SOURCE: The St. Petersburg Times
DATE: Issue #1487 (49), Tuesday, June 30, 2009
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TITLE: Shell      Welcomes Putin’s    Proposal
AUTHOR: By Nadia Popova
PUBLISHER: The St. Petersburg Times
TEXT: Prime Minister Vladimir Putin offered Royal Dutch Shell a role in the Sakhalin-3 and Sakhalin-4 natural gas projects on Saturday, just 2 1/2 years after Europe’s biggest oil producer was forced to cede control of Sakhalin-2 to Gazprom. 
Shell welcomed the proposal, which analysts said illustrated Gazprom’s need for technologies and money to develop the difficult offshore fields rather than a government change of heart toward foreign investors. 
“We consider it possible to continue a partnership with Shell on other fields, namely Sakhalin-3 and Sakhalin-4,” Putin told Shell chief executive Jeroen van der Veer during a meeting Saturday at his Novo-Ogaryovo residence in the Moscow region. 
“Your company’s competence and experience will be in demand in the remote and deep sea offshore areas,” he said, according to a transcript posted on the Kremlin’s web site. 
Van der Veer, whose company now controls 27.5 percent of Sakhalin-2, said Shell was ready to begin work on the proposed projects. “We are ready to begin work on Sakhalin-3 and Sakhalin-4 if there is such an opportunity,” van der Veer told Putin. “There are ideal conditions for that now from the economic viewpoint — prices in construction are quite low, and the expenses will be lower correspondingly.” 
Gazprom took control of Sakhalin-2 from Shell in 2006 after federal regulators threatened to close the $22 billion project on environmental grounds. In 2007, Shell sold its controlling stake in the project to Gazprom for $7.5 billion. 
Shell spokesman Maxim Shoob said Sunday that no official decision had been made on his company’s participation but Sakhalin-3 looked appealing. 
“We want to have Gazprom as a partner in the Sakhalin-3 project, but it’s too early to talk about the form of this partnership,” Shoob said, declining to comment on Sakhalin-4. 
“In complex, large oil and gas projects like those in Sakhalin, we are interested in the entire value chain, which may include the exploration, building all kinds of infrastructure like pipes and sea platforms and the extraction,” he said by telephone. 
Gazprom spokesman Sergei Kupriyanov said Sunday that no talks have been held between Gazprom and Shell on Sakhalin-3 or Sakhalin-4. 
Gazprom could develop the Sakhalin-3 fields of Kirinskoye, Ayashskoye and Eastern Odoptinskoye, which Gazprom just received licenses for last month, said Valery Nesterov, an oil analyst with Troika Dialog. 
Sakhalin-4 is a project that British Petroleum and Rosneft gave up on in March when drilling came up empty. Rosneft backed out of its license for the field afterward. 
Gazprom and Shell declined to specify Sunday which fields they might work on together. Shoob also said it was too early to discuss how much Shell might invest in Sakhalin-3 and Sakhalin-4. 
Putin’s spokesman Dmitry Peskov said Shell had the know-how that Gazprom needed to tap the offshore fields and praised its track record in Russia. 
“Shell has made a good showing in Russia,” Peskov said Sunday. “It knows the market well, it has worked with Russian companies. And it has the technologies we need to develop Sakhalin-3 and Sakhalin-4.” 
Peskov said Shell could cooperate with Gazprom and other companies in the projects. He dismissed the idea that the government might be more open to foreign investment in the energy sector now than in 2006, when Shell was pushed out of Sakhalin-2. 
“Russia has always been open to foreign investors,” Peskov said. 
Shoob said, however, that Shell has recently seen more cooperation and openness from the Russian government. “We can see that the Russian government has been paying more attention to foreign investors in the oil and gas sector,” Shoob said. “The government seems to understand that Russia does need the best internationally available technologies to develop the innovative economy. 
“Developing Sakhalin is like sending a person to the moon — it can’t help but be done through international cooperation,” Shoob added. 
Ronald Smith, chief strategist with Alfa Bank, said not much has changed since the Sakhalin-2 fiasco. “The state’s goal is the same as in 2006, which is to have a Russian company in majority control in any major project but to have the substantial participation of international majors who have experience in technology, either in LNG or offshore,” he said. 
Nesterov noted that more than a third of the world’s oil is extracted offshore, but only 1.5 percent of Russia’s oil is extracted that way. 
Nesterov said Shell might either create a joint venture with Gazprom to work on Sakhalin-3 and Sakhalin-4 or use the model developed for the Shtokman gas field. To develop Shtokman, Gazprom, Total and StatoilHydro established Shtokman Development AG, a special purpose company in which Gazprom owns half and the other investors have about a quarter each. 
Neither Putin nor van der Veer specified Saturday what kind of partnerships on Sakhalin-3 and Sakhalin-4 projects were discussed. 
“I think it’s a natural progress now, having built Sakhalin-2,” Shell chief financial officer Peter Voser, who is going to take over from van der Veer this Wednesday, said when asked about the specifics, Reuters reported. 
Van der Veer came to Moscow to introduce Voser as his successor — and told Putin that the two could communicate in German, which Putin learned as a KGB spy in Germany in the 1980s. 
“Mr. Voser speaks German as well as you do, so you will be able to speak to him directly,” van der Veer said. “He is from the German-speaking part of Switzerland. You have many times heard my bad German. It will not be repeated with Peter Voser.” 
Putin said he wasn’t quite sure he would understand Voser. “The Swiss-accented German is not easier, I assure you,” Putin said. “But I can understand particular sentences in the Swiss dialect.” 
Shell also signed a cooperation agreement with Sovcomflot, the state-run owner of Russia’s largest shipping fleet, to provide transport for liquefied natural gas produced on Sakhalin Island and the Yamal Peninsula. Shell launched Russia’s first liquefied natural gas plant in Sakhalin in cooperation with Gazprom in February. 
Saturday’s developments were preceded by France’s Total and Novatek, Russia’s largest independent gas producer, sealing a $900 million project to develop a Siberian gas field last Wednesday. Total and Novatek signed a cooperation agreement in May 2007 and had been trying to partner up on projects for the past two years without success.

TITLE: Medvedev Inks ‘Milestone’ Deal in Baku
PUBLISHER: Bloomberg
TEXT: BAKU — President Dmitry Medvedev sealed a “milestone” deal to buy natural gas from Azerbaijan, as Russia seeks to thwart European efforts to diversify energy suppliers.
Gazprom, Russia’s largest energy producer, agreed to buy 500 million cubic meters of Azeri gas next year, during a visit to Baku by Medvedev on Monday.
Azerbaijan, a former Soviet republic that imported Russian gas until 2007, is ramping up production of the fuel as it develops its export potential. Russia, the European Union, Iran and even Israel are vying to lock in future supplies as the Caspian country plans to open the second phase of the Shah Deniz field as early as 2014.
Monday’s agreement is a “milestone” for future cooperation, Medvedev said after meeting his counterpart Ilham Aliyev, who said the agreement “turns the page” in relations with Russia. When Gazprom threatened to more than double gas prices in December 2006, Aliyev halted imports and used fuel oil instead to supply power plants.
Gazprom will get priority treatment when the State Oil Co. of Azerbaijan determines the buyers for the offshore field, said Alexei Miller, chief executive officer of the Russian company. Azerbaijan’s gas production will rise 11 percent to 30 billion cubic meters next year, Aliyev said.
Azerbaijan is reviewing bids for future gas volumes from companies seeking to bring Caspian energy to Europe via pipelines that bypass Russia. 
The biggest project, Nabucco, depends on Shah Deniz gas if it is to start deliveries in 2014.
Gazprom is bidding to buy up all excess gas from Caspian producers to maintain its monopoly on exports from former Soviet republics to Europe.

TITLE: Critics Fear Rise in Illegal Gambling Under Casino Ban
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Tuesday sees the last day of legal operations for all casinos and gambling centers in Russia. The Kremlin has launched a reform that involves setting up four large gambling zones in the Primorye region, Altai region, Kaliningrad Oblast and Azov region (the area connecting the Rostov Oblast and Krasnodar region). According to the federal law aimed at regulating and putting in order Russia’s vast gambling industry, all casinos in the country must close as of July 1, 2009 and reopen in one of the specially designated areas.
For St. Petersburg, this means closing down a total of 109 casinos. According to official statistics, the city’s gambling industry employs between 10,000 and 12,000 people.
The gambling industry has been a modest contributor to the city’s coffers. In 2008, tax revenues reached around 3.5 billon rubles. “We are talking about one percent of the city budget,” said Lidiya Mamon, head of City Hall’s department of state-controlled entrepreneurial activities, adding that in the first half of 2009, tax revenues from the industry decreased — totaling 1.2 billion rubles — as some casinos closed down ahead of the start of the reforms, while others have changed their businesses and invested elsewhere.
“We are hoping to see cafes, restaurants, shops and other attractive places in the vacant spots,” said Mamon. “Rental revenues from this retail space will compensate for the loss of the gambling money.”
Casinos and gambling centers occupy 127,000 square meters of commercial space in St. Petersburg.
But not all casinos appear to be willing to leave. Instead, they are disguising their premises as lottery centers. The Russian law on lotteries is at present full of loopholes and so vague that it does not even contain a consistent description of what constitutes lottery facilities. Some businessmen are using this lack of legal clarity to their short-term advantage, classifying slot-machines and other facilities as lottery systems.
Critics speculate that the law will only result in a massive boost of illegally operating private gambling houses. They say few businesses will risk relocation during the instability of the crisis, nor would they find it worthwhile investing far from their hometowns.
Furthermore, it is argued that few Russians would find it appealing to travel to gambling zones and would rather seek a local underground venue.
Sergei Shatalov, deputy Finance Minister of Russia, said the allocated zones are not yet ready to receive an avalanche of gamblers and gambling businesses. They are suffering from the economic crisis, and there is no infrastructure in these areas to facilitate the smooth transfer of hundreds of casinos.
Until the zones begin to function as intended, Russia will find itself in a situation where no legal gambling businesses will exist. Shatalov refused to estimate how long such a period could last.
Nationwide, it is expected that the gambling industry reform will leave over 400,000 people out of a job.
The reform’s key ideologist is Prime Minister Vladimir Putin, who signed the law back in his tenure as Russia’s president. The idea was to give Russia’s vast and chaotic gambling business some kind of frame and structure. Ultimately, the plan aims to create Russian versions of international gambling Meccas, such as Las Vegas and Monaco.
Governments of the regions that are due to host the gambling zones have put a brave face on the matter and speak optimistically about the future, while emphasizing that they rely heavily on state support.
Alexandra Smirnova, the economic minister of the Kaliningrad region, said that “the initial skepticism that existed in regard to the plan to create a gambling zone on the Baltic coast has vanished.”
“The federal authorities have convinced both the regions and businesses that the project is highly attractive and is bound to be a real success,” Smirnova told Interfax news agency.
The Kaliningrad gambling zone, tentatively titled Yantarnaya, has ambitions to take advantage of Kaliningrad’s winning location — the Russian exclave is surrounded by EU states — and attract international visitors. Smirnova said the city administration is working with the federal government to develop a series of proposals that would facilitate the visa regime with the EU states for tourists traveling in order to gamble.

TITLE: Group Claims Responsibility For Attack
AUTHOR: By Mike Eckel
PUBLISHER: The Associated Press
TEXT: A Chechen terrorist group with ties to the late warlord Shamil Basayev claimed responsibility for the suicide bombing attack on Ingush President Yunus-Bek Yevkurov that killed three, according to a statement posted on a rebel-linked web site Sunday.
The group, which calls itself the Riyadus Salikhin Martyrs’ Brigade, said it staged last week’s attack on Yevkurov because of his support for Kremlin policies and because of his role in the second war in Chechnya.
“This operation has yet again showed the Kremlin and its slaves in the Caucasus that the mujahadeen are the legal authorities of this land, and we will never accept the enemies’ laws and its occupation,” it said. 
It was impossible to confirm the statement. Law enforcement authorities refused to comment on the statement.
The suicide bombing hit a convoy that Yevkurov was traveling with last Monday. Two bodyguards were killed and a third bodyguard, Yevkurov’s cousin, died Saturday from his wounds.
Yevkurov, who was a military intelligence officer before being tapped by the Kremlin as Ingush president, remains in serious but stable condition in a Moscow hospital.
Until 2006, the Riyadus Salikhin Martyrs’ Brigade — which also been known as the Reconnaissance and Sabotage Battalion of Chechen Martyrs — was headed by Basayev, a longtime rebel Chechen leader who was behind many of the worst terror attacks to hit Russia.

TITLE: NATO Relations Resumed
AUTHOR: James G. Neuger
PUBLISHER: Bloomberg
TEXT: MOSCOW — NATO on Saturday agreed to resume cooperation with the Russian military, counting on the Kremlin’s help in shipping supplies to Western forces battling the Taliban in Afghanistan.
Foreign ministers from the two sides met for the first time since Russia’s five-day war with Georgia last year, taking a step in President Barack Obama’s “reset” of U.S.-Russian ties.
Western opposition to Russia’s treatment of Georgia will not “bring the whole NATO-Russia Council train to a halt,” North Atlantic Treaty Organization Secretary General Jaap de Hoop Scheffer told reporters Saturday in Corfu, Greece. “Russia needs NATO, and NATO needs Russia.”
The meeting marked a final break with the “no business as usual” policy imposed by the U.S.-led alliance after the Georgia war and set the stage for Obama’s trip to Moscow next month to solicit Russian help on arms control, Afghanistan and containing Iran’s nuclear program.
In Afghanistan, NATO is fighting Islamic militants with roots in the rebel forces that drove out the Soviet army in the 1980s with American help.
NATO already hauls non-military cargoes across the Russian steppe for its 61,000 troops in Afghanistan. De Hoop Scheffer said he won’t rule out Russia allowing “lethal” shipments as well.
The 28-nation alliance also wants Russia to send a warship back to the Mediterranean Sea to join a NATO fleet that monitors suspicious vessels. Russia pulled out of the mission when NATO suspended ties last August.
“I do hope that there will be Russian participation again,” De Hoop Scheffer said. A more distant prospect, he said, would be Russian involvement in NATO’s counter-piracy mission off the coast of Somalia.
Both sides remain at odds over Georgia, a would-be NATO member. Russia crushed the Georgian army and bestowed diplomatic recognition on two breakaway territories last year, a token of Kremlin efforts to re-establish the sphere of influence that crumbled with the collapse of the Soviet Union.
“Everyone has to accept the new realities,” Russian Foreign Minister Sergei Lavrov said. “The decisions that have been taken by Russia after the conflict started are irreversible.”

TITLE: Survey: World's Richest Expats Live in Russia
AUTHOR: By Ira Iosebashvili
PUBLISHER: The St. Petersburg Times
TEXT: Forget the American dream. If you want to make money in a foreign country, the place to go is Russia, which a new survey found to be home to the “wealthiest expats in the world.” 
A third of all expats in Russia — the highest proportion in the world — make more than $250,000 per year, with almost half reporting an income of $200,000 per year or more, according to a survey commissioned by HSBC Bank International. 
The survey, released last week, examined the financial circumstances of 3,100 expats living in 26 different countries. It based its rankings on a series of interrelated factors, such as annual income, disposable income, savings and money spent on luxuries. 
By any standard — and especially given the crisis-fraught times — Russia’s expats live well, the survey said. 
Almost 60 percent say they have $4,000 or more every month in disposable income, the second-highest proportion in the world, while 70 percent earn enough to be able to employ at least one person as domestic staff, significantly higher than the global average of 48 percent. 
When comparing their lives in Russia with their lifestyles back home, 97 percent say they have more disposable income here, while the same number said they were saving and investing more money than they did when they lived in their home country. 
Not surprisingly, while almost three-quarters of expats in Russia said the crisis had affected their spending habits, an overwhelming majority — 83 percent — said they were staying put and not considering a move home. 
Recruitment specialists said the numbers did not surprise them, even with a financial crisis that has seen both top executives and rank-and-filers take substantial pay cuts. 
“There is a massive lack of competition here in Russia in nearly every sector,” said Luc Jones, a partner at the Antal recruiting agency. “Back home, it’s much harder to differentiate yourself, while here you can stand out.” 
High salaries could also be a consequence of the market rather than one’s status as a foreigner. There is little difference in compensation between expat and Russian executives, Jones said. 
And while the crisis might have thinned the ranks, executives will command high salaries regardless of the economic picture, he said. 
“If somebody’s doing a good job, they will still be here on the same package, bottom line,” Jones said. 
Moscow’s expats had a mixed reaction to the survey, from nonchalance to anger to confusion. 
“Why do you think I’m here?” said one American banker. “I would probably do okay back home, but not this well.” 
He said there was “still plenty of money being made” by expat investment bankers despite the crisis. “Of course, it’s not like it was before, but if you’ve established connections in Russia it’s a much better place to sit this thing out than anywhere else.” 
Others, however, railed against what they saw as untalented executives reaping unjust rewards. 
While there was a need to pay out big salaries to attract certain types of experts that Russia lacked, like those with experience in international law or GAAP accounting, most foreign hires were overpaid, said one American, who has been working as a senior executive at a Russian company for more than five years. “I have no idea what these idiots do besides live high on the hog and drive up real estate prices for honest guys like me,” he said. “They can’t do that well at home, and they add no value here because they don’t understand the market or the clients.” 
Other expats cast doubt on the survey’s methodology. 
“I don’t think it’s true,” said Peter Spinella, 26, an English teacher from the United States. “Everyone I know here is hustling, teaching English, doing editing and translation work. Maybe they just didn’t talk to the right people?”

TITLE: Fans Pay Tribute to King of Pop
AUTHOR: By Alexandra Odynova
PUBLISHER: The St. Petersburg Times
TEXT: Hundreds of people laid flowers and lit candles at the U.S. Embassy in Moscow over the weekend to commemorate pop star Michael Jackson, who died Thursday at the age of 50.
As of Sunday afternoon, the embassy’s fence was covered with flowers, toys, hats and gloves reminiscent of Jackson’s costumes and pictures of the singer. Posters read “I don’t believe” and “Just call my name, and I’ll be there.” 
“Why so early?” exclaimed fan Angelina Greyer, weeping on her knees at the makeshift memorial. 
Later Sunday afternoon, Moscow fans moved to Teatralnaya Ploschad near the Hotel Metropol, where the singer stayed during his second visit to Moscow in 1996, when he performed at Dynamo Stadium. Jackson also played in Moscow in 1993, when he wrote “Stranger in Moscow.”
Jackson died in a rented home in Los Angeles after suffering cardiac arrest. Police have ruled out foul play, and autopsy results could take weeks.
Chechen President Ramzan Kadyrov, the most senior Russian official to express condolences, called Jackson “a unique artist” and “true Muslim.” 
“Over the last few years of his life, the artist went through a difficult path where he had to suffer attacks aimed at dishonoring his name,” Kadyrov said in a statement Friday. 
He said Jackson dealt with those difficulties in a “wise” and “steady” manner, like a “true Muslim.” 
Jackson, who was raised a Jehovah’s Witness, never acknowledged converting to Islam. Last November, British tabloid the Sun reported that Jackson had officially converted and taken a Muslim name, Mikaeel. 
According to Muslim tradition, a body must be buried within 24 hours and autopsies are prohibited. 
A senior Russian Muslim cleric, Damir Gizatullin, said the rules could be broken for someone famous like Jackson. “He was a great man for the world who worked for love and peace,” he told RIA-Novosti. “His work belongs to the whole world. Both doctors and experts should be able to have their say.”
During Jackson’s second Moscow tour, he met briefly with Mayor Yury Luzhkov and Alexander Korzhakov, chief bodyguard to then-President Boris Yeltsin, who presented the singer with a saber. Customs officials blocked Jackson from leaving with the gift. 
“Since that time I have been waiting for Michael to come to Europe so that I could meet with him or someone from his team to hand over the saber,” Korzhakov told Kommersant, which splashed out Jackson’s death on the front page of its Saturday issue. “Now he has no need for it.”

TITLE: Gorbachev Backs Politician Over Dismissal
AUTHOR: By Sergey Chernov
PUBLISHER: Staff Writer
TEXT: Former Soviet leader Mikhail Gorbachev on Monday threw his support behind a local politician who said he was fired from his job at a state-run company because of his oppositional views and political activities. 
Yevgeny Konovalov, chairman of the Russian Social-Democrat Union of Youth (RSDSM) and a member of the executive committee of the Gorbachev-led Union of Social Democrats, was fired from Pochta Rossii (the Russian Post Office) on Wednesday. He had worked for the company as head of the advertizing and marketing department since June 3.
According to Konovalov, top executives at the St. Petersburg branch of Pochta Rossii did not like the fact that he was a member of oppositional political organizations and an organizer of Dissenters’ March protests and had signed a joint declaration with Georgian social democrats calling for the normalization of relationships between Georgia and Russia through civil society. 
Pochta Rossii severed all correspondence and money transfers with Georgia when the Russian-Georgian war broke out in August 2008.
Konovalov also said that the company’s security service found out that he had backed a strike at the local branch of Pochta Rossii and taken part in a picket in support of the strikers in 2007. 
Konovalov was told that information about his activities reached the management of Pochta Rossii in Moscow and even the Ministry of Communications, and that his dismissal was ordered during a telephone call made from Moscow late on Tuesday last week, he said.
“They said that I must be fired ‘instantly,’” Konovalov said by phone on Monday.
Konovalov, who had only been in the job for three weeks and was still on a probationary term, said he agreed to the termination of his contract ‘by mutual agreement’ after he was told that there was no way he could continue to work for the company, and that he would be fired for failing to do his job if he refused. He said he was also threatened with the involvement of the company’s security service.
“I thought it would be difficult to explain why I was fired to future potential employers in this case,” Konovalov said.
“I chose to sign it, gather the evidence and take it to the media.”
On Monday, Pochta Rossii’s local branch denied that Konovalov was fired because of his political activities, saying that the contract was terminated by mutual agreement in full accordance with the Labor Code of the Russian Federation. In a statement, it expressed “confusion” about Konovalov’s statements, describing them as “false and slanderous.”
Meanwhile, Gorbachev expressed his support for Konovalov. The former Soviet leader and social democratic politician, who is a shareholder of Novaya Gazeta, asked the newspaper to conduct a journalistic investigation into Konovalov’s dismissal.
“I am not only surprised, but outraged,” Gorbachev was quoted by Novaya Gazeta as saying on Monday.
“What kind of democracy can there be talk of in this case? It implies that hundreds of citizens who hold and express views different from those of the authorities’ representatives can be persecuted. The citizens of Russia must make a firm stand against such violations of their constitutional rights.”

TITLE: Obama to Speak at Graduation
AUTHOR: By Anna Malpas
PUBLISHER: The St. Petersburg Times
TEXT: U.S. President Barack Obama will make a commencement speech to 1,000 guests at Moscow’s New Economic School and hold talks with Prime Minister Vladimir Putin, officials said, as details emerged of Obama’s much-anticipated visit to the capital on July 6 to 8. 
Obama will discuss the economic crisis and security issues during the graduation ceremony at the school on July 7, White House spokesman Robert Gibbs told reporters. 
“The speech will be an opportunity for President Obama to discuss areas of mutual interest between the United States and Russia such as nonproliferation, global security and economic growth,” Gibbs said Thursday, according to a transcript published on the White House web site. 
The graduation ceremony will run from 10 a.m. to 1 p.m. and be attended by about 1,000 people, said the New Economic School, a privately funded graduate school founded in 1992. “We are honored that President Obama will participate in our graduation ceremonies,” school rector Sergei Guriyev said in a statement. “Our graduates, their families and the NES faculty, staff and alumni are looking forward to President Obama’s address, particularly at a time when both the U.S. and Russian economies face such great challenges.” 
Gibbs said Obama would also attend a “civil society event” and a business forum during his visit. The forum of U.S. and Russian business leaders is scheduled for July 7 and is being organized by the Russian Union of Industrialists and Entrepreneurs and the American Chamber of Commerce. 
Gibbs said he did not know which U.S. business executives might accompany Obama on the trip. 
He said the centerpiece of Obama’s visit would be talks on securing a follow-up arms control treaty to START I, which expires in December. The global economy will also be on the agenda. 
Obama and President Dmitry Medvedev also will sign an agreement on military cooperation, General Nikolai Makarov, head of the General Staff, said Friday, in an announcement that caught the U.S. military off guard. The Pentagon said the deal would amount to a sign of goodwill and declined further comment.  
Meanwhile, a White House spokeswoman confirmed Friday that Obama would hold talks with Prime Minister Vladimir Putin. 
In May, Putin told reporters that he would be pleased to meet Obama if their schedules matched but that “the president of the United States is the partner of the president of the Russian Federation.” Putin’s spokesman Dmitry Peskov later said Putin would meet Obama after he met with Medvedev. 
The White House spokeswoman could not say whether Obama would meet with Putin one-on-one or on which day it would take place. 
Separately, gay activists applied to Moscow City Hall on Friday to hold a 25-person rally outside the U.S. Embassy at 1 p.m. on July 7 asking Obama to legalize same-sex marriage in the United States. The activists, who plan to hold a banner reading “Yes You Can,” said they would hold a protest at another location on July 7 if city authorities refused to sanction their rally.

TITLE: State Tells Jews to Fight Case in Russian Courts
AUTHOR: By Nedra Pickler
PUBLISHER: The Associated Press
TEXT: WASHINGTON — The Russian government told a U.S. court on Friday that American judges have no authority to tell it how to handle sacred Jewish documents held in its state library that were seized by the Nazi and Soviet armies.
The documents are at the center of a lawsuit brought by members of Chabad-Lubavitch, which follows the teachings of Eastern European rabbis and emphasizes the study of the Torah. The group is suing the government in U.S. court to recover thousands of manuscripts, prayers, lectures and philosophical discourses by leading rabbis dating back to the 18th century.
The case is being handled by the chief judge of the U.S. District Court in Washington, Royce Lamberth, who in January ordered the government to preserve the documents over Chabad’s fears that they are not being properly cared for and could be sold on the black market.
The government said in its filing Friday that even though it respects the U.S. court, it would not participate in the litigation in order to protect its sovereignty. The government said the United States should use diplomatic channels to deal with any problems it has about the collection, and Chabad can pursue claims in Russian courts.
“This court has no authority to enter orders with respect to the property owned by the Russian Federation and in its possession, and the Russian Federation will not consider any such orders to be binding on it,” said the Russian filing.
Lamberth agreed to take the case in U.S. court because he said both the Nazi seizure and the Russian government’s appropriation of the collection, which Chabad says totals 12,000 books and 50,000 rare documents, violated international law.
The collection was formerly held by Rabbi Joseph Isaac Schneersohn, a leader of Chabad-Lubavitch who was born in Russia but forced by the Soviets to leave in 1927. He took the documents to Latvia and later Poland but left them behind when the Nazis invaded and he fled to the United States. The collection was seized and taken to Germany and then recovered by the Soviet Army in 1945.
Lawyers representing Chabad at the law firm Bingham McCutchen said that after five years of litigation, the Russian government “is now acting like a child who has lost the game and wants to start all over on its home court.”
“Obviously, Russia cannot justify why it has refused to return Jewish manuscripts which were stolen by the Nazis and then looted by the Soviet Army during the Second World War,” the lawyers said in a statement. “The plundering of religious texts during war is contrary to the Hague convention and the norms of any civilized society.”

TITLE: Two Students Killed After Being Struck by Lightning
PUBLISHER: The St. Petersburg Times
TEXT: Lightning killed two students celebrating their high school graduation and wounded the police officer acting as their chaperone Saturday, RIA-Novosti reported.
The boy and girl were among a group of 15 students who went to the Pacific coast to watch the sun rise after their graduation ball in the Primorye region village of Zarubino, the report said, citing local police. 
“A loud rumble of thunder was heard, and lightning flashed. Two students — a boy and a girl — died at the scene. Another girl and the police officer were hospitalized with burns,” a police source said.
The source said other graduation balls in the area passed without incident, and all had police officers present to maintain order.

TITLE: Berezovsky Sentenced to 13 Years for Defrauding AvtoVAZ
PUBLISHER: The St. Petersburg Times
TEXT: Prosecutors will send a new extradition request to Britain after a Moscow region court on Friday sentenced self-exiled tycoon Boris Berezovsky to 13 years in prison for defrauding AvtoVAZ in the 1990s.
The Krasnogorsky City Court also ordered Berezovsky to pay 58 million rubles ($1.9 million) in compensation to the Samara administration, which filed the lawsuit against Berezovsky and his business associate Yuly Dubov. 
The court on Thursday convicted Berezovsky and Dubov of using their LogoVAZ auto dealership to defraud AvtoVAZ out of 2,000 cars in 1994 and 1995 and then using the proceeds to buy shares and real estate.
The court sentenced Dubov to nine years in prison in absentia Friday.
The Prosecutor General’s Office said it would use Friday’s sentence to send Britain another extradition request for Berezovsky. Prosecutors have been seeking his extradition since 2002, but British courts have refused to turn him over. Britain granted asylum to Berezovsky in 2003. 
State-appointed lawyers for Berezovsky and Dubov said they would appeal the sentence within 10 days should their clients request it.
Berezovsky ridiculed a previous trial in absentia as a “farce.” In 2007, Berezovsky was sentenced to six years in prison on Aeroflot embezzling charges.

TITLE: Family of Russia's Last Tsar Looks to Aid Civil Society, Charity Projects
PUBLISHER: The St. Petersburg Times
TEXT: Members of the Romanov royal family plan to return to Russia to help develop civil society and charitable programs — but no longer make a claim to restore the monarchy, Alexander Zakatov, director of the Romanov Emperor House Chancellery, said Friday.
“The emperor’s house is faithful to the idea of monarchy, but we are not going to peddle it to anyone,” Zakatov told reporters.  “Yet coming to its native land, working in cultural, charitable and other nonpolitical programs for Russia’s benefit — that is what the house is able and indebted to do,” he said, Interfax reported.
Zakatov represents Grand Duchess Maria Vladimirovna and members of her family, who live in Madrid, the city where she and her son Georgy Mikhailovich were born.
Her family members are relatives of Russia’s last tsar, Nicholas II, and they fled to Finland during the 1917 Revolution.
Nicholas II abdicated the throne in March 1917, and he, his wife and their five children were executed by Bolshevik soldiers in the basement of a merchant house in Yekaterinburg in 1918.
In October 2008, the Supreme Court declared Nicholas II and his family to be victims of political repression. 
Most contemporary Romanovs live in Western Europe, though the chancellery works in Moscow as a non-governmental organization.

TITLE: Supreme Court Orders Retrial in Politkovskaya Case
AUTHOR: By Alexandra Odynova
PUBLISHER: The St. Petersburg Times
TEXT: Defense lawyers took four months to exonerate their clients in the murder of journalist Anna Politkovskaya. 
It took the Supreme Court less than an hour Thursday to throw out the jury’s acquittal of the four men and order a retrial. 
The Supreme Court’s military collegium overturned the jury’s unanimous acquittal after prosecutors complained that the trial judge had made numerous procedural violations and improperly showed a bias against the defendants in his closing remarks. 
“The principle of contentiousness was violated during the trial,” prosecutor Vera Pashkovskaya told the Supreme Court on Thursday. 
Defense lawyer Murad Musayev protested that if any violations had been made, they were all “in favor of the prosecutors.” 
The defense was supported by Politkovskaya’s family. “I think that the jury’s decision was logical. We ask the court not to cancel the acquittal,” said Anna Stavitskaya, a lawyer for Politkovskaya’s son and daughter. 
The son, Ilya Politkovsky, echoed that sentiment in brief remarks to the court. 
Reporters and cameramen packed a small courtroom in the Supreme Court to hear Thursday’s ruling. 
Three of the defendants, Chechen brothers Ibragim and Dzhabrail Makhmudov and former Federal Security Service officer Sergei Ryaguzov, also sat in the court. 
Four months after being freed, they had gained weight and looked tanned, in marked contrast to their pale and exhausted appearance during the trial at the Moscow District Military Court. They smiled and spoke with reporters as the Supreme Court judges considered the appeal in their chambers. The brothers, who were accompanied by their mother, Zalpa Makhmudova, said they had been relaxing and had planted a garden in Chechnya. 
The fourth defendant, former police officer Sergei Khadzhikurbanov, is under arrest in a separate case, and he was shown from prison via a video link on two big screens. The clanging and banging of steel prison doors echoed in the courtroom. 
The Supreme Court judges spent about 50 minutes in their chambers before emerging to announce the retrial. 
Musayev told reporters that he had expected the decision and accused the Kremlin of meddling in the case because it was embarrassed to have no convictions in the high-profile murder. 
“This ruling has been agreed on the very top,” he said as he left the court. Prosecutors “will correct their mistakes in the new trial, and there will be pressure on the jury.” 
The brothers and their mother left with tears in their eyes, barely able to speak to the crowd of journalists. 
“We have never been on the run, and we are not planning to be. No matter how long these trials might last, we will fight for the truth,” Dzhabrail Makhmudov said. 
Three of the four defendants are accused of playing minor roles in the murder of Politkovskaya, an investigative journalist for Novaya Gazeta and a relentless critic of the country’s ruling elite who was shot dead in the elevator of her apartment building in central Moscow on Oct. 7, 2006. 
Prosecutors say Dzhabrail Makhmudov drove the gunman to Politkovskaya’s apartment building and that the gunman was a third Makhmudov brother who remains at large. 
Ibragim Makhmudov was accused of calling to alert his brothers that Politkovskaya was on her way home. 
Khadzhikurbanov purportedly recruited the Makhmudov brothers and supplied the pistol used in the shooting. 
The fourth defendant, Ryaguzov, was accused of extortion in a case not related to the murder. 
Stavitskaya, the Politkovskaya family lawyer, said the retrial might start this fall in the Moscow District Military Court. The first trial lasted from November 2008 to late February. 
Politkovskaya’s murder sparked an international outcry and rekindled fears about the safety of journalists working in the country. 
Prosecutor General Yury Chaika suggested in August 2007 that the mastermind of Politkovskaya’s murder was hiding abroad and that the crime was an attempt to discredit the Kremlin. 
Politkovskaya’s family has accused prosecutors of poorly investigating the murder. Ilya Politkovsky told reporters after the first trial that he believed that the defendants were somehow involved in his mother killing. But he and Politkovskaya’s supporters fear that if the trio is convicted, the authorities will stop searching for the real killers and the organizer of the murder. 
“We’re more interested in the mastermind and the killer,” Sergei Sokolov, deputy editor of Novaya Gazeta, said on Ekho Moskvy radio. “It’s completely obvious that today’s ruling was based on a political decision, not a procedural one. For the authorities, the most important thing was just to make sure someone went to prison.”

TITLE: Duma Moves to Protect Kids From TV
AUTHOR: By Anna Malpas
PUBLISHER: The St. Petersburg Times
TEXT: Back in the 1990s, the police show “Dorozhny Patrul” used to show unpixelated, mutilated bodies at a time when most people were sitting down to dinner. 
While television has toned down the graphic scenes since then, there is still no clear rating system that specifies whether the content is appropriate for children. 
That would change under a bill approved by the State Duma in a first reading late Wednesday. The bill, passed by 440 votes with one abstention, would require television shows, movies and computer games to carry ratings for the age groups of 6, 12, 16 and 18. 
The legislation also would slap the ratings on cellphone games and other materials that people can pay to receive on cellphones, oblige schools and Internet cafes to filter children’s access and firm up current television rules that restrict the broadcast of adult material to after 11 p.m. 
The bill aims to protect children from what its authors call “psychologically traumatizing and defiling” material. 
“Today, there isn’t a single area that doesn’t need regulation,” said Yelena Mizulina, the head of the Duma’s Family, Women and Children Committee, a co-author of the bill. 
The bill is not about censorship but protecting children from adult material, Mizulina said. 
“We don’t want to use our legislation to limit the market of published information but to regulate the distribution ... [and] make the information field safe for children,” she said. 
The bill describes in detail what scenes are appropriate for children at age 6, 12 and 16. 
Children under 6 can see stylized violence “as long as the material contains the idea of victory of good over evil and sympathy for the victim,” according to the bill, which is published on the Duma’s web site. 
Those aged 6 to 12 can see “a non-naturalistic depiction or description of an accident, disaster or nonviolent death without showing consequences that could give children recurring fears.” 
Those aged 12 to 16 can see episodic, nonsexual violence — as long as there’s “sympathy” for the victim — and episodic non-naturalistic sex. Teenagers from 16 to 18 can see artistically justified sex scenes as long as they’re not pornographic. They shouldn’t see any scenes of drug use, but can see “the dangerous consequences of abuse.” 
The bill obliges movies and computer games to display age certificates but makes this voluntary for other forms of entertainment. It also leaves open who would carry out the voluntary certification. 
Nevertheless, companies would face real penalties if they failed to flag adult material that went on sale, Mizulina said. “They could be punished administratively, right up to suspending the activity of the legal entity for a period up to three months,” she said. 
According to the bill, television channels would be obliged to warn viewers of shows with adult material and only broadcast material suitable for those over 16 after 9 p.m. and those over 18 after 11 p.m. 
The bill would not affect news broadcasts and live shows. 
Under the bill, adult-oriented shows would be preceded by a verbal warning running along the bottom of the screen for at least three minutes before the broadcast. 
“The bill does not break the principle of self-regulation,” Mizulina said. “When showing information, television will simply have to take into consideration what is harmful for children of a certain age.” 
The bill also calls for age certification of films in movie theaters, where the current legal situation is unclear. 
Films are already divided into what is suitable for children over 12, 14, 16 and 18, said Yelena Bogrova, the deputy head of the Culture Ministry’s cinema department for state registry, which classifies films. “We can’t enforce it, especially because many movie theaters are now private,” she said. 
A spokeswoman for a major film distributor in Russia, who asked that her company not be identified, said movie theaters always display a film’s rating, but the information does not appear in advertisements and posters. 
Age restrictions are specified when the Culture Ministry gives out distribution licenses, and checks are carried out on whether movie theaters display the information, said Alexei Sokhnev, head of the expert and analytical cinema department of the Culture Ministry. 
In adopting a ratings system, Russia would join countries like the United States and Britain that for years have required age certificates on the packaging of movie recordings, television shows, computer games and even music albums. The Russian bill does not address albums. 
The bill is the latest in a long line of legislation that has attempted to regulate television and other entertainment mediums. 
“There have been at least a dozen similar attempts since the mid-1990s,” said Andrei Richter, head of Moscow’s Media Law and Policy Institute. 
“All of them have failed, mostly because the government does not want to irritate the national broadcasters.”

TITLE: Communists Criticize NGO Law
PUBLISHER: Combined Reports
TEXT: The State Duma on Friday passed in a first reading a presidential bill that would ease tight regulation of nongovernmental organizations, despite opposition from Communists, who called it a gift to U.S. President Barack Obama.
Communist Deputy Sergei Obukhov said during debates that President Dmitry Medvedev had proposed the bill Wednesday to appease Obama, who will visit Russia in early July. “Not everything that is good for Obama is good for Russia,” Obukhov said.
Communists also opposed the bill’s elimination of a controversial clause in the current law that allows the government to close down NGOs that threaten Russia’s “national unity, uniqueness and cultural heritage.” 
“The clause played a defensive role even if it did not work,” Obukhov said.
The bill passed with a vote of 391 to 57.)
(SPT, AP)

TITLE: South Stream Gas Exports May Sideline Ukraine
AUTHOR: By Anatoly Medetsky
PUBLISHER: The St. Petersburg Times
TEXT: Gazprom will use its planned South Stream pipeline to carry a third of its gas exports to Europe by 2015, chief executive Alexei Miller said Friday in an apparent warning to Ukraine, which now handles the bulk of the transit. 
Gazprom and Italy’s Eni recently agreed to expand the capacity of South Stream, which will run under the Black Sea, to 63 billion cubic meters of gas — or 35 percent of Gazprom’s exports to that region, Miller said. 
Miller’s statement implies that Gazprom is hoping to export about 180 bcm of gas to Europe in 2015. The company and its partners, Germany’s E.On and Wintershall and Holland’s Gasunie, are planning to build another pipeline, Nord Stream, under the Baltic Sea that would transport 55 bcm in 2012. 
The figures suggest that Gazprom aims for an annual 118 bcm of its gas to bypass Ukraine by 2015. Ukraine transported roughly the same amount of Gazprom’s gas last year, or 80 percent of the firm’s exports to Europe. Belarus handled the rest. 
Gazprom has had two major payment spats with Ukraine, most recently in January, when a dispute over transit halted European deliveries for days on end and led to widespread shortages in the middle of winter. 
“The implementation of these projects are a strategic investment by Gazprom into increasing Europe’s energy security,” Miller said at Gazprom’s annual shareholders meeting. 
Miller also took a swipe at Europe for its desire to become less dependent on Russian gas imports by trying to arrange alternative supplies from countries like Azerbaijan, Turkmenistan and Iraq. Many gas-rich countries are politically unstable and are inexperienced at laying pipelines and servicing contracts, he said without naming any countries. 
“That’s why Europe’s desire to diversify gas suppliers is understandable but shouldn’t turn into a fetish,” he said. 
If Europe neglects ties with Russia in favor of securing new alternative supplies, it could risk a surprise result, Miller said. 
“There will be more diversification but less stability and reliability.” 
Russia is seeking to buy as much gas as possible from these possible rival suppliers, a move that could undermine the Nabucco pipeline project, which aims to import gas from the Caspian Sea area and Central Asia. 
In one such effort, Russia is in talks with Azerbaijan to buy some of its gas, and Miller said the countries might strike “new important deals” next week when he will accompany President Dmitry Medvedev on a trip to Baku. 
Shareholders kept Gazprom’s board largely intact, replacing two of the 11 members. Energy Minister Sergei Shmatko will sit on the board instead of Industry and Trade Minister Viktor Khristenko, while law professor Valery Musin will take the single independent member’s slot, replacing Boris Fyodorov, a former finance minister who passed away last year. 
Musin is head of the civil law office at St. Petersburg State University’s law department and a former teacher of President Medvedev and Prime Minister Vladimir Putin. 
In other news from the AGM, the chairman of the board, First Deputy Prime Minister Viktor Zubkov, said board members would donate last year’s remuneration to charity. 
Miller, whose bonus for being a board member is 17.4 million rubles ($560,000), said he would donate it to the St. Petersburg Orthodox Spiritual Academy. The other five members that don’t hold government posts will get 15.1 million rubles each. It was unclear Friday where their donations would go. 
At a news conference after the meeting, Miller announced that Gazprom had reattained the level of daily sales to Europe that it made last year and said the company still hoped to reach the bold goal of having a market capitalization of $1 trillion some day. 
“[Gazprom] is one of the world’s most powerful companies,” he said proudly. “A company with an unbelievable market might.”

TITLE: In Brief
TEXT: <strong>Polymetal to Sell Bonds</strong>
MOSCOW (Bloomberg)— Polymetal, Russia’s biggest silver producer, plans to sell 5 billion rubles ($160 million) of bonds to refinance debt.
Directors approved the sale at a meeting on Friday, the St. Petersburg-based company said Monday in a Regulatory News Service statement. The three-year bonds will go on sale no less than 30 days after related documents are filed with regulators, expected to take place in coming days, Polymetal said. The board also cleared the issue of 84.4 million new shares.
Polymetal has about $330 million of debt, half of which is denominated in rubles, Deputy Chief Executive Officer Pavel Danilin said Monday by phone. The bond sale will help the company to improve the cost of its borrowings, according to the statement.

<strong>GM to Close Local Plant</strong>
MOSCOW (Bloomberg) — General Motors Corp. plans to shut its Russian factory for two months because of falling demand for new cars, RIA Novosti reported, citing a GM spokeswoman.
GM will close its factory in St. Petersburg in July and August as it reconsiders its strategy for the country, the state-run news service said Monday.

<strong>Putin Wants More Cuts</strong>
MOSCOW (Bloomberg) — Prime Minister Vladimir Putin said it will take years for the government’s finances to recover from the worst economic slump in more than a decade and called for more spending cuts to limit future deficits.
Revenue will probably plummet to about 16 percent of gross domestic product through 2011, from between 23 percent and 24 percent in 2007, Putin said at a meeting with lawmakers Sunday, according to a transcript posted on his web site.
“It’s unlikely in the foreseeable future” that Russia will have the kind of windfall oil revenue it enjoyed before the crisis, Putin said. The government must therefore curb spending to hold down the deficit, contain inflation and safeguard its foreign currency reserves, he said.

<strong>Opel Bid Under Threat</strong>
MOSCOW (Bloomberg) — Sberbank, Russia’s biggest lender, and Canadian car-part maker Magna International Inc. may abandon their joint bid for Opel after General Motors Corp. raised the price for its unit, Kommersant reported.
GM is seeking more from Sberbank and Magna than the partners pledged when they were selected as the preferred bidder for Opel before GM’s June 1 bankruptcy, the Russian newspaper said, citing unidentified people familiar with the matter. 
GM wants a pledge to invest as much as 7 billion euros in Opel, 14 times more than Sberbank offered last month, Kommersant said.

<strong>Inflation Rate Declines</strong>
ST. PETERSBURG (Bloomberg) — Russia’s inflation rate between April and June grew 50 percent slower than during the same period last year, central bank Chairman Sergey Ignatiev said.
Consumer-price growth will be “significantly lower” in 2009 than this year’s official forecast of 13 percent, Ignatiev said during a meeting with Prime Minister Vladimir Putin in comments broadcast on state television channel Vesti on Saturday.
Russia’s inflation rate dropped more than expected in May to 12.3 percent, a 17-month low, as the economic decline and falling wages constrained price growth.

<strong>Lenenergo Profits Up</strong>
ST. PETERSBURG (Bloomberg) — Lenenergo, the power tranmission operator in St. Petersburg, saw net profit rise 43 percent last year to 1.84 billion rubles ($59 million), the company said on its web site Monday.

<strong>VTB-24 May Make Cuts</strong>
MOSCOW (Bloomberg) — VTB-24, the retailing-lending arm of VTB Group, may fire or transfer thousands of employees amid Russia’s economic downturn, RIA Novosti reported, citing Nikolai Tsekhomsky, VTB’s financial director.  
Russia’s second-biggest lender has seen overdue loans triple this year to six percent of total loans, Interfax reported, citing Chief Executive Officer Andrei Kostin.

<strong>GDP Forecast Reduced</strong>
MOSCOW (Bloomberg) — Russia’s government cuts its forecast for gross domestic product this year, RIA Novosti reported, citing unidentified Economy Ministry officials.
The ministry now expects the economy to contract 8.5 percent in 2009, versus the previous forecast of 6.8 percent, the state-run news service reported Monday.

<strong>Deficit to Narrow</strong>
MOSCOW (Bloomberg) — Russia’s budget deficit should narrow to between two percent and three percent of gross domestic product by 2012, Finance Minister Alexei Kudrin said in comments broacast live on state television Monday.
Prime Minister Vladimir Putin said Sunday that this year’s deficit, the first since 1999, will reach about eight percent of GDP, and called for a cut to a maximum of two percent or three percent. Putin didn’t specify a target date for the reduction.

<strong>MTS Gets Trio of Loans</strong>
MOSCOW (Bloomberg) — Mobile TeleSystems received three loans worth 413 million euros ($580 million) to develop its network from the European Bank for Reconstruction and Development, Nordic Investment Bank and European Investment Bank, the company said Monday in an e-mailed statement.

<strong>Gazprom Makes List</strong>
MOSCOW (Bloomberg) — Gazprom was included in a list of potential buyers of natural gas from the second stage of the Shah Deniz field in Azerbaijan, Chief Executive Officer Alexei Miller told reporters in Baku on Monday.
Gazprom will have an “advantage” over other competitors in its bid to purchase the gas, Miller said. 

<strong>Call Options Plugged</strong>
MOSCOW (Bloomberg) — Investors should buy call options on shares of Gazprom, the world’s biggest natural-gas producer, on speculation declines this month were overdone, UralSib Financial Corp. said.
“We are betting on Gazprom based on its fundamentals, long-term prospects, and substantial discount to the market following the recent correction,” UralSib analyst AndreIi Bogdanovich said in a note dated Monday. Gazprom has declined 19 percent since June 1.
Call options grant investors the right to buy an underlying stock or security at a fixed price before a given date and typically benefit from rising prices in the underlying instrument.

TITLE: Interest Rates May Lose 2.5%
AUTHOR: By Agnes Lovasz
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russia’s central bank has room to lower interest rates by a further 2.5 percentage points as the recession in the world’s biggest energy exporter drags on, slowing inflation, Morgan Stanley said.
Bank Rossii bank will lower its key interest rate to nine percent by the end of March 2010 from 11.5 percent, Oliver Weeks, an emerging Europe economist at Morgan Stanley, said in an emailed note Monday. He expects the economy to shrink at least eight percent this year.
“Russia’s easing cycle began late and in our view still has much further to go,” London-based Weeks said in the note. “The contraction in Russia has yet to run and monetary easing is not yet halfway through.”
The central bank has reduced its main interest rate three times since April 24 to stimulate lending after the country’s recession deepened and inflation began to slow. The economy contracted an annual 9.8 percent in the first quarter, the most in 15 years as the government’s three trillion rubles ($97 billion) stimulus plan failed to boost production and bank lending.
The inflation rate will fall to 7.5 percent by next March and then begin to rise as rate cuts begin to feed through to consumers and companies, Weeks said.
“Inflation is on track to fall sharply over the next nine months,” supporting lower rates, he said. “Consumer demand continues to weaken and wage growth to slow.”

TITLE: Putin Urges State Banks to Boost Lending
AUTHOR: By Paul Abelsky
PUBLISHER: Bloomberg
TEXT: Russian Prime Minister Vladimir Putin told state-run banks to expedite loans to companies to help stem a financial crisis that will force the government to run deficits for at least three years.
Putin called on banks such as Sberbank and VTB Group to boost lending by as much as 500 billion rubles ($16 billion) by October, saying the government will guarantee 300 billion rubles of that.
“The government expects that banks will consistently expand lending for the priority industries and reduce borrowing costs,” Putin said on state television Monday.
Russia’s economy is shrinking for the first time since 1998, when the government defaulted on its domestic debt and devalued the ruble. A 2.5 trillion-ruble stimulus package and three interest-rate cuts since April have failed to revive lending or stem the contraction. Putin told lawmakers on Sunday to prepare further budget cuts because plunging revenue won’t recover “for the foreseeable future.” 
Budget revenue will probably decline to about 16 percent of gross domestic product through 2012, from between 23 percent and 24 percent in recent years, Putin told lawmakers, according to a transcript published on his web site.
Lenders haven’t been passing on the lower rates to companies on concern the slump in manufacturing and consumer demand may trigger a second wave of problems as companies fail to repay loans, Putin said. This year’s shortfall, the first since 1999, will reach about eight percent of GDP, Putin said, adding that the government should seek to cut its annual deficit to two percent or three percent of GDP, he said.
“This could be a more transparent and effective program to support lending than other efforts that set targets for banks,” said Elina Ribakova, Citigroup’s chief economist in Moscow.
Today was the second time Putin has attempted to implement the 300 billion-ruble program of guarantees. The first “failed” because the legal mechanisms to make it work weren’t in place, President Dmitry Medvedev said last month. Putin said Monday the process was “simplified.”
“We have to launch this as quickly as possible,” Medvedev said at a meeting with ministers in the Kremlin on May 13. “Everyone is waiting for this money, but the system of state guarantees still isn’t working.”
The economy of the world’s biggest energy producer shrank an annual 9.8 percent last quarter, the most in 15 years, and the government expects it to contract as much as eight percent for the whole year.
The program unveiled today will translate into as much as 500 billion rubles in corporate loans because “the government will accept all the main risks,” Putin said.
Russia’s credit recovery has stalled as a result of the “high credit risks,” not because of insufficient funds, Sergey Ignatiev, head of the central bank, said during a meeting with Putin on Saturday. Russian companies’ overdue loans rose to 4.4 percent from four percent last month, according to Ignatiev.
State guarantees will jumpstart lending and eliminate concerns about delinquent debt by spurring a wider economic rebound, Putin said Monday.

TITLE: Indexes Finish Week With Mild Rebound
AUTHOR: By Courtney Weaver
PUBLISHER: The St. Petersburg Times
TEXT: How the mighty have fallen. 
The MICEX and the dollar-denominated RTS, which was touted at the beginning of the month as the world’s best-performing equity index, are again in bear territory. 
While neither is close to the January doldrums, both are already feeling the pangs of a correction that will either smart like ripping off a bandage or burn — like fourth-quarter 2008. 
By June 23, the MICEX had lost 24 percent from its postcrisis high on June 1, while the RTS fell 20.1 percent during the same period. Though some, like Deutsche Bank chief economist Yaroslav Lissovolik, are predicting a brief one or two weeks of volatility, others such as Alexander Zakharov, head of equities at Metropol, say the MICEX is looking to decline to as low as 850, either in a sharp sell-off or gradually. 
“If there’s going to be lots of negative news coming out in one day, we might meet those levels quite quickly. Or we might just get to those levels slowly over the course of the summer and maybe bounce up once in a while quite strongly,” Zakharov said. 
Even the past few days might be viewed as a bit of a rebound. The MICEX gained back 42.9 points, or 4.7 percent, between Tuesday and Friday, finishing the week down 5.6 percent at 960.2 points. 
The RTS gained back 22.7 points, or 2.4 percent, closing at 955.5 points Friday with a 5.5 percent loss for the week. 
The volatility that has come to characterize the past few days can be attributed to the lack of certainty in the market, Zakharov said. While the beginning of the decline two weeks ago prompted a flurry of panicked selling, different investors were in turn using the chaos to serve as speculators. 
“Market participants kind of hesitate on the levels and valuations — some people sell just because they’re panicked and believe they wouldn’t be able to take profit, and vice-versa, some people use that panic as an opportunity to pick stuff up,” he said. 
Sberbank finished the week down 3.6 percent on MICEX after oscillating between session gains and losses of as high as 5 percent. 
MICEX’s other movers were the oil and gas companies, which all reported heavy losses. LUKoil finished down 7 percent, Rosneft lost 7.9 percent and Surgutneftegaz fell 8.6 percent. 
While those losses don’t bode well for the short term, investors have enough money in reserve and they should be in relatively good positions if a rebound appears in sight, Lissovolik said. 
“There are these resources on the sidelines that could be readily employed once the correction is seen to be overshooting,” Lissovolik said. 
According to figures from Hedge Fund Research, funds focusing on emerging markets and energy saw the strongest gains in May, with Russia-focused funds among the top performers. 
Firebird’s New Russia Fund posted one of the strongest gains, rising 40 percent for the month after a 75 percent decline for the period from September to January. 
While the fund is “gratified” to be doing better, co-founder Ian Hauge said, it is still a long way away from last year’s levels. Coming off 2008’s decline, even a 100 percent gain can be easy, he said. 
“Over the last year, I’ve come to the conclusion that Russia, like a lot of other assets, was a derivative of this global credit bubble and drilling down through the actual investment case, the idea that Russian assets could be valued 12 to 15 times earnings is an absurdity,” Hague said. “I hope the market never again deludes itself that that is fair value.” 
MICEX stocks are trading at an average price-to-earnings ratio of 6.2, while the RTS is running at about 5.9 times earnings. 
While Firebird was riding the blue chips like everyone else during the rally, now the fund is steering away from them, hoping to find profit in “well-run companies with less liquid stocks,” Hague said. 
“The way people are going to make money in the stock market is mispricings of overlooked sectors and companies. It’s not going to be the general rise of the market itself,” Hague said.

TITLE: Sechin Charms Shareholders at Inter RAO Meeting
AUTHOR: By Nadia Popova
PUBLISHER: The St. Petersburg Times
TEXT: Shareholders of state electricity trader Inter RAO walked into their annual meeting in Moscow on Thursday determined to oppose management’s calls to skip dividends and pay four independent directors a combined $180,000. 
Three hours later, the shareholders — mostly retirees — left the meeting grinning, with neither dividends nor lower compensation to show for it. 
The magician and master of ceremonies was Inter RAO chairman and Deputy Prime Minister Igor Sechin, the once publicity-shy Kremlin powerbroker who now oversees the Russian energy sector. Shareholders said after the meeting that he persuaded them with lengthy explanations and a healthy dose of charm. 
Before opening the floor to questions, Sechin made a pitch for the board’s recommendations and Inter RAO’s aggressive expansion plans. 
“While electricity consumption is falling on the European markets, demand in Latin America and Southeast Asia will allow us to diversify and grow,” he said, adding that Southern Europe and the Middle East were also interesting markets for expansion. 
The shareholders, however, weren’t there to hear about expansion. They wanted to know why the 11-member board’s four independent directors were being paid a fixed 1.4 million rubles ($45,000) each for attending all board meetings. It was one of the 11 questions put on the vote. 
“Are we going to pay them for sitting in a chair? Why not pay for the results of their work?” shareholder Vladimir Kryukov asked in a written question handed to Sechin. 
Inter RAO’s director for corporate governance, Yevgeny Gorev, said the economic crisis had thrown into chaos the usual parameters for evaluating their contributions. 
“The work of the independent directors is tremendously difficult,” he said. “Some of them don’t live in Moscow. So we actually compensate them for travel expenses and time, rather than pay them a salary.” 
Sechin — who along with the seven other state representatives on Inter RAO’s board is not eligible for compensation — chimed in with support for his colleague. Nikolai Anoshko, head of Russische Kommerzial Bank, the Swiss VTB affiliate recently sold to Gazprombank, lives in Zurich, Sechin said. 
“Mr. Anoshko, who is responsible for attracting foreign capital for us, is in permanent contact with Inter RAO managers in Moscow, he calls them and sends e-mails,” Sechin said. “So the 1.4 million payment is actually compensation for our directors’ expenses.” 
But the shareholders were still having none of it. How could someone spend 1.4 million rubles sending e-mails? 
Several men in the second row stood up and began arguing loudly with Sechin, who was seated onstage. “Calm down, calm down, this is not a rally, it’s a shareholders meeting!” Sechin shouted. 
Minutes later, he got a note suggesting that the independents be paid a symbolic 10 rubles ($0.3) per year. “Believe me, we’re giving them quite modest compensation compared with other companies,” he told the shareholders. 
Explaining why the dividends would not be paid turned out to be a harder task. 
“It’s because of a technicality, which we’re going to change soon,” said Yevgeny Dod, Inter RAO’s CEO. “Under the law, if our charter capital is not less than or equal to net assets, we can’t pay dividends. That’s why we suggest you to vote to decrease the charter capital by cutting our shares’ nominal price.” 
After another few assurances that the move would not affect the value of their shares, the audience voted for the changes. Most of the 2008 net profit, or about 1 billion rubles ($32 million), will be put toward covering previous losses. 
Still, not everyone was convinced. A shareholder identified only as Stoyanov suggested that the company at least cut pensioners a break and pay them a dividend. 
“They never pay us,” said Svetlana Yeneva, 70, who has 51,000 shares of Inter RAO. The stake was worth 1,020 rubles ($33) at Thursday’s closing price of 2 kopeks on the MICEX. 
“They should at least pay dividends to pensioners,” she said. “How can I survive on a pension of 4,700 rubles?” 
Several others told Sechin that they were worried about having their shares taken in an obligatory buyout, or what they called an expropriation. 
“I want to calm everyone down. There won’t be any expropriation or any other extreme actions,” he said. 
Persuaded and calmed, the shareholders voted for an additional 25.8 billion ruble share emission, to be bought by VEB, the Federal Property Management Agency and Rosatom. 
After the meeting, Sechin told reporters to leave. He was seen posing for a group picture with shareholders, hugging them and shaking hands as he said goodbye. 
“I didn’t think it would be so easy to talk to the deputy prime minister. He answered all our questions,” one smiling shareholder said. 
An elderly female woman approached Sechin and spoke with him for about five minutes as he was leaving. When asked what they talked about, the shareholder lowered her eyes, smiling. “It was something personal.”

TITLE: Telenor’s Worst Nightmare
AUTHOR: By Ivar Amundsen
TEXT: Telenor, the Norwegian telecoms giant, is caught in a dispute with Alfa Group, one of Russia’s largest holdings, over the highly lucrative mobile telephone business in Russia and Ukraine. The Norwegian state is a majority shareholder of Telenor, and Alfa is owned by Mikhail Fridman, an oligarch estimated by Forbes in 2008 to be among the 20 richest people in the world. He also has close ties to the Kremlin.
The background to this revealing story of how the power elite do business is as follows: VimpelCom, Russia’s second-largest mobile phone operator, is 44 percent owned by Alfa, and 29.9 percent of the voting stock — 33.6 percent of actual shares — is owned by Telenor. In Kyivstar, Ukraine’s No. 1 mobile phone operator, the situation is somewhat reversed: Telenor owns 56.5 percent, and Alfa has 43.5 percent. 
In 2004, VimpelCom, keen to expand into the Ukrainian market, proposed the take over of a small company called Ukrainian Radio Systems, or URS. The deal was opposed by Telenor, which fended off the move for a year, but the purchase was approved by shareholders in 2005. The purchase price totaled $231 million after URS was unsuccessfully offered to another bidder for $100 million.
At the heart of the deal was a shareholders’ agreement between Telenor and Alfa that any arbitration would take place in Geneva. However, a microscopic shareholder in VimpelCom, Farimex, took Telenor to court in Siberia for loss of profits in the Ukrainian market. Farimex owns 0.002 percent of VimpelCom’s shares and is registered in the British Virgin Islands. The owner apparently was a businessman named Dmitry Fridman, and Alfa insisted that there was no connection to Mikhail Fridman.
Farimex said Telenor stalled VimpelCom’s penetration into the Ukrainian market and thus damaged growth prospects, claiming an absurd $1.7 billion for the one-year delay. Still, Farimex won its case in Omsk last year. Telenor refused to put up the money and saw its stock in VimpelCom frozen by the court. An appeal scheduled for June 10 was delayed until Sept. 30 for “technical reasons.” 
This outcome is Telenor’s worst nightmare. It had hoped for a decision, any decision, and to bring the case to the Supreme Court in Moscow. Under Russian law, the court can take ownership of confiscated property after a second trial — even if there is an appeal pending to the Supreme Court. So, Telenor’s shares in VimpelCom can now be sold on the open market before September and before any consideration by the Supreme Court. In that case, it is game over. Court marshals said on June 19 that they had approved an order to auction off Telenor’s shares and that the parties were in the process of being notified.
It is true that Russian oligarchs have been very badly hit by the financial crisis and the crash of the Russian stock exchange. Last year, Mikhail Fridman was to repay a $2 billion loan to Deutsche Bank but was unable to do so. Rather than pay with his VimpelCom shares by passing them onto German interests, he was bailed out by state-controlled Vneshekonombank, which took the stock as collateral. If Fridman cannot pay back this fall, Vneshekonombank — that is, the Russian government — will become the owner of his VimpelCom stock. If Telenor’s shares are sold on the market in the meantime, one will have to wonder who is really pulling the strings. 
It is particularly noteworthy that Communications Minister Igor Shchegolev last Tuesday announced the government’s plans to restructure national telecommunications holding Svyazinvest. This company holds a dominant position in the fixed-line market and now plans to attain a similar position in the more significant mobile sector. It would be very attractive for the company to build a foundation with one of the three existing operators: VimpelCom, Mobile TeleSystems or MegaFon.
Telenor’s legal troubles echo the Yukos case and has become a test of President Dmitry Medevedev’s commitment to the rule of law and an independent judiciary. A negative outcome for Telenor might seriously undermine the credibility of the Russian market for foreign investors. It is also noteworthy that Mikhail Fridman was instrumental in the group that drove British oil giant BP to defeat last year in its power struggle at TNK-BP. A lawsuit in that battle also landed in a court in Siberia, a region where courts always seem to make ruling that are favorable to Fridman. The court sided with a small TNK-BP shareholder — and by extension Fridman — who complained that fees TNK-BP had paid to use BP specialist “secondees” amounted to an illegal dividend for BP.
For Norway, the VimpelCom affair could have an impact beyond Telenor. The Norwegian government needs to rethink the implications of Statoil, the Norwegian oil conglomerate, as a junior partner in the Shtokman petroleum field in the Barents Sea, where Gazprom is very much in the driving seat. 
One more thing. The chairman of the supervisory board of Vneshekonombank is none other than Prime Minister Vladimir Putin, and his board includes First Deputy Prime Minister Viktor Zubkov, Deputy Prime Minister Sergei Ivanov and Finance Minister Alexei Kudrin. 

Ivar Amundsen is a Norwegian public figure, human rights activist and director of the Chechnya Peace Forum.

TITLE: Gas Spat Should Spur EU Energy Links
AUTHOR: By Paul Taylor
TEXT: Just as Europeans are packing their bags for the beaches, another Russia-Ukraine gas dispute is flaring up. The European Union should use it as a stimulus to speed up connecting its energy networks to reduce Eastern Europe’s vulnerability to gas cutoffs.
The middle of summer may seem like a counterintuitive time for the latest standoff between Moscow and Kiev. Consumers are not shivering in the cold, industrial demand for energy has plummeted because of the recession and Russia, Europe’s biggest gas supplier, is choking on its own unsold gas.
The dispute arises out of an unrealistic deal that Prime Ministers Vladimir Putin and Yulia Tymoshenko signed in January to end the previous round of gas wars. The deal committed Ukraine’s Naftogaz to fill up its storage tanks this summer with gas bought from Gazprom and sell it back in the winter for supply to the West.
The problem is that Ukraine is skint, and Naftogaz, which can barley manage to pay its monthly gas bill to Moscow, can’t afford the reserves. Ukraine has thrown itself at the mercy of the EU, begging Brussels to lend it the money. But the EU has no fund to make such a loan, and it doesn’t trust the Ukrainians to keep their hands off the gas.
Instead, the EU says Ukraine should borrow the money from the International Monetary Fund on three conditions: that it implement long-promised budget reforms, raise domestic gas prices and, most controversially, spin off some of Naftogaz’s assets, in which European companies could buy a stake. The European Commission has called a meeting with international financial institutions on Monday to discuss a loan.
But the budget reforms are blocked by internecine warfare between Tymoshenko and President Viktor Yushchenko. Hiking domestic gas prices is not the kind of measure that anyone wants to take before an election. And Tymoshenko is adamant that Naftogaz — officially one of Ukraine’s crown jewels and unofficially a cash cow for its political elite — is not for sale, in whole or in parts.
The EU would like to see Naftogaz broken up without being handed to the Russians. The thinking in Brussels is that if, say, Bulgarian, Slovakian or Hungarian companies took a minority stake, that would start to “Europeanize” and modernize Ukraine’s strategic energy sector, reduce the scope for corruption and help anchor Ukraine to the European Union. For precisely those reasons, Moscow hates the idea.
Despite Putin’s bluster, the Europeans have little to fear in the short term from a summer gas crisis. Demand is low. European utilities have been importing liquefied natural gas from Norway, Algeria and the Gulf because it is temporarily cheaper than Russian gas and it reduces their dependency on Moscow. Gazprom is strapped for cash and has more gas than it can sell. In the words of one Brussels official, “We are enjoying watching the Russians squirm.”
But Europe should not be complacent. Gas pipeline interconnectors meant to reduce the dependency of Bulgaria, Slovakia and the Western Balkans on Russian imports are not yet built and won’t be ready for next winter. And a frustrated Russia, which feels that Ukraine is acting against its interests, has plenty of ways besides playing with the gas taps to make its displeasure felt.
If there is a benefit to more frequent gas crises, it is that they keep energy security high on the EU’s agenda. The Europeans should use that stimulus to hasten work on building gas links between member states and with the Balkans — as well as LNG terminals and storage. Only these changes will reduce Eastern Europe’s vulnerability to Russian pressure.

Paul Taylor is a Reuters columnist. The opinions expressed are his own.

TITLE: Alcohol Blamed for Over 50% of Deaths Last Decade
AUTHOR: By Douglas Birch
PUBLISHER: The Associated Press
TEXT: A new study by an international team of public health researchers documents the devastating impact of alcohol abuse on Russia — showing that drinking caused more than half of the deaths among Russians aged 15 to 54 in the turbulent era following the Soviet collapse. 
The 52 percent figure is compared with estimates that less than four percent of deaths worldwide are caused by alcohol abuse, according to the study by Russian, British and French researchers published in Friday’s edition of the British medical journal The Lancet. 
The Russian findings were based on a survey of almost 49,000 deaths between 1990 and 2001 among young adult and middle-aged Russians in three industrial Siberian towns, which had typical 1990s Russian mortality patterns. 
Professor David Zaridze, head of the Russian Cancer Research Center and lead author of the study, estimated that the increase in alcohol consumption since 1987, the year when then-Soviet leader Mikhail Gorbachev’s restrictions on alcohol sales collapsed, cost the lives of three million Russians who would otherwise be alive today. “This loss is similar to that of a war,” Zaridze said. 
Dr. Murray Feshbach, a senior scholar at the Woodrow Wilson Center for Scholars and a leading expert on Russian public health, called the study “very impressive, very substantive” and overall methodologically sound. He was not part of the research team. 
The tragic mortalities were largely invisible outside of Russia but devastated Russian society, claiming the lives of millions during what should have been their most productive years. The study is part of a long-running debate among public health scientists as to the causes of an unprecedented spike in mortality among Russians in the post-Soviet era. 
Some researchers have blamed the crumbling of the Soviet health care system, increased smoking, changes in diet or a loss of jobs that raised stress levels for the mysterious rise in deaths. 
Many others, like Zaridze and his team, pin the blame squarely on increased drinking, which the report says roughly doubled in Russia between 1987 and 1994 — from the equivalent of about 5 liters of pure alcohol annually to about 10.5 liters. 
“If you look at the dynamics of death and the dynamics of alcohol consumption in Russia, it is obvious that all these sharp increases and decreases of the mortality level are caused by increases and decreases in alcohol consumption,” Zaridze said. 
The scientist argued that the social and economic shocks of the late 1980s and 1990s drove people to drink. 
“Alcohol consumption is always connected with poverty,” he said. “It’s been associated with social crisis. If we take our mortality statistics, it will be obvious that it’s parallel to our social crisis, to our social instability.” 
Russia and some of its Eastern European neighbors still have the world’s highest levels of alcohol consumption, according to another study also published in The Lancet on Friday as part of a series on alcohol and global health. 
Two other papers in the series called for stronger government policies worldwide to reduce the dangers of alcohol abuse. 
Russians currently consume almost twice the global average, the equivalent of 6.2 liters of pure ethanol alcohol per year, the global report found. 
Although life expectancy here has risen slightly in recent years, Russia still has one of the lowest in Europe. 
According to the most recent UN National Human Development Report on Russia, males born in Russia in 2006 could only expect to live to just over 60 years, while a woman born that year could expect to live on average about 73 years. By comparison, the average Western European man could expect to live to be 77, about 17 years longer than his Russian counterpart. 
The average Western European woman could expect to live to be 82, about nine years longer than the average Russian woman. 
The Lancet’s Russian study was based on a long-term, large-scale study of drinking patterns and deaths in three industrial cities in western Siberia: Barnaul, Biysk and Omsk. 
Researchers conducted tens of thousands of personal interviews and mined death records in gathering data for the report. They reported finding a strong link between heavy drinking and causes of death associated with high alcohol abuse, including alcohol poisoning, trauma, pneumonia and liver disease. 
The link between life expectancy and alcohol in Russia has long been the subject of study. Mortality rates fell sharply in Russia from late 1985 to 1987, when then-Soviet leader Mikhail Gorbachev imposed strict limits on alcohol sales. During the period of political and social revolution that followed, death rates soared to levels unprecedented in modern industrialized nations. 
By 2000, the reported noted, the chance that a 15-year-old Russian male would die before his 35th birthday was one in 10. In Europe, the chance of a 15-year-old male dying by age 35 was one in 50. 
Part of the problem may be the important cultural role vodka and alcohol play in Russian society. Moderate drinking is considered healthy by many Russians, and few major events are celebrated without raising a 100-gram glass or two — or three — of vodka. 
“If the soul needs it, we drink. If the soul doesn’t need it, we don’t drink,” said Alexei Kitayev, a St. Petersburg cab driver. “Do I drink often? Beer after work to relax, vodka and beer on the weekends with my family at dinner — it’s good for me and the soul is happy.” 
Russians generally blame alcohol deaths on the consumption of adulterated or industrial alcohol. Maxim Vdovin, an unemployed St. Petersburg resident, voiced the commonly held view here that many Russians die because the state does not control the sale of adulterated spirits. 
“No one gives a damn,” Vdovin said. “So many people are dying because of this raw vodka and they don’t give a damn, everybody is drinking and so many people die,” he said. 
A previous study carried out by British and Russian researchers and published in The Lancet in 2007 estimated that drinking alcohol not meant for consumption like cologne and antiseptics was responsible for nearly half of all deaths among working-age Russian men. 
A recent government crackdown on the sale of alcohol not intended for human consumption appears to have significantly cut those deaths, experts say. 
But there is relatively little recognition here that excessive drinking of alcohol in any form, including beer and wine, can lead to serious health problems.

TITLE: Leaders Rally Behind Ousted Honduran President
AUTHOR: By Nathan Gill and Eric Sabo
PUBLISHER: Bloomberg
TEXT: Honduran President Manuel Zelaya, ousted by the military, was due to meet with Venezuelan President Hugo Chavez and regional leaders Monday in a show of support designed to restore him as head of the Central American country.
Zelaya said soldiers surrounded his house and forced him at gunpoint to board a plane for Costa Rica on Sunday. His opponents accused him of seeking to change the constitution through a referendum in an attempt to hold onto power.
Honduran lawmakers named Roberto Micheletti, the head of Congress, as president and accused Zelaya of “repeated violations of the constitution.”
The coup was condemned by the U.S., European Union and Organization of American States, which said they won’t recognize any new government. Regional leaders called an emergency summit Monday in Nicaragua’s capital, Managua.
“It appeared that the darkness of Latin American dictatorships had ended, but now that’s not the case,” Costa Rican President Oscar Arias said at a news conference with Zelaya. “Democracy in Central America and Latin America continues to be fragile and vulnerable.”
The military coup may threaten the country’s economy and put at risk a free trade agreement with the U.S., Honduras’s biggest trade and investment partner, Alfredo Coutino, director for Latin America at Moody’s Economy.com in West Chester, Pennsylvania, said in an interview.
Micheletti denied there had been a coup d’etat, saying Honduras is a “civil state” that isn’t being run by the military. A curfew is in force until 6 a.m. Tuesday local time, he said in an interview with CNN en Espanol. Airports and borders were also closed.
Over the past year, Zelaya alienated Honduras’s political and business elite by aligning with the Chavez-led group of socialist Latin American leaders, said Heather Berkman, a political risk analyst at the Eurasia Group in New York.
“Zelaya took a substantial turn from traditional Honduran politics by moving dramatically to the left,” Berkman said in a telephone interview.
Zelaya was seeking backing for a referendum later this year on whether to create a constitutional assembly to rewrite the charter, like Bolivia, Ecuador and other countries in the region have done. He advanced his plans even after they were ruled unconstitutional by courts and over objections by members of the opposition and some in his own party.
Micheletti said he would step down after a new president is elected in November. “The transition was absolutely legal,” Micheletti said in a speech to Honduras lawmakers, who voted in favor of replacing Zelaya.
The OAS, a 34-nation organization of Western Hemisphere countries, demanded the immediate and unconditional return to power of Zelaya. The United Nations General Assembly was due to hold an emergency meeting Monday to discuss events in Honduras.
UN Secretary-General Ban Ki-moon in a statement Sunday called for Zelaya’s reinstatement.
President Barack Obama said he was “deeply concerned” and called on “all political and social actors in Honduras to respect democratic norms,” according to a statement from the White House.
The U.S. may impose trade sanctions and replace imported Honduran textile and agricultural products with those made by its neighbors such as Costa Rica, El Salvador or Nicaragua, if Zelaya isn’t reinstated, Coutino said. Honduras is the second-largest coffee producer after Guatemala in Central America.
“This is going to be a negative mark for Honduras,” Coutino added. “The U.S. will put pressure for the restoration of democracy. If that doesn’t happen, we will see major economic consequences.”
Electricity has been cut and the country of 7.8 million people is “completely paralyzed,” Zelaya said Monday.
Zelaya last week tried to fire the head of the armed forces, General Romeo Vasquez, for refusing to back the plan to hold a referendum on changing the constitution. The general on June 26 said he would remain at his post after the Supreme Court overturned the president’s decision to fire him. The Honduran Supreme Court ordered the removal of Zelaya, Agence France Presse said, citing unnamed officials at the court.
Marcia Villeda, vice president of the Congress, told CNN a letter of resignation was received from Zelaya. Villeda said there has been no coup and the events in Honduras “could be called a transition of power.”
The president wanted to use results from a poll planned this weekend to press for a national referendum in November on whether to change the constitution. The poll, a process the Supreme Court already ruled illegal, was canceled after Zelaya was forced to flee the country.
Honduran Foreign Minister Patricia Rodas was also seized by the military and later put on a flight to Mexico, Nicaraguan President Daniel Ortega said. She may attend the meeting in Managua, he added.

TITLE: Brazil Beats U.S. to Carry Off 3rd Confed Cup Title
AUTHOR: By Chris Lehourites
PUBLISHER: The Associated Press
TEXT: JOHANNESBURG —Next year’s World Cup just got a little more interesting.
Forget that the final score of the Confederations Cup final Sunday was Brazil 3, the United States 2. The Americans proved their upset of top-ranked Spain was no fluke, dominating the Brazilians in the first half and giving the five-time World Cup champions a test to the final whistle.
“This disappointment’s going to be here for a while,” captain Carlos Bocanegra said. “But it’ll go away, and what we can take away from this is the confidence that we played so well against the big teams here. This is a difficult tournament, we did well here and got to the finals and we showed that we belong.
“We’re not just going to be a pushover in the World Cup when we come down here.”
Luis Fabiano scored twice for Brazil, and Lucio added the third in the 84th minute to give Brazil its second straight Confederations Cup title and third overall.
The United States has beaten Brazil once in 15 games, and it was just 10 days ago that the Brazilians hung a 3-0 rout on the Americans in group play of the tournament that had the critics piling on and some calling for coach Bob Bradley’s job.
The U.S. men became a different team in the aftermath. They beat Spain to reach their first final at a FIFA tournament. And for the first 45 minutes Sunday, it was Brazil that looked like the beaten team.
Brazil’s usually fluid offense created few opportunities and was constantly stymied by the U.S. defense and goalkeeper Tim Howard.
Meanwhile, the Americans were relentless in their attack on a nervous-looking Brazil defense, with Landon Donovan working hard to give his team several scoring chances.
Just 10 minutes into the game, Jonathan Spector sprinted down the right side and sent a low cross into the area. Clint Dempsey, who had plenty of room to maneuver, raised his right leg and put just enough of a touch on the ball to alter the direction and send it past a diving Julio Cesar.
Donovan then got possession at his own end shortly after Maicon had sent in a corner for Brazil from the right. The United States midfielder ran up the middle, passed to Charlie Davies and then reclaimed the ball from his teammate before beating Julio Cesar.
“Leading up to the game, we showed a lot of heart, a lot of character,” Howard said. “We gave them everything they could handle, took a 2-0 lead and deserved every piece of that lead.”
There is a reason Brazil has won so many titles over the years, though, and it wasn’t about to let another slip away.
Luis Fabiano started the comeback in the 46th minute. The striker collected a pass from Ramires before turning and shooting past defender Jay DeMerit for his fourth goal of the tournament.
“We gave up the first goal so early in second half,” Bradley said. “We really put ourselves in a tough spot.”
Luis Fabiano added a tournament-leading fifth goal to equalize in the 74th, heading in a rebound after Kaka’s cross was kicked against the crossbar by Robinho.
The Americans caught a break in the 60th when Kaka headed a cross from Andre Santos to the near post. Howard stepped back into his goal and knocked the shot off the underside of the crossbar and then grabbed it safely in his arms. Kaka appealed, arguing that the ball crossed the line before Howard was able to get to it, and television replays indicated he was correct.
“I don’t know whether the ball crossed the goal line,” Kaka said. “It would have been fantastic for me to score a legitimate headed goal.”
It wouldn’t matter, with Lucio delivering the decisive goal in the 84th when he headed a corner kick from Elano past Howard. Brazil has won eight matches in a row, and is unbeaten in 16.
The Americans were downcast after the game, with Dempsey sobbing openly as he walked to get his medal.
“This is a massive learning experience. You always hope to do the most learning when you win, but you probably learn more by losing,” Donovan said. “If we’re smart and we take what we should from this game, we can progress. And that’s what we’re trying to do.”
They’ll see soon enough.
The United States begins defense of the Gold Cup, the championship of North and Central America and the Caribbean, on Saturday in Seattle, though only four players from the Confederations Cup are on that roster. Then comes an Aug. 12 World Cup qualifier against Mexico at Azteca Stadium, where the United States has never won.

TITLE: Iran Releases Some of U.K. Embassy Staff After Protests
AUTHOR: By Ladane Nasseri and Henry Meyer
PUBLISHER: Bloomberg
TEXT: TEHRAN — Iran freed some local staff of the U.K. Embassy in Tehran after protests from the European Union, while it kept others in detention, saying they played a key part in post-election protests.
“The British Embassy played a crucial role in the recent unrest both through its local staff and via media,” Intelligence Minister Gholam Hossein Mohsen Ejei said, state-run Press TV reported Monday. While some of the Iranian employees have been released, others remain in detention after preliminary investigation, he said. Foreign Ministry spokesman Hassan Qashqavi said five of the original nine detainees have been freed, IRNA state news service reported.
U.K. Foreign Secretary David Miliband on Sunday condemned the arrests as “harassment and intimidation of a kind which is quite unacceptable.” The EU also lodged a protest, and said the detentions would meet with a “strong” response.
Iran’s leadership accuses the U.S. and the U.K. of instigating the violence that followed protests sparked by President Mahmoud Ahmadinejad’s officially declared victory in the June 12 election. His opponents allege massive ballot-rigging.
Iran expelled two U.K. diplomats on June 22, prompting a tit-for-tat expulsion of two Iranian diplomats from London. Iran also ordered out the British Broadcasting Corp. correspondent from Tehran after accusations that the U.K. was interfering in Iran’s internal affairs.
Qashqavi said Monday that cutting diplomatic ties with any country is not on the agenda. His comments were carried live on state television.
Iran’s top election body, the Guardian Council, on Monday began a partial recount of the disputed presidential election, AFP reported, citing television.
Ahmadinejad’s main challenger on the ballot, former Prime Minister Mir Hossein Mousavi, has demanded the election result be scrapped due to vote-rigging. He said he doesn’t support the recount proposed by the Guardian Council and would like to see a review of the election by an independent arbitration committee.
Ilan Berman, an Iran expert at the American Foreign Policy Council in Washington, said the arrests are a sign that the Iranian leadership is feeling embattled and make it harder for the EU to resume nuclear negotiations with Iran. “This is a visceral move by Iran, it’s not a very smart one,” he said.
The EU said yesterday the treatment of protests at Ahmadinejad’s re-election would determine whether major world powers will re-enter talks on Iran’s nuclear program.
EU governments condemned the arrests, saying that “harassment or intimidation of foreign and Iranian staff working at the EU embassies will be met with a strong and corrective EU response,” Czech Foreign Minister Jan Kohout told reporters in Corfu, Greece.
Supreme Leader Ayatollah Ali Khamenei on June 19 called Britain the “most treacherous” Western nation.

TITLE: Williams Sisters Look Set for Another Final
AUTHOR: By Steven Wine
PUBLISHER: The Associated Press
TEXT: WIMBLEDON, England —Venus Williams advanced to the quarterfinals at Wimbledon when opponent Ana Ivanovic retired one game into the second set Monday.
Williams, seeking her sixth Wimbledon title, led 6-1, love-1 when Ivanovic called it quits.
The Williams sisters remained on course for a rematch of last year’s all-family final, which Venus won. No. 2-seeded Serena Williams, seeking her third Wimbledon title, advanced by beating Daniela Hantuchova 6-3, 6-1.
Ivanovic took a 10-minute break during the first game of the second set to have her left thigh taped by a trainer. She returned for two more points, but after hitting a service winner to take the game, she began crying as she walked to her chair and told the umpire she was retiring.
No. 3-seeded Venus dominated from the start, taking a 5-0 lead before Ivanovic finally won a game 27 minutes into the match. Venus came into the match having won 29 consecutive sets at Wimbledon, the longest such streak since Martina Navratilova won 40 in a row in 1982-85.
Former No. 1 Ivanovic still hasn’t reached a Grand Slam quarterfinal since winning the 2008 French Open.
American 17-year-old Melanie Oudin’s surprising run ended when she lost to No. 11-seeded Agnieszka Radwanska, 6-4, 7-5.
Missed chances hurt Oudin, a qualifier from Marietta, Ga. ranked 124th. She flubbed an easy volley to lose the first set, and she was up a break in the second set.
Oudin, making her Wimbledon debut this year, pulled the biggest upset in the first week by beating former No. 1 Jelena Jankovic. Oudin was the youngest American to reach the women’s fourth round at Wimbledon since Jennifer Capriati was a quarterfinalist in 1993.
No. 4-seeded Elena Dementieva eliminated fellow Russian Elena Vesnina 6-1, 6-3. No. 8 Victoria Azarenka beat No. 10 Nadia Petrova 7-6 (5), 2-6, 6-3.
In men’s play, No. 24 Tommy Haas never faced a break point and beat No. 29 Igor Andreev 7-6 (8), 6-4, 6-4.
Those reaching the men’s round of 16 included six players age 27 or older, among them Haas, 31, and Radek Stepanek and Ivo Karlovic, both 30. The message: When it comes to the brief lawn tennis season, experience pays.
“Grass definitely takes some getting used to,” said Andy Roddick, 26, who reached Week 2 for the fifth time in nine Wimbledons. 
“If you’ve played on it for years and years and years and years, I think the adjustment period will be probably a little bit quicker.”
While returning the 130 mph serves common in the men’s game requires a big adjustment on grass, novices sometimes thrive on the women’s side. Among those reaching the ladies’ fourth round were Oudin and 19-year-old Sabine Lisicki of Germany, who won a match on grass for the first time Tuesday.
“I just can’t believe I’m in the fourth round,” Lisicki said.
Two other teenagers made it—19-year-old Azarenka of Belarus and 18-year-old Caroline Wozniacki of Denmark.

TITLE: Mortar Kills 20 in Pakistan Mosque
AUTHOR: By Zarar Khan
PUBLISHER: The Associated Press
TEXT: ISLAMABAD — Pakistani fighter jets bombed suspected Taliban hideouts on Monday and a stray mortar crashed into a mosque during prayers as violence in the volatile northwest claimed more than 20 lives.
The air strikes hit a guesthouse being used by militants in the village of Kani Guram, in South Waziristan, where government forces are readying an offensive against Pakistani Taliban leader Baitullah Mehsud. Four militants were killed, three intelligence officials said.
The officials spoke on condition of anonymity because they were not authorized to release the information.
It was not possible to independently confirm the casualty counts or the identities of those reported killed as journalists have little access to the remote, dangerous region.
Late Sunday, a stray mortar shell hit a mosque during prayers in Azam Warsak in South Waziristan, killing three tribesmen and wounding seven, intelligence officials and a witness said.
“The mosque was destroyed and we could hardly bring out the dead and injured,” said a man who gave his name as Wazir. He escaped the shelling unharmed.
It was not immediately clear who fired the mortar, but intelligence officials said it appeared to be aimed by at a nearby military outpost, presumably by militants.
On Monday, security forces launched an early morning raid on a suspected militant hideout in Tank, a small city near South Waziristan, killing two suspected militants and arresting nine others, senior police officer Abdul Rasheed said.
Meanwhile, 15 militants died in overnight clashes with a local tribal militia in the tribal region of Kurram, north of Waziristan, a tribal elder and a lawmaker in the region said.
Ali Akbar Toori and lawmaker Sajid Toori said two tribal militiamen were killed and 35 were injured in the attack, which appeared to be an attempt by militants to take over the area.
Pakistan says it is preparing for a major offensive aimed at eliminating Mehsud and his militant network in South Waziristan, which lies in the mountainous tribal belt along Pakistan’s long border with Afghanistan where the government wields little control.
Mehsud’s group has been blamed for a string of deadly suicide bombings across the country that have killed more than 100 people in the past month. On Sunday, a militant ambush claimed by Mehsud killed a dozen soldiers in North Waziristan.
On Sunday, the government announced a 50-million-rupee ($615,000) reward for information leading to Mehsud’s capture or death. Smaller amounts were offered for information on his top lieutenants.
The government’s military campaign is strongly supported by Washington.

TITLE: Doctor Orders End To Ortiz vs Maidana Match
AUTHOR: By Greg Beacham
PUBLISHER: The Associated Press
TEXT: LOS ANGELES —Victor Ortiz’s left eye was nearly swollen shut, and his right eye was ringed by a deep cut. Bruises and abrasions covered much of the rest of his face.
Nope, the Golden Boy’s telegenic protege isn’t quite ready for prime time.
Argentina’s Marcos Maidana stopped Ortiz early in the sixth round of an action-packed fight Saturday night, leaving one of the sport’s top prospects pulverized and chastened.
The 140-pound bout featured five knockdowns and several wild momentum swings that both thrilled and stunned a Staples Center crowd of 8,600 expecting to witness another step in the evolution of the 22-year-old Ortiz, a charismatic slugger ticketed for stardom by promoter Oscar De La Hoya.
Instead, the fans marveled at a remarkably resilient U.S. debut by Maidana (26-1, 25 KOs) a heavy-handed 140-pounder largely unknown outside his native land and Germany, where he has fought six times in the last two years.
Maidana was knocked down three times in the opening two rounds, yet rallied with a devastating right hand that turned Ortiz’s face into a mess. After Ortiz stumbled to the canvas early in the sixth, the ringside doctor stopped the fight.
“I knew I was fighting against the local guy, and I had to knock him out,” said Maidana, whose only previous loss was a contentious split decision to Andreas Kotelnik earlier this year. “I went down, but I got up because I have a big heart. I saw that Victor felt my punches, and I said, ‘I know I can win this.”’
Ortiz (24-2-1), who held a comically large bag of ice to his swollen face afterward, acknowledged he entered the ring thinking about the bright lights, the chanting fans and the pressure — everything but Maidana, who also knocked him flat in the first round and then eagerly accepted Ortiz’s invitation to brawl.

TITLE: Iraq Prepares for Pullout of U.S. Troops From Cities
PUBLISHER: Bloomberg
TEXT: KIRKUK — Iraqi government officials will mark Tuesday’s long-planned withdrawal of U.S. forces from their cities by taking the day off, decorating cars with flowers and broadcasting patriotic music.
After the celebration comes a sobering responsibility.
U.S. officers say that the Iraqis will be in exclusive control of major combat in urban areas, including the flashpoints of Baghdad, Mosul and Baquba, for the first time since the 2003 overthrow of Saddam Hussein. U.S. forces will ring volatile cities to prevent rebel infiltration, provide intelligence and fight if Iraqis request.
“This is a very important step in the withdrawal process,” said Major Gen. Robert L. Caslen, who heads the 25th Infantry Division and commands U.S. forces in northern Iraq. “If anyone was in doubt, this shows we’re not here to occupy,” he said in an interview in Kirkuk, hub city of Iraq’s northern oil fields.
The urban pullout is part of an accord signed by the Bush administration and the Iraqi government in November, which called for a complete withdrawal of U.S. forces by the end of 2011. President Barack Obama wants to pull out all but 35,000 to 50,000 soldiers by August 2010. About 131,000 American troops are now in Iraq, according to Pentagon figures.