SOURCE: The St. Petersburg Times
DATE: Issue #1517 (79), Tuesday, October 13, 2009
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TITLE: Putin Travels To China
To Develop Energy Links
AUTHOR: By Lucian Kim
PUBLISHER: Bloomberg
TEXT: MOSCOW — Prime Minister Vladimir Putin arrived in China on Monday bidding to strengthen a relationship forged by Russian oil exports to Asia’s largest energy consumer.
Russia, which this year sealed Chinese oil contracts valued at $100 billion, is now negotiating an agreement that would make China Gazprom’s biggest customer for natural gas. Its communist neighbor currently buys no Russian gas.
The two countries, which were on the brink of war 40 years ago despite a shared ideology, are deepening ties based on mutual economic gain. Bilateral trade totaled a record $56 billion in 2008, a six-fold increase in six years, according to Russia’s Federal Customs Service.
“Political ties are very good, probably the best since China’s communist revolution in 1949,” said Fyodor Lukyanov, the editor of Moscow-based Russia in Global Affairs magazine. “There’s never been such closeness in position on major international issues, and there are no more territorial disputes.”
China and Russia, the world’s third- and ninth-largest economies respectively, hold two of the five permanent seats on the United Nations Security Council as well as membership in the nascent BRIC group that also includes India and Brazil. The former foes, which share a border more than 4,000 kilometers long, broke a three-decade diplomatic deadlock in 1989 when then Soviet leader Mikhail Gorbachev visited Beijing.
Putin, 57, is set to meet with Chinese President Hu Jintao and Prime Minister Wen Jiabao in two days of talks that start tomorrow. He’ll also attend a meeting of the Shanghai Cooperation Organization, a regional group that also includes four former Soviet republics in Central Asia.
Russia agreed in February to supply China with oil for 20 years in return for a $25 billion credit to state oil company Rosneft and the government’s oil pipeline monopoly Transneft. The total value of oil accords signed with Chinese companies this year amounts to about $100 billion, the Russian government said in a statement released before Putin’s trip.
Transneft plans to finish the first segment of its East Siberia-Pacific Ocean pipeline this year, enabling Russia to begin sending the fuel directly to China. Oil and other mineral products account for 56 percent of trade, with Russia currently making fuel deliveries by rail and through a pipeline that passes through Kazakhstan.
Gazprom, which aims to become a global energy company beyond its traditional markets in Europe, plans to build two gas pipelines to China that might one day deliver as much as 80 billion cubic meters annually, or more than half its current European exports. Gazprom and China National Petroleum Corp. last month initialed an accord in advance of Putin’s visit.
“The ideal outcome would be a similar deal to that agreed between China and Russia for oil,” Chris Weafer, chief strategist at UralSib Financial Corp., said in a note to clients. “We could see a timeline not only for the pipelines but also for the development of the Kovykta gas deposit.”
Gazprom has not yet completed a deal to buy oil producer TNK-BP’s stake in Kovykta, an east Siberian field that holds enough gas to supply Asia for five years.
China, in its drive for new energy sources to fuel the world’s fastest-growing major economy, is also reaching out to landlocked Central Asian producers that until recently were dependent on Russia’s pipeline systems to bring their oil and gas to market. CNPC plans to finish building a gas pipeline to Turkmenistan, Central Asia’s largest gas producer, this year.
“Russia sees this as a foray into its traditional zone of interests,” Lukyanov said. “Russia tries to compensate its economic weakness with political initiatives. But China is hard to attract if it doesn’t see their necessity.”
The Shanghai Cooperation Organization, whose prime ministers meet in Beijing on Oct. 14, is at risk of becoming irrelevant unless it takes on a greater economic role, said Alexander Lukin, director of the East Asian Studies Center at the Moscow State Institute of International Relations.
“SCO doesn’t have the image of an organization that can make any economic difference,” Lukin said. China may lose interest in the group as a forum for doing business and give priority to developing bilateral relations, he said.
At the organization’s last meeting in June, Hu said China would supply member countries with $10 billion in credits to help weather the financial crisis. Besides Russia and China, the group comprises Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan.
Putin comes to China a week after Wen, on a visit to Pyongyang, won a conditional agreement for North Korea to return to six-party negotiations, which include Russia, aimed at eliminating North Korea’s nuclear weapons program. Russia and China have been the reclusive regime’s closest partners during the past six decades.
While Russia and China face a “delicate balance” where their interests overlap in Central Asia, the two former Cold War rivals have more that binds than divides them, said Zhu Feng, a Beijing University professor who specializes on international security issues.
“The two countries are cautiously but passionately pushing ahead for greater cooperation,” Zhu said. “Oil shipments are a very strong economic bond.”
TITLE: Thousands Gather to Oppose Skyscraper
AUTHOR: By Sergey Chernov
PUBLISHER: Staff Writer
TEXT: Thousands protested the authorities’ decision to let Gazprom build a 403-meter skyscraper close to St. Petersburg’s historic center at a rally on Saturday.
Protesters opposed the construction of the Okhta Center tower, saying it would ruin St. Petersburg’s UNESCO-protected skyline, and called for the resignation of Governor Valentina Matviyenko, an outspoken adherent of the project, who signed off on City Hall’s decision to allow the construction to go ahead last week.
The decision to build what may become Europe’s tallest skyscraper opposite Smolny Cathedral was taken despite opposition from many city residents, and violated a number of both local and federal laws, protesters said.
Dismissing the decision as illegal, Yabloko Democratic Party member Mikhail Amosov, one of the rally’s speakers, tore up a copy of the document and threw pieces of it from the platform. Many posters carried by protesters portrayed Matviyenko satirically, with at least one reading “Put Matviyenko in prison.”
Other slogans included “No one is above the law,” “History is worth more than money,” “Stop disfiguring the city,” and “The 400-meter tower is the symbol of the authorities’ greed and vulgarity.”
Poet Alexander Kushner, film director Yury Mamin, actors Alexei Devotchenko and Larisa Dmitriyeva and artist Dmitry Shagin, along with musicians Mikhail Borzykin, Vladimir Rekshan and Mikhail Novitsky backed the cause with speeches and performances.
“We are not only faced with a choice between a tower or no tower; we are facing the choice between democracy and totalitarianism,” said Kushner.
Every second St. Petersburg resident opposes the tower, according to the most recent poll conducted by the Russian Public Opinion Research Center (VTsIOM), the leading research organization in the field of public opinion studies. Published on Friday, the poll showed that 50 percent were against the construction with 23 percent speaking in favor of it.
Minister of Culture Alexander Avdeyev spoke against the project as “spoiling” St. Petersburg’s appearance and reported City Hall to the St. Petersburg Prosecutor’s Office on Thursday, citing “violations of the law” identified by the federal cultural heritage watchdog Rosokhrankultura.
Reacting on City Hall’s web site on Saturday, Matviyenko said that she was “surprised.” “In our opinion, all the procedures were conducted in strict accordance with the law,” she said.
But by granting exemption for Gazprom from the 100-meter height limit for construction in that area, the local authorities broke a number of laws including the town-planning code, land code and cultural heritage law, the ECOM Center of Expertise director, Alexander Karpov, said by phone on Monday.
The decision, which Matviyenko put her final signature to on Oct. 6, was voted for unanimously and without discussion by City Hall on Sept. 22. “So much has been said about this that any comment is superfluous,” Matviyenko said before the voting.
Five days later, Arabtec Construction, a United Arab Emirates company, announced it had begun preliminary foundation tests following the terms of its first contract with Gazprom Neft.
The rally, which has been held annually for the past three years, is officially called March for the Preservation of St. Petersburg, but a march was only allowed by City Hall in 2007, when it drew an estimated 5,000. Subsequently, the authorities have only permitted stationary meetings.
Different sources gave varying estimates of the number of protesters present, ranging from 1,500 to 8,000. There was not enough room for all the protesters at the site outside the Yubileiny stadium, even when the fences previously set up by the police were moved and later taken away.
The police said 1,500 people were present, but the anti-tower pressure group Okhtinskaya Duga said its activists gathered 4,618 signatures during the meeting for a petition urging President Dmitry Medvedev to block the construction.
In accordance with the organizers’ plans, flags of parties and other organizations were few, with the red flags of St. Petersburg dominating. Some protesters wore blue ribbons symbolizing the city’s endangered skyline.
This year, the organizers — the Citizens’ Coalition for the Protection of St. Petersburg, consisting of preservationist groups, civic organizations and political parties ranging from liberal to communist — wanted to hold a march as a more dramatic protest format that would attract more protesters, but last week agreed to a stationary meeting after City Hall refused permission for a march.
“It was made clear to us that they would not authorize the march,” Yabloko’s local leader Maxim Reznik said last week.
The police, whose presence was not as large-scale or intimidating as at last year’s rally, did not obstruct the protesters or make any arrests.
No provocations were reported, although several separate groups were seen near the site but abstained from meddling with the rally.
Despite the rally’s relatively large turnout, it divided the political opposition last week. Eduard Limonov’s National Bolshevik Party (NBP) said that Yabloko’s Reznik, backed by the United Civil Front’s leader Olga Kurnosova, had yielded to pressure from City Hall to exclude NBP activists from the rally in exchange for the permit.
“We didn’t admit them into the coalition, that’s all,” was Reznik’s comment last week.
“These people have broken their promises many times. They’re interested in publicity more than anything else.”
Praising Saturday’s rally as “good and a success,” the NBP’s local leader Andrei Dmitriyev dismissed Reznik’s arguments as “excuses.”
“We know that City Hall made [the NBP’s non-participation] a condition,” he said by phone on Monday.
“In the long run, the situation looks very bad for the opposition, because City Hall managed to drive a wedge between the “systemic” and “non-systemic” opposition and caused us to quarrel.”
The NBP held its own, unauthorized protest outside Gazprom’s local offices on Friday. A group of activists unveiled an anti-tower banner, ignited flares and burned a paper effigy of the tower.
On Sunday, the Libertarian Party showed its support for the tower with an authorized meeting on Pionerskaya Ploshchad. The rally lasted 20 minutes and drew four supporters.
TITLE: Pro-Kremlin United Russia Party Sweeps Moscow Elections
AUTHOR: By Lynn Berry
PUBLISHER: The Associated Press
TEXT: MOSCOW — The pro-Kremlin party dominated an election for Moscow city council as well as other local elections across Russia, results released Monday showed.
With 99 percent of the Moscow vote counted, United Russia won 66 percent and the Communist Party 13 percent. They were the only two parties to pass the 7 percent threshold to win seats on the city council.
United Russia is a power base for Vladimir Putin, now the prime minister and party head, who has not ruled out a return to the presidency in 2012. President Dmitry Medvedev congratulated party leaders on their “convincing” victory, which he said showed “the authority the party has acquired from our people in recent years.”
Opposition candidates claim they were hindered from campaigning for Sunday’s elections and some were denied places on the ballot.
The liberal Yabloko party fell short of the threshold, with less than 5 percent, and will no longer be represented on the council, where it previously provided the only opposition to Moscow’s powerful mayor, Yuri Luzhkov.
The Communists claimed there were mass electoral violations during the voting, particularly in Moscow. The party had monitors in polling stations throughout the country and “they said openly that there had never before been such vandalism and barbarity,” Communist leader Gennady Zyuganov told journalists.
More than 7,000 local elections — for mayors, district leaders, regional and local legislatures — were held in 75 of Russia’s 83 regions, including in Chechnya and other republics in the North Caucasus where there has been an upsurge in violence.
Russian election commission head Vladimir Churov said the elections were held in accordance with the law. He acknowledged problems in the city of Derbent in the Dagestan region, where one third of the 36 polling places did not open, but he said they were resolved by the end of the day.
The newspaper Kommersant reported Monday that the incumbent Kremlin-backed mayor, Felix Kaziakhmedov, ordered police officers to block access to polling stations. Voters were also forced to give their passports to the officers, who then cast their ballots for Kaziakhmedov, the paper reported.
Kaziakhmedov won the election with 68 percent of the vote, Dagestani election official Benyamin Shartilov said. More than 55 percent of registered voters cast their ballots at 23 polling stations, he said.
His rival, former chief prosecutor Imam Yaraliyev, told Kommersant that thousands of people were prevented from voting.
In the southern Volgograd region, both candidates of African descent running for head of a rural district finished back in the pack. Joaquim Crima, a Guinea-Bissau native, who attracted wide attention as “Russia’s Obama,” was joined late in the race by Filipp Kondratyev, the son of a Ghanaian father and a Russian mother. Crima, who became something of a local celebrity, accused the local authorities of putting forward a second black candidate to steal some of his votes.
With votes still being counted, Crima was running fourth out of seven candidates, with Kondratyev in last place. The United Russia candidate was leading, with the incumbent district head in second.
TITLE: Interior Ministry Asks Interpol
To Put Browder on Wanted List
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The Interior Ministry said Friday that it has asked Interpol to put William Browder, once one of Russia’s largest foreign investors, on an international wanted list as part of an investigation into a $16.9 million tax evasion, Reuters reported.
Browder, who is chief executive of Hermitage Capital Management, was stopped at a Moscow airport in 2005 and deported on national security grounds.
Browder has accused senior Russian government officials, judges, security officials and private citizens of stealing large sums from his fund, and the case against him has spooked many foreign investors.
The Interior Ministry has put Browder on its wanted list, and the investigator in his case could present charges within a few days, said ministry spokeswoman Irina Dudukina.
The ministry may then request a court to issue an arrest warrant for Browder, she said, but conceded it was unlikely that he would be sent to Russia from Britain, where he now lives.
“The chances that he will be extradited to Russia are very small since Great Britain refuses to extradite even our own citizens,” she said.
A spokesman for Hermitage said the Interior Ministry had often failed to follow its public statements of intent and he would not comment on hypothetical steps. Browder was put on a search list in April 2008 and nothing further happened after a flurry of announcements at that time, he said.
TITLE: Clinton to Press Russia Over Iran, Arms Control
AUTHOR: By Matthew Lee
PUBLISHER: The Associated Press
TEXT: BELFAST, Northern Ireland — U.S. Secretary of State Hillary Rodham Clinton travels to Russia on Monday hoping to win Moscow’s backing for a strong stance on Iran’s nuclear program and looking for progress on a new arms control pact.
American officials say Iran will be at or near the top of Clinton’s agenda when she meets Russian President Dmitry Medvedev and Foreign Minister Sergey Lavrov on Tuesday. She plans to push for Russian support for new sanctions on Iran if it doesn’t comply with demands to prove its nuclear program is peaceful.
On Sunday, in London on the second leg of her current five-day overseas tour, Clinton warned Iran that the world “will not wait indefinitely” for proof it is not trying to develop atomic weapons.
She said a recent meeting in Geneva in which Iran and six world powers resumed nuclear talks was “a constructive beginning, but it must be followed by action” from the Iranians.
Iran insists it has the right to a full domestic nuclear enrichment program that it maintains is only for peaceful purposes, such as energy production.
Russia and China have long balked at imposing new sanctions on Iran if it fails to come clean about its suspected nuclear program, although Medvedev hinted the Russian position might be shifting after Tehran disclosed a previously secret uranium enrichment site near the holy city of Qom.
But U.S. officials believe it will be a hard sell to convince the Russians on fresh penalties since Iran agreed to allow U.N. inspectors to visit the Qom site and has agreed, in principle, to send most of its low-enriched uranium to Russia for reprocessing.
Iran agreed to allow inspections of the Qom site following the Geneva talks between Iran’s chief nuclear negotiator and diplomats from the U.S., Russia, China, Britain, France and Germany.
The Iranians were given time to decide whether to accept a package of incentives in exchange for Iran’s compliance with international demands to suspend its uranium enrichment or face new sanctions.
The Obama administration is anxious not to let up on the pressure and Clinton will be looking for Russian expressions of support for sanctions and other penalties should Iran continue to refuse by the end of the year, the officials said.
As Clinton left Washington on Friday for Switzerland, Britain, Ireland and Russia, Medvedev said his government does not want to see any more nations develop nuclear weapons, signaling that Moscow shares U.S. concerns about Iran. But he said nothing about potential sanctions.
In addition to Iran, Clinton will bring a wide array of other issues to Moscow, including arms control, missile defense and cooperation on convincing North Korea to abandon nuclear weapons, the officials said.
Negotiators from the two countries are racing to reach agreement on a successor to the 1991 Strategic Arms Reduction Treaty, or START I, and Clinton wants to underscore the urgency of the talks, they said.
She also will explore possible cooperation on missile defense following President Barack Obama’s decision not to proceed with Bush-administration plans to base such a system in eastern Europe. Russia had vehemently opposed those plans and has welcomed Obama’s new approach.
Though the Kremlin is pleased with the move, it has pushed for a link between missile defense and the START talks. Russian and U.S. diplomats were to hold consultations about missile defense on Monday prior to Clinton’s arrival.
Clinton will also join Lavrov in chairing a meeting of a commission set up by Obama and Medvedev to improve cooperation and coordination on a variety of matters, including Afghanistan.
Russian Prime Minister Vladimir Putin is traveling to Beijing on a trade mission and will not be in Moscow for the talks with Clinton.
TITLE: Medvedev Responds to Nobel Win
AUTHOR: By Natalya Krainova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — President Dmitry Medvedev said Saturday that he hoped U.S. President Barack Obama’s surprise 2009 Nobel Peace Prize would encourage the further improvement of U.S.-Russian relations.
The Norwegian Nobel Committee announced Friday that Obama, just nine months into his first term in office, had won the prize “for his extraordinary efforts to strengthen international diplomacy and cooperation between peoples” and for his “vision of and work for a world without nuclear weapons.”
“Only very rarely has a person to the same extent as Obama captured the world’s attention and given its people hope for a better future,” the committee said in a statement.
The decision, which honored Obama more for words than deeds, prompted both praise and criticism around the world, including in Russia. Obama has promised to “reset” relations that were badly strained with Russia under his predecessor, George W. Bush.
“I hope that this decision will serve as an additional incentive to our work to create a new climate in international politics and promote initiatives that are fundamentally important for global security,” Medvedev said in a brief statement on the Kremlin’s web site.
Medvedev also confirmed Russia’s readiness to work on strengthening ties with the United States.
Obama said he was “surprised” and “deeply humbled” by the award.
In the hours after the announcement, Konstantin Kosachev, chairman of the State Duma’s International Affairs Committee, said choosing Obama was “an acknowledgment of the rightness of his intentions rather than certain results,” Interfax reported.
His counterpart in the Federation Council, Senator Mikhail Margelov, called the award “a credit” that Obama would have to “work on until the end of his political career,” Interfax reported.
Margelov said the Bush administration’s policies were a source of “severe disappointment” in Europe, which explained why Obama’s rhetoric was so welcome now. Both he and Kosachev are members of United Russia.
Communist Party leader Gennady Zyuganov said he had seen no real results in Obama’s “verbally peaceful” policies. “It’s an advance of sorts and shows Europe’s desire to support the U.S. president in a time when his ratings at home are starting to fall,” Zyuganov said in comments posted on his party’s web site. “It’s also a sort of warning to the U.S. president not to start a war against Iran.”
Vladimir Zhirinovsky, leader of the Liberal Democratic Party and known for making harsh anti-U.S. statements, was relatively restrained in his remarks, saying it was a mistake to award someone for making “peaceful statements” but Obama was the “dove of peace compared to George Bush,” Interfax reported. But Zhirinovsky also criticized the Nobel Committee for awarding the prize to a president and not a public activist, saying it was the duty of any president to try to preserve stability and prevent war. “You can even see a certain amount of brown-nosing,” he said.
Last year’s Nobel Peace Prize was awarded to former Finnish President Martti Achtisaari, who secured Kosovo’s independence from Serbia, prompting anger from senior Russian officials who accused the Nobel Committee of making politicized decisions.
TITLE: Germany Beats Moscow in Qualifier
PUBLISHER: Agence France Presse
TEXT: MOSCOW — Miroslav Klose booked Germany their place at the 2010 World Cup in South Africa as his first-half goal sealed a 1-0 win for the 10-man Germans over Russia here on Saturday.
“We dealt well with the pressure here - it was not an easy place to play,” admitted Bayern Munich striker Klose after combining with Werder Bremen’s Mesut Oezil for the goal.
“We used our chance, it was not a top-class game and the match was difficult in places, but Mesut Oezil and I are developing a good understanding,” he added.
Klose’s 34th-minute strike leaves Germany four points clear at the top of Group Four and means they can not now be caught by their main pool rivals Russia regardless of either side’s remaining World Cup qualifier on Wednesday.
Russia play Azerbaijan in Baku while Germany host Finland in Hamburg in their last qualification game, but Guus Hiddink’s Russian side now face two-legged play-off matches if they are to reach South Africa.
“We cannot be happy with the result of course, but the team showed character in the second half,” said Hiddink.
“We were not good enough at finishing our chances or on the counter-attack.
“But we still have a chance to qualify for the finals in November’s play-off.”
Hamburg defender Jerome Boateng started his first international in the cauldron of Moscow’s Luzhniki Stadium, but a second booking midway through the second-half earned him a red card as Germany finished with ten men.
Russia made a strong start and missed the opportunity to take the lead after nine minutes when Alexander Kerzhakov got in behind the German defence, but the Dinamo Moscow forward volleyed wide.
Germany’s best chance came when Oezil made a strong run into the head of the defence and Lukas Podolski’s shot was blocked by defender Vasili Berezutsky in the 22 minute.
Germany goalkeeper Rene Adler was the visitors’ hero with at least four world-class saves and looks set to travel to Africa as the number one choice ahead of Hanover’s Robert Enke.
Adler pulled off a superb save when Russia captain Andrei Arshavin slid a perfect pass through the German defence to Zenit St Peterburg midfielder Vladimir Bystrov.
Adler made a save with his legs from point-blank range and it proved to be crucial as Germany took the lead moments later when Klose netted.
Despite Russia’s pressure, Germany got the breakthrough when Podolski’s pass found Oezil down the left side of the penalty area and Klose slipped his marker long enough to flick the ball past Igor Akinfeev.
TITLE: Reputed Mobster 'Yaponchik' Dies Aged 69
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Vyacheslav Ivankov, better known as Yaponchik and dubbed the godfather of the Russian mafia, died at a Moscow hospital Friday morning after being wounded by a sniper in July. He was 69.
Ivankov died from peritonitis, an inflammation of the abdomen that resulted from his wound, medical sources told RIA-Novosti and Interfax. The Investigative Committee confirmed that Ivankov had died.
Calls to the Oncological Center on Kashirskoye Shosse, where he was said to have died, went unanswered.
Doctors performed several operations on him in the last several months, but they were not enough to save him, Interfax reported.
Ivankov was gunned down in late July when he was leaving the Thai Elephant restaurant in northwestern Moscow. The gunman has not been found.
The motive for the attack was also unclear, although many pointed to a gangland conflict between factions reputedly headed by Tariel Oniani and Aslan Usoyan, also known as Grandpa Khasan. Ivankov was said to have supported Usoyan in the conflict, which might have led to the attack.
TITLE: 'Black Hawks' Get Hefty Prison Terms
AUTHOR: By Alexandra Odynova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — A Moscow court convicted six Caucasus youths of beating two white teens in a racially motivated attack Thursday and sentenced them to prison terms ranging from four to seven years.
Several dozen nationalists waiting outside the Dorogomilovsky District Court erupted in loud cheers when they heard the verdict.
Racial tensions have been simmering during the first case, labeled by prosecutors as reverse discrimination. One of the defendants was shot dead during the trial, and a white nationalist group has claimed responsibility.
The six defendants, dubbed the Black Hawks by the media and human rights groups, were found guilty of assaulting Pavel Novitsky, 16, and Fyodor Markov, 19, in a racially motivated attack in a metro train car on May 6, 2008. Witnesses said the attackers shouted “Allahu akbar!” (Allah is great!) and “Kill the Russians!” during the assault.
The defendants told the court earlier that they had participated in the attack, which one of them videotaped on his cell phone. But they denied that it was racially motivated and said it had occurred spontaneously.
Several of the defendants were under 18 when the attack took place, but were sentenced as adults. Judge Vera Ptitsyna sentenced Dilgam Guseinov to seven years in prison, Grant Arutyunov to six years, and Chingiz Arifullin, Shakhin Khudiyev and Rashid Sadykhov to four years. Rashad Mamedov, who is under 18, will serve five years in a juvenile correctional center.
The seventh defendant, Rasul Khalilov, an 18-year-old Azeri student, was killed in September as he left his apartment building for a court session. Most of the defendants were allowed to stay at home during the investigation and subsequent trial on condition that they didn’t leave Moscow. No one has been arrested in the slaying.
The group that claimed responsibility, the Battle Organization of Russian Nationalists, had said it did not expect a fair verdict in the trial and had acted to punish the “Caucasus gang” that “sold narcotics in Moscow’s universities and attacked Russian youth.”
Thursday’s session was attended by representatives of the radical Movement Against Illegal Immigration, or DPNI, and its former leader, Alexander Belov. Belov entered the courtroom dressed in all black and an orange- and black-striped tie. “They all will be imprisoned today,” he whispered as the judge entered the courtroom.
The judge read the verdict in monotone voice for two hours, and the defendants’ parents wept when she finished.
Only one defense lawyer attended, and she vowed to appeal. “The sentences are too harsh. A major part of what the judge read is not true,” said Tatyana Prilipko, lawyer for Sadykhov.
TITLE: Moskva-City Used to Gauge Crisis
AUTHOR: By Alex Anishyuk
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — It will be clear that the Russian economy has recovered when construction on Moskva-City, the city’s new business district, is completed, Mirax Group president Sergei Polonsky said.
“It’s hard to say when all construction at Moskva-City will be completed — there are a lot of projects under way,” he told The St. Petersburg Times in an interview. “But basically, the completion of Moskva-City will be the main sign that the economy has reached stability.”
The development of several projects within the Moskva-City business center was frozen last November as real estate prices plummeted. Since then, work has been halted on the 169,000-square-meter City Palace development, being built by Inteko and Snegiri, as well as the 500,000-square-meter Russia Tower, billed as Europe’s biggest tower and owned by Russian Land, exiled tycoon Shalva Chigirinsky’s developer.
Mirax has said it has a total 12 million square meters of development projects. It has put on hold those projects on which it hasn’t yet broken ground — or about 10 million square meters.
“I have a feeling that we’ve touched the bottom,” he said Tuesday. "We haven’t witnessed a slump in prices over the recent 5 months ... Demand is starting to grow. Specifically, we have seen more interest in apartments and offices in the past few months.”
Commercial real estate has slid over 50 percent over the past year, with the average square meter of office space costing $780 in September, according to Cushman & Wakefield Stiles & Riabokobylko.
Last fall, Polonsky was so confident that housing prices would rebound by at least 25 percent within 1 1/2 years, that he promised he would eat his tie if they didn’t. Since the start of the crisis, new housing has declined in price by 16.8 percent, according to the Russian Association of Builders.
As real estate prices plummeted last fall, Polonsky became dismayed by the amount of negative coverage of the segment in the press. So much so, that he wrote an open letter to journalists, urging them to create a “positive picture” when writing on the topic, and not to exaggerate or make negative forecasts.
Unlike many of the Moskva-City developments, Polonsky said, Mirax was able to retain control over its developments — Mirax Plaza and the Federation Tower. VTB and Sberbank, which financed most of the construction in Moskva-City, took control over many of the projects as developers became insolvent. VTB Group owns 58,600 square meters of the Federation Tower’s western building, where it plans to move its headquarters
Mirax passed one of its biggest hurdles last month when it reached a deal to restructure $250 million of its debt to Alfa Bank. “We’ve restructured our debt with Alfa Group. We had to contribute a certain number of square meters [in Moskva-City] to them,” Polonsky said. “The price was within the market, roughly $5,000 per square meter, and the deal is closed now. We don’t see any problems here.”
In addition to other loans to the developer, Alfa bought about $240 million of Mirax’s debt in July from Credit Suisse at a deep discount. Mirax’s total debt to Alfa amounted to about $330 million, but the bank wrote off about $80 million as part of the restructuring agreement.
In August, when debt talks with Alfa Group were at their most heated, Polonsky published a letter on his blog saying Mirax was on the verge of collapse and that there could be a change of ownership if no new owner was found.
In order to cover part of its debt to Alfa, Mirax Group issued 3.6 billion rubles in bonds in August. Many of the company’s debtors, however, refused to trade their previously issued debt for the new bonds.
Since it was able to come to an agreement with Alfa, Mirax paid off the newly issued bonds several days ago, Polonsky said. He said Mirax’s previous overall debt of $750 million was lower now, but would not disclose the exact figures. Estimates have put the group’s total level of debt at about $700 million.
“Last year our turnover was $1.5 billion, our debt/EBITDA ratio was just above one, which was the lowest on the Russian property development market,” he said.
“This is roughly half of our revenue, which is nothing for such a large company as ours.” he added. “However, in view of the reduction in volume experienced by all participating companies across the property development market since the end of 2008, we — along with all of our competitors — were obliged to enter debt-restructuring negotiations, despite having such a low debt-load indicator.”
Last month, MFK Bank, owned by billionaire Mikhail Prokhorov, said it would help Mirax restructure its debt by acting as an agent and adviser to the developer in upcoming debt talks.
Polonsky said MFK has been very helpful but rejected rumors that the bank may get a stake in Mirax in exchange.
TITLE: Patrushev Signals Change in Nuclear Policy
AUTHOR: By Natalya Krainova
PUBLISHER: The St. Petersburg Times
TEXT: Russia will change its policy on the use of nuclear and other weapons as part of a new military doctrine that could take effect by the year’s end, Security Council Secretary Nikolai Patrushev said Thursday.
The new doctrine, which is being drafted by military officials, would “formulate provisions” on nuclear and preventive strikes that would “differ slightly from the ones that were before,” Patrushev told reporters without elaborating, RIA-Novosti reported.
President Dmitry Medvedev will get the draft doctrine for approval by the end of the year, Patrushev said at another news conference Wednesday, RIA-Novosti reported Thursday.
The content of the doctrine will be made public, he said.
In December, when the government announced plans for a new military doctrine, the deputy head of the General Staff, Anatoly Nagovitsyn, told Interfax that the part of the document regulating the use of nuclear weapons would not be released.
The current military doctrine, which took effect in April 2000, says Russia can “use nuclear weapons in response to attacks against it or its allies with nuclear weapons or other types of weapons of mass destruction, as well in response to large-scale aggression involving conventional weapons in circumstances that threaten national security of the Russian Federation,” according to RIA-Novosti.
However, the doctrine forbids Russia from using nuclear weapons against members of the Nuclear Nonproliferation Treaty that have no nuclear weapons unless they attack Russia jointly with a state that has nuclear weapons, RIA-Novosti said. Only five of the treaty’s 189 members — the United States, Russia, Britain, China and France — are confirmed to have nuclear weapons.
Medvedev signed off on another updated key policy paper — Russia’s national security strategy — in May. The strategy replaced a 2000 document and was published by the Security Council.
TITLE: Pipeline Minesweep Frozen
PUBLISHER: Bloomberg
TEXT: HELSINKI — Nord Stream, the Gazprom-led gas pipeline venture, has been temporarily banned by a Finnish court from blowing up naval mines at the bottom of the Baltic Sea.
Nord Stream cannot clear the mines while an investigation takes place into a court complaint attempting to block the project, the Helsinki District Court said in a statement received by e-mail Monday.
The clearing of the World War II era mines is a part of the preparations for constructing a 1,200-kilometer natural-gas pipeline from Russia to Germany in the Baltic Sea. The Nord Stream pipeline will pass through Russian, Finnish, Swedish, Danish and German territorial waters and requires environmental permits from the five nations.
Nord Stream doesn’t need to clear any mines in the 50-meter strip where the work is temporarily banned, Sebastian Sass, the venture’s permitting manager said by telephone. The clearing of approximately 50 mines from the pipeline’s route will start as planned at the end of October or early November, he said.
Erkki Sederqvist, the claimant seeking to halt the clearing of mines, earlier attempted to establish a mining claim to block the pipeline. The mining claim was rejected by Finland’s Economy Ministry on Sept. 24. The court gave Sederqvist until Oct. 29 to file the necessary paperwork in this latest case.
TITLE: City, State Allocate Funds for New Housing
AUTHOR: By Anatoly Tyomkin and Nadezhda Zaitseva
PUBLISHER: Vedomosti
TEXT: City Hall plans to spend 9.5 billion rubles ($321 million) next year to build 260,000 square meters of residential real estate — three times less than this year.
The targeted investment program has allocated the funds to construct and purchase housing for the city’s needs, Eduard Batanov, chairman of the financial committee, said last week. The same amount was spent this year, he said.
A further 13.7 billion rubles ($462 million) have been set aside for the construction of affordable housing in St. Petersburg in 2009 by the federal budget and the fund for housing and utility reform. As a result, the total to be invested comes to 23.2 billion rubles ($783 million), said the construction committee’s press office. According to the committee’s plan, the city will rent about 800,000 square meters of housing this year to people on the waiting list for affordable housing. Next year, the city will not receive federal assistance, Batanov said.
In 2010, 260,000 square meters will be built using budget funds. This includes launching new projects as well as completing those begun earlier, according to the press office of Deputy Governor Roman Filimonov.
Some of the projects that will be completed next year are being built now; so the contracts have already been decided, said Sergei Kuznetsov, sales manager at the Center for Equity Construction. Baltros can count on budgetary funds in 2010, since in June, the company signed a contract worth 6.1 billion rubles ($206 million) with the city to build 140,000 square meters of housing on the territory of the Slavyanka site by December 2011.
For the St. Petersburg contract market, 9.5 billion rubles ($321 million) is insignificant, said Dmitry Kunis, president of Step contracting company. Before the crisis, this market was valued at approximately 75 billion rubles ($2.5 billion) per year (2.5 million square meters of housing at a rate of 30,000 rubles per square meter,) said Alexander Batushansky, general director of Reshenie consulting company.
Budget construction makes up about 15 percent of the general housing market, so this is a good addition for contracting companies, agreed Mikhail Bimon, general director of the St. Petersburg Real Estate consulting center.
Kunis estimates that contract jobs have become about 15 percent cheaper since the beginning of the crisis due to lower costs for building materials and labor.
DSK company (a part of LSR Group) is interested in government contracts, but everything depends on the conditions, said Yulia Sokolova, LSP’s communications director. In June, LSR DSK’s Blok unit won a contract to build 380,000 square meters of housing in Osinovaya Roshcha for the Ministry of Defense at a rate of about 29,000 rubles ($979) per square meter.
TITLE: Medvedev Sets 15-Year Plan
AUTHOR: By Maria Ermakova and Paul Abelsky
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russia will need as long as 15 years to free itself of its reliance on raw materials and become a modern economy, President Dmitry Medvedev said.
“That is a perfectly plausible time frame in which to create a new economy, an economy that will be competitive with other major world economies,” Medvedev said in a television interview Sunday evening. “Once a significant portion of our revenue is generated by something other than energy exports, let’s say at least 30 or 40 percent of it, then we will already be living in a different economy and a different country.”
Russia entered the credit crisis with its budget and current account in surplus and with the government assuming the world’s third-biggest currency reserves would shield it from the worst of the global recession. Slumping commodity prices shattered that assumption and helped plunge the economy into its worst decline for a decade, forcing the central bank to manage a 35 percent ruble decline in the six months through January.
The ruble on Monday gained against the euro and was little changed against the dollar, leaving it at a nine-month high versus the central bank’s target basket. Russian stocks extended the longest rally in 11 months, with the 30-stock Micex Index gaining 1.6 percent at 11:50 a.m. in Moscow to 1,328.6, the highest level in more than 13 months.
“I must admit that we sank below our lowest expectations,” Medvedev said. “The real damage to our economy was far greater than anything predicted by ourselves, the World Bank, and other expert organizations.”
Crude oil, Russia’s chief export, touched a three-week high, rising for a third day Monday.
Volatile commodity prices have continued to undermine stability in the world’s biggest energy exporter. Urals crude oil, Russia’s main export blend, fell $100 a barrel between its peak in July last year and the beginning of 2009.
Energy, including oil and natural gas, accounted for 69.4 percent of exports to the Baltic states and countries outside the former Soviet Union in the first eight months, according to the Federal Customs Service. About 30 percent of Russian gross domestic product comes from oil and gas, the government says.
“Everything was okay as long as prices for energy and raw materials were high,” Medvedev said. “Then those prices fell. Our economy was hit hard. Our citizens were hit hard.”
Russia should pursue energy efficiency, including creating new fuels, developing nuclear power and information infrastructure, and producing its own medicines, Medvedev said.
The president, who has called Russia’s raw material dependency “humiliating” and “primitive,” said the economy will contract a “very serious” 7.5 percent this year, compared with an official government forecast for an 8.5 percent decline.
The central bank has cut its key interest rates seven times since April, when it started to ease policy, bringing the benchmark refinancing rate to 10 percent in an effort to buoy demand after output contracted a record 10.9 percent in the second quarter.
The bank, which uses policy to steer the ruble, says it wants to move to an inflation target by 2011.
Russia aims to bring down inflation, which was “rampant in this country,” to a range between 5 percent and 7 percent or less, according to the president.
“Then we will be able to lend at normal rates,” he said. “Then our citizens will be able to obtain mortgages and consumer loans at reasonable rates.”
TITLE: Sollers to Open Car Plant In Vladivostok This Year
AUTHOR: By Maria Antonova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Sollers will open a plant in Vladivostok at the end of the year to assemble Korean cars, with investment in the project reaching 5 billion rubles ($169 million), Vadim Shvetsov, the auto holding’s director and main shareholder, said Friday.
The project, which received state backing in the summer, will be completed about a year after the federal government hiked import duties on used cars, angering drivers in the Far East who relied almost exclusively on imported Asian cars.
Separately, Industry and Trade Minister Viktor Khristenko said Friday that the government would extend the duties, and Vedomosti reported that an order had been approved by the relevant ministries and was ready to be signed by Prime Minister Vladimir Putin.
Shvetsov said the assembly project’s first stage would relocate Naberezhniye Chelny production lines, making 25,000 SsangYong SUVs per year starting Dec. 29. By the middle of next year, the plant will start making Isuzu trucks and eventually switch production to complete knocked down mode, which includes welding and painting, in 2012.
Localization of assembly can lower prices on the models, which are now imported from Korea’s SsangYong and Japan’s Isuzu, by 5 percent, he said.
Sollers bought space for the project from Dalzavod, a huge shipyard that built military boats and submarines in the Soviet period and declared bankruptcy in March after several years of economic despair.
Primorye Governor Sergei Darkin applauded the possibility of assembling cars there after signing an agreement with Sollers in March to develop a plant. The facility could employ up to 2,200 people.
Vneshekonombank, the state development bank, provided Sollers with a six-year, 5 billion ruble loan in July. VEB head Vladimir Dmitriyev said at the time that 1.8 billion rubles of the sum would go toward the Primorye assembly project.
“We are planning to make only foreign brands in Vladivostok. There are no plans to launch production of UAZ cars in the Far East,” Shvetsov said, Interfax reported.
Sollers, which was rebranded from Severstal-Avto last year, owns a majority stake in the Ulyanovsk Auto Plant, which makes UAZ off-road vehicles and minibuses. The holding also controls production sites in the Nizhny Novgorod region, and Naberezhniye Chelny and Elabuga, both in Tatarstan.
Space at the Naberezhniye Chelny plant currently being used to make SsangYong SUVs will be retooled to expand production of Fiat vehicles, a Sollers spokeswoman said.
Fiat chief executive Sergio Marchionne told Putin on Thursday that “one of our wishes is to make it possible to develop SUVs here in Russia,” according to statements posted on the government web site.
Earlier this year, Fiat took a stake in Chrysler, which has a range of SUVs.
TITLE: Renault, AvtoVAZ Join Forces
PUBLISHER: Bloomberg
TEXT: TOLYATTI, Samara Region — Renault and partner AvtoVAZ agreed to build cars together starting in 2012, part of the French automaker’s effort to satisfy Russian government demands for aid to forestall dilution of the company’s stake.
The venture would make 300,000 vehicles per year by 2015, AvtoVAZ President Igor Komarov told reporters Friday at the company’s main plant in Tolyatti. AvtoVAZ will provide 25 percent of the funding, with the remainder coming from Renault’s alliance with Nissan, Komarov said.
Prime Minister Vladimir Putin said Oct. 2 that Renault should help finance AvtoVAZ’s overhaul as a shareholder or face having its holding reduced to less than 25 percent. Renault is ready to offer technology to help AvtoVAZ modernize production, First Deputy Prime Minister Igor Shuvalov said Thursday. The platform, including chassis and major parts, will be based on Renault’s low-cost Logan car.
The joint car project “signals that our strategic partners have confirmed their intention to keep their stake in AvtoVAZ,” Komarov said.
Renault acquired its holding in AvtoVAZ, the country’s biggest carmaker, at the end of 2007 for $1 billion. The government also owns 25 percent through Russian Technologies, and another 25 percent is controlled by Troika Dialog. Frederique Le Greves, a spokeswoman at Renault, said Friday that the company had no immediate comment.
The state has already spent 25 billion rubles ($844 million) to support AvtoVAZ, which Komarov said might lose 35 billion rubles ($1.2 billion) this year. Vneshekonombank, the state-run development bank, may buy as much as 40 billion rubles of the carmaker’s bonds, VEB chief executive Vladimir Dmitriyev said Thursday.
Renault, Nissan and AvtoVAZ will each introduce vehicles based on the joint platform in 2012, and Renault may produce a model exclusively in Russia for the local market, Komarov said. Renault, France’s second-biggest carmaker, owns 44 percent of Nissan, Japan’s third-biggest auto manufacturer, and the two companies cooperate on some parts, production and marketing.
AvtoVAZ plans to expand production of Lada Kalina cars as its “first priority” next year, with annual production of the models reaching 300,000 by 2013, said Igor Dubrovin, vice president for production.
Development of a new midsize car has been put off until AvtoVAZ and its partners can evaluate how well the joint models are doing, he said.
Russian sales of new cars and light commercial vehicles fell 52 percent in September, compared with a year earlier, according to the Association of European Businesses. AvtoVAZ’s Lada remained the most popular brand, with sales of 28,109 last month. That’s a decline of 43 percent from September 2008.
TITLE: Putin Seeks to Increase Domestic Drug Production by 50 Percent
PUBLISHER: Bloomberg
TEXT: MOSCOW — Prime Minister Vladimir Putin on Friday called for boosting the share of medicine produced by local companies to at least 50 percent of total sales within three years, from 20 percent now.
“Overseas drugs are often sold in Russia at prices that are several times higher than in other countries,” Putin said at a meeting on the pharmaceuticals industry in Zelenograd.
He said the difference was impossible to explain, since transportation costs were no more than 0.2 percent of total costs. About 350 Russian companies produce pharmaceuticals, Putin said.
Pharmstandard, the country’s largest, accounted for 4.8 percent of retail drug sales in the first half, according to Pharmexpert. Germany’s Bayer had 3.8 percent of sales, followed by Italy’s Menarini Group and Paris-based Sanofi-Aventis, with 3.6 percent each.
The government spends $7.8 billion per year on drug purchases, Putin said.
TITLE: Budget Deficit May Be Less Than Predicted
AUTHOR: By Paul Abelsky
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russia’s budget deficit this year may be smaller than the government’s official forecast as higher oil and gas revenue replenishes state coffers, VTB Capital and Troika Dialog said.
The fiscal gap this year may be at, or smaller than, 7.5 percent of gross domestic product, Aleksandra Evtifyeva and Dmitri Fedotkin, economists in Moscow at VTB, said in a report Monday. The shortfall may be 2.5 trillion rubles ($84.5 billion) to 2.6 trillion rubles, Moscow-based economists Yevgeny Gavrilenkov and Anton Stroutchenevski at Troika, Russia’s oldest investment bank, said in a note.
“With higher revenues in September, the 2009 deficit might even beat our most optimistic forecast,” VTB said. “This year’s budget deficit is not a threat for the ruble or inflation.”
Russia’s deficit was 4.7 percent of gross domestic product in the year through September as the government spent 1.35 trillion rubles more than it collected, the Finance Ministry said last week. The monthly deficit in September shrank to 199.3 billion rubles from 258.9 billion rubles in August.
Oil and gas revenue, which accounted for more than 39 percent of total government income in the first nine months, rose in September by 17 percent compared with a month earlier.
Crude oil, Russia’s chief export, touched a three-week high, rising for a third day Monday. Oil for November delivery climbed as much as 81 cents, or 1.1 percent, to $72.58 a barrel in electronic trading in New York. Futures have gained 63 percent this year.
The shortfall may exceed 8 percent this year, Finance Minister Alexei Kudrin said on Sept. 29. This year’s gap is equivalent to 3.2 trillion rubles.
Spending reached 882.9 billion rubles in September compared with 881.3 billion rubles a month earlier, Finance Ministry data showed.
Russia will need to spend 4.3 trillion rubles in the remaining months of the year, including 1.5 trillion rubles in December, to meet the government’s 2009 target of 9.9 trillion rubles in expenditures, VTB said.
The economy of the world’s biggest energy supplier will contract a “very serious” 7.5 percent this year, compared with an official government forecast for an 8.5 percent decline, President Dmitry Medvedev said in a television interview Sunday night.
GDP will shrink 6.8 percent in the second half, the government estimates. The economy will return to growth of 1.6 percent next year and 3 percent in 2011.
“The increase in budget revenues was connected not only with oil price inflation, but also the normalizing situation in the economy,” Troika said. “The economic recovery will contribute to further budget revenue increases in the fourth quarter of 2009 and in 2010.”
Russia’s deficit in the last three months of the year may reach between 1.1 trillion rubles and 1.2 trillion rubles, according Troika.
“A more moderate deficit in the fourth quarter could be treated as a positive sign, as it would mean greater ruble exchange rate stability and that the inflation rate will continue to decelerate,” Troika economists wrote.
TITLE: Mystery Money Pushes Yota Expansion
AUTHOR: By Timofei Dzyadko
PUBLISHER: Vedomosti
TEXT: MOSCOW — WiMax operator Skartel, 25.1 percent of which belongs to Russian Technologies, is building a federal network of 180 cities under its Yota brand, but the source of financing for the project remains a mystery.
Skartel, which has been providing a high-speed wireless Internet service since this summer, expects to become a nationwide operator covering 180 cities in Russia within three years, spokeswoman Natalya Tsarevskaya-Dyakina told Vedomosti.
She declined to comment on the size of the investments. Konstantin Ankilov, an analyst at iKS-Consulting, estimated that the costs could reach $1.5 billion to $2 billion, depending on the density of the network.
Skartel, which was created in 2007 and bought several operators with rights to the frequencies between 2.5 and 2.7 gigahertz throughout Russia, spent $300 million last year building its network and developing user equipment. In 2009, it is spending $170 million for further development in Moscow, St. Petersburg and another six cities.
The investments came from the fund Telconet Capital, which owns 74.9 percent of Skartel, Tsarevskaya-Dyakina said. The company has not disclosed the fund’s owners.
When Telconet sold the blocking stake to Russian Technologies in November 2008, Skartel chief executive Denis Sverdlov disclosed plans to expand in 40 cities beyond Moscow and St. Petersburg, with investments of up to $1 billion from Telconet. Russian Technologies chief Sergei Chemezov said in an interview with Vedomosti in May that the state corporation joined the project “for an entirely small sum,” even though the initial investment had already been set at $300 million.
Sverdlov told Reuters on Wednesday that the company was already breaking even and that it could become profitable by the end of the year. Skartel, which launched its paid service in Moscow and St. Petersburg four months ago, already has more than 150,000 clients and is signing up about 2,000 new subscribers monthly, Tsarevskaya-Dyakina said.
Next week, commercial service will begin in Ufa and commercial testing will start in Sochi and Krasnodar. By the end of the year, the company will launch its networks in several other cities, she said.
Skartel also owns licenses in Belarus, Nicaragua and Peru.
Moscow’s only other mobile WiMax provider is Comstar, which invested $20 million in the project last year. Comstar does not disclose how many clients it has, since WiMax is treated as an additional service for fixed-line, broadband Internet subscribers, spokeswoman Yekaterina Nevskaya said.
This summer two companies began building national WiMax networks: Interproyekt, controlled by the fund Icon Private Equity, and Noviye Telekommunikatsii, controlled by former Senator Gleb Fetisov.
Icon promised to spend $300 million in 2009 ($200 million from shareholders and $100 million from China’s Huawei as a credit for goods) to build networks in 11 regions. Noviye Telekommunikatsii plans to invest just $25 million for 25 regions.
TITLE: Medvedev’s Corruption Drive Nets Small Fish
AUTHOR: By Vera Kholmogorova
PUBLISHER: Vedomosti
TEXT: MOSCOW — A yearlong campaign against corruption has allowed law enforcement officials to tally up thousands of cases, but major successes have been elusive.
President Dmitry Medvedev submitted a package of anti-corruption laws to the State Duma in October 2008.
In the first half of 2009, the Prosecutor General’s Office uncovered more than 11,000 violations of the law on state service, including on income declarations, Prosecutor General Yury Chaika said at a meeting Wednesday. Authorities at all levels of government are committing violations, with officials owning large stakes in companies and holding positions in commercial structures.
This year, 532 government officials have been convicted on corruption-related charges, as have 764 law enforcement officials. Some 6,000 cases are under investigation, he said.
Among those snared were some high-ranking individuals: the acting deputy prime minister of Karelia, the chairman of the Stavropol legislative assembly, and deputy governors in the Kurgan, Oryol and Volgograd regions, Interior Minister Rashid Nurgaliyev said at the meeting.
A federal deputy minister was illegally running a business as the sole founder of a limited liability company, Chaika said, although he closed shop after prosecutors got involved.
Duma Deputy Alexander Khinshtein and one other lawmaker identified the federal government’s violator as Oleg Savelyev, the deputy economic development minister overseeing the special economic zones. The Economic Development Ministry declined comment.
Prime Minister Vladimir Putin’s spokesman, Dmitry Peskov, declined to comment on complaints about specific officials, saying only that the fight against corruption was important.
A criminal investigator in the Interior Ministry’s central office said high-ranking officials have been detained with increasing frequency for violations of the law on state service but for the most part the violations had been minor.
The figures from the Prosecutor General’s Office and Interior Ministry really are insignificant violations of the law on state service, agreed Mikhail Grishankov, a United Russia deputy in the State Duma and deputy head of the Security Committee.
Viktor Ilyukhin, a Communist who serves as deputy head of the Duma’s Constitution and State Affairs Committee, said midlevel officials were responsible for the increases, which allowed the state to meet its national target for catching bribe takers. Even the deputy minister mentioned by Chaika kept his post, he said.
Gennady Gudkov, a Just Russia deputy who also sits on the Security Committee, said the changes were only noticeable at the regional level, with the discovery of corrupt mayors, deputy governors, regional officials and local lawmakers.
On the federal level, however, there’s a caste of officials who are untouchable and the corrupt among them will remain untouched, Gudkov said.
Grishankov agreed, saying that unfortunately a lot of evidence would not be investigated or uncovered for political reasons.
TITLE: In Brief
TEXT: TNK-BP Plan
MOSCOW (Bloomberg) — TNK-BP said it would spend $1.3 billion on improving the quality of fuels produced in refineries in Russia and Ukraine over the next five years, TNK-BP said Thursday.
The company also plans to invest $400 million in new oil field development in the Yamal region. “The funds will be spent on early production activities, exploration work and construction of base infrastructure at the Suzun, Tagul and Russkoye oil fields,” it said.
TNK-BP will start pumping oil from five fields, including Suzun, Tagul and Russkoye in Siberia, in 2013 and 2014.
Gusinsky to Return?
MOSCOW (SPT) — Former tycoon Vladimir Gusinsky would like to return to Russia and do business here if the government allowed him, he told an Israeli newspaper.
“I was born in that country. I speak the Russian language. I haven’t been exiled and I still see Russia as my country,” Gusinsky said in an interview with The Marker, Interfax reported.
“I knew [Prime Minister Vladimir] Putin before he was president, and respected him very much. He was a proper person and did much good,” Gusinsky said. “I don’t think anything has changed.”
Gusinsky was jailed in 2001 on suspicion of defrauding the state out of $10 million. He was later allowed to leave the country after agreeing to pass control over NTV television to Gazprom.
Fiat SUVs in Russia
MOSCOW (SPT) — Italian carmaker Fiat would like to launch production of a sport utility vehicle in Russia, its chief executive Sergio Marchionne said Thursday, Reuters reported.
“Our dream is to make a jeep in Russia,” Marchionne said.
“SUVs are in very big demand in Russia given that we have yet to build a big number of roads,” said Putin, referring to the often-disastrous state of Russia’s roads, which is seen as one of its key economic problems.
Marchionne said Fiat would further develop its partnership with midsize Russian carmaker Sollers, with whom it already plans to produce small and mid-sized Fiat cars.
AvtoVAZ Loss Increases
MOSCOW (Bloomberg) — AvtoVAZ said its first-half loss widened as Russia’s worst economic slump in a decade caused sales to plummet and raised “doubt” the country’s largest carmaker could pay its debts without state financial aid.
The net loss widened to 19.5 billion rubles ($659 million) from 2.15 billion rubles a year earlier, the Tolyatti-based company said in a statement Monday on its web site. Sales declined 46 percent to 53.1 billion rubles.
RWE Alternative
FRANKFURT — German utility RWE said Wednesday that it could send gas to Eastern Europe if Russian supplies are disrupted in the winter.
“We have sufficient reserves to help,” said Stefan Judisch, who heads RWE’s Supply and Trading unit. “We have enough supply diversity and enough in storage to not be threatened by any short-term supply disruption from Russia.”
Pipe Tariff
MOSCOW (Bloomberg) — The Industry and Trade Ministry proposed a 29.4 percent import tax on bearing pipes made in China following an anti-dumping investigation. Duties on bearing pipes, used in machinery, would be imposed for five years, it said.
The probe began in December after TMK and ChTPZ Group complained about Chinese imports.
Telenor Deal
MOSCOW (SPT) — Vneshekonombank, which hold a blocking stake in mobile operator VimpelCom as loan collateral, will agree to its merger with Ukrainian operator Kyivstar, Vladimir Dmitriyev, the bank’s head, said Thursday. Reuters reported.
Altimo owes $1.5 billion VEB pledging a blocking stake in VimpelCom as collateral and VEB has agreed to extend the loan for another 12 months on Thursday.
VEB Bonds
MOSCOW (Bloomberg) — VEB may sell more foreign currency bonds this year, RIA-Novosti said Vladimir Dmitriyev, the bank’s head, RIA-Novosti reported.
Dmitriyev didn’t say what amount of bonds the bank may sell or when, RIA-Novosti said. VEB sold $2 billion of bonds in June out of a possible $10 billion, the state-run news service said.
TITLE: Old House Razed on Eve of City Vote
AUTHOR: By Irina Filatova
PUBLISHER: Special to The St. Petersburg Times
TEXT: MOSCOW — Builders knocked down a 19th-century building on a protected piece of land in central Moscow last Thursday to make way for an elite apartment complex, the latest casualty in a construction drive that preservationists say is destroying the city’s cultural heritage.
What made Thursday’s demolition of the two-story Deacon’s House near Ulitsa Bolshaya Ordynka remarkable is that Mayor Yury Luzhkov’s City Hall had promised to protect the site and the razing occurred on the eve of City Duma elections.
Workers with Torgproduktservis, which controls the land where Deacon’s House stood, dismantled the building on Kadashevsky Tupik to clear the area for the construction of the elite Five Capitals complex, which will contain 36,000 square meters of apartments.
“The destruction of the building was a big surprise for us. The landowners had promised that they would not touch Deacon’s House, and we did not expect that they would break the promise,” said Lidia Shestakova, who works in a museum located in the nearby Church of the Resurrection in Kadashi.
Deacon’s House was part of an architectural ensemble that included the church, which was built in 1695 and itself may be at risk from the new construction.
A Moscow merchant gave Deacon’s House to the Church of the Resurrection in Kadashi shortly after it was built in the late 1800s, and the entire area is a protected historical zone, said Natalya Samover, a preservationist with Arkhnadzor, a group seeking to protect old buildings in central Moscow.
“This building [Deacon’s House] and the nearby Chamber of Olenevy are of great historical value,” Samover said. “They are part of the authentic surroundings of the church that were built at the end of the 19th century.”
Still, City Hall included Deacon’s House on a list of buildings to be knocked down when it authorized the Five Capitals complex in 2002, Samover said.
Construction workers began dismantling Deacon’s House in 2003, but the work was suspended amid opposition, and the building stood half-demolished until Thursday.
“We are sure that they left the house in this state intentionally. The ruins could prove that the building had no value and there was nothing to save here,” Samover said.
Church representatives also put up a fight for Deacon’s House.
“We have been in talks with Torgproduktservis for a long time. They even offered us money and asked us not to protest against the construction of the apartment complex,” Shestakova said.
Torgproduktservis officials were unavailable for comment Thursday. The director of Five Capitals’ main contractor, Felix Batkin, refused to discuss the project, saying he does not talk to reporters.
The construction of Five Capitals poses a danger for the foundation of the church, which is built on piles. “Any underground construction near the church is forbidden, but as far as we know the new apartment complex is supposed to have a large underground parking for 190 cars,” Shestakova said.
Church representatives complained to the Prosecutor General’s Office but were told to turn to City Hall’s cultural heritage committee, she said. The officials also wrote to Luzhkov but received no reply, she said.
Moscow’s chief architect, Alexander Kuzmin, previously promised to keep builders off the territory.
Kuzmin and the cultural heritage committee were not immediately available for comment.
TITLE: Foreign Media Fret Over Big Rent Hike
AUTHOR: By Nikolaus von Twickel
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Many of Moscow’s foreign media are worrying about rising costs after the Foreign Ministry’s property department notified them that rental rates would go up sharply next year.
The notices, sent by e-mail last week, declared that the hike would be by 50 percent to 100 percent, foreign media representatives said Monday.
“We were told to pay 70 percent more, and there was absolutely no reason given. It was just shocking,” the bureau chief of a major European news organization told The St. Petersburg Times, requesting anonymity because he was not authorized to speak publicly about the matter.
He said the notice had not been totally unexpected since other tenants had been hit by such hikes before. Yet he said now was “the worst possible time — in the middle of a crisis where we see that rent is going down everywhere.”
The property department, more commonly known by its Russian acronym UPDK, rents out apartments in more than 20 addresses in Moscow and manages about 1 million square meters of office and apartment space, according to its web site, Updk.ru.
Many of its tenants are foreign diplomats and foreign media, which under Soviet restrictions had little choice but to rent UPDK premises.
After the Soviet breakup, UPDK remained popular because its rents often were below market rates, and some organizations said they paid about $240 per square meter per year.
“We are getting a bargain here and hope to continue that,” said another Western bureau chief, speaking on condition of anonymity so as to not jeopardize his bargaining position.
Most tenants said Monday that they suspected that the property department was under pressure to increase income after state revenues had been dented by the crisis.
While foreign media representatives interviewed for this article said they did not suspect that any political motives were behind the rent hikes, political pressure has been reported before. A German correspondent said he was gently asked to write more favorably about Russia during rent negotiations in 2006 and 2007. After this, his rent was effectively increased by 100 percent over the course of more than 12 months, the correspondent said Monday, requesting anonymity because he feared being targeted by another rent hike.
A woman who answered the phone at the property department said nobody was available for comment immediately. She added that the department was planning a hearing with foreign media representatives, organized in the Foreign Correspondents’ Association.
The association’s president, Adib Al-Sayed, said he hoped a solution would be found, citing many years of “constructive cooperation” with the property department. “We have negotiated with UPDK successfully in the past and hope to reach an agreement that pleases both sides this time, especially with regard to the fact that many media organizations had to shorten budgets because of the financial crisis,” Al-Sayed said.
TITLE: Moscow Will Use Only Russian Materials
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The Moscow city government will now use exclusively domestic materials on its construction sites, RIA-Novosti reported Monday.
The decision was made to “support domestic suppliers, lower construction costs, use the potential of the capital’s industrial facilities and create more jobs for Muscovites,” in addition to other reasons, said a source in the city administration who asked that his name not be used.
Moscow’s committee for architecture and urban development will have to correct project documentation for construction in the city and change imported materials to those made in Russia, with the exception of materials that are not produced domestically, the source said.
Starting next year, another Moscow committee will inspect construction projects to make sure that they are using Russian materials.
TITLE: Expats Spurn Pricey Rentals
AUTHOR: By Alex Anishyuk
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Elite apartment rentals have become much less popular among foreigners this year, while demand for luxury apartments by Russian clients has tripled, according to a report released Monday.
“The share of foreign clients decreased 18 percent, however, as before they constitute the majority of total demand,” IntermarkSavills said in a report.
The number of Russian tenants in elite housing jumped 250 percent in the first nine months of the year and accounted for 30 percent of the total rentals in the sector, compared with 9 percent in the same period last year. The number of tenants from the Commonwealth of Independent States did not change.
The decrease in the number of foreign tenants is a direct consequence of the recession that hit the Russian economy, said Oleg Repchenko, head of real estate web site IRN.ru.
“Many foreign companies shrank their activity and cut their expenses on top managers,” he said. “Besides, there was a big outflow of expat top managers in 2009, so this is why their share in elite rentals fell so drastically.”
The most expensive properties (starting at $10,000 per month) are still in high demand, the report said. But the number of clients who can afford such properties fell 50 percent and now constitutes approximately 9 percent of the total number of applicants.
The three most popular districts for elite rentals remained the same as last year: Centrally located Arbat-Kropotkinskaya, Tverskaya-Kremlin and Patriarch’s Ponds are still heavily in demand, the report said, adding that Zamoskvorechye, Lubyanka-Kitai-Gorod and Leningradsky Prospekt are also popular regions.
Interest in properties in the Leningradsky Prospekt area decreased about 50 percent, the report said.
Demand for apartments in the elite rental market rose throughout 2009 and increased 7 percent compared with the same period in 2008.
“This demonstrates that the elite rental market remains stable and firm even in the crisis period,” the report said. “Along with this trend ... the volume of demand grew due to the number of tenants who wanted to improve their housing conditions and to rent a better apartment.”
TITLE: Let President Medvedev Share Nobel Peace Prize With Obama
AUTHOR: By Vladimir Frolov
TEXT: It is a pity that President Dmitry Medvedev will not share the 2009 Nobel Peace Prize with U.S. President Barack Obama. In my view, he deserves it no less than Obama, whose principal accomplishments are still in the future.
Together with Obama and French President Nicolas Sarkozy, Medvedev is responsible for changing the tone and direction of international politics to craft a better world.
Not unlike Obama, Medvedev inherited a foreign policy plate that was driving his country into isolationism and debilitating self-pity.
In fits and starts in less than two years, he has managed to transform Russia’s international role from that of an estranged spoiler to that of a constructive problem-solver with a stake in a functional world order. Medvedev has gradually steered Russia away from the unilateralist initiatives taken by his predecessor.
He shares Obama’s penchant for multilateral diplomacy and has worked to make international institutions — from the United Nations to the nascent Group of 20 — stronger and more efficient. His more pragmatic position on Iran is likely to make global efforts to stop Tehran’s secretive nuclear program more effective. Medvedev commanded a successful war that was forced upon him. Like Obama in Afghanistan, he did not go wobbly in Georgia and proved his resolve to defend Russia’s interests and citizens. Medvedev’s toughest foreign policy decision has been to unilaterally recognize Abkhazia and South Ossetia.
Despite broad international criticism, Medvedev’s perseverance on this issue casts him as a world leader with a strong set of values. He does not crave popularity, just respect for his country.
Obama won his Nobel for a number of flowery foreign policy speeches and a vision for a nuclear-free world that is not likely to take shape in his lifetime. From this perspective, Medvedev’s call in 2008 for a new, all-encompassing security architecture in Europe is a much more realistic and no less peacemaking undertaking worthy of a Nobel. Medvedev needs to work on this much more to make it a reality.
Medvedev’s greatest challenge in foreign policy is to restore Russia’s leadership in the region encompassing the former Soviet republics. It is a Herculean task with all cards stacked against him, one that is not likely to win him a Nobel.
But this is what he has to do to secure an honorable legacy for himself.
Vladimir Frolov is president of LEFF Group, a government-relations and PR company.
TITLE: Awarding the Third Non-Bush Nobel Prize
AUTHOR: The Wall Street Journal
TEXT: The Nobel Peace Prize awarded to U.S. President Barack Obama on Friday was greeted with astonishment as much as any other emotion, even among many of his admirers. Our own reaction is bemusement at the Norwegian decision to offer what amounts to the world’s first futures prize in diplomacy, with the Nobel Committee anticipating the heroic concessions that it believes Obama will make to secure treaties that will produce a new era of global serenity.
Maybe he really is The One.
Obama seemed more than a little amazed himself, after only nine months on the job and having been inaugurated only 12 days before Nobel nominations were due in February. The prize isn’t “a recognition of my own accomplishment,” the president said Friday, adding that “I do not feel that I deserve to be in the company of so many of the transformative figures who’ve been honored by this prize.” Humility grace note accepted.
Yet something more than the power of charisma induced the Norwegians to honor Obama, so this is also a moment we can learn from. The committee’s citation provides a crib sheet. The Norwegians hailed “Obama’s vision of and work for a world without nuclear weapons,” noting “a new climate” in which “multilateral diplomacy has regained a central position.”
The statement extols the U.S. support for the United Nations and notes that “dialogue and negotiations are preferred as instruments for resolving even the most difficult international conflicts.” Praise comes as well for Obama’s commitment to fight climate change by capping greenhouse gas emissions.
George W. Bush may have retired from public life, but the Europeans want the Yanks to know that they never want to see his likes again. Counting Jimmy Carter in 2002 and Al Gore in 2007, this is the third Nobel Non-Bush Peace Prize.
On one level, all of this represents the parochial European foreign policy agenda. But somehow we doubt Obama would have received the Nobel merely for believing in climate change. The Norwegians rightly detect something larger in Obama’s vision. As Thorbjorn Jagland, the Nobel Committee chairman, told CNN, “He has done a lot already” and this award will “enhance the ideals Barack Obama is promoting.”
What ideals are those? Well, the Nobel citation declares that Obama’s “diplomacy is founded in the concept that those who are to lead the world must do so on the basis of values and attitudes that are shared by the majority of the world’s population.” Now, the world is a big place, much of it run by despots and crooks, each of whom gets the same vote in the UN as the United States. The Europeans are applauding that at long last there is a U.S. president willing to let himself and his country mingle as equals with this amorphous global “majority.”
The Norwegians are on to something. In a mere nine months, the president has promulgated a vision for the U.S. role in the world that breaks with both Republican and Democratic predecessors. Madeleine Albright, Bill Clinton’s secretary of state, called America the “indispensable nation” a decade ago. Ronald Reagan called it a “city on the Hill,” an example to the world.
But Obama sees the United States differently, as weaker than it was and the rest of the planet as stronger, and so he calls for a humbler United States — at best a first among equals — working primarily through the UN. The world’s challenges, he emphasized, “can’t be met by any one leader or any one nation.” What this suggests to us — and to Norway — is the end of what has been called “American exceptionalism.” This is the view that U.S. values have universal application and should be promoted without apology, and defended with military force when necessary.
Put in this context, we wonder if most Americans will count this peace-of-the-future prize as a compliment. Appearing at the Rose Garden on Friday, Obama wrapped the Nobel in the U.S. flag “as an affirmation of American leadership” and concluded, “I believe America will continue to lead.”
We all have at least three more years to learn if Obama will fulfill the audacity of hope that the Nobel Committee has put on him to bow to the values of the world’s “majority.”
This comment appeared as an editorial in The Wall Street Journal.
TITLE: Managing Russia After the Crisis
AUTHOR: By Odd Per Brekk
TEXT: The international crisis dealt a severe blow to the Russian economy. The lower oil prices and reversal of international capital flows to emerging markets hit the country hard because the shocks struck just as the economy was on a steep upturn and Russia’s dependence on oil made it particularly vulnerable.
As a result, economic activity fell precipitously. Faced with this challenging turn of events, the government mounted an economic policy response that was swift and unprecedented in its scale and contents. The banking pressures were addressed through large-scale liquidity injections and a rescue of problem banks, while fiscal policy became expansionary. At first, the Central Bank allowed gradual exchange-rate depreciation into early 2009, drawing on its foreign reserves to moderate the pace. This allowed banks and corporations to bolster their foreign exchange positions and brought the ruble in line with the new fundamentals implied by lower oil prices.
Looking forward, the global economy suggests a slow recovery as it will be facing deleveraging, corporate restructuring and slow job growth. Similarly, Russia cannot expect a rapid return of high oil prices or large capital inflows. We should therefore foresee a fairly modest recovery in Russia combined with a weaker balance of payments than in recent years.
This sobering outlook has important implications for the country’s economic strategy. Clearly, the government’s response over the last year has helped preserve stability, which is a prerequisite for the resumption of growth. In fact, since mid-2009, there have been signs of economic stabilization. But large challenges remain. The central goal will be to turn the tentative signs of a rebound into lasting economic growth, while preserving the stabilization gains. In this regard, Russia faces delicate trade-offs, as well as room for improving the boost to economic growth, both in the short and longer term.
Consider first the short-term policy priorities. Ensuring a healthy banking system will be critical for the resumption of credit supply. This underscores the need for a proactive and comprehensive strategy so that banks have the capacity to lend once the economy recovers. Key elements of this strategy should include mandatory stress tests of major banks to obtain better assessments of their viability. These tests should, above all, reveal whether banks have adequate capital or have the ability to raise more capital if needed, either from private sources or from the envisaged bank recapitalization by public funds.
Turning to budget policy, the cautious fiscal policy of the past has left Russia with a low public debt level and sizable buffers, creating “fiscal space” for relaxation. But the size of the relaxation should not be so large as to undermine the quality of public spending. Moreover, the use of the Reserve Fund for budgetary financing is effectively the same as printing money for this purpose, and this could easily threaten the stability of the ruble. The good news is that with a better composition of the fiscal stimulus, Russia could achieve the same boost to domestic demand with lower fiscal deficits. To this end, the fiscal stimulus should enhance social safety nets and infrastructure projects. Also, the government should keep in mind longer-term fiscal policy objectives. Emphasizing self-reversing spending categories now would allow more flexibility in budget policies later. The more convincing the medium-term fiscal plans are, the stronger the fiscal boost will be today.
On the monetary policy side, the Central Bank is facing a balancing act. Inflation is coming down and may undershoot the target this year. But at the same time, the ruble remains vulnerable to swings in oil prices, banks are still liquid, and the fiscal expansion may renew pressures. On balance, however, the gradual relaxation of monetary policy envisaged by the Central Bank would seem appropriate. But there is clearly a need for careful implementation to avoid instability while keeping an eye on capital flows, the exchange rate and depositor confidence.
Looking beyond the crisis, there is broad consensus on the need for Russia to achieve economic diversification. This would help Russia realize its economic potential and also make the country less vulnerable to the vagaries of financial and commodity markets. Diversifying would not necessarily mean an increase in hi-tech industries but could equally well involve such sectors as light industry and tourism. To achieve real diversification, however, Russia will need significant investment.
The reform agenda is well-known. The most important priorities are a rollback of state control, easing of entry for new firms, reforms of the public sector, strengthening anti-corruption efforts and gaining accession to the World Trade Organization. While the commentary on Russia’s medium-term policies tend to focus on these structural reforms, we should not lose sight of the macroeconomic foundations for balanced economic growth.
Both medium-term government budget policy and monetary policy will play critical roles in how Russia recovers. As for medium-term budget policies, the central issue is how the country over time would best benefit from its natural resource wealth. One option would be to conservatively aim for a public spending level consistent with the income that the government will derive from petroleum over the long haul. Taking the 2009 budget as the starting point, this would require considerable restraint in government spending once the economy recovers, while at the same time underlining moving forward with deep and comprehensive public sector reforms. Other options toward fiscal viability entail large fiscal adjustments. Whichever option is pursued, conservative fiscal policies will preserve Russia’s competitiveness and limit “Dutch disease” by avoiding excessive reliance on natural resources.
The second important condition for achieving sustained growth is to anchor inflation at a low and stable level. This can be achieved through higher domestic saving and investment. To this end, formal inflation targeting must become a goal of the government. The Central Bank has been making progress on the technical preparations for formal inflation targeting. Encouraging recent examples include increased exchange-rate flexibility and more public statements explaining interest rate decisions.
Russia must now concentrate its efforts on how to foster sustained growth. For the near term, the government’s strategy on the banking and budget sides should aim to facilitate an early recovery and protect stability. Russia has vast economic potential, and unleashing it will require a deliberate and broad economic strategy that encompasses sound macroeconomic policies and structural reforms.
Odd Per Brekk is senior resident representative at the International Monetary Fund in Moscow.
TITLE: A Political Shakeup in the Offing
AUTHOR: By Konstantin Sonin
TEXT: In December, I predicted that there would be huge shakeup in the Kremlin and White House at some point in 2009. It looks like I will be wrong on this one.
The reason I was so bold in my forecast was that over the last 100 years of Russian history, there has never been a drastic drop in manufacturing during peacetime like the one we experienced during the 2008-09 crisis without it resulting in major changes in the country’s leadership. I envisioned two possible scenarios. In the first, Prime Minister Vladimir Putin would be sacked in a bloodless internal Kremlin coup, a la former Soviet leader Nikita Khrushchev’s forced retirement. Many people — both inside and outside the Kremlin — believe that despite Putin’s numerous attributes and achievements, his prolonged hold on power is only making a bad crisis worse. In the second scenario, Putin could have tried to avert the first scenario by “retiring” President Dmitry Medvedev.
So far, neither scenario has played out, and the existing power structure has remained surprisingly stable. But that stability has come at a high price. It is impossible to make even the slightest change to the top positions in government. Even the smallest change in the political status quo could upset the precarious balance.
But it appears that a change is brewing, and we are seeing the first signs of it in the strong attacks against Mayor Yury Luzhkov. In the past, the mayor did an excellent job of coping with Kremlin pressure and allegations that Luzhkov helped his wife become the richest woman in Russia through various corrupt, inside business deals. The formula for his popularity in the capital had been simple: Despite the high corruption and monopolization of the economy, revenues flowed to Muscovites in one form or another. This helped residents tolerate the disproportionately high prices that resulted from runaway corruption and high monopolization.
But this tolerance is running very thin now. The income that used to trickle down to Muscovites has sharply decreased, and this has left residents upset with the Moscow leadership. It is clear that Luzhkov is concerned that the candidates from his United Russia will do poorly in the Oct. 11 City Duma elections, and this may be one explanation why so many opposition candidates were disqualified from running. But in cases of manipulating elections, a falsified “victory” often ends up as a big loss for the chief manipulator.
If Luzhkov were to be ultimately ousted, who could be appointed in his place? Perhaps Deputy Prime Minister Sergei Sobyanin, former governor of the Tyumen region and former head of the presidential administration. He is being seriously considered to one day replace Luzhkov. That would place Sobyanin in the third — and possibly second — most important political post in Russia. It would also put him in a good position to run for president in the future.
Sobyanin is not the main issue though. The bigger problem is changing the status quo. Putting a strong politician in Luzhkov’s spot could very well tip the balance, giving him too much political strength vis-a-vis the president and prime minister. But appointing a weak politician for the spot would tip the scales the other way, creating a power vacuum that could lead to instability.
Despite these inherent political dangers, I remain firm in my prediction: There will be some big political shakeups in the next few months.
Konstantin Sonin, a professor at the Kellogg School of Management at Northwestern University and the New Economic School/CEFIR, is a columnist for Vedomosti.
TITLE: U.S. Shooting Victim Fears Crime Linked to Russia
PUBLISHER: The Associated Press
TEXT: ADELPHI, Maryland — That night, he was returning home from the International Spy Museum, of all places. He had been meeting with, of all people, an old friend who once was a top officer in the KGB.
It was raining when Paul Joyal pulled into his driveway in this suburb 16 kilometers from the White House. As he stepped out of his car, nothing seemed amiss. He did not see two men lurking in the darkness.
But suddenly, he was under attack, cold-cocked on the side of his head. The 55-year-old Joyal fought back. He elbowed one of the attackers in the gut and bowled into him. He and the assailant tumbled to the ground.
“Shoot him!” barked the man that he struggled with — and Joyal instinctively folded his arms across his chest and rolled to the side as the other attacker fired.
The bullet ripped through his intestines. Then the shooter moved in for a second shot at close range — and pulled the trigger.
But the gun jammed.
By now, Joyal’s dogs were barking because of the commotion and gunshot, and his family and neighbors were stirring.
Without a word more, the attackers ran, possibly through the sprawling cemetery behind Joyal’s backyard.
Normally, his wife, Elizabeth, would have been attending a dance class Thursday, but she happened to be home that night, March 1, 2007, and frantically dialed police.
“My husband’s just been shot,” she said.
“Who was he shot by?” the dispatcher asked after confirming the address.
“I don’t know.”
And that’s still true today. Some 2 1/2 years after the shooting, the motive still remains uncertain.
Police assumed that Joyal was the victim of a random street crime. He assumed the same, at first.
But he soon confronted another possibility. For years, he had warned that the Russian government was taking extreme steps, including assassinations, to silence its critics.
Perhaps he too had become a target.
??
Joyal studied the Soviet Union in college.
“I’m a child of the Cold War. It was the big issue growing up for me. It was the focus of many of our lives back then,” Joyal said.
Those who taught him said that to understand the Soviets, you have to understand the Soviet intelligence apparatus. You have to understand the KGB.
After graduation, Joyal went to work on Capitol Hill, eventually serving as director of security for the Senate Intelligence Committee when its chairman was Barry Goldwater, the fiercely anti-communist former Republican presidential nominee.
When the Soviet Union collapsed in 1991, the zeal for reform within America’s former enemy was genuine, Joyal said, and he again placed himself in the middle of the action. He traveled frequently to Moscow and to the newly independent Georgia.
“In Moscow it was a very exciting time,” Joyal said. “There was a true opportunity to participate in the reform movement.”
It was during this time that he met former KGB counterintelligence chief Oleg Kalugin, forming a friendship and a business partnership. Joyal helped Kalugin land a teaching position at Catholic University in Washington.
But in time the reformist tide ebbed in Russia, and men like Kalugin fell out of favor. Then-President Vladimir Putin called Kalugin a “traitor” for criticizing Russia. In 2002, Kalugin was convicted in absentia on treason charges; the United States refused to extradite him.
Joyal spoke out forcefully against the changes. He was a frequent commentator on the BBC decrying what he considered Russian bullying tactics against Georgia. Joyal became a paid lobbyist in the United States for Georgia, where last year tensions with Russia boiled over into a brief military conflict.
He and Kalugin remained close. It was Kalugin whom Joyal had met at the spy museum before the shooting.
??
Doctors kept Joyal in an induced coma for nearly a month after he was shot. Because the bullet tore through his intestine and colon, the wounds resulted in numerous infections requiring follow-up surgeries at Washington Hospital Center.
Local police could not interview him for weeks.
As the investigation proceeded, some saw signs that the shooting was not typical of a random street crime. Joyal’s wallet was not taken. His car still sat in the driveway.
“If it were a carjacking, the keys were laying right there for the taking,” said a skeptical Karl Milligan, a retired detective who was once chief of the intelligence unit in the county police.
The case remains open, but a police spokesman, Mike Rodriguez, says they have no reason to think that the shooting was anything but a random street crime. He declined to discuss why that is the working theory.
Joyal would like to believe that theory — it would comfort him and his family — but no longer does.
“It’s worthy of a thorough investigation,” Joyal said, one that would likely require a strong commitment from the FBI.
But FBI involvement does not appear to be extensive. Rich Wolf, a spokesman for the FBI in Baltimore, said the bureau provided some assistance to county police but is not actively involved in the case. He declined to discuss in any detail why the bureau did not take a more active role.
The FBI’s lack of interest in the case mystifies Oliver “Buck” Revell, a former associate deputy director of the FBI who now owns a security consulting company.
“To think that the Russians might be willing to assassinate a U.S. citizen … in his front yard is rather alarming,” Revell said. “If that’s not a priority for the FBI, then it damn well ought to be.”
Yevgeny Khorishko, a spokesman for the Russian Embassy in Washington, said the suggestion that Joyal’s shooting was carried out on behalf of the Russian government is “absolute nonsense.”
Even Joyal’s old friend, Kalugin, expresses doubt about Russian involvement. It would be the first time that Russia committed such a crime on U.S. territory, he said, comparable only to the 1940 assassination in Mexico of Leon Trotsky, who was stabbed in the head with an ice pick by a Soviet agent.
??
“A message has been communicated to anyone who wants to speak out against the Kremlin: If you do, no matter who you are, where you are, we will find you, and we will silence you — in the most horrible way possible.”
Those were Joyal’s words — not recently, but on the NBC television program “Dateline,” one month before his shooting.
He went on the February 2007 show to discuss the murder in London of Kremlin critic Alexander Litvinenko, a former KGB agent who was poisoned with radioactive polonium. British authorities later named a chief suspect: Andrei Lugovoi, a flashy millionaire businessman and former KGB officer. Russia refused to extradite him, and Lugovoi denies involvement.
Also interviewed for the “Dateline” program was Times of London reporter Daniel McGrory, who also criticized the Russians. McGrory was found dead in his home just a few days before the segment aired. The 54-year-old had appeared to be healthy but died of a heart attack.
Some have questioned why the Russians would risk a serious diplomatic incident just because critics have offered some televised criticism.
Joyal’s wife and others had worried about the risks of him speaking up, especially in a national broadcast, but before the shooting he dismissed their concern. Yes, outspoken Kremlin critics around the world might be placing their lives at risk, but as an American living in the United States he figured he was safe.
And now?
“Being an American is no longer a guarantee” of protection, he said.
Besides the “Dateline” appearance and his decades of high-level involvement on Russian security issues and friendships with people like Kalugin, other factors must be considered, Joyal said. Among them: what he described as the tangled, opaque nature of the relationships between the Russian government, organized crime, and elements of the business community that have enriched themselves through ties to the existing power structure.
“Only in today’s Russia can you be an intelligence officer, a businessman and a member of organized crime all at the same time,” Joyal said.
In February, he noted, Polish authorities arrested a suspect in the shooting death of 27-year-old Umar Israilov, a former bodyguard to Putin ally Ramzan Kadyrov. The bodyguard, who last year had accused Kadyrov, the Chechen president, of torture and human rights abuses, was gunned down while returning home from a grocery store in Vienna under circumstances that have some resemblance to the Joyal shooting.
Glen Howard, president of the Jamestown Foundation, a national-security think tank with expertise on Russian issues, said the Russians seem to be acting with impunity on the international stage. He noted that the administration of President Barack Obama has moved to push the “reset button” in its relations with Russia.
Howard said it is certainly plausible that Joyal was targeted, given the breadth and depth of Russia’s campaign against its critics.
“It’s almost like we’re bending over backward to court Russia” at a time when it is indifferent to Western demands to respect human rights and political dissent, Howard said.
??
Joyal has maintained his professional involvement in Russian security issues — earlier this year he moderated a discussion of the Russia-Georgia conflict at a security conference. But he has scaled back his public profile in the last two years in part out of respect for his family’s concerns for his safety.
He continues to prod for a more extensive investigation, and met with county police and the FBI in July to discuss the case. Because of the time that has passed, some possible leads were never explored and cannot be retrieved, Joyal said. Cell phone tower records, for instance, that might have been able to home in on an unusual call that could help identify the shooters, are only kept for two years.
Meanwhile, he stays vigilant.
“I now take precautions as I did when traveling or living in the former Soviet Union or Iraq,” Joyal said. “Never thought I would have to live like that here.”
TITLE: Americans Take Nobel Economics Prize
AUTHOR: By Karl Ritter and Matt Moore
PUBLISHER: The Associated Press
TEXT: STOCKHOLM — Elinor Ostrom became the first woman to win a Nobel Prize in economics, honored along with fellow American Oliver Williamson on Monday for analyzing economic governance — the rules by which people exercise authority in companies and economic systems.
Ostrom was also the fifth woman to win a Nobel award this year — a record for the prestigious honors.
It was also an exceptionally strong year for the United States, with 11 American citizens — some of them with dual nationality — among the 13 Nobel winners, including President Barack Obama, who won the Nobel Peace Prize on Friday.
Ostrom, 76, and Williamson, 77, shared the 10 million kronor ($1.4 million) economics prize for work that “advanced economic governance research from the fringe to the forefront of scientific attention,” the Royal Swedish Academy of Sciences said.
Ostrom, a political scientist at Indiana University, showed how common resources — forests, fisheries, oil fields or grazing lands — can be managed successfully by the people who use them, rather than by governments or private companies.
Williamson, an economist at the University of California, Berkeley, focused on how firms and markets differ in the ways that they resolve conflicts. He found that companies are typically better able to resolve conflicts than markets when competition is limited, the citation said.
The academy did not specifically cite the global financial crisis, but many of the problems at the heart of the current upheaval — bonuses, executive compensation, risky and poorly understood securities — involve a perceived lack of regulatory oversight by government officials or by corporate boards. The Nobel awards on Monday were clearly a nod to the role of rules, institutions and regulations in making markets work.
“There has been a huge discussion about how the big banks, the big investment banks have acted badly, with bosses who have misused their power, misused their shareholders’ confidence, and that is in line with (Williamson’s) theories,” prize committee member Per Krusell said.
Ostrom, also the founding director of Arizona State University’s Center for the Study of Institutional Diversity, devoted her career to studying the interaction of people and natural resources. One notable publication she wrote in 1990 examined both successful and unsuccessful ways of governing natural resources — forests, fisheries, oil fields, grazing lands and irrigation systems — that are used by individuals.
Ostrom’s work challenged conventional wisdom, showing that common resources can be successfully managed without privatization or government regulation.
To explain her ideas, the academy cited an example about dams in Nepal that Ostrom used in her 1990 book “Governing the Commons: The Evolution of Institutions for Collective Action.”
Local people had for many years successfully managed irrigation systems to allocate water between users, but then the government decided to build modern dams made of concrete and steel with the help of foreign donors.
“Despite flawless engineering, many of these projects have ended in failure,” the academy said.
That was because the new, modern dams cut out communications and ties between the users. The new dams required little maintenance whereas the earthen local dams forced users to work together to keep them functional.
Ostrom told the academy by telephone that she was surprised by their choice.
“There are many, many people who have struggled mightily and to be chosen for this prize is a great honor,” Ostrom said. “I’m still a little bit in shock.”
Williamson said he was “gratified” by the honor and hoped that in the future “organizations will play a more prominent role in the study of economic activity.”
“The organization of the government itself is something which we ought to examine in a more self-conscious way — the Federal Reserve and the Treasury and the Securities Exchange Commission,” Williamson said. “The mission that each of them has is mainly economic, but should be informed by good organizational practices.”
Williamson previously was a consultant to the U.S. Federal Trade commission from 1978-1980 and a special economic assistant to the Assistant Attorney General for Antitrust at the U.S. Department of Justice in 1966-1967.
TITLE: Insurers Struggle Against Health Plans
AUTHOR: By Ricardo Alonso-Zaldivar
PUBLISHER: The Associated Press
TEXT: WASHINGTON — The health insurance industry is warning that a comprehensive Senate bill would increase the cost of a typical policy by hundreds, or even thousands, of dollars a year after lawmakers eased up on the requirement that all Americans get coverage.
The stinging attack came on the eve of a pivotal Senate vote and was a clear message to President Barack Obama and congressional Democratic leaders who have been making headway on overhauling the nation’s health care system. The industry fears that a weakening of the penalties for failing to get insurance would let Americans postpone getting coverage until they get sick.
The industry has worked for months behind the scenes to help shape health care reform. Unlike the 1990s, when it contributed to the failure of President Bill Clinton’s health overhaul, the insurance industry has been attracted by the promise of millions of more people getting coverage. Translation: millions of new consumers buying policies.
The industry wants lawmakers to expand coverage, not lessen the penalties, which would reduce the number of people. The Senate Finance Committee is slated to vote on its 10-year, $829 billion bill on Tuesday, but more important to the industry are the steps beyond the panel’s decision.
Senate Majority Leader Harry Reid, D-Nev., will be merging the bill with a companion measure from the Senate Health, Education, Labor and Pensions Committee, with the goal of a sweeping, affordable bill. In the House, Speaker Nancy Pelosi, D-Calif., and Democratic leaders have been pulling together legislation from three committees.
Angered by the insurance industry’s late-in-coming cost estimate, a spokesman for Senate Finance Committee Chairman Max Baucus, D-Mont, questioned the credibility of the numbers.
“It’s a health insurance company hatchet job, plain and simple,” said the spokesman, Scott Mulhauser.
Late Sunday, the industry trade group America’s Health Insurance Plans sent its member companies a new accounting firm study that projects the legislation would add $1,700 a year to the cost of family coverage in 2013, when most of the major provisions in the bill would be in effect.
Premiums for a single person would go up by $600 more than would be the case without the legislation, the PricewaterhouseCoopers analysis concluded in the study commissioned by the insurance group.
“Several major provisions in the current legislative proposal will cause health care costs to increase far faster and higher than they would under the current system,” Karen Ignagni, the top industry lobbyist in Washington, wrote in a memo to insurance company CEOs.
The study projected that in 2019, family premiums could be $4,000 higher and individual premiums could be $1,500 higher.
TITLE: Pakistan Says 41 Killed in Market Bombing
AUTHOR: By Riaz Khan
PUBLISHER: The Associated Press
TEXT: PESHAWAR, Pakistan — A suicide car bombing targeting Pakistani troops killed 41 people Monday, the fourth grisly militant attack in just over a week, as the Taliban pledged to mobilize fighters across the country for more strikes.
The Taliban also claimed responsibility for the 22-hour weekend attack on the nation’s heavily fortified army headquarters, saying a cell from Pakistan’s most populous province carried out the raid.
The claim that a Punjabi faction of the Pakistani Taliban was behind that strike is a sign the insurgents have forged links with militants outside their main strongholds in Pashtun areas close to the Afghan border, increasing their potency.
The army, however, maintained it was launched from South Waziristan — where the military is preparing for what will likely be a long and bloody offensive against the major base of the Taliban along the frontier.
In advance of that offensive, the militants have launched a wave of attacks across the country.
In the latest strike, a suicide bomber detonated a car packed with explosives near an army vehicle in a market in the northwest Shangla district, provincial Information Minister Mian Iftikhar Hussain said. The attack killed 41, including six security officers, and wounded 45 other people, he said. There was no immediate claim of responsibility.
In a statement on the state-run news agency, President Asif Ali Zardari said the attacks would not undermine the government’s resolve to eliminate the insurgent groups.
“Such attacks cannot deter us from the offensive against the militants,” Hussain said. “We will continue our fight till the death of the last terrorist.”
Shangla lies east of Swat, which has been the focus of an intense military operation against the Taliban. The army says it has largely cleared the valley of the insurgents, but the bombing demonstrated their continuing ability to mount deadly attacks there. Many Taliban are believed to have melted into the rural areas or gone to neighboring districts.
The recent string of bloody attacks began last week when a suicide bomber blew himself up inside a heavily guarded UN aid agency in the heart of the capital, Islamabad, killing five staffers. On Friday, a suspected militant detonated an explosives-laden car in the middle of a busy market in the northwestern city of Peshawar, killing 53 people.
Those attacks were followed by the raid on army headquarters in the city of Rawalpindi on Saturday that killed nine militants and 14 others. Military spokesman Major General Athar Abbas said the militants were hoping to seize senior army officials and trade them for their jailed comrades.
“Their main focus was the release of their leaders,” he said.
The attack was launched from South Waziristan and the assailants were in contact with their handlers there during the assault, Abbas said.
The army also intercepted audio of deputy Taliban leader Waliur Rehman getting an update on the attack and telling a subordinate to pray for the assailants, Abbas said.
Abbas said the attacks were aimed at making the government reconsider its decision to go after the Taliban in their heartland on the Afghan border.
TITLE: Netanyahu:
No War Crimes Trials For Israelis
PUBLISHER: The Associated Press
TEXT: JERUSALEM — Israeli Prime Minister Benjamin Netanyahu says he will never allow any of the country’s leaders or soldiers to be put on trial for war crimes.
Netanyahu made the comments during a fiery speech at the opening of the winter session of the Israeli parliament.
Netanyahu opened the speech with an angry tirade against a recent UN report that accused Israel of committing war crimes during its war against militants in the Gaza Strip last year.
He says Israel has the right to defend itself and that Israel “will not agree” to a situation where wartime leaders or troops who participated in the operation stand trial.
Netanyahu also accused Muslim extremists of being behind recent violence in Jerusalem and said Monday they spread baseless lies to “undermine the peaceful life” in the holy city.