SOURCE: The St. Petersburg Times
DATE: Issue #1447 (9), Tuesday, February 10, 2009
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TITLE: ‘Mystery Cops’ Raid Arctica
Rock Club
AUTHOR: By Sergey Chernov
PUBLISHER: Staff Writer
TEXT: A concert that drew nationalists was raided by an unknown law enforcement agency in St. Petersburg on Friday, while an anti-Nazi concert was targeted by the police in Moscow on Saturday.
Dozens of masked and camouflaged men stormed the Arctica music club in St. Petersburg soon after 8 p.m. on Friday, when the Moscow-based neopaganist folk metal band Arkona was 40 minutes into its show, switching off the equipment and turning on the lights in the concert room.
Around 400 fans, who paid 300-400 rubles ($8.40-$11.20) per ticket, were ordered to stand by the wall and then spent hours waiting as the officers interrogated them, taking the fingerprints of everybody present as well as photographing them, members of the public who were in the club at the time said.
Arkona is a popular group among Russian nationalists, although the band claims in interviews that it is not political. Although neo-Nazis have reportedly been seen at Arkona’s concerts, many in the crowd are often simply heavy-metal fans.
The policemen were interested in nationalist groups, according to Kirill Tsvetkov, a member of Eduard Limonov’s banned National-Bolshevik Party (NBP), who was interrogated and had his photo and fingerprints taken at Arctica on Friday. He said several police vehicles were parked near the venue from around 5 p.m.
“The concert started at 7.45 p.m., and at 8.25 p.m. a man — I don’t know whether he was an OMON officer or not — climbed onto the stage and stopped the concert, then the rest came in and made everybody stand against the walls,” Tsvetkov said.
The raiders did not explain their actions. “They just said, ‘Faces to the wall!’” he said. According to Tsvetkov, the agents divided the public into men and women, and dealt with the women first.
Tsvetkov said he was dealt with separately, because the officers recognized him as an NBP member. 
“An officer spoke to me separately for half an hour, did not learn anything new and that was it,” he said.
“Specifically, he asked what the organization was doing, about its structure, the things they usually ask.”
Although some reports speculated that the raid targeted youth subcultures in the wake of the murder of a young woman, who was described as a “goth,” last month, Tsvetkov said the officers expressed interest in nationalist groups when speaking to him on Friday.
“I asked him why they had come and what it was all for, and he said they had information that the [extreme nationalist organization] Slavic Union and skinheads could be there, so they were looking for them there,” Tsvetkov said.
Those present were detained for hours before being let go. “I got out of there at 11 p.m., but there were still some people in there, I was far from being the last.”
While in St. Petersburg the police were looking for nationalists on Friday, the Moscow police targeted an anti-Nazi concert, detaining around 40 activists after a show at the Bratislava club and taking them to the police station on Saturday, according to the web site Indymedia.org. The police only admitted 20 detainments, but said the reason was “disorderly conduct,” Gazeta.ru reported on Sunday.
St. Petersburg’s Interior Ministry Department (GUVD) denied media reports that the force that raided Arctica on Friday was the OMON special-task police. 
“We didn’t carry out an operation [in Arctica],” said Vyacheslav Stepchenko, spokesman for the GUVD, speaking by phone on Monday.
“OMON was not there,” Stepchenko said. “If there was physical back-up from some other unit there, it was not the GUVD. The other forces also have similar detachments.” 
The Federal Security Service (FSB) also denied its involvement, while Interfax news agency reported that the raid was carried out by the special-task detachment of the Northwest Department of the Interior Ministry (MVD). The MVD declined to comment when contacted on Monday.
“We can’t say what [the raid] was connected to, moreover, we can’t even say whether our men were there,” said the MVD’s press officer, Eduard Sholokhov.

TITLE: Experts Test Blood Stains in Search of Pushkin
AUTHOR: By Irina Titova
PUBLISHER: Special to The St. Petersburg Times
TEXT: Staff at the Pushkin Apartment Museum in St. Petersburg expect a historical sensation if a scientific analysis proves that the museum’s sofa is the one on which the famed 19th-century Russian poet and author died in 1837.
Alexander Pushkin died in St. Petersburg on Feb. 10, 1837, at the age of 37, as the result of a duel with the French-born Georges Dantes. Pushkin was shot in the stomach and died two days later at his home on the river Moika. 
The results of the preliminary tests have shown that the blood traces found on the sofa belonged to a man and were left many years ago, said Yury Molin, deputy head of the Leningrad Oblast Legal and Medical Analysis Bureau which carried out the analysis. The experts have also established that the blood belonged to either the second or fourth group, according to the Russian system. The results of the analysis were announced at a meeting held at the museum on Monday.
The legal and medical experts took 27 swabs from the sofa, including one blood sample, Molin said.
Molin said the other aim of the analysis was to establish whether or not the medical treatment given to Pushkin at his home was appropriate and whether he would have survived had he been taken to hospital. 
Molin said that in order to prove that the blood from the sofa belonged to Pushkin, they would need to test a blood sample from the waistcoat that he was wearing when he was wounded during the duel.  An analysis of this kind will take some time, Molin said, adding that fibers from the garment have already been taken for analysis. 
Until now, the museum’s experts have assumed that the traces of blood left on the sofa were those of Pushkin.  The provenance of the sofa is also a corroborating factor, said Galina Sedova, the museum’s curator.
The leather sofa has been on display in Pushkin’s study for over 70 years. Guides giving tours around the museum would invariably say that Pushkin died on it, though some of the museum’s staff have expressed doubts as to whether or not it was the actual sofa on which the poet passed away. 
The museum received the sofa from the State Hermitage Museum in 1937. Prior to that, it had belonged to the Filosofov family, who had received it as a gift from the wife of Pushkin’s youngest son, Grigory. 
Pushkin is considered to be one of Russia’s greatest poets, and something of a national hero. The author’s rich language, ingenious rhymes and liberal politics awed not only his contemporaries but following generations, too.  Pushkin’s epic poems such as “Yevgeny Onegin,” “The Bronze Horseman” and “Boris Godunov,” as well as his prose and poetic fairy tales, have become much-loved classics of Russian literature.
An eternal romantic, Pushkin was also known for having a number of love affairs, many of which inspired his striking love poetry. His wife Natalya Goncharova, with whom he had four children, was reputed to be one of the most beautiful young women in Moscow and had many admirers. Pushkin challenged Dantes to a duel after the latter’s attentions toward the poet’s wife became the subject of public rumor. The Frenchman was also wounded in the duel, but made a full recovery.

TITLE: Moscow Welcomes ‘Reset’ Of U.S. Ties
AUTHOR: By Nikolaus von Twickel
PUBLISHER: Staff Writer
TEXT: The administration of U.S. President Barack Obama has made a first crucial step toward breaking the ice between Washington and Moscow, winning carefully worded approval from the Russian government.
Vice President Joe Biden told an annual security conference in Munich this weekend that relations with Russia would be given a new start, signaling a break with the presidency of George W. Bush, which saw ties spiraling to post-Cold War lows.
“It is time to press the reset button and to revisit the many areas where we can and should be working together with Russia,” Biden said Saturday, according to a transcript published on the U.S. State Department’s web site.
Biden was speaking at the same conference where two years ago then-President Vladimir Putin harshly attacked Washington’s foreign policy. Putin’s “Munich speech” later became synonymous with the Kremlin’s growing assertiveness and troubled ties with the United States.
Deputy Prime Minister Sergei Ivanov said Sunday that Biden’s speech was very positive and that he most liked the comments about “restarting the button.”
But, asked at the conference whether Russia would also take a step toward breaking the ice, Ivanov said, “This is not an oriental bazaar, and we do not trade the way people do in a bazaar,” news agencies reported. He spoke after meeting Biden earlier in the day.
A Kremlin spokesman said Sunday that President Dmitry Medvedev would not comment on Biden’s speech.
While Biden reached out to Moscow in his highly anticipated speech, which provided the first outline of the new administration’s foreign policy, he did not offer any major concessions.
“We will not agree with Russia on everything. For example, the United States will not recognize Abkhazia and South Ossetia as independent states,” he said in reference to Georgia’s breakaway republics that Moscow recognized as independent after a five-day war last August. 
“But the United States and Russia can disagree and still work together where our interests coincide,” Biden said.
The vice president also did not back down on the most bitter dispute with Moscow: U.S. plans to deploy elements of a missile defense shield in Central Europe. Washington “will continue to develop missile defense to counter growing Iranian capability, provided that the technology is proven and that it is cost-effective,” he said. 
He did, however, say the United States would consult with its allies and Russia.
Obama has questioned the feasibility of the missile shield, which would be partially based in Poland and the Czech Republic.
Moscow has described the plans as a threat to its own security. The day after Obama was elected president, Medvedev announced that Russia would place Iskander missiles in Kaliningrad, near the Polish border.
Ivanov took a more conciliatory tone in his conference speech Friday, reiterating that Russia would not deploy its Iskanders if the United States rethought its missile plans. 
The election of a new U.S. president has led to a “window of opportunity,” Ivanov said. 
Speaking to reporters later, he said, “It is obvious that the new U.S. administration has a very strong desire to change, and that inspires optimism.” 
His comments were echoed by Konstantin Kosachyov, chairman of the State Duma’s International Relations Committee. Biden’s speech “was really a serious call to restart U.S. foreign policy including, clearly, Russian-American relations,” he said in televised comments.
Despite widespread expectations of Washington moving toward a softer path, Moscow continued to send mixed signals to the Obama administration as late as last week.
Washington expressed concern about new reports that Russia was stepping up preparations to open military bases in Abkhazia. And Kyrgyzstan announced that it would close a key U.S. air base, which Washington said was the result of pressure from Moscow. 
The Manas air base serves as a supply hub for U.S. military operations in Afghanistan.
Biden also struck a friendlier tone on Iran, stressing that Washington was willing to talk directly with Tehran over its nuclear program.
Ivanov said this would be welcomed by Moscow.
Alexei Malashenko, an analyst with the Carnegie Moscow Center, said that while Biden’s speech was a clear attempt to create a new atmosphere, not everyone in Moscow might be ready for this.
“There are hard-liners among the security services and the military who will continue to push a confrontational agenda and to lobby for higher budget spending in their sectors,” Malashenko said.

TITLE: Hiddink Hits Back At Zenit’s Dutch Manager
AUTHOR: By Gennady Fyodorov
PUBLISHER: Reuters
TEXT: BELEK, Turkey — Russia manager Guus Hiddink has hit back at Zenit St Petersburg coach Dick Advocaat for complaining about his club’s players being called up for a national team training camp.
Advocaat lashed out at his fellow Dutchman last month for naming six Zenit players for the Feb. 8-11 camp in Turkey, saying it would interfere with preparations for this month’s UEFA Cup last-32 tie with VfB Stuttgart.
Hiddink, however, saw it differently.
“We had a very successful camp here last year, using it as part of preparations for Euro 2008, so we decided to do it again,” he said in an interview at the Mediterranean resort.
“All the [club] coaches have known about it in advance as we planned it way back in November.
“He [Advocaat] was also a national team coach so he should know it’s always a give-and-take situation. You can never have it your own way, you must always find a compromise.”
Advocaat coached Netherlands before succeeding Hiddink at South Korea.
Most of the coaches from the leading Russian clubs have agreed to release their players, with only Advocaat publicly voicing his disapproval.
Advocaat said last month he should have been consulted before Hiddink called his players up.
“I don’t understand why we should release our players for a training camp as we have a very important game coming up,” Advocaat said.
On Saturday, Hiddink visited Zenit’s training camp, which is also in Belek. He did not see Advocaat, who went to Germany that day to watch Stuttgart in action in the Bundesliga.
“I had a nice chat with [Zenit’s Dutch assistant coach] Bert van Lingen,” Hiddink said. “We’re very good friends, we have known each other for over 40 years since the day we attended the same coaching school in Holland.”
Russian media suggested Hiddink had picked Saturday to avoid seeing Advocaat.
“No, not at all,” Hiddink replied. 
“We’re not friends, we don’t have to be friends, but it’s not true we don’t talk.
“Last week I sent him a text explaining everything. I didn’t talk to him because he doesn’t like to talk much on the phone.” 
Hiddink decided against calling up Tottenham Hotspur striker Roman Pavlyuchenko and new Arsenal forward Andrei Arshavin.
“Arshavin has just joined Arsenal, Pavlyuchenko is in his first season with Tottenham, so it wouldn’t be wise to bring them here just for a few days,” he said.

TITLE: Opposition Says the Problem is Putin
AUTHOR: By James Kilner
PUBLISHER: Reuters
TEXT: Opposition leaders accused Prime Minister Vladimir Putin on Friday of wasting billions of dollars in public funds and said he was the country’s main obstacle to coping with the global financial crisis.
At a news briefing largely ignored by state media, two former deputy ministers and former world chess champion Garry Kasparov said the government had lied about the country’s economic problems and laid out their alternative strategy.
“To begin with, we need the resignation of Vladimir Putin’s government, which in this crisis has demonstrated its complete helplessness and ridiculous incompetence,” the opposition movement Solidarity said in a statement.
Solidarity, an umbrella movement supported by anti-government liberals, includes former Deputy Prime Minister Boris Nemtsov, former Deputy Energy Minister Vladimir Milov and Kasparov, who hosted the briefing.
Two weekends ago, the opposition held a series of anti-government marches across the country that attracted a few thousand people — mainly old Communists and young radicals. On Saturday, Communists rallied in St. Petersburg to call on the government to protect workers during the financial crisis. They carried banners reading “Give Workers Worthy Wages,” “Put Government Money into Production” and “No Capitalism — No Crisis.”
The opposition expects a weakening economy to create more support for rallies and to undermine the government.
Since last summer, the ruble has dropped by about 35 percent and reserves have shrunk by 40 percent to about $385 billion because of state support of the ruble and the low price of oil.
“This is wrong,” Milov said. “We don’t want to waste the money on defending the ruble, which will devalue anyway. We want to give the money directly to the people to compensate for the negative consequences of ruble depreciation.”
Most Russians earn only a few hundred dollars a month, and the opposition said they wanted to direct the oil wealth to the poorest Russians — a section of society they need to woo.
“We want to use the reserves to help with the social consequences and not burn them at this stage” on defending the ruble, Milov said.
Putin and President Dmitry Medvedev remain popular despite the economic downturn, while support for opposition groups is low.
But Kasparov said it was just a matter of time until support for anti-government opposition gathered momentum.
“We debate among ourselves when the support will come, but there is no doubt it will happen,” he said.

TITLE: Nashi Activist Tells Of Snooping for Kremlin
AUTHOR: By Natalya Krainova
PUBLISHER: Staff Writer
TEXT: Undercover pro-Kremlin agents have worked in opposition groups across Russia to provide the presidential administration with information on opposition activists and rallies, a self-described handler said Thursday.
Anna Bukovskaya, a St. Petersburg activist with the pro-Kremlin Nashi youth group, said she coordinated a group of 30 young people who infiltrated branches of the banned National Bolshevik Party, Youth Yabloko and United Civil Front in Moscow, St. Petersburg, Voronezh and six other cities.
The agents informed Bukovskaya, who passed the information to senior Nashi official Dmitry Golubyatnikov, who in turn contacted “Surkov’s people” in the Kremlin, Bukovskaya told The St. Petersburg Times. Vladislav Surkov is President Dmitry Medvedev’s first deputy chief of staff.
The agents provided information on planned and past events together with pictures and personal information on activists and leaders, including their contact numbers, Bukovskaya said by telephone. 
They were paid 20,000 rubles ($550) per month, while she received 40,000 rubles per month, she said.
She said Nashi, which is believed to have been created by Surkov, had nothing to do with the project and speculated that Kremlin officials might be behind it.
Golubyatnikov, reached on his cell phone Thursday, asked a reporter to call him back. He did not answer repeated return calls. 
A Kremlin spokesman said he did not have time to comment on the claims and promised to call back. He did not call back and declined to comment in several subsequent phone calls, saying he was busy.
Mikhail Kulikov, a senior Nashi member, confirmed that Bukovskaya was one of the group’s “rank-and-file” activists but said the group had “nothing to do with her activities.”
“Nashi doesn’t get involved in such things,” he said.
Bukovskaya said she oversaw the 30 agents from January 2008 until Tuesday, when she told Youth Yabloko, which she joined six weeks ago, that she was being paid to monitor their activities and to handle people in other opposition groups.
Bukovskaya said she decided to quit “the dirty project” because she had become disillusioned with Nashi and sided with the opposition.
Opposition groups, “the people who really stand up for the rights of ordinary citizens, must know about this project,” Bukovskaya said.
She said she also handled people in Red Youth Vanguard, Oborona and Mikhail Kasyanov’s People’s Democratic Union.
Ilya Yashin, former leader of Youth Yabloko, said he feared for Bukovskaya’s safety in light of her claims. “She is in a dangerous situation,” Yashin said. “She mustn’t be left alone.”
Opposition leaders said informers could not cause any trouble because they had nothing to hide. They also said that it was next to impossible to prevent informers from penetrating their groups.

TITLE: Spokesman Denies ABBA Tribute Band Played for PM
PUBLISHER: Combined Reports
TEXT: Vladimir Putin’s spokesman has denied that the prime minister attended a private concert by an ABBA tribute band. 
But members of the Bjorn Again band gave plenty of details and said they recognized Putin at the Jan. 22 gig on the shores of Lake Valdai.
The revelations that Putin could be a closet ABBA fan run counter to his traditional strongman image. 
Putin spokesman Dmitry Peskov denied on Friday that Putin attended any such party on or around Jan. 22, adding, “Neither Mr. Putin nor his apparatus ordered any band of this kind.”
“I have no doubt that he likes some music of ABBA,” Peskov said. “But he simply wasn’t there.”
ABBA was one of the best-loved foreign bands during Soviet times, and the Swedish quartet even traveled to Moscow to perform in the Kremlin.
Bjorn Again member Aileen McLaughlin said the band traveled 320 kilometers north of Moscow to Lake Valdai to perform before an audience of eight people — Putin, an unidentified blond woman and six other men in tuxedoes. McLaughlin said the audience — comfortably seated on three sofas — appeared to enjoy the concert.
“They were clapping and swaying, and putting their fingers in the air, that kind of thing,” McLaughlin said. “He [Putin] had good rhythm. He was shouting ‘Bravo, Bravo!’ after the songs.”
A lace curtain separated the band from the elite audience for the hour-long, high-security show, but McLaughlin said at one point the spotlight flashed on the audience and band members saw Putin. McLaughlin described the lone woman as a blonde who was “wearing a long, cream, really pretty dress.” Putin’s wife, Lyudmila, has blond hair, but they are rarely seen together anymore.
The show was organized by Moscow-based agency SAV Entertainment, said Bjorn Again founder Rod Stephen. 
A woman at SAV Entertainment denied that the agency had anything to do with the event. “We are telling everyone that such a concert never took place. We are denying it,” she said, refusing to give her name.
Stephen told CNN: “I’ve had phone calls from the agency saying, ‘Don’t talk to anyone else. We are getting grief from the Kremlin.’ But there was no nondisclosure contract.” 
(AP, SPT)

TITLE: U.S. Army Supplies Allowed Through Russia
PUBLISHER: Combined Reports
TEXT: Foreign Minister Sergei Lavrov announced Friday that Russia would allow the United States to resume the shipment of nonlethal military supplies for Afghanistan across its territory, a vital link in an alternative route to Pakistani roads threatened by militant attacks.
The top national security official in Kyrgyzstan said, meanwhile, that the country would not reverse the decision to close an important U.S. air base, a move seen as influenced by Russia’s irritation with the U.S. military presence in Central Asia.
The overall message appeared to be that Russia is ready to help the United States on Afghanistan but only on its own terms.
Lavrov said in remarks broadcast by Vesti-24 television that Russia had agreed several days earlier with a U.S. request to allow transit of nonlethal supplies to Afghanistan, which first started in April but were suspended by NATO after Russia’s brief war with Georgia in August.
“We are now waiting for the American partners to provide a specific request with a quantity and description of cargo,” Lavrov said. “As soon as they do that, we will issue relevant permissions.”
U.S. Brigadier General James McConville praised the announcement, saying in Kabul on Sunday that the transit rights would make it harder for militants to attack the U.S. supply line.
Lavrov and other officials would not say whether the United States would be offered air or land transit corridors. But the transit routes are unlikely to make up for the loss of the Kyrgyz Manas air base, home to tanker planes that refuel warplanes flying over Afghanistan. Manas also supports airlifts and medical evacuation operations and houses troops heading into and out of Afghanistan.
Kyrgyzstan’s security council chief, Adakhan Madumarov, appeared to dash any U.S. hopes of securing a last-minute reprieve for the base, saying he was sure of winning parliamentary support for the move.
“The fate of the air base has been sealed,” he said.
Kyrgyzstan’s president announced the closure of Manas on a visit to Moscow last Tuesday, just hours after securing more than $2 billion in loans and aid from Russia. U.S. officials said the move came as a result of pressure from Moscow, but Russia and Kyrgyzstan denied that. 
Moscow, however, has sought to increase its influence in Central Asia — and lessen Washington’s — in recent years. At the same time, it does not want the chaos in Afghanistan to spread across the region if the United States and NATO fail there.
The Kremlin last year signed a framework deal with NATO for transit of nonlethal cargo for coalition forces in Afghanistan and has allowed some alliance members, including Germany, France and Spain, to move supplies across its territory.
Foreign Ministry spokesman Igor Lyakin-Frolov said Germany has been using air and land routes and France has so far only used air transit.
U.S. ground routes through Russia would likely cross into Kazakhstan and then Uzbekistan before entering northern Afghanistan.
The United States has reached a preliminary deal with Kazakhstan to use its territory, and officials have said they are considering resuming military cooperation with Uzbekistan, which neighbors Afghanistan.
That option is problematic for Washington: Uzbekistan kicked U.S. forces out of a base there after sharp U.S. criticism of the country’s human rights record and the government’s brutal quashing of a 2005 uprising.
Renewing those ties would also open the United States to new accusations that it is working with an authoritarian government that tortures its citizens. Uzbekistan has also in the past faced a low-level insurgency from Islamic radicals, though a government crackdown has quelled much of it.
U.S. officials have repeatedly said talks with Kyrgyzstan on the Manas base are still ongoing. U.S. State Department spokesman Gordon Duguid suggested Friday that Kyrgyz officials might be divided over whether to close the base. “They’ve not told us they reached a final decision,” Duguid said.
(AP, SPT)

TITLE: MiGs Still Grounded 2 Months After Crash
AUTHOR: By Vladimir Isachenkov
PUBLISHER: The Associated Press
TEXT: A significant part of the Russian Air Force fleet has been grounded for two months after a MiG fighter lost its tail on a training flight, and a report said Friday that at least a third of the nation’s fighter jets are unsafe and should be written off or repaired.
A MiG-29 crashed in southern Siberia on Dec. 5 during a training flight, killing its pilot. Another such plane had crashed in the same area in October.
Air Force spokesman Colonel Vladimir Drik said Friday that the entire MiG-29 fleet has remained grounded as a military panel has been looking into the cause of December’s crash, which occurred when a part of the jet’s tail section broke off. Drik said the ban on all MiG-29 flights will remain in place until the investigation ends.
The grounding of the MiG fleet will dent Russia’s pride, dealing a blow to the Kremlin’s effort to revive the military and project power worldwide. It will also hurt Russia’s efforts to increase arms sales.
The twin-engined MiG-29, codenamed Fulcrum by NATO, has been a mainstay of the Soviet and then Russian Air Force since the 1980s.
Drik would not say how many MiG-29 planes the Air Force now has, but Kommersant quoted an official who put the number at 291.
The number would represent nearly half of the entire fighter jet fleet of some 650, Kommersant said. The two other types of fighters in the inventory, the Su-27 and the MiG-31, also date from the 1980s.
Kommersant quoted a former Air Force chief, retired General Anatoly Kornukov, as saying Russia needed to mothball or start costly repairs of its entire fighter jet fleet.
The report said officials had determined that December’s crash was caused by corrosion, the reason for which remained unclear. It quoted a military industries official, whom it did not identify, as saying the reason is simply age and wear and tear.
The jets’ lifetime can only be extended after costly repairs, and the Air Force has failed to do that, the report said.
Drik refused to comment on whether the Air Force would refurbish the fighters and how fast it could happen. 
He said a decision on what to do with the MiG-29 fleet would be made after the probe into the crash is completed.
Despite a steady rise in defense spending during the past eight years, the military has modernized only a few dozen of Su-27s and MiG-31s. 
The prospects of upgrading the arsenals now look bleak after slumping oil prices have drained government coffers.
Kommersant said the Air Force had cleared about one-third of MiG-29s for flights after a detailed inspection of their condition, but Drik dismissed the claim, saying all planes of the type remain grounded.
The decline of military industries will likely make it difficult to modernize the jet fleet even if the government comes up with cash. Observers have said aging equipment, an exodus of qualified industrial personnel and lack of key components would make it difficult for the nation’s defense industries to meet weapons orders.

TITLE: Freed Ukrainian Cargo Ship Sails Away From Somalia
AUTHOR: By Malkhadir M. Muhumed
PUBLISHER: The Associated Press
TEXT: NAIROBI, Kenya — A Ukrainian cargo ship carrying tanks and other heavy weapons was sailing Sunday for Kenya with a U.S. military escort, leaving the Somali coast where pirates had held it for more than four months.
MV Faina was heading for the port of Mombasa under its own power, Vadim Alperin, the ship’s owner, said in a statement posted on a Russian maritime web site. It was being escorted by the guided missile destroyer USS Mason, and U.S. Navy commandos were on board the Faina to provide security, he said.
Commander Jane Campbell, a spokeswoman for the U.S. Navy’s Bahrain-based 5th Fleet, confirmed that the Navy was escorting the Faina, but gave no details.
The U.S. Navy has watched over the Faina since its Sept. 25 capture by Somali pirates to make sure its cargo of 33 tanks and weapons did not fall into the hands of Somali insurgents believed to be linked to al-Qaida. The Faina and its 20-member crew were freed Thursday after pirates received an airdropped ransom of $3.2 million.
The ship began moving late Friday after it received fuel from the USS Catawba and the crew got a diesel generator going, switched on navigation and other equipment and put the main engine in working order, the statement said. It said the Faina’s crew had been given a five-day supply of food and water, as well as fresh sheets.
“We are on the way. Faina is cruising to Mombasa,” Captain Viktor Nikolsky said via a satellite phone Saturday. 
He estimated that the trip would take three to four days.

TITLE: Georgia Accuses Russia of Flying 27 Fighter Jets to Air Base in Abkhazia
PUBLISHER: Combined Reports
TEXT: TBILISI, Georgia — Georgia’s foreign minister accused Russia on Friday of sending more than two dozen fighter jets to a base in the breakaway region of Abkhazia. Russian and Abkhaz officials denied the claim. 
Foreign Minister Grigol Vashadze said 27 jets are now at the former Soviet airfield at Gudauta, which he said was a flagrant violation of a 1999 treaty on conventional forces in Europe. Speaking to journalists in the parliament, he said the deployment was clearly aimed against Georgia.
But Garry Kupalba, deputy defense minister of Abkhazia, said there were no Russian jets at the Gudauta air base and that the base had not been used since 1993. The Abkhaz leadership was in discussions with Moscow about military cooperation, he said. “If a decision is made to establish an air base, we will announce it officially,” Kupalba said.
Russian Air Force spokesman Alexander Drobyshevsky said the Georgian comments were “irresponsible.” 
“No Russian military airplanes have been stationed either on the territory of Abkhazia or the territory of South Ossetia,” he said, Interfax reported.
In Washington, the State Department voiced concern about Russia’s plans, which it said included the establishment of a naval base at the port of Ochamchire and army bases in Abkhazia and South Ossetia, in addition to the possible deployment of combat aircraft.
Robert Wood, acting spokesman at the State Department, said the bases would “violate Georgia’s sovereignty and territorial integrity,” to which Russia committed itself in UN Security Council resolutions.
A NATO spokesman said Friday that NATO Secretary-General Jaap de Hoop Scheffer and Deputy Prime Minister Sergei Ivanov had “agreed to disagree” on Russia’s plans to establish the bases during a security conference in Munich.
(AP, Reuters)

TITLE: Annual Inflation Rate Reaches13.4%
PUBLISHER: Combined Reports
TEXT: Russia’s inflation rate rose in January for the first time in five months as the weakening ruble pushed up the cost of imports and planned tariff increases raised utility costs, the State Statistics Service said Thursday. 
The annual rate rose to 13.4 percent from 13.3 percent. Consumer prices rose 2.4 percent from December, when they advanced a monthly 0.7 percent.
Food prices gained 15.9 percent in the year through January, while the cost of services such as electricity and heat rose 16.9 percent. 
A number of retail chains said at a news conference Thursday that food prices would rise 25 percent to 45 percent by the end of the year.
“Prices will go up — and sharply,” Ilya Yakobson, vice president of retailer Dixy Group, said at an international food conference, Interfax reported.
Other representatives of the retail foods sector agreed, predicting a minimum of a 20 percent rise in prices. They cited the ruble devaluation, a glut of intermediaries and measures limiting sales of products from other regions.
Russia was forced to abandon its defense of the ruble after the price of oil, the government’s biggest export earner, tumbled more than two-thirds in less than six months. The ruble lost 35 percent against the dollar, the second-worst performing emerging-market currency behind the Polish zloty. Russia also allowed utilities to raise rates last month. 
Lev Khasis, chief executive of X5 Retail Group, which operates Pyatorochka, Perekryostok and Karusel, also warned that the country is seeing an increase in shoplifting. He said X5 stores detained a total of 250,000 people attempting to shoplift in 2008. 
(Bloomberg, SPT)

TITLE: Giant Rive Gauche  For Petrograd Side
AUTHOR: By Yelena Dombrova
PUBLISHER: Vedomosti
TEXT: The cosmetics chain Rive Gauche plans to open its biggest store yet in the middle of this month, covering an area of 1,417 square meters, part of which will be occupied by a beauty salon.
The store will be located at 55 Bolshoi Prospekt on the Petrograd Side. The first two stories will be given over to the shop and a bar, according to Olga Nikiforova, Rive Gauche’s advertizing manager. The third floor will house 10 cosmetic treatment rooms, though Nikiforova did not say exactly when they would open. 
From 1988 until 2008, the premises were occupied by the Elegant store, said a representative from Avot, the company responsible for glazing the building. 
Alexei Krivoshapko, director of Prosperity Capital Management, estimated the cost of renovating and furnishing such a store at $400 to $500 per square meter. Arina Sender, executive director of Alyance, estimated the rent at $45 to $50 per square meter per month.
Rive Gauche has 42 stores in St. Petersburg with an average retail area of 350 square meters. Two of them include treatment rooms. The city’s other leading cosmetics retailers, L’Etoile and Ile de Beaute, have 30 and 11 stores respectively. Representatives from Yedinaya Yevropa, which owns the Ile de Beaute chain, and from Alkor and Co., which owns L’Etoile, both declined to comment.
Demand for cosmetics is not decreasing, said Yevgeny Bogdanov, general director of Farmatsia, which manages the Novaya Apteka and Zdravnitsa pharmacy chains. According to Bogdanov, the mark-up on cosmetics is about 35 to 40 percent in pharmacies, and 50 to 60 percent in shops.  
Nikolai Pashkov, director of professional operations at Knight Frank St. Petersburg, said that the current financial crisis should not affect long-term planning strategies, since the cosmetics sector is more stable than that of clothing stores, for example. 
Alexei Kramarev, general director of Torgovye Resheniya consulting company, said that the combination of retail space and a beauty salon was a good one, especially since third floors are usually the most problematic in terms of attracting customers to them. 
The turnover of the St. Petersburg perfume and cosmetics market was about $1 billion in 2008, according to data from the Staraya Krepost group — 10 to 12 percent higher than the previous year. Natalya Zagvozdina, an analyst at Renaissance Capital, said that the profitability of cosmetics retail was no more than 6 to 7 percent. Beauty salons are more profitable, she said, but people may start nding less money in them during the crisis. The cosmetic services market is not yet fully formed, and new salons are opening and closing all the time, she said, adding that attracting loyal clients is difficult, and overheads are very high.

TITLE: Local GM Union Head Beaten Near Home
PUBLISHER: Combined Reports
TEXT: The union leader of General Motors’ auto factory in St. Petersburg was beaten by two unidentified men on Sunday, RIA Novosti reported, citing the official.
Yevgeny Ivanov was attacked at around 2.30 p.m. near his apartment in Kolpino, just outside the city, according to the state news agency, which cited him. 
“I was going to the shop,” said Ivanov. “When I left my apartment building, I was punched several times in the face. There were two of them — one held the door to the building open, the other was standing around the corner. I was taken by surprise and fell down, and while I was getting up, I heard them say, ‘Greetings from the trade union,’” he said, Fontanka.ru reported.
The local news portal reported that he intended to make a statement to the police about the incident in the near future. Ivanov, who became the union leader two months ago, had earlier reported receiving anonymous threats related to his union activities. The police looked into his statement, but did not open a criminal investigation, citing the lack of any crime, Fontanka reported.
The recently-formed trade union has announced that it plans to negotiate changes in the payment system for workers at the plant.
(Bloomberg, SPT)

TITLE: Bank Head Warns Traders Not to Count on Weak Ruble
AUTHOR: By Oksana Kobzeva
PUBLISHER: Reuters
TEXT: The Central Bank warned bankers on Friday against betting on any further ruble weakness, concluding a week when, for the first time in months, it did not have to intervene to support the currency.
The country has allowed the ruble to lose a quarter of its value versus a dollar/euro basket in three months, gradually adjusting to low oil prices and the worst economic outlook in a decade.
Two weeks ago, the Central Bank sought to put a floor under the ruble, vowing to stop it from weakening beyond 41 to the basket. But the battle forecast by market players has so far not materialized — the ruble has stayed within the band, only touching it briefly on Thursday.
Investors are growing increasingly convinced that the regulator means business, and Central Bank Chairman Sergei Ignatyev reinforced that message at an annual meeting with bankers in a hotel near Moscow on Friday.
“Forty-one rubles — that is serious and for a long time. And people who are counting on playing on devaluation will be disappointed. An appreciation of the ruble is not out of the question,” Ignatyev told some 300 bankers, according to one conference participant, who added, “Ignatyev was brimming with confidence.”
Keeping the ruble depreciation gradual has cost Russia one-third of its foreign exchange reserves, or some $200 billion, and prompted its first sovereign rating downgrades in a decade.
But the interventions gave companies and individuals time to convert their savings into foreign currency and helped to avoid public panic in a country that still remembers the 70 percent ruble collapse in 1998.
Dealers said they had seen no significant Central Bank intervention last week, yet the ruble held within the band, closing Friday at 40.86 to the basket.
The regulator had sold dollars each week since it began widening the ruble’s trading band three months ago. The one exception was a week in January when it sold rubles to meet demand from companies that had to pay taxes.
Now the Central Bank has other tools to try to support the ruble. By raising interest rates and reducing the amount of rubles it lends to the banking system, it hopes to prompt banks to convert their dollars and euros back into rubles.
“If necessary, [the Central Bank promised to] cut the amount of collateral-free loans for banks, to raise interest rates on them,” said another banker who attended the meeting, which was organized by an association of Russian regional banks.
“We think that this stabilization [of the ruble] might prove much more sustainable than previous support levels,” UniCredit said in a research note Friday. 
“The Central Bank seems to have started to limit liquidity injections into the market, which should eventually undermine the speculative run on the currency and provide support to the ruble,” the note said.

TITLE: In Brief
TEXT: <b>Ukraine Deficit Talks</b>
MOSCOW (Bloomberg) — Russia’s Finance Ministry said it held talks with Ukraine on lending $5 billion to help cover Ukraine’s budget deficit.
Ukraine hasn’t officially asked either the Russian Finance Ministry or the government for a loan, the Finance Ministry said in an emailed statement Monday. Ukrainian President Viktor Yushchenko didn’t authorize the talks, his spokeswoman said in a statement on the presidential web site on Monday.

<b>Rating Agencies Vetted</b>
MOSCOW (Bloomberg) — Russian Prime Minister Vladimir Putin said the Finance Ministry will now manage accreditation of Russian rating agencies, Interfax reported.
The government wants to increase the number of the local agencies that would assign credit ratings, while considering “the specifics of the Russian market,” Putin said at a government meeting in Moscow on Monday, according to the news service.

<b>Prices to Increase in Feb.</b>
MOSCOW (Bloomberg) — Russia’s Economy Ministry expects consumer prices to advance 1.4 percent to 1.6 percent in February, Interfax reported, citing an unidentified government official.
Under that forecast, the inflation rate for the first two months of the year would be 3.8 percent to 4 percent, according to the Moscow-based news service.

<b>No Profit for Adidas</b>
FRANKFURT (Bloomberg) — Adidas Chief Executive Officer Herbert Hainer said the declining value of the ruble will erase most of the sporting-goods manufacturer’s profit in Russia this year.
Currency fluctuations are the biggest risk for Adidas’s business in 2009, Hainer told Bloomberg Television on Sunday in an interview in Wiesbaden, Germany, citing Russia and Ukraine.LNG Export Prepared

<b>LNG Export Prepared</b>
MOSCOW (Bloomberg) — Gazprom will start loading Russia’s first export cargo of liquefied natural gas “at the end of March,” the Russian Energy Ministry said, citing company plans for the Sakhalin-2 project.
The development off Russia’s Pacific coast expects to pump more than 5 million metric tons of oil and produce almost 6 million tons of LNG this year, the ministry said in an emailed statement Monday. Plans presented to the government by operator Sakhalin Energy were approved on Saturday, the ministry said.

<b>VTB Rates Dixy ‘Buy’</b>
MOSCOW (Bloomberg) — Dixy Group, Russia’s third- largest publicly traded food retailer, was rated “buy” in new coverage by VTB Group on the grounds of the company’s “strong balance sheet, and competitive format.”
Dixy and Magnit, Russia’s second-largest food retailer, are “safe plays on a short-term horizon,” Maria Kolbina and Ivan Kusch, analysts at VTB in Moscow, wrote in a Feb. 6 report. They also have a “buy” rating on Magnit.

<b>Sberbank Price Cut</b>
MOSCOW (Bloomberg) — Sberbank, Russia’s biggest lender, may seek 300 billion rubles ($8.3 billion) in new equity this year, according to Citigroup Inc., which lowered its price estimate for the stock to 56 cents from $1.23.  
The brokerage cut its estimate for VTB Group, Russia’s second-biggest bank, to $1.08 from $1.68.

TITLE: Southern Gas Route Faces Delay
PUBLISHER: Bloomberg
TEXT: Gazprom plans to delay gas deliveries to Europe through its South Stream pipeline as it cuts investment, and the project may cost considerably more than previously announced.
The start date for shipments through South Stream, originally set for 2013, will be pushed back to the end of 2014 or 2015, according to a presentation to investors Friday in Moscow. Gazprom spokesman Sergei Kupriyanov couldn’t be reached for comment. 
The cost of the project may top 24 billion euros ($31 billion), Gazprom told investors. Energy Minister Sergei Shmatko said in July that the project might cost $20 billion. 
Gazprom may cut investments by 14 percent this year, according to the presentation. The gas producer said it would invest $29 billion this year, down from $33.6 billion in 2008. 
“Our takeaways were generally positive, including surprisingly large declines in expected capex outlays,” Alfa Bank wrote in a note after the presentation. “Gazprom is adapting to the new economic reality.” 
Gazprom’s budget is based on a Urals crude price of $50 per barrel. Other scenarios assume prices of $40, $30 and $25, the company said. 
Exports to Europe may fall 5 percent this year to 170 billion cubic meters from 179 bcm in 2008, it said, and the average price per 1,000 cubic meters will drop to $280 from a record of $409 last year.

TITLE: AvtoVAZ Sending Contradictory Messages
AUTHOR: By Maria Antonova
PUBLISHER: The St. Petersburg Times
TEXT: AvtoVAZ said in a statement late Friday that it was stopping its conveyors indefinitely, despite comments earlier in the day from the company’s president that supply problems would not force a halt to production.
“The conveyor was stopped on Thursday for an indeterminate amount of time because of nondelivery of auto components,” AvtoVAZ said in an e-mailed statement. Requests for clarification went unanswered.
The announcement appeared to directly contradict assurances made by AvtoVAZ President Boris Alyoshin, who told news agencies earlier Friday that production would continue as planned. 
“We’re a little behind schedule this week, but we will resume production on Monday,” Alyoshin told Interfax. He said the company was in talks with suppliers to resolve the matter.
Calls to official and independent union representatives went unanswered Sunday evening. 
AvtoVAZ, Russia’s largest carmaker, restarted its plant on Feb. 2 after a monthlong extension of the winter break, and it announced plans to produce 32,000 cars in February, a drop of 31 percent year on year. 
The company, which is one-quarter owned by French automaker Renault, began paying suppliers 70 percent of invoices in promissory notes in January, AvtoVAZ said in a statement last month, citing unfavorable economic conditions. Domestic sales fell by 6 percent in 2008 to 622,000 vehicles, and as many as 100,000 unsold cars piled up in storage late last year.
Although lower demand is a problem across the industry, AvtoVAZ is in a particularly difficult position because its flagship model, the Lada Classic, is no longer competitive, said Mikhail Lyamin, an automotive analyst with the Bank of Moscow.
“The situation on the market is such that nobody wants that scrap metal,” he said, referring to the Lada. “It is highly questionable whether demand will return to that segment of the market, even with the imposed government measures,” he said. 
In January, the government raised tariffs on used, foreign-made cars, with certain duties being hiked as high as 80 percent. Rallies have been held in Tolyatti, the hometown of AvtoVAZ, in support of the increases, which were protested in several other cities around the country.
Government officials met with domestic automakers in December and offered to increase state purchases, create a special leasing company to boost sales and provide 233 billion rubles ($6.4 billion) in direct financial support, loans and leasing arrangements.
Although AvtoVAZ has amassed at least 18 billion rubles in short-term debt to creditors and suppliers, the government is likely to come to the rescue, Lyamin said. 
“But the issue is not about rescuing the company, it’s about making sure the situation in the region is stable.”
AvtoVAZ is the main employer in Tolyatti, a city of just over 700,000 people in the Samara region. In January, the plant announced that it would lay off 400 employees.
The company’s workers protested the layoffs on Friday in front of the entrance to the plant, Interfax reported.

TITLE: Ministry Says Geology To Blame for Uralkali’s Flood
PUBLISHER: Bloomberg
TEXT: Geological circumstances were the main cause of a flood in 2006 at a potash mine owned by Uralkali that endangered a key rail link for exporters, the Natural Resources and Environment Ministry said Friday. 
“Geology was the main factor ... that caused the accident,” said Boris Krasnykh, deputy head of the country’s industrial-safety watchdog, an e-mailed statement from the ministry shows. He is heading the investigation into the accident’s cause. Some technical violations at the site occurred in the Soviet era, the statement said. 
An initial inquiry in 2006 found that the flood stemmed from natural causes. Deputy Prime Minister Igor Sechin reopened the probe in November without giving a reason. Damages of more than 3.1 billion rubles ($86 million) may be owed to the state and Russian Railways, Uralkali said Wednesday. 
The renewed investigation said that “if the subsoil user had been systematically conducting geological surveys, the abnormal structure of the water-resistant section in the area of the accident” might have been found earlier, Uralkali said last week, citing a state report. 
Aggregate costs linked with the flood will be determined within a month, Natural Resources and Environment Minister Yury Trutnev said Friday, Interfax reported. He also said only a court could decide how much Uralkali should pay, rather than the state. 
The ministry plans to draft a law that will enable the government to recover damages from subsoil users for mineral reserves left unusable because of accidents, Trutnev was cited as saying. 
A 2.5-kilometer railroad bypass around a sinkhole created after the mine flooded is unnecessary, the ministry said, and a 53-kilometer bypass will be built. Damages from the flood may be between 20 billion rubles ($550 million) and 104 billion rubles, Vedomosti reported Feb. 2.

TITLE: Russia, India to Ink Nuclear Fuel Deal
PUBLISHER: Bloomberg
TEXT: Russia will become the first supplier of nuclear fuel to India since a club of uranium producers lifted a three-decade ban on sales to the south Asian country. 
A unit of state nuclear corporation Rosatom will sign a contract with Indian atomic energy monopoly Nuclear Power Corporation on Wednesday in Mumbai to deliver 2,000 tons of uranium pellets, both companies said. 
India will pay $780 million for the fuel, Rosatom spokesman Sergei Novikov said Friday. “We’re very glad that a Russian company will be the first to supply India with low-enriched uranium after the Nuclear Suppliers Group canceled its restrictions,” Novikov said. 
The 45-member Nuclear Suppliers Group, founded after India detonated a nuclear device in 1974, ended its boycott of the country in September. 
India has since signed nuclear accords with the United States, France and Russia.

TITLE: New Market Regulations in Offing for Irate Traders
AUTHOR: By Courtney Weaver and Jessica Bachman
PUBLISHER: The St. Petersburg Times
TEXT: Since September, Moscow traders have had to put up with 30 trading freezes on the MICEX and have watched the exchange lose 52 percent of its value, while the RTS has fallen by 69 percent.
Now they’ve just about had enough.
One trader from Troika Dialog stood up at a panel on market regulation last week at the investment bank’s annual Russia Forum and demanded changes from the CEOs of both Russian exchanges: MICEX’s Alexei Rybnikov and RTS’s Roman Goryunov.
The trader rattled off a laundry list of grievances, including poor transparency, the extended trading hours and seemingly erratic market closures.
“You guys get all the bad rap because you didn’t get in front of the market,” he said. “You need to get in front of the press. You need to say: ‘This is why we’re closing the market. This is what we’re going to do.’”
Speaking after the conference, Rybnikov acknowledged that this was not the first time he had heard complaints. “We are, and we have to be, in very direct and constant contact with the biggest brokers. We think we pretty much understand their concerns,” he said.
The Federal Service for Financial Markets introduced a new set of regulations for the exchanges to follow that will go into effect on March 1. The revised regulations will formalize rules on trading halts and widen the corridors for market suspensions.
Currently, MICEX trading is suspended until the next day if a share price falls more than 10 percent. Under the new rules, it will take a 15 percent deviation to stop trading for an hour and a change of 25 percent to halt trading until the end of the day. “It’s huge progress,” Rybnikov said.
“People will have absolute transparency as to when and how market holds are being applied. People will have predictability. This is a transparent legal act that has been approved by the regulator and registered with the Justice Ministry so everyone knows exactly how it operates,” he said.
The changes are arriving at a time when MICEX is facing increased competition from London, Rybnikov said. 
East Capital Asset Management, for example, has been forced to begin trading more in London because of the irregularities on the Russian exchanges, the fund’s director, Peter Elam Hakansson, said at the conference.
In addition to rules on delistings and trading suspensions, MICEX is creating a trading platform for private equity placements in response to the drop-off in Russian initial public offerings, Rybnikov said.
The platform is meant to be an investment tool for funds and a capital-raising vehicle for issuers for whom Russia’s stock market drop-off ruined all chances of an IPO.
“We are offering this platform because there is still a huge demand for IPO among issuers and they can’t raise capital through exchange placements,” Rybnikov said. 
The new rules also call for regulations in bond trading, requiring issuers to delist in case of default, as well as overseeing their use in repo operations.
Using repos, or repurchase agreements, financial institutions use bonds as collateral to borrow short-term money at a fixed rate. Securities are transferred to the lender if the borrower does not manage repayment.
Presently, there is no formal method for regulating conflicts in the event of a default on the bonds used as collateral. The new rules would make it easier for the side holding the bond as collateral to price the security and sell it.
Pavel Pikulev, a fixed-income analyst at Trust National Bank in Moscow, said the rules would “prevent future chain defaults on the repo market.
“When the market was liquid and the borrower defaulted, you could sell the bonds and get your money back. But in the fall, there were no buyers for the bonds so then these lenders defaulted on their obligations as well and the domino effect took off,” Pikulev said.

TITLE: Reaction to Crisis Poses Threat to Competition
AUTHOR: Alex Nicholson and Lucian Kim
PUBLISHER: Bloomberg
TEXT: Russia’s reaction to the world economic crisis threatens to increase state control over the economy and reduce national competitiveness, according to a research institute close to President Dmitry Medvedev.
 “Ballooning state involvement in the economy, the propping up of ineffective businesses and the atrophy of market institutions present major risks both now and in the future,” Igor Yurgens, head of the Moscow-based Institute of Contemporary Development, said at a presentation on Monday.
The “fundamental balance” between government and business may be harmed if state ownership of companies’ stock rises another 10 percentage points from the 45 percent held at the end of 2008, according to a 73-page report published by the institute.
Prime Minister Vladimir Putin said in December the state may buy stakes in key companies on “a large scale” to help them survive the crisis. The government has set aside $50 billion to help businesses pay foreign borrowings in exchange for putting up part of their stock as collateral.
Yurgens rejected suggestions by the country’s leadership that the domestic situation was caused by problems in western economies. Russia is facing a “systemic crisis” resulting from structural weaknesses particular to its economy and financial system, he said.
The state will only find a way out of the crisis with a “full-fledged” dialogue with society, including civil groups, Yurgens said.
New import duties on cars and trucks, which sparked demonstrations in cities across Siberia and the Russian Far East, are typical of protectionist measures “popular in many ministerial offices,” the report said.
The tariffs were “categorically misdirected,” supporting an outmoded industry and running counter to a declaration signed by Russia at November’s G-20 summit in Washington opposing protectionism, the authors said.
The Institute of Contemporary Development was founded last year on the initiative of Medvedev, who was elected president in March. He is the chairman of the institute’s board of trustees.

TITLE: Crisis to Boost Tea Imports
PUBLISHER: Reuters
TEXT: Russia, the world’s largest tea importer, will increase purchases by up to 5 percent this year as consumers shun more expensive beverages to better cope with the economic slowdown, an industry lobby group said on Monday.
Rusteacoffee head Ramaz Chanturiya said he expected Russia, which relies largely on imports to quench its traditional thirst for tea, would raise purchases to between 185,000 tons and 187,000 tons this year from 178,000 tons in 2008.
“The financial crisis will shift demand to traditional tea from juices, energy and other fashionable and expensive drinks,” Chanturiya told reporters on the sidelines of the Moscow International Tea Symposium.

TITLE: Kremlin Aide Dvorkovich Sees Toxic Assets Program
AUTHOR: By Nadia Popova
PUBLISHER: Staff Writer
TEXT: State-run banks may co-manage toxic assets they get from borrowers who default on loans, the Kremlin’s top economic aide, Arkady Dvorkovich, said in an interview Friday.
Dvorkovich also said the government might cover this year’s budget deficit with bonds worth “a few hundred billion rubles” and suggested that Russia would recover from the crisis earlier than other countries.
“I think it would be reasonable for state banks to cooperate in managing their problem assets,” Dvorkovich told The St. Petersburg Times. “It would be a good way to cut expenses. And they won’t necessarily have to merge the assets for that.” 
Dvorkovich said he was referring to noncore assets that state-controlled banks held as collateral for defaulted loans or those that they already had on their books.
Dvorkovich said he knew that VTB and Sberbank are exchanging information about how they manage their noncore assets, “trying to work in a coordinated manner on the same problems.” 
VTB would not comment Friday on the discussions or the idea of co-managing problem assets, and it declined to disclose its noncore assets.
Sberbank did not respond to requests for comment.
Yevgeny Nadorshin, chief economist at Trust National Bank, expressed skepticism about the idea of lumping together noncore assets. “What would managing an oil well and a restaurant have in common?” Nadorshin said. “A government collection of assets from banks in return for more financial support would be a more reasonable [solution] because the state has assets to which the toxic ones could be added.”
Dvorkovich said the state might consolidate problem assets. “So far, no one in the world has managed to consolidate and successfully manage such assets,” he said. “But we do not rule out that way completely.”
Separately, Dvorkovich said in the interview that the government might issue bonds for a few hundred billion rubles — part of which might be borrowed in dollars — to cover the budget deficit this year. 
“We can fully cover the deficit with the Reserve Fund money,” Dvorkovich said, speaking in his parquet-floored office on Staraya Ploshchad, which was occupied by Soviet leader Leonid Brezhnev in the 1960s. “But we don’t rule out issuing state bonds for a few hundred billion rubles because we understand that the crisis may continue beyond 2009.” 
Dvorkovich said earlier in the week that the 2009 deficit would exceed 6 percent of the country’s gross domestic product, or 2.5 trillion rubles ($69 billion). It will be the first budget shortfall in a decade after commodity prices crashed, with oil dropping by 70 percent since a July peak of $143 a barrel. 
Dvorkovich said the state might issue some bonds in dollars. “We know that those who have dollars today are dreaming about investing them in state bonds,” he said. 
Nadorshin, of Trust, said the government would probably try to raise as much as possible through bonds and plug the rest of the deficit from the five trillion ruble Reserve Fund.
Budget spending will remain at the previously planned level of 9.024 trillion rubles, but the structure of the spending will change, Dvorkovich said. 
“We will prioritize some of our projects, mainly social and infrastructure ones, while we may delay some others,” he said. “The Finance Ministry, for instance, has proposed cutting around 15 percent of some of the government’s expenses, partly administrative costs.” 
The government is now revising the budget it adopted last year, which was calculated at $95-per-barrel oil, to assume an average price of $41.
Dvorkovich said Sberbank would soon get at least 400 billion rubles as an injection to its capital. 
On Thursday, the government approved a new package of up to 500 billion rubles ($14 billion) for VTB, the country’s second-biggest lender; Vneshekonombank, which is overseeing the state’s bailout program; and private banks.
Dvorkovich said the government would not take a big stake in the private sector because it does not want it and would face a fight from investors.
“The state’s taking a significant stake in the private sector is highly unlikely,” he said. “Businessmen in Russia do not give away their assets easily. It was too hard for them to get hold of their companies.”
He added: “The government does not actually want to bear the full responsibility for all those problem assets.”
As the ruble settles near the bottom of its trading band at 41 against a dollar/euro basket, Dvorkovich said, market players will stop the flood of currency transactions that have earned them millions of dollars as the ruble was gradually devalued over the past three months. 
“A new phase for the economy is beginning now because exporting is profitable and the currency markets are more stable,” he said. 
The government expects the revival of some industries in the second quarter as programs jointly funded by the state and private investors to build infrastructure and homes are implemented. “For instance, metals producers will be provided with contracts through this. In this way, we want to revitalize the whole chain,” Dvorkovich said. 
A decision on the biggest current business project in Russia — the possible merger of Metalloinvest, Norilsk Nickel, Raspadskaya, Russneft and Uralkali — will be made soon, Dvorkovich said. 
RusAl chief executive Oleg Deripaska and Norilsk Nickel major shareholder Vladimir Potanin have suggested creating a conglomerate of at least five companies producing nickel, iron ore, coal, oil and potash. Metalloinvest chairman Alisher Usmanov wants to merge his company with Norilsk.
The state has been offered a 25 percent stake in either merger if it helps cover or refinance the participants’ multibillion-dollar debts. 
“The opinions of the shareholders of the companies involved differ,” Dvorkovich said. “And I’m afraid they won’t agree on anything without us.
“We understand that it would be unfair to cover private companies’ debts with the money of Russian taxpayers,” he said. “But if we do not help those companies, thousands of their workers will be put in danger.”
The official unemployment rate is expected to reach 7.5 percent this year. Programs to retrain and relocate workers are expected to begin across the country by late March, Dvorkovich said. 
Some workers who are moved to other cities or regions may take up jobs in infrastructure and housing construction, which would help Russia get out of the crisis quicker than other countries, Dvorkovich said.
“Stabilization on the low level may take place as early as in the second part of the year,” said Dvorkovich, 36, who holds a master’s degree in economics from Duke University in North Carolina. “The anti-crisis projects — mainly infrastructure and housing construction — will help the Russian economy get out of the crisis a bit earlier than other world economies.” 
As enthusiasm for buying dollars fades, sky-high interest rates on loans will go down soon, Dvorkovich said. 
“We understand that taking out loans at current interest rates is dangerous,” he said. “The interest rates may fall very soon. It will certainly happen in the first half of the year.”
He said the timing of the drop in rates depended on expectations for both the inflation and ruble exchange rates. “The Central Bank is obliged to keep [lending] rates high to curb pressure on the national currency,” Dvorkovich said. 
Looking back at the more than one-third of Forex reserves that the Central Bank has spent since November on gradually devaluing the ruble, Dvorkovich said the government did not initially expect the cost to be so high. 
“Spending that amount of reserves to avoid a sharp fall of the ruble was the reasonable cost of financial stability, which we were paying consciously,” Dvorkovich said. “But we didn’t initially expect it would be that high.”
Russia spent more than $200 billion of its reserves, the world’s third largest, as the Central Bank softened the ruble’s fall. The ruble has lost 26 percent of its value since the Central Bank started to widen its trading band Nov. 11. 
Now that the currency risks are gone, Dvorkovich said, it is safe to invest in Russia. 
“The price of assets has plummeted, while the main financial risks are substantially lower,” Dvorkovich said. “It is a very good time to invest in the Russian economy.”
BNP Paribas has estimated that foreign and local investors have withdrawn $290 billion from Russia since August, including through bets on the ruble’s devaluation. 
“The question is whether some of the foreign investors want to go through this uneasy time with us,” Dvorkovich said. “I think those who are more far-sighted will do it and will invest in our assets. Those who are still cautious about the financial risks and get in later are likely to earn less.” 
As for political risks, which worried investors after Prime Minister Vladimir Putin harshly criticized the metals and mining company Mechel in July and Russia fought a brief war with Georgia in August, Dvorkovich said they should not be a problem.
“There are no political risks for foreign investors in Russia,” he said. 
Asked why the Russian stock market and economy have performed worse than those in other emerging markets, Dvorkovich acknowledged that not every policy had been ideal. 
“We haven’t managed to diversify sufficiently from our dependency on commodities exports. We haven’t had enough time for that,” he said. “We haven’t managed to build a financial system strong enough to become independent of foreign financial resources, and that is why we are going through all these problems now.
“But it all doesn’t mean that we are worse than the others,” Dvorkovich said. “We just still have a lot of work to do.”

TITLE: Russia’s Silver Bullet for Afghanistan
AUTHOR: By Mikhail Margelov
TEXT: During his election campaign, U.S. President Barack Obama promised to shift the focus of his Middle East policy from Iraq to Afghanistan. There is a good reason for this. Operation Enduring Freedom, the official name for the U.S. contribution to the campaign against terrorism in Afghanistan, brought a quick military victory in that country, but it failed to establish lasting peace. The war drags on as the Taliban continues to control a sizable portion of Afghanistan. Moreover, the Taliban has strong support networks in Pakistan, whose government is unable to control the extremist groups operating in the country. 
The Iraq debacle has shown once again that democracy cannot be spread by military force. Of course, Russia would like to see a peaceful and democratic Afghanistan. In fact, Moscow has supported the U.S. doctrine of a “Middle East Helsinki” — that is, the spreading of democracy in the greater Middle East — and the post-Sept. 11 NATO operations against the Taliban. 
Therefore, Moscow and Washington do not have any serious disagreements over Afghanistan. Russia’s leadership is hopeful that with a new U.S. administration, both countries will find new ways of working together to achieve shared goals — all the more since U.S. officials have stated repeatedly that Russia is a key component of the U.S. strategy in Afghanistan.
And that strategy includes sending an additional 30,000 U.S. troops to Afghanistan over the next two years. One of the problems, according to NATO’s leadership, is that European allies are not carrying their share of the military burden in Afghanistan. Although this issue will be discussed at a NATO summit in April, Europe’s small contingent in Afghanistan continues to be a sore point for NATO Secretary-General Jaap de Hoop Scheffer, who singled out Germany and France at the Munich security conference over the weekend. “When the United States asks for a serious partner, it does not want advice. It wants and deserves someone to share the heavy lifting,” de Hoop Scheffer said.
The other crucial issue for the United States is how to transport military and civilian freight into Afghanistan. Pakistan cannot guarantee safe passage through its border areas in the Kandahar region and the Khyber Pass. Only two other routes are available. One route would go through Georgia, Azerbaijan and Uzbekistan. The other route would go through Russia, which makes Russian cooperation crucial to Washington’s and NATO’s success in Operation Enduring Freedom. 
Foreign Minister Sergei Lavrov announced Friday that Moscow and Washington had reached an agreement on reinstating transit routes through Russia of U.S. nonlethal military freight intended for Afghanistan. The transit agreement between Russia and NATO was actually signed last April, and Moscow never closed this corridor. It was NATO that temporarily froze relations with Moscow after the Russia-Georgia conflict in August. In any event, the reinstatement of U.S. and NATO nonmilitary shipments through Russia is one of the most positive developments in U.S.-Russian relations that we have seen in years.
The question remains open, however, about whether Moscow will ever agree to allow the transportation of U.S. and NATO military freight through Russia. If Washington puts this on the negotiation table, Russia’s leaders will surely ask what they can get in return. The issue of NATO membership for Ukraine and Georgia will probably take a back seat in those talks, but an agreement from Washington to withdraw support for a missile defense system in Central Europe may be the very thing that closes the deal.
Nonetheless, Russia’s “Afghanistan complex” will surely make the negotiating process more difficult. Russia has no desire to enter into direct military conflict with anyone in Afghanistan. As for the strengthening of Kabul’s military potential, most defense experts agree that the emphasis will be placed on military-technical cooperation and the training of Afghan military and police forces. 
Russia has very mixed feelings about a greater U.S. military presence in Central Asia. On the one hand, Moscow would like to see the chaos end in Afghanistan and a peaceful regime established. In that respect, a victory over the Taliban is truly in Russia’s best interests. 
On the other hand, the United States’ and NATO’s predominate influence in that region will infringe upon Russia’s interests there, including its influence among the former Soviet republics. This is why Russia suggests expanding the circle of countries involved in finding a peaceful settlement of the Afghanistan conflict — above all by inviting nations from the Shanghai Cooperation Organization to participate in the peaceful settlement of the Afghanistan conflict. After all, wider cooperation opens up greater possibilities for compromise. 

Mikhail Margelov is chairman of the International Affairs Committee in the Federation Council.

TITLE: The Battle for the Great Bear
AUTHOR: By Richard Lourie
TEXT: Russia is pursuing its strategy of “energy equals power” on three fronts: Europe, Central Asia and the Arctic Circle. The first two are closely linked. Wishing to maintain European dependence on Russian gas, Moscow seeks to control the sources — for example, by signing exclusive deals with Uzbekistan and Turkmenistan for gas supplies. Europe and Russia both agree that diversity is a good idea, except that Europe wants diversity of sources whereas Russia only wants diversity of pipelines. The main pipeline not under Russian control, the BTC pipeline that runs from Azerbaijan through Georgia to Turkey, was shown to be vulnerable during the Russia-Georgia clash in August. Russia’s plans to establish military bases in the breakaway republics of South Ossetia and Abkhazia will only make that region seem increasingly unreliable.
Russia is also looking north. In 2009, Moscow must file its claim to the United Nations Convention on the Law of the Sea demonstrating that its continental shelf extends far beyond the 322 nautical kilometer zone to encompass most of the Arctic Circle and its immense oil, gas and mineral wealth now made more accessible by global warming. Russia has threatened to withdraw from the treaty if its claims are not recognized. The rhetoric has been heated: “We will not surrender the Arctic to anyone,” declared State Duma Deputy Artur Chilingarov, who led the 2007 expedition that placed a titanium Russian flag on the ocean floor under the North Pole at a depth of nearly 4,267 meters. The Kremlin has openly stated its intention to make the Arctic into a main strategic resource base in the 21st century. In 2004, the state security services created an Arctic directorate and established border guard stations in the area. In late January, NATO Secretary General Jaap de Hoop Scheffer called for a NATO “military presence” in the Arctic. Russia’s Security Council has said that in the resolution of the Arctic’s many problems “military force is not out of the question.” 
But military clashes may not be the real problem either. Drilling for oil and gas and mining for gold and diamonds in the Arctic — and transporting these goods through the Northwest Passage — pose other threats. Thirteen nuclear reactors from Russian submarines and decades worth of nuclear waste have been dumped in these waters. In the Soviet era, 138 nuclear tests took place in the Arctic region. The environmental organization Bellona warns that “when the drill bits hit the ocean floor, there is the danger of disinterring a vast portion of the Soviet Union’s irresponsible nuclear legacy.”
In Greek, Arctic means “Great Bear.” Russia has already staked its claim on the great bear on and under the Arctic ice. Though its tactics can sometimes be objectionable, Russia at least has an energy strategy. 
Factories shut down and more than a dozen Europeans froze to death as a result of the Russia-Ukraine gas war in January. The United States and NATO may not recognize a Russian sphere of interest in Central Asia, but they will discover how real it is when they begin moving supplies to Afghanistan through alternate routes across Uzbekistan and other countries. As an Arctic country, the United States needs to ratify the Law of the Sea (it is the only one of the five countries that hasn’t done so). But what it really needs is an energy policy as comprehensive as Russia’s. So far, U.S. energy independence rhetoric has soared with the price of gas, and it has fallen with it. The United States should be grateful to Russia for a challenge that makes it get real. 

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

TITLE: Giggs Puts Man U
On Top
PUBLISHER: Agence France Presse
TEXT: LONDON – Manchester United hammered out a statement of intent to their title rivals as the champions returned to the top of the Premier League with a 1-0 win at West Ham on Sunday.
Sir Alex Ferguson’s side had arrived in east London in second place after Liverpool’s late 3-2 fightback at Portsmouth 24 hours earlier.
But United showed they have no intention of relinquishing their crown as Ryan Giggs’ second half goal sent them two points clear of Rafael Benitez’s second placed side.
By the time Liverpool are next in action that lead will have extended to five points if United win their game in hand against Fulham on February 18.
The Old Trafford outfit are beginning to have the look of champions again and this was the kind of obdurate display that has become their hallmark this season.
United’s defensive excellence in recent weeks has reached record-breaking levels and they chalked up another milestone en route to a 13th consecutive cleansheet and an eighth successive win.

TITLE: Captain Describes ‘Thud’ As Birds Hit
PUBLISHER: The Associated Press
TEXT: NEW YORK — The pilot who ditched his plane in the Hudson River and saved the lives of everyone on board said he had a “sickening” feeling when a flock of birds disabled both engines with violent thuds, crippling the plane at 3,000 feet over the nation’s most populous city.
Captain Chesley “Sully” Sullenberger said in an interview with CBS’ “60 Minutes” that the sound of the geese hitting the plane and the smell of burning poultry entering the cabin was “shocking.”
“Oh, you could hear them,” he said. “Loud thumps. It felt like the airplane being pelted by heavy rain or hail. It sounded like the worst thunderstorm I’d ever heard growing up in Texas.”
The interview with Sullenberger and the other four crew members was broadcast Sunday, their first since US Airways Flight 1549 landed in the frigid water Jan. 15.
Sullenberger took control of the plane from his first officer and glided it to safety, but said that in the aftermath of the emergency landing, he lay awake at night second-guessing his performance, even though all 155 people aboard survived.
He said he initially had trouble forgiving himself because he thought he could have done something different in that “critical situation.”
“The first few nights were the worst,” Sullenberger said. “When the ‘what ifs’ started.”
He said he no longer regrets his actions that day, calling his decision to land in the river “the only viable alternative” to attempting a return to LaGuardia Airport or landing at Teterboro Airport in New Jersey.
“The only level, smooth place sufficiently large to land an airliner was the river,” he said, recalling that the plane had no thrust and was “descending rapidly.”
Sullenberger, a former Air Force fighter pilot who has flown commercial planes for nearly three decades, said he knew he had to touch down with the wings level and the nose slightly up, and “at a descent rate that was survivable.”
“Did you, at any point, pray?” CBS’ Katie Couric asked.
“I would imagine somebody in back was taking care of that for me while I was flying the airplane,” he said.
The flight attendants said they didn’t know they were landing in the water until it happened.
“When I got out of my seat and saw that water, it was the most shocked I’ve ever been in my life,” flight attendant Doreen Welsh said, adding that her emotions “had gone through, within seconds, accepting death and seeing life.”
She said she then “went crazy” and started yelling and pushing people to get them out because the impact tore a hole in the plane’s tail and water poured into the cabin.
“And as I was getting up, I thought I might actually live,” Welsh said. “  ’Cause a second ago, I thought I was gone.”
Sullenberger landed the plane near two ferry terminals, and rescue boats appeared within minutes to take the 150 passengers and five crew members to safety.
When the pilot got official confirmation that everyone had survived, “I felt like the weight of the universe had been lifted off my heart,” he said.

TITLE: Russians Swamp Chinese at Federation Cup
PUBLISHER: Agence France Presse
TEXT: Defending champions Russia wrapped up a 5-0 thrashing of China to book a Fed Cup semi-final against Italy in a repeat of the 2007 final after the Italians dispatched France in Orleans.
The Russians have dominated the tournament in recent years and on current form look set for their fifth title in the past six years after Anna Chakvetadze motored past Yan Zi 6-1, 6-2 for the decisive third point before debutant teen Alisa Kleibanova crushed Tian-Tian Sun 6-1, 6-1.
Star pair Elena Dementieva, the Beijing Olympic champion, and Svetlana Kuznetsova completed the whitewash with a 1-6, 6-4, 6-4 doubles success over Yan Zi and Tian-Tian Sun.
The Chinese effort was hampered by the absence of their number one player Zheng Jie due to a wrist injury she suffered in the Australian Open.
In her absence, qualification against Shamil Tarpishchev’s host nation, boasting five players in the world’s top 10 comprised mission impossible.
Chinese skipper Zhang Qi strove to lift a depleted squad missing the injured Zheng as well as Li Na, but was unable to prevent Russia repeating their 5-0 romp in the countries’ only previous meeting in 2002.
Italy reached their third semi-final in four years after Flavia Pennetta obliterated Alize Cornet 6-2, 6-2.
France, champions in 2003, slumped to their third opening round loss since 2005 after Pennetta saw off former Wimbledon and Australian Open champion Amelie Mauresmo on Saturday in a bad-tempered three-setter.
Pennetta won 2-6, 7-6 (9/7), 6-4, but only after hurling insults at the umpire over a line call that went against her.
The Italians, who completed a 5-0 win over France, will host Russia on April 25-26.
The Czech Republic also moved into the semis for the first time in 12 years after beating fellow five-time champions Spain 4-1.
Petra Kvitova saw off Nuria Llagostera 6-4, 7-5 and Lucie Safarova moved past Carla Suarez 6-4, 6-3 after the teams had ended the first day all square.
The Czechs can now look forward to a home encounter with the United States, who defeated Argentina 3-2.
“I am certainly no hero, this is a team contest and each of us has her share in the success,” said teenager Kvitova.
The U.S., playing without the superstar Williams sisters, also got a key contribution from a teenager, as 17-year-old Melanie Oudin shrugged off a 30-minute rain delay and rallied from a set down to defeat Argentina’s Betina Jozami 2-6, 6-1, 6-2 and force a deciding doubles match in Surprise, Arizona.
Slovakia, Germany and Ukraine also won their World Group II ties.

TITLE: Aussie PM: Fire Zone May Be Crime Scene
AUTHOR: By Tanalee Smith
PUBLISHER: The Associated Press
TEXT: WHITTLESEA, Australia — Police declared incinerated towns crime scenes Monday, and Australia’s prime minister spoke of mass murder after investigators said arsonists may have set some of the country’s worst wildfires in history. The death toll rose to 135.
The scale of the carnage, growing daily, has shocked a nation that endures deadly firestorms every few years. There were no quick answers, but officials said panic and the freight-train speed of the firefront probably accounted for the unusually high toll.
Prime Minister Kevin Rudd, visibly upset during a television interview, reflected the country’s disgust at the idea that arsonists may have set some of the 400 fires that devastated Victoria state, or helped them jump containment lines.
“What do you say about anyone like that?” Rudd said. “There’s no words to describe it, other than it’s mass murder.”
The country’s top law officer, Attorney General Robert McClelland, said that people found to have deliberately set fires could face murder charges. Murder can carry a life sentence.
More than one dozen fires still burned uncontrollably across the state, though conditions were much cooler than on Saturday, which saw record-high heat and winds of up to 60 km/h.
At least 750 homes were destroyed on Saturday, the Victoria Country Fire Service said. Some 2,200 square kilometers of land were burned out.
Officials said both the tolls of human life and property would almost certainly rise as they reached deeper into the disaster zone, and forecasters said temperatures would rise again later in the week, posing a risk of further flare-ups.
Police updated the death toll late Monday to 135.
In a sign of the nationwide impact of the tragedy, Parliament suspended its normal sessions Monday to hear condolence speeches by legislators. The voices of many quavered with emotion. Some called it Australia’s worst peacetime disaster.
Victoria Police Commissioner Christine Nixon said investigators had strong suspicions that at least one of the deadly blazes — known as the Churchill fire after a ruined town — was deliberately set. And it could not be ruled out for other fires. She cautioned against jumping to conclusions.
Police sealed off Maryville, a town destroyed by another fire, with checkpoints, telling residents who fled and news crews they could not enter because there were still bodies in the streets. Armed police moved through the shattered landscape taking notes, pool news photographs showed.
While Australia grapples with wildfires every year, deaths are rare — and unheard of in this number. The country’s deadliest fires before the current spate killed 75 people in 1983. In 2006, nine people died on South Australia’s Eyre Peninsula.
But on Saturday, the wind surged and changed direction quickly time and again, fanning the blazes and making their direction utterly unpredictable from minute to minute. Local media had been issuing warnings in the days leading up to the weekend, but many people guarding their homes with backyard hoses would have been outside when the wind changed, and thus could have missed the fresh warnings.
Evidence of heart-wrenching loss abounded. From the air, the landscape was blackened as far as the eye could see. Entire forests were reduced to leafless, charred trunks, farmland to ashes. 
At Kinglake, a body covered by a white sheet lay in a yard where every tree, blade of grass and the ground was blackened. Elsewhere in the town, the burned out hulks of four cars were clustered haphazardly together after an apparent collision. Australian Broadcasting Corp. radio reported a car in a small reservoir, the driver apparently steering there in desperation.
“What we’ve seen, I think, is that people didn’t have enough time, in some cases” Nixon told a news conference. “We’re finding (bodies) on the side of roads, in cars that crashed.”
John Handmer, a wildfire safety expert at the Royal Melbourne Institute of Technology, said research had shown that people in the path of a blaze must get out early or stay inside until the worst has past.
“Fleeing at the last moment is the worst possible option,” he said. “Sadly, this message does not seem to have been sufficiently heeded this weekend with truly awful consequences in Victoria.”
Even if a house is set ablaze, it will burn more slowly and with less intensity than a wildfire and residents have a better chance of escape, he said.
Extraordinary survival tales were also told.
Jack Barber described how he fled his house in Pheasant Creek near Kinglake with his wife and spent Saturday night on a sports field dodging flames that licked at them from different directions as wind gusts blew around.
They drove out of the disaster zone to Whittlesea on Sunday.
“There were dead horses, live horses, kangaroos bouncing down the road with flames at their back. It was horrific,” Barber said.
Daryl Hogan of Wandong, 12 miles (20 kilometers) north of Whittlesea, said he leapt into his pool to escape the flames as they roared over his house, leaving it unscarred but razing the neighbor’s.
Nine Network television reported that one woman, Nesh Sinclair, sheltered with her children in the burrow of a wombat as the worst of the fire passed.
Victoria state Premier John Brumby on Monday announced a commission would be held to examine all aspects of the fires, including warning policies.
“I think our policy has served us well in what I call normal conditions. These were unbelievable circumstances,” Brumby said on Australian Broadcasting Corp. television.
Blazes have been burning for weeks across several states in southern Australia. A long-running drought in the south — the worst in a century — had left forests extra dry and Saturday’s fire conditions in Victoria were said to be the worst ever in Australia.
In New South Wales state on Monday, a 31-year-old man appeared in court charged with arson in connection to a wildfire that burned north of Sydney at the weekend. No loss of life was reported there. He faces up to 10 years in prison.

TITLE: Video May Show Pole’s Beheading
AUTHOR: By Ishtiaq Mahsud
PUBLISHER: The Associated Press
TEXT: DERA ISMAIL KHAN, Pakistan — A video delivered to media outlets appears to show Pakistani militants beheading a kidnapped Polish engineer, underscoring security fears ahead of a debut visit Monday by a newly appointed Obama administration envoy.
Pakistan has witnessed several attacks on foreigners in recent months as its overall security has deteriorated amid a growing insurgency. 
The seven-minute video appears to show the Polish hostage, Piotr Stanczak, sitting on the floor flanked by two masked men. Off camera, a militant briefly engages him in conversation before three others behead him. One of the hooded men then addresses the camera, blaming Pakistan for the killing for not agreeing to their demands.

TITLE: Female Suicide Bomber Kills 28 in Sri Lanka
AUTHOR: By Ravi Nessman
PUBLISHER: The Associated Press
TEXT: COLOMBO, Sri Lanka — A suspected rebel suicide bomber killed 20 soldiers and eight civilians when she blew herself up Monday at a facility where government forces were processing Sri Lankans fleeing the northern war zone, the military said.
The bombing was the first major suicide attack in Sri Lanka in more than a month and led to fears the Tamil Tiger separatists — boxed in by the military and on the verge of defeat — will increasingly turn to guerrilla warfare in their battle against government forces.
Following a string of victories, the military backed the rebels into a small strip of land on the northeastern coast, where the Red Cross estimates 250,000 civilians are also trapped.
The military has accused the rebels of holding the civilians as human shields and called for noncombatants to flee to government-controlled areas. The rebels have accused the government of indiscriminately shelling the war zone, leading to increasing civilian casualties.
On Monday morning, more than 800 civilians had crossed the front lines and were being searched by soldiers before being sent to camps farther south, military spokesman Brig. Udaya Nanayakkara said.
When the attacker was frisked, she set off the bomb, killing 28 people, he said. The blast also wounded 24 troops and 40 civilians, he said.
Footage run on state television showed a child in a purple checked dress lying lifeless on the ground. Other civilians lay dead nearby. Plastic chairs they were apparently sitting in as they waited to be processed were overturned, and blood stained the ground.
“The LTTE is now desperate because they don’t have any control over the civilians now,” Nanayakkara said, calling the rebels by the initials of their formal name, the Liberation Tigers of Tamil Eelam. “They wanted to stop these people coming in.”
Confirmation of the attack was not available because independent journalists were barred from the war zone.
The United Nations condemned the bombing.
“We deplore the loss of civilian life in this targeted killing. It’s a blow for people who have suffered so much,” UN resident coordinator Neil Buhne said.
The attack appeared aimed at one of the military’s weak points, the processing of the masses of civilians trying to flee the area. It also highlighted concerns that the rebels were trying to blend in with the civilian population, so they can fight on using insurgent tactics.
The military has said the flow of civilians out of the war zone has increased in recent days, with 4,700 fleeing Sunday, bringing the total number of noncombatants to escape the war zone to 20,000 this year, Nanayakkara said.