almost unanimous in declaring that the police move marks the end of the Olmert era.
Olmert’s government is already hobbled by mounting internal divisions that could prevent it from making any significant decisions in U.S.-backed peace talks with the Palestinians or indirect negotiations with Syria.
“Olmert is a dead horse. Occasionally, he still kicks but his kicks are weak,” the left-leaning Haaretz newspaper said in an editorial.
On Sunday Olmert failed to convince his cabinet to discuss a plan to compensate Jewish settlers who agree to relocate from the occupied West Bank to Israel as part of a future peace agreement with the Palestinians.

TITLE: ‘Blade Runner’ Looks Ahead to Golden Paralympic Games
AUTHOR: By Nick Mulvenney
PUBLISHER: Reuters
TEXT: BEIJING — Double amputee Oscar Pistorius has put the disappointment of not qualifying for the Beijing Olympics behind him and is confident of snaring three gold medals in the athletics at the Paralympics.
The 21-year-old South African, dubbed the ‘Blade Runner’ because of the prosthetic legs that enable him to sprint, won a legal battle in May for the right to participate in the Olympics, only to then fail to meet the qualifying time.
“It was a huge disappointment, it was something I’d been working for the last three years,” he told Reuters in an interview ahead of the Sept. 6-17 Games.
“The opportunity was given back to me and I had two and half months to try and qualify. Although I didn’t, it has opened the doors for the future of disabled sports and, for me, that alone was a great accomplishment. I didn’t make the Olympics this time, I’m hoping for the future.”
Pistorius thinks had it not been for the legal case with the International Association of Athletics Federations (IAAF) — which claimed the J-shaped blades gave him an advantage over able-bodied athletes — he might have qualified for the Olympics.
“Trips out to the U.S. for testing took a lot of time out of training and just the distraction and the pressure from that definitely influenced the training a lot,” he said.