SOURCE: The St. Petersburg Times
DATE: Issue #1479 (41), Tuesday, June 2, 2009
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TITLE: Crude Is Back, But Not On Demand
AUTHOR: By Courtney Weaver
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — This year’s federal budget, which only recently appeared doomed to an ugly 8 percent deficit, is beginning to look a lot healthier thanks to spiraling inflation, a weakened currency and a surge of optimism. 
And while the Central Bank has devalued the ruble and announced plans to print 3 trillion more, the heroes of this story are, of course, OPEC and the United States. 
The U.S. Federal Reserve is funding a massive spending program to dig the economy out of recession with a steady stream of freshly printed dollars, sending investors scrambling from the safety of the greenback back to the inflation-haven commodities, including crude. 
And the optimism, also flourishing in the new U.S. administration, was served up last week by the Organization of the Petroleum Exporting Countries. The oil cartel’s secretary general, Abdalla el-Badri, said Thursday that crude would range between $60 and $70 per barrel for the remainder of 2009, well above the target of $50 set just a month ago.
OPEC’s decision to leave output quotas unchanged had already been priced into the market for at least a week, Renaissance Capital analyst Tom Mundy said, and while the forecast is “definitely optimistic” it’s also “not unrealistic.”
The price of crude has added 27 percent in May, keeping pace with a Russian equity rally that many supposed was ending, and on Friday evening was trading at more than $65 per barrel, up 7.2 percent for the week.
While hopeful forecasting is one way for OPEC to support prices without actually cutting output, oil could still face a correction of 10 percent to 15 percent before they see anything near the levels that they were predicting, Mundy said.
“If you look at the actual hard data, there are very few indicators that demand is actually increasing,” he said.
Overstocked U.S. oil inventories look to become an issue in coming weeks, especially if gasoline demand fails to pick up during the summer driving season. On U.S. roads, truck traffic will lag behind last year’s figures because of the economic slowdown, and those feeling the pinch may be reluctant to pay double what they did in the fourth quarter for gasoline, said Viktor Mishnyakov, an oil analyst at UralSib.
While such factors, along with depressed demand, could push oil as far down as $45 to $50 per barrel, OPEC’s prediction could become a reality if the United States continues printing money and using it to purchase commodities, Mishnyakov said.
“If inflation goes through the roof, if the dollar plummets to $1.50 per euro, oil can go to $70 easily,” he said.
“The more we price in inflation, the more we can expect the oil prices to rise,” Mundy said.

TITLE: Putin Opens New Contest for Mariinsky II
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Prime Minister Vladimir Putin has ordered the country’s Culture Ministry to organize a new architectural competition to design a second stage for the world-renowned Mariinsky theater, or Mariinsky II.
“The contest must be held as soon as possible,” Putin said, adding that the building is due to be completed by 2011.
“No specific deadlines for the competition have yet been set but it is expected that it will take place no later than July,” said St. Petersburg governor Valentina Matviyenko.
Critics argue that the timing appears too rushed for the Mariinsky to afford a high quality project but officials remain adamant. The governor’s office has announced they have a pile of attractive-looking proposals from around the world but considering the notorious history of the Mariinsky II, skepticism is in the air.
The Mariinsky II saga has been dragging on since 2003, when prominent French architect Dominique Perrault won a prestigious international competition to design the stage.
In 2004, after painstaking bureaucratic scrutiny, the Culture Ministry finally signed a contract with the French architect to use his design for a state-of-the-art building. Despite the imminent deadlines, the government appeared to be in no rush to get things started.
Some insiders say this embarrassing procrastination was due to a lack of money. Since the competition, the projected cost of the building had increased from $100 million to $244 million. Perrault’s design was a non-symmetrical, many-sided golden metal structure built around a new theater building. The architect said that he saw himself as a fashion designer, and his design was meant to wrap the black marble facade of the building inside a light, transparent golden tunic. The new building was intended to harmonize with the existing theater building built in 1860 to a design by the Italian Albert Cavos. A bridge over the Kryukov Canal was to connect the two buildings.
Many St. Petersburgers — including many members of the city’s cultural elite — never accepted the French project, branding the design as too revolutionary or lacking taste. One of the least offensive nicknames applied to the new building was “the golden potato.” Critics said Perrault’s design was too elaborate and out of keeping with the classical lines of the neighborhood.
In November 2008, the Russian government officially announced that the Perrault project had been rejected.
“The architect has many wonderful ideas but, most regrettably, he had absolutely no idea as to how to build an opera theater,” said the Mariinsky’s artistic director Valery Gergiev. “I personally was against using our theater for someone’s training.”
“We have never envied anyone in terms of artistic talent,” he said. “But I have to admit that, especially over the past several years, we have looked very closely at the technical and technological side of the venues where we perform. Everywhere we went on tour, be it Europe, Asia or America, we studied their resources and capacities very carefully, and this experience will be of enormous help for our new building.”
Following Perrault’s failure, Gergiev tried to persuade the Russian government to go for a project developed by Canadian agency Diamond&Schmitt Architects, but Russia’s Culture Minister Alexander  Avdeyev was lobbying for another design — by the Moscow architect Alexei Denisov — as the official sought to get what he described as “another imperial theater.” At the government meeting on Saturday, Vladimir Putin was expected to resolve the dispute — and he opted to announce another competition.
Discussions about a second stage for the Mariinsky began over five years ago. Gergiev says the technical capabilities of the existing theater do not match the troupe’s artistic potential. The Mariinsky has to close for several days to erect sets for certain performances, while many foreign directors working with the company have to adjust their bold designs to the modest capacities of the Mariinsky’s stage.

TITLE: Dozens of Students Detained in Egypt Ahead of Obama Visit
AUTHOR: By Anna Malpas
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Several dozen Russian students have been detained in Egypt in document checks just days before U.S. President Barack Obama pays a visit to Cairo.
Cairo police rounded up the students at Al-Azkhar University, a world center of Islamic studies, last week during checks on foreign students studying in the country, Foreign Ministry spokesman Igor Lyakin-Frolov said.
“The action was taken by the local police. They supposedly did it to check the legitimacy of foreigners staying on Egyptian soil,” Lyakin-Frolov said by telephone Friday. 
It was not immediately clear if the detentions were related to Obama’s visit. The U.S. president is to give a speech at Cairo University, a secular institution, on Thursday.
Lyakin-Frolov said more than 30 Russians were detained but added that he did not know the exact number and did not know whether they had the necessary documents to study in Egypt.
A spokesman for the Russian Embassy in Cairo told Interfax that at least 35 students from the North Caucasus were detained “in a brutal way” during the roundup Tuesday night.
One of the detainees, Khamid Alkhazurov, was quoted by state-run Channel One television as saying conditions in detention were unbearable. “We were herded into a room measuring five square meters. Fifty people, it’s unbearable,” he said. “It’s hot here, and there are no facilities, and there are sick people among us. They are categorically refusing to carry out our demands.”
The Russian Embassy in Cairo sent a note to the Egyptian Foreign Ministry demanding information on the reason for the detentions, where the students are being held and permission for embassy officials to meet the detainees, Lyakin-Frolov said.
Egyptian police officials could not be immediately reached for comment Sunday. A senior Muslim cleric said the students had failed to properly document their stay in Egypt. “The arrested citizens were living there in contravention of the visa regime,” said Damir Gizatullin, first deputy chairman of the Council of Muftis of Russia. “They did not apply officially, they did not register.”
Gizatullin said he had obtained this information from the council’s representative in Egypt, Rubin Munirov.
“We are following the situation. I think that humanitarian norms should be observed,” Gizatullin said.
He said none of the detained students had been sent by his council to study in Egypt. He could not immediately say how many council-sponsored students were studying there now.
Yusup Abakharov, an official at the Russian Embassy in Cairo, said Sunday that Egyptian authorities had promised to make a decision on the release of the students by Tuesday, Interfax reported. 
The Foreign Ministry said students from other countries, including France, Britain, Denmark, Tajikistan and Uzbekistan were also detained. A report on the Ingushetia.org web site said a total of 198 Russian students were picked up in Cairo, Alexandria and Mansoura.

TITLE: Facility to Destroy Weapons Opened
AUTHOR: By Jim Heintz
PUBLISHER: The Associated Press
TEXT: SHCHUCHYE — Rising out of the rolling fields and tree-lined country roads of southern Siberia is a complex of hulking metal buildings, piping and high-security fencing.
Its purpose? To cope with one of the nastiest legacies of the Cold War.
On Friday, Russian and American officials formally dedicated the high-tech plant, built with the help of $1 billion from the U.S. and designed to destroy about 2 million chemical weapons shells.
The opening was a major step toward disposing of Russia’s huge stockpile of Soviet-era chemical weapons, and a rare example of cooperation between two nations that still don’t quite trust one another two decades after the Soviet collapse.
The 25-structure complex, the size of a small town, was largely funded by the U.S. under a program called the Cooperative Threat Reduction initiative, launched a year after the Soviet collapse. It is meant to help Russia cope with its vast Cold War arsenal of weapons of mass destruction.
U.S. Senator Richard Lugar, an Indiana Republican who helped author much of the legislation that set up the program, came to the plains of Siberia Friday to speak at the dedication of the building, the program’s largest single project.
“The path to peace and prosperity for both Russia and the United States depends on how we resolve the threats posed by the arsenals built to fight World War III,” Lugar said. “Thankfully that confrontation never came. But today we must ensure that the weapons are never used, and never fall into the hands of those who would do harm to us or others.”
Red, white and blue balloons were tied to the buildings, and a two-story-high photograph of President Dmitry Medvedev hung on the wall of one of them. Medvedev did not attend.
In his speech, Lugar referred in passing to recent tensions between Moscow and Washington, which peaked during last year’s brief war between Russia and the former Soviet nation of Georgia, a U.S. ally.
“The United States and Russia have too much at stake and too many common interests to allow our relationship to drift toward conflict. Both of our nations have been the victim of terrorism that has deeply influenced our sense of security,” he said.
The weapons at Shchuchye, loaded with nerve gases including VX and sarin, have a cataclysmic potential for terrorist attacks. If set off in a tightly packed area, each could kill tens of thousands of people. Many of them are small enough to fit in a briefcase.
Russia, as a signatory of the international Chemical Weapons Convention, is obliged to eliminate its vast stores of Class I weapons — chemicals that have no use other than in arms. Moscow already has destroyed about 30 percent of its stockpile, according to the Russian Munitions Agency.
“In this context, Shchuchye is the most important facility allowing us to fulfill this task,” said Viktor Khristenko, the Russian minister of industry.
But the Shchuchye facility significantly boosts destruction capacity. Russian officials claim it will allow the country to meet its treaty obligations of destroying all chemical weapons by 2012, although Lugar said that goal probably won’t be met.
Nonetheless, the opening — which follows preliminary destruction work that began in March — is significant because of the dangers posed by the weapons. Lugar said some of the shells at Shchuchye could kill 80,000 people if deployed in a stadium.

TITLE: Responsibility for Disputed Column Goes to Hermitage
AUTHOR: By Irina Titova
PUBLISHER: The St. Petersburg Times
TEXT: The State Hermitage Museum is set to provide security and video surveillance cover for the Alexander Column in the city’s Palace Square.
“The museum will institute these measures once the column is in the Hermitage’s care,” the museum’s director Mikhail Piotrovsky said last week, Interfax reported.
“The decision to pass responsibility for the column to the Hermitage has already been made. At the moment we are working on the paperwork. As far as I’m concerned, it makes sense for the column to be under the Hermitage’s auspices,” Piotrovsky said.
“Transferring responsibility for the column to the museum will allow for better security provision,” he said.
“We are planning to implement CCTV and police security here,” Piotrovsky said.
The fence around the column will also undergo more thorough restoration, he said.
On several occasions recently, elements of the decoration from the fence around the Alexander Column have gone missing.
Following the dismantling of the skating rink set up on Palace Square in winter 2007, several decorative eagles were found to have disappeared. 
However, Vera Dementieva, head of the city’s Monument Security Committee, said that they had given notification of the missing decorations and some other damage as early as November 2007 — in other words, before the skating rink was opened.
At that time, the committee registered 36 features as missing. At present, at least 80 out of the 106 eagles are missing.
The city prosecutor’s office opened criminal proceedings against two men over the matter.
Meanwhile, Bosco, the company that organized the skating rink around the column in the winter of 2007-2008, has donated 1.5 million rubles ($49,000) toward the restoration of the fence. 
“I’ve said many times before that what happened to the eagles is a shame,” said Piotrovsky. “It demonstrates that St. Petersburg is not a true cultural capital. When the column is transferred to our jurisdiction we’ll try to raise the level of the cultural knowledge of our citizens,” he said.
The decision to transfer responsibility for the Alexander Column to the Hermitage was made by the Russian Culture Ministry.

TITLE: Target Practice Hits Town in LenOblast
AUTHOR: By Irina Titova
PUBLISHER: The St. Petersburg Times
TEXT: A Russian naval ship carrying out target practice off the Russian Baltic Sea coast accidentally rained shell fragments on a village near St. Petersburg, officials said Friday.
Nobody was injured when the fragments from shells fired by an anti-submarine ship in the Gulf of Finland fell on houses in the village of Zelyonaya Roshcha, close to the border with Finland, regional military prosecutor Igor Lebedev said. An investigation has begun, explained Lebedev.
Russia’s NTV television channel said that the ship fired its six-barrel anti-aircraft gun near the shore, and the exploding shells rained shards of metal on the village. It broadcasted images of metal fragments several centimeters long spread all over the area.
“Some people thought that a war had started,” Mikhailov was quoted as telling the RIA Novosti news agency. “It was like a hail of steel.” 
Gardeners from the Zelyonaya Roscha village association are planning to request compensation from the Baltic Navy Fleet for the accidental shelling.
Yuri Mikhailov, chairman of the association, said this week the gardeners will assess the extent of the material and moral damage they suffered during the shelling last Thursday.
“We are not going to appeal to the courts yet, but the residents of the village are scared, and they feel they should be compensated for the damage,” Mikhailov said, Interfax reported.
The gardeners also hope to receive apologies for the incident from the Fleet authorities, he said.

TITLE: Artists' Hunger-Strike Enters 5th Day
AUTHOR: By Sergey Chernov
PUBLISHER: The St. Petersburg Times
TEXT: Despite continued pressure from the authorities, an artists’ hunger strike against the police’s arbitrariness went into its fifth day on Monday. The protesters are demanding the investigation and punishment of those responsible for the May Day mass arrests, when some 300 anarchists, artists and musicians were seized or dispersed by the OMON, preventing them from taking part in an authorized demonstration in St. Petersburg.
Their other demands include launching a federal commission to investigate the activities of the “E” (anti-extremism) Center that is reportedly used to spy on and persecute dissidents and the release of Artyom Loskutov, an artist and activist arrested on drug charges in Novosibirsk last month (the protesters say the drugs were planted).
“We’ll be holding a hunger strike until at least one of these demands is met,” Anastasia Nekoza, one of the protesters, said.
“We appealed to the Prosecutor’s Office, the GUVD (the Interior Ministry Department) and the Human Rights Commission about the May 1 events a little over a week ago, and we’re expecting that some sort of enquiry will begin. We’re aiming at producing an intensifying effect.” 
The group of artists, who have been holding the demo since Thursday, have been staying in a public garden in front of the former Smolny Institute, now City Hall’s residence and painting pictures dealing with the police’s unlawful behavior – a helmet-wearing OMON special-task policeman standing on a pedestal in front of City Hall, currently occupied by the Soviet-era Lenin monument; little children scared by the OMON police or a policeman’s boot ready to trample a colorful beetle.
“The paintings reflect the unlawfulness of both the police and the authorities, including the “E” Department, that society can’t control in any way,” Nekoza said.
On Thursday, the artists came to the site with chains, ready to chain themselves up and thereby complicate any possible arrests, but no attempts to detain them were made. 
“We thought we’d get arrested at once, we didn’t really expect it to last this long,” Yevgeny Schyotov, one of the protesters, said, adding that they are considering holding an exhibition of the works painted during the hunger strike.
According to Schyotov, the hunger strike was launched by five artists, but a few more joined as time passed, increasing the number to nine. Schyotov was a co-organizer of the thwarted May Day demo and was one of the first arrested by the OMON.
However, some pressure is being applied, according to Nekoza.
“The FSO (the Federal Protection Service) is putting pressure on the policemen who are on guard here to clear out the park, but the policemen can’t find any lawful grounds to do it,” she said.
“But because they’ve been put under pressure by the FSO, they tell us about it and ask us [to leave.] But, they say, ‘If you obey our demands, it’s good, if not, we can’t do anything.”
Novosibirsk artist Loskutov, who has been one of most prominent participants of the “Monsterations” — colorful May Day events featuring artists and musicians, was arrested on May 14 after receiving calls and invitations for a “conversation” from the “E” Center, according to his artist friend Leonid Gegen, who came to St. Petersburg to join the protest.
“When he was returning home from work, several plain-clothed men came to him and pushed him into a car,” Gegen said.
“He was taken to a nearby courtyard where he was searched and the police said they found 11 grams of marijuana. The most strikingly cynical thing about it is that you need to have over 10 grams to be prosecuted.”
According to Gegen, artists in Leipzig, Germany, have launched a foundation in support of Loskutov.

TITLE: 2 Charged Over Bombing Of Moscow-St. Petersburg Train
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Two Ingush natives have been charged in connection with the 2007 bombing of a Moscow-St. Petersburg train that injured 30 passengers, investigators said Saturday.
The suspects, Maksharip Khidriyev and Salambek Dzakhiyev, both 41, are accused of acquiring explosives and transporting them to the Novgorod region to be assembled into a bomb, the Novgorod Investigative Committee said in a statement. It gave no motive for the bombing.
A bomb planted on the rails exploded as the train carrying 251 passengers traveled through the Novgorod region at about 9:30 p.m. on Aug. 13, 2007. Several coaches were derailed. The Investigative Committee statement said the bombers had hoped to derail the train while it was crossing a bridge.
If convicted of weapons trafficking and terrorism charges, Khidriyev and Dzakhiyev face up to 20 years in prison.

TITLE: United Nations Chief Rebukes Georgia
PUBLISHER: The Associated Press
TEXT: UNITED NATIONS — In a very rare public rebuke, UN Secretary-General Ban Ki-moon has denied a claim by Georgia’s UN ambassador that he amended a recent report in response to “Russian blackmail.”
“The claim by the Georgian permanent representative that the Secretary-General amended his report on Georgia in response to ‘Russian blackmail’ is categorically rejected. The statement itself is very unfortunate,” UN spokeswoman Marie Okabe said. 
Georgian UN envoy Alexander Lomaia said last week that Russia threatened to veto an upcoming Security Council resolution on revamping the UN mission in Georgia’s breakaway region of Abkhazia unless the title and content of Ban’s report to the council were changed. Lomaia said “very reliable sources” told him that Ban’s final report to the council “differed drastically from the original version” and that part of the pressure on the Secretary-General came during a recent visit by Foreign Minister Sergei Lavrov.
Russia’s UN ambassador, Vitaly Churkin, said he attended Lavrov’s meeting with Ban and at “no stage of this discussion of the report [did] Russia ever threaten any kind of veto.”
nIn Tbilisi, protesters demanding Georgian President Mikhail Saakashvili’s resignation beat several police officers and stabbed one with a knife on Thursday night, raising new fears that the protests could slide into violence.

TITLE: Space Station Crew Finally Reaches Full Staff of 6
PUBLISHER: The Associated Press
TEXT: CAPE CANAVERAL, Florida — The international space station just had a population boom.
A Soyuz capsule carrying three new space station residents docked at the orbiting complex Friday. With three astronauts there to greet them, the space station now has a full staff of six for the first time in its 10-year history.
What’s more, each of the major space station partners is represented on board for the first time. The combined crew, all men, now includes two Russians and American, Japanese, Canadian and Belgian astronauts.
“It is a historic day. It’s also a very happy day up here,” said newly arrived Canadian astronaut Bob Thirsk. “We’ve got an incredible potential for success here. This is going to be something incredible. You ain’t seen nothing yet.”
Having all these countries represented on board is “a great way to kick off a six-person crew,” NASA’s deputy space station program manager, Kirk Shireman, said on the eve of the linkup.
When shuttle Endeavour and its crew of seven arrives in another few weeks, a record 13 people will be at the space station, but that will be only temporary.
The Soyuz spacecraft blasted off from Kazakhstan on Wednesday and pulled in at the space station as the two vessels soared 350 kilometers above China’s coast. There were hugs and handshakes all around when the hatches between the two craft swung open. The six astronauts gathered in the main living quarters for the many congratulations that streamed upward. “Finally, we’ve lived to see this moment,” Russian Mission Control radioed.
NASA expects science research to triple at the space station. Until now, astronauts have had to spend most of their time keeping all the systems running and fixing things, like a urine-into-drinking water machine that took months to coax into operation. Astronauts took their first sips of the recycled water in orbit last month.
There should be a mental bonus as well with a bigger crew. Psychologists have long said three is hardly the ideal crew size because of the potential for one person to feel left out. “Think about when you’re 7 years old and you’ve got three kids,” noted U.S. astronaut Timothy Kopra, who will fly up aboard Endeavour and then move in.
The first space station crew arrived in 2000, two years after the first part was launched. Until now, no more than three people lived up there at a time. 
The space station has since expanded to nine rooms, three of them full-scale labs, and is now 81 percent complete. There are five sleeping compartments, two toilets, two kitchens and two mini-gyms. Another sleep station and more exercise equipment will be coming in August, and a dining table big enough to accommodate all six inhabitants will be launched early next year.
Those immense supply runs will end, though, when the shuttles are retired at the end of next year. NASA hopes to stockpile big spare parts at the space station before that happens; Endeavour, in fact, will carry up some on the next shuttle mission.
NASA also will have to rely on the Federal Space Agency to transport all its astronauts up and down during the estimated five years between the final shuttle mission and the first ferry flight with a replacement spacecraft.
The Federal Space Agency said Friday that it had signed a $306 million deal with NASA to ferry its astronauts to the space station in 2012.
The agreement covers four launches aboard the Soyuz capsules to swap out crews in the orbiting laboratory.

TITLE: Turnout Tops 75 Percent In South Ossetia Election
PUBLISHER: Combined Reports
TEXT: MOSCOW — Georgia’s separatist South Ossetia province held parliamentary elections Sunday expected to strengthen its Moscow-friendly leader’s hold on power.
Officials said turnout topped 70 percent in South Ossetia’s first elections since the August war that pitted Russian forces against Georgian troops. Russia routed Georgia’s military and recognized South Ossetia as an independent country, but Nicaragua is the only nation that has followed suit.
Critics of South Ossetian leader Eduard Kokoity claim that he stifles dissent and intimidates challengers with threats of violence. They say money for restoring infrastructure destroyed in the five-day war has disappeared and called for a boycott of the elections to fill the 34-seat legislature.
“I want these elections to make life better, I want the city to finally start to be rebuilt,” Atsamas Kokoyev, a resident of Tskhinvali, said after voting. “I want no more war. I want life to return to normal.”
The opposition claims that Kokoity, 44, is seeking a landslide victory for the main pro-government party, Unity, to minimize resistance to constitutional changes that would strengthen his grip on power. Opponents say he wants to scrap term limits and run for a third term in 2011, but government spokeswoman Irina Gagloyeva denied those claims.
Kokoity announced in April that he would not attempt to seek a third term, Gagloyeva said.
Interfax reported late Sunday that turnout among the 52,000 potential voters was 70.33 percent, well over the 50 percent needed to make the elections valid.
Ekho Moskvy radio cited a South Ossetian opposition figure, Albert Dzhusoyev, as asserting that authorities were pressuring people to vote. Gagloyeva denied that and said Dzhusoyev was not in South Ossetia.
In remarks broadcast on Russian television, Kokoity said South Ossetia’s elections showed “the maturity and stability of our democracy.”
Of the four parties taking part, three — Unity, the Communists and the People’s party — support Kokoity. “If this election was free and fair, the ruling party would not get a majority, and our party would get 35 to 40 percent of votes, or about 10 or 11 seats in parliament,” said Vyacheslav Gobozov, leader of the opposition Fatherland-Socialist party.
(AP, SPT)

TITLE: In Brief
TEXT: <strong>Putin Pal to Irkutsk</strong>
MOSCOW (SPT) — President Dmitry Medvedev has nominated a former St. Petersburg colleague of Prime Minister Vladimir Putin to become Irkutsk’s governor, a post that remains vacant after the previous governor died in a helicopter crash.
Medvedev has nominated Dmitry Mezentsev, 49, who headed St. Petersburg City Hall’s Media Committee from 1991 to 1996 and currently serves as deputy speaker of the Federation Council, RIA-Novosti reported late Thursday.
Putin worked in St. Petersburg City Hall during the same period.
Mezentsev was not named in Medvedev’s “Golden 1,000” list of candidates for senior government jobs or United Russia’s talent pool for lower government posts. Mezentsev, a graduate of the Leningrad Railroad Engineering Institute and a doctor of psychology, has represented Irkutsk in the Federation Council since 2002, according to the Federation Council’s web site. 
Former Irkutsk Governor Igor Yesipovsky was killed in a helicopter crash in the Irkutsk region on May 10. A gun was found in the wreckage, fueling speculation that Yesipovsky was on an illegal hunting trip.

<strong>Israeli Minister to Visit</strong>
JERUSALEM (AP) — Israel’s foreign minister will head to Moscow on Monday to air his nation’s concerns over Iran’s nuclear program in talks with Russian leaders.
The trip is the tough-talking Avigdor Lieberman’s first to Russia since taking office on March 31.
Israel’s Foreign Ministry said Sunday that Lieberman would meet with President Dmitry Medvedev, Prime Minister Vladimir Putin and Foreign Minister Sergei Lavrov.
Last week, Lieberman expressed “deep disappointment” over Lavrov’s recent meeting in Syria with Hamas leaders. (AP)

<strong>Medvedev vs. Japan</strong>
MOSCOW (SPT) — President Dmitry Medvedev criticized Japan on Friday for questioning Moscow’s rights to the four disputed Kuril Islands and said he hoped that Tokyo would rethink its approach, Reuters reported.
“We cannot avoid mentioning some of the recent attempts by Japanese partners to question Russia’s sovereignty over the Kuril Islands,” Medvedev told a Kremlin ceremony to receive credentials from new ambassadors, including Japan’s. 
The Kremlin has been annoyed by remarks by Prime Minister Taro Aso, who has referred to “ongoing Russian occupation” of the islands. 

<strong>Guard Steals $4 M</strong>
MOSCOW (SPT) — A security guard helping transport $4 million in cash fled with the money when his two fellow guards got out of the car, RIA-Novosti reported.
The guards were transporting the money in a car in southern Moscow when two of them got out to exchange some of their own money at a currency exchange booth, the report said. The third guard drove away with the money.
Police later found the abandoned car. No money was left inside. It was unclear to whom the money belonged. 

<strong>Car Explosion Kills 3</strong>
MOSCOW (AP) — A suspected car bomb blast killed three people Sunday on the outskirts of Karabula, Ingushetia, police said.
While the blast occurred at a gas station, the ministry said investigators believe it was caused by a bomb attached to the underside of the car. Authorities were trying to identify the victims.
In Dagestan, security forces stormed an apartment Sunday in Makhachkala and killed a gunman who was holed up inside, police said. 
In Chechnya, authorities said separate bomb blasts Saturday killed a federal serviceman in a forest and wounded two police officers in Grozny. 

<strong>Prokhorov in Scuffle </strong>
MOSCOW (Bloomberg) — Mikhail Prokhorov, Russia’s richest man, threatened to punch two men in the face after his sister was insulted during a protest of an arts event sponsored by his charity fund in Norilsk.
“They insulted Irina and trashed the charity fund, which is involved in cultural and social projects and has no relation whatsoever to my business,” Prokhorov said on his blog last week. “If the two gentlemen who staged the protest don’t apologize to my sister within three weeks, I will do what any normal guy would do — I’ll smash their faces in. And you know I can do it.” Prokhorov is a kickboxing enthusiast. 

<strong>For the Record</strong>
About 25 people, including National Bolshevik founder Eduard Limonov, were detained Sunday when police roughly broke up an attempt to hold a rally against Prime Minister Vladimir Putin on the square near Mayakovskaya metro station in Moscow, Ekho Moskvy radio reported. (SPT)

Soviet Communist Party official Oleg Shenin, who played an active part in an abortive attempt to overthrow Mikhail Gorbachev in 1991, died Thursday in Moscow, the Communist Party said Friday. He was 71. No cause of death was given. (AP)

The CIA said Friday that it was undertaking a five-year plan to boost the agency’s fluency in Russian and other key foreign languages. (AP)

Venezuelan President Hugo Chavez said Friday that he has a new book for U.S. President Barack Obama: “What is to be Done?” by Vladimir Lenin.Chavez gave Obama a copy of “Open Veins of Latin America: Five Centuries of the Pillage of a Continent” by Eduardo Galeano in April.  (AP)

TITLE: 12th Economic Forum Prepares to Open Its Doors
AUTHOR: By Irina Titova
PUBLISHER: The St. Petersburg Times
TEXT: More than 2,000 participants, including heads of states, ministers, and business and science leaders from dozens of different countries will take part in the St. Petersburg International Economic Forum from Thursday to Saturday.
The forum is dedicated to topical issues including the current economic crisis.
Participants of the forum will discuss a new approach to understanding the future of international financial institutions, the prospects for the development of the banking sector, the effectiveness of government measures and other burning issues, forum organizers said on the event’s web site.
The forum will pay special attention to the role of Russia in solving those problems.
The event opens on Thursday — “International Day” — with discussions on Russia’s business relations with the Arab world, the European Union and the U.S. 
Business contacts between Russia and Arabic countries have developed considerably in recent months, with Russian-Arab trade approaching eight billion U.S. dollars so far this year. The formation of institutions and mechanisms for the realization of bilateral potential is therefore currently the key to collaboration between Russia and the Arab and Muslim world, the organizers said.
The discussion on Russia-EU business dialogue will focus on protecting investments and avoiding protectionism.  
The dialog on Russia-U.S. business relations will be dedicated to the economic cooperation as a basis for “resetting” Russia-U.S. relations. The participants will talk about possible forms and mechanisms of a strategic Russia-U.S. partnership in the economic sphere, cross-sectoral investment; and opportunities for a free trade area between the two countries.
On June 5 — “Economics Day” — the guests and hosts of the forum will discuss the lessons of the global economic crisis and ways of solving it.  This plenary session will be attended by President Dmitry Medvedev, Philippines President Gloria Macapagal Arroyo, Japanese Prime Minister Junichiro Koizumi and former Chancellor of Germany Gerhard Schroeder, among others.
The ensuing discussions will be dedicated to the price of oil, the global role of energy resources, demand forecasts, and the potential for the development of alternative energy sources. This event will accordingly be attended by the heads of Russian and foreign leading gas and oil companies.
 The participants will also hold a discussion titled “the Cinema Industry During the Crisis.” This session will be attended by the Russian film director Timur Bekmambetov, who produced the hit Russian movies “Nightwatch” and “Daywatch,” along with Andy Bird, chairman of Walt Disney International; Russian actress Ingeborga Dapkunaite and others.
Saturday is labeled “Financial Day.”
On that day, the forum’s participants will speak about restructuring financial institutions, risks and regulations of financial markets, experiences and prospects of international financial centers; project financing in crisis conditions, future payment systems and the future of cities.
About a thousand reporters from 27 countries will attend the forum to report on the decisions made there.
Meanwhile, guests of the forum will also be treated to an impressive cultural program.
On Thursday, they will have the chance to visit an exhibition of Romanov tsars at the city’s State Museum of History, enjoy the opera Yevgeny Onegin at the city’s famed Mariinsky Theater and a concert at the Mariinsky Concert Hall; or listen to the St. Petersburg Philharmonic Orchestra in the main hall of the Shostakovich Philharmonic.
On Friday, the forum’s participants can attend the ballet Giselle at the Mariinsky Theater or the opera Die Walkure at the Mariinsky Concert Hall, or watch the ballet Spartacus at the Mikhailovsky Theater or listen to the Philharmonic Orchestra at the Shostakovich Philharmonic.
They can also watch the Boris Eifman ballet “The Seagull” at the Alexandriinsky Theater or attend a reception given on behalf of St. Petersburg Governor Valentina Matviyenko.
On Saturday, the Mariinsky Theater will present the ballet “Romeo and Juliet,” and at the theater’s concert hall, guests will be able to enjoy Wagner’s opera “Parsifal,” while Boris Eifman’s ballet version of “Anna Karenina” will be performed at the Alexandriinsky Theater.

TITLE: Hotels Offer Discounts
AUTHOR: By Yelena Dombrova
PUBLISHER: Vedomosti
TEXT: Hotels accused by the Federal Anti-Monopoly Service (FAS) of price-fixing during last year’s St. Petersburg Economic Forum do not appear to be raising prices this year — in fact, some are even offering discounts.
Sponsors of the forum have arranged for special tariffs for their delegates. A typical room is subject to a 10 to 25 percent discount, according to Yelizaveta Dunayeva, the director of the forum’s accommodation service. As Dunayeva explained, the reductions are due to hotels attempting to attract guests and buck the trend of falling demand for tourist services brought about by the economic crisis. As it is, the quota of delegates has been reduced from last year’s total of 2,500 to only 2,200 attendees, she said. 
According to a representative of Intourist St. Petersburg, which is collaborating with the forum’s organizers to provide accommodation for delegates, not all hotels are offering reductions. “Many have already filled all of their rooms, despite the fact that demand is nothing like the rush we saw two years ago,” one source said.
According to the forum’s organizers, prices at the Corinthia St. Petersburg, Grand Hotel Europe, Radisson SAS Royale, Renaissance Baltic Hotel, Marco Polo Hotel and Ambassador have been reduced.
Yulia Pashkovskaya, a manager at the Grand Hotel Europe, confirmed that the hotel is offering a 25 percent discount to forum participants. On the hotel’s web site, the dates of the forum are not listed as High Season, when the cost of a standard single room normally rises to 24,750 rubles ($808).
“The published price for the hotel’s services is the same for everyone, including Forum delegates, although we have entered into special agreements with some international participants to offer them a lower rate,” said Natalia Belik, public relations director at the Corinthia St. Petersburg, refraining from clarifying the value of the discounts. 
During last year’s forum, hotels raised prices by 80 to 100 percent, with the Grand Hotel Europe raising them by two or three times, according to the St. Petersburg branch of the FAS. For example. the Grand Hotel Europe charged 220,000 rubles ($7,187) per night for a junior suite, complained one forum delegate. The hotels explained the price rises as due to a seasonal rise in demand. In February of this year, the local branch of the FAS demanded that 11 hotels observe anti-cartel laws, and began imposing fines against them in May.
In the period leading up to this year’s forum, hotels are being closely watched to ensure that price hikes do not take place, said Oleg Kolomichenko, director of the St. Petersburg branch of the FAS. Furthermore, according to sources at City Hall, city officials have also made it clear to hotels that price hikes are not acceptable.
According to Pashkovskaya, the reduction in prices is in no way connected with the initiative of the FAS, and is due to the reduction in the number of participants in this year’s forum as a result of the crisis.
In 2008, most rooms were already booked three or four months before the start of the forum, but this year delegates only began to book their accommodation in May, said Belik. Discounts are due to a reduction in overall hotel bookings, according to Vladimir Ivanov, general director of the Oktyabrskaya Hotel.

TITLE: In Brief
TEXT: <strong>Steelmaker Seeks Loan</strong>
MOSCOW (Bloomberg) — Novolipetsk Steel, the steelmaker controlled by Russian billionaire Vladimir Lisin, may borrow $355 million from the European Bank for Reconstruction and Development to increase its own electricity supply.
The bank will help Novolipetsk to fund a new 150-megawatt power station the company plans to build in the Lipetsk region, the steelmaker said Monday. Novolipetsk said it expects to take the loan on “market terms” for four or five years. The project will allow the Lipetsk-based company to raise self-sufficiency in electricity to 60 percent from 40 percent.
The total cost of the project is estimated at 490 million euros, the EBRD said on its web site.

<strong>Dixy Group Makes Loss</strong>
MOSCOW (Bloomberg) — Dixy Group, Russia’s third-largest publicly traded food retailer, reported a first-quarter loss after the ruble’s decline against the dollar led to a revaluation of dollar-denominated debt.
The net loss was 790 million rubles ($25.8 million) and compared with a profit of 166 million rubles a year earlier, Moscow-based Dixy said in a statement on its web site Monday. Revenue increased 19 percent to 13.3 billion rubles, helped by the opening of new stores.
Dixy recorded a foreign-exchange loss of 840.4 million rubles after the Russian currency lost 14 percent against the dollar in the quarter. The Moscow-based company’s debt stood at 8.89 billion rubles, or $261 million, as of March 31.

<strong>Gas Proposal Planned</strong>
MOSCOW (Bloomberg) — Russia’s government will soon submit a proposal to lawmakers asking for natural gas produced as a byproduct of crude oil to have priority status in applications for spare pipeline capacity, the energy minister said.
Russia aims to create incentives for companies to use more of the 15 billion cubic meters a year of so-called associated gas that is flared instead of sold, Sergei Shmatko said on Russian state television Monday.

<strong>Gas Emissions Slammed</strong>
MOSCOW (Bloomberg) — Russia called on developing countries to reduce greenhouse-gas emissions as part of a new treaty to fight global warming, a commitment many of those nations oppose.
Restraining output of heat-trapping gases is a burden that must be shared “fairly” among all nations, a Russian delegate told United Nations climate-treaty negotiators in Bonn on Monday, during the first session of 12 days of UN-led talks.
“Unless some of the major emitters make commitments, then this process will not make sense,” Oleg Shamanov said. “That includes both developing and developed countries.”

<strong>Reserve Fund Plummets</strong>
MOSCOW (Bloomberg) — Russia’s Reserve Fund fell $5.8 billion in May as the government transferred more money to plug its first budget shortfall in a decade.
The fund, which Finance Minster Alexei Kudrin warned may be exhausted by the end of next year, dropped to $101 billion from $106.8 billion in the previous month, the ministry said in a statement on its web site Monday. In the same month, the National Wellbeing Fund rose to $89.9 billion from $86.3 billion. In ruble terms, the Reserve Fund contained 3.1 trillion rubles and the Wellbeing Fund was at 2.8 trillion rubles.

TITLE: Foreign Investors Put Up Less Cash
AUTHOR: By Anatoly Tyomkin
PUBLISHER: Vedomosti
TEXT: Foreign investment in St. Petersburg dropped in the first quarter of 2009 by eight percent in comparison to the same period last year.
In the first quarter of 2009, foreign investors pumped $651.5 million into the St. Petersburg economy, of which 32.3 percent was direct investment, according to a press release from the city’s Economic Development Committee. The majority of the money went into projects that were already in progress, and no major new initiatives were launched, said Sergei Fiveisky, the committee’s deputy chairman. 
Around 71 percent of all foreign investment in the first quarter came from the manufacturing sector, including 16 percent from automotive manufacturing and outfitting, compared to 65 and 8.3 percent respectively in 2008. This growth is thanks to the completion of the city’s new Nissan factory and the output of Toyota’s plant, according to an employee of the city administration. Toyota Motor Manufacturing Russia made no capital investments at the start of this year, aside from taking out credit to replenish working capital, according to the factory’s press service. Nissan was unavailable for comment.
Food production accounted for 6.1 percent of foreign investment — almost twice as much as during the same period in 2008. Alexei Krivoshapko, director of Prosperity Capital Management, explained that the food production sector, and especially St. Petersburg’s key brewery and tobacco firms, were far from struggling. Japan Tobacco International’s Petro factory carries out frequent technical upgrades on its systems, and this year is no exception, confirmed a representative of the company’s press office.
Construction made up only 15 percent of foreign investment in the city in the first quarter of this year, in comparison with 18.8 percent last year; real estate’s proportion also fell from 10.2 to 6.9 percent. In general, construction firms operating with foreign capital complete projects, but start few new ones, according to one manager in the sector. In the period from 2006 to 2008, foreign firms showed a huge interest in investing in real estate, but there were few viable opportunities, said Oleg Barkov, general director of Knight Frank St. Petersburg. Now, even those who have the means are waiting for the market to stabilize before investing again, he added.
However, a certain revival of investment in the city can be expected toward the end of the year, according to the head of Dokhod finance group, Vselovod Lobov. He explained that in his opinion, there are plenty of interesting propositions for international investors in the city, particularly in the industrial sector, where the cost of investing has at least halved over the past six months.

TITLE: Economic Crisis Set to Dominate Forum
AUTHOR: By Boris Kamchev
PUBLISHER: The St. Petersburg Times
TEXT: Organizers of the annual International Economic Forum in St. Petersburg last spring boasted that the event is becoming “a second Davos,” a supreme showcase of Russia’s vast and diversified business potential. This confidence was largely based on then-skyrocketing oil and gas prices. But with the Russian economy now facing a recession due to the fall of crude prices and markets after financial turmoil developed in the second half of 2008, the tone and hopes of the forum’s hosts have become more modest. This year’s forum, like dozens of such business events around the world, is all about anti-crisis measures.
With the budget having been slashed by 25 percent and the number of participants significantly less than last year’s forum, the organizing committee insists that the economic crisis has not affected preparations for the forum.
“Together with the Economy Ministry, we have succeeded in maintaining the level and importance of the forum,” St. Petersburg Governor Valentina Matviyenko said last week during a press event arranged by the forum’s organizing committee.
Minister for Economic Development Elvira Nabiullina said that this year’s forum would devote a lot of attention to the problems of small and medium-sized businesses.
“A program has been developed to help entrepreneurs with small and medium-sized businesses to open new companies, especially in innovative spheres,” said Nabuillina. 
After the documents for the program have been signed, around 700 entrepreneurs will be entitled to receive 300,000 rubles ($9,730) to start and develop their business projects. 
An exhibition presenting St. Petersburg as a business and tourist destination will feature for the first time at this year’s forum in Lenexpo exhibition center, the forum’s traditional venue. The exhibition will set back the city budget an additional $1.7 million.
 The forum’s program focuses mainly on the global economic crisis and its consequences for the economies of various countries. As a result, most of the participants of this year’s forum are from auditing and consulting companies, while last year’s event was dominated by developers and construction companies.
Finance Minister Alexei Kudrin has called the forum a chance to assess what the governments of developing countries have done so far to try to weather the crisis. 
“Of course, the positions of our countries, including the BRIC nations [Brazil, Russia, India, China] in overcoming the crisis will be developed here,” Kudrin was quoted by RIA Novosti as saying. “I believe this is a very timely forum in the crisis period. Today Russia has become a site for discussing the position of developing markets on the global market,” he said.
 The forum’s opening on Thursday will be “International Day,” covering the topic of Russia-EU business dialog. 
Russia-U.S. business dialog will mostly be devoted to economic cooperation as a key factor in “resetting” Russia-U.S. relations. Many predict a major thaw between the two global powers when U.S. president Barack Obama pays his first visit to Russia in July.
The forum officially opens on Friday, with “Economics Day” — a plenary session at which the main guest will be president Dmitry Medvedev. He is set to deliver a keynote address entitled “The global economic crisis: First lessons and leading the way forward.”
“It’s important not how, but where we are heading out of the crisis,” said Yevsei Gurvich, head of the Economic Expert Group. “We have to discuss the new model of growth.” He said that in the current situation, the forum should provide intelligent answers on the prospects of the global economic crisis. “The sharp drop in oil prices has shown that the Russian economy should rely on other sources,” he said. 
Western experts agree. In his latest paper, “Russia in 2009-10,” Daniel Thorniley, senior vice president of the Economist Group, argues that Russia’s GDP, stock market prices and the ruble are now inextricably linked to global oil prices.
Consequently, the forum’s program also includes a panel discussion entitled “The Price of Oil,” between numerous government participants and leading international CEOs, including deputy prime minster Igor Sechin, Gazprom’s Alexei Miller, LukOil’s Vagit Alekperov and Shell’s Jeroen Vand der Veer, as well as senior consultants such as Dr. Daniel Yergin, chairman of Cambridge Energy Research Associates and Nobuo Tanaka, executive director of the International Energy Agency. 
Nabuillina and Vikram Pandit, the chief executive of City Group, are expected to take part in the panel discussion “Anti-Crisis Programs: Scale And Limits of Government Intervention in the Context of a Market Economy,” on what forms government investment and debate on nationalization should take, and on how public-private partnerships can effectively replace direct state interference and what measures Russia should take. 
Kudrin is expected to speak on the forum’s third day — “Financial Day” — during the plenary session “Post Crisis Financial Architecture,” in which the current global financial landscape will be discussed, focusing on reforming international monetary institutions (the IMF and World Bank).
The St. Petersburg International Economic forum had its peak in 2007 and 2008, when deals were signed worth $13.5 billion and $14.6 billion respectively, though many projects have been put on hold due to the crisis, including the Orlov tunnel under the River Neva, the New Holland multifunctional center and other development and housing projects.
Neither the forum’s organizing committee nor the Ministry for Economic Development could provide forecasts as to whether any deals were planned for this year’s event.

TITLE: IMF: Russia Needs Plan — and Fast
AUTHOR: By Alex Nicholson
PUBLISHER: Bloomberg
TEXT: MOSCOW — The International Monetary Fund cut its forecast for Russia’s economic growth in 2009 to 6.5 percent from six percent and said the country “urgently” needs a plan for banks’ bad assets.
“The swing in growth is much larger in Russia” than its peers in the Group of 20, the IMF’s Russia mission said in a statement Monday. “This susceptibility to the global business cycle and to the attendant collapse in commodity prices reflects, to some extent, longstanding policy weaknesses.”
Russia’s economy contracted 9.5 percent in the first quarter and may shrink as much as eight percent this year, Economy Ministry Elvira Nabiullina said last month after the worst financial crisis since the Great Depression pummeled demand for the exports of the world’s biggest energy producer.
The government’s efforts to wean the economy off energy exports “exist only on paper,” President Dmitry Medvedev said on May 15. Energy, including oil and natural gas, accounted for nearly 70 percent of exports to the Baltic States and countries outside the former Soviet Union in the first two months of the year, according to the Federal Customs Service.
IMF mission head Poul Thomsen met with central bank Chairman Sergei Ignatiev on his latest visit, as well as Finance Minister Alexei Kudrin and First Deputy Prime Minister Igor Shuvalov who coordinates the government’s anti-crisis program.
“The central bank does not yet have a full picture of the situation in the banking system,” the IMF statement said. Bank Rossii needs to stress test small and medium-sized lenders and plans for recapitalizing banks must be “formalized,” it said.
The IMF called for a “more comprehensive assessment and determined policy,” otherwise banks may “struggle to adjust balance sheets for a prolonged period, with credit and counterparty concerns stifling credit expansion.”
As Russia seeks to lure foreign capital that could spur a recovery, its World Trade Organization accession bid “appears to be losing momentum,” the statement said.
“Long-term growth will become increasingly dependent on boosting investment,” the statement said.

TITLE: Quest for Challenges Brings Banker to St. Petersburg
AUTHOR: By Shura Collinson
PUBLISHER: Staff Writer
TEXT: Vytautas Buciunas could have become a racing driver, had he let his passion for his hobby dominate his career. Fortunately for Swedbank, he realized he had to choose between his promising career in banking and his time-consuming hobby, and now contents himself with visiting rallies as a spectator — though he admits it broke his heart to do so. 
Now the branch director of Swedbank in St. Petersburg, Buciunas, 33, was born and raised in Vilnius. Though he may have relinquished his passion for the world of motor sport, he has retained a love of adventure and has embraced the challenges his career has thrown at him so far.
Having graduated from the economic faculty of Vilnius University and worked for Hansa Leasing for seven years, Buciunas’ first major challenge came in 2004 when he was offered the job of opening Hansabank (now part of Swedbank) in the Russian exclave of Kaliningrad between Lithuania and Poland on the Baltic Sea. 
“It was an unexpected but interesting offer,” said Buciunas. “It was a big adventure, and big adventures lead to big business.”
Buciunas said that the move to Kaliningrad from Vilnius heralded the most interesting period of his life so far. 
“When you live in your native town, everything is very convenient, everything is nearby, you can relax. Kaliningrad was a big challenge. I didn’t really know anything about it, or know anyone there.
“When I arrived by car, all I had was the address of a hotel and the telephone numbers of two Lithuanian businessmen there whom I didn’t know,” he recalled. “That’s how it all started.”
The job entailed a considerable amount of responsibility, since Buciunas arrived alone with the task of opening the branch. Three years later, by the time he left for St. Petersburg, the branch was up and running with 70 employees, and now occupies more than five percent of the regional market. 
“The bank is doing well, so I’m proud of what I did,” he said. “But everything was ready really, it only needed fine tuning, so I wanted new experiences and challenges.”
Buciunas, who is married and has two children, said he was sad to leave Kaliningrad, and was left with only good impressions of the people and city.
“People in Kaliningrad are very kind, they are quick to welcome you. It’s a really friendly place,” he said. “The city is nice — small, quite green and pleasant.”
However, he did not need time to think when he was offered the position of branch director in St. Petersburg.
“The city is fantastic, I used to come regularly as a tourist and have always loved it,” he said. “The energy of the city matches my own. I had no doubts about coming here, and I knew what challenges were waiting for me here.”
Buciunas, who in 2007 completed a leadership program at France’s prestigious Insead business school, said that banking in Russia does not differ dramatically from practices in Europe and around the world.
“When I was working in Vilnius I had a totally different opinion of the Russian banking sector — I thought it was all about gangsters, cash on the table, all these myths,” he said. “But after working here for four-and-a-half years, I have been impressed. The level of management is high.
“The main difference here is the level of regulation. We saw from the beginning of the crisis that there was not enough regulation, so it’s not a negative difference.”
Buciunas said that he had discovered that the myths and stereotypes associated with doing business in Russia were far from reality when he started working here.
“Western people think that everything here is done through drinking vodka, visiting the banya and so on. These myths come from the Soviet era — normal businesspeople have an intensive working agenda. I have a good opinion of the businesspeople I work with.”
According to Buciunas, the banking sector is still unstable and overdue loans are increasing. “We’re still in the active fall stage of the crisis, and of course a lot more support will be needed from the state,” he said.
“The only good news is that banks are being forced to be more efficient, restructuring their business portfolios and changing what they can offer customers. There will be systematic changes in the banking sector — I would say that consolidation will continue and the government will have to continue its active support, otherwise there will be very bad social consequences.
“The other positive aspect is that people have stopped spending and begun saving. In recent years, people were spending far beyond their possibilities. The current situation should change people’s finances in a positive way — people should assess their possibilities,” he added.
“Overall, we are trying to be optimistic but realistic.”

TITLE: Canadian-Russian Group Makes Winning Bid for Opel
AUTHOR: By Nadia Popova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The government made no official comment on the winning bid by a consortium of Sberbank, GAZ and Canada’s Magna International to buy U.S.-controlled Opel in a deal that promises to give a huge boost to the Russian car industry.
But Prime Minister Vladimir Putin’s appearance at a church Saturday just hours after the sale was announced spoke volumes. Putin showed up driving his antique GAZ-21.
Putin drove the gray, Soviet-era Volga model to a foundation-laying ceremony for a Russian Orthodox church in the village of Usovo in the Moscow region. After the ceremony, Putin gave Russian Orthodox Patriarch Kirill a lift to his Novo-Ogaryovo residence.
A Putin spokesman denied that there was a link between Putin’s decision to drive the car and the multibillion-dollar sale, which will give Sberbank a 35 percent stake in Opel and GAZ the status of “industrial partner.” 
“Vladimir Vladimirovich’s driving of the Volga on Saturday had no connection with the Opel deal,” spokesman Dmitry Peskov said Sunday. “He usually drives it when he goes somewhere on his own business.”
But Putin has rarely been seen driving the car off Novo-Ogaryovo’s grounds, where he gave former U.S. President George W. Bush a ride shortly after acquiring the vehicle in 2005. 
In a country where leaders’ actions often speak louder than words, some saw Putin’s spin on Saturday as something of a victory lap.
“Putin must have driven the GAZ to symbolize Russia’s victory,” said Dmitry Oreshkin, an independent political analyst. “This kind of symbolism was used by the Soviet government. It may be cheered by some Russians but frowned upon by foreigners.”
The German government chose the Russian-Canadian consortium to buy General Motors-controlled Opel early Saturday, ending more than a month of tense negotiations brokered by German Chancellor Angela Merkel and overseen by U.S. President Barack Obama. The deal saves Opel from the planned bankruptcy of GM, which is expected to be filed Monday.
State-owned Sberbank said Saturday that the deal would give Russia’s car industry access to new technologies, while Oleg Deripaska’s GAZ said it wanted to organize the production of Opel cars at its plant in Nizhny Novgorod. 
The consortium’s biggest competitor was Italy’s Fiat, which called the talks “a Brazilian soap opera” and withdrew its bid just hours before the decision was announced.
In a sign of how high the stakes were, Italian Finance Minister Giulio Tremonti declared that Fiat had lost the bid just because it played by market rules, while the German economy minister offered his resignation. 
As part of the deal, Magna, a car parts producer, will get 20 percent of Opel while GM will keep 35 percent and Opel employees will get 10 percent. 
Magna will lend Opel 300 million euros ($424 million) to cover short-term needs on Tuesday, while the Canadian company and Sberbank are to invest 500 million to 700 million euros into Opel later. (For more details of the deal, see the table on p. 2.)
Magna co-chief executive officer Siegfried Wolf said he expected a final contract with GM within four to five weeks, Bloomberg reported. 
It was not immediately clear how much money Sberbank was ready to invest in Opel. Sberbank chief German Gref said Saturday that he saw the deal as a big opportunity for Russia’s car industry. 
“This is a great chance for Russia to get one of the most technologically advanced European carmakers at an unprecedented low price,” Gref told state-run Vesti television. 
“Such an asset would make it possible to restructure the Russian car industry,” he said. 
Gref gave no further details of the deal. A Sberbank spokeswoman declined further comment on Sunday. 
A GAZ spokeswoman said GAZ would need about nine months to retool its plant and plans to produce up to 180,000 Opel cars a year there beginning in 2010.
“We will keep our production facilities busy thanks to this,” said the spokeswoman, who spoke under condition of anonymity in line with company policy. “This will also allow us to rise to a higher technological level in production.” 
No specific Opel models have been chosen for production, which will be organized on the conveyor where the Volga Siber sedan is now produced, the spokeswoman said. 
The production of the model was launched in July but suspended several times since because of low demand. 
“It hasn’t been decided whether we will fully stop the production of the Volga Siber when we begin to make Opels or continue to produce it in parallel,” the spokeswoman said. 
The production site that GAZ wants to use was constructed by Magna. “It has 85 percent automated equipment that ideally will be completed with Opel’s technology,” the spokeswoman said. 
GAZ owner Deripaska bought a 18 percent stake in Magna for $1.54 billion in May 2007 but was forced to cede it to bankers in September of last year.
Magna said it also wanted to produce Opel cars. “We want to build Opel cars in Canada,” Magna chairman Frank Stronach told Toronto-based Globe and Mail. “If we don’t change the culture, North America’s got no chance to be in the automobile industry, absolutely no chance.” Magna will become Canada’s second-largest producer after the merger. 
Mikhail Pak, an analyst with Metropol Group, said Opel would be welcome on the Russia market. “In the economy class, it will become a competitor for Ford Focus and Honda Civic,” Pak said. “Magna will get a bigger share on the market in Russia by providing Opel service centers with car parts.”
Pak said Sberbank’s motives for participating in the deal may have been purely financial. “The bank may want to sell its share at a higher price later,” Pak said. 
Fiat withdrew its bid for Opel on Friday, saying in a statement that it hadn’t been provided with enough financial information and felt that last-minute additional funding requests could expose it to “unnecessary” risks. It pledged assets but no cash in its bid.
Fiat CEO Sergio Marchionne extended his criticism at a news conference Friday. “This process is taking on the air of a Brazilian soap opera,” he said in Montreal. 
Tremonti, the Italian finance minister, said late Friday that Fiat might have lost its bid because it played by market rules and didn’t ask for state support.
“Fiat did not ask the Italian government for anything,” Tremonti said on the state-run RAI TV channel. He said Fiat “went to Germany to play according to market rules.”
Italian Prime Minister Silvio Berlusconi “could have done a lot using his influence” had Fiat approached him for help, Tremonti said. 
Further underlining the drama of the competition, German Economy Minister Karl-Theodor zu Guttenberg offered his resignation over the government’s decision to pick Magna over Fiat, news reports said. Guttenberg did not support the sale to Magna because of taxpayer risk associated with the accompanying loan provided by the German government. 
Merkel said Saturday that Obama had played a key role in influencing the outcome of the negotiations. “I spoke on the phone with the American president yesterday,” Merkel said at a news conference Saturday. “That conversation clearly influenced the negotiations last night.”

<strong>The Opel Deal</strong>

Germany has clinched a deal with Canadian auto parts group Magna, General Motors and the U.S. government to save carmaker Opel from the imminent bankruptcy of its U.S. parent. Below are the key developments in the deal.
Cornerstones Of Deal
• Magna will take over parts of the new European Opel activities from parent General Motors. This is, however, so far only included in a letter of intent and legally not yet binding. Magna could, in theory, still bail out.
• Germany is to provide 4.5 billion euros in loan guarantees, including a bridge loan worth up to of 1.5 billion euros from state banks, which will be evenly divided by the federal government on one side and the four state governments with Opel plants on the other: Hesse, North Rhine-Westphalia, Thuringia and Rhineland-Palatinate.
• Magna will loan Opel 300 million euros to cover short-term liquidity needs. Longer-term, Magna and partner Sberbank plan to inject 500 million to 700 million euros into Opel. None of the funds would be paid to GM.
• A trustee scheme to prevent the parts of Opel in Europe that can survive from getting caught in any turbulence over GM. The trustee will be led by five people — two picked by the German government and two from U.S. side. A fifth neutral representative will be included. The most important parts of GM’s European operations will be put into the trustee, which will seek investors and take key decisions. It will have to be dissolved by 2014 at the latest.
Ownership Structure
The ownership structure of the new company could, according to Magna officials, look like this: Magna 20 percent, Sberbank 35 percent, 35 percent for GM and 10 percent in the hands of Opel staff or Opel car dealers.
Carmaker GAZ will serve as an industrial partner for Opel. Magna plans to gain 20 percent of the Russian market in the short term before expanding this to 1 million units, including light commercial vehicles. GAZ’s biggest creditor is Sberbank.
No Dividends
The newly restructured German Adam Opel will not pay any dividends until state-backed loans to save the carmaker are repaid, a German government official said.
Opel’s Main Plants in Europe
• Ruesselsheim, Germany: About 15,600 employees build the Vectra and Signum models as well as the new Insignia. The site also houses a technical center that carries out research and development for the entire GM group.
• Bochum, Germany: A staff of some 5,200 produced close to 200,000 Astra compacts and Astra-based Zafira vans last year.
• Eisenach, Germany: About 1,800 workers assemble three-door Corsa subcompacts at the plant.
• Kaiserslautern, Germany: About 3,500 employees manufacture four-cylinder petrol and diesel engines and components in a plant situated in Rhineland-Palatinate.
• Zaragoza, Spain: The factory built 423,000 vehicles last year, consisting of five-door Corsas, the Meriva minivan based on Corsa architecture and the Combo delivery van.
• Gliwice, Poland: Built about 170,000 vehicles last year, mainly Zafiras as well as Astras, making it a chief rival of Bochum for production volume.
• Antwerp, Belgium: Some 133,000 Astras were built here. Often considered to be one of the top candidates for closure.
• Ellesmere Port, Britain: The site assembled more than 110,000 Astras in 2008 under the Vauxhall badge, the British version of the Opel brand.
• Luton, Britain: Built about 60,000 Vivaro delivery vans last year, a larger sister to the Combo used for commercial purposes. Like Antwerp, a potential candidate for closure.
— Reuters

TITLE: VTB Eases Worries On Share Issue
PUBLISHER: The St. Petersburg Times
TEXT: VTB will most likely not sell all of the shares that it planned to offer last fall, chief financial officer Nikolai Tsekhomsky said at a meeting with minority shareholders Friday.
The nine trillion shares that the bank plans to issue “includes reserve shares,” Tsekhomsky said. “It shouldn’t frighten you. Most likely, not all of these shares will be placed.”
He said the shares, which are to be priced at one kopek each, would probably be issued in September or October.
The government has allocated 200 billion rubles ($6.5 billion) to buy shares in VTB, Russia’s second-biggest lender, to help the bank meet capital requirements in an environment of deteriorating loan portfolio quality and rising bad loan provisions.
Tsekhomsky also said top executives’ year-end bonuses would be tied to stock performance. “During the course of the year, this system of motivating top management will be tested,” he said. 
The bank was one of several state-controlled companies, including Rosneft and Sberbank, that went public with the help of a so-called “people’s IPO” — where a portion of shares were made available to individual investors — over the last few years.
The shares were issued at 13.6 kopeks a piece in May 2007, raising $8 billion. VTB’s shares have since fallen dramatically, closing Friday at 4.4 kopeks, and investors have clamored for the government to refund their losses.

TITLE: Gazprom Concentrates on LNG Market
AUTHOR: By Anatoly Medetsky
PUBLISHER: The St. Petersburg Times
TEXT: Gazprom has announced that it is speeding up its plans to sell more gas by tankers to a wider range of customers as it faces a sharp drop in demand from its traditional consumers in Europe.
“Trends on the global gas markets create conditions for Gazprom to increase the pace of producing and supplying liquefied natural gas,” the company said in a statement late Thursday.
Gazprom’s management board ordered the company’s engineering divisions to work faster in studying options for building an LNG plant in the Far East, the statement said. The board also ordered the engineers to report on the possibility of building a long-discussed LNG plant that would use prospective gas from the Yamal Peninsula, saying for the first time that the plant would take gas from independent producers.
Privately held Novatek, the second-largest Russian gas company, announced days before that it had acquired a large gas deposit in Yamal from Gennady Timchenko, an acquaintance of Prime Minister Vladimir Putin’s. Timchenko’s Volga Resources investment company said shortly afterward that it had increased its stake in Novatek to more than 18 percent.
LNG plants chill gas into a liquid state for shipment by special tankers. A Gazprom spokeswoman said Friday that she was unaware of the deadlines for submitting the reports on either plant proposal.
Gazprom is headed for a major drop in output this year. Deputy chief executive Alexander Ananenkov has predicted that production could fall 18 percent from last year’s level. Exports to Europe, the company’s principal source of revenue, were down 57 percent in January through April, compared with the same period last year.
European customers this year have begun to prefer buying cheaper LNG in spot trading from Gazprom’s competitors because contracts with the Russian company fix prices for pipeline gas to those of oil six to nine months ago, when it hovered at record high levels.
The Gazprom statement had other details about its plan to build the LNG plant in Yamal, including that it was considering gas from the Tambeiskaya group of fields. Novatek’s new field is part of the group.
A cheaper option for Gazprom to counter slumping demand would be to offer a 20 percent discount on pipeline gas to European buyers, said Mikhail Korchemkin, director of East European Gas Analysis, a Pennsylvania-based consulting firm. If it had done so earlier this year, it would have kept sales at last year’s level and earned better profits, he said. “It’s like making a fast nickel instead of a slow dime,” he said.
In addition, cheap LNG shipments from Qatar to Europe would be Gazprom’s biggest competition on the market, he said.
Gazprom’s comments about an LNG plant in the Far East likely refer to the idea of building a facility near Vladivostok. The company signed a memorandum of understanding with Japan’s Itochu Corporation and Japan Petroleum Exploration Company, or Japex, in May to study the option.
The plant would provide lower profits than the plant that Gazprom co-owns with Shell, Mitsui and Mitsubishi as part of the Sakhalin-2 project, Korchemkin said.

TITLE: Poll Shows People Losing Confidence in Government
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russians are losing faith in the government’s ability to lift the country out of its economic crisis, though their dissatisfaction doesn’t extend to the president or prime minister, a poll shows.
Twenty-nine percent of respondents said the government was capable of improving their lives in the near future, down from 37 percent in May 2008, according to the poll. Thirty-two percent said the government was incapable of making positive changes, compared with 25 percent last May.
President Dmitry Medvedev’s approval rating rose to 72 percent in May, up four percentage points from the month before and two points from when he took office a year earlier, a second poll shows. Prime Minister Vladimir Putin’s approval rating rose two percentage points to 78 percent from a month earlier.
Russia’s economy shrank 9.5 percent in the first quarter and may slump as much as eight percent in 2009, Economy Minister Elvira Nabiullina said last month. Unemployment reached 10.2 percent, the highest rate in more than eight years, in April, the Federal Statistics Service said. Medvedev and Putin have repeatedly said the government won’t cut social spending as the country heads toward its first recession in a decade.
Forty-two percent of respondents said the country was “moving in the right direction,” compared with 59 percent a year earlier. Fifty-four percent of respondents cited rising inflation and falling incomes as the main problems the government was failing to tackle, up from 36 percent in 2000, when Putin’s presidency began.
The Moscow-based Levada Center conducted both polls of 1,600 people on May 22-26. They had margins of error of 3.4 percentage points.

TITLE: Production Industry Looks Brighter
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russia’s manufacturing industry contracted at the slowest pace in seven months in May as a decline in new export orders eased and companies cut staff at a weaker pace, VTB Capital said.
VTB’s Purchasing Managers’ Index rose to 45.3 last month from 43.4 in April, the Moscow-based bank said in an e-mailed statement Monday. A reading below 50 signals a contraction. The bank surveyed 300 purchasing executives.
The report “provided further evidence that the second quarter will see a much slower contraction than that registered in the first three months of 2009,” VTB said.
The manufacturing PMI has been negative for 10 months, compared with seven successive declines during the 1998 economic collapse, when the government defaulted on $40 billion of debt and devalued the ruble.
“Underpinning the ongoing contraction in output was a sustained fall in incoming new work in May,” VTB’s report said. “Anecdotal evidence linked lower receipts of new business to a combination of subdued underlying demand and difficulties experienced by clients in securing sufficient credit.”

TITLE: Cuba of the East
AUTHOR: By Charles Tannock
TEXT: The European Union recently embarked on a policy of “constructive engagement” with Belarus. None too soon. Previously, EU policy was to isolate Belarus, which itself was seeking isolation. 
That policy achieved little more than bolstering the country’s authoritarian leader, President Alexander Lukashenko. Belatedly and somewhat reluctantly, EU leaders have now accepted that they need to deal pragmatically with Lukashenko if they want to promote reform in Belarus and shift the country from its tight orbit around Russia. 
This realization does not mean that Europe should turn a blind eye to the nature of his regime. EU members are rightfully concerned about human rights in a place dubbed by some “the Cuba of the East.” Political repression and press restrictions remain common in Belarus. But the same — and perhaps worse — can be said about China, yet the EU has invested much political capital in a strategic, multifaceted partnership with its rulers. 
Belarus is the missing link in Eastern Europe’s post-Soviet democratization and reintegration. European officials have been at pains to prevent the EU’s enlargement from creating new dividing lines between Belarus and its neighbors to the west and north — Poland, Lithuania, and Latvia – that joined the union in 2004. In fact, these countries are the biggest advocates of improving relations with Belarus because of their shared historical, commercial and familial links. 
The EU has also suddenly awakened to the need for a common external energy security policy, not least to diversify away from Russian supplies. Given that 20 percent of Russian gas destined for Europe passes through Belarus, a stable and structured relationship with its government has become a priority. In turn, Lukashenko has decided for economic reasons that his country needs EU support and can no longer depend exclusively on Moscow without paying a heavy political price. 
But the thaw in EU-Belarus relations needs to be based on reciprocal, permanent steps. After all, no EU strategic partnership is unconditional. But the EU must be ready to respond to the perceptible momentum in Belarus in favor of domestic reform, greater openness and respect for fundamental democratic rights. 
For example, the recent release of political prisoners in Belarus removed one of the key reasons for the EU’s hostility toward Lukashenko. This gesture, together with the free publication of an opposition newspaper, is precisely the kind of move that will entice EU interest in an enhanced relationship. Similarly, Belarus must in turn respond positively to the EU’s steps to normalize relations, one of which should be rescinding travel restrictions against Lukashenko and other senior officials. 
Of course, releasing political prisoners does not excuse Lukashenko’s past excesses. But the political opposition to Lukashenko is hopelessly divided, plagued by infighting and incapable of mounting any serious challenge to his rule. Moreover, Lukashenko appears to be genuinely popular. The country’s rural and elderly population appears to prize economic stability and social order over democratic development, not unlike in other former Soviet republics. 
Some observers believe that Lukashenko is making cynical, calculated overtures to the West in order to elicit more support from Russia, particularly at a time of economic crisis. Although Lukashenko is probably playing a divide-and-rule game, he must eventually make a choice. 
The closer he moves to the EU, the greater the alarm in the Kremlin. Russia is hypersensitive about challenges to its influence in what it calls its “near abroad” of former Soviet satellites. The August war in Georgia and the Kremlin’s habitual efforts to destabilize Ukraine’s pro-Western government serve as warnings for what Lukashenko can expect if he moves precipitately. 
With Belarus’ economy crumbling and its export markets withering, the Kremlin is looking for ways to exploit Lukashenko’s weakness and vulnerability. For example, in November Moscow sent a $1 billion stabilization loan to Minsk. In March, Belarus received another $500 million loan from Russia, and an additional $500 million tranche was discussed Thursday during high-level talks in Minsk. Russia was also to discuss at the meeting the construction of Belarus’ first nuclear power plant with Rosatom’s assistance. But in return for the loans and technical assistance, Belarus can expect to pay a heavy political price — for example, being forced to accept the Russian ruble, at least as a reserve currency. 
Russia could also insist on greater military cooperation, including the deployment of its missiles in Belarus in response to the planned U.S. missile defense system in Poland and the Czech Republic. Prime Minister Vladimir Putin and President Dmitry Medvedev may also insist on Belarus recognizing the independence of Abkhazia and South Ossetia, knowing that this would surely drive a wedge between Belarus and the EU and bury many of the planned joint projects.
Belarus’ reliance on cheap energy supplies from Russia could also be used as leverage. But with Russia’s economy contracting, Belarus is perhaps in a stronger position than it realizes. The country needs greater access to global markets and eventual support for admission to the World Trade Organization, which is one of the EU’s greatest selling points and one of the Kremlin’s fundamental weaknesses. 
Now is the time for EU leaders to present Lukashenko with a clear alternative to dependence on Russia. The first step in this process was the inclusion of Belarus in the EU’s Eastern Partnership, a new framework for relations with six former Soviet republics.
After years of atrophy, EU-Belarussian relations finally offer some promise for the future. Much responsibility rests with Lukashenko, but the EU must make every effort to coax Belarus into the family of European nations where it belongs. 

Charles Tannock is the British Conservative foreign affairs spokesman in the European Parliament and vice chairman of the European Parliament delegation for relations with Ukraine. © Project Syndicate

TITLE: Looking for the Bright Side in Banking
AUTHOR: By Anna Shcherbakova
TEXT: The beginning of June is a good time to talk about banks, and not only because it heralds the annual International Banking Congress that has taken place in St. Petersburg since 1991. It’s also a way to look for some good or at least clear signs amid the current uncertainty of the economy as a whole. 
There are not many rosy outlooks, despite the promise of Gennady Melikyan, deputy chairman of the Central Bank, that “nothing terrible will happen.” Overdue loans, which currently stand at four percent, will increase to approximately 10 or maximum 13 percent by the end of the year, which is not good, but is far from fatal, according to the Central Bank’s forecast. 
Indeed, bankers look discouraged. Many of them salvaged their assets during the very shaky autumn. Now they have to sit on the cash instead of gaining from it. Some of their most active over-credited clients are bankrupt, and the companies that are seeking money are unreliable borrowers. Some companies that are short of financial resources have reduced their working capital as well as their operations. 
The situation has turned into a vicious circle in which banks are afraid to lend money to businesses, whose financial state is in turn getting worse due to limited access to credit resources. 
Only cowards repay their loans in times of crisis, according to a popular joke among the entrepreneurs these days. But it does not draw a smile from bankers. 
The unpaid debts of bankrupt or struggling companies are a huge problem for bankers. Ironically, it gets worse when good borrowers repay loans, since the proportion of bad debts in the loan portfolio then increases. Reducing outstanding loans is possible only if the portfolio does not grow. 
Loans to businesses increased by just 5.3 percent from January to April, but without the huge loans issued by state-owned Sberbank, there would have been a 0.4 percent decline. Even the largest, most stable banks say that their portfolios, which grew steadily during recent years, are stagnant, and even the most optimistic bankers do not expect an increase of more than 10 percent by the end of the year. 
Companies that are desperately seeking money have to have enough property to use as collateral. Real estate is valued with a good 50 percent discount, according to companies. However, they are coming up with new ways to influence the banks. The latest popular trick is to get a letter from the city administration in support of the potential borrowers. Although these letters are signed by high-ranking officials, they cannot serve as a guarantee from the city in the event that the borrower goes bankrupt, and will not help the bank to get their money back. 
Such letters do not bring money to the company, said the appalled manager of a foreign bank, who claims he put the letter from the city administration straight into the waste-paper basket. 
His colleague from a bank with a state-owned share was also disgusted, but said that his bank answers every “letter of recommendation” it gets from officials, explaining where the weaknesses of the recommended companies lie, and why his bank is not able to lend them money. 

Anna Shcherbakova is the St. Petersburg bureau head of business daily Vedomosti.

TITLE: Police: Group of 400 Abducted in Pakistan
TEXT: ISLAMABAD — Police say suspected militants have abducted some 400 students, staff members and relatives driving away from a school in a troubled tribal region in northwest Pakistan.
Police official Meer Sardar said the mass abduction occurred about 30 kilometers from Razmak Cadet College in North Waziristan.
The people were leaving the school area after a phone call from a man they believed to be a political official warned them to get out.
A large group of suspected militants forced around 30 vehicles carrying the group to stop before leading them away.
Sardar says around 17 people in one vehicle managed to escape and report the incident to the police.
North Waziristan is a major Taliban stronghold.
Pakistan’s army said it lifted curfews Monday in several parts of the Swat Valley as it hunted Taliban militants in the region, while insurgents killed two soldiers in a tribal region that could be the next front in the northwest military offensive.
Elsewhere in the volatile region bordering Afghanistan, a bomb blast killed at least two people.
Pakistan launched an offensive against militants in Swat and surrounding districts a month ago after they violated the terms of a cease-fire and advanced into a region close to the capital, Islamabad. The U.S. has praised the operation, which it considers a key test of Pakistani resolve to flush out militants implicated in attacks on Western forces in Afghanistan.
Although the military has captured Swat’s main town, Mingora, insurgents still control some areas in the valley. However, a spate of clashes between the Taliban and troops in the South Waziristan tribal region have already prompted speculation the military will extend its offensive beyond Swat.
South Waziristan is the main base for Pakistani Taliban chief Baitullah Mehsud.
In the latest fighting there, militants firing rockets killed two soldiers, the army said in a statement Monday. At least 25 militants and seven troops died in other clashes in that region over the weekend.
With the army still facing challenges in Swat, opening a new front in South Waziristan appears unlikely for now.
Already, large numbers of families have begun leaving South Waziristan amid rumors of an imminent operation.

TITLE: U.K. Singing Star Susan Boyle 
Seeks Treatment
AUTHOR: By Jill Lawless
PUBLISHER: The Associated Press
TEXT: LONDON — Singer Susan Boyle was being treated for exhaustion at a mental health clinic Monday after taking second place in a TV talent competition that turned the humble church volunteer into a global star, the show’s producers and a newspaper said.
Boyle was admitted to London’s Priory Clinic on Sunday, a day after she finished behind a male dance group on the show “Britain’s Got Talent,” the Sun newspaper reported.
“Nobody has had to put up with the kind of attention Susan has. Nobody could have predicted it,” one of the show’s judges, Piers Morgan, told breakfast TV show GMTV. “It has been crazy, she has gone from anonymity to being the most downloaded woman in history.”
Boyle was favorite to win the show’s finals — watched by more than 19 million people — after a clip from her first appearance became the fifth most-watched in YouTube history, viewed more than 220 million times.
The discovery that a woman from a small Scottish town was capable of singing very well on a national stage turned Boyle into a modern-day Cinderella. On Oprah Winfrey’s U.S. television show, the singer had said she was “loving every second” of her unexpected stardom.
But much of the media storm surrounding her debut was laced with snide comments about her looks, her social awkwardness and her remark that she had never been kissed.
Scotland’s First Minister Alex Salmond said there were “elements of a press who like nothing better than to build people up and then drag them down.”

TITLE: Missing Jet Hit Storms Flying Over Atlantic
AUTHOR: By Alan Clendenning and Greg Keller
TEXT: SAO PAULO — A missing Air France jet carrying 228 people from Rio de Janeiro to Paris encountered lightning and strong thunderstorms over the Atlantic Ocean, officials said Monday. Brazil began a search mission off its northeastern coast.
Chief Air France spokesman Francois Brousse said “it is possible” that the plane was hit by lightning.
Air France Flight 447, an Airbus A330, left Rio on Sunday at 7 p.m. local time with 216 passengers and 12 crew members on board, company spokeswoman Brigitte Barrand.
About four hours later, the plane sent an automatic signal indicating electrical problems while going through strong turbulence, Air France said.
The plane “crossed through a thunderous zone with strong turbulence” at 0200 GMT Monday (10 p.m. EDT Sunday). An automatic message was received fourteen minutes later “signaling electrical circuit malfunction.”
Brazil’s Air Force said the last contact it had with the Air France jet was at 0136 GMT (9:30 p.m. EDT Sunday), but did not say where the plane was at that time.
Brazil’s air force was searching near the archipelago of Fernando de Noronha, about 300 kilometers (180 miles) northeast of the coastal city of Natal, a spokesman said, speaking on condition of anonymity in keeping with department policy.
The region is about 1,500 miles northeast of Rio.
The head of investigation and accident prevention for Brazil’s Civil Aeronautics Agency, Douglas Ferreira Machado, told Brazil’s Globo TV that he believes the plane must have left Brazilian waters and could have been near the coast of Africa by the time contact was lost, based on the speed it was traveling.
“It’s going to take a long time to carry out this search,” he said. “It could be a long, sad story. The black box will be at the bottom of the sea.”
Air France-KLM CEO Pierre-Henri Gourgeon, at a news conference at Charles de Gaulle Airport north of Paris, said the pilot had 11,000 hours of flying experience, including 1,700 hours flying this aircraft. No name was released.
Aviation experts said the risk the plane was brought down by lightning was slim.
“Lightning issues have been considered since the beginning of aviation. They were far more prevalent when aircraft operated at low altitudes. They are less common now since it’s easier to avoid thunderstorms,” said Bill Voss, president and CEO of Flight Safety Foundation, Alexandria, Va.
He said planes have specific measures built in to help dissipate electricity along the aircraft’s skin.
“I cannot recall any examples in recent history of aircraft being brought down by lightning,” he told The Associated Press.
Experts said it was clear the plane was no longer in the air, due to the amount of fuel it would have been carrying.