SOURCE: The St. Petersburg Times
DATE: Issue #1416 (80), Tuesday, October 14, 2008
**************************************************************************


TITLE: State Bank Set to Put Money In Markets
AUTHOR: By Courtney Weaver
PUBLISHER: Staff Writer
TEXT: MOSCOW — Prime Minister Vladimir Putin announced Friday that the state-owned Development Bank would start pumping 175 billion rubles ($6.7 billion) this week into Russian stock markets, which have plummeted more than 60 percent since their highs in May.
The move came after the Federal Service for Financial Markets halted trading in a pre-emptive move Friday morning after Asian markets took a battering overnight. The markets’ closure rounded off another frustrating week of stop-start trading that left both indexes down by more than 20 percent amid growing fears that the global financial system is teetering on the brink of a systemic collapse and predictions of a deep economic recession.
“The Development Bank will start placing funds in Russian shares, not foreign shares, next week,” Putin told reporters during a meeting at his Novo-Ogaryovo residence near Moscow. “The amount to be placed is up to 175 billion rubles this year, and no less than 175 billion rubles next year.”
Putin, who is chairman of the Development Bank, also known as Vneshekonombank, or VEB, did not elaborate on the details of the plan, but said he was responding to requests to protect the Russian stock market from the effects of the global financial crisis.
“Taking into account what’s happening on Western markets, I think these demands are justified,” Putin said, Interfax reported.
Speaking on the sidelines of talks in Washington with Group of Seven finance ministers and a larger group of 20 advanced and developing economies, Finance Minister Alexei Kudrin said the government would not divulge its criteria when investing in Russian stocks and bonds.
“Shares are significantly undervalued. The market stopped responding to any logic and is led by psychosis,” Kudrin said, Bloomberg reported. “The government’s aim is not to prop up prices — the government’s only goal is to make a profitable investment.”
Kudrin also said the government would soon move towards enabling Russian pension funds to invest in the country’s stock market, a measure that analysts have said is vital to increase the long-term domestic capital base and reduce volatility.
The State Duma on Friday passed on second and third readings a series of government measures aimed at stabilizing the financial system, including its package of loans and a state guarantees to cover the first 700,000 rubles ($26,800) of personal bank deposits.
The pledge to inject state funds into the market came after another torrid week for investors. Despite trading for the equivalent of about three days, the RTS Index slumped 21 percent to end the week at 844.75 points, while the MICEX Index fell 24 percent on the week to 700.37 points.
With Russian markets closed Friday, Russian companies’ shares in London fell hard as world oil prices dropped $6 per barrel, with the FTSE Russia index of 15 Russian companies’ Global Depositary Receipts sinking 12 percent to 460.18 points at the close, Bloomberg reported. Among the most-liquid blue chips, Gazprom shed 13 percent, while LUKoil dropped 11 percent.
The flow of domestic bad news continued Friday as the Central Bank revoked Eurasia Center’s license on credit concerns and rule violations, while a midsized lender, RosEvroBank, asked clients to repay mortgages early and ratings agency Standard & Poor’s put 13 institutions on negative outlook, including Alfa Bank, Troika Dialog and UralSib. (Stories, Page 9.) 
While the G8 finance ministers met in Washington to work out a common approach on preventing a failure of the global banking system, another tough week for Russian markets looked likely as fears arose that domestic interbank and other lending is freezing up. 
U.S. markets were closed Monday for the Columbus Day holiday.
Investors and analysts welcomed the promise of state aid for the equity market, which comes on top of about $220 billion in offered loans via state banks, according to a Citibank note to investors Friday.
The injection was probably spurred by the sharp drop in oil prices and would likely go toward large state-controlled blue-chip stocks, such as Sberbank, VTB and Gazprom, which have all taken enormous losses this year, said Chris Weafer, chief strategist at UralSib.
In the year to date, Gazprom has fallen 64 percent, Sberbank is down 70 percent and VTB has lost 79 percent.
“[The $6.7 billion in promised aid] is approximately 5 percent of the current free float of the total market,” Weafer said in e-mailed comments. “The government at least thinks that valuations are very oversold and that the market is close enough to the bottom to justify this action. In that regard it is a smart investment decision.”
With market trading suspended several times during the week, the focus switched to the international political stage as the government sought to take a larger role in global reaction to the crisis. After the Kremlin announced the possibility of a $5.4 billion bailout loan for Iceland, President Dmitry Medvedev attended the World Policy Forum in France to outline proposals for economic recovery.
The chances for a turn in the Russian markets largely depend on global markets’ reaction to the Washington talks over the weekend, analysts said.
“I think Russia will not be able to resist whatever’s happening [in the markets next week],” said Martin Gilman, a professor at the Higher School of Economics and a former IMF representative in Russia. “If international markets start to find a bottom then the Russians are actually better placed than most for a rebound in terms of lending and credit [in banking].”
Still, Putin’s latest statement hints that the light at the end of the tunnel may be drawing closer for Russia.
“Time-wise, we are very close to the bottom,” said James Beadle, director at Pilgrim Asset Management. “Percentage-wise, it’s not so easy to say because the volatility is so high.”
Of the estimated $220 billion the government has put toward liquidity and credit growth, Citibank said in its note Friday that only about $33 billion had actually been distributed through the state-controlled banks.
“Until the necessary legislative changes are made, which we think could take one to two weeks, liquidity-strapped banks still do not have access to emergency funding,” Citibank analyst Yelena Rybakova wrote in the note. “We also believe that further measures are needed for the [Central Bank] to be able to provide direct liquidity support.”

TITLE: Chechen Turnout High Despite Quake
AUTHOR: By Anna Malpas
PUBLISHER: Staff Writer
TEXT: MOSCOW — A magnitude 5.6 earthquake killed 13 people and injured 100 others Saturday afternoon in Chechnya, one day before parliamentary elections in the republic.
A state of emergency was declared in the region, but the election went ahead, with the republic’s elections commission reporting a very high turnout.
Two tremors hit the region in quick succession Saturday, the first with a magnitude of 5.6 and the second at 4.8, the Emergency Situations Ministry reported on its web site Sunday. 
An Emergency Situations Ministry spokeswoman in Moscow said Sunday that three children were among those killed by the quake and that of the 27 people hospitalized, 12 were in serious condition.
Timur Taisumov, a spokesman for the Chechnya branch of the Emergency Situations Ministry, said the death of one man in the hospital Sunday had brought the toll to 13 and that 117 people had been treated for injuries.
A spokeswoman for the Chechen government said the quake had not prevented any of the 437 polling stations in the republic from opening and that all were functioning normally.
The head of the Chechen Electoral Commission, Ismail Baikhanov, said by telephone from Grozny that the turnout was “very high.” More than 80 percent of voters turned out by 5 p.m., he said.
“People are coming [to vote]. I think the events yesterday even prompted them to come out,” he said.
Baikhanov said two polling stations had to be moved outside because there were cracks in the walls of the buildings where they were set up, adding that the good weather Sunday meant that this was no problem.
The earthquake wreaked significant physical havoc, with 317 buildings listed as damaged by the tremors, including three hospitals, Taisumov stated. He had no information on the number of people left homeless.
The three hospitals have cracks in their walls but are still safe for admitting patients, Taisumov reported.
The situation was downplayed on a Channel One news broadcast on Sunday afternoon, which showed only a cracked wall on one building as evidence of the damage.
The area that suffered the most was the Kurchaloi district, an area of small private houses, Taisumov said. In the Gudermes district, some 5-story apartment blocks were damaged.
More than 500 families in the Kurchaloi district were forced to find shelter in tents, Reuters reported, citing the Emergency Situations Ministry.
The Emergency Situations Ministry web site said two schools, four mosques and two stores were also damaged.
Rescue workers had arrived from Moscow, Nalchik and North Ossetia and were on standby in case any more buildings collapsed, Taisumov said. 
He said rescue workers were not expecting to find any more victims from the quake, as most of the collapsed buildings were small homes and anyone trapped had been located quickly.
The Chechen authorities had planned a large program of concerts and other entertainment for election day, but those events had been canceled, Baikhanov said.
Chechen President Ramzan Kadyrov voted in his home village in the Kurchaloi district, RIA-Novosti reported.
“I’m sure that the citizens of Chechnya will fulfill their obligation as citizens and will come to vote today as in previous years, because the Chechen people know the value of peace and stability,” Kadyrov said, the news agency reported. “The turnout will be no less than 100 percent, and maybe more.”
Kadyrov was a little less ambitious on the Chechen administration’s web site, where he was quoted as saying he expected turnout to be “almost 100 percent.”
Chechnya regularly registers incredibly high turnouts. Official figures for the 2007 State Duma election said 99.5 percent of eligible voters participated.
No results had been released Sunday evening, as election commission officials had only begun counting votes.

TITLE: St. Petersburg Hunger Strikers Take Campaign to Moscow
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: A group of local investors in off-plan residential property developments who have been cheated out of their apartments are holding a hunger-strike in Moscow, after organizing several similar events in town and failing to win the support of St. Petersburg officials who have been adamant that the disputes should be settled in court. 
The investors started the strike on Oct. 1 in Moscow’s Metropol hotel but were soon forced out of the premises and moved into Napoleon hostel in central Moscow.
The investors, who had paid for apartments in buildings under construction, are demanding action from the Russian government after the apartments were sold to third parties or construction was never completed, leaving them out-of-pocket. The City Hall in St. Petersburg had earlier offered financial compensation in several individual cases but refused to recognize the problem in general and failed to develop and efficient systematic approach. The strike’s participants are representing a protest committee that unites almost 1,000 victims of various construction scams.
Six protesters are currently on strike in one room of the hostel. Three people had to withdraw from the protest because of serious health risks. Margarita Silina, the oldest participant of the strike — and a survivor of the Siege of Leningrad — ended the protest on Oct. 7 due to high blood pressure and returned to St. Petersburg.
So far, the investors’ hunger strikes have proved fruitless. The most recent strike — which resulted with several investors ending up in hospital — took place from July 21 to 31 at the former headquarters of the St. Petersburg branch of the democratic party Yabloko. 
“We have sent appeals to Russia’s ombudsman Vladimir Lukin; Ella Pamfilova, head of the presidential Human Rights Commission; and State Duma deputy Alexander Belyakov asking them to raise the issue on a government level,” said a participant in the strike, Natalya Dunayeva. “Similar scams have been used in many other regions of Russia, and while in some of them — including Moscow and Tatarstan — the local authorities volunteered to take full responsibility for the victims’ lost property, in most places people were left to their own devices.”
Earlier this year, off-plan investors in some other Russian cities, including Moscow and Ulyanovsk, held local hunger strikes as part of a nationwide protest campaign. In Ulyanovsk, 38-year-old Igor Vosevoi died suddenly of a heart attack during the hunger strike.
One of the most common ways to buy an apartment in a residential block that is under construction in Russia is to sign an investment contract, where investors typically pay part of the price of an apartment — usually 20 percent to 30 percent of the total cost — before construction work begins. The rest of the money is paid on a monthly or quarterly basis during the construction period.
Under such conditions the total cost of an apartment is much lower than it would be after the residential block is completed — thanks to rising property prices — as well as allowing future flat owners to gradually invest in their property instead of having to come up with one lump sum.  Although it is the investors’ money that makes construction possible, their legal position has been dependent on the construction company.
St. Petersburg ombudsman Igor Mikhailov is in the meantime urging the local law enforcement agencies to be more active in opening criminal investigations into the investors’ complaints. “If there is the slightest catch that allows a case to be launched it must be done,” Mikhailov said. “The legislation on the subject is very loose, which works greatly to the investors’ disadvantage but the investigators’ endeavors can to some extent compensate for that.”
Mikhailov was critical of what he described as double standards applied in property issues in Russia.
“It turns out that many officials will help someone who has been fooled out of their only apartment but, if exactly the same scam scheme is used to cheat someone else of several properties, the victim is declared a despicable capitalist not worth helping,” Mikhailov said. “In reality, the level of responsibility of the state — which allowed the dirty tricks to exist on the market and often go unpunished — has to be exactly the same.”
Dunayeva said uncertainty is the most stressful aspect of the investors’ plight. “We have resorted to the risky tool that is the hunger-strike because we’re sick of empty statements,” she said. “We need to know exactly when and how this issue is going to be resolved. All of us have fulfilled our obligations to the full, and are entitled to a fair solution.”

TITLE: In Brief
TEXT: <b>City Cuts Budget</b>
ST.PETERSBURG (SPT) –  In the wake of the economic crisis, City Hall has developed a series of proposals to amend the 2009 city budget in order to cut expenses, Interfax reported.
Currently, the St. Petersburg budget for 2009 plans for 403 billion rubles ($15.36 billion) in income and 423 billion rubles ($16.12 billion) in spending. The authorities plan to liquidate the 20 billion ruble ($762 million) budget deficit.
“I would like to stress that spending on social issues, including health care, pensions, salaries and social benefits will not suffer from the amendments,” Governor Valentina Matviyenko told reporters on Saturday. “We may have to postpone the launch of several industrial and city development projects until 2010 as well as reduce spending on them.”

<b>24hr Meditation</b>
ST.PETERSBURG (SPT) –  A twenty-four-hour Buddhist meditation was held in the city on Sunday to highlight the opening of the nationwide Buddhist festival that is running through Oct. 21, Interfax reported.
The festival’s program features film screenings at Dom Kino as well as lectures, exhibitions, scientific conferences and book presentations.
The film festival that opens on October 16 marks the first ever cinema event in Russia to focus exclusively on Buddhist themes. The program includes both celebrated movies created by some of the world’s finest directors and rarely shown documentaries shot by Buddhist filmmakers.

<b>Helsinki Trains Stopped</b>
ST.PETERSBURG (SPT) – All train travel between St. Petersburg and Helsinki will be temporarily suspended from Oct. 28 owing to a series of repair works being carried out by the Oktyabrskaya Railways, Interfax reported.
Most of the works are concentrated in the area linking the town of Vyborg and the Buslovskaya station.
In addition, on Oct. 27, train no. 32, Moscow-Helsinki, will depart from St. Petersburg at 16.54 instead of 22.50.

TITLE: Soyuz Blasts Off From Baikonur With Tourist
PUBLISHER: The Associated Press
TEXT: BAIKONUR, Kazakhstan — A Soyuz spacecraft with two Americans and one Russian on board lifted off from Kazakhstan on Sunday for the international space station.
The Soyuz TMA-13 capsule carrying American computer game millionaire Richard Garriott soared into a clear sky atop a Russian rocket as the latest paying space traveler’s family watched from a viewing platform. Also aboard were U.S. astronaut Michael Fincke and Russian cosmonaut Yury Lonchakov.
The rocket lifted off on schedule at 1:01 p.m., sending an orange flare behind it as it streaked upward. The craft entered orbit about 10 minutes later.
“I’m elated, elated,” said Richard Garriott’s father, Owen, a former U.S. astronaut who is the first American to see his child follow in his footsteps and reach space. “They’re in orbit, that’s good.”
Garriott’s mother Eve and his girlfriend, Kelly Miller, shed tears of joy and relief at the successful launch.
“This is cool, this is cool,” Miller said.
The Soyuz is to dock Tuesday with the international space station, where Garriott will spend about 10 days conducting experiments and photographing the Earth before returning in a Soyuz capsule with cosmonaut Yury Volkov, whose father also traveled to space.
Garriott dreamed of space as a child but learned as a youth that he could not become a NASA astronaut because of his poor eyesight. He paid a reported $30 million for his voyage.

TITLE: Police Arrive in Force for Demo
AUTHOR: By Sergey Chernov
TEXT: Dozens of policemen, commanded by high-ranking officers, dispersed a handful of protesters, arresting three activists on Sunday.
The Stop Prizyv (Stop Conscription) movement, which includes members of the Republican Party of Russia, the Yabloko Democratic Party, the United Civil Front, and the youth movements Oborona and DA!, had planned to hold a March for an All-Volunteer Army in Park Pobedy. The authorities, however, denied them permission. 
According to a letter signed by Vladimir Korovin, the head of the Moskovsky District Administration, the march could not be held there because Moskovsky Prospect is a “federal” highway, Park Pobedy itself is a federal historical and cultural site, and the European Table Tennis Championships were underway at the nearby Peterburgsky Sports and Concert Complex. 
Instead of a march, the administration proposed that Stop Prizyv hold a stationary demonstration at Chernyshevsky Garden, far from the Central District’s busy streets, on Oct. 19. The organizers agreed to this change of plans, but said they would sue the administration. They are arguing that according to Russian law the authorities do not have the right to change the form of a demonstration.
The organizers instead decided to conduct multiple one-man pickets (which do not require permission from the authorities) and distribute flyers advertising the Oct. 19 rally. In response, the administration sent a massive police squad with at least two colonels in command to the location. The police were already in place at 1 p.m., the scheduled start of the protest. 
As about ten activists and several journalists gathered, an OMON special-forces police truck and a police van were parked near the Park Pobedy metro station. Dozens of policemen, including plainclothes officers, were stationed around the site.
When one protester took up her post and unfurled a poster that read, “The March for an All-Volunteer Army Should Have Happened Here,” two police officers approached her, confiscated the poster and rolled it up.
An unknown man, described by a policeman as an “outsider,” approached a second protester. He tried to join the activist, which thus allowed police to qualify the one-man picket as a “mass action.” The police frequently employ this type of provocation in order to break up such protests and arrest the protesters.
The poster was then taken by a third protester. He stood holding it while giving an interview to a television crew. In this case, the police did not intervene.
The arrests began when activists took out leaflets and attempted to distribute them to infrequent passersby. Three activists — Maria Govorova and Darya Kostromina of Oborona) and Yelena Popova of Yabloko and the United Civil Front) — were immediately detained and taken to a police bus, where arrest reports were drawn up. 
Later in the day, they were taken to court. Popova, charged with obstruction of justice, was fined 800 rubles (approximately $30). The two other cases were postponed.
The dispersal of the protest and arrests were “baseless,” said Stop Prizyv coordinator Yelena Ivanova. She added that Stop Prizyv would appeal the verdict.
“It is of course arbitrariness on the part of the policemen: they had no right to act like that. There was no actual cause [for their behavior] or any wrongdoing,” she said by phone on Monday.
The police spokesman said on Monday that the arrests were made for two different offences, obstruction of justice (Popova) and violation of the law on mass events (Govorova and Kostromina).

TITLE: Police Held for Thefts at Aeroflot Nord Crash
AUTHOR: By Natalya Krainova
PUBLISHER: Staff Writer
TEXT: MOSCOW — Two policemen in Perm have been apprehended on suspicion of stealing valuables from the victims of the Aeroflot Nord airliner that went down in the Urals city last month, killing all 88 people on board, the Investigative Committee said Friday.
The two officers at Perm’s Dzerzhinsky district precinct were detained Wednesday after internal affairs officers discovered Tuesday that jewelry had gone missing from the thousands of valuables impounded from the crash site, the committee said in a statement.
The jewelry had been stored at the firing range at the Dzerzhinsky precinct, the committee said.

TITLE: EU Censure Continues Despite Withdrawal
PUBLISHER: The Associated Press
TEXT: MOSCOW — Foreign Minister Sergei Lavrov on Sunday challenged criticism from his French counterpart that Russia had not fully complied with a cease-fire in Georgia, news agencies reported.
Russia, which invaded Georgia in August as part of an operation to stop Tbilisi’s attempt to retake South Ossetia by force, pulled troops out of a buffer zone surrounding the province last week to meet an Oct. 10 deadline under a French-brokered peace plan.
French Foreign Minister Bernard Kouchner said Friday that he was sympathetic to Georgian claims that Russian troops should have left Akhalgori, a disputed pocket of South Ossetia that for years was de facto controlled by Tbilisi.
“Akhalgori is within South Ossetia’s borders, so the [cease-fire] plan does not cover it,” news agencies quoted Lavrov as saying in Germany, where he met with Germany’s Minister of Foreign Affairs Frank-Walter Steinmeier.
Asked in the Georgian town of Gori, near South Ossetia, if Russia had honored the cease-fire deal, he told reporters: “I think so, but partly.”
“This is not complete. This is not perfect. It’s just the beginning. This is not the end,” Kouchner, whose country holds the European Union’s rotating presidency, said in a tent camp for Georgians displaced by the fighting.
After a tour of the buffer zone vacated by Russian forces last week — where human rights groups say hundreds of ethnic Georgian homes were wrecked after the cease-fire came into force — Kouchner took a swipe at the Russian military.
“It’s always very sad to see houses destroyed and people coming back and discovering their belongings in desperate state,” said Kouchner, speaking in English. “It was not a good march of the Russian army. Not at all.”
EU foreign ministers could decide next week whether to restart talks on a strategic partnership treaty that the bloc has put on hold until it is satisfied Russia has complied with the cease-fire deal.
Kouchner said he did not know if this would happen, pointing to a lack of consensus among EU members. “Some are not in agreement. There are people supporting Russia, and there are people fighting against Russia,” he said.
Kouchner and EU observers will present the findings of his trip at a foreign ministers’ meeting Monday, two days before a possible decision by European leaders to restart the talks.
Moscow says it will keep a total of 7,600 troops in Abkhazia and South Ossetia, which it has recognized as independent states, to protect them from further Georgian aggression.
Talks on the future of the two breakaway regions are due to begin in Geneva on Oct 15.
* The UN Security Council voted unanimously late Thursday to renew its peacekeeping mission in the Georgian-Abkhaz conflict zone for another four months.
The council’s 15-0 vote buys time for Russia, the United States and the European Union to work out disagreements over how to proceed with the UN’s observer mission in light of the Russian-Georgian war in August.
The mission’s mandate was extended until Feb. 15. Since 1993, the UN has kept dozens of political observers in Abkhazia, which is bordered by Russia to the north, to monitor a cease-fire with Georgia.

TITLE: Navy Launches New Strategic Missiles
PUBLISHER: Reuters
TEXT: PLESETSK COSMODROME, Arkhangelsk Region — President Dmitry Medvedev was on hand for the test firing of two different strategic missiles over the weekend in the Northwest Federal District, where he vowed to commission a new generation of weapons for the armed forces.
Medvedev watched the firing of a truck-mounted intercontinental Topol missile Sunday morning from the Plesetsk Cosmodrome. Half an hour later it hit the Kura testing site, 6,000 kilometers away on the Kamchatka Peninsula.
“I have just been told that the dummy warhead has landed in Kura,” he said from the Topol launch pad.
“We will continue to commission new types of weapons but we will also continue testing the ones we have now,” said Medvedev. “Their effectiveness has been proved by time. Our shield is fine.”
Russian nuclear submarines also successfully test fired two ballistic missiles from the Pacific Ocean and Barents Sea on Sunday at targets inside the country, the Navy said.
Dressed in the army’s new-style leather jacket — with a badge saying commander-in-chief — Medvedev inspected the 21.5 meter Topol rocket before the launch.
The rocket is designed to pierce anti-missile defense systems, such as those that the United States wants to build in Eastern Europe. The Kremlin has opposed Washington’s plans.
“This missile and others which will be commissioned in the next few years are capable of effectively providing the nuclear deterrent and ensuring the security of Russia and its allies,” Colonel-General Nikolai Solovtsov, commander of the Strategic Missile Forces, told Medvedev.
The Topol, a highly mobile missile designed in Soviet times, is a key part of Russia’s nuclear deterrent. The RS-12M Topol, called the SS-25 Sickle by NATO, has a maximum range of 10,000 kilometers.
Medvedev was also on hand Saturday for the test launch of the country’s newest strategic missile, the Sineva, which reached the equatorial part of the Pacific Ocean later that day.
After watching the launch from the aircraft carrier Admiral Kuznetsov, Medvedev said problems caused by the global financial turmoil would not impede Russian plans to revive its armed forces.
The Sineva missile was launched by the nuclear-powered submarine Tula from an underwater position in the Arctic Barents Sea, and hit an unspecified area near the equator in the Pacific Ocean, a Navy spokesman said.
“For the first time in the history of the Russian Navy the target of the missile was in an equatorial part of the Pacific Ocean rather than the Kura testing ground on the Kamchatka Peninsula,” he said.
Television news programs showed the missile emerging from the icy waters of the Arctic Barents Sea for the 11,547-kilometer journey to the Pacific.
“Not one missile of this class has ever flown so far,” Medvedev told sailors.
The spokesman did not specify the area where the missile landed. He said the area was closed for navigation and flights ahead of the test, in accordance with international rules.
On Saturday, Medvedev said the country would start building aircraft carriers, a type of vessel once derided by the Soviet military as an instrument of imperialism unbecoming of Moscow’s defensive military posture.
He said Russia should “not scrimp” on its armed forces and called for government spending to improve living conditions for its armed forces as well as new weapons systems.

TITLE: Early Vote for Ukraine Stymied
PUBLISHER: The Associated Press
TEXT: KIEV — Ukraine’s feuding leaders intensified their power struggle Saturday, with Prime Minister Yulia Tymoshenko seeking to undo President Viktor Yushchenko’s decision to hold early parliamentary elections.
Election officials refused to start preparations for the early vote after a court suspended Yushchenko’s decree at Tymoshenko’s request. But Yushchenko later appealed the suspension, paving the way for a protracted legal struggle.
Yushchenko has the power to dissolve parliament and call an early election, unless a court overrules his decision.
Last week, he ordered parliament dissolved and set the vote for Dec. 7, following the collapse of his pro-West coalition with Tymoshenko, his former ally from the 2004 Orange Revolution.
But Tymoshenko, who is determined to retain her job and avoid the third election in as many years, has vowed the vote will not take place.

TITLE: Bank Loses License Over Poor Liquidity
AUTHOR: By Tai Adelaja
PUBLISHER: Staff Writer
TEXT: MOSCOW — The Central Bank on Friday withdrew the operating license of Eurasia-Center Bank, citing the lender’s liquidity problems and violations of banking regulations.
“As a result of the loss of liquidity, Eurasia-Center could not settle with its clients in a timely manner,” the Central Bank said in a statement posted on its web site Friday.
Eurasia-Center Bank had also violated some regulations, including giving inaccurate financial reports to prevent the Central Bank from initiating bankruptcy procedures, the statement said.
The Central Bank also said Eurasia-Center’s managers and shareholders failed to rectify the bank’s financial position or eliminate the need for the Central Bank to revoke its license.
A temporary administration will be appointed to manage the bank’s affairs until a bankruptcy procedure is initiated, the Central Bank statement said.
As the liquidity squeeze hits home, many domestic banks have struggled to cope with growing demand, while some have had to sell off assets to stay afloat.
Last month, billionaire Mikhail Prokhorov agreed to buy half of Renaissance Capital for $500 million, which analysts said was a bargain price.
Russian Railways and diamond monopoly Alrosa on Wednesday stepped in to jointly buy 90 percent of KIT Finance, three weeks after the investment bank defaulted on its debt obligations.
A woman who answered the phone at Eurasia-Center’s office on Friday and only gave her name and patronymic as Marina Vladimirovna confirmed that Eurasia-Center had indeed received a directive from the Central Bank.
“Everything is in a state of flux at the moment,” she said. “Our bank is being run by special administrators from the Central Bank.”

TITLE: Oligarchs Lose $230 Billion in Collapse
AUTHOR: By Greg Walters, Yuriy Humber, Maria Kolesnikova
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russian billionaires from aluminum magnate Oleg Deripaska to football club owner Roman Abramovich lost more than $230 billion in five months during the nation’s worst financial crisis since the 1998 default on its debt.
The combined wealth of Forbes magazine’s 25 richest Russians tumbled 62 percent from May 19 to Oct. 6, based on declines in the equity value of traded companies and analysts’ estimates of closely held assets they own. The loss is four times larger than the fortune of the world’s wealthiest man, Warren Buffett.
Moscow’s benchmark MICEX stock index has declined 61 percent since its peak in May. The global credit seizure, war with Georgia and falling commodity prices led foreign investors to pull $74 billion out of Russia since the start of August, according to BNP Paribas. While Russia’s 1998 default and devaluation of the ruble eradicated savings for most of the population, this year’s losses are wiping out the fortunes of its richest citizens.
“There was a massive transfer of wealth into the hands of the oligarchs in 1998,” said Mark Mobius, executive chairman of Templeton Asset Management, which has about $30 billion in emerging market stocks. “Now it’s going the other way.”
United Company RusAl’s Deripaska, the richest Russian on the list, lost more than $16 billion and this month has ceded stakes in construction firm Hochtief and car parts maker Magna International. Chelsea Football Club owner and Evraz Group shareholder Abramovich lost $20 billion, based on assets excluding property and cash.
The biggest loser has been Vladimir Lisin, an avid hunter and head of Russia’s Shooting Club, whose 85 percent stake in Novolipetsk Steel lost $22 billion in value in the period.
Novolipetsk rival Evraz declined 83 percent, shrinking founder Alexander Ambramov’s fortune to $2.2 billion from $13.4 billion. The country’s biggest steelmaker, Severstal, also fell, cutting the wealth of chief executive and majority owner Alexei Mordashov to $5.3 billion.
“They should take us all off the Forbes list,” said Alexander Lebedev, ranked 39th by the magazine in May with an estimated fortune of $3.1 billion. Lebedev, who owns 30 percent of Aeroflot, said in a Sept. 23 interview that “silly” rhetoric by the Kremlin over the conflict in Georgia was responsible for 40 percent of the stock market’s drop in August.
LUKoil chief executive Vagit Alekperov saw his 20 percent stake in the country’s second-biggest oil producer decline to $7.2 billion from $19.5 billion. 
The fortune of Alekperov deputy Leonid Fedun declined to $3 billion from $8.4 billion. Both men have said they will continue to buy more LUKoil shares.
Dmitry Rybolovlev, who controls Uralkali and owns 20 percent of Silvinit, the country’s only potash producers, lost about $12.8 billion, leaving him with $4.1 billion.
Alfa Group partners Mikhail Fridman, German Khan and Alexei Kousmichoff ranked seventh, 10th and 17th, respectively, lost at least a combined $12.1 billion.
Alfa’s shareholdings include stakes in TNK-BP, mobile phone operators VimpelCom and Turkcell, supermarket chain X5 Retail Group and television broadcaster CTC Media.
Spokespeople for companies including Deripaska’s Basic Element, Evraz, Nikolai Tsvetkov’s UralSib and Rybolovlev’s Uralkali declined to comment on the losses.
But at least one of Russia’s wealthiest got out in time.
Mikhail Prokhorov sold his 25 percent stake in Norilsk Nickel to Deripaska’s RusAl for an undisclosed amount in April, just before nickel prices began to slump. The value of that stake plummeted from $13 billion on April 24 to $3.38 billion on Oct. 6.
Prokhorov received $7 billion in cash as part of the Norilsk transaction, Kommersant and Vedomosti reported at the time, citing sources familiar with the deal.

TITLE: In Brief
TEXT: <b>Miner Halts Projects</b>
YEKATERINBURG (Reuters) — Russian Copper said Friday that it temporarily shelved separate projects to expand into nickel and build a zinc plant with a rival miner because of the financial crisis. 
The company, Russia’s third-largest copper producer, said all existing projects would continue to operate and that no production cuts were planned. “We are not closing any projects. We are only putting on hold those projects which are at the blueprint stage,” spokesman Alexander Khanin said. 

<b>Protection Raised</b>
MOSCOW (Bloomberg) — The State Duma raised the government’s maximum guarantee on bank deposits to 700,000 rubles ($27,000) from 400,000 rubles, Interfax reported Friday. 
The Duma also allowed the Central Bank to provided unsecured loans to banks for up to six months, Interfax said. 

<b>TGK-2 Buyout Dispute</b>
MOSCOW (Bloomberg) — Sintez Group, controlled by Leonid Lebedev, is seeking to back out of an obligation to buy back the shares of TGK-2 from minorities, shareholder Prosperity Capital Management said in a statement on Friday. 
The St. Petersburg-based miner bid with German utility RWE for a stake in TGK-2 in March, but RWE said Sept. 19 that it would not buy a stake. Investment fund Prosperity Capital said in a statement that Sintez was seeking to avoid going through with a mandatory buyout offer for minority shareholders. 
Sintez could not immediately be reached by phone when called outside of normal working hours. 

<b>Eurocement Cuts Prices</b>
ST. PETERSBURG (Bloomberg) — Eurocement Group, the country’s biggest producer of the building material, cut prices around Moscow by as much as 7 percent as the financial crisis hurts construction and threatens plans by foreign producers to expand in the country. 
Eurocement, controlled by billionaire Filaret Galchev, lowered the price to 4,200 rubles ($160) a ton as of Thursday, spokeswoman Yelena Rudovskaya said Friday. 

<b>Polonsky Heads Mirax</b>
MOSCOW (Bloomberg) — Mirax Group chairman Sergei Polonsky said he would head the company after chief executive Alexei Kunitsyn quit over a moratorium on firings until January 2009 amid the global credit crisis. 
“I am taking the management of the company into my hands to calm the market and my employees,” Polonsky said Friday. Mirax’s board had actively discussed job cuts in past weeks. 
The talks were “incorrectly” reported in local media and caused “groundless panic,” Polonsky said. 

<b>VTB on Renaissance</b>
MOSCOW (Bloomberg, SPT) — VTB Group may buy a 40 percent stake in Renaissance Credit, the consumer lending arm of Renaissance Group, injecting $1 billion to maintain liquidity, Kommersant reported Friday. 
VTB will have the right to buy the rest of Renaissance Credit by the end of next year, Kommersant reported. Renaissance Group will maintain operational control, the newspaper said. VTB declined to confirm the report, Interfax reported.

TITLE: Bank Asks Clients to Pay Off Mortgages
AUTHOR: By Simon Shuster
PUBLISHER: Reuters
TEXT: MOSCOW — Midsized lender RosEvroBank has asked clients to pay back their mortgages right away rather than risk the prospect of real estate prices falling 30 percent, the bank said on Friday.
“We are warning clients that they are in a crisis situation, that we are in this situation with them, and that both of us need to create a certain pillow of support,” said Yelena Safyanova, the bank’s head of communications.
With the credit crunch showing no signs of abating, many Russian companies from the largest conglomerates to the smallest retail chains have been taking desperate measures to raise cash.
Safyanova said her bank was in good financial shape and that it had recently paid back the first tranche due on a loan for $150 million.
But she said borrowers would be better off paying back their mortgages now, as their financial well-being could quickly deteriorate given the present state of the economy.
“There is also a crisis on the labor market, so they may be left without work or have their pay cut. … We should all try to close our debts now before it’s too late,” she said.
RosEvroBank chairman Ilya Brodsky said that dropping property values were eating away at the value of the mortgage loans’ collateral, which is usually the property itself.
“If the collateral loses its value, becomes worthless, the bank has to take steps to make the borrower compensate for that,” he said in a statement. “Some of the largest real estate agencies are forecasting at least a 30 percent drop in property values.”
Safyanova said the bank had the right to change the loan agreement unilaterally if the value of the collateral falls but that in practice the bank would try to work with clients to renegotiate the terms allowing early repayment.
Garegin Tosunyan, the head of the Association of Russian Banks, a lobbying group, said that in troubled times this practice was understandable.
“They are worried that this will make trouble for them later, so they are hedging their risks. But this doesn’t mean people are going to start ripping up contracts,” Tosunyan said on Ekho Moskvy radio.
Several Russian banks have frozen or suspended their mortgage lending operations as a growing chorus of analysts claim that a bubble has formed in Moscow’s housing market, and sooner or later it will burst.
In a recent note to investors, Moscow brokerage UniCredit compared the housing market in Russia with that of the United States, where soaring prices and risky lending have led to a collapse that infected the wider global economy.

TITLE: Kudrin Says Pension Fund Next for Stocks
AUTHOR: By Anatoly Medetsky
PUBLISHER: Staff Writer
TEXT: MOSCOW — The government plans to invest some money from the Pension Fund in the Russian stock market, amidst a major outflow of foreign capital, Finance Minister Alexei Kudrin said Sunday.
The Cabinet will soon submit a bill to the State Duma that would allow a portion of the fund’s government-managed $13.5 billion to be invested in the domestic market, Kudrin said at a meeting of central bankers and finance ministers in Washington. 
“Prices are favorable to enter these assets,” he said at the meeting, organized by the World Bank and the International Monetary Fund. He did not say how much of the Pension Fund’s money would go towards buying stocks.
Kudrin also dismissed reports that the crisis had fractured the government, saying he had not opposed any of the proposed measures to help keep the financial markets afloat.
The 30-company MICEX Index has fallen by nearly two-thirds from its peak in May, hitting a three-year low last week amidst an outflow of capital estimated at $74 billion by BNP Paribas. 
Kudrin also cautioned that the financial crisis would slow growth in Russia next year, which in turn would help contain inflation.
The government decided earlier to tap into the National Welfare Fund and spend 175 billion rubles ($6.8 billion) on local stocks. Kudrin said Sunday that the figure represented a mere 5 percent of the fund’s projected value at the end of the year.
He also stressed that purchases by the two funds were not intended to reduce the market’s volatility, after ratings agency Standard & Poor’s criticized Kudrin last month for suggesting that the welfare fund might be used to support slumping financial markets. 
“Our participation in the market will have a completely different goal, which is to make good investments,” he said. “Nevertheless, our presence on the market will have some healing effect.”
The stock market may take years to rebound and bring a return on the investments, Kudrin said. “Maybe we will have to wait three to five years for the assets to grow, but that’s okay,” he said.
Vneshekonombank, or VEB, the state-owned development bank, held 96.6 percent of the Pension Fund, or 353.7 billion rubles, at the end of the second quarter. Currently, VEB can invest the funds only in Russian government bonds.
The bank, which also manages the welfare fund’s money, will likely receive instructions to buy stakes of no more than 5 percent, Kudrin said. The purchases will be spread out over several months, with VEB acting as the government’s broker until a special government agency is created later this year.
Guidelines on which stocks to buy will take into account the volume of a company’s listed stock, but the information will remain off-limits to the public, he added.
The finance minister, who has long advocated fiscal austerity, took credit for proposing “most” of the country’s recent anti-crisis measures. 
“When I defended the oil fund, I always said we can spend it during the crisis. Maybe I was expected to always say that we should not spend the oil fund, but this is wrong,” Kudrin said, Reuters reported.
Kudrin announced a day earlier in Washington that the government would probably cut its projection for the Urals blend of crude, used to calculate the budget, to $90 per barrel from $95, the figure it assumed for this year’s projections. He has previously said the budget will maintain a surplus even if the price falls to $70.
The government assumes an average oil price of $50 per barrel in its long-term budget strategy through 2023, Kudrin said, adding that it was not planning to cut production.
The benchmark WTI crude price has dropped by almost half from an all-time high of $147 per barrel in July.
Kudrin also warned that the country’s gross domestic product growth would likely drop to 5.7 percent next year because of lower investment. Additionally, China and some other trade partners have been reducing their orders for Russian exports, he said.
That prediction is a downgrade from the government’s most recent estimate of 6.7 percent growth. The economy is expected to grow 7 to 7.5 percent this year, Kudrin added.

TITLE: S&P Downgrades 13 Financial Institutions
PUBLISHER: Combined Reports
TEXT: LONDON — Ratings agency Standard & Poor’s on Friday cut the outlook for 13 Russian financial institutions, including Troika Dialog and Alfa Bank, from “stable” to “negative,” citing increasingly tough trading conditions as global market turmoil worsens.
The squeeze on credit will put pressure on banks by increasing the cost of borrowing, tightening liquidity and reducing profits, S&P analysts, including Ekaterina Trofimova in Paris, wrote in a report.
The agency said that one positive development was the government’s apparent willingness to address the market turmoil, including plans to provide banks with up to $38 billion in long-term loans and a $150 billion package to refinance corporations’ and banks’ foreign borrowings.
“The outlook provisions reflect our growing concerns about the adverse impact of the ongoing domestic and international market turbulence with regard to the financial and commercial fundamentals of many domestic financial institutions,” Trofimova said. “These relate to growing credit risks, tight liquidity, pressured refinancing and weaker short-term growth prospects and reduced profitability, mainly due to trading losses.”
The other outlook downgrades were for UralSib, Promsvyazbank, Vozrozhdenie, MDM Bank, Home Credit and Finance Bank, Petrokommerts, Natsionalnaya Faktoringovaya Kompaniya, Veles Capital, Tsentrokredit, Zapadno-Sibirsky Commercial Bank and Binbank.
S&P said credit was likely to become scarcer, exacerbated by extreme risk aversion in international markets, particularly given the sizeable amount of debt refinancing to take place in the coming 12 months.
The agency maintained a “stable” outlook on state-run and foreign-owned banks, including VTB, Gazprombank and the Russian unit of Raiffeisen International, because they will be less exposed to adverse market conditions. 
Bloomberg, Reuters, SPT

TITLE: CIS Moves to Coordinate Response to Financial Crisis
PUBLISHER: Combined Reports
TEXT: BISHKEK, Kyrgyzstan — The Commonwealth of Independent States decided Friday to join forces in handling the impact of the financial crisis, Kyrgyz President Kurmanbek Bakiyev said.
“A decision was made today to create a working group of finance ministers in connection with the situation in the global economy,” said Bakiyev, whose country currently chairs the CIS. 
“I mean the financial crisis which has affected everyone,” he added. He said CIS finance ministers were expected to meet in Moscow within the next 10 days.
But the leaders made no visible progress on the main agenda item, sending a plan for long-term economic development through 2020 back to be reworked instead of adopting it.
Georgia announced that it was pulling out of the organization in August after Russian forces repelled a Georgian attack on the separatist South Ossetia region and rolled deep into the country’s territory.
Ukrainian President Viktor Yushchenko did not attend Friday’s summit amidst political turmoil at home and differences with Russia and other members over energy exports and other issues. Azeri President Ilham Aliyev, who is running for re-election in a vote next week, also snubbed the meeting.
But President Dmitry Medvedev downplayed the absences.
“I’m not trying to idealize the commonwealth. No one is idealizing it, and we had frank and sometimes harsh discussions on the subject today,” he said after the summit. “But this is what makes it valuable. We don’t have any other platform to discuss these issues.” 
Reuters, AP

TITLE: Deripaska Unloads Stake in Hochtief
PUBLISHER: Combined Reports
TEXT: Billionaire Oleg Deripaska has sold his 9.99 percent stake in German construction giant Hochtief, his company said, as the credit crunch batters Russia’s richest man.
The sale marks the second major blow this month to Deripaska, who already handed a $1.4 billion stake in Canadian auto parts maker Magna to creditors as his indebted empire struggles to find money amid the liquidity squeeze.
United Company RusAl, of which Deripaska is majority owner, is alone estimated to be $14 billion in debt after it borrowed $4.5 billion from Western banks to fund the purchase of a one-quarter stake in Norilsk.
As stock prices around the world have tumbled dramatically in recent weeks, margin calls have led to forced selling of assets at steep discounts.
A spokesman for Basic Element, Deripaska’s main investment vehicle, said the firm was still committed to its large minority stakes in Norilsk Nickel and Austrian construction firm Strabag.
In a terse statement, Basic Element, which was valued at $45 billion at the end of 2007, said the Hochtief stake had been sold.
In a separate statement, Germany’s Commerzbank said it had increased its stake in Hochtief to 11.53 percent as of Oct. 6. Hochtief said Commerzbank and Allianz were the investors.
Hochtief spokeswoman Jutta Hobbiebrunken said Friday that the company would have liked to continue its relationship with Deripaska but that his departure would not greatly affect Hochtief’s business in Russia.
“We have been making a yearly turnover of 150 million euros ($200 million) for years in Russia and our projects will continue without him,” Hobbiebrunken said by telephone from Essen, Germany. 
Among other projects, Hochtief is working on Sheremetyevo Airport and an eight-lane highway around St. Petersburg. 
Hobbiebrunken also suggested that the company was disappointed over developments in Sochi, where construction firms are hoping for a bonanza in the run-up to the 2014 Winter Olympics.
“It would have been nice if Mr. Deripaska had opened that market for us, but especially in Sochi things did not work out as expected,” she said.
Maximilian Bicker, a spokesman for Commerzbank, denied that a margin call had caused the sale. “The financing deal reached its contractual maturity this week and Commerzbank took the shares on a preplanned basis,” Bicker said by telephone from Frankfurt. 
Strabag, Deripaska’s other major construction investment, hurriedly refinanced $683 million in loans this week that he had taken to finance a 25 percent stake.
In a separate development, Deripaska’s RusAl is facing an investigation in the United States and Britain over a $57.5 million wire transfer last year from MDM Bank via an affiliate in Latvia to Barclays Bank in New York, The Wall Street Journal reported Friday, citing people familiar with the transaction. Some of the money ended up with Deripaska consultants in Washington who are under investigation for possible money laundering or other crimes, the newspaper said, citing law enforcement officials and lawyers.
RusAl on Friday referred questions to Basic Element, which declined to comment on the report. A Barclays representative in London did not immediately respond to a request for comment. 
A spokeswoman for the Manhattan district attorney said she could neither confirm nor deny the existence of an investigation and the Justice Department did not answer an e-mailed request for comment. 
No one at GlobalOptions Management, the consultancy that the WSJ identified as advising Deripaska, replied to written questions. 
Reuters, SPT

TITLE: RusAl Seeks New Board At Norilsk
PUBLISHER: Bloomberg
TEXT: United Company RusAl, controlled by billionaire Oleg Deripaska, escalated a battle for control of Norilsk Nickel on Friday by calling for an extraordinary shareholders meeting to oust the board.
The board, controlled by billionaire Vladimir Potanin, has “abused corporate governance principles and presided over the destruction of significant shareholder value,” RusAl said in a statement. The aluminum miner owns 25 percent of Norilsk.
Norilsk confirmed in a statement that it received a request from RusAl for a meeting and said its board would consider the request. Nina Dementsova, a spokeswoman for Potanin’s Interros holding, declined to comment on RusAl’s actions.
Potanin and Deripaska are divided on how to develop Norilsk, with Interros favoring a merger with copper, iron ore and uranium producers and RusAl preferring to limit the combination to the two companies. Norilsk’s shares have fallen 76 percent this year, compared with a 63 percent drop in the MICEX Index.
RusAl intends to propose Fiat chairman Luca Cordero di Montezemolo, Kinross Gold chief executive Tye Burt and James Goodwin as nonexecutive directors on a new board, it said.
Changing the board “should provide for Norilsk’s sustainable development and fair value of the company in the interests of all shareholders,” RusAl CEO Alexander Bulygin said in a separate statement.

TITLE: Finding Energy to Beat a Recession
AUTHOR: By Tatyana Mitrova
TEXT: As a global economic recession looms, the medium-term development prospects for the world’s energy sector will change substantially. Fifteen years of rapid growth, and the assumption that it would continue, led us to expect a corresponding increase in the demand for energy. This, in turn, led to the appearance of numerous extremely ambitious energy-related projects. Now, however, is the time for careful spending. 
The stock market’s record fall in September suggests that the impending global financial crisis is not just some kind of bad dream, but the new reality. With globalization, it is clear that the next few years will be painful for both the world economy as a whole, and for the energy industry — one of its most important sectors — in particular. 
On the one hand, a global recession will inevitably lead to if not a decrease in the size of the world energy market, then at least a slower rate of growth in energy consumption. With a number of economically developed countries slipping into recession against a backdrop of high energy prices, the demand for oil and gas is already decreasing. Declines in production and incomes combined with increased unemployment and the other ills that accompany a recession reduce people’s spending power and demand for energy. Consumers have no choice but to tighten their belts. 
The rate of growth in electricity consumption, which is highly dependent on economic growth rates, could suffer the most. This process will be aggravated as a number of the largest energy-consuming countries make the transition to post-industrial economies, with significantly higher portions of their gross national product generated by the service sector. Energy consumption in these countries is already declining, and the severe financial conditions will further constrain their economies. 
Serious changes in supply are inescapable as well. The global liquidity crunch is making borrowing more costly. This limits energy companies’ access to the loan capital that serves as the basis for practically all of their large-scale projects. It will be especially painful for energy suppliers in developing countries. These countries control most of the planet’s hydrocarbon resources, yet their economies are less immune to fluctuations on the world’s financial markets. Russia is no exception: The international credit market is already practically closed to Russia’s largest borrowers, and the cost of loans on the domestic market has doubled. 
The natural reaction for energy companies in such conditions is to cut back on investment. A host of Russian companies have already announced cutbacks, and we can expect most of the world’s energy-producing companies to follow suit by the end of the year. Who needs mega-projects in a period of decreasing demand? Who will be willing to finance these projects? The crisis has forced banks to re-examine their exposure to risk and to employ greater scrutiny in lending. Companies will have to be more responsible in selecting priority projects, favoring modernization to increase efficiency and, ideally, scope, but not the development of entirely new mega-projects. 
As a result, energy companies will have to control expenses in order to survive. There has been an explosive growth in costs over the last two years, with expenses doubling in upstream operations, and as much as tripling in the electric power sector. The sharp increase in capital costs for projects — metals, equipment, land, services and workers’ salaries, which are especially high in post-industrial societies — has radically changed the economics of energy-sector projects. Given these rising costs, only fantastically high growth in energy supply and prices allowed them to stay afloat. Nonetheless, a number of major oil and gas companies were already reporting in mid-summer that runaway expenses were eating into their margins, despite record incomes. If expenses can’t be reined in, companies will not be able to survive. Companies must therefore devote all of their managerial energy and know-how to cutting expenses. 
The amazing variety of ambitious projects that sprang up around the world on the wave of general economic euphoria are now doomed to undergo drastic cuts. At the start of 2008, it seemed possible to connect any two points on the globe with oil pipelines, and plans for high-priced nuclear power plants were sprouting like mushrooms after the rain. For the last two years, the catchphrase had been: “With prices this high, any project is cost effective.” 
But every drinking binge is followed by a hangover. It is difficult to imagine who would risk financing the enormous Nabucco project or run a pipeline from Alaska to Russia during a financial crisis. Completion dates for most projects will have to be pushed back. The postponement of major investments and project delays will lead to a reduction in global energy supply. Overall, this is not tragic — a new balance will be found, only at lower levels of production and consumption. This is actually beneficial because it will generate a sort of natural selection to find the most cost-effective projects. Companies seemed simply to forget about cost criteria in recent years, apparently caught up in the boom market hysteria. But this kind of financial restructuring is almost inevitable after the long and even unprecedented economic growth that began in the early 1990s. 
A growing number of the world’s economies can already be described as post-industrial. Russia and Brazil are already moving in that direction. The high expense of hiring qualified personnel has forced companies to relocate their energy hungry and material-intensive production facilities to developing countries. And the inevitable depletion of energy resources — despite technological and administrative progress — leads naturally to higher prices. Wealthier countries with high standards of living can afford to buy high-priced energy, including “green” alternative energy sources, since their demand tends to stabilize over time. There is no longer a need to force the development of large-scale projects or to build colossal production capacity. The time has come to learn how to perfect and make optimal use of what we already have. The world will hit an energy consumption plateau in the next five to seven years. Following that leveling out there will be another period of growth, but before that happens, we will have to deal with the baggage of the past. 

Tatyana Mitrova is the director of the Energy Research Institute of the Russian Academy of Sciences.

TITLE: Crisis — What Crisis?
AUTHOR: Yulia Latynina
TEXT: I have been trying to understand the nature of Russia’s economic crisis, but honestly, I don’t see any crisis. Instead, I see a number of surprising moves by the government. For example, the authorities permitted the Central Bank to extend loans to Russian banks without requiring collateral. How is that possible? Of the 500 banks in Moscow, I suppose 400 launder their money — and now they can get credit without collateral as well. 
Are things really all that bad? After all, it is natural for the stock market to take a dive with so many margin calls coming in. 
A few Russian companies are extremely over-burdened with debt. This pertains primarily to Oleg Deripaska’s United Company RusAl and MTS, Russia’s largest cellular provider. RusAl shares have been leveraged and re-leveraged through the roof. That’s how it goes; when the margin call sounds, the shares have to be sold. 
What’s so bad about that? Nothing really. RusAl’s shares will lose value, and somebody will buy them for a song. Fine. Many Russian companies have absolutely no problem with liquidity. Billionaire Mikhail Prokhorov has a ton of cash. The Magnitogorsk Iron & Steel Works also has a heap of currency because the company’s accountants have probably never heard the word “derivatives.” Surgutneftegaz has more cash than it can count. 
Yevgeny Chichvarkin, former co-owner of the successful but debt-burdened Yevroset chain, recently sold his company for about $500 million in cash. Stephen Jennings of Renaissance Group also recently sold half his company for $500 million — just a year after rejecting a $2 billion buyout bid from VTB. 
Despite all of this, nothing has changed for consumers. Yevroset has not stopped selling cellular phones, and Renaissance Capital continues to provide its financial services. Why should Deripaska’s fate — or the fate of any other businessperson deep in debt — differ from Chichvarkin’s fate? 
The government’s intervention is far from risk-free. It is behaving as if its gold and currency reserves were unlimited. They are immense, but they are not unlimited. 
Russia has an official who has always been opposed to senseless expenditures — Finance Minister Alexei Kudrin. However, aside from him, Russia also has the KIT-Finance investment bank that got burned on the mortgage credit market. Kudrin took great pains to turn that bank around and in the end he saved it. It’s clear that after the Kremlin brought KIT-Finance back from the edge, Kudrin cannot veto efforts by other top officials to bail out companies with which they have personal ties. That would be perceived as playing unfairly. 
Russia has another official who knows what to do with the state debt: Kudrin’s former deputy finance minister, Sergei Storchak. Unfortunately, Storchak has been jailed on charges of fraud. Maybe in the state’s hour of need they will let him out. 
This is how Russia’s economy works: Russia sells oil and gas and uses the proceeds to buy everything else — from Mercedes cars to cement. For now, the economic crisis has affected only the elite by redistributing their business shares. 
Naturally, everything I’ve said here makes sense only as long as the U.S. mortgage meltdown does not drive oil prices down too far. If that happens, it will become clear that the world is, in fact, unipolar. It will prove that the United States is a superpower — not because it sends tanks and troops abroad, but because its financial problems will have triggered a global crisis. 

Yulia Latynina hosts a political talk show on Ekho Moskvy radio.

TITLE: U.S. Takes N. Korea Off ‘Terror Black List’
AUTHOR: By Hyung-Jin Kim
PUBLISHER: The Associated Press
TEXT: SEOUL -- South Korea is considering expanding cross-border projects with North Korea following major progress in an international standoff over the communist country’s nuclear program, an official said Monday. 
On Saturday, the United States removed North Korea from its terrorism blacklist, saying Pyongyang agreed to all Washington’s nuclear inspection demands. The North welcomed the delisting, saying it would resume disabling its main nuclear facilities and allow international inspections there.
Meanwhile, conservative protesters took to the streets in Seoul to denounce the delisting.
Kim Ho-nyeon, a spokesman at South Korea’s Unification Ministry, told reporters Monday that South Korea is considering “adjusting” various projects with its neighbor, such as its food aid to the impoverished North.
He did not elaborate but his office later explained that South Korea has long sought to expand inter-Korean economic projects and humanitarian aid to the North in tandem with progress in the nuclear issue.
“I hope the terrorism delisting will have a positive effect on improvement of inter-Korean ties,” Kim said.
North Korea halted its nuclear disablement in mid-August in anger over Washington’s failure to remove the regime from the terror list and began moves toward restarting its plutonium-producing facility. The U.S. had said North Korea first had to allow verification of the declaration of its nuclear programs it submitted in June.
The weekend’s developments raised hopes that the stalled nuclear talks could quickly resume and help improve ties between the U.S. and North Korea, Cold War adversaries still technically at war.
About 70 activists called on the U.S. to withdraw its delisting decision in a rally Monday near the American Embassy in Seoul.
Chanting “We oppose the terror delisting,” the activists tried to burn signs with photos of North Korean leader Kim Jong Il, triggering a minor scuffle with police.
“We cannot help being disappointed after seeing the U.S. delisting North Korea, as we had believed it would do so after the North completes its nuclear dismantling,” said Park Chan-sung, a protest leader.
It was not known Monday whether the North had restarted its disablement work as pledged. The North’s state media carried typical propaganda articles praising the Kim Jong Il regime. South Korea’s Foreign Ministry also said it has not detected any such signs.
Relations between the divided Koreas have worsened since a conservative, pro-U.S. government was inaugurated in Seoul in February with a pledge to get tougher on the North. Pyongyang has cut off government-level contacts with the South in retaliation.
Inter-Korean ties deteriorated further in July after a North Korean army guard fatally shot a South Korean housewife who allegedly wandered into a restricted military area at the North’s scenic Diamond Mountain resort. In response, the South suspended tours to the mountain.

TITLE: Jankovic, Kunitsyn Win at Kremlin Cup
AUTHOR: By Leonid Chizhov
PUBLISHER: The Associated Press
TEXT: MOSCOW — Top-ranked Jelena Jankovic won her third title in three weeks Sunday, beating Russia’s Vera Zvonareva 6-2, 6-4 in the final of the Kremlin Cup.
Igor Kunitsyn won the men’s tournament, upsetting fellow Russian Marat Safin for his first ATP Tour title. Kunitsyn, who survived seventh-seeded Safin’s 21 aces to win 7-6 (6), 6-7 (4), 6-3, said he had prepared a speech to congratulate his opponent on the victory.
“I was hoping to win a couple of games and that’s it,” Kunitsyn said. “I still don’t know how I was able to outplay Marat, but I guess it happens. I still don’t understand how I won.”
Jankovic was coming off back-to-back wins at the China Open and the Porsche Grand Prix in Germany. She earned her fourth title of the season and eighth of her career.
The 23-year-old Serb also was runner-up twice this season, losing to Serena Williams in Miami and at the U.S. Open.
“I’m quite close to finishing the year as the No. 1 player in the world, so it’s really a huge achievement for me,” she said.
Jankovic broke the ninth-ranked Zvonareva twice in the first set. The two were tied at 4 in the second set when Jankovic earned another break.
Jankovic, who beat Zvonareva in her two previous events, said she knew she was going to have to work hard for every point.
“I was really expecting a tough match,” Jankovic said. “I was really focused from the start of the match. I went out there aggressive and really played my game and I was really going after the shots.
“Especially the first set I played quite well. I was dominating. But then the second set my level of tennis went down a little bit and I let her come back into the match. At the end of the second set I focused a little bit and changed the match in my favor.”
Jankovic said she is committed to playing in Zurich next week but will then take two weeks off to prepare for the season-ending tournament in Doha.
Jankovic took the top ranking from Williams on Monday and will retain it next week because Williams, the runner-up in Moscow last year, pulled out with an injury.
The 71st-ranked Kunitsyn was playing in his first ATP Tour final.
Safin, who hasn’t won a tournament since beating Lleyton Hewitt in the final of the Australian Open in January 2005, was playing in his first final since losing to Nikolay Davydenko in Moscow in 2006.
Kunitsyn was in control of the match and constantly kept Safin on the baseline. He prevailed in a first-set tiebreaker when Safin made two unforced errors and broke his racket in frustration.
“Had I won the first set it could have gone a different way,” Safin said.
Safin won five consecutive points in the second-set tiebreaker to stay in the match.
In the third set, Kunitsyn got a break in the sixth game and served out the match at love, closing it with an ace.
“I was chasing him all the time,” Safin said. “I could not capitalize on my chances. But he converted every time he had a chance and didn’t make many mistakes. There’s no surprise he won.”

TITLE: Fernando Alonso Wins Japanese Grand Prix
PUBLISHER: The Associated Press
TEXT: OMAYA, Japan — Renault’s Fernando Alonso won the Japanese Grand Prix on Sunday in a race that featured a collision between championship rivals Lewis Hamilton and Felipe Massa on the second lap.
Both leading drivers received pit drive-through penalties, and while Ferrari’s Massa recovered to finish eighth and earn one championship point near the end of the race, McLaren’s Hamilton finished out of the points in 12th.
Hamilton’s championship lead was cut from seven to six points with two races remaining this season, while Ferrari moved six points ahead of McLaren in the constructors’ standings.
“What can I say, it was a bad day, I’ll move on to next week,” Hamilton said. “I went wide at turn one, it was a mistake, and then Felipe hit me off, I went on the inside and he broke left and hit me pretty hard.
“I lost one point which I guess is damage limitation.”
Alonso completed back-to-back wins after his victory in Singapore, taking advantage of an incident between Hamilton and Ferrari’s Kimi Raikkonen to move up to second on the opening lap, and then passing early leader Robert Kubica of BMW via the first set of pit stops.
“It’s difficult to believe,” Alonso said. “Today we had nothing and we won again — I can’t believe it now. ... The feeling I have now is we can do anything.”
Kubica finished second and Raikkonen third. Kubica has now emerged as an outside contender for the title, 12 points behind Hamilton.
“Twelve points behind the leader with two races to go — anything can happen,” Kubica said.
Raikonnen — second on the grid — got the better start and slipped ahead of pole-sitter Hamilton in the run to the first corner. The Briton, eager to take back the lead, went into the bend too quickly on hard tires in cool conditions, running wide and forcing the Finn to do the same.
That allowed Kubica, Alonso, Heikki Kovalainen, Jarno Trulli and Massa to get ahead of that front-row pair after the first corner.
The key incident came on the second lap when Hamilton passed Massa at turn 10. The Brazilian, trying to immediately re-pass, went over the ripple strip curbing at turn 11, and they collided after the apex, with the front right tire of his Ferrari clipping the left rear of the McLaren. Hamilton spun as a result while Massa continued on.
The extraordinary collision between title combatants — reminiscent of previous Japan tangles between championship rivals Alain Prost and Ayrton Senna in their heyday — had the Ferrari pit crew punching the air in exultation, as it looked like Massa was set to cut into if not overtake Hamilton’s championship lead.
Their joy was to be short-lived as stewards quickly penalized both drivers.

TITLE: European States Agree to Back Banks
AUTHOR: By Greg Keller And Jamey Keaten
PUBLISHER: The Associated Press
TEXT: PARIS -- Nations in Europe’s single-currency zone agreed Sunday to temporarily guarantee bank refinancing and pledged to prevent banks failing as part of a raft of emergency measures designed to get credit flowing again. 
It was Europe’s most unified response so far to the global financial crisis and addresses a key part of the problem: banks’ reluctance to lend to each other. That has helped fuel the crisis that has pulled down some of Wall Street’s most storied names and is threatening the core of the U.S. and European economies.
After the Dow Jones industrial average ended its worst week in history, plummeting more than 18 percent last week, world leaders scrambled all weekend for a way to unblock money markets before they open Monday.
At an emergency summit of leaders of the 15 euro-zone countries in Paris on Sunday, European governments agreed to guarantee new bank debt until the end of 2009, allowed governments to help banks by buying preferred shares, and vowed to rescue important failing banks through emergency recapitalization.
But it stopped short of a one-size-fits-all solution: It’s up to individual governments to announce how they will implement the measures.
“I want to tell our compatriots in all the countries of Europe that they can and should have confidence,” summit host French President Nicolas Sarkozy said.
Sarkozy hoped the momentum from Sunday’s meeting wouldn’t stop at Europe’s borders, and renewed his call for a summit of major world economies to help rebuild an international financial system “to make European ideas triumph.”
European Central Bank Chief Jean-Claude Trichet welcomed the unity of Europe’s leaders — but warned there is more work to do.
“The force of unity that we showed today is a fundamental element of confidence,” said European Central Bank Chief Jean-Claude Trichet.
But “there are still many things to do,” both by governments and central bankers, Trichet added.
European Commission President Jose Manuel Barroso said: “Our analysis isn’t of an immediate miracle.”
The plan follows Britain’s 50 billion-pound ($88 billion) plan to partly nationalize major banks and promised to guarantee a further 250 billion pounds ($438 billion) of loans to shore up the banking sector.
But there was no sum given on how much the EU measures would cost, and Sarkozy said each country would decide how much it would spend.
British Prime Minister Gordon Brown, who met with Sarkozy earlier Sunday, said: “I believe that there is common ground now about what needs to be done, that it has to be comprehensive, and it has to be all countries working together to get to the bottom and solve what is a global financial problem.”
Sarkozy said the measures — which also include new accounting rules for banks — will be enacted “without delay” in the 15 countries using the euro.
On Monday, the governments of Italy, Germany, France and others will present their individual ways of implementing the measures. The rest of the 27-member EU will have a chance to sign up to the measures when the countries meet Wednesday.
The statement by EU leaders said they agreed to “avoid the failure of relevant financial institutions, through appropriate means including recapitalization.”
Governments would guarantee “for an interim period and on appropriate commercial terms” new debt issued by banks for up to five years. 
“This scheme would be limited in amount, temporary and will be applied under close scrutiny of financial authorities until Dec. 31, 2009,” it said. 
Sarkozy said the measure taken by the leaders is “not a gift to banks.” 
“Banks need to be loaned money,” he said. “So that this confidence is restored, states will have the possibility to guarantee the loans that banks take out, guarantee them under different forms.” 
German Chancellor Angela Merkel said the measures “will allow markets to start functioning again, that was our aim. It is a strong message to the markets.” 
As the financial crisis drags down the global economy, world leaders are scrabbling for a way to stop the panic. But efforts to agree on a coordinated global response have stumbled as leaders seek to address the unique challenges of their own countries. 
“It’s not easy,” said Sarkozy. “We have different traditions. For some of us we don’t have the same currency. We have different regulators.” 
But, he said, “In a situation of urgency we had to take responsibility.” 
Even within the 27-nation EU, some countries are facing the collapse of a housing market, some have had to step in to save banks, while others have faced different problems. 
Finance ministers from the Group of 20, which includes rich countries and major developing nations such as China, Brazil and India, meeting in Washington this weekend, pledged to intensify their efforts to unblock a frozen financial system before it does more damage to an increasingly shaky global economy — but made no concrete offers of new moves.

TITLE: Golf Legend Seve Ballesteros Determined to Fight Tumor
AUTHOR: By Paul Lothetis
PUBLISHER: The Associated Press
TEXT: MADRID, Spain — After a career full of miraculous shots — including one from a parking lot during his first British Open win — Seve Ballesteros was preparing for the “hardest challenge” of his life Sunday after announcing he has a brain tumor.
The 51-year-old Ballesteros was set to undergo a biopsy Tuesday before doctors determine how to proceed.
“Throughout my career I have been among the best at overcoming challenges on the golf course,” the five-time major winner said in a statement released by Madrid’s La Paz hospital. “Now I want to be the best confronting the hardest challenge of my life, with all my strength, counting on all of you who are sending me encouraging messages.”
Ballesteros was admitted to the hospital Monday after briefly losing consciousness.
“Once I had been able to inform my three children personally and their mother, I can now communicate to you the illness I am suffering from,” Ballesteros said. “After an in-depth checkup which has been carried out on me in the La Paz Hospital they have detected a brain tumor.”
Ballesteros did not give any more details on the test results. It was unknown whether the tumor was benign or malignant.
“I have always shown my solidarity with those people who face illness, including those whose (illnesses) are much worse than mine,” said Ballesteros, who was also admitted to a hospital last year when doctors discovered an irregular heartbeat. “Now my wish is to ask for respect towards my family and especially my children. We will keep you informed.”
The swashbuckling Spaniard was well known for being able to manufacture a shot from just about anywhere, a feat that earned him the title “Car Park Champion” at the 1979 British Open. The Pedrena native found the green from a parking lot next to the 16th fairway at Royal Lytham & St. Annes before sinking a long birdie putt on his way to his first major title.
During that final round, Ballesteros used his driver only nine times and hit the fairway once.

TITLE: Iraq PM Calls For U.K. to Withdraw
PUBLISHER: The Associated Press
TEXT: BAGHDAD -- Iraq’s prime minister said the 4,100 British troops in southern Iraq are no longer necessary to provide security, a newspaper reported Monday. 
Prime Minister Nouri al-Maliki told The Times of London that there may be a need for a few British troops to remain for training and technical issues. But as a fighting force, al-Maliki said the British were no longer needed.
“Definitely, the presence of this number of British soldiers is no longer necessary. We thank them for the role they have played, but I think that their stay is not necessary for maintaining security and control,” al-Maliki said in the interview.
“There might be a need for their expertise in training and some technical issues, yes, but as a fighting force, I do not think it is necessary,” he said.
His comments were in line with an August report that most of Britain’s contingent in Iraq would be withdrawn over the next nine months, leaving only a few hundred soldiers there.
In July, British Prime Minister Gordon Brown promised a major troop withdrawal in the early months of 2009, but Britain’s military has said it’s premature to discuss specific figures.

TITLE: U.S. Vice-Presidential Candidate Palin Booed by Hockey Fans at Flyers Game
PUBLISHER: The Associated Press
TEXT: PHILADELPHIA — Sarah Palin is hoping John McCain’s campaign isn’t on ice, but that’s exactly where the GOP vice presidential nominee was Saturday in Philadelphia.
Palin was booed when she first stepped on the ice before the Flyers’ home opener against the New York Rangers to drop the ceremonial first puck. Palin, the Alaska governor and self-described “hockey mom,” is trying to turn Pennsylvania into a red state.
Palin waved to the crowd and smiled as the reaction quickly turned to polite applause. Her hair down and wearing her Tina Fey-glasses and a coat, Palin dropped the puck between Flyers center Mike Richards and Rangers center Scott Gomez. Gomez is from Alaska.
Cathy O’Connell, of Erdenheim, Pa., joined Palin on the ice as the winner of a team promotion for the “Ultimate Hockey Mom.”
Last month, Palin visited a Philadelphia bar with Flyers owner Ed Snider, who has donated money to the Republican presidential nominee John McCain’s campaign.
The NHL said it did not view the Flyers’ invitation to be politically motivated.
“Governor Palin is a supporter of the sport, which she has proclaimed publicly,” said NHL deputy commissioner Bill Daly. “As a public figure who has a very public connection with hockey, her recent associations with the Flyers and other NHL franchises is not surprising and, in our view, not inappropriate.”
There were no apparent signs of protest outside the arena, and one fan held a sign that read “Vote Obama” behind New York’s net. A few other held “Obama-Biden” signs behind her.

TITLE: Conservatives Lead in Lithuanian Elections
AUTHOR: By Liudas Dapkus and Gary Peach
PUBLISHER: The Associated Press
TEXT: VILNIUS — A conservative opposition party won the first round of Lithuania’s national election, although strong support for two populist groups means this Baltic nation will face difficult talks on forming a coalition government. 
With almost 100 percent of precincts counted Monday, the right-wing Homeland Union was in first place with 19.2 percent of the vote. Party leader Andrius Kubilius declared that victory meant Lithuanians wanted change.
“We are ready to take responsibility and expect the president’s offer to start forming a new Cabinet,” Kubilius told cheering colleagues at party headquarters.
The vote Sunday appeared to spell the end for Prime Minister Gediminas Kirkilas’ centrist coalition government. Kirkilas’ Social Democratic Party, which has controlled the prime minister’s post since 2001, was in fourth place with 12.2 percent.
The surprise second-place finisher, with 15.2 percent of the vote, was the National Revival Party, a centrist upstart formed by major TV and pop music personalities in this state of 3.4 million.
Meanwhile, two populist parties led by an impeached former president and a Russian-born millionaire in legal trouble made a strong comeback and could form the backbone of a centrist coalition that would likely talk tough to the European Union and improve relations with neighboring Russia.
The Order and Justice party, led by Rolands Paksas, a former president impeached and removed from office four years ago, was in third place with 12.9 percent, while ally Viktor Uspaskich’s Labor Party was in fifth place with 9.2 percent.
Nevertheless, the final outcome was unclear because the results only included the party list vote, which covers 70 of the 141 seats in Parliament. The remaining 71 seats are decided in individual races, many of which will require a runoff on Oct. 26.
No clear coalition is expected to emerge until the single-mandate constituencies are decided.
Paksas, a stunt pilot, would not rule out any possible partners in coalition talks, despite a strong antipathy toward the conservative winners.
“If I had a choice, we would not work together with the conservatives or Social Democrats, who are responsible for this disorder in Lithuania,” he said. “But if voters decide those parties deserve to be in government, we may be negotiating with those parties.”
The Sunday vote also featured a nonbinding referendum on whether to keep a Soviet-era nuclear plant operating beyond its scheduled closure of December 2009. However, according to Central Election Commission data from Monday, that referendum appeared to be invalid due to low voter turnout.
Only 47.8 percent of Lithuania’s 2.6 million registered voters cast ballots, while the law requires 50 percent participation for a referendum to be valid.
Still, of those who voted, nearly 89 percent said the plant should remain open.
The Chernobyl-style nuclear plant’s design flaws scare EU members, who insist it be closed as planned. Many Lithuanians claim that shutting down the Ignalina plant would leave them vulnerable to Russia, an unreliable energy supplier.
Lithuania, which regained independence in 1991 amid the collapse of the Soviet Union, experienced an economic boom after joining the EU in 2004. But now, like elsewhere in Europe, Lithuania is struggling with high inflation and slumping growth.