SOURCE: The St. Petersburg Times
DATE: Issue #1515 (77), Tuesday, October 6, 2009
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TITLE: Putin Tells Renault To Invest In AvtoVAZ
AUTHOR: By Ira Iosebashvili
PUBLISHER: The St. Petersburg Times
TEXT: Prime Minister Vladimir Putin on Friday told Renault to either help its partner, struggling carmaker AvtoVAZ, or risk the dilution of its 25 percent stake.
Putin said the government had protected Renault’s interest in the company this summer, when it gave AvtoVAZ 25 billion rubles ($829 million) in financing.
“Now they either have to participate in funding the enterprise or we will have to discuss our relative stakes,” Putin said at a meeting of senior government officials.
The comments come as the government is making an effort to attract foreign capital into state-owned companies. First Deputy Prime Minister Igor Shuvalov said last month that a new wave of state asset sales could begin by the end of the year.
Shuvalov is scheduled to meet with executives from Renault and Nissan — which is 44 percent owned by Renault — on Monday.
Renault officials said they would have no comment on Putin’s remarks.
The French carmaker paid nearly $1.2 billion for its stake in AvtoVAZ in early 2008, in a bid to reap benefits from what was then Europe’s fastest-growing car market. For AvtoVAZ, which built eight cars per employee in 2008 compared with Renault’s 28 cars per employee, the investment provided hope of access to Renault’s technology.
But as the financial crisis took a toll on Russia’s economy, AvtoVAZ quickly fell on hard times. The company went through its government loan in a matter of months, and recently announced that it would lay off 27,600 employees — about a quarter of its workforce — as part of a restructuring plan.
AvtoVAZ officials could not be reached for comment Sunday.
Car sales in Russia plummeted by 51 percent in the first eight months of 2008. The Association of European Businesses this month cut its forecast for Russian sales to 1.4 million new cars and light commercial vehicles in 2009.
Renault reported a $187 million loss on its AvtoVAZ stake in the first half of this year.
Analysts said while Putin’s demands came as a surprise, the government was not overstepping its boundaries by asking Renault to help bail out the car giant. “Each month, this company [AvtoVAZ] generates about 2 billion rubles in losses,” said Sergei Udalov, who tracks the car industry with Avtostat. “It would be wrong for anyone to assume that the state would continue financing the company and not expect Renault to participate.”
The next logical step the French carmaker could take would be to offer financing while pushing for a more active role in AvtoVAZ, Udalov said.
“To date, Renault has been a rather passive shareholder. Now they can change that,” he said.
The government has shown a heavy hand with foreign shareholders before, most notably in 2006 when federal regulators threatened to close Sakhalin-2 on environmental grounds until Royal Dutch Shell agreed to cede control in the $22 billion oil and gas project to state-owned Gazprom.
Renault has a blocking stake in AvtoVAZ and the right to appoint senior managers. But many of those managers have left this year, and Renault would lose its blocking stake if AvtoVAZ shares were diluted.
Finance Minister Alexei Kudrin said last week that the government was willing to help AvtoVAZ one last time, possibly by adding to the 25 percent share it already owns through Russian Technologies.
“I don’t think AvtoVAZ will die,” Kudrin said.
The aid, however, would come with demands for a restructuring of the company, he said.
It will take two weeks to figure out how much money AvtoVAZ needs, Shuvalov told Putin at Friday’s meeting.
Troika Dialog is the third large majority shareholder in AvtoVAZ, with a 25 percent stake. The remaining
25 percent of the company’s shares trade in the open market.
TITLE: Chubais Blamed for Role in Dam Disaster
AUTHOR: By Alex Anishyuk and Alexandra Odynova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Anatoly Chubais, the former CEO of Unified Energy System, tops a list of six officials accused of neglect and making bad decisions in a much-anticipated report on the cause of the August dam disaster that killed 75 people.
The report, released Saturday by the industrial safety watchdog after a monthlong delay, says Chubais was among the six officials “conducive to the disaster” at the Sayano-Shushenskaya hydropower station on Aug. 17.
The report also blames TGK-1 CEO Boris Vainzikher and Valentin Stafiyevsky, head of RusHydro’s southern division, as well as former Energy Minister Igor Yusufov, Deputy Energy Minister Vyacheslav Sinyugin and Anatoly Dyakov, who headed a commission that launched the dam in 2000.
The 141-page report directly links Chubais to the accident because he signed off on documents approving its launch in 2000. At the time, Chubais headed UES, the state electricity monopoly that he finished dismantling last year.
“Under order No. 690 dated Dec. 13, 2000, … UES chairman Anatoly Chubais approved the act of the central commission to launch the Sayano-Shushenskaya hydropower complex without a comprehensive evaluation of the data on Sayano-Shushenskaya’s operations,” says the report by the Federal Service for Environmental, Technological and Atomic Inspection.
Chubais, who is widely disliked among Russians for his role as the architect of Russian privatizations in the 1990s and now heads state-run Rusnano, confirmed that he had signed the documents in 2000. “I’m responsible for everything that took place in the field during my time in office,” Chubais said in a statement posted on his official web site late Saturday.
He said the plant had already been working for 20 years when he signed the papers, adding that officials had been forced to take many risks in 2000 because of a lack of money. He said waiting for funds to replace crucial equipment at the plant would have “meant a catastrophe for the economy of Siberia and millions of residents there.”
It was not immediately clear why Chubais had issued the order so many years after the RusHydro-run plant actually began operating.
Saturday’s report also accuses 19 people of failing in their duties to prevent accidents at the plant, including Vasily Zubakin, the acting chairman of RusHydro’s executive management board; Alexander Toloshinov, who headed the plant from 2002 to 2006; and Nikolai Nevolko, who headed the plant when the disaster occurred in August and currently works as Zubakin’s adviser.
The report, however, promises not to have a decisive impact on the official investigation into the disaster.
“Investigators can take into consideration the commission’s conclusions, but only checks ordered in the course of the official investigation will be decisive in the case,” a law enforcement source told Interfax on Sunday.
The industrial watchdog’s chief, Nikolai Kutin, also voiced caution about whether his report might lead to any criminal charges.
“Our state is a democratic one, and therefore it is the court that defines who is guilty,” he told reporters Saturday. “For our part, we study the technical causes of the accident that were in the making for a long time, and that is why you will find a relatively large number of names, both from the plant management and RusHydro, as well as senior officials who made decisions affecting the stability and security of the plant’s operation.”
Energy Minister Sergei Shmatko, who is also chairman of RusHydro’s board of directors, told reporters Saturday that he would shuffle the staff at RusHydro but Zubakin, the acting chairman of the executive management board, was not to blame for the disaster.
The head of a group representing relatives of those who died in the accident, Nikolai Zholob, criticized the report as incomplete, saying at least 30 officials should be named as responsible, Ekho Moskvy radio reported.
Kutin said Sunday on Vesti state television that his watchdog would finish inspecting the country’s hydropower plants in November, a probe ordered by Prime Minister Vladimir Putin shortly after the accident.
TITLE: Residents Clash With Security Guards Over Construction
AUTHOR: By Irina Titova
PUBLISHER: The St. Petersburg Times
TEXT: Defenders of the public garden at Komendantsky Prospekt 40, where the construction company Severny Gorod plans to build a 12-story residential building, had another serious conflict with the security guards in charge of guarding the construction site on Monday.
“This morning about 40 security guards tried again to drive out local residents from our public garden, but they failed to do so,” said Yelena Gavrilova, a resident of the neighborhood.
The security guards had to relent when almost 150 protesters and representatives of mass media gathered at the site, she said.
Cesare Ottolini, a global coordinator of the International Alliance of Inhabitants, was present at the site and supported the actions of local residents, saying his organization “would now take the area under its watch.”
“It happens all around the world,” Ottolini said. “Developers try to get the maximum profit at minimal expense. You have to fight for your rights.”
The conflict surrounding the public garden at Komendantsky Prospekt, which is protected by a law issued by the city of St. Petersburg in 2007, began to unfold last week. On Thursday, around 40 construction trucks arrived almost simultaneously at the site with the aim of building a three-meter-high concrete fence around the garden in order to turn it into a closed-off construction site.
Local residents hurried out to protest the infill construction of what they say is the only public garden in that area. They tried to block the path of the trucks and stop workers from entering the site.
However, the construction workers still managed to build the concrete fence and metal gates around a section of the garden. They also cut down nearly 300 trees and dug up bushes that local residents planted several years ago, Gavrilova said.
“It looked like a military operation,” she said.
Even after the plants were uprooted, the protesters did not go home, but stayed and continued to plead with the developers and security guards.
“We stood up for this small public garden of ours because it’s the only place where people can go for a walk, or to take their children out to play,” said Gavrilova. “It is the place where we gather for New Year’s celebrations around the public Christmas tree. It’s hard to imagine how people will be able to move around this small space if another building is constructed.”
Meanwhile, while security guards were closing the gates of the new fence on Thursday night, a group of six protesters — mostly women — entered the fenced-off area and remained there for the entire night.
Representatives of Severny Gorod, which is a part of RBI holding, said that the women had sneaked into the gated area and stayed there voluntarily, even though they saw that the gates were being closed.
Police representatives who were on site at the time refused to intervene in the situation.
Early the next morning, security guards tried to force the women out of the garden but could not make them leave, Gavrilova said.
On Friday, deputies from the A Just Russia party intervened, putting the conflict on hold until Tuesday to allow time for an investigation.
During the weekend, Oleg Nilov, A Just Russia deputy in the city’s Legislative Assembly, had a truck of trees saplings driven to the site. Residents planted about 40 of them in the garden.
“People were so happy when they were planting those trees,” Gavrilova said. “And we are ready to stand up to protect our little green oasis.”
At the same time, Gavrilova said that many residents still had doubts that the law would prevail, even though it is technically on their side.
“People really need laws that work in this country,” she said.
The site that RBI is attempting to develop appears to be rather ill-fated. The conflict between the developers and residents of the neighborhood has been going on for a few years.
The site was opened for construction in 2004, a decision that was immediately met with protests by local residents. The construction was to take place over part of a public garden that local residents had planted themselves at their own expense. They also complained that the site was already crowded and had very little space to accommodate a new building.
“Several years ago Severny Gorod built a residential building in our area, right on the spot where there used to be a district sports ground,” said Gavrilova. “They built a 16-story building instead of the 10-story building they had originally planned. It affected the electricity and water supplies in the neighboring buildings, because the engineering infrastructure of the area was not equipped for such demand.”
In 2007, the public garden at Komendantsky Prospekt made it onto a list of green areas for public use which, under St. Petersburg law, were to be protected from future development.
However, in its press release on the case, Severny Gorod said that its development of the area was fully within the law, and that it had received all necessary permission for construction.
The company referred to a St. Petersburg law from 2004 that opened up city property for possible future development. They also said that, in October 2004, they had signed a contract with the city’s Real Estate Committee regarding the lease of the site at Komendantsky Prospekt.
Furthermore, the company is beginning construction on the site in accordance with permission given by St. Petersburg’s State Construction Review in 2006 and valid through 2010, said a representative of Severny Gorod.
In 2003, the project was brought up for public discussion, but no serious objections were raised at the time.
“At a time when a third of construction sites in St. Petersburg have stopped work, Severny Gorod continues to work, despite the financial crisis,” the representative said. “We are beginning the construction of new buildings that will provide the good quality living space that city residents need.”
“Meanwhile, a group from the neighboring buildings on Komendantsky Prospekt is actively violating the legal right of Severny Gorod to complete construction,” he said.
Natalya Shorina, a spokeswoman for Severny Gorod, said that the company is aware of the city law of 2007 that protects the area’s green space, and that in light of this law, Severny Gorod appealed to St. Petersburg’s arbitration court to solve the legal collision.
“In September, the court recognized the supremacy of the previous laws, because they were signed earlier,” said Shorina. “Therefore
the company intends to exercise its legal right to build on the site,” she said.
TITLE: Luzhkov Sues Nemtsov Over Inteko Allegations
AUTHOR: By Maria Antonova
PUBLISHER: The St. Petersburg Times
TEXT: Mayor Yury Luzhkov and his wife, Yelena Baturina, said Friday that they were suing opposition politician Boris Nemtsov for claiming that the success of Baturina’s real estate development company Inteko was directly linked to her marriage to Luzhkov.
Nemtsov released a report titled “Luzhkov, Conclusions” on Sept. 8 that criticizes the mayor for failing to handle problems like crime, traffic, corruption and pollution in Moscow. The biggest section, however, is dedicated to exploring the relationship between Baturina’s success in Inteko and the Moscow city government.
Baturina, who is ranked by Forbes magazine as Russia’s richest woman with a fortune of $900 million, has filed a defamation lawsuit in the Moscow Arbitration Court for 200,000 rubles ($6,630) based on a calculation of 1 ruble for each copy of the report that was published, Inteko said in a statement. Luzhkov said he was also suing Nemtsov over the report.
“The leaflet is full of lies and I have filed a suit against Boris Nemtsov for defamation. I am certain the supposed facts in the leaflet are false,” Luzhkov said at a news conference, titled “Coming out of the crisis — to act and not to wait.”
Inteko said Baturina was suing because the report contained “clear lies” and distorted the image of Inteko. “This attempt to show that Inteko can only work effectively in Moscow is absurd. The company is realizing large-scale investment development projects in other regions and abroad,” it said.
Nemtsov’s spokeswoman at the Solidarity opposition group, Olga Shorina, said she had not seen the lawsuit yet and Nemtsov was traveling and unavailable for comment Friday.
But Nemtsov wrote on his LiveJournal blog that he would be “glad” to meet the couple in court. “We will try to make the process as open as possible,” he said. “We have irrefutable proof that [Luzhkov] favored Inteko while signing decrees for commercial development, making [Baturina] the richest woman in Russia and Eastern Europe.
“Although we understand the way the Moscow courts operate, they have never ruled against the Moscow mayor and his wife,” Nemtsov added.
Luzhkov, however, has lost a handful of Moscow cases, including a lawsuit in June against an artist who created the anagram “nimble thief” by mixing up the letters of his first and last names at a performance four years ago. (But the same court ordered Kommersant and one of its reporters to pay damages to Luzhkov for printing the anagram.)
Luzhkov successfully sued another opposition leader, Eduard Limonov, in November 2007 after Limonov said he controlled the Moscow courts. Luzhkov filed a defamation lawsuit against Right Cause party leader Leonid Gozman late last month after Gozman said the mayor should be held responsible for corruption in Moscow.
“I’m sure I will win the lawsuit” against Nemtsov, Luzhkov said Friday.
He said he had never counted the number of lawsuits that he had filed but estimated 10 court cases per year for the past 17 years. “It’s an impressive figure,” he said.
At the news conference, Luzhkov gave few details on anti-crisis strategies for Moscow, but he threw out ideas like changing companies’ working hours to decrease rush hour traffic. Such a measure would turn “Mt. Everest” into “little mounds,” he said, Interfax reported.
He also lashed out against the U.S. dollar, calling it “a piece of paper with no marked value.” “One needs to be careful with the dollar,” he said.
The mayor also criticized Finance Minister Alexei Kudrin’s policy of fiscal restraint, saying bigger spending would ease the pain of the economic crisis.
Giving a large news conference is not typical for Luzhkov and should be seen in the context of Moscow City Duma elections on Oct. 11, said Rostislav Turovsky, a political analyst with the Center for Political Technologies. Luzhkov, 73, is leading the United Russia ticket for the elections, even though he is not expected to take a seat.
“Luzhkov’s style is to go around visiting city locations, not building an image of a public politician,” Turovsky said. “Now he’s being pressured, and his family has been directly accused, so he’s switching tactics from ignoring the report to fighting back.”
TITLE: UN Tells Russia To Adapt To Shrinking Population
AUTHOR: By Douglas Birch
PUBLISHER: The Associated Press
TEXT: MOSCOW — Russia’s population has fallen by 6.6 million since 1993, despite the influx of millions of immigrants, a United Nations report said Monday, and by 2025 the country could lose a further 11 million people.
The result could be labor shortages, an aging population and slower economic growth, the U.N. said.
Recent Kremlin efforts to reward women for having more babies have caused a surge in the birth rate, the report said, but won’t make much difference in the long term.
It urged Russia to reduce its high mortality rate — similar to that in parts of sub-Saharan Africa — through reform of its public health system and by encouraging lifestyle changes — especially a reduction in alcohol consumption.
The United Nations Development Program report, titled “Russia Facing Demographic Challenges,” predicted that Russia will be forced to adapt to a smaller population and work force.
“Efforts to resist the unfavorable trends must be combined with efforts to adapt to what cannot be resisted,” the report says.
Population levels in many developed countries have stagnated and are expected to fall by 2025, but Russia’s population, currently around 142 million, has been in retreat since 1992. Russia’s mortality rate is among the highest in the developed world, with average life expectancy for males at barely 60 years.
For reasons that are not fully understood, Russians suffer very high levels of cardiovascular disease. But most experts blame the country’s overall high death rate on one factor, alcohol. It has been linked to everything from liver disease to Russia’s high number of murders, suicides and fatal accidents.
According to a 2007 U.N. report, in 1950 what is now the Russian Federation had the world’s fourth-largest population. By 2007, the report said, Russia ranked ninth globally, behind Bangladesh and Nigeria. By 2050, the UN estimates, Russia will rank 15th, with a population smaller than that of Vietnam.
The report adds that the effects of depopulation will be magnified in Russia because of its huge territory.
An influx of immigrants over the past 16 years has helped soften the impact of Russians dying young and having fewer children. But the report says that many of these immigrants were ethnic Russians returning to their homeland from other former Soviet states, and this is mostly over.
Meanwhile, many skilled Russians could be lured abroad in the coming decades, the report says, as labor shortages develop in Western Europe, where a shrinking pool of working-age people is expected to drive up wages for the highly educated.
To cope with this demographic crisis, the UN report recommends that the government overhaul the health system to provide more efficient care, while encouraging lifestyle changes to reduce the number of deaths related to alcohol consumption.
Russia can help compensate for fewer births and high death rates, the report said, by encouraging immigration. It estimated that the country will need to attract about 15 million migrants by 2025 to fill vacant jobs.
TITLE: Former Izvestia Editor Dies Aged 74
AUTHOR: By Natalya Krainova
PUBLISHER: The St. Petersburg Times
TEXT: Igor Golembiovsky, a former editor of the Izvestia and Noviye Izvestia dailies who led a push toward editorial independence for journalists in the early 1990s, died Friday in Moscow. He was 74.
Golembiovsky suffered a serious stroke several years ago. His wife, Anna, announced his death to Interfax.
President Dmitry Medvedev extended his condolences to Golembiovsky’s relatives, the Kremlin said in a statement. Praise also poured in from fellow journalists.
With Izvestia, Golembiovsky created a “Russian New York Times,” Novaya Gazeta editor Dmitry Muratov said, RIA-Novosti reported. Along with former Moskovskiye Novosti editor Yegor Yakovlev, Golembiovsky has “become a symbol of independent Russian journalism,” Noviye Izvestia editor Valery Yakov told Interfax.
Born in Georgia, Golembiovsky began working at Izvestia in the 1960s, when the paper was the official news outlet of the Supreme Soviet, and served as its special correspondent in Mexico and later in Nicaragua, Ekho Moskvy radio reported.
Known for his liberal views, Golembiovsky returned to Moscow during the perestroika years and was voted editor-in-chief by the newspaper’s staff in 1991. He was widely credited with turning the newspaper into one of Russia’s most respected news outlets in the tumultuous 1990s, when its circulation reached 12 million copies.
In 1997, Golembiovsky left Izvestia after he and other editors lost a battle with the newspaper’s powerful shareholders, LUKoil and Uneximbank, over editorial control. A feud erupted when Izvestia published what turned out to be erroneous information from the French daily Le Monde that then-Prime Minister Viktor Chernomyrdin had amassed a personal wealth of $5 billion. Chernomyrdin was furious, and LUKoil threatened to fire Golembiovsky and the other editors.
That year, Golembiovsky and other former Izvestia journalists founded the liberal newspaper Noviye Izvestia, which was effectively bankrolled by Boris Berezovsky and became critical of then-President Vladimir Putin’s policies in Chechnya.
In February 2003, Oleg Mitvol, then-chairman of the board at Noviye Izvestia, fired Golembiovsky as the newspaper’s general director over suspicion that he intentionally bankrupted it, Lenta.ru reported.
He denied the allegations, saying at the time it was impossible to bankrupt a loss-making newspaper and that it “survived only on sponsors’ money.”
Shortly after, Golembiovsky quit as editor, saying he could not publish what he wanted. The newspaper was evicted from its offices and suspended publication, resuming four months later under a new editor.
In May 2003, Golembiovsky started Russky Kurier, a similarly independent newspaper that was shut down after two years because of financial constraints.
TITLE: March Plans Meet Official Resistance
AUTHOR: By Sergey Chernov
PUBLISHER: Staff Writer
TEXT: City Hall has effectively banned the planned March for the Protection of St. Petersburg, organized to protest the local authorities’ decision to approve the Okhta Center’s planned 400-meter skyscraper, or Gazprom Tower. The march’s organizers said it was too late to change the previously announced meeting point in front of Yubileiny Sports Palace and the time (noon on Saturday.)
On Thursday, City Hall’s Law and Order Committee rejected all six march routes proposed by the organizers, the Coalition of Citizens to Protect St. Petersburg. It also forbade protesters to gather near the Yubileiny stadium, saying that the organizers could instead hold a stationary meeting at a less prominent site in front of Baltiisky Dom Theater, 1.5 km away.
By law, the authorities have to provide a reasonable explanation as to why the location or route is not suitable for a public event, but the organizers described the reasons that City Hall gave as “ridiculous.”
“It’s the same as always; [they said] there are construction works everywhere,” Maxim Reznik, the leader of the Yabloko Democratic Party’s local branch and one of the march’s organizers, said by phone on Monday.
“It turns out that we cannot gather near Yubileiny because there will be — can you imagine — an exhibition of cats and dogs there. I don’t understand how we could possibly hinder the cats and dogs. They always think up any old pretexts, even the most ridiculous ones.”
Formed earlier this year, the Coalition of Citizens to Protect St. Petersburg includes 18 political and civic organizations, including Living City, Okhtinskaya Duga, Yabloko, Solidarity Democratic Movement, the United Civil Front (OGF), the Communist Party of the Russian Federation’s (KPRF) faction in the Legislative Assembly, and the St. Petersburg Human Rights Council.
Upon receiving a refusal from City Hall, the organizations submitted a new application listing 16 different possible routes of a march from Yubileiny Palace to Baltiisky Dom on Friday, Reznik said. The organizers expect an answer on Tuesday, but insist that the original gathering point at Yubileiny Sports Palace should remain the same.
“We have no choice, because all our informational materials told people to go there, and we refer to this, among other things [in the application to City Hall]: ‘Don’t create a conflict situation consciously, because there is no way out,’” Reznik said.
“As the organizers, we’ll have to go there, because some people will go there all the same, probably even most of them. We have no time to inform people about a change of location — unless they give us airtime on Channel 5 [the City Hall-controlled main local TV channel], for instance.”
The planned march found itself under pressure earlier, when no local printer would agree to print the March for the Protection of St. Petersburg’s eight-page newspaper. The organizers had to have it printed in the provinces and were expecting copies to arrive on Monday evening, Reznik said.
As well as an effective ban on the newspaper, disinformation has been used to confuse people about the rally. At least two kinds of fake leaflets were put in some local residents’ mailboxes, one giving the wrong date for the march and the other giving the correct date but the wrong location.
“There were no such things before,” Reznik said. “I think organizations affiliated with Gazprom Media are responsible, and are using money allocated to them for such activities.”
The St. Petersburg government led by Governor Valentina Matviyenko voted unanimously to approve the Okhta Center tower’s 400-meter height last month, despite warnings from UNESCO and other organizations and multiple protests from architects and Russian public figures.
The Town-Planning Code only allows heights of up to 100 meters in the area to prevent taller objects from affecting the city’s protected historic skyline, but the decision was taken to exempt the project from the law.
In a statement published in the march’s newspaper, the Coalition of Citizens to Protect St. Petersburg said that City Hall had “trampled on the law” and that those who took the decision, primarily Matviyenko, would be held responsible.
“We’ll use every legal means to have this monstrous decision canceled,” it said.
Reznik said the problems that City Hall was creating for the protesters were predictable.
“What reaction there can be? It’s only natural that they’re afraid,” Reznik said.
“It’s an issue that a large number of people are concerned about, and this issue, like a mirror, reflect all the vices of the current authorities.”
TITLE: UN Advises Russia to Ease Immigration Procedures
AUTHOR: Douglas Birch
PUBLISHER: The Associated Press
TEXT: MOSCOW — Russia should ease barriers to immigration in order to reduce the impact of labor shortages, slower economic growth and other pressures brought on by its ongoing demographic crisis, a United Nations report said Monday.
The report said that Russia should adopt legal and other reforms that insure basic rights and access to services for millions of migrants, many of them from other former Soviet nations, who work in construction and other industries. These workers often face discrimination, exploitation and in the worst case even violence.
Migrants in the former Soviet Union not only provide a crucial source of labor for Russia, the report found, they serve a vital economic purpose in their home countries.
The amount of money sent to Tajikistan by its citizens working abroad represents 45 percent of its gross domestic product, the highest level in the world, an earlier UN study found. Most of Tajikistan’s migrant workers are employed in Russia.
In order to ensure that Russia’s shrinking workforce does not slow economic development, the report said, efforts should be made to raise labor productivity.
In part, that means cutting employment in many faltering industries where Soviet-era labor practices linger.
Russia’s population has fallen by 6.6 million since 1993, despite the influx of millions of immigrants, according to a UN report released last year.
Population levels in many developed countries have stagnated and are expected to fall by 2025, but Russia’s population, currently around 142 million, has been in retreat since 1992. Russia’s mortality rate is among the highest in the developed world, with average life expectancy for males at barely 60 years.
The UN has also urged Russia to overhaul the health system to provide more efficient care, while encouraging lifestyle changes to reduce the number of deaths related to alcohol consumption.
TITLE: Ingush President Fires Government For Poor Work
PUBLISHER: Bloomberg
TEXT: MOSCOW — Ingush President Yunus-Bek Yevkurov fired the government Monday amid a surge in violence in the mainly Muslim region of Russia.
The government was sacked for “unsatisfactory work in the social and economic sphere,” Yevkurov’s spokesman Kaloi Akhilgov said Monday. The outgoing secretary of Ingushetia’s Security Council, Alexei Vorobyov, will serve as acting prime minister until a new government is formed “in the coming weeks,” Akhilgov said.
Yevkurov, a retired general, took power in Ingushetia last year amid escalating violence in the mainly Muslim region that borders Chechnya, where federal forces fought two wars against separatists after the collapse of the Soviet Union in 1991.
“The use of force is only 1 percent to 2 percent of the process” to end unrest in the region, Yevkurov said on state television last month. “The rest consists of social and economic efforts.”
TITLE: Hotel Dostoevsky Up for Sale
AUTHOR: By Nadezhda Zaitseva
PUBLISHER: Vedomosti
TEXT: The construction company Alice has put the Dostoevsky Hotel in the center of St. Petersburg up for sale.
The developer hopes to fetch 50 million euros for the hotel, which is located in the Vladimirsky Passazh retail complex, said Alexander Pavlov, the company’s managing director. Alice, which owns Vladimirsky Passazh, has presented its proposal to several investment funds.
The three-star Dostoevsky Hotel, which opened in 2003, has 207 rooms occupying an area of more than 8,950 square meters, according to the company’s press office. In 2003, investment in the project amounted to an estimated eight to nine million dollars. The hotel is not one of Alice’s core assets, but the money raised from it wouldn’t hurt right now either, Pavlov said, explaining his company’s decision to sell the hotel.
The price is inflated — after all, the building is not being sold in its entirety, said Oleg Gromkov, director of the Knight Frank St. Petersburg market research group. He added that the hotel has a good location. Dmitry Vorobyev, the general director of R.E.D. company, said that a lot of commercial real estate — including detached buildings — has been put up for sale on the market, so potential buyers have many options. According to Vorobyev, there have been no transactions for a long time. He believes Alice will have to lower their asking price by up to 40 percent.
Alice plans to use proceeds from the sale for the realization of other projects, said Pavlov. The company is building housing complexes in Shuvalovo-Ozerki and on Prospekt Kosmonavtov, and plans to begin constructing another three complexes next year.
In February the geotechnical surveyor Otel, a subsidiary of Alice, received a 1,600 sq. m. plot neighboring Vladimirsky Passazh to conduct work to determine whether the land is suitable for building a hotel. Preliminarily consisting of 170 rooms, the hotel would require $150 million in investment. The company plans to begin work in a year; it is planned that the project will be financed by existing and borrowed funds, said Pavlov.
TITLE: More Tourists Choose to Arrive by Sea
AUTHOR: By Yelena Zborovskaya
PUBLISHER: Vedomosti
TEXT: The number of tourist groups visiting St. Petersburg decreased by 15 to 25 percent this year. Cruise tourism has suffered the least during the economic crisis.
The city’s passenger seaport closed for the season late last month. This year, it welcomed 426,500 people — 7 percent more than the year before. During the last year, the number of passengers grew by 32 percent. Three hundred and twenty-three passenger vessels docked in the St. Petersburg port from May 4 through Sept. 25, compared to 317 last year. The Marine Facade terminal served as the gateway for 244,300 of the city’s tourists, said Nikolai Isayev, head of tourism infrastructure development at St. Petersburg’s committee for investment and strategic projects.
Ships filled up at pre-crisis levels of 99 to 100 percent, said Igor Glukhov, general director of Inflot Worldwide St. Petersburg cruise company. Stopping in St. Petersburg has become more profitable for cruise ships, since harbor dues — which make up 30 to 50 percent of ship-owners’ costs — have decreased by 25 to 30 percent due to the devaluation of the ruble, explained Glukhov. According to him, cruises last from three to 20 days, with an average cost of $150 per person per night. The manager of one American cruise operator confirmed that demand has not decreased, although filling up one vessel takes several times longer than it did in pre-crisis times. The majority of passengers are American and British retirees whose incomes have not suffered, he said.
When visiting ports, tourists generally spend little. Clients have become penny-pinchers and are more likely to choose inexpensive overview excursions that do not include museum visits, said Yelena Malchonok, general director of Arktour Travel. Demand among foreign tourists for river cruises from St. Petersburg to Moscow has decreased by 2 to 3 percent, said Anastasia Stepanova, the department manager of the Vodhod – St. Petersburg cruise line.
Yet the level of organized inbound tourism fell this year by 15 to 20 percent compared to the same period in 2008, said Sergey Korneyev, northwest division manager for the Russian Union of Tourist Industries. This year the hotel occupancy level was 55 percent, while the average for 2008 was 70 percent. Prices for accommodation have not gone up, said Vladimir Ivanov, general director of Hotel Oktyabrskaya. In summer, up to 80 percent of the guests are foreigners. Hotel occupancy has fallen on average by fifteen percent down to sixty percent — mostly on account of tourists, said Alexei Musakin, director of the St. Petersburg branch of the Russian Hotel Association.
The flow of foreign tourists has decreased by 20 to 25 percent, estimates Valery Fridman, general director of Mir. Tourists reduced their spending by 20 to 25 percent compared to last year; for instance, 10 to 15 out of every 30 people will visit Peterhof, said Fridman. The excursion costs 22 euros. A year ago, clients spent $30 on additional tours; now, they think before spending $20, added the director of another tour company.
According to Korneyev, the reduced flow is compensated by individual tourists, both foreign and Russian. Fridman and Ivanov said they had not noticed such a trend.
By Malchonok’s estimates, the number of passenger vessels may fall by 10 to 15 percent in 2010.
TITLE: Gostiny Dvor Could Be Sold To Private Bidder At Auction
AUTHOR: By Nadezhda Zaitseva and Anatoly Tyomkin
PUBLISHER: Vedomosti
TEXT: In 2010, St. Petersburg could put up for auction buildings including Gostiny Dvor and the Nikolsky and Krugly markets.
A fortnight ago, City Hall gave the green light to a privatization program of six historic buildings in 2010. More buildings will appear on the list, said Deputy Governor Yury Molchanov. Approximately 10 sites are due to appear on the list, said Oleg Lyapustin, deputy head of the Committee for City Property Management.
Gostiny Dvor and the Nikolsky and Krugly markets are three objects on a list featuring up to 50 historic buildings that in spring this year were passed over from federal ownership to municipal ownership.
According to Lyapustin, the city expects to receive about seven billion rubles from the privatization project. The buildings will be sold at auction by the City Property Fund.
The high cost of reconstructing the buildings during the crisis creates a difficult situation for investors, said Yekaterina Markovets, director of the consulting and evaluation department for the Real Estate Development and Research Agency.
In 2000 the Committee for City Property Management transferred Gostiny Dvor to Viking bank. Viking now has the right to rent the building for the next 49 years for $1.5 million per year (excluding VAT). Alexander Zaozersky, first deputy president of the bank, did not comment on the bank’s participation in the auction.
Fyodor Lychagin, the director of Nikolskye Ryady, said his company was interested in the privatization project. To finance participation in the project, according to Lychagin, a co-investor would need to invest another $200 million.
The renovation of Krugly market was undertaken by the company Sovkomflot, which currently rents the building.
Taking into account the poor condition of the Nikolsky market, Markovets estimated its value at up to $500 per square meter. She estimated Gostiny Dvor and the Krugly market at $1,000 to $1,500 per square meter.
Olga Zemtsova, director of planning brokerage at Astera St. Petersburg, said Bolshoi Gostiny Dvor could fetch up to $5,000 per square meter due to its prime location. She said that once the buildings are sold, the city should continue to monitor their use.
TITLE: In Brief
TEXT: Sheremetyevo for Sale
MOSCOW (Bloomberg) — Russia’s government plans to sell a stake in Sheremetyevo International Airport, the country’s second busiest, to help finance its budget deficit, said Roman Genis, a spokesman for the company.
The timing of the sale and the size of the stake will be determined later, Genis said by phone from Moscow, confirming a report published earlier Monday in Vedomosti newspaper.
The government has about 5,500 enterprises that can be converted into joint stock companies and sold starting as early as this year, First Deputy Prime Minister Igor Shuvalov said last month.
Gazprom Plans Cafes
MOSCOW (Bloomberg) — Gazprom plans to start a chain of fast-food and supermarket outlets that may become Russia’s fifth-biggest food retailer, Kommersant reported.
Gaztorgpromstroi, a unit of Russia’s natural-gas producer, will unite the 400 stores and canteens that service the company’s employees into a chain called Naraskhvat, the newspaper said, citing Irina Vedenetskaya, executive director of branding agency Corun, which is working on the project.
While most Naraskhvat stores will be located east of the Ural Mountains, some may appear in European Russia, according to Kommersant.
Serbia May Get $1 Bln
MOSCOW (Bloomberg) — Russia is ready to lend money to Serbia and is considering loans to Bulgaria, RIA Novosti reported Monday, citing Finance Minister Alexei Kudrin in Istanbul.
Serbia is seeking $1 billion, including $350 million to cover a budget deficit, the state-run news service said. Russia won’t lend directly to Ukraine or Belarus, RIA said, citing Kudrin.
Meat Revenues Soar
MOSCOW (Bloomberg) — Cherkizovo Group, a Russian meat producer, said first-half net income almost doubled to 1.66 billion rubles ($55.3 million) compared with 868 million rubles in the same period last year.
Sales advanced 15 percent to 15.2 billion rubles, Cherkizovo said in a statement Monday.
RusHydro Needs Loans
MOSCOW (Bloomberg) — RusHydro will sell shares and take out loans to raise the 21.6 billion rubles ($720 million) it needs through 2010 to rebuild its Sayano-Shushenskaya plant after an accident on Aug. 17, Interfax reported, citing Energy Minister Sergei Shmatko.
RusHydro will spend 5.6 billion rubles on reconstruction of Sayano-Shushenskaya this year, which will come mostly from loans, and another 16 billion rubles in 2010, the news agency said. The government will keep controlling stake in RusHydro if the company sells new shares to raise money needed in 2010 for rebuilding the plant, Interfax reported.
Reconstruction of Sayano-Shushenskaya may cost 40 billion rubles, Interfax said, citing Shmatko. The government so far has no plans to spend budget money to finance the repairs of the plant this year and in 2010, the news agency said.
Medvedev Names Price
MOSCOW (Bloomberg) — Russian President Dmitry Medvedev said a fair price for oil is between $80 and $90 a barrel, Kommersant reported Saturday.
Russia has no interest in “infinitely high” oil prices as this wouldn’t allow the country to diversify its economy and reduce its dependence on oil exports, the newspaper quoted Medvedev as saying.
TITLE: Beer Sales In Kiosks May Be Banned
PUBLISHER: Bloomberg
TEXT: The Industry and Trade Ministry is proposing banning sales of beer at kiosks and outdoor markets, Deputy Minister Andrei Dementiyev said last Tuesday.
Beer sales should be banned “anywhere where there are no special premises for alcohol product sales,” Dementiyev said, RIA-Novosti reported.
The government is raising taxes on beer and clamping down on its availability to curb what President Dmitry Medvedev has called the country’s “colossal” alcohol consumption.
The news caused Carlsberg stock to fall 3.7 percent in Copenhagen trading Tuesday. Carlsberg generates more than 30 percent of net sales in Eastern Europe, of which its Baltika unit is by far the biggest contributor.
“We’ve had this ban proposed before, but this time around it seems the government has it in for beer,” Simon Hales, an analyst at Evolution Securities in London, said in an interview. “Kiosks represent somewhere over 20 percent of beer consumption in Russia — this doesn’t bode well” for Carlsberg and the other foreign brewers in the market, he added.
The Industry and Trade Ministry also wants to ban alcohol sales during certain times of the day, said Natalya Makarkina, a ministry spokeswoman. The Finance Ministry last week said beer excise will rise 50 percent each year from 2010 to 2012.
TITLE: Alfa, Telenor End Feud, Plan Asset Merger
AUTHOR: By Steve Gutterman
PUBLISHER: The Associated Press
TEXT: MOSCOW — Norway’s Telenor and Russian conglomerate Alfa Group said Monday they are ending their longstanding legal battles and combining their main mobile phone holdings in Russia and Ukraine into a single company, a deal Telenor’s CEO called a milestone.
Alfa Group and Telenor have been fighting for control of Russia’s No. 2 mobile operator, Vimpelcom, and have been entangled in court battles for years. The struggle has threatened to deprive Telenor of its 30 percent stake in Vimpelcom, raising concerns about the rule of law and the security of investments in Russia.
In a joint statement, Telenor and Altimo, the telecommunications arm of Russian billionaire Mikhail Fridman’s Alfa Group, said they have agreed to combine their holdings in Vimpelcom and Ukraine’s Kyivstar into a new jointly owned mobile operator called Vimpelcom Ltd.
Altimo will get 43.89 percent of the voting shares in the new company — about the same as it has in Vimpelcom today — and Telenor will get 35.42 percent, the companies said. Vimpelcom Ltd. is incorporated in Bermuda and will be headquartered in the Netherlands and listed on the New York Stock Exchange.
Altimo and Telenor said they will suspend all ongoing legal proceedings and seek to withdraw or settle them before the deal is completed, hopefully by mid-2010. Telenor CEO Jon Fredrik Baksaas called the agreement a “milestone.”
It came after Russian Prime Minister Vladimir Putin, whose country has been struggling with the worst economic crisis in a decade amid the global financial meltdown, courted foreign investment at a forum in Moscow last week.
The companies said combining Vimpelcom and Kyivstar will create one of the largest mobile operators in emerging markets. Vimpelcom and Kyivstar had combined revenues of $12.6 billion last year with about 85 million subscribers at year’s end, they said.
“We have turned a five-year struggle into an exciting venture for the future,” the statement quoted Baksaas as saying. He urged Vimpelcom shareholders to support the deal, and Altimo CEO Alexei Reznikovich expressed confidence the merger would “substantially increase shareholder value.”
Baksaas would not discuss how the deal emerged from the bitter battle.
“As to who did what at what point of time, that isn’t so relevant. The most important part now is that we’re here,” he told a news conference in Oslo.
Jon Edvard Thygesen, Telenor vice president and head of Eastern European operations, said that “all legal cases between the shareholders have been suspended and will be withdrawn prior to closing.”
He said a case involving Farimex Products Inc., a tiny Vimpelcom stakeholder that claimed Telenor’s efforts to block a takeover deal in Ukraine had resulted in huge losses, was among those that would be withdrawn or resolved.
After a Siberian court ruled against Telenor earlier this year, bailiffs authorized the auction of the majority of its stake in Vimpelcom in a bid to recover $1.7 billion in court-awarded damages.
Telenor has refused to pay the damages, contending that the suit was flawed and that Farimex was a front for Alfa Group — a claim that both Farimex and Alfa have denied.
“The Farimex case will go away before closing,” Thygesen.
Vimpelcom Ltd. will provide mobile telecom services in Russia, Ukraine and other ex-Soviet republics, including Georgia, as well as Vietnam, Cambodia and Laos, the statement said.
Vimpelcom operates the Beeline brand in Russia and neighboring countries.
Its shareholders will be offered new shares in VimpelCom Ltd. based on their current shareholdings, Thygesen said.
TITLE: Nokia Won’t Be Fined For Violations, Announces FAS
PUBLISHER: Bloomberg
TEXT: Nokia will not be fined for violating competition laws after the company addressed the issue, the Federal Anti-Monopoly Service said Friday.
The regulator on Sept. 23 “found that Nokia has violated the anti-monopoly legislation and closed the case because of the company’s voluntary elimination of the violation,” the service said. Nokia won’t be fined because the probe was conducted before legislative amendments setting out fines came into force, the service added.
“The company yesterday received written confirmation of the Anti-Monopoly Service’s decision to close the case,” said Eija-Riitta Huovinen, a spokeswoman for Nokia.
The service decided that Nokia could have hurt competition between Russia’s retailers after the company “coordinated the retailers’ activity by setting recommended prices for telephones,” the regulator said in the statement.
TITLE: Putin Sticks Up for Dairy Farmers
PUBLISHER: Bloomberg
TEXT: Prime Minister Vladimir Putin said the government may help dairies get better prices for their milk after a farmer complained about “milk cartels.”
“If you think it’s a problem, I will forward your request to the government to consider,” Putin told a farmer during a trip to the Vladimir region.
Samodurov said local farmers need government protection because often they are forced to sell milk at below cost to wholesalers such as Wimm-Bill-Dann and Unimilk. The parliament is debating a new trade law that seeks “to establish a balance between farmers and retailers,” Putin said.
Samodurov was one of eight local residents chosen by the dominant United Russia party to address complaints to Putin in person. One man asked for financing for the construction of a sports center, while a single mother asked for help getting a bigger apartment.
TITLE: OPK Says It May Receive Chinese Investment
PUBLISHER: Bloomberg
TEXT: OPK Mining, a closely held firm planning to mine a Siberian coking coal deposit, said Friday that it might get investment from Chinese companies.
Chinese companies also expressed interest in supplying equipment and investing in the construction of an associated $3.2 billion railroad, OPK said, citing an accord signed between the Russian and Chinese energy ministries in September. The Russian government is financing half of the railroad’s costs.
OPK’s Elegest coal deposit holds about 900 million tons of coal, said Mitsui, which agreed with OPK in July to help finance the project and got an option to buy a stake. OPK is digging coal at Elegest and transports it 400 kilometers by truck to the nearest railroad.
“The cost of production is $10 per ton, transportation is $25 a ton, while the coal could be sold to steelmakers at $100 a ton,” OPK Board Member Dmitry Sakhno said in an interview.
TITLE: Moscow Airports Could Face Liquor Ban
PUBLISHER: Vedomosti
TEXT: MOSCOW — Transportation prosecutors are threatening to close bars and restaurants in Moscow airports that continue to serve hard alcohol, expanding the use of a law that bans the sale of liquor in crowded and dangerous places.
Since early September, prosecutors have been making frequent visits to restaurants and bars in the city’s airports, officials from a major alcohol producer and an international vodka company said.
The inspectors are citing Article 16 of the law on state regulation of the production and sale of alcohol, which prohibits the sale of beverages with an alcohol content above 15 percent in crowded or dangerous areas, which would include airports.
The checks in Sheremetyevo have already finished, but they are still under way at Domodedovo and Vnukovo, industry sources told Vedomosti.
The establishments were given 60 days to eliminate the violations. If hard alcohol sales continue, the restaurants will be closed for three months. A senior assistant to the Moscow area transportation prosecutors confirmed that the checks were taking place.
Representatives of Sheremetyevo and Domodedovo operator East Line said the restaurants had nothing to do with the airport and were simply renting the space they occupy.
Sheremetyevo’s largest food-services operator is Aeropit-Servis, which has 12 restaurants, bars and cafes that serve more than 10,000 people per day in Sheremetyevo’s terminals, according to its web site.
A lawyer for Aeropit-Servis declined comment. An executive at Aeropit-Vnukovo said he was unaware of the transportation prosecutors’ complaints.
Sheremetyevo’s Terminal 2 has a T.G.I. Friday’s, which belongs to Rosinter Restaurants Holding. Dmitry Timofeyev, director of Rosinter’s legal department, would neither confirm nor deny the information about the checks, saying there were so many inspections that it was difficult to remember everything that they demand.
The company has a license from the Moscow region’s consumer goods and services ministry to sell alcohol in Sheremetyevo 2, but it will stop selling liquor if requested, he said.
Some 30 percent of a restaurant’s revenue can come from alcohol, said Mikhail Zelman, general manger of the restaurant company Arpikom, which operates brands including Goodman Steak House. In an airport, the figure could be even higher because of the pricey alcohol they tend to sell.
The sources speaking about the inspections said the prosecutors were not opposed to banning alcohol sales in duty-free as well, but they had not yet found any reason to do so.
There is no ban on alcohol sales in airplanes, which are not in the law’s list of crowded and dangerous places. There are no limits on the sale or consumption of alcohol for Aeroflot business-class passengers, regardless of the alcohol percentage, spokeswoman Irina Dannenberg said.
TITLE: FAS May Fine IKEA
PUBLISHER: Bloomberg
TEXT: MOSCOW — The Federal Anti-Monopoly Service said Friday that it might fine a unit of IKEA, the world’s biggest home-furnishings retailer, over claims it forced tenants at shopping centers to buy insurance from preselected companies.
IKEA Mos, a Russian IKEA unit, “for a number of years” urged tenants to choose from a list of “recommended” insurance companies, a practice that discriminated against more than 700 other insurers, the service said on its web site. The watchdog said it would decide whether to fine IKEA after further investigation.
IKEA has faced at least four disputes with authorities while opening outlets since entering the country in 2000. Russian sales account for 4 percent to 5 percent of IKEA’s total and are the company’s fastest growing, Per Kaufmann, general director for Russia and Ukraine, said in August.
“Since we are interested in long-term cooperation with our tenants, we make them familiar with our insurance requirements, informing them about the insurers we consider sufficiently reliable from our point of view,” Oksana Belaichuk, a spokeswoman for IKEA, said.
The retailer and its Russian unit never severed contracts with tenants if they chose insurers other than those recommended by IKEA, she said.
Kaufmann said in June that the Swedish company would halt future investment in the country until “key issues” affecting operations were resolved as it struggled to gain approval to open a mall in Samara. In August, he said the company would end the freeze because local officials were adhering more closely to the law.
TITLE: Service Industry PMI Shows Second Month of Growth
AUTHOR: By Alex Nicholson
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russia’s service industries ranging from banks to mobile-phone retailers expanded for the second consecutive month in September after orders rose and new business grew.
The Purchasing Managers’ Index advanced to 53 last month from 52.2 in August, VTB Capital said in an e-mailed statement released Monday. A reading above 50 indicates expansion.
The economy of the world’s biggest energy exporter is showing signs of recovering from a record slump in output sparked by declining commodities prices. Services, which account for about 40 percent of the economy, are picking up after seven central bank rate cuts since April and following government stimulus measures aimed at funneling credit from banks to businesses.
“The survey indicates improving market conditions and growing clientele, resulting in a further expansion of new orders and business activity across all sub-sectors,” Svetlana Aslanova, an analyst at VTB Capital in Moscow, said in the report. “In addition, the rebound in the future activity index shows an improvement in business sentiment for the next 12 months.”
The ruble strengthened 0.5 percent to 30.1014 against the dollar at 10:05 a.m. in Moscow. It weakened 0.4 percent against the euro to 44.0614.
Russian retail sales will rise 5.3 percent next year, adjusted for inflation, as higher incomes allow consumers to boost purchases of food and other products, according to Renaissance Capital. The services gauge grew for the first time in 11 months in August as orders rose and business confidence improved.
“Underpinning sustained growth of activity was a further rise in the level of new work received in September. New work also increased at a faster pace than one month previously,” according to the report. “Firms reported that underlying market conditions had improved during the month.”
Hasbro Inc., the second-largest toymaker, opened a Moscow office last month, calling Russia one of its “key markets” and saying it expected the country’s share of European sales to “grow significantly.” Ikea, the world’s biggest home-furnishings retailer which entered the Russian market in 2000, said in August its sales are growing faster there than in any other market.
The government forecasts the economy will grow 1.6 percent next year compared with a drop of 8.5 percent in 2009, the first contraction since Russia defaulted on its debt and devalued the ruble in 1998. The economy contracted a record 10.9 percent in the three months through June.
The situation in the service sector remains fragile as pay cuts and mounting joblessness force shoppers to reduce spending.
August sales slid 9.8 percent from a year earlier, the most since the same month in 1999, after declining 8.2 percent in July, the Federal Statistics Service said Sept. 21.
“The complex situation in the sector earlier this year is still convincing companies to cut costs, with job shedding increasing further,” Aslanova said. “This leaves less room for a rapid sector rebound if new orders continue to grow.”
VTB first compiled the survey, which is based on responses from about 300 purchasing managers, in October 2001.
TITLE: Moscow Gambling Industry Finds Loopholes in Ban Law
PUBLISHER: The Associated Press
TEXT: MOSCOW — City authorities expressed concern Monday about the rise of “surrogate” gambling technologies such as lottery machines and online gambling three months after an almost total ban on gambling in Russia.
“We are seriously concerned about the rise of surrogate technologies,” Moscow Deputy Mayor Sergei Baidakov said at a news conference. “They are the byproduct of imperfect legislation.”
He said about a third of Moscow’s now-defunct 525 casinos and slot machine halls have opened “lottery parlors” to sell instant lottery tickets, while the number of Internet cafes providing access to online gambling resources has risen threefold since July.
Since July 1, gambling has been confined to four far-flung special zones.
Government pressure to crack down on gambling began in 2006, when then-President Vladimir Putin pledged to root out the industry whose effect on Russians he compared to “alcoholization” of the country.
Baidakov said the budget had suffered little from the disappearance of gambling, with tax revenues down 0.5 percent.
“It’s nil compared to the benefits to the health of the nation,” he said.
He also downplayed the impact of the industry shutdown on unemployment, saying that about 1,500 former casino employers in Moscow have registered as unemployed and secured government handouts.
Casinos multiplied in Russia after the 1991 Soviet collapse, and slot machines quickly spread beyond gaming halls to shops and malls. In 2008, the industry as a whole provided 400,000 jobs and had a turnover of $3.6 billion.
Moscow authorities are continuing to seek out illicit casinos and slot machine halls.
Police seized 33 slot machines late Sunday and have shut down 35 underground casinos since the legislation passed, deputy Moscow police head Viktor Vasilyev said.
Moscow city lawmaker Inna Svyatenko said city and federal authorities would close the legal loopholes that allow online gambling and the unrestricted sale of lottery tickets.
As of July, casinos and slot machines have been restricted to the Western exclave of Kaliningrad, the Primorsky region on the Pacific coast, the Altai region in Siberia and near the southern cities of Krasnodar and Rostov. No casinos have opened there yet, because potential investors say the zones are too remote and their infrastructure is too underdeveloped.
In Moscow, the glittering casinos and slot machine halls that once exemplified Russia’s post-Soviet embrace of Western habits have made way for restaurants, shops and fitness clubs.
A spacious former slot machine hall near Kievsky station in central Moscow has been split into a fast-food outlet, a currency-exchange bureau and a cell phone store. Vendors from nearby shops hailed the removal of the one-armed bandits — as well as the obsessive and often drunk gamblers who would typically hover nearby.
“It’s a lot quieter here now, after all those weird gamblers disappeared,” said Alexandra Tarpishcheva, a saleswoman at a deli next door.
TITLE: Yukos International Seeks $100 Billion in Damages in Strasbourg
PUBLISHER: The St. Petersburg Times
TEXT: A U.S. branch of what was once Russia’s biggest oil company is planning to collect $100 billion in damages at the Strasbourg court from the Russian government’s bankruptcy of Yukos.
Former Yukos chief financial officer Bruce Misamore told RIA-Novosti on Monday that the company he now heads, Yukos International, is going to seek damages from the 2006 bankruptcy. The company’s former chief, Mikhail Khodorkovsky, is serving an eight-year sentence for tax evasion and is on trial again in Moscow for related charges.
Yukos International represents 55,000 shareholders hit by the Yukos bankruptcy, RIA-Novosti said.
“It’s the biggest lawsuit in the history of the European Court of Human Rights, with no earlier precedent,” Misamore was quoted as saying. The prosecution of Khodorkovsky and other Yukos managers is unlawful, he said.
??On Monday, a Moscow court for the second time in as many weeks rejected a motion to suspend the trial of former Yukos vice president Vasily Aleksanyan, who is dying of AIDS and cancer, despite a warning from doctors that it would further damage his health.
Aleksanyan, 36, is charged with embezzlement and money laundering in the trial, part of the politically tinged onslaught against Yukos. He was released on bail in December.
The trial is to resume Nov. 2, when the court expects Aleksanyan to declare his inability to participate in the trial, Interfax reported.
TITLE: Opel’s Van Factory To Move to Russia?
PUBLISHER: Combined Reports
TEXT: MOSCOW — Magna International, the lead investor in a group buying General Motors’ Opel unit, was accused of plans to move van production to Russia from its British factory, by Unite, a trade union at Opel’s Vauxhall division, the Financial Times reported Friday.
“This is a stitch-up,” said Tony Woodley, joint general secretary of Unite, the newspaper reported. “We could see vans go to GAZ.”
Woodley told the newspaper that Magna had given no guarantee that the Luton plant would produce vans after 2013, when a production joint venture with Renault expires. Production may go to Oleg Deripaska’s GAZ Group, the newspaper said.
Magna denied the plans to the newspaper, saying, “No movement of production facilities to Russia is envisioned under the business plan and workers at Luton are in no worse a position than they were under GM, which had made no commitment beyond 2013,” the newspaper reported.
“What we’re dealing with here doesn’t … share the pain of downsizing and job losses,” Woodley said.
“It’s clearly biased for obvious political and financial reasons toward the German plants,” he said.
Magna gained favor early on with the German government, which strongly backed the firm’s Opel bid. Germany is providing 4.5 billion euros ($6.6 billion) of loan guarantees, which are necessary to finance Opel’s restructuring.
The deal has come under increasing criticism from other European countries where Opel operations are housed. Critics say that most of the downsizing is targeted on Opel’s non-German operations.
On Friday, Magna told Opel’s unions in Spain that it planned to present a new proposal on cost cuts next week, a labor representative said Friday.
Chema Fernando, a union leader at the plant in Figueruelas, Spain, said he was “satisfied” that Magna agreed to review an earlier proposal for the factory following a two-day meeting in Germany last week. A new plan was due to be presented Monday, Fernando said in an interview, without giving details.
Opel’s reorganization after the division’s planned sale to a partnership of Magna and Sberbank may lead to the loss of as many as 10,900 jobs in Europe. Under a July proposal, Magna, Canada’s largest car-parts maker, would eliminate 1,672 jobs, or 23 percent of the work force, at Opel’s Spanish plant.
Workers at Opel’s four German factories, where GM employs 25,000 people, may have to achieve 175 million euros ($254 million) in annual savings out of a proposed 265 million euro Europe-wide cost-cut target, Alfred Klingel, works council chief at the Kaiserslautern, Germany, plant, said Wednesday.
(Bloomberg, SPT)
TITLE: Incandescent Bulbs Banned From 2011
PUBLISHER: Vedomosti
TEXT: The government has established a schedule for banning incandescent lights, starting with 100-watt bulbs in 2011, and officials are promising to start buying only energy-efficient lamps.
A law on energy efficiency should be approved by lawmakers this fall and could take effect next year, Kremlin economic adviser Arkady Dvorkovich said after a government meeting on modernization and science, Interfax reported.
The law bans the sale of incandescent bulbs of 100 watts and higher from 2011, Deputy Economic Development Minister Stanislav Voskresensky told Vedomosti. That year, the state will be banned from buying any such lights.
The ban may be extended to 75-watt lights in 2013, with a full end to sales in 2014, Economic Development Minister Elvira Nabiullina said Wednesday.
Russian-made incandescent bulbs — at 10 to 15 rubles (33 to 50 cents) — are much cheaper than energy-efficient lights, which go for 150 to 300 rubles. But the added expenses are recouped in a year, Voskresensky said, because the more expensive bulbs last longer.
There is currently no major production of energy-efficient bulbs in Russia, which the Economic Development Ministry has conceded poses a problem. Between 700 million and 800 million incandescent bulbs are made in the country every year, while sales of energy-saving lights has reached an annual 50 million units, said Andrei Turyanitsa, development director of the company AZ, which distributes both kinds of light bulbs under the brand Start.
TITLE: State’s Sport Channel Retired As Costs Soar
AUTHOR: By Ksenia Boletskaya
PUBLISHER: Vedomosti
TEXT: State media holding VGTRK wants to attract active young viewers and will use its Sport channel as the basis for a new station starting next year, provisionally called Rossia-2.
In the six years that Sport has been on-air, strong competition from paid, specialized sports channels has driven up the prices by several times for broadcasting rights to athletic events, said Anton Zlatopolsky, chief executive of VGTRK’s Rossia channel. As a result, Sport is just barely breaking even, and VGTRK expects it to have revenue of $40 million this year.
By comparison, CTC television — one of the few Russian broadcasters that publish financial results — had revenue of $143.1 million last year. Zlatopolsky said the most important and popular sports competitions could be shown in a more compact schedule than Sport has now.
The new channel will continue to broadcast the biggest draws — football, volleyball, basketball, hockey and figure skating — which are shown live. In total, sports will represent about one-third of the new channel’s programming.
According to TNS, Sport has 47 million viewers in Russia. The channel began broadcasting in June 2003 after lobbying from then-President Vladimir Putin.
The new channel will begin broadcasting from January 2010 and Vladimir Troyepolsky has been named its chief executive. He recently returned to VGTRK after working for just over a year as CEO of St. Petersburg’s Channel 5. The new channel’s launch will be financed through advertising on the frequency that is currently used by Sport. A budget and break-even target for the project have not yet been decided.
The nonsports broadcasting will be targeted at sophisticated, active young people older than 25, Zlatopolsky said. Among the programming will be art and documentary films that are only shown in the late evening or at night on Rossia because of the nature of that channel’s audience. He gave Alexei German Jr.’s film “Bumazhny Soldat” as an example. The channel could also pick up popular Western television series.
“We’re planning to attract a large female audience, as well as people who almost never watch federal television stations and spend most of their time online,” Zlatopolsky said. Sports content is only profitable on paid TV channels, so reorganizing Sport makes sense, said Sergei Piskaryov, chief executive of Gazprom-Media. At the same time, there’s demand for content appealing to a young, active audience.
“The fight for young, active viewers is clearly getting tougher,” said Vyacheslav Murugov, chief producer at CTC Media. “VGTRK is a very serious player and Troyepolsky is an experienced executive.”
Piskaryov said it would be hard to say how successful VGTRK would be without seeing their product.
TITLE: Severstal Says Steel Production Is Recovering
PUBLISHER: Bloomberg
TEXT: MOSCOW — Severstal, Russia’s biggest steelmaker, said production at its mills is recovering from record low use of capacity at the start of the year as demand from domestic pipemakers and shipbuilders picks up.
Severstal’s biggest mill in Cherepovets resumed working at full capacity last month, Anatoly Kruchinin, head of domestic steel output, said in an interview Monday. Pipemakers have increased steel consumption in the second half to meet demand from the BTS-2 oil route and the gas pipeline between Sakhalin and the Pacific port of Vladivostok, he said.
“The second half has picked up a little,” Kruchinin said at Severstal’s Izhora pipe plant near St. Petersburg.
Severstal’s Russian pipe plants ran at half capacity in the first six months as steel prices collapsed and local and export demand slumped. The company has fired 9,500 staff to cut costs and help pay off debts, idled two U.S. plants, and said last month it would sell 15 billion rubles ($499 million) of bonds.
TITLE: Government Submits Bill to Double Taxes on Beer
PUBLISHER: Combined Reports
TEXT: The government, seeking to plug holes in the federal and regional budgets, has submitted a bill to lawmakers that would triple the excise tax on beer next year and double a transportation tax.
The measures also come amid a Kremlin-led campaign to curb rampant alcohol consumption, and they drew heavy criticism from brewers, including foreign companies that have rushed to build market share in the country’s rapidly expanding beer market.
“It’s not good news for the total beer market in Russia and as such not good news for Carlsberg,” chief executive Joergen Buhl Rasmussen said by phone. “But this is still a long process. It’s not a given that the proposal will pass looking like this. We’ll still make our voice heard.”
The package of tax hikes would also increase duties on cigarettes. The government said the increase to the transportation tax, in place since 2003, would help regional governments with their budgets.
The excise tax on beer will be increased by an average of 50 percent per year from 2010 until 2012. Currently, the rate for beer with an alcohol content of 0.5 percent to 8.6 percent is 3 rubles per liter, which would increase to 10 rubles by 2012, according to the proposals, Interfax reported.
Carlsberg, which has 41 percent of the Russian beer market, said in a statement that the bill would increase the excise duty on beer by 200 percent in 2010, by 11 percent in 2011 and by 20 percent in 2012.
For wine and other low-alcohol beverages, the rate will increase by an average of 30 percent per year over the same period. The excise tax on hard alcohol would be increased just once — by 10 percent — in 2012, RIA-Novosti reported.
Russia is raising taxes on beer and clamping down on its availability to curb what Medvedev has called the country’s “colossal” alcohol consumption.
(Bloomberg, SPT)
TITLE: October Sees Market Rally Slow Down
AUTHOR: By Ira Iosebashvili
PUBLISHER: The St. Petersburg Times
TEXT: The markets started October in dramatic fashion, as worse-than-expected U.S. economic numbers and falling oil prices put the brakes on the five-month rally.
Market watchers, however, said a sell-off this month could present a perfect jumping-off point for investors looking to capitalize on the world’s best-performing equity market.
Stocks had their worst day in two weeks Friday, as the U.S. unemployment rate rose to a 26-year high and employers cut more jobs than expected in August. The MICEX closed the day down almost 3 percent at 1175.83, rallying in the late afternoon after being down as much as 5 percent during the trading session. The RTS followed suit, paring an intraday 5 percent loss to close down 3.3 percent at 1224.8.
The MICEX finished the week with a 1 percent loss, while the RTS stayed nearly flat.
Oil, Russia’s chief export, joined the sell-off on Friday, with Urals crude closing down 1.5 percent at $67.07 per barrel, still up 4.2 percent on the week.
The sell-off was distributed evenly, with most sectors experiencing an equal share of bloodletting. Power companies, which had been enjoying a rally in recent weeks, fell hard Friday, with the MICEX Energy Index down by over 3 percent. Similar losses were experienced across the board, with metals and mining, oil and gas and banking all falling more than 3 percent.
Norilsk Nickel led the 30-stock MICEX Index’s decline, closing down 5.5 percent, followed by LUKoil and Gazprom, which finished down 5 percent and 4.5 percent, respectively.
The sell-off was far from unexpected, and may even present a buying opportunity for investors willing to put up with their share of risk, analysts said.
“The markets have been very strong for the last six months, but the technical indicators have been showing a high possibility of consolidation,” said Nigel Rendell of RBC Capital Markets.
But Russia remains an attractive bet for international investors, who have been the driving force behind the market’s rally since oil stabilized above $60 per barrel in May, Rendell said.
Russian equities have led world markets in 2009, with the MICEX and RTS both up by more than 90 percent on the year.
“The ruble is strong and fixed income yields for Russian corporate bonds are high. There is a great deal of global liquidity and people are looking for a place to put their money,” Rendell said. “If we see a 10 percent to 15 percent correction, we will see a lot of cash that has been waiting on the sidelines stepping in.”
There were hopeful signals last week that the economy could be rebounding, with VTB Capital’s Purchasing Managers’ Index showing growth in the manufacturing sector for the first time in more than a year.
Also last week, the Central Bank made a surprise 50 basis point cut in its key rates Tuesday in an attempt to reinvigorate stalling credit growth.
“It’s been surprising how quickly growth has come back,” said Kingsmill Bond, chief strategist at Troika Dialog. “All we need is for U.S. growth not to collapse and the oil price to remain at reasonable levels.”
Russian equities are still “not too expensive,” Bond said, adding that the decimated property and construction sector is one place to look for bargains, such as LSR Group or Raven Russia.
LSR closed down 1.1 percent on the week at 572.97 rubles, while Raven Russia’s London-traded shares fell 3.8 percent to 38 pence.
TITLE: States Plans Svyazinvest Share Sale
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russia plans to restructure Svyazinvest, the state-controlled holding company for fixed-line regional operators, by spring 2011 and sell shares in the new company in 2012.
“We will finish the restructuring by 2011,” Communications Minister Igor Shchegolev said in an interview in Geneva on Monday. The government will then consider listing the company on different stock exchanges in 2012 if market conditions will allow it to get a “just” price, he said.
Shares can’t be sold earlier as investors will want to see accounts for at least one year, he said. The state will consider selling a “substantial part” of its stake, he said, declining to say whether it aims to keep a majority.
On Sept. 15, Russia’s government approved a plan to swap AFK Sistema’s stake in Svyazinvest for other assets, allowing the state to take full control of the holding company for the country’s seven regional fixed-line phone operators.
Under the swap, the government will get a 25 percent stake in Svyazinvest from Sistema’s Comstar Mobile Telesystems company while Sistema, billionaire Vladimir Yevtushenkov’s holding company, will get 28 percent of voting shares in Moscow City Telephone and debt relief for Comstar. Comstar’s 26 billion rubles of debt will be transferred to state bank VEB.
To compensate for the difference in asset value, Sistema will give Rostelecom, controlled by Svyazinvest, 100 percent in mobile operator Sky Link, the ministry said in September.
Sistema bought its Svyazinvest stake for $1.3 billion in December 2006.
TITLE: Untangling Iran’s Nuclear Web
AUTHOR: By Dmitry Trenin
TEXT: Thursday’s Geneva meeting of the five permanent members of the United Nations Security Council plus Germany regarding Iran’s nuclear program did not lead to a breakthrough or a decisive showdown. It did, however, demonstrate more unity among the major powers vis-a-vis Tehran, and we witnessed the first meeting of President Barack Obama’s administration between U.S. and Iranian diplomats. The meeting also encouraged the Iranian leadership to make somewhat conciliatory noises after a salvo of missile test launches and the revelations about a new nuclear facility near Qom. The game that Iran and the international community have been playing with each other continues, and this has to stop. It is a losing game for both sides.
Speaking after the meeting, Obama welcomed Iran’s gestures, but he also held out the prospect of “crippling sanctions” against Tehran if it does not comply with the international community’s demands. President Dmitry Medvedev, speaking before the Geneva talks, produced a jewel of diplomatic casuistry when he stated that although sanctions do not usually work, sometimes they are necessary. Many observers interpreted this as a subtle change in the Russian position to meet the United States in the new more positive atmosphere created by the cancellation of U.S. plans to deploy elements of a missile defense system in Poland and the Czech Republic. The issue, however, is not so much about sanctions as it is about strategy.
And the strategy is still lacking. The U.S.-European idea of preventing Iran’s development of nuclear weapons rests on the belief that Iran will buckle under pressure if the Security Council members — including Russia and China — joined in a common front to demand that Iran comply with its obligations as a signatory to the Nuclear Nonproliferation Treaty and observe Security Council resolutions. The Kremlin’s plan for dealing with Iran downplays sanctions and apparently assumes that the complex and controversial issue be decided on the basis of goodwill.
If this approach fails, the West will be faced with a difficult dilemma: either to try to contain and deter Iran by nonmilitary means or resort to air strikes against Iranian nuclear targets — using the Israeli Air Force, the U.S. Air Force or a combination of the two.
Moscow very well may be forced to join the West on a nonmilitary basis, thus admitting it had miscalculated its strategy on Iran, or face a barrage of sharp criticism from the West for having de facto helped Iran defy the United States and its allies.
Any strategy needs to proceed with a few basic truths about nuclear weapons and countries that seek them. Nations seeking to join the “nuclear weapons club” are in quest for security and status. In this sense, Iran is no different from India, Pakistan, China or France. Iran is interested, above all, in gaining security for the ruling regime and strengthening its status as the predominant powerhouse in the Middle East. What is also certain is that Iran, despite President Mahmoud Ahmadinejad’s inflammatory, malicious anti-Israeli rhetoric, is unlikely to use nuclear weapons to attack the Jewish state if it gets the bomb. But the Israelis do not want to take any chances with Ahmadinejad should he wish to follow through with his promise to wipe Israel off the face of the Earth.
Another unwelcome truth is that if a nation the size of Iran — with its rich energy resources and its inflated ambition and self-image — is determined to build nuclear weapons, it won’t be stopped. At best, a nuclear program can be delayed using surgical air and missile strikes, but short of a military occupation of the country, Iran’s nuclear program will inevitably continue.
The Russians are right about one thing: The only way to prevent Iran from obtaining nuclear weapons is to create a situation whereby Iran no longer wants them. But the United States and many of its allies are naive to think Iran would walk away from its nuclear ambitions simply because of the costs incurred by sanctions.
A successful approach would go beyond the nuclear issues and address Iran’s perceived needs and ambitions. Dealing with both is crucial. Tehran wants a noninterference policy from the United States. This should be offered in exchange for a certifiable commitment to stop well short of the nuclear threshold. Iran also wants to be a regional power, and it can hardly be denied an important role in the Persian Gulf and the Middle East. The future U.S. policy in Iraq and Afghanistan, Pakistan, the Palestinian territories, Lebanon and the Gulf will be critically strengthened if the United States is able to acknowledge Iran as a prominent regional leader.
Iran should also realize that there are serious costs involved if the engagement policy fails. For both political and psychological reasons, a common stand by all the permanent members of the Security Council is of special importance. The present rapprochement between the United States and Russia on the issue of Iran needs to be translated into a coordinated approach where sanctions and opportunities become incentives pushing and pulling Iran toward a solution that is both in the interest of regional and global security and the long-term national interest of Iran itself.
To develop such a strategy and implement it will be extremely difficult. The wounds of the 444-day U.S. Embassy hostage crisis 30 years ago still run deep, and anti-Iranian sentiment remains high in the United States. Nonetheless, Obama should not retreat from his campaign commitment to solve the Iranian problem through a bold, but calculated, outreach to Tehran. Rather than tinkering with policy instruments divorced from a policy, he needs to have a broad strategy on Iran and the entire region, where the nuclear issue is just one element, albeit of paramount importance. A failure to think big and act boldly could put Obama into a position where he would have to either accept a major policy failure or make a desperate and fateful decision.
Russia, which has a long-standing relationship with Iran, should not support the West’s Iran policy if this contradicts what the Kremlin believes in. But Moscow needs to take its global responsibility as a permanent member of the Security Council seriously. Stopping proliferation of nuclear weapons in Iran and elsewhere is clearly not only a concern in the West. It directly affects Russia as well. Russia has always said it wanted an active part in world governance. Iran is a test case for the strength of that commitment.
Dmitry Trenin is director of the Carnegie Moscow Center.
TITLE: Atomic Eggs
AUTHOR: By Richard Lourie
TEXT: Former U.S. President George W. Bush did Barack Obama one favor. Bush’s plans to counter the Iranian missile threat with a radar installation in the Czech Republic and 10 interceptors in Poland bequeathed his successor a bargaining chip. Otherwise, the whole thing was a bad idea from the start. Due to the Earth’s curvature and other such basic factors, Poland was hardly the ideal spot for the missiles. Not to mention the fact that they probably wouldn’t work anyway.
Neither would the missile defense installations have improved Poland and the Czech Republic’s security one iota. They are both NATO members and probably safer than they’ve ever been in their history. On the contrary, the missiles reduced their security by drawing and focusing the Kremlin’s ire. Medvedev threatened to deploy Iskander missiles at Poland’s doorstep in Kaliningrad, a threat made only hours after Obama’s election.
Also, there was no strong popular support for the project in either Poland or the Czech Republic. In any case, the installation would not have been ready until 2018, and judging by the recent discovery of the nuclear facility near Qom and the International Atomic Energy Agency’s report that Iran now has the data to design a nuclear weapon, the world doesn’t have nine years before Iran becomes a nuclear power.
So, it didn’t cost Obama much to trade away the Bush missile defense project, especially since U.S. sea-to-air missiles are apparently more effective and politically less problematic.
Indeed, Obama had to withdraw the Bush plan before he announced the intelligence findings about Iran’s secret uranium-enrichment facility because he wanted the Russians on board for stricter sanctions if no resolution could be found to this issue.
But if there is one Qom, why can’t there be two or even 10? “If you were the manager of the Iranian nuclear program, how likely is it that you would put all your nuclear eggs in one basket?” asks Graham Allison, assistant defense secretary under former President Bill Clinton. He expects that “over the months ahead, Iran will either be found to have a number of other sites or Iran may even announce that it has a number of other sites.”
Iran has good reason to seek to become a nuclear power. It is surrounded by nuclear nations — Israel to the west, Russia to the north and Pakistan and India to the east. In addition, the United States is fighting wars on both sides of Iran — in Iraq and Afghanistan. Lastly, Iran’s history in the 20th century was marked by incursions and humiliating manipulations by foreign powers, including England, the Soviet Union and the United States. Considering Iran’s history and its geopolitical situation, its acquisition of nuclear weapons could appear as an imperative.
The Geneva talks, which brought the United States and Iran together for high-level negotiations for the first time in 30 years, have both symbolic and substantive significance. They also have an aura of win-win: Washington gets a dramatic diplomatic breakthrough, and Moscow gets off the hook while gaining a little income from enriching Iranian uranium.
But if the talks are only a delay tactic — just another element in what Defense Secretary Robert Gates calls a “pattern of deception and lies” — a showdown is in the offing. Obama will have to demonstrate that he is capable of dealing with a full-blown international crisis. And Russia will finally have to decide whether to act like a serious power or side with the sinister clowns like Venezuelan President Hugo Chavez and Ahmadinejad.
Richard Lourie is the author of “The Autobiography of Joseph Stalin” and “Sakharov: A Biography.”
TITLE: In the Spotlight
AUTHOR: By Anna Malpas
TEXT: This month, GQ magazine picked Dasha Zhukova, girlfriend of Roman Abramovich and founder of the Garage gallery, as its woman of the year. She won the laurels as part of the magazine’s incredibly sexist People of the Year awards, which are otherwise only given out to men.
Zhukova gets a four-page spread, almost as long as the one with the Italian model in black underwear. She’s interviewed by It Girl Ksenia Sobchak, who has become a fairly prolific journalist, what with her column in the Tatler magazine and regular work as a GQ interviewer.
You get the impression that if outspoken, loud-mouthed Sobchak is abashed by anyone, it’s probably someone glossy and aloof like Zhukova, even if she addresses her with a pally “ty.” So the questions are soft ones such as, “Describe your ideal day.”
The big unmentioned topic is Zhukova’s pregnancy, which was first reported by British newspapers in August. Surely they don’t have deadlines as early as that at GQ? It’s understandable that Zhukova doesn’t want to talk about it, but it seems a bit odd that Sobchak doesn’t even attempt a compliment about her glowing appearance.
Zhukova poses in a bump-deflecting black knee-length dress and gladiator sandals in Garage. She talks about her work there for most of the interview, saying that she’d like to curate exhibitions but feels she doesn’t have the experience yet.
She also reveals that she likes to get up at 7 a.m. and go out for breakfast, when she always eats something with chocolate. Oh, and she doesn’t like shopping, despite cofounding a fashion label, Kova&T.
The magazine’s 13 men of the year include Channel One director Konstantin Ernst, comedian Sergei Svetlakov, former NTV star Leonid Parfyonov and footballer Andrei Arshavin.
Kommersant’s Kremlin reporter Andrei Kolesnikov wins the “Editor of the Year” award for his Russky Pioneer magazine, which in May managed to recruit as a columnist Prime Minister Vladimir Putin, no less.
Kolesnikov is interviewed by Sobchak, who doesn’t hold her horses with him. “Come clean, do you love Medvedev and Putin?” she asks. “I only have a work relationship with Putin and Medvedev,” he answers. “If it’s a romance, it’s an office one.”
Channel One director Konstantin Ernst wins “Producer of the Year.” The magazine writes a eulogy saying, “Channel One made television fashionable again,” with shows such as improvised comedy half-hour “ProjectorParisHilton.”
Like or dislike Ernst, his big-spending channel certainly outruns the others. This Friday, it begins showing the “FlashForward” sci-fi series just a week after it started in the United States.
Ernst pontificates to GQ editor Nikolai Uskov about AIDS, contemporary civilization and consumer culture. He even gets round to television, revealing that he dreamed up the gruesomely watchable dating show “Let’s Get Married,” and that it’s not about getting married.
The show is about people who don’t know what they want, Ernst says. “Let’s face it, most people have never been in love.”
The “Face of Television” category went to Svetlakov, the blond comedian who appears in two of the funniest shows on television, “ProjectorParisHilton” and TNT’s “Nasha Russia,” a local version of “Little Britain.”
Svetlakov’s latest Channel One project, “Yuzhnoye Butovo,” is an improvised show where comedians have to obey commands given into their earpieces. The first episode was flat and unfunny, though Svetlakov always comes across as likeable.
Posing in Paul Smith, he gives a jokey interview that mainly plugs the “Nasha Russia” movie — due out in December, since you asked. It remains to be seen how well the show’s satirical characters, such as the honest traffic policeman, will work on the big screen.
TITLE: Recounting Starts In Afghanistan
PUBLISHER: The Associated Press
TEXT: KABUL — Election workers began recounting ballots from the disputed Aug. 20 Afghan presidential election Monday, and a senior official said he expected to announce late next week whether President Hamid Karzai had won or would face a runoff with his main rival.
A UN-backed commission ordered a partial recount from about 10 percent of the country’s polling stations after allegations of widespread fraud in the vote, which was supposed to install a legitimate government to confront the growing Taliban threat.
However, vote-rigging allegations have plunged Afghanistan into an electoral crisis at a time when Taliban militants are expanding from their southern strongholds into the north and west of the country.
In a sign of the growing threat, hundreds of militants launched fierce attacks Saturday against two isolated outposts in Nuristan province, killing eight American soldiers in the biggest loss of U.S. life in a single battle in more than a year.
Afghan officials said U.S. and Afghan forces had sealed off an area Monday where the assailants were believed hiding.
In Kabul, election officials said the recount began Monday morning with ballots from 274 of the country’s 3,498 polling stations. Ballots from about 84 more locations were expected shortly, according to the deputy director of the election commission, Zekria Barakzai.
Barakzai said the count should take about three days to complete and that the commission would be able to announce the final results “by the end of next week.”
Preliminary results released last month showed Karzai won the August ballot with 54.6 percent of the votes, enough to avoid a runoff with second place finisher Abdullah Abdullah. A recount could push Karzai’s numbers down below the 50 percent mark and force a runoff with Abdullah, a former foreign minister.
If a runoff were required, Barakzai said it must be held within two to three weeks of the announcement of the final results. Winter snows typically start in mid-November, making much of the country impassable.
Waiting for spring to hold the poll could create a power vacuum in a country already destabilized by the resurgent Taliban and delay both government projects and military operations.
Bolstering Afghanistan’s weak and corruption-ridden government is considered key to President Barack Obama’s strategy for curbing the Taliban insurgency so that U.S. and other international troops can go home.
However, fraud allegations threatened to undermine those plans at a time when the Taliban was proving to be a skillful and determined adversary.
The Obama administration is also divided over a request by the top military commander, Gen. Stanley McChrystal, to send up to 40,000 more U.S. soldiers to Afghanistan. Obama is considering a range of ideas for changing course in Afghanistan, including scaling back, staying put or sending more troops to fight the insurgency.
U.S. officials are also waiting for the results of the Afghan elections, as disturbing reports of fraud grow.
As the debate rages in Washington, the NATO command reported that two
TITLE: Suicide Bomber Strikes In Pakistan Office
AUTHOR: By Zarar Khan
PUBLISHER: The Associated Press
TEXT: ISLAMABAD — A suicide bomber disguised as a security officer struck the lobby of the UN food agency’s Pakistan headquarters on Monday, killing five people a day after the new leader of the Pakistani Taliban vowed fresh assaults, authorities and witnesses said.
The attack raises questions as to how the bomber managed to evade tight security at the heavily fortified World Food Program compound in the capital, Islamabad. It could also hamper the work of WFP and other aid agencies assisting Pakistanis displaced by army offensives against al-Qaida and the Taliban in their strongholds close to the Afghan border.
Hours after the attack, the world body said it was closing its offices in Pakistan temporarily.
“This is a heinous crime committed against those who have been working tirelessly to assist the poor and vulnerable on the front lines of hunger and other human suffering in Pakistan,” UN Secretary-General Ban Ki-moon told reporters in Geneva. He also said the UN would continue providing humanitarian assistance to the Pakistani people.
There was no immediate claim of responsibility for the bombing. Militants have carried out scores of suicide attacks in Pakistan over the last 2 1/2 years, several of them targeting foreigners and their interests. Under U.S. pressure, Pakistani security forces have recently had some success combating the extremists.
The attack shattered windows in the lobby of the compound in an upscale residential area of Islamabad and left victims lying on the ground in pools of blood, witnesses said. The office is situated close to a home belonging to President Asif Ali Zardari.
“There was a huge bang, and something hit me. I fell on the floor bleeding,” said Adam Motiwala, an information officer at the UN agency who was hospitalized with injuries to his head, leg and ribs.
Medical officials at two hospitals said five people had been killed in the attack, including an Iraqi working for the agency. Two of those killed were Pakistani women. Several others were injured, two of them critically, the WFP said in a statement.
Interior Minister Rehman Malik said the attacker was wearing the uniform of a paramilitary police officer and asked a guard if he could go inside the building to use the bathroom. He was carrying around 8 kilograms (18 pounds) of explosives.
Police official Bin Yamin said the attacker, who was in his 20s, detonated his explosives in the lobby. It was unclear how he came that far. Typically, visitors to UN buildings in Islamabad are screened and patted down for weapons and explosives in secure chambers some distance from the entrance to the building.
U.S. Ambassador Anne Patterson condemned the targeting of aid workers as an attack against Pakistani society. “Such cruel acts expose the true nature of the terrorists’ agenda,” she said.
The bombing was the first such attack in Islamabad since June, when two police officers where killed. Another explosion in June in a luxury hotel in the northwestern city of Peshawar killed two UN staffers and injured others.
Malik said that the attack is a desperate measure of Pakistani militants in response to recent government offensives against minority groups. “These terrorists, they are injured snakes,” he said.
On Sunday, Hakimullah Mehsud, the new leader of the Taliban in Pakistan, met with reporters in the country’s tribal areas for the first time since winning control of the militants. His appearance, flanked by other Taliban commanders in a show of unity, ended speculation that he was killed in a leadership battle within the militant group sparked by the August slaying of his predecessor, Baitullah Mehsud, in a missile strike.
“We all are sitting before you which proves all the news about myself ... was totally baseless and false,” he said. Mehsud spoke to a small group of reporters as he sat on a blanket on the ground in the shade of a tree, flanked by guards carrying heavy machine guns and rocket-propelled grenade launchers. He spoke on condition his comments not be published until the reporters left the area Monday, out of concern their use of satellite phones could lead Pakistani forces to him.
Mehsud vowed to strike back at Pakistan and the U.S. for the increasing number of drone attacks in the tribal areas along the border with Afghanistan.
TITLE: Generals Allege Musharraf Diverted U.S. Aid Away From Pakistan Army
PUBLISHER: The Associated Press
TEXT: ISLAMABAD, Pakistan — The United States has long suspected that much of the billions of dollars it has sent Pakistan to battle militants has been diverted to the domestic economy and other causes, such as fighting India.
Now the scope and longevity of the misuse is becoming clear: Between 2002 and 2008, while al-Qaida regrouped, only $500 million of the $6.6 billion in American aid actually made it to the Pakistani military, two army generals tell The Associated Press.
The account of the generals, who asked to remain anonymous because military rules forbid them from speaking publicly, was backed up by other retired and active generals, former bureaucrats and government ministers.
At the time of the siphoning, Pervez Musharraf, a Washington ally, served as both chief of staff and president, making it easier to divert money intended for the military to bolster his sagging image at home through economic subsidies.
“The army itself got very little,” said retired Gen. Mahmud Durrani, who was Pakistan’s ambassador to the U.S. under Musharraf. “It went to things like subsidies, which is why everything looked hunky-dory. The military was financing the war on terror out of its own budget.”
Generals and ministers say the diversion of the money hurt the military in very real ways:
Helicopters critical to the battle in rugged border regions were not available. At one point in 2007, more than 200 soldiers were trapped by insurgents in the tribal regions without a helicopter lift to rescue them.
The limited night vision equipment given to the army was taken away every three months for inventory and returned three weeks later.
Equipment was broken, and training was lacking. It was not until 2007 that money was given to the Frontier Corps, the front-line force, for training.
The details on misuse of American aid come as Washington again promises Pakistan money. Legislation to triple general aid to Pakistan cleared Congress last week. The legislation also authorizes “such sums as are necessary” for military assistance to Pakistan, upon several conditions. The conditions include certification that Pakistan is cooperating in stopping the proliferation of nuclear weapons, that Pakistan is making a sustained commitment to combating terrorist groups and that Pakistan security forces are not subverting the country’s political or judicial processes.
The U.S. is also insisting on more accountability for reimbursing money spent. For example, Pakistan is still waiting for $1.7 billion for which it has billed the United States under a Coalition Support Fund to reimburse allies for money spent on the war on terror.
TITLE: Rescue Workers Halt Search For Survivors in Indonesia
PUBLISHER: The Associated Press
TEXT: PADANG, Indonesia — Rescue workers called off the search Monday for life under the rubble left by a massive earthquake, focusing instead on bringing aid to survivors in the towns and hills of western Indonesia, despite being hampered by torrential rains.
“The chances of survival while trapped without water and food under the rubble for so long are impossible from now,” said Gagah Prakoso, a spokesman for the Indonesian Search and Rescue Agency. “So we will speed up our search to find bodies and clean up the ruins with bulldozers.”
The death toll from Wednesday’s 7.6-magnitude temblor in Sumatra island is expected to be in the thousands once the missing people are declared dead. The UN has said 1,100 people died, while the government puts the toll at 603.
Ignacio Leon, the head of the UN’s humanitarian agency in Indonesia, told the Associated Press that the focus has now shifted away from finding survivors and “we are supporting the government now more in the relief side.”
The undersea quake devastated 10 districts in the Western Sumatra province including the capital, Padang, a city of 900,000 people where scores of tall buildings, including hotels, a mall, mosques and schools came crashing down. In addition, the quake triggered huge landslides in the hills of the Pariaman district that wiped out entire villages.
Hiroaki Sano, head of the Japan Disaster Rescue Team, told the AP that international search and rescue teams were winding up operations and preparing to go back home.
“We got here quickly but we haven’t found any survivors. The first 100 hours are crucial,” he said.
Government minister Aburizal Bakrie told reporters that $600 million was needed to repair infrastructure. It had initially said $400 million was needed, but raised the estimate after the scale of the disaster became clear.
Little aid has reached the remote communities in Pariaman as many roads and bridges were destroyed. Landslides also blocked many of the roads leading to villages and an AP crew saw aid workers scrambling to clear the road of dirt, boulders and trees.
One road ended at Kampung Dalam village. The rest of the way had caved in, forcing rescue teams from South Korea, France and Germany to camp there. Villages further up the road were now accessible only by foot.
Heavy rain since Sunday night triggered a landslide on Monday but no casualties were reported, according to Prakoso, the rescue agency spokesman.