SOURCE: The St. Petersburg Times
DATE: Issue #1424 (88), Tuesday, November 11, 2008
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TITLE: With Crisis Comes New
Devaluation
Anxieties
AUTHOR: By Emma O’Brien and Ye Xie
PUBLISHER: Bloomberg
TEXT: Russia’s currency reserves, the third-biggest in the world, are no match for tumbling oil prices and an exodus of capital that may force the central bank to accept a devalued ruble, analysts suggest.
Just 10 years ago, Russia let the ruble fall as much as 71 percent as the government defaulted on $40 billion of debt and world stock and bond markets collapsed. Now, the combination of a 61 percent drop in oil prices from their peak in July, slowing economic growth and increasing investor concern about emerging markets are draining Russia’s foreign reserves, which fell 19 percent to $484.6 billion in the 12 weeks through Oct. 31.
Russia, which uses reserves to curb swings in the ruble that hurt the competitiveness of exports, may find the resistance futile after the currency fell 13 percent against the dollar since Aug. 1. The central bank sold a record $40 billion in October, according to Moscow-based Trust Investment Bank. Troika Dialog, the country’s oldest investment bank, said the currency may slump as much as 30 percent in the event of a devaluation.
“When oil falls, capital runs out of Russia and the ruble weakens, it’s not justified to hold your positions,” said Anas El Maizi, who oversees $342 billion in fixed-income assets in Paris at Axa Investment Managers, a unit of Europe’s second- largest insurer. “If oil stabilizes at this level, Russia will have some trouble.” Axa cut its Russian bond holdings in August.
Bank Rossii, the central bank, may “gradually” widen its ruble trading band if the current account falls into a deficit next year, Arkady Dvorkovich, an economic adviser to President Dmitry Medvedev, said Friday. Goldman Sachs Group said the comment marked a “departure from the previous party line.”
The ruble rose 0.2 percent to 26.9690 per dollar as of 11:08 a.m. in Moscow, from 27.0304 on Friday. Against the euro, it dropped 0.5 percent to 34.5459, from 34.3773.
When Russia defaulted in August 1998, it caused an investor stampede to the safest assets. Yields on 10-year U.S. Treasury notes dropped more than half a percentage point to 4.98 percent that month and the Standard & Poor’s 500 Index slumped 15 percent. Hedge fund Long-Term Capital Management LP collapsed after losing about $4 billion, prompting a Federal Reserve- backed bailout by Wall Street. Gross domestic product in Russia shrank 6.5 percent and inflation accelerated to 84 percent.
Since then, rising prices of oil, gas and metals such as nickel and aluminum provided Russia with 10 years of economic growth under former President Vladimir Putin and his hand-picked successor, Medvedev. Foreign reserves grew to $598.1 billion in August, the world’s biggest behind Japan’s and China’s, from $18.4 billion just before the 1998 default.
With average economic growth of about 7 percent a year since 1999, rising commodity and stock prices created more than 100 Russian billionaires, including aluminum magnate Oleg Deripaska and soccer club owner Roman Abramovich. 
Russia’s current account, the widest measure of flows in goods and services, is now headed toward a deficit. Investors pulled at least $140 billion out of the country in the past three months, according to BNP Paribas SA, sending the dollar-denominated RTS Index of stocks down 61 percent.
The benchmark 30-year government bond slumped in 2008, pushing the yield to an almost seven-year high of 12.55 percent on Oct. 27. So far this year, the RTS Index lost 67 percent, headed for the worst performance since 1998.
“With the oil price falling we were concerned that the trajectory of Russia’s reserves had changed from building them up to selling them,” said Kieran Curtis, a fund manager in London at Aviva Investors, which cut Russian holdings in August from the $787 million of emerging-market assets it has under management.
Russia is poised to grow 7.7 percent this year, the Economy Ministry said Oct. 29, down from 8.1 percent in 2007. Gross domestic product will expand 5.4 percent in 2009, according to a Bloomberg survey of 14 economists.
The combined wealth of Forbes magazine’s 25 richest Russians fell more than 50 percent in four months, based on the equity value of stocks and analysts’ estimates.
Bank Rossii, headed by Chairman Sergey Ignatiev, began managing the ruble’s exchange rate in February 2005 against a currency basket comprised of about 55 percent dollars and 45 percent euros. Policy makers let it trade within a fixed range in mid-May. Since then, it has dropped 2.2 percent against the basket to 30.39. Though the central bank doesn’t reveal the limits of the band, BNP Paribas considers 30.40 to be its weaker end.
“You can’t stimulate a slowing economy by keeping the currency fixed,” said Lars Christensen, head of emerging- markets currency strategy in Copenhagen at Danske Bank A/S. “They will have to change their attitude to using reserves for the sake of the economy.”
Dvorkovich increased speculation that Russia will reduce its interference in foreign exchange last week when he told reporters in Moscow a “prolonged” period of deficit in the current account may prompt policy makers to “gradually” widen the trading band.
The current account, now at a surplus of $91.2 billion, may swing into a deficit as early as next year, though there will be no “sharp devaluation” in the ruble in 2008 or in 2009, Dvorkovich said.
“These remarks mark a departure from the previous party line among top officials that there was no reason for the ruble to depreciate,” Rory MacFarquhar, a senior economist at Goldman Sachs in New York, wrote in a note Friday. “They confirm our view that there is a strong political preference for gradual depreciation over a steep devaluation, even though the central bank would prefer the latter approach.”
Urals crude, Russia’s export oil blend, rose to an all-time high of $142.94 a barrel in July. For the past three weeks, it has averaged $61.74, below the $70 mean price that Finance Minister Alexei Kudrin said in September the government will need to balance its budget next year. It traded at $57.08 today.
“Without an increase in oil prices or an improvement in the capital account of the balance of payments, the central bank will eventually have to devalue,” Evgeny Gavrilenkov, Troika Dialog’s Moscow-based chief economist, wrote on Friday. An average price for Urals crude of $60 a barrel “would imply a devaluation of the ruble against the bi-currency basket by 25 to 30 percent,” he said.
Russia’s reserves are 25 times bigger today than what they were on the eve of the default, central bank data shows. The world’s biggest energy exporter, Russia still earns $700 million a day from oil, compared with $100 million 10 years ago, according to Chris Weafer, chief strategist in Moscow at UralSib Financial, Russia’s biggest privately owned bank.
“The market is getting overly bearish,” said Michael Ganske, head of emerging-markets research in London at Commerzbank AG. “This is a temporary phenomenon and the ruble will stay stable until investors realize the value.”
Brazil, Russia, India and China, the so-called BRIC nations, plan coordinated measures to increase trade and capital flows between their economies, Kudrin said in a Saturday interview in Sao Paulo. Russia, the world’s second-biggest oil producer, will also pursue an “independent” strategy on production, ignoring the Organization of Petroleum Exporting Countries’ moves to cut output, he said.
While Russia’s plight 10 years ago reflected an economy emerging from communist control, the turmoil today is part of a crisis hurting nations worldwide as a shortage of credit prompts investors to sell higher-yielding assets in favor of the safest securities.
OAO Gazprom, Russia’s natural-gas exporter, said Oct. 22 it may have trouble getting new loans and refinancing debts even after posting record earnings. OAO GMK Norilsk Nickel, the world’s largest producer of the metal, posted a 33 percent decline in first-half earnings on Oct. 3 as demand slumped.
Russians are taking note. Svetlana Malyarevich, a Moscow- based accountant, says she considered changing some of her savings into foreign currency after people in her office said the ruble might slide to 40 per dollar.
“People who have ruble accounts understand that their savings decline if the dollar rises,” the 36-year-old said. “The security of my money is directly dependent on the economic situation in Russia.”

TITLE: EU, Russia Get Ready to Mind Fences
PUBLISHER: Reuters
TEXT: BRUSSELS — The European Union edged closer to agreeing to restart talks with Russia on a partnership pact on Monday after Britain and Sweden backed the move despite their concerns over Moscow’s troop presence in Georgia.
Their decision, which followed acknowledgements by Lithuania and Poland that they could not block such a move, made it more likely that an EU-Russia summit on Friday will give the green light for negotiations frozen by the EU in September after the war between Russia and Georgia.
EU states have been grappling with the issue for weeks, with Britain and Sweden among a minority of countries with reservations about relaunching the negotiations on the key pact.
“To have a relationship with Russia that has a framework is better for the EU,” EU foreign policy chief Javier Solana said as foreign ministers met on the matter in Brussels.
The foreign ministers of Britain and Sweden said they backed a resumption as it was in the interests of the 27-state bloc. “We are not turning the page on the conflict in Georgia,” Britain’s David Miliband and Sweden’s Carl Bildt said in a statement, adding that they would ask their EU counterparts that the EU-Russia relationship be kept under regular review.
“There is no question of the EU rewarding bad behavior. What we’ve seen is some movement from Russia, some significant movement, but not yet a complete withdrawal,” Miliband said of the peace deal to end the conflict over the breakaway South Ossetia and Abkhazia regions of Georgia.
The proposed EU-Russia pact covers political, trade and economic ties between the bloc and its major energy supplier.
The Kremlin has been markedly less enthusiastic than the EU about the arrangement, traditionally preferring to deal with European states individually.
But Russian Foreign Minister Sergei Lavrov welcomed signs that the EU wanted to return “to work as ‘as usual’” with Russia.
“We...express our wish to turn the page and increase mutual activities,” he said in an interview with Finnish newspaper Helsingen Sanomat, released by Russia’s foreign ministry on Monday.
“We want durable, long-lasting and close relations with the EU as a strategic partner,” Lavrov said. 
“From our side there are no obstacles to full development (of ties) in all spheres.”
Lithuania, with some backing from Poland, has argued that Russia has not met all the commitments imposed on it by a French-brokered ceasefire.
Georgia said full Russian compliance would require Moscow to withdraw forces from Akhalgori and Kodori Valley areas and reverse its military buildups in Abkhazia and South Ossetia.

TITLE: Reports: Deadly Submarine Was to be Leased to India
PUBLISHER: The Associated Press
TEXT: MOSCOW — India’s navy was supposed to lease the brand-new Russian nuclear submarine that suffered an accident over the weekend which killed 20 people, news reports said Monday.
An Indian naval spokesman would not comment Monday on leasing this or any submarine from Russia — but his boss had said previously that India was interested.
The Akula-class sub was undergoing trials in the Sea of Japan when its fire-extinguishing system activated in error, spewing Freon gas that suffocated the victims and injured 21 others.
Russia’s navy said the submarine itself was not damaged in Saturday’s accident and returned to its Pacific coast port Sunday under its own power.
Russia’s top business dailies Kommersant and Vedomosti reported Monday that the Nerpa was to be handed over to India’s navy next year under a 10-year, $650-million lease.
India previously leased a nuclear-powered submarine from the Soviet Union in 1988-1991, and India’s navy chief, Adm. Sureesh Mehta, was quoted as saying that India was negotiating with Moscow to lease two Russian nuclear submarines, the first of which could arrive next year.
Armed with cruise missiles capable of hitting targets 3,000 kilometers away, Akula-class subs are considered the quietest and deadliest of Russian attack submarines. A sub of that class could unsettle the military balance of power in Asia, dramatically bolstering India’s navy capability as it jockeys with China for influence over energy supply routes in the Indian Ocean.
Phone calls to China’s defense and foreign ministries seeking comment rang unanswered Monday night.
Vedomosti quoted an unidentified shipping industries official as saying the sub was intended for India’s navy, which has already named it the Chakra.
Indian naval spokesman Commander Nirad Sinha would not confirm whether the Nerpa was to be leased and said no Indians were on board the submarine when the accident occurred.
“It’s a Russian submarine, and any concerns are Russian concerns,” Sinha told The Associated Press.
Indian news reports said Monday the submarine was to join the southern Asian country’s navy in August. The Indian Express newspaper also reported that Indian sailors had been scheduled to head to Russia later this month for on-board training.
Kommersant, meanwhile, quoted an unnamed shipyard official as saying the delivery of the submarine to India, originally set for August 2007, had been postponed twice already.
As investigators tried to determine what activated the firefighting system, Russian naval experts said overcrowding and human errors may have contributed to the accident.
The Nerpa had 208 people on board when the accident occurred, including 81 seamen, according to the navy. Akula-class subs normally carry a crew of 73.
Retired submarine Capt. Alexander Pokrovsky said in a commentary that sea trials often pose increased safety risks.
Pokrovsky also criticized Freon-based fire-extinguishing systems, saying they are dangerous for the crew and need to be replaced with safer equipment.
Individual breathing kits should have saved the crew, but some former submariners said civilian shipyard workers usually have little experience in using them. Seventeen of those killed in the accident were civilians, the Russian navy said.
“Civilians were supposed to undergo training, but it usually is pretty informal,” said Igor Kurdin, who heads an association of former submariners. He speculated the fire system could have been triggered by something as simple as someone smoking a cigarette near a safety gauge.
Some commentators also speculated there might not have been enough individual breathing kits for all those on board during the test.

TITLE: Putin Promises Action On Economic Meltdown
AUTHOR: By Anatoly Medetsky
PUBLISHER: Staff Writer
TEXT: MOSCOW — Prime Minister Vladimir Putin has signed off on a program to help the Russian economy battle the global financial crisis as part of a promised shift of focus from the banking sector and stock exchanges to the country’s real economic sector.
The plan, published Friday, includes placing Central Bank representatives within the management of the country’s biggest banks to ensure that state money reaches its intended targets and will see state-controlled corporations investing more rigorously in the economy.
Putin said during a meeting Friday with senior members of the United Russia party that he heads, that he had signed off on the plan the day before.
“I am confident that the faster we set into motion new factors for economic development and growth, the more confidently we will pass through the period of global instability,” Putin said.
United Russia will be called on to pass the necessary laws for a number of the measures — a mere formality given the pro-Kremlin party’s overwhelming majority in the State Duma — and will also play a key role in promoting the ideas with the public, Putin said.
One of the 55 measures laid out in the anti-crisis plan is the drafting of a law later this month that would enable the Central Bank to assign representatives to the management of banks that receive state support.
These officials would make sure that the banks lend money to four priority sectors: airlines, real estate development and automobile and farm equipment manufacturing.
State corporations and state-controlled “natural monopolies” like Gazprom have until the new year to increase the tempo of their investment plans in order to maintain domestic demand.
The plan only calls for the final forms of some of the other measures to be completed by the end of March, including an order calling on the Finance and the Health and Social Development ministries to draft legislation to raisethe level of monthly unemployment benefits.
The Transport, Energy and Finance ministries have been given the same March deadline by which to formulate proposals for the floating of government-backed “infrastructure” bonds to finance the construction of roads and electricity facilities.
Yelena Matrosova, macroeconomic research director at the consulting firm BDO Unicon, praised the call on state corporations to drive domestic demand.
“Who else has money?” Matrosova said. “Only them.”
If these corporations move their enormous investment projects ahead, this will boost slackening demand for metals, energy and equipment, creating jobs for people currently being laid off, she said.
The government-backed bonds, meanwhile, would lure back some of the portfolio investors that have fled the uncertainty of the country’s stock markets, Matrosova said.
She also cautioned that trying to pursue a broad wish list would be ineffective, saying that the government should instead single out a couple of projects to receive the new financing.
On a global scale, Russia teamed up with Brazil, China and India on Friday to call for a greater say for emerging economies in the way international financial bodies like the World Bank and the International Monetary Fund are run.
Finance Minister Alexei Kudrin and his counterparts from the three other so-called BRIC countries, released a joint statement saying these institutions have to reflect the “increasingly central role that emerging markets now play.” 
They also agreed to help each other in countering the crisis by increasing trade and mutual investment, Kudrin said.

TITLE: Medvedev Tells Police to Quell Signs of Crisis-Linked Unrest
PUBLISHER: Reuters
TEXT: President Dmitry Medvedev in St. Petersburg on Friday ordered police to stamp out any social unrest or crime arising from the global financial crisis.
“We have a stable state. … We do not need a return to the 1990s when everything was boiling and seething,” Medvedev told a meeting of senior officials.
“The law enforcement agencies should keep track of what is happening,” he said. 
“And if someone tries to exploit the consequences of the financial crisis … they should intervene, bring criminal charges. Otherwise, there won’t be order.”
The longest economic boom in a generation has helped the Kremlin maintain political stability, but some analysts say the financial crisis could give rise to a wave of social unrest.
The benchmark RTS Index has fallen about 70 percent since May, making it one of the worst performers among emerging economies.
High oil prices, which fueled Russia’s economic boom, have fallen from a peak of over $140 in July to just over $60 now.
The impact on ordinary people so far has been limited, partly because share ownership is not widespread and few people have private pensions. But firms in some sectors have started laying off staff.
Interior Minister Rashid Nurgaliyev told Medvedev at the meeting that higher unemployment could lead to a rise in crime.
He also said there was a risk of greater extremism and racial tension centered on the millions of immigrants working in Russia, most of them from other former Soviet republics.
“The mounting consequences of the world financial crisis could well have an unpredictable effect,” he said. “Anti-crisis groups have been set up in the regions … to intercept any early indications of destabilization.”
Analysts say the financial crisis poses no political threat to the Kremlin for the time being because opposition parties are too weak and divided to mount a serious challenge. Garry Kasparov, a Kremlin opponent and former world chess champion, predicted last week that the crisis would bring new recruits to the opposition. 
Nurgaliyev also told Medvedev on Friday that Russia should revive the Soviet-era practice of compulsory treatment for alcoholics.

TITLE: Cool Moscow Will Wait For Obama
PUBLISHER: Combined Reports
TEXT: Moscow signaled over the weekend that relations with Washington will come to a virtual standstill until President-elect Barack Obama assumes office in January, rejecting new U.S. proposals on missile defense and nuclear arms reduction.
President Dmitry Medvedev also spoke by telephone with Obama, and the two agreed to meet soon, possibly at a summit on the global financial crisis in Washington this week, the Kremlin said. 
Foreign Minister Sergei Lavrov said Saturday that Moscow was not satisfied with new U.S. proposals on missile defense and nuclear arms reduction and that positions expressed earlier by Obama provided hope for a “more constructive” approach.
“We have paid attention to the positions that Barack Obama has published on his site. They instill hope that we can examine these questions in a more constructive way,” Lavrov said after an 80-minute meeting with U.S. Secretary of State Condoleezza Rice on the sidelines of a Middle East peace conference in Sharm el-Sheikh, Egypt.
Lavrov said there would be further consultations on defense issues with the United States this year but suggested that any final agreements would likely come only after the Obama administration takes office on Jan. 20.
Rice met with Lavrov in an effort to ease escalating tensions in the waning weeks of the administration of President George W. Bush — tensions that have grown over the Bush administration’s plan to set up elements of a missile-defense system in Poland and the Czech Republic. Washington says the shield is aimed at countering any threat from Iran’s ballistic missile program.
Few details about the United States’ new proposals have been released. John Rood, acting U.S. undersecretary of state for arms control, said Thursday that one proposal included new ideas about allowing Russian observers at the planned U.S. missile-defense sites in Poland and the Czech Republic. The other proposal, he said, involves a successor to the 1991 Strategic Arms Reduction Treaty, known as START, which expires at the end of next year. Rood said the proposal envisioned further reductions in the two countries’ nuclear weapons capabilities.
Washington sent the START proposal two weeks ago, while the suggestions on missile-defense cooperation were offered right before Medvedev’s state-of-the-nation speech Wednesday, in which he threatened to deploy missiles to Kaliningrad in response to the U.S. missile-defense plans, Rood said.
“Some of the comments that President Medvedev made with regard to the U.S. missile-defense system were unfortunate,” Rood said. “We have heard some of those threats before.”
In his speech, Medvedev threatened to deploy Iskander missiles to Kaliningrad, sandwiched between Poland and Lithuania, “to neutralize, if necessary, a missile-defense system.”
Deputy Foreign Minister Alexander Grushko said Sunday that Moscow would not carry out the threat to deploy missiles if Washington scrapped its plans to deploy the missile system. “These measures will only be implemented if the U.S. missile-defense system is deployed,” Grushko said, Interfax reported.
It was unclear whether Medvedev and Obama discussed missile defense Saturday in their telephone conversation, one of a series of calls that Obama has made to world leaders since winning the U.S. election on Nov. 4.
A Kremlin statement said Obama and Medvedev “expressed the determination to create constructive and positive interaction for the good of global stability and development” and agreed that their countries had a common responsibility to address “serious problems of a global nature.”
To that end, according to the Kremlin statement, Medvedev and Obama believe that an “early bilateral meeting” should be arranged.
A Kremlin spokesman said the meeting might take place on the sidelines of the financial crisis summit in Washington on Nov. 15. 
Obama has not confirmed whether he will attend the summit, and his office did not issue a statement describing the call with Medvedev.
But Obama made no commitment on the missile shield plan during a phone call with Polish President Lech Kaczynski, Obama foreign policy adviser Denis McDonough said Saturday.
“His position is as it was throughout the campaign, that he supports deploying a missile-defense system when the technology is proved to be workable,” McDonough said.
During the presidential campaign, Obama expressed skepticism about the missile-defense system, saying it would require much more vigorous testing to ensure that it would work and justify the billions of dollars it would cost.

AP, Reuters, MT

TITLE: Communists Use Anniversary To Tell Capitalist World: Told You So!
AUTHOR: By Anna Malpas
PUBLISHER: Staff Writer
TEXT: MOSCOW — Tens of thousands of Communists took to the streets nationwide Friday to celebrate the 91st anniversary of the 1917 Revolution and gloat at how capitalism has led to the global financial crisis.
More than 150,000 citizens took part in the rallies across the country, according to the Interior Ministry, and in Moscow thousands of supporters marched Friday evening from Pushkin Square to Teatralnaya Ploshchad to commemorate the Revolution.
Led by Communist Party head Gennady Zyuganov, his deputy Ivan Melnikov and a group of girls in red satin caps holding carnations, the demonstrators marched down Tverskaya Ulitsa toward the Kremlin, blocking two lanes of traffic.
The global financial crisis was one of the key themes in the rally. “Capitalists! I recommend you start reading [Karl] Marx’s ‘Das Kapital,’” Zyuganov told the crowd in a speech.
Nov. 7 was traditionally one of the most important Soviet holidays, although it was renamed by former President Boris Yeltsin and later scrapped altogether in favor of a Nov. 4 holiday commemorating the expulsion of Polish invaders from Moscow in 1612. The change has angered Communists, who accuse the Kremlin of trying to diminish the importance of the date in the public consciousness.
“They are purposefully silencing this holiday because they don’t want workers to be people,” said demonstrator Mikhail Kardasevich, a member of a Communist-affiliated party who was carrying a portrait of Soviet leader Vladimir Lenin at Friday’s rally.

TITLE: Medvedev Happy To Talk Trade With U.S.
AUTHOR: By Maria Antonova
PUBLISHER: Staff Writer
TEXT: After including a chilly, anti-American message in his state-of-the-nation address Wednesday, President Dmitry Medvedev was on hand to offer a warm welcome Friday as U.S. automaker General Motors officially opened a new plant in St. Petersburg.
Medvedev used the event, which was also attended by U.S. Ambassador John Beyrle, to talk about doing business with the United States.
“This is a great example of investment cooperation between Russia and the United States,” Medvedev said at the ceremony, wishing the Detroit-based company good luck.
Beyrle emphasized the same theme of Russia-U.S. cooperation.
“We are both unwell because of the financial crisis, but we can improve the situation by working together,” Beyrle said.
Called the “godfather” of the plant by Governor Valentina Matviyenko during the event for his early involvement in the project, Medvedev talked about taking part in the groundbreaking ceremony for the plant as first deputy prime minister in 2006.
“I was given a shovel as a souvenir, which I still keep at my dacha with other gardening tools,” Medvedev, a St. Petersburg native, said before inspecting the interior of a Chevy Captiva midsize SUV presumably right off the assembly line.
The ribbon-cutting ceremony came on the same day that GM announced year-to-date operating losses of $4.2 billion in posting its third quarter results. The company is currently lobbying the U.S. government for a bailout to help it avoid bankruptcy.
Despite a fall in global sales of 11 percent for the first nine months of the year, GM has moved into first place among foreign manufacturers in Russia, where its sales rose by 44 percent over the same period, almost double the 23 percent growth across the country’s automotive industry.
Jazz music greeted guests at the plant in the suburb of Shushary, where GM Europe president Peter Forster and the company’s president for Russia, Chris Gubbey, reiterated their commitment to Russia.
“We remain bullish and dedicated to Russia,” Forster said before the ceremony.
The plant will eventually employ 1,700 people and has the capacity to produce 70,000 vehicles per year, starting out with the Captiva and the Opel Antara, also a midsize SUV. It will add the Chevrolet Cruze compact to production in 2009. 
“There is a lot of room inside and around the plant to expand,” Gubbey said. “We will watch the market, bring new models here and stay flexible.”
He said he was confident that demand for SUVs would remain strong despite a drying up of consumer loans tied to the current credit crunch.
“It’s a big country, and there will still be demand for off-road capabilities,” Gubbey said.
Shushary, in the south of St. Petersburg, has been labeled the “Russian Detroit” in recent years as a number of foreign carmakers have established a presence there. Toyota opened a production facility just across the road last year, and a shiny lot full of brand-new Camry sedans is visible from the windows of the GM plant, symbolic of the global competition between the two companies.
Nissan, Suzuki and Hyundai are also scheduled to launch production nearby next year.
The Shushary location adds to GM’s existing capacity of 100,000 vehicles per year in the country, from joint ventures at Kaliningrad’s Avtotor and Tolyatti’s GM-AvtoVaz plants. The new plant is fully owned by the company.
“It wouldn’t be possible without the flexible and unbureaucratic support of the St. Petersburg government,” said Gubbey, who moved to head GM Russia in the beginning of the year from GM’s Chinese unit.

TITLE: Russia, Venezuela to Form New Bank
PUBLISHER: Combined Reports
TEXT: Venezuela and Russia agreed Saturday to form a $4 billion joint bank to pay for development projects, the day after inaugurating the first Venezuelan-Russian offshore natural gas project. 
Officials from Gazprombank and state-owned Petroleos de Venezuela signed a memorandum of understanding between the two countries Saturday in Caracas, in a ceremony attended by Venezuelan President Hugo Chavez and Deputy Prime Minister Igor Sechin. 
Venezuela, the biggest oil producer in South America, is seeking new funding sources as bonds and bank loans have become more difficult to arrange amid a lack of buyers for emerging market debt. The country formed a $12 billion development fund largely with Chinese loans that are being repaid in oil. 
The fund will primarily finance economic development in Venezuela, Elias Jaua, Venezuela’s minister of land and agriculture, said Saturday. 
Rodriguez will look into making it possible to engage in trade using bolivars and rubles rather than dollars or euros, Chavez said. “We are also studying using the ruble as the reference for the international reserves,” he said. 
Chavez and Sechin on Friday mingled with workers from Petroleos de Venezuela and Gazprom and donned hard hats as exploration began at a Gulf of Venezuela drilling platform.
“Russia and Venezuela are establishing a strategic alliance,” Chavez said on the platform. “We have freed ourselves from Yankee imperialism.”
Venezuela has South America’s largest natural gas reserves, which have remained largely untapped while the country has focused on oil production.
Gazprom won the contract to help develop two natural gas blocks in the gulf in 2005. The project is expected to start producing gas within five years.
United Company RusAl is continuing efforts to open an alumina mill in Venezuela, Chavez said. The country will find a way to provide the 4 gigawatts of electricity that the plant needs, Chavez said, possibly by building electric plants that burn coke, a carbon-rich byproduct of oil refining. 
Rodolfo Sanz, Venezuela’s minister of basic industries and mining, said the RusAl mill would process 1.4 million tons a year, double Venezuela’s current output. 
Venezuela also plans to enlist Russian help to build mines at its largest gold deposits, the mining minister said Thursday, apparently killing a yearslong bid by two Canadian companies to develop the projects.
An accord was to be signed on Friday with Russian-owned Rusoro to operate the Las Cristinas and Brisas projects with Venezuela, Sanz told a Russian delegation.
Las Cristinas, one of Latin America’s largest gold projects, is currently operated by Canada’s Crystallex, which waited in vain for years for an environmental license to start mining.
Nearby, Brisas is operated by Gold Reserve, which has a concession for the mainly gold project but was also waiting for environmental permits.
While it appeared that Sanz will replace Crystallex and Gold Reserve with Rusoro, he did not mention their names.
The statements came a day after Venezuela said it wanted to recover control over its gold to boost its reserves as a shield from global financial crisis. 
Bloomberg, AP, Reuters

TITLE: Aide Ties WTO Membership With Russia-EU Trade Policy
AUTHOR: By Jessica Bachman
PUBLISHER: Staff Writer
TEXT: MOSCOW — Arkady Dvorkovich, the Kremlin’s top economic adviser, signaled ahead of a key meeting with European officials that the government would be willing to reconsider potentially contentious trade decisions if WTO negotiations could be wrapped up quickly.
Russia’s long-term aim of joining the World Trade Organization has been interrupted by a number of trade disputes with Europe in recent years, most recently over a proposal to raise export duties on timber from the start of 2009.
“The head of the government will speak at this summit about our readiness to settle this matter in the course of a few weeks,” Dvorkovich told reporters Friday, referring to Russia-EU talks in Italy on Nov. 14. 
“If it becomes clear that the WTO accession negotiations will finish quickly, we’ll delay making any concrete decisions on trade policy with the EU,” Dvorkovich said. “But if the entry talks are being put off for a while and we see that we’ve got no chance at all, then it’s still entirely possible to come to an agreement with the EU on trade but not necessarily within the framework of our earlier agreements,” he said.
After Medvedev’s meeting in Italy, he will head to Washington for a G20 summit on the global financial crisis. Dvorkovich said the president had sent a letter to the heads of 18 countries, the European Union and the Commonwealth of Independent States, which includes “specific proposals” for getting out of the crisis.
In his first state-of-the-nation address on Wednesday, Medvedev laid much of the blame for the global financial crisis on the United States, saying that since the fall of the Soviet Union the country has held its opinion to be “the single, true and indisputable,” leading to a number of “major blunders” in the economic sphere.
The plan includes new institutions for cooperating on macroeconomic policy and the formation of structures to resolve disputes between states and commercial organizations and a reconsideration of how the International Monetary Fund operates, Dvorkovich said.
“It should work more like a bank, and as a lender it should put forward financial, and not political, conditions for borrowers,” he said.

TITLE: Baltika Profit Up
PUBLISHER: Bloomberg
TEXT: Carlsberg’s Baltika Breweries, Russia’s largest beer company, said that its nine-month profit rose 7.7 percent as consumers bought pricier brands. 
Net income climbed to 360.7 million euros ($460.1 million) from 334.8 million euros a year earlier, the brewer said Friday. Revenue increased 13 percent to 1.99 billion euros. 
Profitability increased in the second and third quarters under a strategy to raise sales of more expensive brands such as Carlsberg’s Tuborg and Asahi Breweries’ Asahi Super Dry, as well as projects to improve distribution and marketing, Baltika said. Sales of Tuborg, the best-selling licensed brand, gained 24 percent, while sales of its own brand rose 17 percent. 
“A higher share of premium brands in total sales helped to offset rising costs of production,” said Sabina Muhamedzhanova, an analyst at Bank of Moscow, who has a “buy” recommendation on the stock. 
Sales growth in the nine months was helped by an increase in excise tax and the ruble’s 5 percent depreciation against the euro, according to analysts at Alfa Bank in Moscow.

TITLE: In Brief
TEXT: <b>Chelsea Funding Cut Down</b>
LONDON (Reuters) — Billionaire Roman Abramovich has hit the financial brake at Chelsea, chief scout Frank Arnesen said Saturday.
“The [worldwide] financial crunch has meant Roman has hit the financial brake and asked us to cut deep,” Arnesen told the Guardian newspaper.
“However, we are now getting close to the time when the club can carry on without Roman’s money,” he added. 

<b>Gazprom’s Pipeline Plans</b>
MOSCOW (Bloomberg) — Gazprom may revise its plans for the South Stream natural gas pipeline, designed to carry fuel from Russia to Europe, because of the financial crisis, Agence France-Presse reported. 
The company will have to carry out “a probable revision,” the news service cited Stanislav Tsygankov, head of Gazprom’s international business department, as saying in Portoroz, Slovenia. 

<b>Hungary’s Gas Price to Fall</b>
BUDAPEST (Bloomberg) — Gazprom will probably cut the price it charges for the natural gas it ships to Hungary next year, Vilaggazdasag said, citing sources familiar with negotiations. 
The price, which is currently $534 per cubic meter, may fall to $520 in January, $480 in April and $450 in June, where it will remain for the rest of the year, the newspaper reported. 

<b>Severstal’s Blast Furnaces</b>
MOSCOW (Bloomberg) — Severstal has closed the two remaining blast furnaces at its largest Russian steel mill as demand weakens. 
“The situation in the steel market has accelerated” the planned closure at the mill in Cherepovets, Severstal said. Some of the 400 people who worked at the furnaces will be laid off, while others will be relocated, the company said. 

<b>Sedmoi’s VTB Credit Line</b>
MOSCOW (Bloomberg) — Sedmoi Kontinent received a 2.5 billion ruble ($92.5 million) credit line from the state lender VTB Group. 
Sedmoi Kontinent received the first 500 million ruble tranche of the loan as part of the government’s plan to support the retail industry during the global credit crisis, it said Friday. 

<b>For the Record</b>
- Gazprom Neft became the first Russian oil company to be granted access to Cuba’s land and offshore deposits, Interfax reported, citing an unidentified company official. (Bloomberg)
-?AvtoVAZ received a one-year loan of 4 billion rubles ($150 million) from VTB Group to finance operations. (Bloomberg)
-?VTB Bank, the country’s second-biggest lender, said trading losses reached 4.8 billion rubles ($180 million) in October because of “negative market dynamics.” (Bloomberg)

TITLE: The Court Makes the King
AUTHOR: By Dimitri K. Simes
TEXT: Senator Barack Obama’s impressive victory will clearly lead to important changes in U.S. domestic policy, where he differs significantly from both President George W. Bush and Senator John McCain. Whether the president-elect will make major adjustments in U.S. foreign policy, particularly policy toward Russia, is a different question. 
Setting aside their positions on the issue of U.S. troop withdrawal from Iraq, Obama and McCain had broadly similar approaches to many international issues. On Russia, after initially appealing to both Moscow and Tbilisi for restraint when Georgian troops attacked Tskhinvali, Obama quickly adopted McCain’s highly critical attitude toward Russia’s conduct. Moreover, just like McCain, Obama called for giving both Georgia and Ukraine NATO Membership Action Plans.
Still, there are reasons to believe that Obama is less inclined than McCain to see Russia as a threat to the United States. In fact, according to Obama’s advisers, one reason he did not challenge his Republican rival on the conflict over South Ossetia was his reluctance to divert attention from U.S. economic difficulties, his perceived area of strength, and shift it to foreign policy, where many believed McCain had an advantage. Obama’s preoccupation with the economy may also make him less inclined than McCain to engage in daring and expensive foreign policy pursuits. On a personal level, Obama appears more judicious than McCain and sounds less inclined to see international relations in terms of personalities. McCain, for his part, either admires leaders, like President Mikheil Saakashvili, or dislikes them, as in the case of Prime Minister Vladimir Putin.
Precisely because Obama does not have long-standing foreign policy views, much may depend upon the composition of his national security team. There are three groups being considered for key appointments. One consists of seasoned and experienced foreign policy realists, such as Defense Secretary Robert Gates, Republican Senator Chuck Hagel from Nebraska and former Democratic Senator Sam Nunn. These senior statesmen are known for their moderation, bipartisanship and willingness to work with other major powers. All of them are known to be skeptical of expediting NATO membership for Georgia and Ukraine and would like to find a formula for cooperation with Russia on the issue of a missile defense system in Europe. 
The second group is made up of liberal internationalists, such as former Assistant Secretary of State for African Affairs Susan Rice, former Deputy National Security Adviser James Steinberg and one of President Bill Clinton’s key lawyers, Gregory Craig. Unlike the first group, these somewhat younger officials who served in second-tier posts in the Clinton administration talk about the need to continue with democracy promotion, albeit in a less confrontational way and to engage in humanitarian interventions in places like Darfur and, earlier, Kosovo. They are not openly hostile to Russia, but their vision of the United States’ global role could lead to serious disagreements with Moscow. 
The third group is represented by liberal interventionists like former United Nations Ambassador Richard Holbrooke, one of the architects of the U.S. intervention in the Balkans during the era of Bill Clinton. Holbooke is known for championing both Kosovo independence and bringing Georgia and Ukraine into NATO. During the Russia-Georgia confrontation, Holbrooke became one of Saakashvili’s greatest defenders in the United States, going as far as denying that there was a Georgian attack on Tskhinvali. His appointment to a top national security position would be an ominous sign for U.S.-Russian relations. 
The conventional wisdom is that Holbrooke, championed by his friend Vice President-elect Joe Biden, has only an outside chance of becoming secretary of state or defense. After all, he supported Senator Hillary Clinton and is not on good personal terms with a number of key Obama advisers who do not share his views and are uncomfortable with his aggressive self-promotion.
Russia’s response to Obama will be very important as well. If Moscow sees his election as an opportunity and offers a fresh start in the U.S.-Russia relationship, a new beginning might be possible. Conversely, if Russia chooses to use the global financial crisis to try to undermine U.S. world leadership, Obama would have fewer incentives to offer an olive branch.
So far, Russia has not been too effective in making its case to Americans and Europeans, whether in explaining demands for a fair market price for gas sold to Ukraine or in protecting Russian peacekeepers and civilians in South Ossetia. The problem is less with its Foreign Ministry, which has many skillful diplomats, and more with the apparent lack of strategic planning and interagency coordination, on one hand, and what sometimes sounds and looks like a wealth-driven, in-your-face attitude on the other. Should Moscow this time couple strength and self-confidence with humility and sensitivity to Western concerns, the United States’ transition could provide an important opportunity to improve U.S-Russian interactions. 

Dimitri K. Simes is president of The Nixon Center and publisher of The National Interest.

TITLE: Obama and the KGB
AUTHOR: By Richard Lourie
TEXT: I was arrested by the KGB in Stalin’s hometown of Gori in March 1988. Six men interrogated me about my Russian-language skills, my lack of papers and my high-speed camera, but after several hours my explanation was accepted. Planning to write about Stalin, I wanted to see his childhood home, his school and his town. My passport was at the hotel in Tbilisi as Soviet law required, but I admitted to breaking another Soviet law — not to leave the city where you were registered. 
At the end, the leader said he wanted to ask one question about the U.S. primaries then under way and which included among other hopefuls, Jesse Jackson. He asked: “Is that negr going to be president?”
He had used the proper Russian word for a black person but had said it with worry and disdain. He could imagine nothing worse — the United States revealed as a democracy not a hypocrisy. 
Then I had the odd duty of delivering a brief talk on U.S. civics to a half a dozen KGB men. No, I said to their immense relief, the United States wasn’t ready to elect a black president yet, it was still a little too soon for that.
But only 20 years too soon as it’s now turned out.
On the day after Obama was elected president, Dmitry Medvedev gave his first state-of-the-nation speech and blamed the United States for most of Russia’s problems — from arming Georgia to causing the global financial crisis. 
There are several things wrong with this approach. By blaming Washington for all his country’s problems, Medvedev casts Russia as a passive victim that can at best react. It grants to the United States precisely what Russia fears it seeks: omnipotence.
The same rebuke Senator John McCain made to Obama can also be made to Medvedev. You’re not running against George W. Bush. It was Bush’s idea to place elements of a missile-defense system in Poland and the Czech Republic, and it was Bush and Vice President Dick Cheney who armed and encouraged Georgia.
It’s not clear yet what sort of Russia policy Obama will conduct. He won’t say much before the inauguration. And so it would have been a perfect time for Medvedev to seize the initiative and make a bold, innovative move to show that Russia was the master of its own fate and capable of “new thinking.” But instead, he resorted to the language of threat, the old game of move and countermove.
It was clever to threaten to deploy missiles in Kaliningrad, near the Polish border. Now Medvedev has something to swap for the U.S. missile-defense system slated for Poland without having to give up anything in the Caucasus. He made a point of saying Russia would remain there. 
What else could Medvedev have done? He could have taken a few plays from Obama’s campaign and seen that words can be deeds and create real change. He could have sent Obama a warm-hearted, high-spirited greeting, saying that 2007 marked the 200th anniversary of U.S.-Russian relations, a perfect time for a new beginning. It would have cost Medvedev little and he would have gained in stature and created new possibilities for the relationship.
Hope and the future matter greatly in this new and youthful century. Obama embodies that spirit, while Medvedev’s speech had a musty air about it. 
Stalin’s Foreign Minister Vyacheslav Molotov said the problem with free elections is that you never know who’s going to win. The U.S. primaries and the 2008 election had all the high drama and breathless suspense of life itself. Obama’s election was proof that anything is possible in a free country. A real election shames the sham. The day those six KGB men feared 20 years ago has come at last.

Richard Lourie is the author of “The Autobiography of Joseph Stalin” and “Sakharov: A Biography.”

TITLE: Obama Faces Nation in Crisis
PUBLISHER: The Associated Press
TEXT: WASHINGTON — All presidents are tested. Few walk into the Oval Office when the nation is in the throes of multiple crises.
Like Franklin Delano Roosevelt, President-elect Obama is facing a banking emergency.
Like Abraham Lincoln, Obama is trying to patch up national divisions. To ready himself for the job, Obama said Friday he is reading some writings by Lincoln, “who’s always an extraordinary inspiration.”
And like Richard Nixon, George W. Bush and others, Obama will be commander in chief over U.S. troops in combat.
“With two wars and an economic crisis, this is one step away from what Lincoln or FDR faced,” said Terry Sullivan, associate professor of political science at the University of North Carolina at Chapel Hill. “The question is ‘Which direction is the nation going to go?’”
While the challenges Obama faces are daunting, they also give him the opportunity to shape history in a big way.
“My 88-year-old mother asks me regularly, ‘Why would anybody want to be president now?’ said Sullivan, who manages the Presidential Transition Project at Rice University. “My answer is ‘Every one of them wants to be FDR.’ This is their chance. What makes fame in the American presidency is a great challenge and succeeding.” Or, Sullivan added, facing a great challenge and failing.
In fewer than 11 weeks, Obama will inherit not just the economic crisis and the wars in Iraq and Afghanistan, but also the ongoing threat of a terrorist attack, a resurgent Russia and nuclear proliferation in hot spots across the globe.
“We are in an almost unprecedented situation, at least in modern times,” White House chief of staff Joshua Bolten said in a C-SPAN interview Friday.
Knowing his opening moves will be widely scrutinized, Obama tried to roll back expectations on election night.
“Our climb will be steep,” he said. “We may not get there in one year or even in one term.”
Yet he remained upbeat as did Roosevelt, who took the reins of a nation in the depths of the Depression. FDR used his optimism to lift up the downtrodden and refresh the American spirit. “The only thing we have to fear is fear itself,” he said at his inauguration in 1933.
When Roosevelt died in 1945, by then a wartime president making secret plans for an atomic bomb, Harry Truman told reporters, “I felt like the moon, the stars and all the planets had fallen on me.”
In an earlier conflict, when the country was on the brink of civil war, Lincoln took a hands-off approach during a four-month lag between his election and inauguration, staying mum so as not to inflame tensions in the North or the South. After Lincoln was elected, but before he took office, South Carolina announced its decision to secede from the Union. Six more states then seceded and together formed the Confederate States of America.
During the transition, Lincoln maintained what became known as an attitude of “masterly inactivity,” said Harold Holzer, who recently wrote the book “Lincoln President-Elect.” Lincoln didn’t want to do anything that would upset the South, lose him the support of abolitionists in the North or the northern Democrats whom he needed on his side if there was going to be a fight to save the union.
“He thought the best way to deal with it was to be silent,” Holzer said.
Like Lincoln, Obama used his first speech as president-elect to try to mend fences — and he did it by quoting Lincoln’s conciliatory first inaugural address, which was given at a time of such national turmoil that Lincoln traveled to Washington in secret for safety.
“Let’s remember that it was a man from this state who first carried the banner of the Republican Party to the White House, a party founded on the values of self-reliance and individual liberty and national unity,” Obama said of Lincoln, another lanky lawmaker from Illinois.
“As Lincoln said to a nation far more divided than ours, we are not enemies but friends,” Obama said. “Though passion may have strained, it must not break our bonds of affection.”
To reach out to his critics, Lincoln even allowed a reporter from an opposition newspaper, a journalist named Henry Villard, to virtually move into his office in Springfield, Missouri, to chronicle the transition.
“That’s the equivalent of Obama picking up the phone and asking Sean Hannity to move in,” Holzer said of the conservative television personality.
Roosevelt, who picked members of the opposing party for Cabinet spots, was as noncommittal as Lincoln was as he was about to be sworn into office amid a banking crisis. When Herbert Hoover asked him to sign on to a bank holiday — a temporary closure of banks — three days before inauguration, Roosevelt famously looked up and said, “The drapes look very pretty. I’m sure Eleanor will want to keep these just as they are.”
That made Hoover furious. Soon after taking the oath of office, Roosevelt declared the banking holiday on his own.
In his first fireside chat in March 1933, FDR said: “We had a bad banking situation. Some of our bankers had shown themselves either incompetent or dishonest in their handling of the people’s funds. They had used the money entrusted to them in speculations and unwise loans. ... It was the government’s job to straighten out this situation and do it as quickly as possible, and the job is being performed.”
Sound familiar?
“He wanted to do it himself. A clean slate is what Lincoln wanted. It’s what Roosevelt wanted,” Holzer said. “The lessons of history are there. The most successful transformative presidencies were patient between the election and the inauguration.”
Maybe history is repeating itself in that regard. When President Bush announced before the election that he was hosting a global economic summit in Washington on Nov. 15, the Obama camp said the presidential hopeful wouldn’t be there. “He understands there is only one president,” an Obama adviser said.
It’s early in the transition to draw many conclusions, but Obama’s style as a candidate and a legislator was to proceed in a measured, disciplined fashion.
“Obama is an empty vessel into which the American people can be expected to pour their inexhaustible supply of hope — in just the same way that they did in 1932,” said Bruce Kuklick, professor of history at the University of Pennsylvania in Philadelphia.
Obama supporters who spontaneously flocked to the White House into the wee hours after his election Tuesday night were anxious for Obama to move forward. Gazing at the illuminated Executive Mansion where Bush slept, one waved signs that said: “Why wait? Evict Bush now.”
For some, jubilation was tempered by recognition of the enormity of the tasks Obama faces.
“It’s not just about him,” said Rachel Reclam, of Olympia, Wash., an international affairs student at George Washington University. “He inspired people, but I’m not expecting miracles. The financial crisis, the war in Iraq, the health care crisis are not going to be over tomorrow.”

TITLE: Meanwhile, Some Stories You May Have Missed
PUBLISHER: The Associated Press
TEXT: WASHINGTON — While you were fixated on the election campaign and on the collapsing economy and your vanishing retirement investments, stuff happened.
Iraq stood tough — against the U.S.
Afghanistan bled.
Guantanamo refused to close, all pledges to the contrary notwithstanding.
At home, the deficit swelled. So did the national debt. It is now twice as big as it was when President Bush took over from Bill Clinton.
The Big Three automakers raised the possibility of becoming the not-so-big two.
The Bush administration tried to relax rules intended to protect animals and plants in danger of extinction.
You, no doubt, noticed that a funny thing happened at the gasoline station — prices dropped. But that made alternative energy sources less attainable.
The following is a rundown of some things that happened while you may not have been watching from Associated Press reporters covering these developments:

WARS
Iraq is grinding toward a showdown. Afghanistan, with violence on the upswing, is grinding toward a troop buildup.
Iraq is demanding greater legal control over American troops accused of committing crimes against Iraqis. That demand is blocking agreement on a U.S.-Iraq security pact that would allow American forces to continue operating in Iraq after Dec. 31.
As those discussions plod along, violence in Afghanistan is on the rise. And so is pressure to send thousands more Americans to the original battleground in the post-Sept. 11 fight against terrorism.
There are about 150,000 U.S. troops in Iraq. A U.N. mandate authorizing the U.S. mission expires at the end of the year. Without a new security agreement, the U.S. would have to suspend operations. That would put heavy pressure on Iraq’s still shaky military and police to battle insurgent groups solo.
The government of Iraq may try to drag out the negotiations until after the inauguration of President-elect Obama, who wants most U.S. forces out by mid-2010.
In Afghanistan, 2008 has been the deadliest year for U.S. forces since the country was invaded for sheltering Osama bin Laden and his al-Qaida network. About 31,000 U.S. troops now are on duty in Afghanistan; Obama supports sending as many as 10,000 more.
All is not well between Washington and Pakistan, a longtime U.S. ally. The U.S. has launched at least 17 missile strikes since August against militant targets in Pakistan’s volatile tribal area along the Afghanistan border. The attacks have been condemned by Pakistan as violations of its sovereignty.
Army General David Petraeus, newly installed as the officer overseeing the wars in Iraq and Afghanistan, just visited Pakistan to help ease the friction. He also traveled to Afghanistan to assess the situation there.
— By Richard Lardner

GUANTANAMO BAY
How much closer has the administration moved to the president’s stated goal of closing the prison for terrorist suspects at Guantanamo Bay, Cuba?
Not one inch.
Why?
The administration says it cannot work its way through a thicket of legal obstacles. A big question is where in the U.S. it would jail — and put on trial — the 80 or so it intends to charge with war crimes.
Also, what to do with the approximately 110 prisoners who, in the administration’s judgment, are too dangerous to let loose but against whom the government has too little evidence to put on trial. The U.S. is having trouble finding countries willing to take the 60 or so cleared to be transferred out of Guantanamo Bay but who remain there in limbo.
The administration has repatriated 19 prisoners this year and has moved ahead with military trials for a small number.
So far, two detainees have been convicted and sentenced, both closely connected to bin Laden.
Ali Hamza al-Bahlul, who made propaganda videos for bin Laden before being captured in December 2001, was convicted of terrorism charges this past week and sentenced to life in prison. Former bin Laden driver Salim Hamdan was convicted in August and sentenced to 5 1/2 years in prison. A third prisoner, Australian David Hicks, reached a plea agreement that sent him home to serve a nine-month prison sentence.
There are now 255 held at Guantanamo Bay, compared with 390 at the end of 2006.
— By Robert Burns.

BUDGET DEFICIT
Even before an economic slump that may morph into a full-blown recession and the $700 billion financial bailout, Obama wasn’t facing a pretty budget picture.
You may not have noticed the news last month that the deficit registered an ugly $455 billion for the budget year that ended Sept. 30. That is a new record in dollar terms but not quite as bad as the deficit Clinton faced when measured against the size of the economy. That is the way most economists prefer to measure deficits and whether they are too big for the nation’s fiscal good.
But hold on. The deficit could double in the current year after accounting for the costs of the bailout, further erosion in tax revenues due to the sour economy and a second relief bill exceeding $150 billion.
Something else you may not have noticed: The national debt is now about $10.5 trillion, almost double the debt that Bush inherited eight years ago. Last month Congress had to raise the legal limit on the size of the debt to $11.3 trillion to accommodate borrowing to finance the bailout.
With the economy so lousy, the deficit is not a big concern in the near term. In fact, Obama and Democrats controlling Congress are likely to press for new public works spending and other deficit-financed stimulus steps to try to jolt the economy out of its slump.
Over the longer term, however, big budget deficits in the range of $500 billion or more for years on end cannot help but put a crimp in Obama’s priority items like his proposed expansion in health care. Otherwise, huge deficits might lead to interest rates too high for the economy’s good.
For those reasons — coupled with the unsustainable demands on Medicare and Social Security as baby boomers retire — closing deficit simply has to return as an issue.
Actually balancing the budget is probably out of the question in Obama’s first term and is not likely to even be a goal. Rather, economic advisers such as former Treasury Secretary Robert Rubin advocate keeping deficits in the range of 2 percent — or about $300 billion in today’s dollars — of the size of the economy once things stabilize.
— By Andrew Taylor.

OIL & GASOLINE
As the presidential candidates tangled over energy policy and promised an aggressive push for more alternative energy, something happened that might make achieving that more difficult. Oil prices plunged. They fell from a high of $147 to less than $70 a barrel. Anger over gas prices eased. Motorists now see gas costing $2.40 a gallon instead of $4.
Good news often has an evil twin. Suddenly, alternative energy sources — solar, wind and even ethanol — have lost some luster. Developing alternatives to petroleum, it seems, requires high oil prices and easy credit to spur the capital investments that are needed.
So with credit tightening and oil prices falling, shares of alternative energy companies have fallen more sharply than the broader stock market. Venture capital financing is more difficult to get for advanced solar and biofuels projects. Some wind projects have been delayed. A major ethanol producer has filed for bankruptcy protection and a maker of battery powered cars has delayed production and laid off workers. The cost of new nuclear power plants has soared with little interest in financing them without substantial guarantees from the government.
Obama wants to spent $15 billion a year over the next decade to spur research into cellulosic ethanol; more fuel efficient cars; plug-in electric hybrid cars; new solar and wind turbine technologies; and capturing carbon dioxide — the leading culprit in global warming — from coal burning power plants. All these efforts could become less politically urgent and more financially difficult if oil prices keep on falling and financial turmoil keeps its grip on credit markets.
— By H. Josef Hebert.

AUTO INDUSTRY
General Motors celebrated its 100th anniversary in mid-September. Today, Detroit’s automakers are facing dire conditions that could threaten their existence. General Motors and Chrysler even had to deny bankruptcy rumors.
U.S. auto sales declined to their lowest level in more than 17 years last month. GM and Ford reported Friday that they burned through a combined $14.6 billion in the third quarter. Ford said it would slash more than 2,000 white collar jobs.
In need of cash, GM held talks with Cerberus Capital Management, the majority owner of Chrysler, about acquiring Chrysler. GM reportedly sought Chrysler’s $11 billion in cash — and federal aid — to make the deal happen.
The U.S. Congress approved $25 billion in loans in September for the companies to retool plants to build more fuel-efficient vehicles. But since then, market conditions have deteriorated and the companies are turning to Congress for more help.
The companies and the United Auto Workers want an additional $25 billion in loans to get through the downturn in sales. That money could come from the $700 billion financial bailout being run by the Treasury Department or from low-rate emergency borrowing from the Federal Reserve’s discount window, used in normal times by banks. They also want an additional $25 billion in federal loans for health care payments for retirees.
The leaders of GM, Ford and Chrysler, and the president of the UAW met with House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid on Thursday to discuss several options. On Saturday, Reid and Pelosi said in a letter to Treasury Secretary Henry Paulson that the administration should consider expanding the bailout to include car companies.
At a news conference Friday, Obama said his early focus as president would be on producing jobs and he mentioned actions to help the auto industry.
— By Ken Thomas

TITLE: Light Remarks,Weighty Matters
PUBLISHER: The Associated Press
TEXT: WASHINGTON — It popped out casually, a throwaway line as he talked to reporters about finding the right puppy for his young daughters.
But with just three offhanded words in his first news conference as president-elect, Barack Obama reminded everyone how thoroughly different his administration — and inevitably, this country — will be.
“Mutts like me.”
By now, almost everyone knows that Obama’s mother was white and father was black, putting him on track to become the nation’s first African-American president. But there was something startling, and telling, about hearing his self-description — particularly in how offhandedly he used it.
The message seemed clear — here is a president who will be quite at ease discussing race, a complex issue as unresolved as it is uncomfortable for many to talk about openly. And at a time when whites in the country are not many years from becoming the minority.
Obama made the remark as he revealed his thinking in what is becoming one of the highest-profile issues of this transition period: What kind of puppy will he and his wife, Michelle, get for their daughters as they move into the White House.
Because Malia, 10, has allergies, the family wants a low-allergy dog. But Obama said they also want to adopt a puppy from an animal shelter, which could make it harder to find a breed that wouldn’t aggravate his daughter’s problem.
“Obviously, a lot of shelter dogs are mutts like me,” Obama said with a smile. “So whether we’re going to be able to balance those two things, I think, is a pressing issue on the Obama household.”
In his first postelection news conference, the man who will be president in just over two months described himself as a mutt as casually as he may have poked fun at his jump shot.
If he thought nothing of such a remark in his first news conference, doesn’t that signal that over the next four years, the country is likely to hear more about race from the White House — and from the perspective of a black man — than it ever has before?
It’s not necessarily that he will make a crusade about the issue once he takes office. There was little sign of that in his election campaign, in which he ran on issues like the economy with a broad appeal to all Americans.
But it does underscore that the president-elect clearly does not see race as a subject best sidestepped or discussed in hushed tones. To Obama, race in all its complications has long been a defining part of his life, and he is comfortable talking about it.
The timing seems fortuitous. Obama will be sworn in as the country is rapidly becoming more racially diverse. The latest government projections indicate that by 2042, white people will make up less than half the nation’s population.
Blacks have been elected to local and statewide office in growing numbers in recent years, a sign that the country is becoming more tolerant. Obama lost the white vote to Republican John McCain by 12 percentage points, according to exit polls of voters — a better showing than Democrat John Kerry’s 17-point deficit with whites four years ago.
Still, a conversation about race over the next four years that is more open and explicit than the country has ever heard from its president can’t be bad, can it?
Obama’s comment was all the more noteworthy coming from a man who just ended a presidential campaign in which he stayed relentlessly on-message and made few comments that could be hurled against him. This is a man who can limit himself to saying exactly what he wants to say — usually.
One remark that did haunt him came during his long-running primary campaign against Hillary Rodham Clinton. Speaking at a private fundraiser in San Francisco, Obama said some residents of depressed rural areas get bitter and “cling to guns or religion or antipathy to people who aren’t like them.”
Eager to avoid slips like that in the campaign’s closing days, Obama usually avoided reporters and seldom departed from prepared remarks.
At his news conference Friday, Obama seemed less guarded. But that led to another eyebrow-raising moment.
Obama told reporters that he has turned for advice to all “living” former presidents. But he then joked, “I didn’t want to get into a Nancy Reagan thing about, you know, doing any seances.”
The former first lady actually has not been linked to conversations with the dead. President Reagan’s former chief of staff, Donald Regan, did write that she set her husband’s schedule with the help of an astrologist.
Obama called Mrs. Reagan late Friday to apologize.
Ironically, Obama’s remarks came just a day after Italy’s Premier Silvio Berlusconi, in an apparent joke, described Obama as “young, handsome and even tanned.” Critics called the comment racist, while Berlusconi defended it as a compliment.

TITLE: U.S. Troops on Frontline of Nation-Building in Iraq
PUBLISHER: The Associated Press
TEXT: ISKANDARIYAH, Iraq — The two sides squared off in a brightly patterned tent big enough to hold about 100 angry Sunni Muslim clan chiefs, the Shiite Muslim police chief, two Shiite government officials and — overseeing all — one frustrated senior U.S. Army officer.
In the Arab world, such tents are put up for weddings, wakes or tribal gatherings where the local sheik hears grievances. The “sheik” in this case is Lieutenant Colonel Michael Getchell, and the tent is the new battleground for American troops given the job of nation-building, city by city, in an Iraq battered by five years of violence.
It’s uncharted territory for U.S. commanders. Instead of going into battle, they are dishing out cash to businesses to generate jobs, listening to pleas to free relatives in American custody and trying to settle bitter rivalries between Shiites and Sunnis — just as Getchell was doing in that tent on the edge of Iskandariyah, a mixed-population city with a complex tribal structure.
“Four or five years ago, we did not know any of this,” said Captain Michael Penney, 34, a soft-spoken Texan under Getchell’s command who is on his second tour in Iraq. “It’s challenging to adjust. Last time I was here, it was strictly security, chasing the enemy. But the way things are now, I had to adjust or risk failure.”
To see how the U.S. military is handling its new duties, The Associated Press embedded this reporter three times in recent months with a unit that shared a downtown post with Iraqi police in this city of 150,000 people along a busy highway 30 miles south of Baghdad.
Iskandariyah was once one of the country’s bloodiest warfronts. But the violence began to wane in mid-2007 after the U.S. troop surge and the decision by some tribal leaders and insurgents to cooperate with the Americans. For the past year, Getchell’s troops from Fort Campbell, Kentucky, have struggled to hold the fragile peace together.
So far it’s working, despite occasional flare-ups. But American involvement in almost every aspect of daily life has expanded the vacuum to be filled when U.S. forces leave.
Most of the American troops based here have moved to the edge of the city, and the last soldiers will leave Iskandariyah to head home next month. Some U.S. officers express confidence that the calm will survive their departure. But the city’s Sunni and Shiite sheiks are far more nervous.
The opposite views are no surprise. While the Iraqis and Americans speak of each other as friends, and exchange hugs and kisses in Arab fashion, they often seem to be talking past each other. The U.S. officers are all about team spirit and getting down to business, while the Iraqis take tribal perspectives, tend to wander around the subject, and can be loose with the truth to smear a rival or gain advantage for their clan.

SHIITE HEARTLAND
The 120 men of Alpha Company, 2nd Battalion, 502nd Brigade of the 101st Airborne Division arrived in Iskandariyah last November. The city is a dusty place of tall date palms and long-slung buildings, and is home to a state-owned industrial complex that once had 36,000 workers making buses, trucks and agricultural machinery.
Nearly 70 percent of the population is Shiite and the rest is Sunni. Part of Babil province, the city is the gateway to the Shiite heartland of southern Iraq and a main crossroad between Baghdad and the Shiite shrine city of Karbala, with hundreds of thousands of pilgrims passing through.
Barely a year ago, Iskandariyah was a stronghold of militants on both sides. Residents say sectarian violence was so ferocious that hardly anyone showed up for work at the factories, and streets emptied by early afternoon.
“My predecessor was killed on his way to work here and he only lived one kilometer away,” said Raad Bahloul Moussa, director of the city’s truck factory. “I used to change cars every month, always buying a different color to escape detection. Now I drive to work in a car with the words ‘Ministry of Industry’ written on its side.”
These days, shoppers throng to outdoor food markets, stores remain open well after dark and children go to school regularly. Enrollment in the city’s sole vocational school — partly supported with U.S. funds — swelled from 30 a year ago to 1,270 this summer.
“We do not only offer training but we also contribute to security because some of the students who enrolled here would have otherwise planted roadside bombs or joined militias,” said the school’s director, Naseer Abdul-Jabar.
In preparation for their departure, the American officers are trying to get people to take their problems to the municipal council and provincial government instead. And with less money for business grants and salaries for private security forces, they’re urging the Iraqis to find other sources of cash.
“My goal is that there will be no more need for coalition forces here when I and my unit leave,” Penney told community leaders in July.

POWER STRUGGLE
Penney, a native of Jacksboro, Texas, met Sheik Zaher al-Shafaie soon after arriving in Iskandariyah. Al-Shafaie has an English degree from Baghdad University and an extensive vocabulary of American profanities. The Shiite sheik’s family sided with the Americans early in the war, inviting danger.
The two men act friendly, but their relationship seems based mostly on mutual need.
Penney sought al-Shafaie’s help to secure Iskandariyah and help reconcile Shiite and Sunni clans. Al-Shafaie wanted some reward to bolster his standing in his clan — money for a showcase project, say, or a bigger contract to supply the Americans with armed security men.
“We have been friends with the coalition forces from the very beginning, but we got nothing in return,” al-Shafaie told Penney during one conversation in May.
“Al-Shafaie always wants to make you feel that you owe him,” Penney said later.
Penney brought together al-Shafaie and Sunni sheiks with whom he has a long-running blood feud to explore whether they could jointly set up a farmers’ cooperative.
“Sheik Zaher,” Penney told the sheik during the May meeting, “you always give me so many suggestions. I want to make just one suggestion to you: Complete the reconciliation.”
But Al-Shafaie says he’s survived two assassination attempts by Sunni militants, and claims the rival sheiks facilitated the murder of two of his brothers and nine cousins. He demanded the Sunni suspects be brought to justice. The Sunnis replied that they would try to find the suspects and hand them over to police if al-Shafaie could identify them.
Al-Shafaie was not convinced. He sent a younger brother in his place to further meetings on the cooperative, which was finally set up in late summer but has done little to foster reconciliation.
“It’s a start,” Penney said. “I think it is more of a power struggle than an issue of reconciliation.”
One night, as he sat in his cramped quarters before a picture of his two young boys, Michael Ezekiel and Samuel Christian, Penney mused on his family and his mission in this dusty corner of Iraq.
“Personally, I feel good about what we have accomplished here,” he said.
And does he think the calm in the city can last? “Our experience tells us that as fragile as reconciliation is in Iskandariyah, it will take something really big to break it down,” he said.

‘IRAQ IS SO COMPLEX’
Sheik Abdul-Ameer al-Wajid and 1st Lieutenant Eric Zellers hugged and kissed before the Iraqi complained that the 24-year-old West Point graduate had not been to see him in three weeks.
“How could a friend do that to a friend?” said the sheik, assuming a hurt expression and peering from behind tinted glasses.
Al-Wajid, 65, and his son Wissam run a group of 200 Shiite fighters who have joined the Americans in Iskandariyah to fight Sunni and Shiite militants.
The sheik is typical of community leaders who have offered the Americans loyalty and inside knowledge of the region in exchange for wages for themselves and their armed neighborhood guards. Such communities with guards to support U.S. troops across Iraq received more than $200 million through July.
Zellers, an engineer, is among hundreds of young American officers in Iraq implementing a new strategy that focuses on financing small projects such as fish and poultry farms to generate jobs and win goodwill for the U.S.
“Iraq is so complex. It is not easy to work here or get things done,” Zellers said before he heard a lengthy list of complaints about problems the sheik faces running U.S.-backed armed checkpoints.
Zellers, who is from Battle Creek, Michigan, wanted to weed out some lazy or incompetent men on the sheik’s neighborhood guard.
“Obviously, we must start firing people. I will do it. Just put together a list of names and I will take care of it,” Zellers said. “I am tired of talking.”
The sheik was afraid of losing face with his clan.
“Give me the power and I will have them beaten up or jailed,” he suggested.
Zellers nixed that idea. Then came the announcement that dinner was ready. Iraqis and Americans dug into rice, lamb and chicken served on communal platters, ending any discussion of firing the sheik’s clansmen.

HEATED DISCUSSION
Getchell, a 42-year-old from Bridgewater, Massachusetts, is a large man, but his military bearing is undercut by an Arab habit he’s adopted: fingering a string of worry beads.
“I am spending way too much time with the sheiks” is his excuse. Getchell has become their financier, protector, employer and peacekeeper.
He said there is still friction between tribes over killings that took place in 2005 and 2006, and his men keep uncovering arms caches, mostly of rifles and bullets.
Getchell organizes reconciliation conferences at which various sheiks and officials make command performances, such as the meeting in a tent outside a Sunni sheik’s home on an unbearably hot August morning.
City Police Chief Colonel Ali al-Zahawi and two officials of the Shiite-dominated provincial government were invited to hear Sunni complaints after a suicide bombing killed 26 people, wounded 75 and set off the arrests of dozens of Sunnis during police raids on homes and mosques.
Al-Zahawi, in a dark blue uniform, stared sullenly at the Sunni sheiks sitting opposite him in their flowing robes. The provincial officials, members of the Iranian-backed Supreme Islamic Iraqi Council, Iraq’s largest Shiite party, were in Western-style suits. Getchell’s Arab interpreter struggled to keep up with the heated discussion and a long lecture on the dangers of terrorism by one of the provincial officials.
The Sunnis’ spokesman, Sheik Mohammed al-Khonfosi, pointedly noted that the suicide bomber’s victims included Sunnis.
“It was not an attack on Shiites. It was on all Iraqis,” he said.
Earlier, with Getchell in a room full of fellow Sunnis, al-Khonfosi had accused the security forces and the Shiite-led government of bias, and argued the entire country was being run by Shiite-majority Iran, not Prime Minister Nouri al-Maliki’s U.S.-backed government.
“All of us here have arrived at the conclusion that only the U.S. Army can solve our problems. We have no representation in the government,” al-Khonfosi said.
Getchell said nothing. He later confided that the Iskandariyah police were hardly free of bias, but said the Sunni sheiks also were spinning “hearsay and rumors.”
Publicly, the American commander had this to say to the Sunni sheiks: “If you guys sit on your backsides all day, nothing will happen. There are things that you can do to help things. Get the Sunnis recognition by persuading your people to register as voters.”

TITLE: Haitian School Collapse Kills 90 People
AUTHOR: By Jonathan M. Katz
PUBLISHER: The Associated Press
TEXT: PETIONVILLE, Haiti — Rescuers vowed to go on with their search for survivors at a collapsed Haitian school at least through early Monday, despite shrinking hopes amid the growing stench of dead bodies trapped beneath the rubble.
U.S., French and Haitian firefighters used sonar, cameras and dogs to scour the wreckage of College La Promesse for signs of life three days after it collapsed during a school party, killing about 90 students and adults and severely injuring 150 more.
“We have not abandoned the search. We are continuing searching and we are taking a lot of precautions,” civil protection coordinator Nadia Lochard told The Associated Press.
But no indications of survivors have come from the rubble since four children were pulled out Saturday morning, said Daniel Vigee, head of a Martinique-based French rescue team.
Rescuers are exploring every possible avenue, combing through spots where locals claimed to have heard voices or received cell phone calls from trapped survivors. None of those reports led to a rescue.
Rescuers prepared late Sunday to rip down a two-story high concrete slab of roofing that had been hanging precariously since the collapse, in hope of opening up new areas to search and recover bodies. Firefighters flown in from Fairfax County, Va., by the U.S. Agency for International Development had previously warned that removing the wall could be dangerous to rescuers and any potential survivors.
It was unclear how many people were in the building when it collapsed, though the school is believed to have had about 500 students. Haitian officials said some people inside had time to escape when it began to fall, and it was not known how many were pulled out unharmed on Friday.
The collapsed school, located along a ravine in a slum below a relatively wealthy enclave near Port-au-Prince, has brought global attention to a country where chronic poverty and unrest spawn chaotic jigsaws of neighborhoods and building codes are widely ignored.
President Rene Preval, who has made several visits to the disaster site, blamed constant government turnover and a lack of respect for the law for the deadly collapse.
“There is a code already, but they don’t follow it. What we need is political stability,” Preval told The Associated Press.
A lawmaker estimated that more than a fifth of Haiti’s 9 million people live in ramshackle slums that blanket mountainsides with squalid homes, shabby churches and poorly constructed schools like the one that tumbled down Friday.
Anger over what many Haitians consider a slow recovery effort boiled over Sunday as about 100 people rushed the wreckage and began trying to pull down the massive concrete slab. Thousands of onlookers cheered them before Haitian police and U.N. peacekeepers drove them back with batons and riot shields.
The school’s owner and builder, Protestant preacher Fortin Augustin, was arrested late Saturday on charges of involuntary manslaughter, police spokesman Garry Desrosier said.
Neighbors said they have long complained that the three-story school building was unsafe. And people living nearby have been trying to sell their homes since part of it collapsed eight years ago.
“You can see that some sections just have one iron (reinforcing) bar. That’s not enough to hold it,” said 55-year-old Notez Pierre-Louis, whose children used to attend the school. “I said all the time, ‘one day this is going to fall on my house’.”
Haiti, the poorest country in the Western Hemisphere, has struggled this year to recover from riots over rising food prices and a string of hurricanes and tropical storms that killed nearly 800 people.

TITLE: Venus Vanquishes Vera in Season Finale
PUBLISHER: Reuters
TEXT: DOHA — Venus Williams beat Russia’s Vera Zvonareva 6-7 6-0 6-2 on Sunday to win the WTA Championships and complete an undefeated week at the season-ending event.
It was the first time the American had won the event after she reached the semi-finals in her previous two appearances. She retired injured on the second occasion, in 2002, and qualified but failed to play because of injury on five other occasions.
“It’s fantastic to end the season this way,” Williams told reporters. “I’ve never really had the opportunity to play this tournament very often so it’s really awesome to have that opportunity and to play well.”
Williams, unbeaten in her five matches this time, earned $1.34 million dollars, allowing her to overtake Martina Navratilova for fourth place on the list of top prize money earners in women’s tennis. Zvonareva received $715,000.
It was her third title of the year, following victories Wimbledon and Zurich.
The American began sluggishly and dropped her serve in the second game when she double-faulted and then made a backhand error.
Zvonareva, after saving two break points in the next game, at first showed no sign of relinquishing her advantage, making few unforced errors to build a 5-2 lead but Williams slowly raised her level.
Zvonareva failed to convert four set points and was unable to serve out the set at 5-3 before a netted backhand gave Williams a vital break and eventually a first-set tie break.
The Russian fell 5-1 behind in the opening set decider but Williams dropped both her serves when leading 5-4, one with a double-fault, and Zvonareva took the tiebreak 7-5 when her backhand clipped the netcord and fell in her favour.
Her intensity then faded and Williams’s greater strength and versatility dramatically swung the match her way.
Zvonareva, who had played every week since September’s US Open in a bid to qualify for the event, clearly had nothing left to give as she won just two more games. She briefly recovered a break at 2-0 down in the final set but Williams regained her advantage immediately to leave the Russian lying on the court in tears of frustration.

TITLE: Monks Brawl At Holy Site In Israel
PUBLISHER: The Associated Press
TEXT: JERUSALEM — Israeli police rushed into one of Christianity’s holiest churches Sunday and arrested two clergyman after an argument between monks erupted into a brawl next to the site of Jesus’ tomb.
The clash between Armenian and Greek Orthodox monks broke out in the Church of the Holy Sepulcher, revered as the site of Jesus’ crucifixion, burial and resurrection.
The brawling began during a procession of Armenian clergymen commemorating the 4th-century discovery of the cross believed to have been used to crucify Jesus.
The Greeks objected to the march without one of their monks present, fearing that, otherwise, the procession would subvert their own claim to the Edicule — the ancient structure built on what is believed to be the tomb of Jesus — and give the Armenians a claim to the site.
The Armenians refused and when they tried to march, the Greek Orthodox monks blocked their way, sparking the brawl.
Police spokesman Micky Rosenfeld said police were forced to intervene after fighting was reported. They arrested two monks, one from each side, he said.
A bearded Armenian monk in a red-and-pink robe and a black-clad Greek Orthodox monk with a bloody gash on his forehead were both taken away in handcuffs after scuffling with dozens of riot police.
Six Christian sects divide control of the ancient church. They regularly fight over turf and influence, and Israeli police are occasionally forced to intervene.
“We were keeping resistance so that the procession could not pass through ... and establish a right that they don’t have,” said a young Greek Orthodox monk with a cut next to his left eye.
The monk, who gave his name as Serafim, said he sustained the wound when an Armenian punched him from behind and broke his glasses.
Father Pakrat of the Armenian Patriarchate said the Greek demand was “against the status quo arrangement and against the internal arrangement of the Holy Sepulcher.” He said the Greeks attacked first.
Archbishop Aristarchos, the chief secretary of the Greek Orthodox patriarchate, denied his monks initiated the violence.
After the brawl, the church was crowded with Israeli riot police holding assault rifles and standing beside Golgotha, where Jesus is believed to have been crucified, and the long smooth stone marking the place where tradition holds his body was laid out.
The feud is only one of a bewildering array of rivalries among churchmen in the Holy Sepulcher.
The Israeli government has long wanted to build a fire exit in the church, which regularly fills with thousands of pilgrims and has only one main door, but the sects cannot agree on where the exit will be built.
A ladder placed on a ledge over the entrance sometime in the 19th century has remained there ever since because of a dispute over who has the authority to take it down.
More recently, a spat between Ethiopian and Coptic Christians has delayed badly needed renovations to a rooftop monastery that engineers say could collapse.

TITLE: Anelka Puts Chelsea In Pole Position
PUBLISHER: Reuters
TEXT: LONDON — Chelsea returned to the top of the Premier League on Sunday with a convincing 2-0 victory over Blackburn Rovers at a rain-drenched Ewood Park.
A torrential downpour made conditions almost unplayable in the first half but Chelsea adapted far better and took the points with a double from Nicolas Anelka to continue their 100 percent away record in the league.
Chelsea moved above Liverpool, 3-0 winners at home to West Bromwich Albion on Saturday, on goal difference. Both clubs have 29 points from 12 games. Arsenal are third with 23 points after their 2-1 defeat of champions Manchester United on Saturday.
Aston Villa could have gone above Manchester United into the top four but lost 2-1 at Middlesbrough for whom Tuncay Sanli scored an 88th-minute winner.
Tottenham Hotspur’s resurgence under new manager Harry Redknapp continued as they came from a goal behind to secure a 2-1 victory at Manchester City, who had Gelson Fernandes and Richard Dunne sent off.
Robinho gave City the lead but in-form Darren Bent scored both Tottenham goals as they moved out of the relegation zone having collected 10 points from a possible 12 since Redknapp took charge last month.
Spurs ended with 10 men after Benoit Assou-Ekotto was also red-carded for a bad tackle.
Newcastle United are back in the bottom three after losing 2-1 at Fulham. Danny Murphy slotted the winner from the penalty spot to take Fulham up nine places to 10th.
Chelsea have been unstoppable on the road in the Premier League and have now won all six of their away matches.
Needing a victory at Blackburn to edge above Liverpool, it looked as though heavy rain would frustrate them as the game appeared in danger of being abandoned.
“The pitch was dangerous in the first half because it was raining and it was very difficult for us,” manager Luiz Felipe Scolari told the BBC.

TITLE: South African Music Legend Miriam Makeba Dies Aged 76
PUBLISHER: The Associated Press
TEXT: JOHANNESBURG, South Africa – Miriam Makeba, the South African singer who wooed the world with her sultry voice but was banned from her own country for more than 30 years under apartheid, died after a concert in Italy. She was 76.
In her dazzling career, Makeba performed with musical legends from around the world — jazz maestros Nina Simone and Dizzy Gillespie, Harry Belafonte, and Paul Simon — and sang for world leaders such as John F. Kennedy and Nelson Mandela.
“Her haunting melodies gave voice to the pain of exile and dislocation which she felt for 31 long years. At the same time, her music inspired a powerful sense of hope in all of us,” Mandela said in a statement.
He said it was “fitting” that her last moments were spent on stage.
The Pineta Grande clinic in Castel Volturno, near the southern city of Naples, said Makeba died early Monday of a heart attack.
Town Mayor Francesco Nuzzo said Makeba collapsed late Sunday at the end of a concert against organized crime, which has been blamed for the local massacre in September of six immigrants from Ghana.
Makeba had not looked well as she visited an immigrant aid center in Castel Volturno early Sunday afternoon, the mayor said.
The death of “Mama Africa,” as she was known, plunged South Africa into shock and mourning.
“One of the greatest songstresses of our time has ceased to sing,” Foreign Affairs minister Nkosazana Dlamini Zuma said in a statement.
“Throughout her life, Mama Makeba communicated a positive message to the world about the struggle of the people of South Africa and the certainty of victory over the dark forces of apartheid and colonialism through the art of song.”
Makeba wrote in her 1987 memoirs that friends and relatives who first encouraged her to perform compared her voice to that of a nightingale. With her distinctive style combining jazz with folk with South African township rhythms, she was often called “The Empress of African Song.”
The first African woman to win a Grammy award, Makeba started singing in Sophiatown, a cosmopolitan neighborhood of Johannesburg that was a cultural hotspot in the 1950s before its black residents were forcibly removed by the apartheid government.
She then teamed up with South African jazz trumpeter Hugh Masekela — later her first husband — and her rise to international prominence started when she starred in the anti-apartheid documentary “Come Back, Africa” in 1959.
When she tried to fly home for her mother’s funeral the following year, she discovered her passport had been revoked. It was 30 years before she was allowed to return.
In 1963, Makeba appeared before the UN Special Committee on Apartheid to call for an international boycott of South Africa. The South African government responded by banning her records, including hits like “Pata Pata.”

TITLE: Muscovite Competes for $9.15 Million Jackpot in Poker World Series
PUBLISHER: The Associated Press
TEXT: LAS VEGAS — Ivan Demidov and Peter Eastgate emerged from a marathon session early Monday morning at the World Series of Poker and were due to meet later in the night to settle the $9.15 million title.
Eastgate, a 22-year-old poker professional from Odense, Denmark, eliminated the last American in the field with a set of threes. Dennis Phillips, who tried to bluff Eastgate with a 10 high, shrugged his shoulders and nodded his head when Eastgate made the call that eliminated him.
“I just want to be alive on the river,” Phillips said before an ace came on the turn, officially eliminating the 53-year-old trucking account manager who started the final table with the chip lead.
Phillips won $4,517,773 for third place.
Eastgate held 79.5 million chips, nearly 22 million chips more than Demidov, a 27-year-old semiprofessional poker player from Moscow.
“My hands held up all the time — that’s the key factor,” Eastgate said.
Those big hands, including two full houses and a set, helped Eastgate end the tournament for four players.
Ylon Schwartz finished fourth and won $3,774,974 after failing on a bluff, giving Eastgate a lead over Demidov. Scott Montgomery watched Eastgate hit a full house on the river, after Montgomery picked up three aces on the turn.
“I saw it coming,” said Montgomery, 26, of Perth, Ontario. He won $3,096,768 for fifth place, and Eastgate moved just behind Demidov.
Demidov, unlike Eastgate, did not eliminate any players from the final table. But he made plenty of moves from the start, overtaking the lead from Phillips and making a bet that would have put Phillips all-in for the first time at the final table.
“I’m more confident,” said Demidov, an online poker whiz who spent four months up to Sunday night getting more accustomed to live poker games.
He finished third at the main event of the World Series of Poker Europe in September.
Darus Suharto failed on a last-ditch effort to add to his short stack of chips when he lost an all-in bet to Montgomery. Montgomery ended Suharto’s tournament by hitting a fourth spade on the turn to make a flush. Suharto won $2,418,562 for sixth place.
David “Chino” Rheem, the most well-known poker player coming into the final table, busted out in seventh place when Eastgate hit a pair of queens to upend the 28-year-old poker professional from a dominant hand.
“I put my heart into it and my heart is broken,” a visibly upset Rheem said. “This one really hurts.”
Rheem won $1,772,650 for seventh place.
The first two players eliminated went out in back-to-back hands. Each bust out brought higher guaranteed paydays and inched those remaining closer to poker’s richest crown.
Kelly Kim, a big underdog because of his severely low chip stack coming into the final table, held out one hand longer than Craig Marquis and was rewarded with an extra $387,547.
“You play this game, you take the abuse and you give the abuse,” Kim said. “I hung on as long as I could.”
Marquis, a 23-year-old from Arlington, Texas, lost with three sevens to Scott Montgomery, who drew a straight on the turn and river to send Marquis home in ninth.
“You got to try to win the tournament,” Marquis told Kim as the first two players eliminated from the final table greeted each other away from it.
Ylon Schwartz started the day in the middle of the pack and quickly moved to the top with aggressive raises. Phillips — hoping to salvage a lousy start — doubled up through Rheem on his way back into serious contention. By the time Rheem was eliminated, Schwartz and Phillips were essentially tied in chips, an indication of the big swings in the seesaw battle for the top of the poker world.
Kim, a 31-year-old poker professional from Whittier, California, survived two all-in bets after watching his stack slowly whittle away at the start of the final table.

TITLE: Pakistan Hopes for Better U.S. Ties
AUTHOR: By Munir Ahmad
PUBLISHER: The Associated Press
TEXT: ISLAMABAD, Pakistan — Pakistan is succeeding in its fight against Islamic extremists close to the border with Afghanistan, even though the campaign is being hampered by U.S. missile strikes in the region, the country’s president said Monday.
Asif Ali Zardari told The Associated Press in an interview he expects U.S. President-elect Barack Obama to take a “new look” at Pakistan’s objections to the missile attacks on suspected al-Qaida and Taliban targets, but that he did not know if Obama would halt them.
The United States is pressing Pakistan to take more action against militants in its rugged and lawless northwest border area, which many consider the global front line in the fight against al-Qaida.
In a tribal region in the northwest, Pakistan has since August pursued a military campaign that officials say has killed 1,500 suspected insurgents.
U.S. officials say it has helped stem the flow of fighters into neighboring Afghanistan, where they are blamed for rising attacks on American troops.
“I think from where it was when we took over, we are in a much better place,” said Zardari about the military operation in Bajur tribal region.
“We used the force of the government and they (the militants) realized that there is a force here, that the people of Pakistan are to be reckoned to it,” said Zardari.

TITLE: Journalist Imprisoned in Afghan Cave
PUBLISHER: Reuters
TEXT: KABUL — Afghan kidnappers kept a Canadian journalist captive in a cave for four weeks before she was freed, the woman said in comments released on Sunday.
Mellissa Fung, a journalist with the Canadian Broadcasting Corp in Afghanistan, was freed on Saturday after being kidnapped a month ago near the capital, Kabul.
In a video handout by Afghanistan’s intelligence agency, which secured her release, Fung, wearing an army camouflage jacket, also said she had her hands and legs chained during her last week of detention in Maidan Wardak province just southwest of Kabul.
Fung was abducted by armed men at a refugee camp on the outskirts of Kabul on October 12 and taken to the mountains west of the city, the CBC network said in a statement.
Afghanistan, one of the most dangerous nations in the world for reporters, has seen a spike in assassinations and kidnappings of foreigners in recent months.
The intelligence department said Fung was freed without any ransom, but did not say whether her abductors were members of a criminal group or Taliban insurgents who have been behind many kidnappings in Afghanistan in recent years.
Three men were arrested in the raid, but one of the ring-leaders had fled abroad, an intelligence official said.