SOURCE: The St. Petersburg Times
DATE: Issue #1419 (83), Friday, October 24, 2008
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TITLE: OPEC, Russia In Top-Level Crisis Talks
AUTHOR: By Anatoly Medetsky
PUBLISHER: Staff Writer
TEXT: MOSCOW — Russia and OPEC held their highest-level talks ever on Wednesday, with President Dmitry Medvedev meeting Secretary-General Abdallah Salem al-Badri to discuss the volatile oil market amid a Kremlin push for broader cooperation with foreign energy producers. 
Neither the Kremlin nor the Organization of the Petroleum Exporting Countries released details of the meeting, but in comments before the talks, al-Badri sought to dispel the notion that he came to Moscow to ask for an output reduction. 
The meeting came on the heels of an agreement among Russia, Qatar and Iran — which together hold 60 percent of the world’s gas reserves — to consult one another on the gas market and possibly pursue joint projects. 
Deputy Prime Minister Igor Sechin said Russia was not going to cut its crude output, but he reiterated plans to set aside several oil fields as backup capacity to influence world prices. He also said the government was studying the idea of further reducing oil export duties. 
Al-Badri and Medvedev met two days before OPEC is expected to agree on an output cut to prop up falling prices, which are in danger of making production and investment unprofitable. Russia’s state and private oil producers alike need to invest heavily to replace output from depleting fields. 
“Interaction with OPEC is one of the key areas for our energy agencies and for the building of our energy policy in general,” Medvedev said before the meeting at his Gorky retreat outside Moscow. 
Russia enjoys good relations with OPEC and its members, and it intends to develop the contacts because it is interested in stable oil prices, Medvedev said. 
Prior to the meeting, al-Badri spoke at an industry conference in Moscow where he warned that low oil prices would “without any doubt result in the cancellation of many upstream and downstream projects, and this will lead to future long-term supply problems.”
On the other hand, there is a risk of a future downturn in demand as the global economy is slipping into a time of slower growth, al-Badri said. “For producers, there is a real prospect of wasting precious resources on capacity that may not be needed,” he said, according to a transcript of his speech on the OPEC web site. 
Russia began moving closer to OPEC in September, when Deputy Prime Minister Igor Sechin led a delegation to the group’s meeting in Vienna. 
Al-Badri and a group of OPEC officials will hold a joint workshop with Russian officials Thursday to discuss oil market developments and outlook, multilateral issues and prospects for cooperation. 
European Union energy spokesman Ferran Tarradellas Espuny said the European Commission, the group’s executive body, had no comment on the contacts Russia is holding with any organization. 
“The commission expects that Russia will provide information of any activity that can affect our relations with Russia in the field of energy through the usual channels,” he said by e-mail. 
Commenting on the creation of the “gas troika,” Espuny said Europe was not opposed to energy suppliers cooperating more on research, but that if they form a cartel the European Commission might review its energy policy, The Associated Press reported. 
OPEC is to hold an extraordinary session Friday to review output, with some member countries calling for cuts of up to 2.5 million barrels per day, or 8.7 percent, although a cut of closer to 1 million bpd is expected. 
The International Energy Agency’s executive director, Nobuo Tanaka, said at the same industry conference that OPEC should maintain production to allow global stockpiles to grow as a cushion against possible supply disruptions. 
At OPEC’s last meeting in September the group’s members cut output by about 500,000 bpd. 
Russia is already contributing to reduced global production because its output has been declining this year for the first time in a decade, said William Ramsay, former deputy executive director of the International Energy Agency. 
“I would think that this contribution is enough,” he said by telephone from Paris, where he is director of the energygeopolitics program at the French Institute of International Relations think tank. 
Also, the Kremlin cannot push private oil producers to cut output, he added. 
“I wouldn’t impute great things to a meeting between those people,” Ramsay said, referring to Medvedev and al-Badri.

TITLE: Ruble Plunges To Two- Year Low
AUTHOR: By Emma O’Brien
PUBLISHER: Bloomberg
TEXT: MOSCOW — The ruble fell to the lowest level in more than two years against the dollar on Thursday as oil stayed below the average price needed to balance Russia’s budget next year.
Nine of 10 banks surveyed by Bloomberg News forecast the ruble will weaken next year as lower prices for crude, Russia’s biggest export, push the current account into deficit. Urals crude, Russia’s export blend, slid 6.6 percent to $61.81 a barrel on Wednesday, a 1 1/2-year low. The ruble stayed lower versus the U.S. currency after Standard & Poor’s revised the outlook on the country’s credit rating to negative, from stable.
“People seem to be pricing in a devaluation, the market is a bit too panicked,” said Tatiana Orlova, an economist in Moscow at ING Groep, which predicts the ruble may depreciate next year. “The oil price has a big impact on Russian asset prices.”
The currency, which the central bank manages against a dollar-euro basket, fell as much as 0.5 percent to 27.0664 per dollar, the lowest since July 2006. The ruble was 0.2 percent lower at 26.9721 by 5:50 p.m. in Moscow.
Trading in derivatives shows the ruble at a five-year low versus the dollar in three months time. It rose 0.2 percent to 34.5449 per euro.
Bank Rossii buys and sells foreign-currency reserves to keep the ruble within a trading band against the basket and limit the effect of its swings on the competitiveness of Russian exports. The basket rate is calculated by multiplying the ruble’s rate to the dollar by 0.55, the euro rate by 0.45, then adding them together.
Against the basket, the ruble was at 30.3880, from 30.3915 on Wednesday. The 30.40 level is regarded by most analysts to be the weakest end of the basket trading band.
Citigroup and Goldman Sachs, which sees oil at an average $85 a barrel next year, predict the ruble will lose as much as five percent versus the basket in the next 12 months. Danske Bank, one of the top five traders of ruble via its Finnish unit Sampo Bank, sees it at 28.90 per dollar and 31.20 versus the basket in the next year.
Russia had a $91.2 billion current-account surplus in the first nine months of the year, fueled by an average Urals crude price of $104.44 a barrel. The current account is the broadest measure of trade in goods and services. S&P reduced Russia’s outlook because of the cost of the country’s more than $200 billion market rescue package. It was cut from “stable,” the ratings agency said in an e-mailed statement.
Concern the central bank may allow a devaluation of the ruble is making banks reluctant to exchange the currency for dollars and is driving the rate at foreign-exchange kiosks to near 28 per dollar, said Vladimir Tikhomirov, chief economist in Moscow at UralSib Financial Corp. “There is growing demand for dollars both from institutional players like banks and the population.”
Three-month non-deliverable forward contracts have the ruble at 29.92 per dollar today, the weakest level since December 2003. NDFs are contracts used to fix a currency at a particular level at a future date. They are used by companies seeking to protect against foreign-exchange fluctuations.
Kudrin has warned speculators betting on ruble devaluation will be “disappointed,” and Prime Minister Vladimir Putin said Wednesday that Russians should think twice before converting rubles into dollars because it’s a “dubious” game, according to Interfax.
Bank Rossii sold $4 billion of international reserves Wednesday to prevent the ruble from weakening beyond 30.40, according to estimates by MDM Bank. International reserves fell $14.9 billion to $515.7 billion last week, the lowest level since April, Bank Rossii said Thursday. Almost all of that decline was due to interventions in the currency, said Nikolai Kashcheev, head of economic research at MDM.
The central bank said Wednesday reserves will probably fall $4 billion next year, compared with a previous forecast which had them rising between $58.9 billion and $120.6 billion, fueling speculation the central bank may be forced to allow the currency to fall.
“Everyone is surprised at how fast they’ve burned through their reserves,” Ulrich Leuchtmann, head of emerging-markets currency strategy in Frankfurt at Commerzbank, which rates itself among the top 10 ruble traders, said Monday.
In a bid to deter investors speculating on the ruble’s decline, Bank Rossii capped the amount traders can wager through currency swaps since Monday. The limit on these foreign-exchange swaps is 15 billion rubles ($556 million), from 25 billion rubles Wednesday.
Russian government bonds fell, with the yield on the 7.5 percent bond due 2030 rising 8 basis points to 10.94 percent, the highest for more than six years. 
The cost of protecting against a Russian default jumped 131 basis points to a record 1,078 points Thursday, according to CMA Datavision in London, above a level investors regard as distressed. Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a country’s ability to repay debt.

TITLE: Animal Lovers Claim Shelter Managers Will Abuse Dogs
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Volunteers from the St. Petersburg stray dog shelter Rzhevka are sending out an SOS now that the animal home is being taken over by new administrators who the activists say are allegedly responsible for running a “Buchenwald”-style concentration camp for dogs.
Buchenwald was a Nazi death camp where at least 56,000 people were murdered during World War II.
It has been announced that Ilyinka, a large shelter that receives grant funding from City Hall, will take over the management of Rzhevka, a dog’s home with 400 pets in its care. 
But a terrifying picture of cruelty emerges from the volunteers’ stories, as well as the pictures and videos that they allegedly secretly made in the Ilyinka shelter. It has no heating and broken windows covered with polythene, the dogs are starved, and, after death, their corpses are thrown in a nearby pond, the activists claim.
“Animals die of starvation and infections. The staff at Ilyinka do not provide any medical care for the pets,” a Rzhevka volunteer wrote on her blog. “The remains of the dead animals are thrown around the shelter or are dumped into a local pond.”
The volunteers sent a letter to the European Society of Animal Protection but the organization has not yet intervened.
St. Petersburg resident Alisa Vorobyova has contacted the Krasnogvardeisky District Prosecutor’s Office asking them to investigate the way in which the animals are treated at Ilyinka. 
“The illegal and torturous practices must be stopped immediately,” Vorobyova wrote in her statement to the prosecutors. “The outrageously poor sanitary conditions, and corpses of animals — many of them infected — being thrown around, is not only horrifyingly inhuman but also risks the health of nearby residents.”
“The deal for accepting a dog at Ilyinka is 500 rubles,” reads another blog. “First-time visitors who bring pets are typically greeted in a friendly manner. When they come back, a few days later to check on the animals, they are told the animals have been adopted and it is impossible to know who the owners are. They never find out that the dogs are simply dying.”
St. Petersburg currently has four shelters for stray animals, including Rzhevka and Ilyinka, but their facilities and resources struggle to cope with the number of stray animals in the city.
According to official statistics, of a total of over 250,000 dogs in the city, more than 10,000 are homeless. Independent experts estimate the figure is at least twice as high. According to the Baltic Care for Animals charity organization (BCA), between 4,000 and 6,000 dogs are killed every year by various local authorities.
Although City Hall adopted a sterilization plan for stray animals in 2005, funding has not yet been allocated to the program. Many environmentalists agree that sterilization is the most efficient and humane strategy for controlling the population of stray animals, especially in large cities like St. Petersburg. 
Activists are now collecting signatures against the merger of the shelters, as they fear for the fate of the animals. No official reaction has been provided.

TITLE: Donors Offer Georgia $4.5 Million in Aid
AUTHOR: By David Brunnstrom
PUBLISHER: Reuters
TEXT: BRUSSELS — International donors pledged a higher-than-expected $4.55 billion Wednesday to help Georgia recover from its war with Russia, and Washington called it an extraordinary sign of solidarity at a time of financial turmoil. 
The European Commission said the sum pledged at a one-day conference in Brussels included $3.7 billion in public loans and grants and $850 million from the private sector. 
“Four-and-a-half billion dollars far exceeds the expectations we had. ... At a time like this, to show such support is something that no Georgian will ever forget,” Georgian Prime Minister Lado Gurgenidze told a news briefing. 
The head of the U.S. government aid agency said it was a great show of support. 
“The message economically and politically is very strong for Georgia. At a time of financial turmoil, this is extraordinarily strong,” USAID administrator Henrietta Fore said. 
The United Nations and the World Bank had estimated that Georgia, a key energy transit route, would need $3.25 billion over the next three years to help tens of thousands of people forced from their homes and to repair and develop infrastructure. 
Russia sent in troops in August after Georgia tried to retake the breakaway, pro-Russian region of South Ossetia. Moscow has since withdrawn soldiers from Georgia proper, but the West accused Moscow of a disproportionate use of force. 
Russian bombing raids hit mainly military targets, but Tbilisi also reported damage to civilian infrastructure and risks to its economic growth and investment. 
The United States has offered at least $1 billion for rebuilding. 
The European Commission, the European Union’s executive body, promised up to 500 million euros ($642.8 million) through 2010. It said pledges from the EU’s 27 member states and the European Investment Bank brought the EU total to some 863 million euros ($1.1 billion). 
The European Investment Bank said it was allocating more than 200 million euros ($256.8 million) for loans to infrastructure projects for 2009 and 2010, including energy projects, rehabilitation of railways and reconstruction of the runway at Tbilisi airport. 
Japan’s parliamentary vice minister for foreign affairs, Yasutoshi Nishimura, said Japan would provide $200 million. 
Tbilisi said that last month international institutions had pledged a loan package of about $1 billion to help soften the impact of the conflict on the banking sector. 
Georgia had to scale down foreign investment forecasts, and last month the IMF approved a $750 million program aimed at rebuilding currency reserves and restoring investor confidence. 
European Commission President Jose Manuel Barroso said there was a moral imperative to help a neighbor in need, but it was also in the EU’s interest. 
“Any conflict on Europe’s borders clearly has implications for European security and stability,” he said. “This particular conflict also has potential costs for Europe in terms of our energy security and our diversification strategy.” 
Barroso noted that all of Georgia’s main energy transit routes had been disrupted during the conflict. 
Gurgenidze said about $2 billion of the pledges were in grants and $2.5 billion in loans. 
He said the long-term, low-interest loans were easily supportable given Georgia’s relatively low public debt.

TITLE: Yabloko Makes New HQ Appeal
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: The local branch of the liberal party Yabloko, evicted from its headquarters in central St. Petersburg, has appealed to local residents for help funding the renovation of their new home as the democrats desperately struggle to raise money.
“We have been forced out of our headquarters which we have occupied for the past fifteen years after Governor Valentina Matviyenko ordered that the premises be allocated to the House of Entrepreneurs,” said Maxim Reznik, head of the St. Petersburg branch of Yabloko. “Although according to the law, City Hall was obliged to provide us with an adequate replacement, the premises at 13 Shpalernaya Ulitsa are in a horrid state. Massive renovation is needed, and the sums such repairs would entail are much beyond our financial capabilities.”
The party’s former office, located at 46 Ulitsa Mayakovskogo in the historical city center, has recently become a haven for the city’s political opposition and a center of dissent. The office hosted a string of events challenging city authorities, from a hunger strike of local investors swindled in off-plan residential property developments to book presentations and news conferences featuring dissident politicians. 
Yabloko had been prepared for the bad news. The first signs that the party could lose its building came in May 2007. Alexander Shurshev, the party’s spokesman, said that City Hall’s Property Committee, which terminated the rental agreement with Yabloko, had been ignoring its attempts to prolong the deal for almost a year, leaving all letters and enquiries unanswered.
Yabloko’s previous 10-year contract with City Hall had expired in May 2006. 
Boris Vishnevsky, a member of Yabloko’s political council said the party sees the hand of Matviyenko behind the rent dispute, and the politicians perceive the eviction as a political act to exert pressure on the party, which has been critical of Matviyenko’s pro-Kremlin United Russia party. 
“We always paid our rent on time, and were careful and considerate tenants, so the authorities simply cannot fault us in this respect,” he said. “But what annoys City Hall is that our headquarters are among less than a handful of remaining venues where the opposition and people whose activities challenge the authorities can gather. The eviction has seriously damaged the activities of the civil society in the city.”
Yabloko was one of the key organizers of two Marches for the Preservation of the Historical Center of St. Petersburg [in September 2007 and September 2008], rallies against City Hall’s town-planning policies that activists say are threatening the city’s integrity and risk disfiguring the architectural landscape.
The St. Petersburg branch of Yabloko had in 2007 called for a city-wide referendum on the construction of a controversial new skyscraper for a headquarters for Gazprom, Russia’s energy giant. 
In December 2006, a group of Yabloko lawmakers from the St. Petersburg Legislative Assembly sent a letter of protest to the General Prosecutor’s Office, asking that the legitimacy of the architectural contest held to select the plan for the tower and the deal between the city and Gazprom be investigated. According to the law, the Prosecutor’s Office is obliged to answer a parliamentary enquiry within a month but no reply has been sent from Russia’s Prosecutor General Yury Chaika or his office.
These initiatives have irked City Hall and Matviyenko, who has thrown her weight behind the ambitious Gazprom tower project and other controversial construction plans.
A group of St. Petersburg politicians, human rights advocates, writers and scientists had campaigned against the eviction, and sent an open letter to Matviyenko, calling the decision to remove Yabloko from its premises “an act of utmost disregard to more than 100,000 citizens who voted for the party during the State Duma elections in December 2007.”
“We are convinced that finding a home for the House of Entrepreneurs does not need to come at such a devastating price,” reads the letter, signed by author Boris Strugatsky, lawyer Yury Schmidt, sociologist Boris Dubin and a group of thirteen lawmakers from the city’s Legislative Assembly. “The eviction of Yabloko is a truly unacceptable move.”
Matviyenko never responded to the letter.
Vishnevsky said, in view of the party’s financial plight, it is hard to  estimate when the new office can start functioning.
“The new office is not just bare walls, it is completely rundown,” he said.
www.spb.yabloko.ru

TITLE: City Sees Increasing Number of Domestic Tourists
AUTHOR: By Yelena Dombrova and Gleb Krampets
PUBLISHER: Vedomosti
TEXT: This summer, the flow of tourists visiting St. Petersburg increased by 5-10 percent, mainly due to a larger number of Russian tourists.
The summer was a successful period for local tourism companies working with incoming tourists, according to the vice president of the Russian Tourism Industry Union (RST), Sergei Korneyev. Sixty-three percent of firms on the market said their results for the season had been good, the RST ascertained through a survey conducted in September of representatives from 25 travel agencies, 15 hotels and four museums.  According to RST forecasts, almost 4.8 million tourists are expected to visit the city this year — four percent more than last year.
The market growth is the result of internal tourism, said Vladimir Dorofeyev, the general director of Versa travel agency. This season, the number of Russian tourists who used his firm increased by 15-20 percent. Korneyev said that St. Petersburg is a cheaper option for Russian tourists than for foreigners, since many of the former arrive by train and stay in mini hotels.
During the last season, the flow of Russian tourists visiting St. Petersburg grew by five percent, while the number of foreign tourists decreased, agreed the general manager of Azimut hotel in St. Petersburg, Alexei Dereglazov. Growth of 40-50 percent in the flow of incoming tourists from other regions of Russia was also recorded by Tatyana Rumyantseva, head of the domestic tourism sales department at Roza Vetrov travel agency. 
“There were some cases in which people chose to spend their holiday in St. Petersburg rather than Abkhazia,” she said.
The number of foreign tourists visiting the city this summer decreased by 15-20 percent, according to Dorofeyev.  
“They are still put off by the high costs of staying in St. Petersburg,” he said. 
Alexei Zhukov, director of incoming tourism at Aktis tour agency, said that a week-long trip to Russia can set European travelers back by 1,800 euros ($2,300).
The volume of tour groups visiting St. Petersburg has been decreasing for about five years, and this year’s high season was no exception, confirmed Leonid Isakovich, general director of Academservice. This year, numbers decreased by about five to eight percent, he said.  A decrease of several percent in incoming tourism to the city was also confirmed by Vladimir Ilin, general director of the German travel agency Olympia Reisen, which specializes in tourism to Russia.
390,000 people arrived in St. Petersburg by sea this year — 70,000 more people than in 2007, said Igor Glukhov, general director of Inflot Worldwide St. Petersburg.  Arktour Travel saw a 20 percent increase in customers from the previous year, according to the company’s general director, Yelena Malchonok. Cruises are more affordable for European and American visitors than arriving by plane, she added.
The financial crisis could benefit the local tourism market. Korneyev said that prices for services could fall. If hotel and transport prices in Russia fall, the volume of internal and incoming tourists could significantly increase, predicts Vladimir Kantorovich, vice president of the Association of Russian Tour Operators. 
Large hotels situated near the city center are most likely to reduce their prices, said Vladimir Ivanov, the general director of Oktyabrskaya hotel. He did not rule out the possibility of lowering prices at his hotel next year if the crisis drags on.
Sandra Dimitrovich, director of corporate communications at PR Rezidor Hotel Group, said that as a result of the crisis, her company, like others on the market, is currently drawing up its budget and reviewing its prices for next year.
Sergei Kovalyov, executive director of Inter-consult, said that the city’s five-star hotels would suffer the most as a result of the crisis. Prices for five-star hotel rooms could fall by 15-20 percent. 
“The cost effectiveness of such hotels is approaching 80 percent. In order to retain business travelers, whose volume is falling sharply, they will have to reduce their prices,” he said.

TITLE: Federal Budget Altered Amid Crisis
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russian lawmakers have amended the federal 2008-2010 budget and passed a package of measures designed to inject more money into financial markets amid the global credit crunch.
The government will allocate as much as 200 billion rubles ($7.62 billion) for the Deposits Insurance Agency and 175 billion rubles ($6.49 billion) to support Russian securities. The Agency for Housing Mortgage Lending, or AIZhK, will also get an additional 60 billion rubles ($2.2 billion) and Vnesheconombank, or VEB, will receive 75 billon rubles($2.78 billion). Budget priorities were shifted to prevent a rise in total spending.
The State Duma, the lower house of Russia’s parliament, passed the amendments in the third and final reading on Thursday with 388 of 450 members voting for the changes. Lawmakers also allowed the central bank to buy and sell securities and expanded the authority of the Deposits Insurance Agency to enable it to buy banks. The upper house and President Dmitry Medvedev must sign off on the measures before they become law.
The expanded power of the Deposits Insurance Agency “will allow the restructuring of the banking system and the purchase of banks that aren’t in a very good financial state,” First Deputy Prime Minister Igor Shuvalov said on Monday.
The government has pledged more than $200 billion to stem the worst financial crisis since 1998, including a banking liquidity boost worth $86 billion, following capital outflow. Slumping commodities prices, the war with Georgia and the seizing up of global capital markets prompted investors to pull at least $63 billion from Russia since Aug. 8, UniCredit SpA estimates.
The central bank estimated net private capital outflow may reach $20 billion this year, compared with the previous forecast of net inflow of $40 billion.

TITLE: FAS Rejects Google’s Bid to Acquire Begun
PUBLISHER: Bloomberg
TEXT: MOSCOW — Google, owner of the most popular search engine, said its bid to buy a Russian advertising agency was rejected by the country’s competition watchdog.
“We’re very disappointed,” Alla Zabrovskaya, a Russia spokeswoman for Google, said by phone Thursday from Moscow. Google will decide what steps to take after reviewing the ruling, she said.
Mountain View, California-based Google bid for Begun, a unit of Moscow-based search-engine operator Rambler Media, in July. The purchase would violate competition laws, the Federal Anti-Monopoly Service said on its web site Thursday. 
The acquisition would have boosted Google’s share of Internet advertising in Russia, the last European market where it lags behind a local provider, said Olesya Vlasova, a telecommunications and media analyst at UralSib Financial Corporation in Moscow.
“The government urged support for Russian Internet resources and said strategic assets shouldn’t be sold cheaply into foreign hands,” Vlasova said. “Yandex and Rambler are losing ground as Internet users switch to Google.”
Google agreed to buy Begun, which sells search and contextual text-based advertising services, for $140 million in July. Rambler, controlled by Russian billionaire Vladimir Potanin’s Prof-Media holding company, would have gained about $50 million after all costs associated with the transaction, which it planned to spend on further development and acquisitions.
At the same time, Rambler signed an agreement to use Google’s contextual and search advertising technology on its web site in exchange for displaying Google ads next to search results.
Rambler’s press office declined to comment immediately on the antitrust ruling.
Russia offers an untapped market for the Internet, with only about 11 percent of users logging on every day, nine percent using it several times a week and 10 percent using it from several times a month to at least once a year, according to a survey by the All-Russian Center for the Study of Public Opinion, or VTsIOM. The number of Internet users has risen by seven percentage points from two years ago, according to the survey of 1,600 respondents conducted in the past month.

TITLE: In Brief
TEXT: <b>Integra Applies for Loan</b>
MOSCOW (Bloomberg) — Integra Group, Russia’s first London-listed oilfield services provider, applied for $300 million in loans through the European Bank for Reconstruction and Development to refinance debt and purchase equipment.
The EBRD may provide $75 million, while the rest would be provided by a group of banks, according to a statement on the bank’s web site. 

<b>VEB to Help Out VTB</b>
MOSCOW (Bloomberg) — VTB Group, Russia’s second biggest lender, may receive a $3.7 billion subordinated loan this week, Interfax reported, citing the head of the nation’s state development bank.
The loan to VTB, along with a $928 million loan to agriculture bank Rosselkhozbank, will be made “very soon,” Vnesheconombank Chairman Vladimir Dmitriev was quoted as saying.

TITLE: Russia’s Top Economist Needs to Face Reality
AUTHOR: By Anders Aslund
TEXT: On Friday, the government reported that growth in gross domestic product for September slowed to 0.4 percent. On Monday, however, Prime Minister Vladimir Putin claimed that Russia, Brazil, India and China “will remain the locomotive of the world economic growth for the next few years.”
On Sept. 3, I wrote in this column, “A sudden zero growth would not be surprising, and leaders like Putin are not prepared to face reality.” Now zero growth has already been achieved but Putin remains in denial, even though as prime minister he is the chief economist in the country.
In fact, Russia will be lucky if it faces nothing worse than stagnation. A substantial decline in GDP next year is an acute possibility. Do not believe all these forecasts that as recently as a month ago predicted 6 percent or 7 percent growth next year. Each forecast is lower than its predecessor. Let us instead discuss the forces at hand.
As elsewhere in the world, the Russian banking system has frozen up because of rising international interest rates and an elimination of trust. Central Bank Chairman Sergei Ignatyev said two weeks ago that he expected 50 to 70 banks to go under. Others fear more than 200 banks might collapse. That would keep the credit market frozen for quite some time and lead to a contraction of loans, regardless of what the Central Bank does.
The second blow has already hit real estate development, a sector that is particularly dependent on credit. Investment is still increasing, but the growth rate has declined to 8 percent from 24 percent during the same month a year ago in September. You can see for yourselves how many cranes are standing still at construction sites in Moscow, and most large real estate and construction companies are considered to be on the verge of bankruptcy. Their stock prices have fallen 82 percent this year. If construction is halved, that alone would reduce GDP next year by nearly 3 percent.
The third strike has hit commodity prices. Since their admittedly brief, sharp peak in July, both steel and oil prices have halved because of the sudden slowdown in the world economy. In addition, energy production is already stagnant, and export volumes are declining. Russia’s crude oil exports fell by 5.9 percent during the first eight months this year. Steel exports are set to plummet, as China has turned from a steel importer to a major exporter. Domestic demand will decline with construction. Commodities, which represent roughly a quarter of Russia’s GDP, cannot possibly expand next year. But they may contract somewhat, especially steel production and construction materials.
But what will grow? Retail sales have already been hit. Transportation will stagnate with the commodity sector. Public services can hardly expand because the state budget will go into a deficit with the falling oil revenues. Some import-substituting manufacturing — notably car production — and modern services, such as mobile communications, may continue to grow but these are likely to be the exceptions.
This year, Russian exports are expected to reach $500 billion, of which slightly over 80 percent consists of commodities. If next year the average export prices of commodities are little more than half of this year’s prices and volumes are only moderately smaller, Russia’s exports would shrink by no less than 40 percent, or $200 billion, which amounts to a staggering 12 percent of GDP. JPMorgan is already predicting a decline in Russia’s exports by $89 billion, which is surely only the beginning.
Naturally, this is nothing but a tentative picture painted with a broad brush. But who thinks that the bank sector will not seize up again or that commodity prices will recover? 
If anything like this were to happen, Russia’s GDP would fall by 5 percent or more next year. The outcome might not be that bad, but it is much more likely than 6 percent growth, which most forecasters still predict.
A recent International Monetary Fund study shows that the average cumulative GDP decline in a combined banking and housing crisis is 5 percent. 
For example, Finland lost 11 percent of its GDP from 1991 to 1993. Moreover, a serious financial crisis usually lasts three or four years. But the current crisis is the worst the world has seen since 1929, and its reach is truly global. If anything, we should expect a substantially larger fall in output. And, as is usually the case, commodity producers get hit much harder than other sectors in a downturn. It is highly likely that Russia’s total decline over the next two or three years will exceed 10 percent.
Putin is correct when he claims “that our economy is rather well prepared for lengthy external shocks.” But that is not enough. Thanks to Finance Minister Alexei Kudrin’s extraordinary steadfastness, Russia has maintained a large budget surplus and held huge reserves at the outset of this crisis. But $70 billion of the reserves have already fled the country and more will follow.
A crucial shortfall is that the government exploited the 1998 financial crisis to establish a dominance over the banking system by strengthening the position of five state banks, which still hold 45 percent of Russia’s banking assets. The problem with state banks is that they are inefficient. Therefore, the country suffers from very poor financial intermediation.
Putin seems set to aggravate this problem. The first large state support went to big state banks, which acted in their own interests rather than in the national interest. The money was not passed on to other banks. Businesspeople and newspapers tell stories about a number of “red lists” of favored businesspeople who are supposed to get certain amounts of money from the state because they have the right connections. 
So far, everything suggests that Putin is intent on using this financial crisis to carry out a huge renationalization program. Bad cases from Britain and the United States are certainly helpful for him. To his credit, Alexander Shokhin, chairman of the Union of Industrialists and Entrepreneurs, has sharply criticized the state-oriented, ineffective government support.
Yet, I doubt that Putin can repeat the large bank nationalization of 1998 under then-Central Bank Chairman Viktor Gerashchenko. The amounts needed to prop up the economy and recapitalize the banks are truly monumental. Russia’s stock market losses have reached $1 trillion, while the stabilization fund is only $180 billion. That money will be too badly needed to be used for harmful renationalization.
But here is another way of trying to solve the crisis. It is called liberal market reform. As Russia’s veteran reformers Yegor Gaidar and Yevgeny Yasin long have explained, low oil prices are good for reform. The same is true of financial crises.
Russia’s economic problems are so severe that the country cannot survive the crisis without profound structural reforms.

Anders Aslund, a senior fellow of the Peterson Institute for International Economics, is the author of “Russia’s Capitalist Revolution: Why Market Reform Succeeded and Democracy Failed.”

TITLE: Keys to success
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Learning to play the piano was originally anti-stress therapy for blind Incan musician Hwaen Ch’uqi but his talent has made him a recognized globe-trotting performer, most recently the winner of a special prize at the Second International Sviatoslav Richter Piano Competition in Moscow in June.
Friday sees Ch’uqi appear at the Shostakovich Philharmonic in a program of Haydn’s Piano Sonata E major, Bach’s Goldberg Variations, Franck’s Prelude, Choral and Fugue H minor and his own piece “Loss.”
Born in Lancaster, Peru, Ch’uqi was abandoned by his parents and later adopted at the age of five by George and Inez Tomlinson, who took the boy to the U.S. and introduced him to the piano.
“There were some deeply personal traumas in my early childhood that I could not easily communicate to anyone so I found my comfort in sharing the emotions with the instrument, confiding them to the piano,” Ch’uqi said.
Ch’uqi’s concert is being arranged by the Musical Collection concert agency. 
“We spotted him at the Richter competition and his performance made such a profound emotional impact,” agency artistic director Yekaterina Artyushkina said. “I felt we absolutely must introduce this musician to Russian audiences. This is true talent, a genuine diamond that you so rarely see.”
“The musician could not advance to the third round owing to physical limitations: in the final round you have to perform with the orchestra, and Hwaen would not be able to look at the conductor,” Artyushkina added. “For this reason, the jury could not award him a Grand Prix but they have established a special prize for Ch’uqi — which they do not normally do — and the Richter Foundation has become a patron of the musician.”
Ch’uqi had his first piano lessons from Cindy Wittenberg of the “Silver, Wood and Ivory” ensemble on a Suzuki piano stipend. Eventually the musician moved on to study under the emigre Russian professor Natalya Antonova at the respected Eastman School of Music in Rochester, New York. 
When Ch’uqi listened to his first-ever classical work — a recording of Brahm’s Second Piano Concerto — he found it impossible to believe he was hearing a lone musician playing a single musical instrument. “Inca folk music is performed by many people, and listening to the concerto gave me a similar impression,” he said. “I imagined many voices, and it gave me a shock to learn that all this wealth of sound can be produced by just one instrument.”
Russian influences — from Shostakovich to Prokofiev to Rachmaninov — can be traced in Ch’uqi’s own music, and he favors the Russian repertoire as much as Bach. Musically, there is a Peruvian connection too, yet it is not an obvious one.
“When one thinks of Inca folk music they mean primarily the pentatonic scale  [musical scale with five pitches per octave in contrast to the traditional heptatonic, or seven note, scale],” Ch’-uqi said. “This does not apply to my works. The Inca culture affects my music in a different way. The Inca folk music tradition of many people’s voices — or many musical lines — creating a single beautiful and harmonious piece of music is very close to me, and therefore I always wanted to compose with the use of counterpoint, which is really a similar idea.”
In his leisure time Ch’uqi is learning to play banjo and an Inca folk instrument, the reed quena — a kind of flute.
As a blind pianist, Ch’uqi did not have a model to follow and was probing his way with the use of his senses. “Inca are very sensitive people, and many of them have a gift for music and the arts,” he said. “Feeling this connection was an enormous help.”
The pianist learns a new score either from the notes from the collection of the U.S. Library of Congress, which has a Braile section, or through hiring a reader. “I usually learn one large movement from a sonata — or two shorter ones — in one day,” he said. “But works like, for example, the Goldberg variations, would take several months.”
Ch’uqi’s most admired pianist is Richter, and a meeting with the great Soviet pianist — who died in 1997 aged 82 — was always his sacred dream. 
“I still remember the day when Richter died and the way I felt; my devastation at the loss of a genuis,” Ch’uqi remembers. “Richter has a unique distinct performing style: after the first touch of the instrument I always immediately know that it is him playing. He produces such a grand, broad picture, such a wonderful musical landscape. I really want to learn his sound.”
What especially appealed to the musician about the Richter Piano Competition was that he saw numerous references to Richter’s life and career in music.
“The bottom [age] limit for the participants is set at 23 years old — while there is no top limit at all — and Richter’s performing career in piano started relatively late,” Ch’uqi explains. “The festival also encourages the participants to perform their own music — a nod to the fact that Richter had been interested in composing and conducting before choosing to settle on the piano.”
As he noted in a recent interview, when describing his physical condition, Ch’uqi uses the words “I am unable to see” rather than saying he is blind.
“I much prefer these simple words to a broad spectrum of stereotypes which is often associated with words, ‘blind,’ ‘visually impaired’ and so on,” he said. “These days, I frame the events surrounding my condition in the grander context of being an Inca; a point of which I am truly proud.”
“I really wish that all people — regardless of whether they are blind or have a perfect eyesight — learn to see their own potential in life,” Ch’uqi said. “Many of us never become aware of the hidden talents that they have.” 
www.philharmonia.spb.ru

TITLE: Shock tactics
AUTHOR: By Katya Panfyorova
PUBLISHER: Special to The St. Petersburg Times
TEXT: A slap in the face of St. Petersburg’s conservative theater scene takes place Friday at the Priyut Komedianta Theater with a new production of British author Mark Ravenhill’s notorious 1996 play “Shopping and F**king.” 
The plot centers on several sentimental Brits in their early 20s. They live, love, dream, shoot up, sniff, dance, cry and sell drugs and sex in a search for meaning in a commercialized world. 
The posters warn the play is for “over-18s only” and its delirious humor, spine-tingling dialogue and liberal use of the f-word — which needs no translation for Russian ears — make for a challenging performance.
The play was first produced in Russia in 1999 when it was directed by Olga Subbotina at the Center of Drama and Directing in Moscow. Sergey Shipitsyn, who is directing the new St. Petersburg production, said: “The characters are maximalists; they have sold out their lives. They shop, but its play-shopping they don’t believe in.”
The play begins when the character named Mark — the characters share the names of the members of Take That, plus singer Lulu who once sang with the British one-time boyband — vomits in front of his friends. The image is anti-consumerist, and typifies the discomforting themes of the whole play. “Civilization is money” and even the Bible begins with money instead of light, according to the caustic sarcasm of the play. In this world, one can buy food, joy, sex, life and death. Is this the course of nature?
“Shopping and F**king” is ready to answer this question on Friday, Saturday and Sunday.
www.pkteatr.ru

TITLE: Purple reign
PUBLISHER: The St. Petersburg Times
TEXT: As Deep Purple arrives in town this week on its 40th Anniversary Tour, their former bassist and background vocalist also comes to St. Petersburg to perform a separate show at a smaller venue. Glenn Hughes played with British veteran hard-rockers for a few years in the 1970s but remains linked to the band in the Russian imagination. Writing on his site Wednesday, Hughes said: “Gettin’ funky tonight in Rostov! Travellin’ this vast country has been wild.” 
Meanwhile, the current incarnation of Deep Purple has played concerts in Perm and Novosibirsk this week and squeezes in appearances in Kazan and Moscow before its St. Petersburg gig. The band goes on to appear in 13 German towns and cities in November.
Deep Purple reemerged this year when Russian President Dmitry Medvedev declared that the purveyor of such hits as “Lady Double Dealer,” “The Gypsy,” and “Soldier Of Fortune” is his favorite band. They took a slice of Russian oil money in February when they performed alongside semi-retired 68-year old Tina Turner at Russian energy behemoth Gazprom’s 15th birthday party in the Kremlin. “This is simply surreal,” Medvedev was reported as saying. “I started listening to Deep Purple when I was 13. At that time their music was banned. I never would have imagined meeting the famous group in the Kremlin Palace.” 
When Medvedev was 13 in 1978, Deep Purple had already disbanded. The band reformed in 1984.
In an article he wrote for The Times afterwards, vocalist Ian Gillan went on about how big Deep Purple are in Russia and wrote a little about meeting Medvedev after the show. 
“When we met Medvedev he had this stupid grin on his face because he was meeting his favorite band,” he wrote. “We had a nice chat, but we didn’t talk about politics.” 

Deep Purple will perform at the Ice Palace on Tuesday. Glenn Hughes will perform at Lensoviet Palace of Culture on Monday. www.glennhughes.com, www.deep-purple.com

TITLE: One for the road
AUTHOR: By Kaleb Hsing
PUBLISHER: Special to The St. Petersburg Times
TEXT: Tucked away towards the end of Bolshoi Prospekt on Vasilievsky Ostrov is the restaurant and bar Grossen Strasse, which is German for “big road” (i.e. bolshoi prospekt). A short walk away from the Baltiisky mall, this is the spot to dine and unwind after an industrious day, or to simply enjoy a soccer game over a few beers. 
Stepping into the comfy abode instantly mutes the rumpus and racket of the streets, with smooth jazz and velvety lounge music flowing freely. Red brick walls are littered with 60s beer advertisements circa Norman Rockwell, complimented by lofty pine tables and comfy divans. A large flat screen TV sits on a wall in the first room and a corridor leads to another where a full bar sits next to the kitchen. A myriad of alcoholic beverages sit on the mirrored shelves behind a row of taps advertising an international selection of beer from Guinness to Kilkenny to Hoegaarden and Budweiser — there are more than enough choices to accompany the game or your meal. A third of a litre of Hoegaarden is priced at 132 rubles ($5) while half a liter costs 200 rubles ($7.50). 
The menu boasts an extensive selection of European cuisine, with house specialties such as Grossen Chicken (220 rubles, $8.50) and Fish Fusion (350 rubles, $13.50). The latter was a delightfully refreshing combination of juicy salmon and sauteed fresh haddock, drenched in a cheesy cream-based sauce, with a side of plum tomatoes grilled to perfection and served sizzling on a hotplate. This luscious melange is bound to please the palate of any seafood enthusiasts. 
But if you are not a fish fan, try the Grossen Chicken, which comes highly recommended by the waitress. Consisting of tender grilled chicken, the heart of each piece conceals grilled mushrooms, bacon and cheese — a gratifying compliment to the generously served and buttery rich mushroom sauce. Several pieces of artistically carved cucumber accompanied this dish, which would be ideal for a late lunch.
If soup or salad sounds more appetizing, try the Solyanka(150 rubles, $5.50) or Chef Salad (180 rubles, $7). With diced ham, salami, caramelized onions and tomatoes, topped with a dollop of sour cream in a thick broth, Solyanka is a Russian comfort food that never gets old. And the salad was magnificently presented with crispy lettuce leaves and diced honey glazed chicken engulfed in a dizzying medley of ruby pomegranate seeds, crimson tomatoes, syrupy pineapple cubes and a lavish sprinkle of cayenne pepper. It is undoubtedly a visual and gastronomic winner.
To round off the meal, two desserts were ordered: Chocolate Cheesecake (160 rubles, $6), and Apple Strudel (160 rubles, $6). The first was a sinful concoction with a mild, light bite characteristic of French cheesecakes, topped with a rich layer of dark chocolate and unsparingly drizzled with chocolate syrup. 
The strudel, baked with apples, and pears, and spiced with cinnamon and raisins, guarantees to warm you up from the inside — an ideal remedy against bitter autumn weather. 
With starters from 100 to 200 rubles ($4-$7.50) and main courses from 200 to 300 rubles ($7.50-$12), Grossen Strasse offers a bargain for the portions served and a wait time of about 10 minutes after ordering. Its casual atmosphere fosters tete-a-tetes to boisterous congregations on game nights. Propagating the laid back ambience, the restaurant bar offers students with IDs a week-long discount of 30 percent from noon to 5 p.m.

TITLE: Philadelphia Wins Game 1 in World Series
PUBLISHER: The Associated Press
TEXT: ST. PETERSBURG, Florida — Ryan Howard reached into the stands, stuck his glove into a cluster of fans and caught a foul pop for a key out. 
Yes, Tropicana Field was filled with World Series rookies on and off the field.
The glamorous teams all eliminated, the Philadelphia Phillies and Tampa Bay Rays opened a most unexpected World Series on Wednesday night. Cole Hamels escaped trouble to win his fourth postseason start, Chase Utley hit a two-run homer in the first inning and the Phillies beat the Tampa Bay Rays 3-2.
While the City of Brotherly Love celebrated, the worst-to-first Rays might as well have been plopped into the fish tank in right-center, flopping in their first game in baseball’s ultimate event. They managed just five hits — none after the fifth inning.
“If you want to take the wind out of the sails,” Phillies manager Charlie Manuel said, “you shut the cowbells up and get some home runs. That will do it — except in Citizens Bank Park. If you hit enough there, they ring a bell. They ring the Liberty Bell.”
Both teams have a history of losing — the Phillies long-term and the Rays in the short run. But while the Red Sox, Cubs, Dodgers, Yankees, etc., are gone, these teams filled with young, hungry players have made it to the top.
Philadelphia will try to make it two in a row at Tropicana Field when Brett Myers pitches against James Shields in Game 2 Thursday night. The team that won the opener has captured the Series 63 of 103 times, including 10 of the last 11. But the team with home-field advantage has taken 18 of the last 22 titles.
“It’s huge,” Phillies closer Brad Lidge said. “You try and downplay it, but obviously you’re coming into a place like this, you want to make sure you get the first game, especially because you got your ace on the mound. It’s really important to do that.”
It seems the rust versus rest debate as been around almost since, well, the Lincoln-Douglas debates.
Philadelphia had six days to reflect and relax after winning the National League pennant. 
The Rays had two days to recover after beating Boston in Game 7 for the American League title on Sunday night.
“I don’t think it threw off our timing too much,” Utley said of the layoff. “I think tomorrow we should definitely be more back on track.”

TITLE: Murray Wins In City Open
PUBLISHER: The Associated Press
TEXT: Defending champion Andy Murray beat Viktor Troicki 6-3, 6-3 Wednesday to reach the second round of the St. Petersburg Open, and Nikolai Davydenko pulled out because of a wrist injury.
The sixth-ranked Russian was hurt Tuesday and said he was unlikely to play in Paris next week.
“Even if the inflammation and pain pass, I will have no time for preparation,” Davydenko said.
Davydenko said if there was no pain by the end of the next week he would have two weeks to get ready for the season-ending Masters event in Shanghai.Murray, fresh from winning the Madrid Masters on Sunday for his fourth title this season, broke Troicki in the fifth and eighth games of the first set. The fourth-ranked Briton had an early break in the second set and saved the only break point he faced in the eighth game.
“He made a lot of mistakes on his forehand today,” Murray said. “I haven’t seen him play so much, so I didn’t really have too may tactics, but for my game I tried to serve well and change the speed of the ball a lot.”
It was the eighth consecutive win for the U.S. Open finalist, including two victories in Britain’s Davis Cup World Group playoffs against Austria in September. Murray next plays Ernests Gulbis of Latvia.