SOURCE: The St. Petersburg Times
DATE: Issue #1499 (61), Tuesday, August 11, 2009
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TITLE: President Orders Probe Into State Firms
AUTHOR: By Maria Antonova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — President Dmitry Medvedev on Friday ordered Prosecutor General Yury Chaika and the head of the Kremlin’s oversight department, Konstantin Chuichenko, to open an investigation into state corporations, in a sign of growing skepticism over the institutions’ role in the economy.
Medvedev ordered a sweeping investigation into how state corporations function, including their use of state assets and the degree to which their current activities correspond to federal law, according to a statement posted on the Kremlin’s web site.
Medvedev set a deadline of Nov. 10 for the investigators to present their findings, including whether or not the state corporation model should “continue to be used as a legal and management structure.”
Conglomerate Russian Technologies, nanotechnology giant Rusnano, Olympic construction firm Olimpstroi, state lender Vneshekonombank, nuclear conglomerate Rosatom, the Housing Maintenance Fund and the Deposit Insurance Agency are all classified as state corporations.
State corporations have come under fire from influential quarters since they were created in 2007. Presidential aide Arkady Dvorkovich and Finance Minister Alexei Kudrin have spoken out against state corporations, saying they hamper growth.
In March, Medvedev’s legal council on civil law said the special legal status accorded to state corporations was unnecessary and suggested that they operate under the same laws as private businesses.
Shortly afterward, Medvedev fired a broadside against Rusnano, criticizing its state corporation model and saying it would hamper innovation.
But so far, it is unclear what model Medvedev is advocating in its place. In July, the president signed a decree creating state company Avtodor, which will manage the country’s federal highways and establish a system of toll roads. Avtodor is classified as a state company, rather than a state corporation, but it seems to operate under a legal status similar to that of state corporations.
It’s not accidental that the prosecutor general was chosen to perform the investigation rather than bodies such as the Federal Tax Service, the Audit Chamber or the Federal Customs Service, said Anton Kostenko, a partner at Egorov Puginsky Afanasiev & Partners, which works with state corporations.
“Usually, such checks are performed after a signal that the law is not being followed in a particular company, while the rest were tacked on to avoid singling out just one,” he said, adding that the Prosecutor General’s Office has the broadest authority to conduct investigations.
Russian Technologies, which controls titanium major VSMPO-Avisma and owns 25 percent of carmaker AvtoVAZ, looks the most “vulnerable,” as it has received controlling stakes in over 400 companies last July under a decree signed by Medvedev, Kostenko said. Chuichenko will probably investigate how well this decree, as well as others issued by the president, are being followed, he said.
There are signs that Russian Technologies head Sergei Chemezov may have fallen from the Kremlin’s good graces. On Thursday, Chemezov was kicked off the presidential commission for economic modernization, the Kremlin said on its web site. Vedomosti cited sources as saying he lost the position because he never attended meetings.
And the commission reshuffle may just be a precursor to changes at Russian Technologies.
There are so many companies under Chemezov’s control that Russian Technologies “hasn’t even gotten around to some of them yet,” said Yevgeny Minchenko, an analyst with the Institute of Political Expertise.
Even so, seeing the order as directed against a specific person or firm would be simplistic, he said.
“The issue of effectiveness of state corporations is not a new one,” he said.
TITLE: CIS Allies Wary of Moscow Following War
AUTHOR: By Nabi Abdullaev
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — A year after Russian troops crushed the Georgian army in South Ossetia, Moscow has cobbled back together its ties with the West, but in a largely unforeseen consequence of the war, relations with other former Soviet states have become increasingly strained.
The war and Moscow’s subsequent recognition of Abkhazia and South Ossetia as independent states halted NATO’s advance toward Russia’s borders and demonstrated to the world the country’s decisiveness in defending what it deems national interests. But Russian officialdom has yet to learn how to package a convincing message for its main foreign policy audience — the West — to show the legitimacy and expediency of its moves, political analysts say.
Even now, in comments for a documentary on the conflict shown Friday by NTV television, President Dmitry Medvedev spoke at length about his emotions when he decided to send troops into Georgia, but he said little about his motivations — other than that the decision “helped to defend people’s lives.”
The new administration in Washington and the necessity of Russian cooperation on issues of vital importance to the United States have not allowed President Barack Obama’s team to make the Russian-Georgian conflict a major bilateral topic, said Pavel Zolotaryov, an analyst with the Institute of USA and Canada at the Russian Academy of Sciences.
“Georgia was a project of the previous American administration,” he said, referring to then-U.S. President George W. Bush’s backing of President Mikheil Saakashvili, a U.S.-trained lawyer who came to power after a bloodless popular uprising in 2003. “Of course, now Washington cannot turn away from Tbilisi, an ally that sends troops to support Americans in Iraq, but Obama’s hands are not tied.”
When Obama visited Moscow last month, the looming anniversary of the Russian-Georgian war and continuing tensions between those countries did nothing to hinder wide-ranging talks between the U.S. and Russian presidents and their advisers.
Russia has also restored relations with NATO, which were abruptly severed after the conflict last year.
The Georgian conflict proved to be a fleeting thorn in Russia’s ties with its major partners in the European Union, too. Several diplomats from the EU have told The St. Petersburg Times on condition of anonymity because of the sensitivity of the topic that their governments place blame for the conflict on Tbilisi rather than Moscow.
And while concerns of lasting damage to relations with the West have largely passed, Moscow has seen a burgeoning estrangement with its most loyal allies in the Commonwealth of Independent States, a loose, Russia-led alliance of post-Soviet states that Georgia abandoned last fall.
None of the CIS countries — including what had been Russia’s closest allies, Belarus, Kazakhstan and Kyrgyzstan — has followed Nicaragua, the only state other than Russia that has recognized South Ossetia and Abkhazia.
“The war has shown all other CIS countries that they are in no sense equal to Russia, despite all the formal arrangements, and that they should always understand that there is a limit to Russia’s tolerance of their behavior,” said Vladimir Zharikhin, an analyst with the Institute of CIS Countries.
The situation has pushed CIS leaders to look for ways to affirm their sovereignty, he said.
Last month, five CIS heads of state snubbed an informal summit in Moscow despite being invited by the Kremlin. Previously, a no-show by one would have caused a scandal.
Also, Belarus and Uzbekistan are stalling Russia’s latest pet project in the region: the creation of a multilateral rapid-response military task force.
Kyrgyzstan, now the most devoted of Russia’s allies, has hinted that it needs additional support for setting up a new Russian military facility on its territory, while Tajikistan has suggested dumping Russian as an official language.
One of the positive lessons that Russia has learned from the war is that frozen conflicts, if left unattended, risk degenerating into war, as happened in South Ossetia, Zharikhin said.
He pointed to Russia’s postwar effort to advance talks between Moldova and leaders of the separatist, Moscow-leaning Transdnestr republic, as well as last month’s attempt to restart Azeri-Armenian talks in Moscow over the disputed Nagorno-Karabakh republic.
“Of course, these problems are very far from being solved, but Moscow is at least striving to create some dynamics in the talks there,” Zharikhin said.
He and Sergei Markedonov, a Caucasus analyst with the Institute for Political and Military Analysis, agreed that poor informational support for Moscow’s actions remains one of the biggest mistakes still not addressed by the Russian leadership in the conflict or its aftermath.
“I don’t remember any press tour to South Ossetia for foreign journalists arranged by Russian officials. Why don’t they demonstrate the effects of war on the republic to professionals instead of telling us how cruel it was?” Markedonov said.
He pointed to the outbreak of the belligerent rhetoric on both sides as the anniversary of the war approached.
“The same [deputy chief of the Russian General Staff Anatoly] Nogovitsyn who was Russia’s chief talking head during the war last year — in what almost everyone said was Moscow’s PR failure — is doing most of the official talking about the anniversary,” Markedonov said.
Russia’s reluctance to allow international monitors into South Ossetia and Abkhazia is also a counterproductive PR strategy, he said.
“If monitors go there and talk to the locals, this may not change the general perception of Russia’s role in the conflict abroad, but at least a new range of voices supportive of Russia’s actions will be heard,” he said.
TITLE: Arrests Continue as Police Crack Down on Gambling
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: The city’s police arrested the owner of an illegal gambling venue and detained another owner this week as they continue to target illegal gambling spots after the Kremlin launched a reform last month that ordered all casinos in the country to close down. The same law established four specially designated large gambling zones in the Primorye region, Altai region, Kaliningrad Oblast and Azov region.
Not all casinos appear willing to leave. Instead, they are disguising their premises as lottery centers. The city police have confiscated more than 3,300 pieces of gambling equipment from illegally operating venues during the last week alone. At least 500 venues were raided last week, and four criminal cases and 10 administrative cases were launched.
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.
The police have said they will continue to crack down on illegal gambling venues on a regular basis until the situation on the gambling market becomes stable.
Stability may not come for months, however, as governors of the territories in which the Russian Las Vegases would be located report they are not ready to receive the investors. Officials have put a brave face on the matter and are speaking optimistically about the future, while emphasizing that at the moment they rely heavily on state support.
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 like Las Vegas and Monaco.
Critics speculate that the law will only result in a massive boost of illegally operating private gambling houses. Dmitry Nevelsky, head of the St. Petersburg Association of Gambling Businesses, said few businesses will risk relocation during the instability of the crisis, nor would they find it worthwhile investing far from their hometowns.
Owners of gambling businesses in Russia have found themselves at a loss as to where to turn to keep their casinos afloat.
“The European market is tightly packed and the chances for Russian businesses to squeeze themselves in are less than scarce,” said Nevelsky. “Nearby Belarus is not an option either, because the moods of the country’s leader are unpredictable.”
Furthermore, it is argued that few Russians will want to travel to gambling zones and are more likely to seek out a local underground venue.
Deputy Finance Minister Sergei Shatalov 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 in which no legal gambling businesses will exist. Shatalov declined to estimate how long such a period could last.
TITLE: Religious Group Wants Gay Clubs Moved
AUTHOR: By Natalya Krainova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — A nationwide Christian association has called on government authorities to relocate gay clubs away from residential areas and schools, as well as cultural, sports and medical facilities.
“Everything that is connected to the propaganda of gay culture must be moved away to limit the impact on ordinary people, because it leads to degradation,” Konstantin Bendas, spokesman for the Russian Church of Christians of Evangelical Faith, told The St. Petersburg Times.
Bendas also serves as an expert adviser to the State Duma on ties with non-government social and religious organizations.
In an open letter published Friday, the association also said authorities had to endorse “strict control” of gay clubs to remove minors, drugs, prostitutes and porn distribution.
In response to the letter, one of the organizers of unauthorized gay parades in Moscow on Friday accused the association of “intolerance.”
“Such logic of apartheid is currently in high demand among officials like [Mayor Yury] Luzhkov,” Nikolai Bayev, a gay rights activist, said by phone.
Luzhkov has repeatedly banned gay parades from taking place in Moscow in recent years.
Attempts by gay activists to hold them despite the bans have ended in numerous detentions of the activists by police and beatings by opponents of gay parades.
TITLE: Zenit Fires Coach Advocaat Following Dismal Home Loss
PUBLISHER: The Associated Press
TEXT: ST. PETERSBURG, Russia — Zenit St. Petersburg fired coach Dick Advocaat on Monday following a 2-0 home loss to rival team Tom in the Russian soccer league on Sunday.
“Unfortunately, after Advocaat’s decision to take over the Belgium national team, Zenit’s results have notably gone down,” the club said in a statement published on its web site. “The club’s leadership and fans are not satisfied with the place Zenit holds in the Russian championships.”
Anatoly Davydov, the club’s youth team manager, was appointed interim coach.
Zenit is currently seventh in the 16-team Russian league with 24 points after 17 games, 10 points behind leader Rubin Kazan.
Dutch-born Advocaat led Zenit to its first Russian league title in 2007 and won the UEFA Cup a year later.
In June, Advocaat, who took over Zenit in 2006, announced that he would not extend his contract with the club at the end of the season and would take over Belgium’s national team.
Advocaat has previously coached the national teams of the Netherlands, South Korea and the United Arab Emirates, as well as PSV Eindhoven and Scottish League champion Rangers.
TITLE: Japan Told
To Halt Sending Of Aid to Kurils
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The Foreign Ministry announced on Friday that Russia has stopped accepting Japanese humanitarian aid to the Kuril Islands, which have been receiving the assistance for 18 years.
“The Japanese side has received explanations that there is no need for further humanitarian aid,” the ministry said in a statement, without elaborating.
The ministry has asked the Japanese Embassy to inform all Japanese organizations involved in providing the aid about the decision.
Both Russia and Japan will still provide joint humanitarian aid to the islands in emergencies threatening the lives or health of residents, the ministry said.
A Japanese Embassy spokeswoman said no one was available for comment Friday, and repeated calls to the Foreign Ministry press office went unanswered.
TITLE: U.S. Diplomat Named In Purported Sex Video
AUTHOR: By Anna Malpas
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — A senior U.S. diplomat in Moscow was caught up in a sex scandal on Friday, after a grainy video that purports to show him meeting prostitutes was picked up by national newspapers.
The man is named as Kyle Hatcher, the second secretary of the U.S. Embassy, in the video, which was originally published Thursday on Informacia.ru. The video was covered in Izvestia and Komsomolskaya Pravda on Friday.
Izvestia ran a story headlined “An American Diplomat Knows How to Negotiate With Russian Tarts,” while Komsomolskaya Pravda headlined its story “Smut: The Sin of a Diplomat.”
A spokeswoman for the U.S. Embassy said she was aware of the story but that she could not comment or confirm whether Hatcher works at the embassy.
Hatcher’s cell phone was switched off Friday afternoon.
His work involves meetings with Russian Orthodox Church priests, a fact mentioned in the news coverage. The web site of the Moscow Patriarchate writes that he attended a meeting between Patriarch Kirill and U.S. Ambassador John Beyrle on July 3.
His profile on the Linkedin.com networking web site says he became a foreign service officer in 2007 after working as a financial analyst at the Treasury Department.
The Izvestia story says the makers of the video approached Hatcher with a blackmail demand and published the video after he approached embassy officials for help.
The heavily edited video does not show any sex and is too grainy for the man’s face to be clearly identifiable. It begins with recordings of a man speaking Russian with a foreign accent, who talks to women called Tina, Sonya and Veronika on the telephone and arranges meetings. One of the addresses is on Kutuzovsky Prospekt.
The film also shows a man in winter clothing talking on the phone on a snowy street.
It then cuts to a hotel room with a man in a T-shirt and shorts lying on the bed. He stands on a chair and checks something close to the camera. A woman comes in and the couple are shown undressing and walking to the bathroom.
The article on Informacia.ru says the scenes were filmed in March. It also insinuates that Hatcher works for the CIA.
The web site’s chief editor, Vladimir Alexandrov, said in e-mailed comments Sunday that the video came from a “proven and trustworthy source,” declining to elaborate.
The same web site ran a video showing a man resembling British diplomat James Hudson having sex with two prostitutes in July. Hudson, who served as the deputy consul general in Yekaterinburg, resigned from the Foreign Office after The Sun covered the story.
TITLE: Actor Faces 10 Years in Jail Following Drunken Brawl
AUTHOR: By Anna Malpas
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — With his impish, round-cheeked face, Vladislav Galkin began his career playing Huckleberry Finn and became one of Russia’s most popular actors.
But his good-guy image took a severe blow when he drunkenly shot at a barman who refused to serve him another drink and then punched a policeman.
On Wednesday, Galkin, 37, was charged with hooliganism using a weapon and nonlife-threatening violence against a law enforcement official. He could be sentenced to up to five years in jail for each charge.
The actor visited Tiki Bar, a Hawaiian-themed bar on Sadovo-Kudrinskaya Ulitsa in Moscow, on July 23.
When the barman refused to serve him a whisky, he bashed a chair against the counter. He then pulled out an air gun, fired a shot and threatened to use it against the bar staff, Anatoly Bagmet, head of the Investigative Committee’s Moscow branch, told Interfax.
A police lieutenant intervened, but Galkin punched him in the head. The officer is still hospitalized, Bagmet said, Interfax reported.
Galkin apologized for the attack in a statement published in Moskovsky Komsomolets before he was charged.
“I send my deepest and sincere apology to Renat [Zinatullin, the injured policeman],” he wrote. “In this situation, he was injured undeservingly. I feel sad, repulsive and miserable.”
Strangely, the actor was only charged two weeks after he was detained. Life.ru reported that he showed a pass signed by Interior Minister Rashid Nurgaliyev at the police station.
He is listed as a member of the Interior Ministry’s Public Council, a body intended to improve communication with the public.
Galkin began his career at the age of 9, starring as Huckleberry Finn in a popular television adaptation of Mark Twain’s book. He went on to specialize in tough action roles, often playing men in uniform.
He starred in “72 Meters,” a film about a submarine disaster, and in “Spetsnaz,” a television drama about the special forces in Chechnya.
He also played poet Ivan Bezdomny in a recent television adaptation of Mikhail Bulgakov’s “The Master and Margarita.”
Galkin currently stars in a medical drama titled “I Heal” airing on CTC.
TITLE: Politkovskaya Trial to Continue
AUTHOR: By Anna Malpas
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The judge presiding over the retrial of the men charged with involvement in the murder of Novaya Gazeta journalist Anna Politkovskaya on Friday threw out requests from her family’s lawyers to send the case back to the prosecutor for further investigation.
“We will appeal,” Politkovskaya’s son, Ilya, told reporters outside the Moscow District Military Court.
The decision means that the prosecutors’ case will be the same as in the first trial, which ended in February with all the defendants being acquitted.
Two brothers, Ibragim and Dzhabrail Makhmudov, and former Moscow police officer Sergei Khadzhikurbanov are on trial for involvement in the 2006 murder. A fourth defendant, former Federal Security Service officer Pavel Ryaguzov, is being tried on related charges as part of the same case.
“To put it mildly, I am disappointed by the decision,” said Anna Stavitskaya, the family’s lawyer, Interfax reported.
Karina Moskalenko, another lawyer for the family, said they would appeal to the European Court of Human Rights in Strasbourg, Interfax reported.
“In my view, this is yet another attempt to demolish the investigation,” Sergei Sokolov, managing editor of Novaya Gazeta, told Interfax.
Reporters Without Borders also condemned the court’s decision.
The family’s lawyers had asked for the case to be combined with investigations into a third Makhmudov brother suspected of pulling the trigger, Rustam, who is on the run from police, and the brothers’ uncle Lom-Ali Gaitukayev, as well as unidentified people seen watching Politkovskaya.
The prosecutors supported their request.
Judge Nikolai Tkachuk said Friday that there was no legal basis for combining the cases, however.
He also said Ibragim and Dzhabrail Makhmudov and Ryaguzov did not need to be detained during the trial.
Khadzhikurbanov is being held behind bars on separate charges of attempted extortion of money from a key witness in the trial.
The judge said the next hearing would be Sept. 7, when a jury will be selected.
“For us, this decision was unexpected,” Amalia Ustayeva, a public prosecutor, said after the hearing.
The case needed to be sent back to the prosecutors “to ensure a full, multifaceted investigation,” Ustayeva said.
She said the prosecutors would consider whether to appeal.
Murad Musayev, a lawyer representing the Makhmudov brothers, said afterward that he thought the judge’s decision must have been agreed with prosecutors, however.
“I don’t think this was unexpected for the prosecutor of the Russian Federation,” he said, adding that he “ruled out” the possibility.
He speculated that the judge’s decision might be annulled on appeal.
Investigators need to find the “real criminals,” Musayev said, reaffirming that “with an objective jury, our clients will be acquitted.”
Politkovskaya, a relentless critic of the country’s ruling elite, was shot dead in the elevator of her apartment building in central Moscow on Oct. 7, 2006.
TITLE: Navy Continues Its Hunt For Missing Vessel
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The Navy and the Federal Security Service are searching for a Finnish ship with a Russian crew that disappeared in the Atlantic Ocean en route to Algeria, the Navy said Sunday, Reuters reported.
Radio contact with the freighter, Arctic Sea, was lost July 28, according to a statement posted on the Navy’s web site. The ship, which sails under the Maltese flag, had 13 to 15 crew members on board, the statement said.
The Arctic Sea, operated by Oy Solchart Management, was scheduled to arrive in Bejaia, Algeria on Aug. 4, the Sovfracht maritime news web site reported Saturday.
“On July 28, the ship literally disappeared — no communication, no data on its location,” it says. Sovfracht’s editor did not return calls for comment.
The ship was attacked in Swedish territorial waters July 24. The crew was tied up and assaulted while masked pirates searched the cargo vessel, Swedish police said in a statement July 31.
TITLE: Saakashvili Criticizes ‘Invaders’
PUBLISHER: Combined Reports
TEXT: MOSCOW — Georgian President Mikheil Saakashvili defiantly marked the first anniversary of his country’s war with Russia, denouncing Russian troops who control two Georgian regions as “invaders.”
In a heated speech Friday to a rain-drenched crowd of thousands in Gori, Saakashvili vowed that Russia would never again regain control of his small country, his voice sometimes a growl and sometimes rising to a near shout. It was a marked contrast to the day’s otherwise quiet and low-key war commemorations.
“Our future will not be written in a hostile, faraway, frigid capital,” Saakashvili said, referring to his frequent contention that Moscow aims to control or occupy all of Georgia.
“We want to defeat the invaders, not by another war. Obviously not. We want to defeat them by peacefully strengthening our democratic institutions, by constantly developing our economy, by getting closer and closer to the European Union,” he said in the city, which was heavily damaged by the war.
The brief war killed at least 390 people and left a legacy of animosity between leaders and fears of more fighting. About 26,000 people displaced by the conflict still live in temporary housing in Georgia, many on less than $3 a day, according to aid group World Vision.
“We feel there is a great danger in the current situation,” Tbilisi resident Lia Tabukashvili said while visiting a memorial to war victims on the parliament’s steps. “We can only place our faith in God and the international community.”
Georgian soldiers watch the boundary line from a few hundred meters away, and EU monitors use binoculars to survey the South Ossetian side, which Russia refuses to allow them to enter.
Both sides have claimed that the other fired mortars or shot at them in recent weeks. On Friday, Georgian Interior Ministry spokesman Shota Utiashvili said five civilians in the border village of Koshki were kidnapped by armed men who crossed over from South Ossetia. Russian news agencies cited South Ossetia leader Eduard Kokoity as saying the men had inadvertently crossed into the province and were to be released immediately.
Tbilisi closed its main avenue, Rustaveli Prospekt, for a photo exhibition chronicling Moscow’s Soviet-era control, or occupation, of Georgia. The country observed a minute of silence, and church bells tolled.
In Gori, about 80 kilometers west of Tbilisi, several hundred people formed a human flag display at the ruins of a medieval fortress. Residents later held hands in a human chain through the city of 50,000, which was bombed when the war spread into Georgia proper from South Ossetia.
Earlier in Tbilisi, Saakashvili attended a wreath-laying ceremony, where a 2-year-old boy in a tiny military uniform stood by the grave of his father, Emzar Tsilosani, who was killed in the war.
“He will be a soldier, like his father,” said widow and mother Teona Tsilosani. “But Emzar is not coming back.”
(AP, Bloomberg)
TITLE: Cyberattack on Georgian Affects Twitter, Facebook
AUTHOR: By Nikolaus von Twickel
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — A massive cyberattack against a Georgian blogger that caused a global knockout of Twitter and slowed several other popular web sites must have originated in Russia, the blogger said Friday.
Two distributed denial of service attacks hit Twitter on Thursday, just ahead of the anniversary of last year’s war over South Ossetia, making the popular microblogging site unavailable for millions of users worldwide for several hours.
The attacks also hit other social networking sites and were really targeted against a single user, who goes by the name Cyxymu, said Bill Woodcock, research director of Packet Clearing House, a nonprofit organization that tracks Internet traffic.
“Twitter, Facebook, LiveJournal, etc. were collateral damage in a horizontal attack against the blogger,” Woodcock said Saturday in e-mailed comments.
Cyxymu, a Latinized rendering of the Abkhaz capital Sukhumi’s spelling in Cyrillic, is the username of a Tbilisi-based blogger who said he was a 34-year-old economics lecturer and an ethnic Georgian refugee from Abkhazia.
The blogger, who identified himself only as Giorgy, told The St. Petersburg Times that the attack was probably triggered by a timeline of events leading up to the five-day war that he posted on his LiveJournal account.
The timeline, written in Russian, linked media reports suggesting that Moscow, and not Tbilisi, had initiated the war. He said it was published shortly before the wave of attacks began at 5:30 p.m. Thursday.
“I think this did not go down well with some people in Russia,” Giorgy said by telephone from Tbilisi.
His LiveJournal blog was cut off over the weekend, and he claimed on another blog at www1.abkhaziya.net that a new wave of attacks started Friday.
Security experts said that while the assault targeted all of Cyxymu’s accounts, only Twitter succumbed.
The service was unavailable for hours Thursday and was not running smoothly Friday. Twitter co-founder Biz Stone said Friday that “the ongoing, massively coordinated attacks” appeared to have been geopolitical in motivation. “However, we don’t feel it’s appropriate to engage in speculative discussion about these motivations,” he wrote on his blog.
TITLE: Eatery Revenues Slump by Almost 20%
AUTHOR: By Yelena Dombrova and Maria Buravtseva
PUBLISHER: Vedomosti
TEXT: Turnover at St. Petersburg’s restaurants and cafes in June fell by 19.3 percent compared to the same period for last year, dropping to 3.5 billion rubles ($111 million), according to new figures released by Petrostat.
The overall decrease during the first half of the year amounted to 15.3 percent, contrasting with the first half of 2008, when it rose by 20 percent in real terms.
The purchasing power of customers has fallen, according to Valeriya Silina, public relations director for the Rosinter Restaurants Holding, which operates 15 restaurants and cafes in St. Petersburg. In June turnover dropped by 7 percent compared to 2008, and by 10 percent in July, with a 20 percent decrease in the number of customers, according to Leonid Garbar, general director of the Svoi V Gorode group that includes the Stroganoff Steakhouse and Russian Vodka Room No. 1.
Denis Radzimovsky, general director of the Miks chain of cafeterias, put this year’s seasonal drop in turnover at 30 to 40 percent, though the average check per person in the chain’s outlets had remained steady at 150 rubles ($4.75), he said.
“People are organizing to meet up at our restaurants less frequently,” Radzimovsky said, adding that many of the outlets in malls out in the commuter belt have closed down, with the flows of potential diners at those malls having fallen by 50 percent. Radzimovsky added that according to his estimates, the turnover at expensive restaurants had fallen by 30 to 40 percent, while at mid-range establishments, turnover may actually have increased.
A spokesperson for the Ginza Project restaurant group said that demand had fallen in the economy segment of the market, but visiting expensive restaurants remains a matter of status. The concept for the group’s Tsar restaurant, which was intended to cater for tourists, has been broadened to allow it to host banquets. Garbar confirmed that the number of tourists visiting the city’s restaurants had fallen.
The executive director of Restcon, Andrei Petrakov, said that the fast food sector had shrunk by 10 to 20 percent and the restaurant sector by 30 percent as a result of summer season vacations, shortened working weeks and the economic crisis in Europe.
Turnover at the Yevraziya chain of sushi bars has risen by 4 percent during the last two months, according to the holding’s president Alexei Fursov. At the beginning of the year the average check fell by 10 to 15 percent, but in the summer the number of customers increased by 10 percent, he said. In July Yevraziya opened seven new sushi bars and the group plans to increase its total number in the city from 86 to 100 by the end of the year, Fursov added.
Radzimovsky said that the rental rates for premises had fallen by 75 percent, making it easier to open new outlets. He added that while it has become easier to open outlets, it has become harder to make them profitable.
TITLE: Few Dare To Open Businesses
PUBLISHER: The St. Petersburg Times
TEXT: The entrepreneurial spirit is strong in young Russians, a poll published on Friday showed. It’s only after they finish university and go out into the real world that they lose their desire to be their own boss.
About 67 percent of Russians aged 18 to 24 said they were planning to start their own business, according to state pollster VTsIOM. But of those aged 25 to 34, only 37 percent have considered working for themselves, and only 26 percent of those aged 35 to 44 consider themselves potential entrepreneurs.
About 82 percent of respondents said they have never tried to open their own business, and about half said they would never do it. A full 11 percent of respondents said they had tried to launch their own business but failed.
One problem may be that would-be entrepreneurs don’t know about the resources available to small business owners. Only 20 people have come in for assistance this year at the Orenburg office of the Association of Young Entrepreneurs of Russia.
“It must be people’s mentality. They get it from their parents, who grew up in Soviet times,” said Igor Popov, deputy head of the association’s Orenburg office. “A lack of information on how to start a business is also a problem. The municipal government supports startups with interest and rent subsidies, but there are few who know about it.”
TITLE: Relative Calm May Be Coming to an End
AUTHOR: By Alex Anishyuk
PUBLISHER: The St. Petersburg Times
TEXT: Equity markets have been mostly range-bound throughout the summer, taking a breather from a dramatic bounce in the first five months of the year.
But with only a few weeks left before stocks head into the traditionally volatile months of September and October, a variety of factors — from faint signals that the economic crisis could be loosening its grip to fears of ruble devaluation in the coming year — could bring a sudden end to the summer’s calm.
After rallying over 75 percent since the start of the year, the MICEX and RTS have both been trading around their 1,000-point marks for a large part of the summer. Their fluctuations have been tied mostly to moves in oil prices, which have themselves been bouncing between $58 per barrel to a year high of $73 per barrel.
The exchanges closed higher last week, as better-than-expected U.S. job numbers drove the MICEX to finish the week up almost 6 percent, while the RTS closed up more than 6 percent.
July’s Purchasing Manager’s Index gave some hope that the worst of the recession may be past, showing the manufacturing industry shrinking at its slowest rate since September. The Industry and Trade Ministry reported that the country’s unemployment rate fell to a six-month low of 8.3 percent in June.
Separately, July data from the State Statistics Service showed wage arrears hitting a five-month low of 7.2 billion rubles ($227 million) in June, an 18 percent fall from May, when arrears rose 10.8 percent.
The mounting positive economic signs could translate into higher stock prices in the short term.
“We could see a bit of a dip in August, but a rally is possible in September amid expectations of the recession finally coming to an end,” said Oleg Dukhin, an analyst at Zerich Capital Management.
Any move to the upside would be best taken advantage of by buying blue chips such as Sberbank and Gazprom, he said.
Gazprom shares finished the week up 3.5 percent at 47.78 rubles per share, while Sberbank’s closed up by 2.7 percent at 174.06 rubles per share.
But the economic news has not been all positive. Federal Labor and Employment Service head Yury Gertsy said last month that the number of people registered as unemployed is likely to hit 2.6 million by the end of the year, up from 2.15 million at the end of July.
Various government and banking industry officials have also warned about a possible wave of bad debts coming due in the fall, a development that — according to some of the more pessimistic scenarios — sets the stage for a second wave of the crisis.
A correction is probably in the cards for equity markets, though it is unlikely to be a protracted one, said Sergei Perminov, chief strategist at Rye, Man and Gor.
“The market might experience a correction, as technical indicators suggest that U.S. stocks might have already hit their peaks,” Perminov said. “But there’s evidence that the market is far from being short of cash, so we are expecting a short-term correction rather than the widely discussed drastic fall.”
A possible second round of ruble devaluations is the reason for bearishness next year, Perminov said. For now, he recommended investing in blue chips and small cap stocks while staying away from mid-cap companies.
“Second-tier names like Vozrozhdeniye, Magnit and Raspadskaya have generally outperformed blue chips in the last two months and look expensive,” he said.
Oil companies’ shares are ideal for investors with a middle-term perspective, Perminov said.
On one hand, “they are defensive stocks that will benefit from a weaker ruble. But oil is also a lagging asset and is likely to outperform in the latest stages of any global rally,” he said.
The price of oil will remain an important factor in determining stock movements, analysts said.
The current price of oil is in some ways ideal for the country’s economy, supporting domestic firms while not giving superprofits to highly taxed exporters, said Troika Dialog’s Andrei Kuznetsov.
With the country’s 2010 budget running at a 7.5 percent deficit, Kuznetsov recommends investing in retailers, as the government plans on supporting the low-income clusters of society.
“I would suggest investing in X5 or other retailers that own large discount shops preferred by low-income customers,” he said.
X5 Retail Group’s London-traded shares closed down 5.5 percent on the week at $16.43.
Bank equities are also a good option, as banks will benefit from the ruble liquidity influx caused by the state’s measures to support the economy, Kuznetsov said.
TITLE: In Brief
TEXT: Ford Goes Back to Work
MOSCOW (Bloomberg) — Ford Motor Co. resumed production at its factory near St. Petersburg, Russia, after halting output on July 20 because of slumping demand.
Ford, which employs 2,200 workers at the plant, will eliminate one of three work shifts next month to avoid job cuts, said Yekaterina Kulinenko, a company spokeswoman, by phone Monday.
Opel Bid in Doubt
FRANKFURT (Bloomberg) — Magna International’s bid to buy General Motors’s German Opel unit may fail because Russia’s state-owned Sberbank is financing the deal, Frankfurter Allgemeine Zeitung reported, citing unidentified people familiar with the negotiations.
GM fears Opel will only serve as a vehicle to rehabilitate the “technically antiquated” Russian car industry, FAZ said.
Medvedev Outraged
MOSCOW (Bloomberg) — President Dmitry Medvedev called for “intensified talks” with Finland and China on exports of raw timber, saying that Russia needs to develop its domestic wood-products industry.
“The situation is outrageous and has been for a long time,” Medvedev said during a meeting with political party leaders in Sochi on Monday. “We continue to ship raw timber for export and processing isn’t being developed. To a great extent this is the result of the position of our neighbors.”
Medvedev was due to meet with his Finnish counterpart Tarja Halonen in Sochi on Tuesday.
RusAl Plans IPO
MOSCOW (Bloomberg) — United Co. RusAl said that it hopes an initial public offering will help to cut debt by as much as $5 billion, Interfax reported.
The aluminum producer aims to sign a loan-extension agreement with Vnesheconombank by early September and to reach accords on restructuring debts with other Russian banks by the middle of that month, the news service cited Oleg Mukhamedshin, RusAl’s head of capital markets, as saying in an interview.
Customs Off Target
MOSCOW (Bloomberg) — Russia’s Federal Customs Service may miss its annual target for transfers to the federal budget by as much as 500 billion rubles ($15.8 billion), Vedomosti reported, citing the service’s chief, Andrei Belyaninov.
The service will probably collect between 3 trillion rubles and 3.1 trillion rubles this year in tariff payments, compared with the original plan of 3.47 trillion rubles, the paper said, citing Belyaninov.
Signs of Recovery
ST. PETERSBURG (Bloomberg) — Russian cargo volumes show that industrial output probably fell at the slowest pace this year in July, signaling that manufacturers may be emerging from the worst of the recession, VTB Capital said.
“Cargo turnover has shown an improving trend for three consecutive months, so we can now definitely say that Russian manufacturing has switched onto the recovery track,” VTB Moscow-based analysts Elena Sakhnova and Vladimir Bespalov wrote in a report Friday. Railroads carry about 85 percent of Russia’s cargo transport.
Industrial production in June decreased an annual 12.1 percent, falling for the eighth consecutive month, compared with a record drop of 17.1 percent in May.