SOURCE: The St. Petersburg Times
DATE: Issue #1436 (100), Tuesday, December 23, 2008
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TITLE: $5 Billion
Bailout For Electricity Industry
AUTHOR: By Nadia Popova
PUBLISHER: Staff Writer
TEXT: MOSCOW — After more than three months of silence, the Energy Ministry laid out anti-crisis plans for the electricity sector Friday that include $5.3 billion in loans and bonds for state companies but no permission for private firms to delay investment programs.
The government will earmark 146 billion rubles ($5.3 billion) in infrastructure bonds and state bank loans to state-controlled companies including the Federal Grid Company, RusHydro, Energy Systems of the East, and the Interregional Distribution Grid Company, Deputy Energy Minister Vyacheslav Sinyugin said at a media breakfast. Some of the money also will be channeled directly from the federal budget, he said.
In addition, the government will amend the legislation so it can change electricity tariffs several times a year and change a key document outlining the construction of power stations to introduce some flexibility, Sinyugin said.
In return, state banks that lend money to the companies will be able to secure stakes in them, he said, adding that such a mechanism has been approved for OGK-1, the only generation company that Unified Energy System, the former state-run electricity monopoly, failed to find an investor for.
State-controlled electricity companies have been tight-lipped about their problems, but private ones have warned of a looming crisis due to unpaid bills and a lack of bank loans. Investors who participated in the privatization of the sector, which was completed in July, are required to construct much-needed infrastructure as part of their winning bids, but they have little cash amid the economic crisis.
The issue is a sensitive one. Seven generating companies asked to comment on Sinyugin’s remarks on government support refused Friday, citing the sensitivity of the issue.
Among those that offered comment, OGK-1 spokeswoman Yana Dubeikovskaya welcomed the announcement and said her company would need the money before the end of this year.
RusHydro spokesman Yevgeny Druzyaka said his company was counting on state help.
Power companies are among 500 firms being ranked on a priority list for loans, Sinyugin said. The list only includes companies deemed socially and economically important, and is to be confirmed by the government Tuesday.
Sinyugin said Energy Systems of the East and the Interregional Distribution Grid Company faced the biggest problems, while some electricity companies seemed to be faring well.
“The state-run electricity trader Inter RAO has not asked for money,” Sinyugin said, adding that he had been glad to hear from Gazprom chief executive Alexei Miller that the company did not need state money either.
Sinyugin singled out the Interregional Distribution Grid Company and the Energy Systems of the East because they lacked fund-raising programs, such as an additional share emission, said Sergei Pikin, head of the independent Power Development Fund. “As a result, they are very much in need of money now,” he said.
A subsidiary of the Interregional Distribution Grid Company conceded that it was in trouble. “We have recently seen a reduction in the demand for the grid connection services, and the banks are reluctant to give out loans to us,” said Maxim Landa, a spokesman for Moscow United Electricity Grid Company. “With all that, we still have to continue modernizing the [parent company’s] grids, most of which are extremely worn out.”
Pikin said no financial support has been announced for privately owned generators because their lobby in the government was not very strong. “But we believe the state will ultimately help them too,” he said.
Sinyugin said loans for private generators were being discussed in the government and a consensus was near.
Sinyugin also said that spending by state-run electricity companies would be cut by 15 to 20 percent next year due to falling prices for construction materials, and that the Energy Ministry was lobbying state banks to extend loans for electricity sales companies.
As for tariffs, the government has decided to hike them as planned to make sure that the generators have the money they need for their investment programs, Sinyugin said.
Deputy Prime Minister Igor Shuvalov has said the average electricity tariff would rise by 19 percent for industrial customers and by 25 percent for residential consumers next year in line with the initial plans.
“We will also amend legislation so that we can change the tariffs at least twice a year, instead of once as it was determined before,” Sinyugin said.
This will allow the government to react more quickly to shifting economic conditions and the utilities’ pace of building new capacity, Sinyugin said.
The Economic Development Ministry had floated a proposal to raise tariffs by 5 percent next year.
With the higher tariffs, “a strong signal has been sent to the generators that we expect them to fulfill all of their investment programs, without any modifications,” Sinyugin said.
Turning to investment programs, Sinyugin said the government saw a need to change the General Scheme of Power Sector Facilities Placement, the document that outlines where and when power stations will be built through 2020 and what fuel they will use. “We’ll be collecting information to analyze what specific modifications have to be made through the next year,” he said.
As an example, he said the ministry did not see any advantage in building coal- instead of gas-fired power stations.
According to the document, the share of coal-based generation must increase from 25 percent to 46 percent by 2020, while gas usage is supposed to drop from 68 to 50 percent.
TITLE: Israel Crash Survivors ‘Pressurized’ To Return To Russia
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: The treatment of tourists from St. Petersburg who survived a deadly bus crash in Israel on Dec. 16 is at the center of a rapidly escalating dispute over who will meet the medical bills.An Israeli travel agent has accused Russian authorities of forcing the patients to return to Russia after they accepted an offer from the Israeli government to cover treatment costs.
Russia denies the allegations.
Last week, a meeting was held between the representatives of the Russian Emergency Situations Ministry, the staff of the Russian embassy in Israel and the relatives of St. Petersburg tourists and travel agents who are currently recovering in Israeli clinics after the horrific bus crash in which 25 were killed.
On Saturday, Andrei Smotritsky, an Israeli travel agent who was present at the meeting posted a comment in his blog on Live Journal in which he accused the Russians of pressurizing the relatives of the injured to convince them to leave Israel and complete medical treatment in Russia. If they didn’t he claimed they would forfeit the right to future treatment in Russia.
Smotritsky said the offer was an ultimatum, and he spoke with indignation at the victims allegedly being forced to make such a choice.
Several news websites in Israel reported that the patients had to sign an official document that declared they “voluntarily refused to undergo any treatment and further rehabilitation in specialized clinics in the Russian Federation” at any point in the future if they decided to remain in Israel for the time being in accordance with the Israeli government offer.
“I have been warned that if I refuse [to go to Russia] I will have to cover all expenses for any treatment, medications, living costs, transportation and legal documents by myself,” reads the document.
“The Russian authorities were probably very embarrassed by all the patients agreeing as one to stay in Israeli clinics after the Israeli government said it would cover all costs should patients choose to recover in local hospitals,” Smotritsky suggested.
The Northwestern branch of the Russian Tourism Industry Union (RST) on Monday provided the media with the text of the statement, which was allegedly signed by most patients.
In the meantime, RST contacted Ilya Cherny, head of the surgery ward at an Israeli hospital that is treating nine patients recovering from the deadly accident.
The doctor confirmed that the clinic was visited by Vladimir Legoshin, a representative of the Russian Emergency Situations Ministry.
“In my presence, he made no attempts at or showed any intention of exerting any pressure. Niether did he voice any ultimatums,” Cherny said. “He was simply offering the patients the chance to return to Russia and get treated there, and to arrange it if they chose to do so. Three patients did discuss that option but all of them decided to stay in Israel in the end.”
Cherny said one patient might have to return to Russia because her relatives are unable to visit her in Israel.
“She underwent two operations and is safe to travel,” Cherny said. “As a doctor, I would have preferred to complete the treatment here but as far as I know she has decided to go to Russia.”
The Russian authorities deny any pressure was exerted on either patients or their relatives.
Representatives of the Russian Embassy in Israel denounced Smotritsky’s words as speculation and insinuations.
Cherny said seven of his nine patients would fully recover, but the others would not.
“At present, one patient is at high risk of spending the rest of her life in a wheelchair, and the other one may be bedridden,” Cherny said.
TITLE: Wave Of Protest Sweeps Nation
AUTHOR: By Sergey Chernov
PUBLISHER: Staff Writer
TEXT: A wave of protests against used-car import tariffs being raised by the government as part of anti-crisis measures rolled across Russia on Sunday. Starting out as single-issue, peaceful protests, the demonstrations took on an increasingly political character, incorporating anti-Kremlin slogans, after the authorities violently thwarted a protest in Vladivostok and showed reluctance to engage with the nation over the issue.
A protest in the Far Eastern city of Vladivostok, where much of local economy is based on car imports from Japan and most of the population uses second-hand Japanese cars, was curbed brutally by club-wielding OMON special-task police, with more than 100 arrests being made and many police beatings reported.
At a St. Petersburg rally, one of more than 20 across Russia, between 150 and 200 demonstrators protested both against import tariffs and the police brutality in Vladivostok, where the Moscow region’s OMON detachment Zubr (Urus) was reported to have been flown 9,300 kilometers to the Pacific port city, as local police appeared to be reluctant to disperse the protests.
Reports from Vladivostok say the OMON targeted journalists, with more than 10 television cameramen and photographers being deliberately detained and some beaten. According to the Associated Press, the policemen demanded that several journalists turn over videotapes and camera memory chips. A Japanese TV crew’s video camera was reportedly wrecked.
However, photos of the police violence spread quickly on the Internet and it became perhaps the hottest online subject in Russia on Sunday and Monday.
Vladivostok authorities had banned Sunday’s demonstration so an estimated 500 people undertook a peaceful, no-posters protest they described as a “public festival,” with people dancing around a Christmas tree on the square, singing Christmas songs and chanting “Happy New Year!”
Nevertheless, the OMON attacked the gathering, clubbing and kicking people.
To demonstrate solidarity with protesters in Vladivostok, local demonstrators, who gathered on Pionerskaya Ploshchad in St. Petersburg near the Theater of Young Spectators (TYuZ), displayed posters reading “Happy New Year!,” Happy New Year, Vladivostok!,” “Vladivostok, We Stand With You!”
News of events in Vladivostok was widely available on the Internet and from a few other independent sources as mid-Sunday takes there place seven hours ahead of mid-Sunday St. Petersburg time.
Kremlin-controlled major television channels did not report the events.
One man held a picture of a Far Eastern tiger raping a bear. The bear is the symbol of the Kremlin-backed party United Russia.
Another large poster demanded that President Dmitry Medvedev fire Prime Minister Vladimir Putin’s “anti-national” government.
The protesters also used a satirical model of the Cruiser Avrora, a ship that is a symbol of revolution in Russia, positioned on a banner-wrapped truck.
The hike in import tariffs that takes effect next month is intended to back Russia’s ailing domestic car industry, primarily AvtoVAZ, an automobile plant in Tolyatti that produces Lada cars, and AvtoGAZ, a plant in Nizhny Novgorod, that produces Volgas.
Russian cars are infamous for their unreliability and dangerous construction, while they cost about the same as imported used cars.
At the St. Petersburg rally, Russian automobiles were represented by a heap of metal junk, which protesters decorated with a poster reading “Don’t Stop the Russian Motor Industry from Dying Peacefully.”
Another poster suggested that the authorities should exchange their foreign cars for domestic models before introducing punitive tariffs on imported used cars if they really wanted to support Russian automakers.
Although there was a massive police presence at the protest, with several OMON trucks parked nearby and at least three cameramen recording protesters on video, no arrests were made during the rally, which was set up by Svoboda Vybora (Freedom of Choice), a pressure group fighting for the rights of car owners, and was okayed by the local authorities.
However, soon after the meeting, organizer Alexander Rastorguyev of Freedom of Choice was detained after two document checks close to the rally’s site.
According to Rastorguyev, when stopped by the police 400 meters away, he was told that the Avrora model in his truck carried anti-governmental slogans on its sides, but when he covered it with a tent, he was asked for documents for the model and taken to the police station when he was not able to produce any.
“I said that I assembled it at my dacha with my own materials, that it’s a work of art, but [the policeman] said I was being disobedient and produced handcuffs,” he said by phone on Monday.
Rastorguyev was taken to a police precinct and released at around 7 p.m., almost four hours after the meeting had ended. “I took a copy of the police protocol saying that I was detained because of the Avrora model,” he said.
Meanwhile, protesters in 47 cars rode around the city, moving at a speed of 10 km per hour with their indicator lights on, using only “Happy New Year!” as a slogan, Rastorguyev said. Two protesters were briefly detained.
Sunday’s protests were supported by several political organizations and rights groups.
“The rise in foreign car tariffs is a blow to over 20 million car owners in this country, a blow to jobs in the field of the automobile business,” said the newly-formed united democratic movement Solidarity in a statement on Saturday.
“Putin took this decision to defend oligarchs who are close to him, automobile concerns owners Sergei Chemezov (AvtoVAZ) and Oleg Deripaska (AvtoGAZ). These actions will not lead to anything but the a in car prices and the preservation of the backward Russian automobile industry. Essentially, choosing between 20 million car owners and oligarchs, Putin has chosen the latter.”
Protests were held in more than 20 Russian cities, with the largest taking place in Vladivostok, Yuzhno-Sakhalinsk, Kaliningrad, Khabarovsk, Barnaul and Blagoveshchensk. More than 200 protesters were detained, including around 20 in Moscow.
TITLE: Retiring Bush Tells Obama To ‘Stay Friendly With Russia’
TEXT: WASHINGTON — Preparing to leave office, President George W. Bush has advised his successor to try to stay friends with Russia despite disagreements.
“There’s common interest and there’s going to be a lot of tensions,” Bush said Thursday at the conservative American Enterprise Institute think tank. “The president has got to be in a position where he can deal with those tensions in a way that doesn’t send chilling signals with other allies.”
While not mentioning President-elect Barack Obama directly, Bush has spent his final weeks emphasizing efforts he says his successor should continue. Obama will be sworn in on Jan. 20.
Washington and Moscow have sparred over the Iraq war, a U.S. missile defense system for Europe and Russia’s war with Georgia in August, among other things.
TITLE: Tough New Regulations for Adoptive U.S. Parents
AUTHOR: By Svetlana Osadchuk
PUBLISHER: Staff Writer
TEXT: MOSCOW — The government will toughen regulations for Americans wishing to adopt Russian children after a U.S. court acquitted a Virginia man of felony charges in the death of his newly adopted Russian son earlier this year, officials said Thursday.
A Virginia court on Wednesday acquitted Miles Harrison, 49, of involuntary manslaughter in the death of his 21-month-old son, who died in July after being left for nine hours in a sweltering car.
Russia tightened controls over adoptions a few years ago after several children died at the hands of U.S. parents, and Wednesday’s acquittal will lead to a further clampdown, said Alina Levitskaya, head of the Education and Science Ministry’s child welfare department.
The verdict “casts doubts” on adopted children’s rights in the United States and “will lead to a tightening of requirements for the adoption of Russian children by U.S. citizens,” Levitskaya said in a statement on the ministry’s web site.
The ministry has already prepared an official demand to be sent to the U.S. State Department regarding the adoption of Russian children, Levitskaya said. The statement gave no specifics about possible stricter requirements. Ministry spokesman Alexander Kochnev said by telephone Thursday afternoon that officials were in the process of working out new rules.
Yevgeny Khorishko, spokesman for the Russian Embassy in Washington, said U.S. authorities should appeal the “grievous court ruling acquitting the murderer of an infant Russian citizen,” Interfax reported.
State Duma Speaker Boris Gryzlov said he was “disturbed” by the verdict and that Russia should do everything in its power to make adoption a more attractive option for Russian families. “We need Russian children to stay in Russia,” Gryzlov told Interfax.
Gryzlov added that foreigners turn to Russia to adopt as “our children are genetically much healthier and significantly smarter than in other countries.”
In 2005, after the well-publicized deaths of several Russian children at the hands of their adoptive parents in the United States, influential Duma deputies called for a moratorium on all foreign adoptions.
The moratorium never happened, but foreign adoption agencies began facing greater bureaucratic hurdles. Two U.S. adoption agencies were barred from operating in Russia in July, shortly after the death of Harrison’s adoptive child, Chase.
Harrison, managing director of a real estate consulting firm in Herndon, Virginia, left the boy — whose Russian name was Dmitry Yakovlev — in the back seat of his sport utility vehicle for much of the day as he worked in his office, The Washington Post reported. The temperature in the vehicle rose to about 55 degrees Celsius before a passerby saw the dead child late in the afternoon and alerted the office receptionist.
Child welfare advocates criticized the idea of severe limitations on foreign adoptions, noting that the number of deadly abuse cases was minuscule compared with the number of children adopted by foreign parents.
“A possible official crackdown on foreign adoptions will bring more harm than good,” said Boris Altshuler, head of the nongovernmental organization The Right of the Child. “It condemns many children to stay forever at Soviet-era system institutions desperately in need of reform.”
A total of 74,500 Russian children were adopted or placed in foster families in the first nine months of 2008, according to the latest available figures from the Education and Science Ministry. During the same period, however, 79,000 new children were placed into state custody.
“The fact that number of children permanently living in institutions remains unchanged over the last several years — about 150,000 — shows that the effectiveness of both state and regional child welfare systems are at the lowest level,” said Galina Semya, an expert who has worked on federal programs to assist orphans.
While tightening controls over foreign adoptions, the government should also provide proper awareness campaigns and support to domestic adoptive parents, said Moscow ombudsman Alexei Golovan, a prominent children’s rights advocate.
“The state has not given the highest priority to the problem yet,” Golovan said. “If it would, Russian orphans would finally find families.”
Experts say there are three key points in tackling the problem: public opinion, financial support and legislation.
The government has taken some important steps in boosting financial support for domestic foster families, Vladimir Kabanov, head of the Education and Science Ministry’s adoption department, said in a recent interview.
At the same time, adoptive Russian parents receive no financial assistance from the state, and social services typically have nothing more to do with the child after adoption.
Of the 130,500 children placed in families last year, only 9,500 were adopted by Russians. Foreigners, meanwhile, adopted 4,500 Russian children in 2007.
Many Western governments provide financial incentives for adoptive parents, including subsidized medical care for the adopted child.
This is a key point for domestic adoptions in Russia, as a considerable number of Russian orphans are sick or disabled. A Russian parent with a disabled child is left with virtually no government support, said Public Chamber member Sergei Koloskov, head of an NGO that assists children with Down syndrome. Furthermore, it is exceedingly difficult to place such children in schools, he said.
“No wonder so many Russians leave their disabled children in orphanages and so few adopt disabled children,” Koloskov said.
Many Russian families are afraid of adopting because parentless children are often viewed as having suffered irreversible psychological damage. The media, which could be key to removing this societal stigma, has done little to promote the interests of the children, said psychologist Lyudmila Petranovskaya, an expert on adoption issues.
“We have few programs and movies with a positive message,” Petranovskaya said. “Information today is a commodity to be sold — and it sells more quickly with tragedy and sensationalism.”
Public opinion on adoption must be swayed cardinally if any progress is to be achieved, said Golovan, the Moscow ombudsman. The situation could change if the national media were to receive a clear directive from the government to promote adoptions, but no one is lobbying for such measures, he said.
‘We even don’t have a federal ombudsman for children who could lobby for [abandoned children],” Golovan said.
There is another way to help change things for the better, Golovan said.
“I bet if one of the leaders of United Russia would adopt a child, there would be a wave of adoptions — among state officials at least.”
TITLE: 3 Russian Warships Make Stop in Cuba
PUBLISHER: The Associated Press
TEXT: HAVANA — A Russian anti-submarine destroyer and two logistical warships docked in Cuba on Friday, a thumb-your-nose port call aimed at the United States in waters just 145 kilometers from Florida.
The arrival extends a tour that included stops in Venezuela and Panama and shows Moscow’s desire to flex some muscle in the United States’ backyard.
Russian sailors in white and tan dress uniforms stood at attention on the deck of the Admiral Chabanenko destroyer, which chugged into Havana Bay amid a cloud of gray smoke. The ships will be moored here until Tuesday, and the crew planned a tour of Havana that includes a trip to a Cuban naval school.
A Cuban cannon fired a 21-blast salute that rattled the windows of nearby buildings, and a naval band waiting on a cruise ship dock played the Russian and Cuban national anthems. A hulking barge that frequently ferries U.S. food to the island happened to be waiting in the area but had to move to make room for the Russian warships. It was unclear whether it had any U.S. cargo aboard.
The warships’ visit comes even as President Raul Castro reaches out to Washington, offering to negotiate directly with President-elect Barack Obama and proposing an unprecedented swap of political prisoners.
“That is Cuba’s diplomatic specialty, playing both sides, or all sides, on every issue,” said Daniel Erikson, director of Caribbean programs at the Inter-American Dialogue, a Washington think tank.
The Soviet Union provided billions of dollars in trade and annual subsidies to Cuba. Relations soured after the Soviet collapse but have improved greatly, with President Dmitry Medvedev visiting Havana in November.
Friday marked the first time Russian military ships have visited Cuba since the end of the Soviet era. About 100 Cubans — as well as tourists from Russia and other foreign destinations — watched the arrival from a nearby sidewalk. The crowd grew so large that police blocked off the right lane of a crowded boulevard adjacent the bay. “This shows relations with Russia never deteriorated,” said Eric Hernandez, a naval administrative employee who left his office across the street for a closer view. “Russia is a brother nation to Cuba, and Cuba has brother nations all over the world, despite what the United States wants.”
But another onlooker, retired airport employee Jorge Fernandez, said he hoped the Russian visit would not send Washington the wrong signal.
“The new president of the United States wants peace and tranquility with Cuba,” he said. “This is positive for Cuba and Russia. But they might not agree in the United States.”
TITLE: Moscow Presses NATO Over Blame for War
PUBLISHER: Combined Reports
TEXT: MOSCOW — Moscow said it would insist on determining the cause of the August war in Georgia as NATO and Russia restarted diplomatic contacts that have been suspended since then.
Friday’s statement came as diplomats at the Vienna-based Organization for Security and Cooperation in Europe said Russia is jeopardizing the future of the OSCE’s mission to Georgia.
NATO Secretary-General Jaap de Hoop Scheffer and Dmitry Rogozin, Moscow’s ambassador to the alliance, met over lunch in the first high-level meeting after a four-month hiatus caused by the war. The informal meeting aimed to explore how formal contacts could be restarted.
NATO spokeswoman Carmen Romero said the two sides would look to hold an informal meeting of the NATO-Russia Council at ambassadorial level next month. In Moscow, Foreign Minister Sergei Lavrov said the Russian side wanted to discuss the root causes of the brief war in which Russian forces occupied large swaths of Georgia after Georgian troops shelled and invaded the breakaway region of South Ossetia.
The United States and some Eastern European nations have blamed Russia for causing the bloodshed, but Moscow says its military actions were defensive and in response to Georgia’s aggression.
“Now, when our NATO colleagues talk about restoring relations, we will insist that the restoration of ties starts with the discussion of the causes of the Caucasus crisis which our NATO partners dodged in August,” Lavrov said.
Rogozin said that probes conducted since the conflict showed conclusively that Georgian President Mikheil Saakashvili was responsible for starting the war and that NATO would have to acknowledge that.
A Georgian parliamentary commission released a report late Thursday saying mismanagement and poor communications hampered Georgia in the conflict, but it supported Saakashvili’s claims that Russian military movements forced him to launch an attack targeting South Ossetia.
Meanwhile, Russia has demanded that the OSCE divide its operations in Georgia to reflect the “independence” of separatist South Ossetia if it wants to extend its monitoring mission beyond Dec. 31, diplomats said Friday.
The United States and European allies in the 56-nation OSCE have not recognized South Ossetian independence. Moscow did so after the hostilities in August.
“Russia doesn’t want the OSCE’s Georgia mission to have any say or responsibility over activities in South Ossetia to underline that ‘facts on the ground’ have changed,” said an OSCE diplomat who requested anonymity due to political sensitivities.
Russia has prevented OSCE observers from returning to South Ossetia, despite pledging under a ceasefire to let them back in. It says South Ossetian authorities should decide — a firewall since most countries do not recognize them.
Russia and Georgia also blamed each other Friday for delaying repairs to a pipeline that pumps gas to South Ossetia. “According to our estimates, Georgia could repair the problem very quickly,” Lavrov told the Federation Council. After Lavrov’s statement, a Georgian minister said the damaged pipeline was located in a village occupied by Russian soldiers. “If they allow us to enter, we are ready to repair it,” said Georgian Energy Minister Aleko Khetaguri. “But first they must remove their troops. Only then are we ready to consider resuming gas supplies to South Ossetia.”
(AP, Reuters)
TITLE: Oligarchs Search For $78 Billion in Credit
AUTHOR: By Yuriy Humber and Torrey Clark
PUBLISHER: Bloomberg
TEXT: Russian oligarchs are lining up for $78 billion of Kremlin loans to survive the credit squeeze, handing Prime Minister Vladimir Putin the opportunity to increase government control of the nation’s biggest companies.
Just 12 years after they gained ownership of the former Soviet Union’s industries by bailing out the government, the tables have been turned. More than 100 business leaders are vying for loans from Putin and the administration of President Dmitry Medvedev because Russian companies have about $110 billion of foreign obligations due next year, according to the central bank, double the total owed in Brazil, India and China.
Business leaders who tripled international debt in the past three years are putting up part of their stock as collateral for government support because they’ve been hobbled by tumbling commodity prices and the biggest drop in the ruble since Russia’s default in 1998.
Putin already is aiding billionaires Roman Abramovich and Oleg Deripaska and considering requests from Dmitry Pumpyansky of pipemaker OAO TMK, OAO Severstal’s Alexei Mordashov and AFK Sistema’s Vladimir Yevtushenkov.
“Some of them will definitely lose their property, either to the state or to investors,” billionaire Alexander Lebedev, 49, said in a Dec. 8 interview, 11 days before Deutsche Bank AG demanded early repayment of a loan guaranteed by 3 percent of Moscow-based ZAO National Reserve Corp.’s 29 percent stake in OAO Aeroflot, the national airline. “They’ve been over- borrowing and sales of their companies have been falling.”
The oligarchs, Russian business leaders who used their political influence to help gain assets after the collapse of communism, essentially dictated the policies that allowed them to gain control of the nation’s biggest companies in the 1990s by providing financing to the government that was never repaid.
Anatoly Chubais, who oversaw the government’s sale of assets through the so-called loan-for-shares program, said in an interview in 2000 that the plan was necessary to create “big private capital” and help then-President Boris Yeltsin win reelection in 1996 to prevent a return to communism. Chubais, 53, is now chief executive officer of Moscow-based Russian Nanotechnology Corp.
Vnesheconombank, the Russian state lender known as VEB, is responsible for handling the bailouts. In return for one-year loans, VEB is requiring a representative at the company and the right to veto any debt or major asset sale, according to the bank’s Web site. Putin, 56, is head of its supervisory board. Borrowers offer shares, assets or export revenue as collateral.
“It’s extremely unlikely they’ll all be able to repay in a year,” said Zina Psiola, a money manager at Clariden Leu AG in Zurich with $220 million in Russian equities. “Some oligarchs will no longer be oligarchs.”
At least 10 of the 25 wealthiest owners have faced margin calls from lenders since August as Russia’s worst financial crisis since 1998 wiped $230 billion from the value of their equity, according to data compiled by Deutsche Bank and Bloomberg.
Profits for four of Russia’s largest steel producers as well as Moscow-based TMK, the biggest maker of pipes for the oil and gas industry, will fall by about 50 percent to $10.5 billion next year as prices of the metal plunge, according to Clemens Grafe, an economist at UBS AG in London. That may leave the companies unable to pay for anything beyond their $10.3 billion of debt in 2009.
“If they have to pay this then they have no money for capital expenditure, no nothing,” Grafe said.
Prospects for refinancing debt are dwindling. Russia’s war with Georgia, a 75 percent drop in oil and the worsening credit crisis led investors to pull $211 billion from the country’s stocks, bonds and currency since August, according to BNP Paribas SA. The withdrawals weakened the ruble by 17 percent against the dollar, forcing the government to drain $163 billion, or 27 percent, from foreign-currency reserves. The ruble fell to the lowest level in almost three years against the dollar today.
Russian companies have about twice as much foreign debt due in 2009 than the $56 billion total owed by companies and the governments of China, India, and Brazil combined, according to data compiled by Commerzbank AG and RBC Capital Markets.
Greater state involvement may reassure investors, said Jerome Booth, head of research at Ashmore Group Plc in London, which manages $32 billion of emerging-market assets including Russian corporate debt.
“There’s less chance of mass defaults in Russia than in Western Europe,” Booth said. “There’s a degree of state control in the economy already, so this will be more of the same.”
The prime minister, saying he has no intention of nationalizing the economy, pledged on Dec. 4 to offer loans and buy stakes in companies that solicit help, releasing collateral and selling back the holdings later.
Putin, who served eight years as president before becoming prime minister, provided $12 billion of loans since October to companies such as those backed by Abramovich, 42, and Deripaska, 40, and pledged $38 billion more.
That covers only half the amount sought. Among the applicants is Pumpyansky, 44, of TMK, which owes $1.7 billion in 2009, more than forecast earnings. Yields on TMK’s dollar bonds due September 2009 topped 80 percent last month. TMK plans to delay some investments and is seeking to refinance with longer-term debt, according to an emailed statement.
Deripaska is selling Moscow-based Soyuz Bank and may part with control of insurer OAO Ingosstrakh in Moscow, Vedomosti reported last week. Named Russia’s richest man by Forbes in April, Deripaska ceded stakes in auto-parts maker Magna International Inc. in Canada and German builder Hochtief AG to banks in October after the stocks lost more than half of their market value.
VEB’s $4.5 billion loan allowed Deripaska’s United Co. Rusal to keep a 25 percent stake in OAO GMK Norilsk Nickel, Russia’s biggest metals producer. A further $1.8 billion went to Evraz, the steelmaker part-owned by Abramovich.
Deripaska said he’s seeking to sell stakes in “practically all” his companies including Rusal, the world’s biggest maker of aluminum, to pay off loans, according to comments in the Wall Street Journal confirmed by spokesman Sergei Babichenko today. Deripaska said he hopes to have new investors in the companies by end of March.
Yevtushenkov’s Sistema in Moscow may seek as much as $2 billion from Moscow-based VEB to pay debts next year.
Moscow-based Evraz and Cherepovets-based Severstal didn’t respond to requests for comments.
TITLE: Guest Workers Send Less Money Home
AUTHOR: By Ethan Wilensky-Lanford
PUBLISHER: Staff Writer
TEXT: MOSCOW — Azim Abdullu sent $150 home to Dushanbe, Tajikistan, in April. Since then, the 34-year-old day laborer has not been able to provide money to his wife and four children.
Remittances from foreign workers in Russia, a major source of cash for poor Central Asian countries, showed signs of considerable growth through the third quarter of this year. But with the country’s ailing construction sector cutting jobs and the ruble weakening, remittances have begun to slow significantly — in some cases by as much as 10 percent, month on month.
Many firms do not even pay the money they have promised, and foreign workers have little recourse because they often cannot or do not seek help from authorities. And with a worsening job market across the board, immigrants living in Russia, estimated at 12.1 million by the World Bank, face rising hostility and even violence.
“They say they don’t have any money because of the crisis and don’t pay,” Abdullu said while waiting for work in the rain near a bus stop on Yaroslavskoye Shosse, near the Moscow Ring Road.
“I don’t have any money,” he said, looking down at his jeans and sneakers. “I can’t even buy proper winter clothes.”
Responding to a call by Prime Minister Vladimir Putin, the government last week cut quotas for foreign workers by 50 percent in an effort to stem increasing discontent with growing unemployment.
Regional leaders, too, have been pushing for stricter quotas. On Wednesday, Mayor Yury Luzhkov told the Federal Migration Service’s branch in Moscow that more needed to be done to cut quotas for foreign workers and to protect jobs for Muscovites, following similar calls by the governors of the Krasnodar and Sverdlovsk regions.
But despite the hardships, working in Russia is still a lucrative prospect for citizens of several former Soviet states.
“You have to understand that in their countries, the possibilities to earn a good wage are minimal,” said Yevgeny Sidorov, national secretary of the Federation of Independent Trade Unions of Russia. “That is why they are leaving their homes and coming to Russia to do the jobs that sometimes Russians would like to do.”
In 2007, Kyrgyzstan received remittances worth the equivalent of 20 percent of its gross domestic product, which does not include money transfers from abroad. The World Bank projects that Tajikistan will receive remittances worth a whopping 50 percent of its GDP in 2008.
“These countries are heavily dependent on the ability of their workers to obtain jobs abroad,” said World Bank economist Bryce Quillin, who recently wrote a report on global remittances and migration. “Remittances have been one of the key drivers of economic growth and poverty reduction in the last few years.”
A construction boom throughout the first half of this year raised the amount of the average money transfer to post-Soviet republics in the second quarter from $531 in 2007 to $656 this year, according to the Central Bank.
The ruble has since plummeted against the dollar and the financial crisis has expanded into construction and other industrial sectors, slowing the flow of money.
During past economic downturns, migrant workers would travel to new destinations to work. Now, Quillin said, there is no place for workers to go.
“You are going to have more unemployed people in these countries. Migrants will return home,” he said. “We could see an increase in poverty levels.”
TITLE: Recession Fears Grow As 400,000 Lose Jobs
AUTHOR: By Gleb Bryanski and Toni Vorobyova
PUBLISHER: Reuters
TEXT: Around 400,000 Russians lost their jobs in November, official data showed on Friday, as evidence grew that the economy was plunging toward a recession expected to last until at least mid-2009.
Prime Minister Vladimir Putin told employers on Saturday not to cut jobs unnecessarily as unemployment soars due to the economic downturn. “Businesses should not ... fire people without extreme need,” Putin told a meeting of ministers, RIA Novosti reported.
“Our goal is to minimize losses [of business], maintain its ability to survive, but not to guarantee its profits,” he added.
The number of unemployed rose to a 1 1/2 year high of 5 million people in November from 4.62 million in October to stand at 6.6 percent of the workforce compared with 6.1 percent in October.
Factories in the car, metals, coal and construction industries sent thousands of workers on unpaid leave in recent weeks as they halted production due to falling demand and swelling inventories.
“The situation is getting worse every day,” said Yevgeny Gontmakher, head of the Academy of Science’s Social Policy Center, who forecasts 10 percent unemployment if, as many economists now expect, the economy stops growing next year.
Russia, which has enjoyed annual growth of around 7 percent in recent years, has seen its fortunes turn around with the collapse of oil prices, the global credit crunch and flight of investors from emerging markets.
A tight labor market was seen as one of the signs of economic overheating earlier this year as the country brought in millions of migrant workers from neighboring countries to work on sprawling construction sites.
Russia now expects its growth rate to fall to 2.4 percent in 2009 provided the oil price stays at $50 per barrel throughout the year and government measures to support the economy work.
A forecast based on $32 per barrel has been discussed, but has not been made public.
The World Bank said that if the oil price were to fall to $30 per barrel the country may need to turn to international financial institutions to prop up the budget. Russia plans to review the budget early next year.
Putin said last week the unemployment situation was “worrying” and pledged 50 billion rubles ($1.8 billion) in the budget to increase benefits and create public sector jobs. The government has also pledged support for enterprises that are the sole large employers in a city, “to maintain social-economic stability.”
The country saw little public unrest during the oil boom years when household incomes were rising at double-digit rates. However, with rising jobless numbers and falling income growth, media reports about protests and hunger strikes have become more frequent.
Gontmakher said social unrest was likely if the unemployment rate hits 15 percent.
Friday’s data also showed retail sales growing at their slowest pace in five years, real disposable incomes down, growth in capital investment by Russian companies growth at a near-three year low and producer prices posting a record fall.
The data comes a day after the Economy Ministry unveiled its updated forecasts.
With the sharp drop in industrial output recorded last month, household consumption was seen as the last remaining driver of growth as people go on a spending spree fearing a sharp devaluation of the ruble. “Hope for positive growth in the fourth quarter is waning,” said Tatiana Orlova from ING.
“Poor November retail sales and real income data suggest that household consumption is decelerating sharply, increasing the likelihood of a recession in 2009,” Orlova said.
Calls are also growing for the government to shift focus from supporting to stimulating consumer demand through direct budget handouts, prompting optimism from some analysts.
TITLE: Directors at Norilsk Nickel Rescind Bids
AUTHOR: By Nadia Popova
PUBLISHER: Staff Writer
TEXT: MOSCOW — Norilsk Nickel independent directors Heinz Schimmelbusch and Guy de Sellier have withdrawn their candidacies for re-election to the board, Norilsk said Friday in an e-mailed statement, as sentiment appears to be growing around other names.
A Norilsk spokeswoman said the candidates did not give a reason for their decisions.
Schimmelbusch and de Sellier had been nominated by Rosbank, which holds an undisclosed amount of assets belonging to Norilsk affiliates in a trust.
Two other independent candidates to the 13-member board that is to be elected at a shareholders meeting Dec. 26 withdrew their names earlier this month. Tye Burt, chief executive of Kinross Gold, said his decision was based on the “current situation,” and Fiat chairman Luca Cordero di Montezemolo cited an “increasing volume of other obligations.”
Both had been nominated by United Company RusAl, which holds a 25 percent stake in Norilsk.
Schimmelbusch and de Sellier may have stepped back after seeing that they had only a small chance of being elected, said Nikolai Sosnovsky, a metals analyst at UralSib. “There are only three places for independent directors on the board, two of which are likely to be taken by the widely supported candidates and the third will go to the state representative,” Sosnovsky said.
Corporate governance advisories RiskMetrics Group and Glass Lewis Consultants recommended that minority shareholders vote for Gerard Holden, the former head of Barclays Capital’s investment division for metals and mining, and Brad Mills, the ex-CEO of platinum producer Lonmin. Both were nominated by Interros, the holding of Vladimir Potanin that controls 30 percent of Norilsk’s shares.
Holden and Mills had also been supported by the Norilsk board.
RusAl nominated Sergei Chemezov, the head of Russian Technologies, and Alexander Voloshin, a chief of staff to then-President Boris Yeltsin, as independent directors.
Oleg Deripaska’s aluminum giant had to nominate one state representative as a condition of a $4.5 billion loan from Vneshekonombank, for which it used its Norilsk shares as a collateral.
“Taking into account the proportion of the stakes in Norilsk Nickel held by Interros and RusAl, as well as RusAl’s agreement with the state ... minority shareholders should concentrate their votes on the two independent candidates,” RiskMetrics advised, Interfax reported.
RusAl and Interros agreed in November that they would both take four seats on the board, while another three would be given to independent directors, one to a state representative and another one to the Norilsk CEO Vladimir Strzhalkovsky.
TITLE: In Brief
TEXT: Repsol Stake Funded
MOSCOW (Reuters) — LUKoil has agreed with banks on raising a major loan that will allow it to purchase a significant stake in Spanish energy major Repsol, government and industry sources said on Sunday.
“I know that LUKoil has closed the deal to attract money for Repsol,” said a government source, who asked not to be identified. He did not give the size of the loan, neither did he say whether it was a foreign or a Russian loan.
A LUKoil spokesman denied the company had raised the loan: “It is not true,” he said, declining further comment.
Bank Licenses Removed
MOSCOW (Reuters) — The Central Bank said Friday that it had withdrawn the operating licenses of three more banks, Setevoi Neftyanoi bank, ZelAK bank and Baltkredobank, citing their lack of liquidity.
The Central Bank has now withdrawn around 15 banking licenses since the end of August as mistrust and a liquidity crisis hit Russia’s 1,000-plus banking sector. The lenders were unable to meet creditors’ demands and provided unreliable reports to the regulator, the Central Bank said.
Lebedev Margin Call
MOSCOW (Bloomberg) — Alexander Lebedev’s National Reserve Corporation said the company’s blocking stake in Aeroflot is not vulnerable to a margin call after the airline’s shares fell 67 percent this year.
The Moscow-based holding company owes Deutsche Bank $23 million, which it borrowed using 3 percent of Aeroflot as collateral. National Reserve has applied to Deutsche Bank and Vnesheconombank for refinancing, it Reserve said in a statement Saturday.
Ruble To Fall Further?
MOSCOW (Bloomberg) — The ruble will drop further because oil prices are declining and the Central Bank will continue with the current pace of devaluation, said Arkady Dvorkovich, economics adviser to President Dmitry Medvedev.
With commodity prices “at the current levels, it’s pretty certain that the depreciation will continue at the rate it is moving at now,” Dvorkovich said in an interview on Friday.
Rosneft On Oil Reserve
MOSCOW (Bloomberg) — Rosneft said the state should consider creating an oil reserve as an alternative to production cuts suggested by OPEC.
The state should establish a complex of “reservoirs, underground storage and a reserve fund of oil fields,” chief executive Sergei Bogdanchikov said Friday. Asking oil producers to stop and start output involves large capital expenditure, he added.
Pipeline Approved
MOSCOW (AP) — The State Duma voted unanimously on Friday to ratify the pipeline deal with Turkmenistan and Kazakhstan. The Central Asian-Russian pipeline should “significantly weaken the competitive position of alternative projects.”
A planned natural gas pipeline will help Russia preserve its dominance over exports from Central Asia and weaken a Western-backed, rival project, the Energy Minister Sergei Shmatko said Friday.
For the Record
MOSCOW (Bloomberg) — Prime Minister Vladimir Putin said Russian Railways and other so-called natural monopolies may be compensated next year after the government curbed increases in state-regulated prices, Interfax reported.
TITLE: Credit Crunch Hits Banks Hard
AUTHOR: By Boris Kamchev
PUBLISHER: Special to The St. Petersburg Times
TEXT: According to experts, the rapid slowdown in the Russian economy will hit the banking sector hard in the first half of next year. The credit crunch, coupled with the economic slowdown, means that the quality of bank assets has already started to deteriorate. This could lead to difficulties obtaining commercial or personal loans during the next one or two years.
Many banks have reacted promptly to the situation.
“Our first task was to support the client’s payments, and we have succeeded in servicing them... Considering the ongoing liquidity turmoil, it’s a very positive achievement,” Oleg Petrov, president of the board of the directors of Energomashbank said. “The bad news is that we had to reduce the loan volume, as many other banks did. We are planning to continue with this tendency toward the final moment of stabilization.”
Analysts say that one of the biggest drivers of the crumbling state of debts is the speed of the change. Retail borrowing has been caught out as the government went out of its way to suppress reports of the crisis until recently.
“Only a month ago people had no idea of what was going on and were spending as freely as ever. The job cuts and freeze on lending have come as a complete surprise to many,” Ivan Svitek, CEO of Home Credit Finance Bank (HCFB), Russia, told Russia Profile magazine.
For many banks the level of non-performing loans (NPLs) is still manageable, but observers say that current conditions indicate NPLs could rise in the first quarter of 2009, dramatically hitting the banking sector.
“A few weeks ago I was telling people that the Russian economy was fundamentally strong and the bank sector sound. Now I have had to eat my words,” David Nangle, Renaissance Capital’s senior bank analyst, told Russia Profile.
According to UralSib, in the last two months NPLs have risen from under 1 percent to 4 percent of total loan portfolios, something that could have enormous consequences for the banks. The range among banks is wide: some state-owned banks like Sberbank have seen the numbers double, but are still below 3 percent, while other retail-oriented banks are rumored to be doing much worse.
Other banks have taken different approaches in dealing with the liquidity crisis.
The owners of fast-growing Russian lender Ursa Bank and top-30 bank MDM are eyeing a merger that would create Russia’s second largest private bank, Vedomosti reported at the beginning of the month, quoting members of the banks’ boards.
The deal could be the largest in Russia’s banking system, which has more than 1,100 bank affiliates and is trying to survive the financial crisis through consolidation, a move that has been welcomed by the state.
“The first stage will be a share swap, but it shouldn’t stop there,” the business daily said, quoting a source close to MDM Bank. MDM Bank and Ursa Bank would not own more then 50 percent each in the united bank, but there will be an option to control the bank with a smaller stake, a source close to Ursa bank said, giving no details of who would control the new company. The merger should be complete by 2010 if the first stage, where both banks will bring their shares into a single firm, is concluded by the summer 2009.
Some experts believe 2009 will be a crucial year for dealing with the liquidity crisis, with restructuring of the banking system being part of that process.
“I believe that the idea of only saving large banks will be dismissed. The economy is established in such way that large banks don’t have a great interest in serving small customers,” Petrov said.
He said that two decades ago the Russian economy was quite different from what it is now, because back in those days clients were served by just four large banks. The volume of small and medium sized business back then was not the same as it is today.
By December lots of state money had been invested to prop up the Russian banking sector, but some experts say that even massive hard currency reserves won’t be enough.
“In one month, we lost $100 billion [of our hard currency reserves] and we didn’t achieve anything for the banks, for the economy or for companies,” said Bella Zlatkis, deputy chairman of the board and member of the supervisory board at Sberbank. “It is not enough to give liquidity to banks. We are throwing this money into the dustbin. We need to recapitalize them.”
TITLE: Bankers Put Forward 10 Outrageous Predictions
AUTHOR: By Steen Jakobsen, David Karsboel, John Judson Hardy and Christian Tegllund Blaabjerg
PUBLISHER: Experts from Saxo Bank make their predictions for the world’s crisis-hit economy.
TEXT: Iranian Revolution
The Iranian economy is already under pressure as it is. However, its single most important export good is oil and since we expect oil to trade as low as $40 or even $35, the purchasing power of the Iranian society in dollars will diminish. The government will be under severe pressure as they will not be able to maintain the supply of basic necessities. There are limits as to how much the Iranian population will put up with. These limits are wide in a well functioning economy, but with energy prices dropping steeply, social unrest and dissatisfaction are guaranteed.
Crude to $25
Crude will trade lower during 2009 as demand slows due to the worst global economic contraction since the Great Depression. We will see production cuts by OPEC, but due to disagreement within OPEC the cuts will not be as substantial as required in order to hinder crude falling from current levels. Furthermore, oil producing and less civilized countries that have grown dependent on oil revenues in order to appease their populations will go to desperate lengths to break any concerted efforts to keep oil prices high.
S&P500 in 500
S&P500 will hit 500 in 2009. The primary reason will be falling earnings, rather than falling P/E ratios (since the low interest rates justify relatively high P/E’s). There are several reasons why earnings will continue to drop: 1) Consumers will no longer be able to extend their credit from banks, since they are writing off losses and need to lower their balances. 2) The cost of funds has also increased in the corporate sector, especially for debt financed consumption. 3) Total housing equity is vaporizing and will no longer be able to serve as collateral for loans. 4) Companies will curb their investment programs, which will hurt B2B business models.
Italy will make good on threats to leave the ERM
Italy has a long-running affection for devaluations, which is not possible within single-currency cooperation. Government finances are under immense pressure and the ERM requirements will not only be violated, they will be completely ignored in 2009. The EU is likely to crack down on excessive government budget deficits in several member states, but Italy could make good on previous threats to leave the ERM completely.
AUDJPY to 40
The Australian economy is heavily influenced by the commodity market and a large part of the country’s economic expansion in the past year has been driven by the commodity boom. We believe that the whole commodity complex will be left dead in the water for the next ten years due to real demand destruction caused by the high prices in the past five years. At the same time, we are bullish JPY with the big, Japanese Current Account Deficit and overwhelming domestic savings.
EURUSD to 0.95
and then go to 1.30
Potential problems in the Euro-Zone are simply not getting the attention they deserve. European bank balances are under tremendous pressure due to the out-sized exposure to Eastern Europe — a region that will increasingly falter during 2009. At the same time, intra-European economic tensions are increasing as witnessed by the government bond spreads vs. Bunds. Additionally, the USD is the primary medium of exchange in money markets, which ensures that as long as they stay tight, USD demand will be high.
Chinese GDP
growth to 0.00%
This is as close to recession as China gets in 2009. The export driven sectors in the Chinese economy will be hurt significantly by the free-fall economic activity in the US. Furthermore, a lot of the commodity-based investments that have been undertaken in the past five years will sour with the collapsing of commodity prices. Since the Chinese economy has been stimulated by overly expansive monetary policy for years, more of the speculative excesses induced in that process will be revealed in 2009.
Pre-In’s First Out
We believe that several of the Eastern European currencies currently pegged or semi-pegged to the EUR will be under increasing pressure due to capital outflows in 2009. Several of these countries already have extremely large Current Account Deficits and their needed refinancing will make them vulnerable to additional credit market disruptions. This especially goes for the Baltic currencies.
Reuters/Jefferies CRB
Index to drop 30% (to 150)
Commodities might have been an even bigger bubble in the past years than equities (but not credit derivatives). We believe that the speculative excesses have been so large that they have even skewed the demand and supply statistics. We even doubt the consensus belief that demand has been outstripping supply for years is true. Hidden stockpiles industrial metals in particular will be unloaded during 2009 and that will press prices even lower.
First Asian currency
to be pegged to CNY
China’s economic, political and cultural influence is growing and a return from Phony Economics to Old School economics will lead everyone to focus at the important issues. In other words: Who has the productive potential? Who holds the debt? Who has growth and savings? Most of the answers will favor China and the Asian economies will increasingly look towards China to find new trade partners and to scale down on the hitherto U.S.-centric agenda.
Steen Jakobsen is Chief Investment Officer at Saxo Bank; David Karsboel is Chief Economist at Saxo Bank; John Judson Hardy is Chief FX Strategist at John Judson Hardy; Christian Tegllund Blaabjerg is Chief Equity Strategist at Saxo Bank.
TITLE: Tymoshenko Calls for CB Chair to Resign
PUBLISHER: Combined Reports
TEXT: Ukrainian Prime Minister Yulia Tymoshenko called on Thursday for the resignation of Central Bank Chairman Volodymyr Stelmakh, blaming the bank for the hryvna currency’s fall to historic lows against the dollar.
The demand came as 1,000 angry Ukrainians rallied in Kiev, protesting price increases, wage delays, utility cutoffs and other effects of the economic crisis.
“I demand that the president of Ukraine put forward urgently a proposal [to parliament] to dismiss the head of the Central Bank and to remove the entire executive of the bank,” Tymoshenko told a news conference.
The hryvna, meanwhile, gained slightly after a record two-day plunge, following a statement from the Central Bank calling a rate above 9 per dollar “unacceptable.”
The currency fell 1.7 percent to 9.10 per dollar by 6:28 p.m. in Kiev. It pared an earlier 18 percent two-day drop to a record 9.78 after the Central Bank sold reserves to support the currency. Petro Poroshenko, head of the Central Bank council, said at a news conference that a weak hryvna is a threat to the economy.
“The Central Bank did say they would intervene at 8.95 Thursday, so it looks like they went ahead with it,” said Dmitry Gourov, an economist focusing on Ukraine at UniCredit in Vienna. “The question is how big is their war chest, and given the limited amount of reserves they have to spend, there’s not much room left.”
President Viktor Yushchenko earlier tried to stem the drop, saying Ukraine will buy hryvna and calling for licenses to be revoked for lenders found speculating against the currency. The Central Bank said it would raise its benchmark refinancing rate from 12 percent to an unspecified level.
The Central Bank has attempted to manage the hryvna’s decline since October by buying and selling foreign-exchange reserves. Natsionalnyi Bank Ukrainy drained $3.4 billion in November and $4.1 billion in the previous month, reducing them to $32.7 billion on Nov. 30.
Poroshenko said Thursday that the Central Bank still has sufficient foreign currency reserves to stabilize the hryvna.
Ukraine is attempting to arrest a deepening crisis since the International Monetary Fund provided a $16.4 billion bailout last month.
(Bloomberg, AP, Reuters)
TITLE: First Cuts Deepest in Banking Job Sector
AUTHOR: By Olga Kalashnikova
PUBLISHER: Special to The St. Petersburg Times
TEXT: The banking sector was the first in the Russian economy to start firing people as a result of its descent into crisis, experts said. But with the right approach, they added, there is no reason why staff reductions should be irrevocable or harmful to the sector in the long term.
Job cuts in the worldwide financial services industry will increase to 350,000 by mid-2009, according to Bloomberg data, with most coming from hard-hit investment banks.
“When banks start losing money they need fewer staff,” said Oxana Kovaleva, senior attorney at Capital Legal Services in St. Petersburg. “There are hardly any banks that can afford to wait for the good times while holding on to all their staff. All this means that the bloodletting in banking will continue.”
Alfa Bank specialists predict a new wave of staff reductions in February–March as the world economy continues to face slower growth.
“But the level of unemployment is unlikely to exceed 9 percent, while today it is just over 6 percent,” Rushan Khvesyuk, Chairman of the Board of Alfa-Bank, has said.
Many banks, however, prefer not to reveal the scale of job losses as such information is an indicator of the bank’s financial problems. And it can be regarded negatively by clients.
Banks explain that the crisis is a chance to make revisions to expenses to make their business more efficient.
“Like many of our colleagues, we have to watch our expenses closely. Staff reduction is not merely an end in itself. The main thing is optimization. Now we are looking at the correlation between the volume of business and the amount of employees,” said Khvesyuk.
“There have been some reductions. For example, we optimized the amount of workers in the mortgage and auto credit spheres. At the same time we understand that when the crisis passes, we’ll need qualified specialists. That’s why we do our best to keep them.”
Former bank employees suffer more than most because many of them have a narrow professional specialization that only relates to banking.
“Re-training is expensive and most employers are not prepared to do it for now. So, there is a problem of looking for a new job. But, by decreasing their salary expectations, bank workers, fired from one bank, can find a job in another. In spite of the bloodletting, recruiting web sites are full of information about vacancies in banking. I suppose many employers are using the situation to change their employees for cheaper options,” said Kovaleva.
Banking managers and clerks who have been let go may find new opportunities in the financial departments of companies in other parts of the economy.
“In spite of the situation on the market, financial organizations have vacancies and continue to recruit, but on a different scale,” said Alexandra Mayorova of ANCOR Banking & Financial Services. “Companies keep such specialists as risk managers, deposit specialists, corporate lawyers.”
“If we see a development and growth, for example, in consumer credit, we recruit staff,” Alfa-Bank’s Khvesyuk added.
Banks will also cut wages or hours, use extended periods of paid or unpaid leave and other techniques that reduce personnel costs while retaining, as far as possible, their staff.
“If the conditions determined in the labor agreement [contract], such as working hours and salary, cannot be saved because of the changes in work, for example, due to a large reduction in the amount of bank services, the law allows the employer to change the contract,” said Kovaleva.
“The employer should tell the employee about such changes and the reasons behind them not less than two months before the day the new working conditions are to be introduced.”
If the employee does not agree, the employer should offer him another vacancy. And if the worker does not agree again, the agreement with him can be broken. But in case of job losses the employee will receive a pay-off equal to two-week’s worth of his average salary.
Reduced working hours are also an option.
“But it can be just a temporary measure for a period of six months. The task for banks is to prove that of the changes in working conditions really require a change of the labor agreement,” said Kovaleva, hinting at bureaucratic restrictions in the labor code.
TITLE: First-Hand Report: A Debtor’s Tale
PUBLISHER: The St. Petersburg Times
TEXT: It seems as if the modernization of personal finances to utilize loans and credit, long promoted as a necessary reform in Russia, will hit early-adopters hardest now that the economy is tanking and unemployment is rising. The St. Petersburg Times has obtained the account of a recently unemployed middle-aged professional, whose identity we agreed not to reveal, who says she is facing unbearable pressure from a bank — whose side of the story we were unable to verify and have chosen not to name — over credit card payments.
“Yesterday I lost my job. I was fired. Well, in fact, on paper the termination of my contract looks like a peacefully settled agreement, according to Article 77 of the Russian Labor Code. Truth is, however, that mass staff cuts will begin in January, and now the director is parting with those who were hired most recently, and staff cuts are disguised as ‘agreed terminations’ — to make the situation in the company look good on paper. I had been hired very recently, when the crisis already started to unfold. It is common knowledge that such recently hired employees are the first to go.
“I am one of those people who is not likely to survive the financial crisis if the state does not lend them a helping hand.
“Unfortunately, I have not been able to pay my loans and cover debts on credit cards. And, considering my new financial plight, the chances of me getting out of this trouble are not looking good. I have heard that the United Russia party has secured a deal with the Russian government that white-collar workers who are made redundant get extensions on the payments on their loans or any credits. The trick is that to get the extention they have to be officially made redundant which is what many employers are trying to avoid to save money.
“I, for one, failed to get into the right category. What is going to happen to me? How on earth am I going to be able to survive such a catastrophe?
“I started feeling anxious in the early autumn. I realized where everything was heading, became nervous and fell ill.
“A chronic illness that I had had for many years has escalated in a severe form. The illness has led to massive medical payments that emptied my wallet. Now I am facing huge debts I am unable to pay. And, worse, the bank where I am a credit-card holder, is behaving no better than a complete bandit.
“Pressure phone calls started almost immediately. Naturally, every bank has a department that has to make all debtors pay, and the staff do have to find out the reasons for payment delays and agree on a plan. But how often do you think the bank calls me? They ring me every day, even on weekends, non-stop, from 7 a.m. to 11 p.m. I get another phone-call about twenty minutes after I hang up — as if I never talked to them before. And that is just my mobile phone.
“At first I duly answered every single phone call. But it didn’t help: after half an hour, at the most, another person would call and pressure me again. It took me some time to figure out that this apparently seems to be the bank’s approach in dealing with debtors. They hunt you down till you literally fall off your feet.
“Here is one example. On Dec. 11 I answered a phone call from the bank at 21.26. It was a long and draining conversation. I answered all questions, explained that I had lost my job and been ill, and that I filed all the related documents to the bank. Then I received three more calls in a row: at 22.29, 22.40 and 22.45. What was the point? Was I supposed to suddenly get employed, at that time of night? Surely it wouldn’t help the bank if it succeeded in driving me to suicide?
“It is already common knowledge that the number of suicides in Russia has jumped. Perhaps, these figures are not simply due to unemployment. I am confident that an analysis of the recent wave of suicides would show that the main reason behind these tragedies is the inability of those involved to handle their debts. And something tells me that there are probably more deaths among the clients of those banks who terrorize their clients in the way my bank is terrorizing me.”
TITLE: Hi-Tech Solutions
AUTHOR: By Olga Kalashnikova
PUBLISHER: Special to The St. Petersburg Times
TEXT: Modern technologies in both business and retail banking have developed along two lines. The first is the remote control of accounts and the second is additional services for clients. As with all innovations, however, the course to full and easy take-up of what technology allows is sometimes less smooth than its proponents would desire.
“It is convenient for people and, equally importantly, it gives them security,” Yelena Lukina, deputy manager of Binbank in St. Petersburg, said. “Just a few years ago IT services worked hard to improve the image of banks. It characterized the bank as competitive. Now such services are the norm in banking life, bring additional profits and optimize operational expenses.”
Both business and retail clients want to control their accounts 24 hours a day and spend less time on going to branches in person.
Dmitry Kashtanov, the head of the managing department of Alfa-Bank, said businesses want to remotely operate their accounts to, for example, look through account information or transfer money from one account to another.
Private clients can use Internet-banking for the same aims.
“Internet-banking and sms text-banking are the most in-demand services. They combine convenience and securety for the client and additional profit and optimization for the bank,” said Lukina.
“Sms text-banking is popular among individuals, while the internet is often used by corporate clients.”
Moreover, if the client chooses modern banking systems, he does not need to go to the bank office even for the first time to get access to the system. It is enough just to call the bank and ask it to provide this service.
“If the client is familiar with modern technologies — the computer, Internet, mobile phones — he won’t have any difficulties using these systems. One should just carefully read and follow all the instructions,” said Lukina. “But one should keep all keys and logins in a safe place and have passwords of the appropriate length and difficulty.”
“To my mind, the ideal version of the mobile bank is a notebook with wireless access to the Internet and powerful antivirus software package. Nowadays one can get access to the Internet in many stores and cafes or with the help of a mobile,” said Lukina. “The same thing happens with sms text-services.”
So, there is no need for the client to visit the bank at all —except for cash.
“The name ATM — Automated Teller Machine — has long since ceased to correspond to the range of services it offers to clients. Nowadays, they include currency exchanges and allow you to put money on credit cards, in accounts and make remittances. The amount of services depends on the software, technologies and equipment of each particular bank,” said Lukina.
TITLE: Depositors Hold First Bank Protest in Russian Capital
PUBLISHER: Reuters
TEXT: Depositors with a small bank took to the streets in central Moscow on Friday to demand the return of their funds, the first publicized bank protest the capital has seen during the credit crisis.
On Friday, around 15 protesters lined up across the street from Capital Credit bank’s offices, some holding posters that read “2008 = 1998.”
The organizers said they had requested a permit to accommodate 70 members of its depositors’ organization but received a permit for just over a dozen.
They said they had been unable to make withdrawals from the bank for two to three months.
“The bank has effectively suspended withdrawals but has not put this down in writing. Depositors are being told to write a statement [demanding their withdrawal], but it goes nowhere,” said Dmitry Trofimov, a member of the depositors’ group.
Bank officials declined comment.
The government has attempted to sooth depositors’ worries that the financial crisis will consume their savings, as the ruble collapse did in 1998. Government deposit insurance has been raised to 700,000 rubles, far more than the average depositor is likely to have.
Deposit outflows reached 6 percent in October in the weeks after a crisis of confidence in the financial system after liquidity fears forced the state to bail out a few small banks.
TITLE: Getting Out of the Swamp
AUTHOR: By Paul Rogers
TEXT: Russia today faces two great challenges: an aging and inadequate infrastructure and an acute economic crisis. Since the collapse of the Soviet Union, the country’s infrastructure has been crumbling. The number of airports has fallen from 1,342 in 1991 to fewer than 350 today. The average Russian railcar was built in 1983, and many are much older. Today, Russia and the Congo are the only countries in the world where the number of kilometers of roads is actually decreasing. The infrastructure that does exist is inadequate: More than 15 million people have no access to the transport network at all.
Yet at the same time the global economic crisis is now hitting the country in full force. The stock market has collapsed, companies are cutting jobs and salaries, industrial output is declining, and the once-booming construction sector is starting to wobble.
Financing from the private sector for infrastructure projects is going to be hard to come by as long as the crisis continues. In 2009, I estimated that $27 billion of the $99 billion planned total infrastructure spending will be scrapped because of the lower availability of private sector finance.
This means that a massive government investment program into infrastructure is necessary. And unlike the United States and most other rich countries, Russia actually has the money to spend. Over the past decade, the state has done an excellent job building up its balance sheet by accumulating reserves from its oil windfall. At its peak this year, it had squirreled away nearly $600 billion.
Now is the time to spend part of these reserves to rebuild the country’s infrastructure and stimulate the economy. With the price of cement down 40 percent since June, and steel down 20 percent, the government is in a position to invest without igniting inflation. Revamping public infrastructure is key to keeping economic growth going. In 2009, Russia’s public sector must compensate for the nosedive in private sector investment.
The numbers involved are tremendous. My conservative estimate is that $875 billion needs to be invested in Russia’s infrastructure through 2015, with $457 billion going into transportation. That is a huge increase over current levels. Investment in infrastructure is now about 2.5 percent of gross domestic product, compared with a global average of 4.2 percent, even though the country’s economy is growing much faster than the rest of the world. I believe investment rates must rise to 6.9 percent of GDP over the next six years for Russia to build the infrastructure needed to support the expected rate of economic growth.
In the past, any public investment would simply have crowded out private investment. Very high growth rates and rising inflation indicated that the economy lacked the spare capacity to handle public sector infrastructure spending. As a result of freely available, cheap international funds, private sector investment has arguably been too high (there are a worrying number of unfinished real estate projects across Russia), while public sector investment has been too low.
Since June, the situation has clearly turned on its head. Funds for the private sector have entirely disappeared, resulting in a worryingly rapid increase in spare capacity. The public sector, on the other hand, can effectively fund itself at the 1 percent it is currently receiving on its net savings positions. Given the efficiency gains available from improving infrastructure, the returns from investing domestically should be easily profitable.
Top priorities in a big government infrastructure spend should include improving the links between Moscow and St. Petersburg, including the 659-kilometer rail line and the toll highway. The state should increase availability to its Asian regions, continue to develop rich mineral deposits in areas like Sakhalin and overhaul the country’s 213 nonhub airports. The government should also modernize the railway link between the East and West to capture more of the trade from the world’s biggest producing region — China — to the hungriest consumer bloc — Europe. Finally, Russia needs to continue its massive investment in Sochi leading up to the Olympic Games in 2014.
The result of this large infrastructure spending will not just be millions of new jobs and growth in industrial output to the country’s precrisis levels, but it will revitalized Russia and allow it to compete in the 21st century.
Paul Roger is head of infrastructure and transportation research at Renaissance Capital.
TITLE: Looking on the Bright Side
AUTHOR: By Anna Shcherbakova
TEXT: We have eight good, prosperous years behind us, said one of the speakers at a conference organized last week by the Vedomosti newspaper and focusing on the opportunities that the crisis has brought. According to him, the bulk of commercial real estate projects that are underway will be frozen, but even those sites already operating are likely to lose existing clients.
Forecasts from other speakers were also far from being optimistic: unemployment among the white collar work force will grow, consumption will plummet, economic growth will slow or even stop. The city budget, which has increased from 75 billion rubles in 2003 to 377 billion in 2009, is going to cut expenses by 100 billion rubles next year, as the income from taxpayers is expected to decrease dramatically, Vice Governor Mikhail Oseyevsky announced at the conference.
The current atmosphere is mired in uncertainty and depression. For several years we — the city’s business journalists — have been struggling to find evermore synonyms for growth and increase; now we are hurriedly scrambling about to find the right words to describe the opposite process. And also trying to remember what other skills apart from writing we possess, as you never know who will be the next to lose their job.
The main issues for companies involve restructuring their own loans and negotiating with debtors, cutting labor expenses and looking for new smaller, cheaper office premises.
The economy and life itself will never be the same again — we have to accept that and consider new priorities and ideas. Despite the fact that the crisis also creates opportunities, I could find neither an industry that feels better now than it did a year ago nor the criteria for size that might allow us to predict which firms will have an easier time of it. Bankers, who supposed to be able to sense which clients are the best bet, are very cautious in making any predictions. It’s obvious that state–owned structures have a better chance of surviving than private enterprises, they say, but the stop short of telling us which industries will benefit from the current problems. Their desired clients are “those who have positive cash flow” or “efficient companies of any size that are ready to adapt to the current circumstances.”
Banks themselves are afraid of loans that are yet to be paid off, as well as withdrawals of private deposits — no wonder lending has dried up.
It will be bad, but no worse than it was 15 years ago, said a top manager at a national bank. As he glanced at his Swiss watch, he recalled standing in line for locally produced cigarettes and living in a communal apartment. I can remember those hard times too, and recalling them does calm me down somewhat. But there are many who are younger and cannot even remember the financial crisis of 1998. An entire generation has grown up in these years of prosperity — a prosperity fueled by oil prices and praised by state authorities. These people graduated in the early years of this decade. They work — or worked until very recently — in the offices of construction or insurance companies and got used to spending their free time in sushi bars and multiplex cinemas. Their lifestyles comprise vacations in Majorca or in Italy and borrowing money to buy new cars or apartments. They cannot imagine that economic growth isn’t a perpetual state of affairs and their illusions will be ruined once they recognize that the good times of forever increasing salaries and affordable loans are over. This shock is a very unpleasant result of the current crisis.
Anna Shcherbakova is the St. Petersburg bureau head of business daily Vedomosti.
TITLE: Mugabe Has ‘Lost It ’ Says U.S., No More Deals
PUBLISHER: The Associated Press
TEXT: PRETORIA, South Africa – The U.S. can no longer support a proposed Zimbabwean power-sharing deal that would leave Robert Mugabe, “a man who’s lost it,” as president, the top U.S. envoy for Africa told reporters Sunday.
Jendayi Frazer, the U.S. assistant secretary of state for African affairs, made the announcement in South Africa after spending the last several days explaining the U.S. shift to regional leaders. The new U.S. stance will put pressure on Zimbabwe’s neighbors — South Africa in particular — to abandon Mugabe. But South Africa said its position was unchanged.
The U.S., Frazer said, has become convinced Mugabe is incapable of sharing power.
She cited political moves he has made since September without consulting the opposition, reports his regime has continued to harass and arrest opposition and human rights activists, and the continued deterioration of Zimbabwe’s humanitarian and economic situation. Particularly worrying, she said, was the rapid spread of cholera, an easily treatable and preventable disease that has killed at least 1,000 Zimbabweans since August.
Frazer cited accusations from the Mugabe regime that the West waged biological warfare to deliberately start the cholera epidemic as an indication Mugabe is “a man who’s lost it, who’s losing his mind, who’s out of touch with reality.”
If Mugabe’s neighbors were to unite and “go to Mugabe and tell him to go, I do think he would go,” she said.
Secretary State Condoleezza Rice said Sunday on the American TV program “Meet the Press” that Zimbabwe was discussed at the United Nations last week.
“This is another circumstance in which the international community, most of it — including, by the way, several African states: Botswana, the leadership of Kenya and others — are saying that the regime of Robert Mugabe has got to go,” Rice said. You have a cholera epidemic there. You have a humanitarian disaster in terms of food. You have the goons of the Mugabe regime going around and detaining people and frightening people, terrorizing people. Again, the international community in that circumstance needs to act.”
But South Africa said Sunday the agreement under which Mugabe would remain president and opposition leader Morgan Tsvangirai would take a new prime minister’s post was the only way forward.
South Africa is the region’s diplomatic leader. Its former president, Thabo Mbeki, mediated Zimbabwe’s power-sharing agreement in September and has worked since then to break an impasse between Mugabe and the Zimbabwean opposition over how to divide Cabinet posts.
When the power-sharing agreement was announced, the U.S. gave crucial support, offering to lift sanctions and help Zimbabwe re-negotiate relations with international lenders if the deal were implemented.
“We’re not prepared to do any of that now,” Frazer said Sunday.
Asked later whether that robbed Zimbabwe’s neighbors of important leverage, Thabo Masebe, spokesman for South African President Kgalema Motlanthe, said only: “Our position has not changed.”
Tendai Biti, chief negotiator for Zimbabwean opposition leader Tsvangirai, said the opposition remained committed to the stalled talks aimed at forming a power-sharing government with Mugabe and Tsvangirai. But Biti noted that Tsvangirai said Friday that he will ask his party to halt the power-sharing negotiations unless political detainees are released or charged by Jan. 1.
Biti said the U.S. position was difficult to contest, saying that in Mugabe, “you are dealing with someone ... that cannot be trusted.”
South Africa’s Motlanthe had said as recently as last week that he believed the unity proposal was the solution, because it was what Zimbabwean negotiators wanted. Frazer said the U.S. also believed a unity government could move Zimbabwe forward, but “it’s not credible with Mugabe as president.”
Cholera has spread from Zimbabwe to South Africa and other neighbors, underlining the threat Mugabe poses to the region, Frazer said. She said it was understandable that South Africa would try not to do anything that could lead to Zimbabwe’s collapse.
TITLE: Valuev Judged Winner in Holyfield Bout
PUBLISHER: The Associated Press
TEXT: ZURICH, Switzerland — Nikolai Valuev almost certainly ended Evander Holyfield’s chance at winning a fifth heavyweight title, narrowly defending his WBA title by majority decision on Saturday night.
The 46-year-old American, attempting to become the oldest heavyweight to win a major belt, started the fight by moving around the ring to neutralize Valuev’s long reach advantage.
The 7-foot Russian from St. Petersburg, the tallest and heaviest champion ever, struggled to close down Holyfield early but began asserting his jab as Holyfield tired.
One judged scored the bout a draw, while the others had Valuev winning 116-112 and 115-114.
“Of course I am disappointed,” Holyfield said. “I thought I had done enough to get the win. Now I have to go home and think about my future.”
Holyfield (42-10-2) had not fought since losing a one-sided decision to then-WBO champion Sultan Ibragimov over a year ago, and was much criticized for this latest comeback attempt. Some critics suggested he was putting his health at risk by fighting at such an advanced age.
Still, the “Real Deal” appeared in great shape for the fight and was never seriously hurt by Valuev (51-1), who has avoided the top heavyweights and did little to improve his standing in the division. He was vulnerable to Holyfield’s right hooks, many of which landed, even if the Russian also was never stunned.
“He made me work very hard for the win,” said Valuev, the overwhelming favorite and underwhelming winner. “Holyfield was unbelievable with his speed. The fight was fought at a great tempo for the whole 12 rounds.”
Later rounds were largely uneventful, with the Atlanta native dancing and looking for the rare opportunity to attack in combinations. The Russian, who carried a weight advantage of almost 100 pounds, planted himself in the center of the ring and rarely unleashed power punches.
“His hands are not as slow as everyone thinks they are,” Holyfield said.
TITLE: Sparks Still Flying Over Shoe Thrower Scandal
PUBLISHER: The Associated Press
TEXT: BAGHDAD — The Iraqi journalist who threw his shoes at President George W. Bush says he would do it again and that he was forced to write a letter of apology after being tortured in jail, the journalist’s brother said Monday.
Muntadhar al-Zeidi’s outburst during a Dec. 14 news conference with Bush and Prime Minister Nouri al-Maliki has been repeatedly broadcast worldwide, making him a symbol for opponents of the U.S.-led invasion and occupation of Iraq. Thousands of Iraqis have rallied to demand his release.
The prime minister’s office said last week that al-Zeidi had written a letter of apology and asked al-Maliki to recommend a pardon. But his brother, Uday al-Zeidi, told The Associated Press that the letter was written against the journalist’s will.
“He told me that he has no regret because of what he did and that he would do it again,” Uday al-Zeidi said by telephone.
He said he visited his brother in jail on Sunday and found him with a missing tooth and cigarette burns on his ears. Muntadhar al-Zeidi told his brother that jailers also doused the journalist with cold water while he was naked, Uday al-Zeidi said.
The investigating judge in the case has said that the journalist was beaten around the face and eyes when he was wrestled to the ground after throwing the shoes.
“The thing that makes you cry and laugh at the same time is that when the prime minister said that that my brother was not tortured and will not be tortured, he was under severe torture by security authorities,” he said.
Iraqi authorities could not immediately be reached Monday for comment on Uday al-Zeidi’s allegations.
The prime minister, meanwhile, claimed that al-Zeidi said in the letter that a known terrorist had induced him to throw the shoes.
“He revealed ... that a person provoked him to commit this act and that person is known to us for slitting throats,” al-Maliki said, according to the prime minister’s web site. The alleged instigator was not named.
The premier also said that his government remains “committed to protecting the journalist in performing his professional duty” and guarantees him the right to practice his profession “on condition that he does not violate the dignity of others.”
Neither Bush nor al-Maliki have sought charges, but investigating judge Dhia al-Kinani said last week he does not have the legal option to drop the case.
Al-Zeidi is expected to face charges of insulting a foreign leader, for which a conviction could bring two years’ imprisonment.
TITLE: Arshavin In Arsenal Deal?
PUBLISHER: The St. Petersburg Times
TEXT: Arsenal is leading the race against its north London rival Tottenham to sign Zenit St. Petersburg star Andrei Arshavin next month, according to U.K. media reports.
The Russian forward was in London with his agent last week, reported www.telegraph.co.uk on Sunday. The web site said Arshavin visited Spurs’ training ground last Tuesday and Arsenal’s base last Wednesday.
Arsenal manager Arsene Wenger “is thought to have the finances ready to sign an experienced striker from abroad” worth $30 million, according to the report.
A proposed move to Tottenham collapsed in the summer because Zenit demanded $34 million for the 27-year-old, who is arguably Russia’s most popular sportsman, and Spurs were not prepared to match that figure.
Zenit has since been eliminated from the Champions League and are reportedly keen to sell players. Zenit coach Dick Advocaat has said he is happy for Arshavin to leave, while Arshavin has said he would like to move to a top-flight European club.
“I try and play for Zenit the best I can,” www.telegraph.co.uk cited Arshavin as saying. “But I repeatedly told the president of the club that I didn’t want to remain in the side any longer.”
TITLE: Mumbai Hotels Reopen After Attacks
PUBLISHER: Reuters
TEXT: MUMBAI — People of Muslim and Hindu faiths held roses and chanted religious verses to mark the reopening of Mumbai’s Trident hotel on Sunday, three weeks after it was damaged in a militant attack.
Police with sniffer dogs patrolled outside the hotel, which welcomed guests for the first time since Islamist gunmen attacked the Trident and nine other sites in Mumbai last month killing at least 179 people.
“We are feeling sad as we are reminded of the events, but we are also happy that the hotel is open again,” said Rashmi Mehra, a regular at the Trident’s Frangipani restaurant, who lost a friend in the Nov. 26-29 attacks.
“We are going to see if we can get a table for lunch — we were told it’s fully booked.”
Earlier, guests were handed pink roses as they listened to prayers uttered by leaders of the Hindu, Christian, Muslim, Jewish and Buddhist faiths gathered in the 550-room hotel.
India’s foreign minister urged Pakistan to take action against Lashkar-e-Taiba, the Pakistan-based Islamist militant group India, Britain and the United States have blamed for the Mumbai attacks.
Hotel staff said inquiries for rooms and restaurant bookings have been pouring in, although cancellation rates have been 30-35 percent following the attacks.
Officials at the Trident said at least 100 rooms would be occupied at the hotel, a favourite among foreign business executives, and the restaurants were expected to be full.
“A guest walking in will find no trace of what happened,” said Rattan Keswani, president of the Trident Hotels.
Tight security marked the opening of the hotel, which three weeks ago was strewn with broken glass and stained with blood.
Baggage scanners, metal detectors, and armed police behind sandbags were positioned at the entrance to the hotel, with guests also being frisked.
Foreign Minister Pranab Mukherjee said Pakistan had enough evidence to take action against the suspected Lashkar-e-Taiba gunmen.
“We have evidence like the satellite phone conversations, which were intercepted,” Mukherjee told reporters in Kolkata during a visit on Sunday.
“We also have chilling account of the entire Mumbai terror plan from (Ajmal Amir) Kasav (one of the 10 militants captured alive in Mumbai),” he said.
In Mumbai, the historic Taj Mahal Hotel, site of a 60-hour siege, was due to throw open its doors later on Sunday to more than 1,000 clients and guests for a gala reception.
Regulars and curious visitors have flocked back to Leopold Cafe, another of the 10 sites that were attacked, despite the bullet holes that are still visible in its walls and windows.
TITLE: Belgium Plunged Into Crisis
PUBLISHER: The Associated Press
TEXT: BRUSSELS, Belgium — King Albert II consulted with political leaders on Saturday on ways to limit a crisis caused by the Belgian government’s offer to resign over allegations it interfered in a court case regarding the Fortis bank bailout.
All the ruling parties said they hoped to avoid early elections because stability is needed to react to the global economic crisis. But opposition parties insisted Prime Minister Yves Leterme could not stay in office because interference in a court case would be a direct violation of the separation of powers, a cornerstone of parliamentary democracy.
“The king will have to untie this knot,” said Elio Di Rupo, chairman of the French-speaking Socialists, part of the ruling coalition.
Observers said the king could continue his consultations through Sunday. Albert can either reject the offer to resign, call for early elections or explore ways to form a new government based on the current legislature.
Albert met with Jo Vandeurzen, who resigned as justice minister earlier Friday after Belgium’s highest court said the government had tried last week to influence the case brought by shareholders over the bailout and sale of the troubled bank.
Leterme denied he had done anything wrong but said allegations raised Friday by the country’s highest court made it impossible to continue the government’s work.
The future of Fortis, once the country’s largest bank, is now in question as the government tries to proceed with the sale of most of the business to France’s BNP Paribas. Thousands of jobs are at risk and many Belgian shareholders have seen their stakes become nearly worthless.
Fortis was forced repeatedly to seek government help during tight credit conditions and was eventually carved up, selling off most of its business in Belgium, Netherlands and Luxembourg.
Angry shareholders won the Belgian appeals court challenge last week. The court ruled the shareholders should have been consulted on any major deals.
Leterme heads a coalition of Christian democrats, liberals and socialists, split into Dutch- and French- speaking parties. Beside Fortis, several other economic and social issues are suspended because of the crisis.
TITLE: U.S. Editors List Top 10 News Stories of ’08
PUBLISHER: The Associated Press
TEXT: NEW YORK — The epic election that made Barack Obama the first African-American president was the top news story of 2008 — followed closely by the economic meltdown that will test his leadership, according to U.S. editors and news directors voting in The Associated Press’ annual poll.
The campaign, with subplots emerging throughout the year, received 100 first-place votes out of 155 ballots cast for the top 10 stories. Two other political sagas — the history-making candidacies of Hillary Rodham Clinton and Sarah Palin — also made the list.
The vast economic crisis, plunging the U.S. into recession and ravaging many business sectors worldwide, was the No. 2 story, receiving 49 first-place votes. The precipitous rise and fall of oil prices was No. 3.
The top story of 2007 was the massacre of 32 people at Virginia Tech University by a mentally disturbed student gunman.
Here are 2008’s top 10 stories, as voted by AP members:
No. 1. U.S. ELECTION: Obama emerged from Election Night as a decisive victor and a symbol for the world of America’s democratic promise. But he reached that point only after a grueling battle with Clinton for the Democratic nomination and then an often-nasty showdown with the McCain/Palin ticket in the run-up to the election.
No. 2. ECONOMIC MELTDOWN: The bad news kept coming — collapses of Wall Street giants; huge stock market losses; plummeting home prices and a surge of foreclosures; desperate times for U.S. automakers. It added up to the worst economic crisis since the Great Depression, and will cost the federal government well over $1 trillion in various rescue and stimulus packages.
No. 3. OIL PRICES: The global economic angst produced hyper-volatile energy markets. The price of crude soared as high as $150 a barrel in July before crashing to $33 this month. In the U.S., the average price for a gallon of regular gas peaked at $4.11, then plunged below $1.70.
No. 4. IRAQ: The much-debated “surge” of U.S. troops helped reduce violence after more than five years of war, but Iraq is still buffeted daily by bombings, ambushes, kidnappings and political uncertainty. A newly ratified U.S.-Iraqi security agreement sets a timetable for U.S. troop withdrawal by 2012.
No. 5. BEIJING OLYMPICS: China hosted the Olympics for first time, drawing praise for logistical mastery and condemnation for heavy-handed security measures. The games themselves were rated a success, highlighted by the record-shattering performances of swimmer Michael Phelps and sprinter Usain Bolt.
No. 6. CHINESE EARTHQUAKE: A huge quake in May killed 70,000 people in Sichuan province and left 5 million homeless. Many thousands of children were among the victims — authorities said about 7,000 classrooms were destroyed in shoddily built schools.
No. 7. SARAH PALIN: Few Americans outside Alaska knew much about its governor when Republican John McCain picked her as his running mate. That changed rapidly. To her conservative admirers, she was a feisty, refreshing change from most politicians; to her critics, she was in over her head, and worthy of all the lampooning she endured.
No. 8. MUMBAI TERRORISM: Ten attackers allegedly sponsored by a Pakistan-based Islamic group terrorized India’s financial capital in November, killing 164 people in coordinated attacks on hotels, markets and a train station. India’s perennially uneasy relations with Pakistan were badly strained.
No. 9. HILLARY CLINTON: She didn’t win, but Clinton came closer than any other woman in U.S. history to becoming a major party’s presidential nominee. Her determined primary campaign, waged vigorously even when it seemed a lost cause, inspired millions of women across the country — and helped persuade Obama to choose her as secretary of state.
No. 10. RUSSIA-GEORGIA WAR: The two nations waged a five-day war in August ignited by a Georgian artillery barrage on the breakaway region of South Ossetia. Russia responded with a drive deep into Georgian territory, causing severe economic damage and aggravating already troubled Russia-US relations.
TITLE: Manga Karl Marx is Hit in Japan
PUBLISHER: The Associated Press
TEXT: TOKYO — Just in time for Christmas, Karl Marx is finding a new audience among Japanese comic book fans.
The manga edition of his masterpiece, “Das Kapital,” hit Japanese bookstores this month and sold about 6,000 copies in its first few days, said Yusuke Maruo of EastPress Co.
“I think people are looking to Marx for answers to the problems with the capitalist society,” Maruo said. “Obviously, the recent global crisis suggests that the system isn’t working properly.”
Maruo said he hoped the comic version would provide an enjoyable introduction to the German socialist’s original work, written in 1867. The targeted readers are office workers in their 30s. Christmas and New Years are a prime time for publishers, as many people have vacations and more time to read.
Maruo said the comic “Das Kapital” had been planned earlier this year after a revival hit of the 1929 communist novel “The Crab Factory Ship,” which portrays a ship’s crew forced into harsh labor under a sadistic captain.