SOURCE: The St. Petersburg Times
DATE: Issue #1435 (99), Friday, December 19, 2008
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TITLE: Deputy 
PM Sends Weak Signal  To OPEC
AUTHOR: By Anatoly Medetsky
PUBLISHER: Staff Writer
TEXT: MOSCOW — Deputy Prime Minister Igor Sechin appeared on Wednesday to throw Russia’s weight behind OPEC’s announcement of a major production cut, saying the country’s oil output would slide by 3 percent next year if prices remained low. 
The Organization of Petroleum Exporting Countries agreed to remove an additional 2.2 million barrels of crude from the market starting in January — the deepest single cut it has ever made — at a Wednesday meeting in Oran, Algeria, in an effort to reverse plummeting prices. 
In a pre-meeting speech, Sechin said Russian oil companies would be forced to cut supplies by 320,000 barrels a day if prices remain weak. He did not, however, portray the cuts as a move taken in cooperation with OPEC, something President Dmitry Medvedev had previously suggested Russia could do. 
Some industry executives were already predicting in October that the country’s total output could fall by as much as 5 percent next year, as companies trimmed down their investments. 
The government’s decision to make those predictions official, rather than formally committing to joining forces with OPEC on cuts, may not have the desired effect of sending the prices up. 
“It will be seen by experts as just a little bit disingenuous,” said William Ramsay, former executive director at the International Energy Agency. “It won’t affect the price; it will be disregarded.” 
Even this announcement was likely difficult for the government, as it was an acknowledgement on an official level that production would most likely drop, despite three new fields coming on line this year. 
Russian crude output likely wouldn’t have been in danger of such a fall next year — and might even have been poised to post modest growth — if it hadn’t been for the collapse in global prices, said Pavel Sorokin, an analyst at UniCredit Aton. 
Energy Minister Sergei Shmatko said in Oran that Russia would produce 1 percent to 1.4 percent less crude this year than last year, the first decline in a decade. Production will drop to between 485 million and 488 million tons, he said. 
OPEC accounts for 42 percent of the global crude supply, while Russia accounts for 12 percent. 
OPEC’s latest cut comes in addition to combined cuts of 2 million bpd agreed to by the 13-member cartel at its last two meetings. This will bring total supply reductions by OPEC this year to 4.2 million bpd, a reduction of almost 5 percent in total world oil supplies, and lowers the group’s supply target to 24.845 million bpd. “I hope we surprised you — if not, we have to do something about it,” OPEC president Chakib Khelil, who hosted the conference, told reporters. 
Despite the record cut, oil fell by more than $3 per barrel, to $40.20 per barrel in morning New York trading, following the release of weekly U.S. data that showed inventories in the world’s biggest consumer continued to swell, Reuters reported. 
Speaking on the sidelines of the OPEC conference, Sechin said the plans to reduce output next year were a joint decision by the country’s oil companies, Interfax reported. 
In his speech to OPEC ministers, Sechin asked them to upgrade Russia’s status in relation to the organization from observer to that of permanent observer, and invited the cartel to hold one of its events in Russia, according to the summary of the speech posted on the Cabinet’s web site. 
He also invited OPEC ministers to attend the Gas Exporting Countries Forum meeting in Moscow next week. 
There was no official OPEC reaction by late Wednesday to Sechin’s announcement of the possible cuts next year or his other statements. 
Sechin said Russia had cut exports in November by 350,000 bpd because of low prices. He did not say whether this also represented a fall in production. 
Another non-OPEC producer, Kazakhstan, may trim production as well, Sechin said. 
Azerbaijan, which is also outside OPEC, may lower production by as much as 300,000 barrels per day, Azeri Energy Minister Natig Aliyev said in Oran. 
Norway and Mexico, which implemented production curbs in cooperation with OPEC in 2002, to help bolster oil prices after they fell below $20, said they had no plans to join forces this time.

TITLE: Fatal Bus Crash Kills 24 In Israel
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Twenty-five St. Petersburg travel agents and tourists are recovering in Israeli clinics after a fatal accident on the road from Ovda International Airport to the resort town of Eilat which killed 24 people and left Russians and Israelis in state of shock.
The Russians had arrived on a direct charter flight from St. Petersburg on Wednesday afternoon for a week-long tour to Israel and were being transferred by bus to Eilat when the horrendous accident occured.
“The accident was such a profound shock; our colleagues were looking forward so much to exploring a new destination and then helping the Russian people to discover it...what a terrible way to die,” said Irina Tyurina, spokesperson of the Russian Tourism Industry Union. “We are getting an avalanche of condolences from tour operators from all over Russia, from Kaliningrad to Vladivostok.”
The organization is collecting money for the survivors and the families of those who died.
Ovda airport, originally an Israeli Air Force base, is located about 60 kilometers north of Eilat in a desolate part of the southern Israeli desert. Several dozen ambulances and helicopters were sent to the scene. The victims were taken to different hospitals across Israel, including Yoseftal hospital in Eilat, Soroka hospital in Beersheba and Barzilai Medical Center in Ashkelon.
The bus plunged into a ravine from the road, falling nearly 80 meters. The scene resembled a battlefield, with bodies and luggage scattered over a large area. The bus was crumpled like a paper toy.
Several survivors and witnesses to the accident told Israeli and Russian media that the driver drove carelessly and was speeding. The driver, who sustained minor injuries, has denied the accusations. 
According to the Israeli police, the driver has previously been fined more that 20 times for exceeding speed limits and violating traffic rules.
The promotional tour to Israel was aimed at St. Petersburg tour operators and organized jointly by four local tour operators — Solvex-turne travel agency, Classic Travel agency, Megapolus Tours agency and Riviera travel agency.
“Promotional trips are an inseparable, unavoidable part of our work,” said Sergei Korneyev, head of the Northwestern branch of the Russian Tourism Industry Union, or RST.
“In this context, our colleagues died on duty. The scale of this horrifying accident is enormous, and we are all deeply shaken by it.”
Thirty-seven agencies from St. Petersburg and Northwestern region sent representatives to Eilat.
“Our phones have been ringing non-stop around the clock,” said Tamara Khaletskaya, general director of Solvex-turne travel agency, which sent two tourists and one staff member on the trip. “Wednesday night was a night of hell.”
According to Global Voyager Assistance crisis center, seven people are still in a critical condition and remain unconscious.
All the patients currently undergoing treatment in Israel have been identified by relatives or colleagues.
Documents belonging to a number of victims, including insurance policies, were lost during the accident and have not yet been recovered. But the Israeli government announced that it will cover all treatment costs for all victims and will pay for the travel expenses of any relatives visiting them.
In addition, several law firms are now discussing the possibility of the Israeli government paying compensation to survivors and the families of those who died.
“Sadly, Russia is not new to deadly accidents involving its tourists; but neither Egypt or Turkey, or any other country where the Russians typically spend their vacations, go as far as even discussing this topic,” Korneyev said. “The negotiations currently being held will set a precedent for a government being engaged in settling such an issue.”  
The bodies of those who did not survive the deadly crash arrived in St. Petersburg on Thursday on a special flight arranged by the Russian Ministry of Emergency Situations.
On Wednesday, Dec. 24, local tour operators will attend a special remembrance service at the St. Nicholas Cathedral in memory of victims of the Eilat crash.
The Jerusalem Post on Thursday reported that Tourism Ministry officials said Wednesday that they do not expect the accident — the deadliest in Israel’s 60-year history — to negatively influence Russian tourism to the country in the long-term.

TITLE: Missed Mortgage Payments Up 6-Fold as Crisis Hits Hard
AUTHOR: By Maria Levina
PUBLISHER: Special to The St. Petersburg Times
TEXT: MOSCOW — The number of homeowners missing payments on their mortgages more than sextupled in the first nine months of this year, the Central Bank said Wednesday, in a first indication of how badly the crisis was battering the mortgage market. 
Industry insiders predicted that the mortgage market would be dead for at least the next two years as banks funneled funds from a multibillion-dollar state bailout of the banking system elsewhere. 
The Central Bank said the volume of overdue mortgage payments increased 6.2 times in the first nine months of 2008 to reach 5 billion rubles, or 0.5 percent of all outstanding mortgages. 
While the figures remain relatively small, they represent a significant increase and may be a harbinger of the results that will be released for the last three months of 2008, when the crisis took a firm hold on the economy. 
Russia’s mortgage market comprises less than 3 percent of GDP, compared to 10 percent in Poland, 52 percent in Germany and 65 percent in United States. Despite a spike in global interest rates, it skyrocketed 59 percent from 611 billion rubles at the end of last year to 974 billion rubles in September, according to the Central Bank. Overdue mortgages accounted for 0.13 percent of all mortgages in December 2007. 
Banks started facing liquidity constraints at the end of 2007, when the first investment banks announced losses on sub-prime mortgages in the United States, leading to a tightening of capital markets, but they had continued to disburse mortgages in hope of a return of better days. 
Not anymore. 
“To prevent defaults, banks are looking to compromise with borrowers, adjusting their repayment schedules and helping them move into cheaper apartments,” said Igor Zhigunov, deputy chairman of City Mortgage Bank, a leading mortgage bank acquired by Morgan Stanley for $185 million in late 2006. 
Zhigunov said his bank was working on developing such programs to avoid defaults. 
He and other mortgage specialists predicted that the mortgage market would decline throughout the first half of 2009 and only start recovering in two to three years. 
“Banks are not interested in disbursing long-term money at the moment. They want to limit their risks, especially given the prospects of a further ruble devaluation,” said Viktor Afonin, head of marketing at Fosborne Home, a leading credit broker. 
“We have had several cases where a bank changed its lending conditions at the last moment, after the credit agreement was signed,” he said. 
Afonin said that as recently as the summer, Fosborne Home had more than 80 partner banks that offered mortgage programs, and now no more than 10 of its partners continue to disburse mortgages — and these banks have only a limited number of programs. 
Banks are more interested in funding companies at the moment because the risks are much lower than funding individuals, the terms are shorter, and returns more attractive, said one mortgage business investor who spoke on condition of anonymity, saying he did not want to draw attention to his company. 
“Aside from the usual credit risks of the borrower, banks are facing a real estate devaluation risk, as well as another issue — matching their short-term financing with long-term loans,” he said. 

Coping With Fewer Funds
Funding resources for banks have become very limited, and the share of government funding in the banking system has increased to 10 percent from an average of 3.8 percent in the first nine months of 2008. 
“Banks are accumulating cash cushions at the moment,” said Olga Naydenova, a senior banking analyst with Alfa Bank. “Even if they are able to refinance their existing portfolios through a mechanism offered by the Agency for Housing Lending Development, they are unlikely to disburse this money again through mortgages.” 
Naydenova said that in an environment of limited funding sources, banks without a significant cash cushion could face bankruptcy if they saw a repeat of what happened in October, when a run on banks caused deposits to fall by 6 percent in a single month. 
The first signs of disappearing funding for banks appeared in the summer of 2007, when U.S. investment bank Bear Stearns announced losses from its holdings of mortgages and mortgage-based securities. By the end of the year it had written off $1.9 billion of holdings and posted a loss of $854 million, its first in 80 years. Other Wall Street investors also became victims of a slowdown in housing prices, which led to much higher default rates on risky home loans than was expected and unprecedented losses. 
As a result, securitization, an instrument developed to help banks fund themselves by selling their mortgage portfolios to third-party investors, has now reached a dead end. In theory it works well, letting the selling bank receive cash for its portfolio right away and put it to use, while the investor gets future cash flows. One of the advantages of securitization includes the ability of a bank rated “BB” to borrow at “AAA” rates if it has an “AAA”-rated mortgage portfolio, leading to a steep reduction in borrowing costs. But in practice, securitization has backfired, as defaults on portfolios sold to financial investors proved to be much higher than estimated. 
Since August 2007, financing has really dried up, as previously committed securitization transactions were completed but investors showed no new interest in funding. 
“The banks that are continuing to disburse mortgages are offering unattractive terms to borrowers,” Afonin said. “They also now have limited programs and some of them do not offer ruble programs.” 
Borrowers, on the other hand, are much more hesitant to borrow in dollars in an environment where the ruble has depreciated by more than 20 percent against the dollar since the beginning of the year and is expected to depreciate further. 
“We have seen a two times reduction in mortgage applications since July,” said Zhigunov of City Mortgage Bank, the first private bank to securitize its mortgage portfolio, selling 1,275 mortgages for $72.6 million in early 2006. 
The bank now offers mortgages only in dollars, the amount borrowed cannot exceed 60 percent of apartment’s market value, the prepayment penalty is as much as 5 percent, and regardless of a borrower’s monthly income, the interest rate is 13 percent, unless the loan amount is less than 50 percent of apartment value. 
For those that took a dollar mortgage and are now facing repayment difficulties, VTB-24 is offering a program that allows clients to convert to a ruble-based mortgage. Ruble rates vary from 13.6 percent to 16.6 percent, but the customer pays a 24,000-ruble commission for the issuance of a new loan, in addition to being mandated to assess the value of the property again and buy insurance. 
Vera Lanina, a 45-year-old Moscow homebuyer, said she was satisfied with her dollar-based mortgage, which she took out in January when the exchange rate was 24.6, because choosing the dollar had allowed her to borrow a higher amount at a lower interest rate. 
“It [the ruble] has depreciated a lot, but so far I have been able to make my payments,” she said. 
Market specialists said that neither the clients nor the banks will be keen to finance mortgages in the coming months. “People will be afraid to borrow in dollars because of devaluation prospects, banks will be hesitant to offer mortgages in rubles because the resources are limited,” Afonin said. 
Even if the government’s Agency for Housing Lending Development buys mortgage portfolios from banks, the banks are not likely to re-invest these funds back into mortgages, he said. 

State Efforts Dismissed
Finance Minister Alexei Kudrin said earlier this month that the Agency for Housing Lending Development, which is in charge of developing Russia’s mortgage infrastructure, a key element of the government’s housing policy, would receive up to 200 billion rubles through credit lines from state banks to refinance mortgages in 2009. In addition, the agency is in the process of receiving a 60 billion ruble capital injection from the state. This means that the agency could refinance as much as 20 percent of all mortgages outstanding in 2009, giving a significant liquidity boost to banks. But the key question is how the refinancing will be implemented and whether banks will use new funds for mortgage programs. 
In the past several months, the situation on the mortgage market has changed drastically. Down payments have increased from an average of 10 percent to 15 percent to 30 percent to 40 percent, the number of banks offering mortgages has shrunk from 100 in early 2008 to no more than 20 now, City Mortgage Bank said. It said 90 percent of mortgages are currently disbursed by eight to 10 banks and interest rates range from 11 percent to 15 percent in dollars and 17 percent to 26 percent in rubles. 
“It is practically impossible to get a mortgage without an official employment form proving income, and banks have essentially stopped loans for country houses or new housing developments,” Zhigunov said. 
Agency for Housing Mortgage Lending head Alexander Semenyaka said at a conference last week that the agency would provide guarantees for banks that sell their mortgage portfolios to third parties. Semenyaka said that as many as 50 banks with loans of up to 6 billion rubles would receive guarantees from his agency, and 10 banks already approved by his agency have experience in securitization operations. 
Semenyaka also said that his agency would finance a minimum of 100 billion rubles worth of mortgage securities from 50 issuers in 2009. “If amendments reducing mortgage security requirements are introduced, this figure could increase to 200 billion rubles,” he said. 
The Agency for Housing Lending Development intends to tie its refinancing rate to that of the Central Bank, which is currently at 12.65 percent, plus a margin of 0.05 percent. 
Zhigunov said this means the effective cost to the borrowers would be as high as 20 percent in rubles, after accounting for credit risks of the borrower and bank expenses.

TITLE: Local Boxer to Fight American Legend
AUTHOR: By Mark Ledsom
PUBLISHER: Reuters
TEXT: ZURICH — Four-time world heavyweight champion Evander Holyfield will be fighting for all the world’s 40-somethings when he takes on towering Russian WBA champion Nikolai Valuev this weekend, he said on Wednesday.
Holyfield, 46, is bidding to become the oldest heavyweight champion when he fights in Zurich on Saturday against the tallest and heaviest boxer to hold a world title belt.
As well as being 11 years younger than Holyfield, Valuev is 24 centimeters taller — at 2.13 meters — and expected to be some 45 kilos heavier than his American opponent.
“His head is exactly where it needs to be for me to hit it,” Holyfield (42-9-2) shrugged when asked at a Wednesday media conference about the difference in the two men’s statures.
“I honestly do not think that size really matters. It is about how each individual fights. I know I have more experience so I’m just looking forward to showing my talents in the ring.”
For some critics, Holyfield’s ‘experience’ is simply a euphemism for being too old to box, a view that the fight’s promoters labored hard on Wednesday to dispel.
“We’ve been criticized from all sides for letting him box,” acknowledged organizer Wilfried Sauerland.
“But it was Evander who came to us asking for this fight and we said ‘ok, but you will have to go through extensive medical tests’ which he did and passed with flying colors.
“He has built up a reputation as a warrior and I think he will put up a very good fight against Valuev.”
Holyfield said on Wednesday he had lost count of the number of times he had been asked about his age but paid no attention.
“I’m happy to talk about my age, and let people look at me and say ‘wow, he looks as good as any of the younger fighters’.
“It’s a testimony to good living and to not quitting, so my aim is to go and win this fight for all the 40-somethings out there and prove that it’s not really fair to put people all in the same pot based purely on their age.”
While downplaying Valuev’s height advantage, Holyfield acknowledged that he had been working with some oversized sparring partners, including the aptly-named 2.16-meter tall Julius Long, in preparation for Saturday’s fight.
“It’s not something that I’m worrying about though,” Holyfield insisted.
“If he were ten feet tall he would still be a man and this world is not run just by big people or small people. It’s run by the people who make the right decisions at the right time.”
The Valuev camp, meanwhile, said that the Russian was fully-prepared for Saturday’s fight. 
“Nikolai has been working constantly on his technique,” said coach Alexander Zimin. “He’s become stronger, he’s hitting faster and faster and he’s improving with every day.
“I’m sure Holyfield’s team are going to be waiting for the first mistake from Nikolai, but there isn’t going to be one.”
Valuev (49-1-0) acknowledged that Holyfield’s reputation had impressed him but said there was no chance he would be overawed.
“At first I thought ‘wow, Holyfield!’ but I’m done with that now,” the Russian said. “Names aren’t what win fights and he is a boxer just like anyone else.
“Of course, we talked about his age a bit in our training sessions but I don’t think that or the height difference are going to be decisive. It will be about who has prepared best and who can use his experience the most.”

TITLE: State Avoids $4 M Claim on Property
AUTHOR: By Nikolaus von Twickel
PUBLISHER: Staff Writer
TEXT: MOSCOW — The Kremlin on Wednesday managed to avoid paying some $4 million to a German businessman who is seeking to confiscate government property as compensation for a company he lost in St. Petersburg in the 1990s. 
But Franz Sedelmayer, who claims the Russian government owes him up to $10 million, said the forced auction in Cologne, Germany, was still open and that the Kremlin had finally compensated him voluntarily, paying him 40,000 euros ($57,000) in back rent. 
“This is the first time they paid,” Sedelmayer said by telephone from Cologne, adding that he had already received more than 500,000 euros in seized rental payments. 
The only bidder Wednesday for the apartment block owned by the government and valued at around 2.8 million euros ($4 million) was a property management firm controlled by the Kremlin, said Jurgen Mannebeck, a spokesman for the Cologne District Court, which conducted the auction. 
Well before the auction, the Kremlin gave the company the legal right, known as usufruct, to all profits and benefits from the property, Mannebeck said by telephone. This made the apartment block unattractive for other buyers, he said. Because the usufruct is worth the same as the property, the transaction could go through while Sedelmayer would only get his back rent, Mannebeck said. “They need not pay the money. This is very cunning,” he said. 
Sedelmayer accused the Kremlin of “cheating” by illegally giving the usufruct to the company. 
Kremlin Property Department spokesman Viktor Khrekov said the government merely exercised its rights and would take “all possible legal means to protect our property abroad.” 
The block of 45 apartments is part of a 3,570-square-meter estate in Cologne’s southern outskirts that formerly housed staff for the Soviet trade representation. In March, a Cologne court ruled that Sedelmayer could auction off Kremlin property in Cologne as compensation for assets he says he lost after the Property Department confiscated his St. Petersburg security company in 1994.

TITLE: Activisits Claim Treason Bill Could Target Kremlin Critics
AUTHOR: By David Nowak
PUBLISHER: The Associated Press
TEXT: MOSCOW — Under Soviet dictator Josef Stalin, people who fraternized with foreigners or criticized the Kremlin were “enemies of the people” and sent to the gulag. Now there’s new legislation backed by Vladimir Putin’s government that human rights activists say could throw Russia back to the days of the Great Terror.
The legislation, outspoken government critic and rights activist Lev Ponomaryov charged Wednesday, creates “a base for a totalitarian state.”
Government supporters and Kremlin-allied lawmakers said the bill — submitted to the Kremlin-friendly parliament last week — will tighten up current law. Supporters say prosecutors often have trouble gaining convictions because of ambiguities in the definition of state treason.
The bill would add non-governmental organizations based anywhere in the world that have an office in Russia to the list of banned recipients of state secrets. The government has repeatedly accused foreign spy agencies of using NGOs as a cover to foment dissent.
Critics warned the loose wording will give authorities ample leeway to prosecute those who cooperate with international rights groups.
Under current treason statutes, some NGOs are not considered “foreign organizations,” meaning a person who passes a state secret to an NGO might not be considered a traitor.
Some of Russia’s most prominent right activists, including Moscow Helsinki Group head Lyudmila Alexeyeva and Civic Assistance director Svetlana Gannushkina, said the bill in fact gives authorities the power to prosecute anyone deemed to have “harmed the security of the Russian Federation.”
It is “legislation in the spirit of Stalin and Hitler,” the activists said in a joint statement — legislation that “returns the Russian justice to the times of 1920-1950s.”
During the 1930s, Stalin oversaw a sweeping crackdown that came to be known as the Great Terror. Millions were accused of being “enemies of the people,” convicted by farcical courts based on hearsay and anonymous allegations, and executed or sent to the vast system of prison camps known as the gulag.
The legislation expands the definition of treason to include damaging Russia’s “constitutional order,” and “sovereignty or territorial integrity.”
The activists believe each proposed addition cynically targets potential threats to the Kremlin, shattering what remains of civil society in Russia.
Activists said expanding the term “constitutional order,” would effectively outlaw opposition protests.

TITLE: Russia to Donate Planes to Lebanon
PUBLISHER: Reuters
TEXT: MOSCOW — Russia will give 10 MiG-29 fighter jets to Lebanon as a gift, the Federal Military and Technical Cooperation Service announced on Wednesday.
Agency head Mikhail Dmitriyev said Moscow and Beirut were also in talks on selling Lebanon armor for its ground forces, adding that supplies of Russian weapons there were “now possible after the situation in this nation has stabilized.”
That was a reference to an 18-month crisis that ended in May with a deal to form a unity government between an anti-Syrian parliamentary majority alliance and a Damascus-backed coalition led by the military and political movement Hezbollah.
The handover of the Russian aircraft is likely to be viewed with unease by Israel. The MiG-29 is one of Russia’s most advanced military jets, designed for an air superiority role. Ten of these Soviet-designed planes would not allow Lebanon to challenge Israel’s air superiority directly but could threaten Israeli overflights over Lebanon and Syria.

TITLE: Caspian Pipe To Raise Capacity
AUTHOR: By Ethan Wilensky-Lanford
PUBLISHER: Staff Writer
TEXT: MOSCOW — Shareholders in the Caspian Pipeline Consortium agreed Wednesday on plans to double the line’s capacity. 
One partner — LUKArco, owned by LUKoil and BP — did not sign the agreement but agreed not to block the expansion project. 
“BP supported the approval by LUKArco of a plan allowing expansion of the CPC to go ahead in 2009,” said BP spokesman Vladimir Buyanov. 
Among those signing the deal in Moscow were Deputy Energy Minister Anatoly Yanovsky, his Kazakh counterpart Kairgeldy Kabyldin, Transneft vice president Mikhail Barkov and representatives of the energy companies. 
BP has been in negotiations to sell its 46 percent stake in LUKArco to LUKoil, which holds the rest of the shares in the company. BP also owns 49.9 percent of Kazakhstan Pipeline Ventures, a joint venture with KazMunaiGaz. 
Together, the two holdings give BP just over a 6 percent stake in the entire consortium, according to CPC. 
BP said it is looking to sell because its production in the region is too low to warrant participation in the project. 
“We don’t have a sufficient amount of oil to pump through the pipeline,” Buyanov said. “The commercial terms of expansion are currently disadvantageous for BP, as BP is the only investor without substantial upstream production to export.” 
Representatives of BP and LUKoil declined to comment on the negotiations, other than to say that they were ongoing. BP is also in talks with KazMunaiGaz to sell its 19 percent share in Kazakhstan Pipeline Ventures. Chevron, ExxonMobil and Shell are other foreign firms with stakes in the construction of the pipeline. 
TengizChevroil, in which Chevron holds a 50 percent stake, is the largest consortium member in terms of production. This year, it will export 13 million tons of oil through the pipeline from Kazakhstan, said Chevron spokeswoman Irina Rybalchenko. The increase in the pipeline’s capacity will eventually allow the company to raise the annual figure to 30 million tons. The members of the consortium expect the expansion to be completed by 2013. 
The work will not require the building of any new pipe but will expand capacity through the introduction of 10 additional pump stations, six new crude oil storage tanks near the Black Sea port of Novorossiisk and a third, single-point mooring buoy at the terminal in the Black Sea.

TITLE: KamAZ to Shut Production Plant for Month
PUBLISHER: Combined Reports
TEXT: MOSCOW — Truck maker KamAZ, in which Germany’s Daimler took a 10 percent stake last week, said Wednesday that it would halt assembly lines from Friday until Jan. 19. 
“This is linked to a huge amount of unsold stock. ... Russia is in hibernation. There is no demand,” KamAZ spokesman Vladimir Samoilov said. 
KamAZ was down 4 percent on the MICEX, well below the exchange’s main index, which closed down 0.3 percent. Daimler’s stock was up 2.8 percent Wednesday evening. 
Russia’s construction firms and heavy industries, where KamAZ finds most of its customers, have been forced to scale back production and cancel projects because of the global financial crisis. Daimler, the world’s largest truck maker, is seeking access to what it says will become one of the largest truck markets in Europe. 
On Friday, the company signed a deal to pay Troika Dialog $250 million for the 10 percent stake. The deal calls for a further $50 million to be paid in 2012 if KamAZ meets earnings and sales targets. 
The German Federal Cartel Office, the country’s anti-monopoly regulator, approved the deal, according to a posting on its web site Wednesday. 
The German company had been in talks with Troika since July about buying 42 percent of state-controlled KamAZ while also considering setting up its own plant. Daimler limited itself to a 10 percent stake to “minimize risks” during the crisis. 
(Reuters, Bloomberg)

TITLE: Ruble Sees Biggest Drop In Value in Three Months
AUTHOR: By Courtney Weaver
PUBLISHER: Staff Writer
TEXT: MOSCOW — The Central Bank allowed a devaluation of the ruble for the second time this week on Wednesday, allowing it to lose almost 1.4 percent of its value against the currency basket, its biggest devaluation in three months. While the ruble plummeted against the euro, it lost little against the dollar, which sank on news of a Federal Reserve rate cut in the United States. 
Currency analysts expect the devaluations — which have now occurred seven times since Nov. 11, usually at a rate of about 1 percent — to become deeper and more frequent. 
News of the Federal Reserve cutting interest rates to almost zero Tuesday drove the dollar down overnight, keeping the ruble at 27.56 per dollar at 5 p.m. Wednesday, two cents lower than a day before. The ruble fell to 38.87 versus the euro, from 37.87 yesterday, and almost 1.37 percent to 32.64 against the basket. 
The Central Bank said in a statement that it had widened the ruble’s trading band, without giving an exact figure. However, it appeared that the band was widened by 40 kopeks at each end. Previous devaluations saw the trading band widened by 30 kopeks at each end. 
“It appears the Central Bank favors widening the basket on days when the euro is strengthening,” said Yelena Rybakova, chief economist at Citibank. “If the main concern regarding the sharp devaluation of the ruble is its effect on individual [Russian] depositors, it is of course better to do it on the days and weeks that the euro is strengthening.” 
Based on the price of 12-month non-deliverable forward contracts, the ruble may fall as much as 21 percent to 35.02 per dollar. Marina Vlasenko, senior CIS credit analyst for Commerzbank, said market participants were predicting frequent and sharper devaluations of the currency in January. 
“We aren’t ruling out some surprises, however,” she said. 
Vlasenko said the biggest uncertainties lay in how low the Central Bank would allow the ruble to fall, or what level the currency would find if it were allowed to devalue on its own. 
“It seems that each [slight] devaluation increases the need for another devaluation,” she said. “The Central Bank is provoking expectations of further devaluations on the market each time it increases its pressure on its currency reserves.” 
Rybakova said the recent news of a 10.8 percent drop in industrial output in November will force authorities to decide how much they are willing to lose defending the ruble.

TITLE: Crisis Hits Prodigy’s U.S. Chain
PUBLISHER: Bloomberg
TEXT: MOSCOW — Kira Plastinina, a 16-year-old Russian fashion designer whose father says he spent $80 million setting up stores under her name, will close almost all of her 12 U.S. outlets after less than a year as demand slumps. 
“The number of shoppers in the U.S. fell significantly,” said Sergei Plastinin, Kira’s father, the food entrepreneur who co-founded Wimm-Bill-Dann. “It also became much harder to find money for investment because of the financial crisis. We had enormous plans: New York, then India and China in 2009.” 
Plastinina told New York magazine in May that her dad offered to turn her notebook dress-sketching hobby into actual clothes sold by her own retail chain when she was 14. The high-school student appears in the brand’s advertising and has been photographed with U.S. heiress Paris Hilton. The company will focus on its 70 stores in Russia as U.S. retailers mark down inventory to cope with the recession. 
“We have to live through the crisis and see what happens next before making any decisions,” Plastinin, 40, said Wednesday. A spokeswoman for the chain said the teenager’s father speaks to business reporters, while Plastinina only gives interviews to the fashion press. 
The first U.S. Kira Plastinina outlet opened in Manhattan in May and the chain had 12 stores in the U.S.

TITLE: When Writing About the Crisis Is Extremism
AUTHOR: By Yevgeny Gontmakher
TEXT: The shelf life of most newspaper articles is usually one or two days. After that, readers tend to forget whatever the article said. That is why I am so surprised by the continuing debate over my article, “Novocherkassk-2009,” published on Nov. 6 in Vedomosti. In that comment, I described a typical city with a workforce dependent on a single major factory or industry (Russia has about 700 such cities) and the social problems that could result if the economic crisis were to worsen. 
I suggested that first, the central factory or industry would shut down, causing widespread unemployment. This, in turn, would lead to spontaneous demonstrations and public disorder. The local authorities would be at a loss as to how to respond and would either freeze up or panic. That is the type of system that the “power vertical” has created over the past eight years. The only way out of this predicament is to modernize the whole country, and this must include switching to a truly competitive economy and creating an open political system. 
Prime Minister Vladimir Putin’s White House responded the same day the article came out. I received a telephone call from a high-ranking bureaucrat thanking me for the timely warning and saying that the government would be using the information as part of its crisis-management planning.
With that, my article’s shelf life should have ended. But on Nov. 21, Vedomosti received a letter from the Federal Mass Media Inspection Service that was signed by the agency’s deputy head. The letter said my article “could be considered an attempt to incite extremist activities.” 
From that point on, my colleagues and acquaintances began calling me to express solidarity with my position. A stormy debate ensued on the Internet, with the text of the article popping up on one web site after another. Radio and television stations asked me to comment on the situation. I told everyone that the government’s “warning” was a direct attack against the constitutional rights of freedom of speech and freedom of the press.
What part of my piece hit such a raw nerve with the minor officials charged with monitoring freedom of speech? Was it the rioters in the hypothetical scenario who shouted out, “Make those fat-cat bureaucrats accountable for their actions!”? Recall what President Dmitry Medvedev said on the issue in his state-of-the-nation address on Nov. 5. “The state bureaucracy is governed by the same distrust of personal freedoms as it was 20 years ago. That logic is pushing it toward dangerous conclusions and dangerous actions. The bureaucracy periodically ‘nightmarizes’ businesses — so that they won’t do anything ‘wrong.’ It takes over control of the media — so that they won’t say the ‘wrong’ things. It interferes with the electoral process — so that the ‘wrong’ person isn’t elected. It puts pressure on the courts — so that they don’t sentence the ‘wrong’ person. ... The result is that our state apparatus has become the largest employer, the biggest publisher ... it has become its own court of law with jurisdiction over itself ... That kind of system is absolutely ineffective and creates only one thing — corruption. It gives rise to legal nihilism on a massive scale, it stands in opposition to the Constitution and slows the development of innovative economic and democratic institutions.” 
What bothers me most about these events? I don’t like the fact that a precedent has been set. If an analyst or journalist in a particular city publishes something the local authorities don’t want to hear, those officials can — and with the law fully backing them — bring pressure on both the author and the publication. 
That is why I wrote to the Glasnost Defense Foundation asking them to explain the legal basis for determining that my article was “an attempt to incite extremist activities.” On Dec. 8, Foundation president Alexei Simonov sent a request for an explanation to the Federal Mass Media Inspection Service and to Prosecutor General Yury Chaika. We will have to wait a bit for the answer because state agencies usually respond within one month.
Meanwhile, last week I learned that the media oversight agency would be reorganized. Already, as Interfax reported Dec. 10, the head of the watchdog, Boris Boyarskov, has been dismissed by Medvedev after four years in the post. I hope the new staff will have a little better attitude toward freedom of speech.
Regardless of how the legal dispute regarding the accusations of “inciting extremism” turns out, the incident has confirmed the conclusions I made in the “Novocherkassk-2009” article. Without a radical modernization of the leaders’ vision of democracy and the market economy, Russian society and the country itself are ultimately headed toward self-destruction. 
To avoid that unhappy scenario, we must change the direction of Russia’s political development. We must switch from the current top-down vertical power model of ruling the country to one that includes an active dialogue with all sectors of society — including the opposition. 
I recently met with some people from the Netherlands, and they asked me what I thought would happen in Russia in 2009. I told them that the people of Utrecht would certainly be riding bicycles as they have been for decades. As for the question of what will happen in Russia, I don’t know. And I am not the only one who doesn’t know exactly what upheavals await us in the near term. Perhaps this is the biggest problem in our long-suffering country.

Yevgeny Gontmakher is the director of the Center for Social Policy at the Institute of Economics of the Russian Academy of Sciences.

TITLE: Two Problems: China and the Caucasus
AUTHOR: By Yulia Latynina
TEXT: President Dmitry Medvedev has proposed that Europe reform its system of collective security. The Organization of Security and Cooperation in Europe trashed the idea, voting 55-1 against it. Why? Because an odd suggestion was hidden behind the phrase “reform the system of collective security” — namely that NATO be prohibited from expanding its membership, European countries lose their right to deploy U.S. missiles on their territory, but Russia be allowed to do whatever it wants. After the Georgia war, the proposal sounded especially unconvincing.
Russia has two major problems: China and the Caucasus.
The problem with China is that, in the Russian Far East, people are living in the 21st century on the Chinese side of the Amur River, while on the Russian side they are still stuck in the 19th century. On the Chinese side is the prosperous boom town of Heihe. On this side is the dilapidated and run-down city of Blagoveschensk. 
In contrast to the United States, China has territorial claims on Russia. And in contrast to our officials, the Chinese think in terms of millenniums, not dollars. But we do not discuss our “China problem” at all because Russia’s government is in about the same condition as those buildings in Blagoveschensk — and that makes it too frightening to even bring up the subject. It is easier to discuss problems that don’t really exist, such as the issue of collective security in Europe.
Russia’s second big problem is the Caucasus. In reality, the Caucasus was never really integrated into Russia — not in tsarist times, not during Soviet times, not now — and that’s great. Any empire, if it wants to be considered a true empire, needs to have a variety of cultures with varying degrees of development and a marked difference between the regions and the central metropolis — which remains a metropolis because it gives more to the provinces than it takes from them.
In Russia, that relationship has been seriously compromised. Moscow police treat people from the Caucasus as second-rate citizens. Moscow takes everything from the people of the Caucasus — their honor, their dignity, and their right to feel as though they are citizens of a great empire. Moscow feels justified in using a tank to level an apartment building in Makhachkala. But imagine what would happen if troops used a tank to demolish an apartment building in Moscow just because a suspected criminal was living in one of the apartments? And Moscow has no problem with “cleansing” an entire Ingush village, thus labeling — and making — every inhabitant an accomplice to suspected insurgents. The only thing the Kremlin gives the regions in return is money, and this is done in the belief that any fire can be extinguished by pouring enough dollars on it and that the insurgents will remain marginalized as long as the powerful leaders in the Caucasus continue shooting one another in their squabble for federal funds. This strategy has worked out fine as the money kept flowing. But now Russia is running out of cash. What then?
Of course, it would be wrong to say that Russia completely ignores the Caucasus problem. It is discussed. For example, two months ago Deputy Defense Minister Vladimir Shamanov said the situation in the Caucasus was serious and would remain so because of the then-approaching presidential elections in the United States. Let’s just say that his comment fell a little short of being a complete analysis of the situation. 
Russia’s foreign policy is very simple. Moscow does not address the problems that actually exist. It takes on the really nettlesome problems that don’t exist. It won’t discuss what’s happening in the Caucasus, but it is more than willing to defend the interests of 30,000 Russian citizens in South Ossetia. Fine. But what will we do when the Chinese government decides that it wants to defend the interests of the several million Chinese citizens living in the sparsely populated Russian Far East?

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

TITLE: Conflict zone
AUTHOR: By Gleb Bryanski
PUBLISHER: Reuters
TEXT: MOSCOW — A billionaire banker has locked horns with a poverty-stricken left-wing writer in a rare public debate over social division in crisis-hit Russia, revealing growing antagonism in its ostensibly well-controlled society.
The debate, which quickly spread over the Internet but has not been reported on state-controlled mainstream television, has evoked memories of pre-1917 Russia where hatred between the ruling class and the poor sparked a Communist revolution.
The spat started when Pyotr Aven, the wealthy and well connected CEO of the country’s largest privately owned bank Alfa, wrote a damning review of “Sankya”, a novel by Zakhar Prilepin, a member of a banned radical political party.
It tells how Sasha Tishin, a disillusioned young Russian from a provincial town, joins a radical party hoping to change the political system by force, and leads an attack on a local administration headquarters.
“Most of what one needs to hate in life, from my point of view, can be found in writer Prilepin’s book,” Aven wrote in the Russian Pioneer glossy magazine, which targets wealthy educated Russians and has a circulation of 20,000. 
The revolutionary views of the book’s protagonist, he added, made him “reach for a pistol.”
Tishin takes part in violent protests, fights with police, plots killings of officials in neighboring Latvia, and is subjected to brutal torture by security agents.
“Why, instead of bringing order — planting a tree, building a house, washing socks or reading a fairytale to a child — does one need to engage in doing nothing, then after a good booze, taking up a club and smashing everything?” Aven wrote.
After eight years of economic boom, Russia is plunging into an economic crisis which is threatening to crush the fragile stability fostered by Vladimir Putin’s government with the help of buoyant oil revenues, compliant state media and heavy-handed police.
Little-noticed when it was first published in paperback by niche publisher Ad Marginem two years ago, the book’s sales jumped to 35,000 this year. Publication rights have been sold to Poland, France, Serbia, China and Turkey.
Prilepin opposes what he terms the “social Darwinism” which has split Russian society. Despite Russia’s oil wealth, about 21 million Russians or 15 percent of the population live below the poverty line of $158 income per month.
He responded to Aven’s comments by saying he had been working hard, selling over 100,000 copies of his books, while raising three children and paying taxes. 
“I do not understand what else I should do to be able to buy a flat because we do not fit in the one we have,” Prilepin wrote in Ogonyok magazine, which has a circulation of 70,000 and a wider readership than Russian Pioneer. 
He said he had been living with his family in a tiny two-room apartment in the industrial city of Nizhny Novgorod, which was the hometown of Maxim Gorky, an early 20th-century writer.
“The ghost of poverty is still lurking in front of me, it has not gone so far away that I cannot sense its sickening smell,” wrote Prilepin. He said he and his family had sometimes been forced to eat fried cabbage for months to survive.
Some book reviewers have likened Prilepin to Gorky, who was often called “a thunderbird of the Revolution” for books like “The Mother,” written in 1907, about a young factory worker who becomes a revolutionary.
Nizhny Novgorod on the Volga river was renamed after Gorky in Soviet times, but regained its original name after the collapse of the Soviet Union. 
“Russia is on the brink of the social revolution and such a revolution is badly needed,” a skinny, clean-shaven Prilepin told Reuters in a Moscow cafe. “Russia is now in a turbulent state, now it is all going to start.”
With Russia’s rich-poor divide brought into sharp focus by the oil bonanza, there is widespread hatred of billionaires such as Roman Abramovich, the owner of Chelsea football club in Britain, or market reform ideologists like Aven.
Aven worked in Russia’s first reformist government in 1991-92, which used “shock therapy” to reform the economy, wiping out the lifetime savings of millions of Russians. He was 29th in Forbes magazine’s list of richest Russians this year.
Aven’s former colleague in the government Anatoly Chubais, an architect of privatization, survived an assassination attempt in 2005. 
Prilepin served in the special forces, fought in Chechnya, and then worked as a crime reporter before becoming a writer.
“The difference between me and Aven is basic — in case of a crisis, he and his family can leave this country and watch developments from the outside,” Prilepin wrote in the Russian Life magazine, referring to Aven’s properties abroad.
Aven, bespectacled and fast-talking, told Reuters the reaction to his book review took him by surprise, but he could understand the resentment.
“It was like a letter from a world which is totally unknown,” he said by telephone. “I can understand that reaction perfectly well — the outrageous behavior of the rich showing off their wealth.”
Putin, first president, then prime minister, and his hand-picked successor Dmitry Medvedev have portrayed Russia as a stable country where the authorities enjoy the full backing of the population. Prilepin’s book evokes a different world, which is missing from the mainstream media.
In reality, Putin disbanded or marginalized opposition parties like the banned National Bolshevik Party, which counts Prilepin among its members, or their allies from chess grandmaster Garry Kasparov’s United Civil Front. 
“Despite the financial crisis, there are people able to defend the future,” said Aven, justifying his attack on the book. “Moreover, today’s rich came from the same slums as Tishin and had to go through you know what,” he added, recalling the often violent birth of Russian capitalism.
Political analyst Stanislav Belkovsky said Aven’s views were “an ideological manifesto of Russia’s ruling elite” and were in line with the general thinking in the Kremlin. “As long as Aven sits in his office, the regime will not change,” he said.

TITLE: Chernov’s
         choice
TEXT: The <b>FSB</b>, Russia’s Federal Security Service, is celebrating its 91st anniversary this week, which will be marked with a televised gala concert from the Kremlin. Last year there was a big surprise with <b>The Scorpions</b> performing its 1980s glasnost anthem “Wind of Change” to an audience of current and retired security service officers, including Vladimir Putin.
Scarily, the FSB sees the Cheka as its predecessor — the Communist secret police, formed soon after the October revolution as a tool of revolutionary terror by Lenin. Over the years it frequently changed its name (becoming, successively, OGPU, NKVD, MGB and KGB), and was responsible for the deaths of million of people. 
Perhaps due to the nature of the organization, the lineup of the FSB’s birthday concert, which will be broadcast on Russia’s main television station Channel One at 5:10 p.m. on Saturday, is being kept secret. There could be surprises. 
Although many features of the old Soviet Union are coming back into style, there are differences. Just as the FSB chooses to be entertained by the Scorpions, <b>United Russia</b>, the Kremlin-backed political party seen by many as a modern version of the Communist Party of the Soviet Union, has its own heavy metal band.
Called <b>Piligrim</b>, it is led by Andrei Kovalyov, a Moscow Duma deputy and member of United Russia. “I joined the United Russia, because it’s a party of strong people. […] The party made me a deputy, so now I have additional opportunities to support rock music,” he is quoted as saying on the party’s website.
Kovalyov does not look like he is short of money. His band’s albums are frequently given away at shows, while Piligrim’s local concert at Lensoviet Palace of Culture on Friday is free. 
It makes sense because Piligrim’s music is so horrible that it is very unlikely that anybody would pay to listen to it.
Meanwhile, jazz saxophonist and one-time Akvarium collaborator <b>Igor Butman</b> explained his recent decision to join United Russia. A Russian news agency wrote it was “not an easy one.”
According to RIA Novosti, he joined the Kremlin-backed party because he wanted to popularize jazz music, organize charity concerts and help young musicians.
More amusing news is that <b>Bez</b>, the reformed <b>Happy Mondays</b> dancer will visit the city to DJ and MC at Achtung Baby on Saturday. His band performed in Moscow a year ago, but did not make it to St. Petersburg
“Well, Bez is a friend of mine; I mean we’ve been friends since we were children,” Happy Mondays’ frontman <b>Shaun Ryder</b> said, speaking to this newspaper by phone late last year.
“I was never comfortable as a frontperson in a band. […] So I brought Bez in so that he could take the attention off me. And Bez was happy doing that.”

<i>— By Sergey Chernov</i>

TITLE: No restitution
AUTHOR: By John Varoli
PUBLISHER: Bloomberg
TEXT: The Russian government has set up a commission to review the legality of the Soviet Union’s sale of artworks from the country’s museums before World War II, the director of the State Hermitage Museum has said.
Of the hundreds of paintings sold by the Hermitage Museum in the late 1920s and early 1930s, about 20 of them eventually went to help create the National Gallery of Art in Washington D.C.
“President Medvedev has entrusted a commission to raise and study the question to what extent the Soviet government’s sale of artworks from museum collections was legal according to existing laws at that time,” Mikhail Piotrovsky said during his annual state-of-the-museum report in St. Petersburg.
After the Bolsheviks seized power in November 1917 they nationalized private property, including artworks from aristocratic collections and churches. Among these were masterpieces of West European art, Faberge objects, jewelry, silver, and icons.
Some confiscated artworks were destroyed, while many were transferred to state museums, such as the Hermitage. The Soviet government sold artworks to foreign collectors to raise hard currency.
These included Raphael’s “The Alba Madonna” (1511), which American collector and Secretary of the Treasury Andrew W. Mellon bought from the Soviets in 1931. The painting was previously in the Hermitage.
Mellon bought almost two dozen paintings from the Hermitage collection. In 1937 Mellon donated these and his entire art collection to the American people. This was the foundation of the National Gallery of Art, according to the museum’s web site.
In autumn 2004, “The Alba Madonna” was exhibited in the Hermitage for the first time since its sale by the Soviets. At that time, Piotrovsky said the legality of the painting’s sale was not in question. This guarantee was important for the exhibition to go ahead.
How exactly the Kremlin plans to pursue this issue is unclear. Kremlin spokesman Alexei Pavlov said in a telephone interview he didn’t have information. Piotrovsky, however, said he is against restitution.
“The Hermitage has no plans to demand the return of artworks from anyone,” said Piotrovsky. “This is not possible today. However, we plan to resist attempts to make us return items, whether it is Germany or the Russian Orthodox Church, which have claims against Russian museums. Museum items, wherever they are, should remain in their museum collections.”
Piotrovsky was referring to German claims asking Russia to return artworks that Soviet troops looted during and after World War II. The Hermitage has hundreds of so-called “trophy” artworks taken from German collections.
The Russian Orthodox Church has also pressed the country’s museums over the past 15 years to return items that were once in churches, such as icons that believers revere as holy.
Piotrovsky is one of Russia’s most influential culture figures. He is deputy chairman of the Presidential Council for Art and Culture, and chairman of the Union of Museums. He has been Hermitage director since 1992.

TITLE: Euro standard
AUTHOR: By Lauren Abman
PUBLISHER: Special to The St. Petersburg Times
TEXT: This European style cafe is just a short walk from Nevsky Prospekt and offers a break from traditional Russian grub for diners tired of beets and dill. 
The restaurant’s menu comes in both Russian and English, with rather humorous translations. Kristoff’s kid’s menu (Russian only), features cleverly titled dishes such as “Salad like Mommy’s!” 
The restaurant has a front room with a bar, and a back room with cozy booths. Due to the loud, live saxophonist playing in the bar most of the dining pairs were seated in the back room. Black and white photos hang on orange walls above candlelit booths cornered off with translucent curtains. Among the crowd of relaxed visitors were a couple on a date, a “Sex-in-the-City”-style group of ladies dining and enjoying drinks, and a mother and daughter dining together
Kristoff has an assorted offering of wine from European countries, as well as Chile. Beer can cozy up with a Spicy Sausages appetizer (200 rubles, $7.18), which come, as comfort food should, savory and swimming in ketchup. Although advertized as spicy, these sausages were mild, but an experienced Russian diner knows to expect a certain amount of deception whenever a menu item is described as spicy. 
The menu indulges in salads from all over Europe, for those craving a trip to Italy, try the Caprice Salad (210 rubles, $7.50), a plate of thinly sliced tomatoes and fresh mozzarella in olive oil and Italian seasonings, good on it’s own, but begging to be drenched in balsamic vinegar. However, the caprice was outdone by the Parisian salad (225 rubles, $8.08), thin deli slices of beef are served cold over a bed of marinated onions, iceberg lettuce, cherry tomatoes and potato slices.  
For a main course, the Veal schnitzel (340 rubles, $12.21), also known on the Kristoff menu as “Veal on a pillow from spinach, baked under cheese” is cooked correctly with soft and tender meat under a thick layer of mayonnaise covered in cheese. 
Chicken with eggplant (270 rubles, $9.70) is slices of chicken mixed with tomatoes, onions and a bit too much garlic. It’s served on a plate with greasy fried and grilled eggplant slices and fried potato balls. 
Overall, the food was good and filling — the most important qualities of a meal as the days get shorter and colder.

TITLE: Clowning around
AUTHOR: By Katya Panfyorova
PUBLISHER: Special to The St. Petersburg Times
TEXT: A St. Petersburg theater company that uses masks, mime and puppetry was lauded earlier this year when it took first prize in the directing category at the 100, 1000, 100,000 Stories International Children’s Theater Festival in Romania.
It was a significant achievement for the troupe, Mr. Pezo’s Wandering Dolls, which merges real life and fairytale in performances based on acting technique, music and using expressive masks that need no translation. European folklore and the Russian Silver Age (late 19th/early 20th century) culture are among the themes that inspire the troupe. 
The theater was born in 1993 with a group of “young and romantic amateurs” in the heart of a park in Peterhof, the St. Petersburg satellite town where tsars built summer palaces. 
The Old Palace of Nicholas II was populated and turned into a workshop by a creative mob that included comedians, musicians, costumiers, armories and puppet makers. 
Over the years the seven-member troupe formalized its repertoire, adding new productions that showcase the group’s special combination of talents. With its wordless performances that use mime, dance, clowning and acrobatics, as well as costumes and visual effects, Mr. Pezo’s Wandering Dolls were soon wandering far from Russia and have developed a following abroad.
The latest triumph came this autumn in Bucharest where, according to Alyona Kuzmina, director of Mr. Pezo’s Wandering Dolls, city life became a theatrical cavalcade. 
“Every day several performances took place in different locations,” Kuzmina said. “Happy crowds wandered from one play to another with specially printed programs.” 
“We performed ‘Mutabor,’ which is a mix of cabaret, circus and theater,” Kuzmina said. “An essential part of each performance is audience participation. This time we chose a young woman from the public and taught her to ride a unicycle right there on the stage. We never ask actors or special people to help; it’s purely improvisation both for us, and the public. Of course we choose people who seem to be physically able and are wearing suitable clothes. The girl on the unicycle was slim, and was wearing jeans — not a miniskirt!”
Kuzmina said that naturally children are among Mr. Pezo’s most responsive audience members. 
“Our clowns played with a foam cake and threw it to the children, who were very happy about it. This foam doesn’t dirty clothes and quickly disappears,” she said.
Two of the theater’s most popular performers are unfortunately unable to travel abroad — Gonduras, a black Labrador, and Antokha, a rabbit. However, Shpilman, a lizard, is a frequent stowaway. 
“We hide him at customs. He’s a part of our troupe and has a very important role in the performance,” Kuzmina said. “There’s an episode called ‘Black Box.’ Shpilman sits in a box with sweets and different little things. One child from the public puts their hand into the box and takes something out. Sometimes it’s Shpilman!” 
“We buy crickets for Shpilman,” Kuzmina said. “When we go somewhere on our orange bus, the crickets sing all the way. Crickets abroad have different voices. Romanian crickets were very loud. We love the songs of our native Russian crickets.” 
The troupe has a repertoire of about 25 characters: heroes of fairytales and folklore, partly represented by the unique masks and costumes and partly by the actors’ performances. Among Mr. Pezo’s Wandering Dolls are satyrs, aliens, cyclopses, hunchbacks, and even carnival executioners. 
The theater has an annual workshop where masterclasses are free. Anybody can participate and learn how to act and make papier-mache masks. 
Currently, Mr. Pezo’s Wandering Dolls are preparing for New Year but after that the eclectic and engaging theater troupe plans to build on its international success in Romania and open the new season in March at the Magdalena Circus Festival in Spain. 

www.pejo.ru

TITLE: Shoe Thrower Sparks Anti-Bush Sentiment in Iraq
PUBLISHER: The Associated Press
TEXT: BAGHDAD — Chaos erupted in Iraq’s parliament Wednesday over the jailing of a reporter who threw his shoes at U.S. President George W. Bush, with lawmakers loyal to a radical anti-American cleric demanding his freedom. The parliament speaker responded by threatening to resign.
Muntadhar al-Zeidi, a correspondent for an Iraqi-owned television station based in Cairo, Egypt, had been expected to appear Wednesday before an investigative judge at Iraq’s main court as a first step in a complex legal process that could end in a criminal trial.
Instead, the judge visited him in his jail cell and the family was told to return to the court in eight days, according to the journalist’s brother, Dhargham al-Zeidi.
“That means my brother was severely beaten and they fear that his appearance could trigger anger at the court,” he said.
However, Iraqi officials and another brother have denied that the journalist suffered severe injuries after he was wrestled to the floor when he hurled one shoe and then another one from close range at Bush during a news conference Sunday in Baghdad. Bush deftly ducked out of the way both times.
Al-Zeidi could face two years imprisonment for insulting a foreign leader. When he threw the shoes, he shouted at Bush in Arabic, “This is your farewell kiss, you dog! This is from the widows, the orphans and those who were killed in Iraq.”
His act of defiance won the obscure television reporter hero status in Iraq and throughout the Muslim world, much of which holds Bush personally responsible for the deaths of tens of thousands of Iraqis since the invasion.
In Pakistan, demonstrators held a candlelight vigil outside the U.S. Consulate in Lahore on Wednesday, carrying photographs of al-Zeidi and hand-painted signs with slogans such as “Hush, Hush Bush. We Hate You.” 
At a small rally outside the Iraqi Embassy in Ankara, Turkey, the head of a civil servant union displayed a pair of shoes he said he intended to send to al-Zeidi as a show of support.
In Iraq, followers of anti-American Shiite cleric Muqtada al-Sadr as well as other Shiite and Sunni groups have staged demonstrations for the last three days demanding al-Zeidi’s release.
The Sadrists particularly hope to exploit public sympathy for the reporter to regain the political momentum they lost after their failure to stop the U.S.-Iraq security agreement, which parliament approved last month. The deal allows U.S. troops to remain in Iraq until 2012.
On Wednesday, al-Sadr’s supporters in parliament interrupted a session in which lawmakers were to review a resolution calling for all non-U.S. troops to leave Iraq by the end of June.
Several Sadrist lawmakers interrupted, demanding that the session address al-Zeidi’s case and allegations that he had been beaten in custody. A noisy argument broke out after other lawmakers shouted that the case was a matter for the courts, according to Wisam al-Zubaidi, an adviser to Khalid al-Attiyah, parliament’s deputy speaker.
With legislators screaming at one another, speaker Mahmoud al-Mashhadani, a Sunni, shouted: “There is no honor in leading this parliament and I announce my resignation.”
Al-Mashhadani, who has not taken a public position on al-Zeidi, has a history of eccentric behavior and it was unclear whether the resignation was serious. Two years ago, the Shiite bloc ousted al-Mashhadani after a series of outbursts, but his fellow Sunnis forced his reinstatement.
An official in the speaker’s office confirmed al-Mashhadani’s announcement but said he was uncertain whether he meant what he said. The official said the speaker may have made the remark because he was upset. He spoke on condition of anonymity because he was not authorized to talk to the media.
Even if the speaker follows through, his departure would not affect the Shiite-led government of Prime Minister Nouri al-Maliki. The prime minister was said to have been furious and personally humiliated by the shoe-throwing incident, considering it a breach of Arab rules of hospitality.
In Washington, deputy State Department spokesman Robert Wood said Wednesday the decision about what to do with al-Zeidi is up to the Iraqis.
“Iraq is a democracy, these types of things happen in a democracy,” Wood said.

TITLE: Huge Fraud Case Sends Shock Waves Across U.S.
PUBLISHER: The Associated Press
TEXT: NEW YORK — As Bernard Madoff returned home to his Manhattan apartment, it was impossible to overlook the disorder he has brought on with his alleged $50 billion investment fraud.
Cameras awaited him as he walked out of the courthouse toward his black SUV. Minutes later, a smirking Madoff was swarmed by more cameras as he entered his apartment building, with the scrum at one point turning into a shoving match between Madoff and a journalist.
He was then fitted with an electronic-monitoring bracelet and placed under house detention in his $7 million apartment.
Madoff’s chaotic commute came on a day when the fallout over the scandal spread through the nation’s capital, with the Securities and Exchange Commission taking more heat and Congress jumping into the fray.
The chairman of the House capital markets subcommittee, Representative Paul Kanjorski, announced an inquiry that will begin early next month into what may be the biggest Ponzi scheme of all time and how the government failed to detect it. The SEC is also looking into the relationship between Madoff’s niece and a former SEC attorney who reviewed Madoff’s business.
Madoff made his appearance in the courthouse to shore up conditions of his bail package. The judge had required him to find two additional co-signers to vouch for Madoff, but he was apparently unable to find anyone as the cloud of scandal swirled around him.
Judge Gabriel W. Gorenstein responded by approving a modification to the bail package. As a result, Madoff had to show up to sign over his Upper East Side apartment and his homes in Palm Beach and the Hamptons.
Madoff, who has already surrendered his passport, now will be required to stay at his apartment from 7 p.m to 9 a.m. His wife was required to surrender her passport as well. His lawyer, Ira Lee Sorkin, said the electronic monitoring was in place by Wednesday evening.
In Washington, SEC Chairman Christopher Cox again found himself on the defensive after days of withering criticism that his agency did not do enough to root out the fraud.
“We have thus far no evidence of any wrongdoing by any SEC personnel,” Cox told reporters at SEC headquarters. “We need to go about this in a thorough, professional way.”
SEC Inspector General David Kotz is looking into the agency’s failure to uncover the alleged fraud in Madoff’s operation. One area Kotz said he will examine is the relationship between a former SEC attorney, Eric Swanson, and Madoff’s niece, Shana, who are now married.
As an SEC attorney, Swanson was part of a team that examined Madoff’s securities brokerage operation in 1999 and 2004. Neither review resulted in any action against Madoff. In a statement about Swanson’s role, the SEC compliance office cited its strict rules prohibiting employees from participating in cases involving firms where they have personal interests.
A spokesman for Swanson said that he and Shana Madoff met at a breakfast in October 2003, started dating in April 2006 and married last year.
Another potential conflict also emerged in Washington on Wednesday.
U.S. Attorney General Michael Mukasey recused himself from the Madoff probe because his son, Marc Mukasey, is representing Frank DiPascali, a top financial officer at Madoff’s investment firm. The Justice Department refused to say when Mukasey became aware of the conflict but confirmed he was removing himself from all aspects of the case.
DiPascali was the Madoff employee who had the most day-to-day contact with the firm’s investors. Several described him as the man they reached by phone when they had questions about the firm’s investment strategy, or wanted to add or subtract money from their accounts.
The events unfolded the day after Cox delivered a stunning rebuke to his own career staff, blaming them for a decade-long failure to investigate Madoff.
Credible and specific allegations regarding Madoff’s financial wrongdoing going back to at least 1999 were repeatedly brought to the attention of SEC staff, Cox said. He said he was gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate the allegations or at any point to seek formal authority from the politically appointed commission to pursue them.

TITLE: Kennedy to Seek Clinton Seat
PUBLISHER: The Associated Press
TEXT: SYRACUSE, New York — Caroline Kennedy finally made public her desire to carry on her famous family’s legacy, reaching out to a handful of mayors and some political leaders Wednesday in a carefully choreographed effort to win support for her quest to succeed Hillary Rodham Clinton in the U.S. Senate.
The daughter of President John F. Kennedy was driven across the state along the main east-west road, hitting three of its four biggest cities to talk to elected officials and Democratic party power brokers alike. She bypassed Albany, the state capital and seat of political power.
In Rochester, Kennedy stuck closely to a tightly controlled script but started to sound themes apparently designed to assuage those who question her readiness for a high-profile elected office.
“I just hope everybody understands that it is not a campaign but that I have had a lifelong devotion to public service,” she said. “I’ve written books on the constitution and the importance of individual participation. I think I really could help bring change to Washington.”
Before that, in Syracuse, her handlers cut her off when she was asked what her qualifications were to be a U.S. senator. As she left Syracuse City Hall, the first of her brief stops, she spoke briefly to a group of reporters and took no questions.
“I just wanted to say, as some of you may have heard, I would be honored to be considered for the position of U.S. senator,” Kennedy said. “I wanted to come upstate to meet Mayor Driscoll and others to tell them about my experience and also learn how Washington can help upstate New York.”
Kennedy, 51, took note of the crowded field of elected officials who have been named as possible successors to Clinton, who has been nominated to be Secretary of State.
“There are lot of good candidates the governor is considering and he’s laid out a process and I’m proud to be in that process,” she said.
Governor David Paterson has said he won’t name a replacement until Clinton is confirmed, which won’t happen at least until the end of January. The new senator will have to run in 2010 to fill the last two years of Clinton’s term and then run for a full term in 2012.
In response to a reporter’s question later in Rochester, Kennedy said that if Paterson doesn’t appoint her, she will run for the office.
“Absolutely,” she said.
Kennedy spokesman Stefan Friedman later said she misheard the question, and meant only that she would run for election in 2010 if the governor appointed her in the coming weeks.
Meanwhile, Rep. Charles Rangel, a close adviser to Paterson, suggested the governor may have already made up his mind.
“The governor has privately shared with me his decision to name a candidate and I support that decision,” Rangel said in an interview with WNET in New York. Asked when the rest of the state would know, Rangel said, “when he picks that candidate.”
A Rangel spokesman, though, immediately told The Associated Press the congressman’s comments do not mean he knows who the next senator will be.
Kennedy is the highest profile name in the race to take the seat once held by her uncle, Robert F. Kennedy.
Her upstate outreach is similar to Clinton’s “listening tour” in 1999 and 2000 when she first ran for the Senate.
Like Clinton, Kennedy faces criticism because she’s never been elected to public office.

TITLE: Space Shuttles Up For Grabs
PUBLISHER: The Associated Press
TEXT: CAPE CANAVERAL, Florida — NASA’s soon-to-be-retired space shuttles are up for grabs.
The space agency said Wednesday it’s looking for ideas on where and how best to display its space shuttles once they stop flying in a few years. It’s put out a call to schools, science museums and “other appropriate organizations” that might be interested in showcasing one of the three remaining shuttles.
Beware: NASA estimates it will cost about $42 million to get each shuttle ready and get it where it needs to go, and the final tab could end up much more.
The estimate includes $6 million to ferry the spaceship atop a modified jumbo jet to the closest major airport. But the price could skyrocket depending on how far the display site is from the airport. Only indoor, climate-controlled displays will be considered.
“The orbiters will not be disassembled for transportation or storage,” NASA insists in its nine-page request for information.
One space shuttle appears headed to the Smithsonian Institution’s National Air and Space Museum in Washington. The remaining two would be placed in storage at Kennedy Space Center until their final homes are decided.
If a space shuttle is too pricey, NASA is offering some of its shuttle main engines for anywhere between $400,000 and $800,000, not counting shipping costs.
The space shuttles, so you know, will not come with any main engines.
NASA plans to retire Discovery, Atlantis and Endeavour by Sept. 30, 2010, in keeping with President George Bush’s initiative calling for a return by astronauts to the moon by 2020. A transition team set up by President-elect Barack Obama is reviewing all the options, however, including the possibility of keeping the shuttles flying beyond 2010.
If that happens, then all space shuttle deals are off.

TITLE: Kennedy to Seek Clinton Seat
PUBLISHER: The Associated Press
TEXT: SYRACUSE, New York — Caroline Kennedy finally made public her desire to carry on her famous family’s legacy, reaching out to a handful of mayors and some political leaders Wednesday in a carefully choreographed effort to win support for her quest to succeed Hillary Rodham Clinton in the U.S. Senate.
The daughter of President John F. Kennedy was driven across the state along the main east-west road, hitting three of its four biggest cities to talk to elected officials and Democratic party power brokers alike. She bypassed Albany, the state capital and seat of political power.
In Rochester, Kennedy stuck closely to a tightly controlled script but started to sound themes apparently designed to assuage those who question her readiness for a high-profile elected office.
“I just hope everybody understands that it is not a campaign but that I have had a lifelong devotion to public service,” she said. “I’ve written books on the constitution and the importance of individual participation. I think I really could help bring change to Washington.”
Before that, in Syracuse, her handlers cut her off when she was asked what her qualifications were to be a U.S. senator. As she left Syracuse City Hall, the first of her brief stops, she spoke briefly to a group of reporters and took no questions.
“I just wanted to say, as some of you may have heard, I would be honored to be considered for the position of U.S. senator,” Kennedy said. “I wanted to come upstate to meet Mayor Driscoll and others to tell them about my experience and also learn how Washington can help upstate New York.”
Kennedy, 51, took note of the crowded field of elected officials who have been named as possible successors to Clinton, who has been nominated to be Secretary of State.
“There are lot of good candidates the governor is considering and he’s laid out a process and I’m proud to be in that process,” she said.
Governor David Paterson has said he won’t name a replacement until Clinton is confirmed, which won’t happen at least until the end of January. The new senator will have to run in 2010 to fill the last two years of Clinton’s term and then run for a full term in 2012.
In response to a reporter’s question later in Rochester, Kennedy said that if Paterson doesn’t appoint her, she will run for the office.
“Absolutely,” she said.
Kennedy spokesman Stefan Friedman later said she misheard the question, and meant only that she would run for election in 2010 if the governor appointed her in the coming weeks.
Meanwhile, Rep. Charles Rangel, a close adviser to Paterson, suggested the governor may have already made up his mind.
“The governor has privately shared with me his decision to name a candidate and I support that decision,” Rangel said in an interview with WNET in New York. Asked when the rest of the state would know, Rangel said, “when he picks that candidate.”
A Rangel spokesman, though, immediately told The Associated Press the congressman’s comments do not mean he knows who the next senator will be.
Kennedy is the highest profile name in the race to take the seat once held by her uncle, Robert F. Kennedy.
Her upstate outreach is similar to Clinton’s “listening tour” in 1999 and 2000 when she first ran for the Senate.
Like Clinton, Kennedy faces criticism because she’s never been elected to public office.

TITLE: China Marks 30 Years of Capitalist Reforms
PUBLISHER: The Associated Press
TEXT: BEIJING — China marked the 30th anniversary of the start of its capitalist revolution with a speech Thursday from Communist Party leader Hu Jintao, who urged continued economic reform but said it would not lead to Western-style democracy.
He praised the economic changes of the last three decades, including opening the door to free market reforms and foreign trade, which have brought a massive transformation to the country.
“Since the reform and opening up, the fundamental reason for all the achievements and progress we have made has been our creation and development of the socialism with Chinese characteristics,” Hu said in a speech during a ceremony at the Great Hall of the People.
The concept, frequently touted by the leadership, refers to the jettisoning of the centrally planned economy while maintaining strict authoritarian one-party communist rule.
The theory “not only showcases the vitality of contemporary Chinese Marxism, but also opens more room for further innovation of theories,” Hu said during his 90-minute address, which was nationally broadcasted.
“We need to draw on the beneficial fruits of mankind’s political achievements, but we will never copy the model of the Western political system,” Hu said.
The event at the Great Hall of the People — the seat of the country’s legislature in the heart of the Chinese capital — was attended by more than 6,000 party leaders, legislators and military officials, who politely applauded throughout Hu’s remarks.
The Great Hall was the site of a Communist Party gathering on Dec. 18, 1978, that endorsed small-scale private farming, the first step toward abandoning the late leader Mao Zedong’s vision of communal agriculture and industry.
China’s economy has since grown into the world’s fourth-largest behind the U.S., Japan and Germany. Annual per capita income has soared to about 19,000 yuan ($2,760) last year, up from just 380 yuan in 1978.
Along with private enterprise and capital markets have come greater prosperity and stability than ever before.
Virtually all Chinese families now have at least one television and, in the cities, a washing machine — rare items three decades ago. Some 15 million families own private cars, and many Chinese also own their own homes.
“Nowadays, we worry instead about eating too well rather than not eating enough,” says Guo Linchun, 78, retired music teacher in Beijing. “Now, living standards have improved so much, we see not only televisions, so many people even own cars.”
The modern industries have also brought many modern ills: pollution, industrial accidents and product safety scandals. And China’s heavy reliance on exports and foreign investment ensures that the uncertainties now afflicting the global economy are haunting the Chinese as well.
Hu said China needed to firmly focus on economic development to weather the current crisis.
“Standing still and regressing will lead only to a dead end,” he said.
As economic growth slows and factories close, job losses threaten to fuel political unrest. Authorities have slashed interest rates and promised to spend more than half a trillion dollars to stimulate the economy.
The latest problems may widen a wealth gap that has already alarmed China’s leaders, who worry about social instability caused by people who have missed out on China’s economic boom.
“In the past 30 years, we attached great importance to promoting a harmonious society through achieving social equality while developing the economy,” Hu said.