SOURCE: The St. Petersburg Times
DATE: Issue #1529 (91), Tuesday, November 24, 2009
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TITLE: Putin Thanks Party, Sets Priorities
For 2010
AUTHOR: By Irina Filatova
PUBLISHER: The St. Petersburg Times
TEXT: Prime Minister Vladimir Putin addressed United Russia’s 11th party congress Saturday in St. Petersburg, where he congratulated his government for averting economic disaster and rehashed a set of policy ideas for the coming year.
Putin offered mild praise to the governing party, which had just met with a harsh rebuke from President Dmitry Medvedev, and promoted government programs in his first major domestic policy speech since the president’s state-of-the-nation address.
“Russia’s economy is showing the first signs of recovery. However, it’s too early to speak about the end of the crisis. There are serious hurdles in a number of industries,” Putin said in comments posted on the government web site.
The prime minister outlined a range of policy areas where he said the government would focus next year, including: modernizing strategically important companies, developing the country’s high-tech sector, stimulating housing construction, boosting domestic demand and dealing with unemployment, especially in single-industry towns.
Putin pointed to the struggling automotive industry as one where the government has a particularly urgent role to play, singling out AvtoVAZ, the country’s biggest carmaker, for support. (Story, Page 6.)
“Car production has contracted by 60 percent. That’s why anti-crisis measures in this industry should be not only preserved but also increased,” he said.
Putin pledged to launch a controversial “cash-for-clunkers” program, in which the government would give 50,000 rubles ($1,274) to car owners who trade in cars more 10 years old for newer, domestically made vehicles.
He also proposed a pilot program to develop single-industry towns, which would start in AvtoVAZ’s hometown, Tolyatti.
“We’re talking about new infrastructure, roads, modern production facilities, techno-parks and ‘business incubators,’” he said.
Modernizing Russia’s economy and industrial base has been a goal pushed hard by Medvedev, who emphasized the topic again in his speech to United Russia.
He said United Russia would preserve its dominance in Russia’s political system only if it could help modernize the country’s economy.
“United Russia will be able to preserve its dominating position in the political system under the only condition, if it is able not only to stabilize the situation in the country but also modernize the economy — that’s the main task today,” he said.
Putin referred back to Medvedev’s state-of-the-nation address, saying Medvedev’s calls for modernization “reflect the mood of the entire Russian society.”
“Today, a very difficult goal stands before us, but one that can absolutely be realized and fulfilled,” he said.
As evidence of the success of his government’s policies, Putin pointed to a less-than-expected decline in gross domestic product and lowered inflation.
“The decline in GDP by the end of the year will not be as big as we thought. Our calculation was at 10 percent or maybe even more,” he said, adding that Russia’s economy would return to the precrisis level not earlier than in two to three years.
The government is now projecting an 8 percent to 8.5 percent drop for the year.
Putin also said the inflation rate “would fall substantially” from 13.3 percent in 2008 to 9.6 percent in 2009, which was one of the lowest indicators since 1992.
Nevertheless, 9 percent, not to mention 10 percent, is “intolerably high” and the government will continue implementing its anti-inflation program, he said.
Putin also called for the extension of several government programs, some because they had been successful and others because they hadn’t worked out yet.
The government’s 300 billion ruble ($10.3 billion) program for loan guarantees has not been effective enough and must be corrected, he said. He vowed that the state guarantees program would be implemented in full by the end of 2009 as planned initially. “We’ll continue this program in 2010. Enterprises will be able to raise more than 500 billion rubles in loans,” he said.
Critics have knocked the program of state guarantees, saying the bureaucratic hoops that banks and other enterprises had to jump through in order to qualify made them all but unattainable.
Putin also pushed a new mortgage program announced last week. The government plans to use 250 billion rubles from the Pension Fund to buy mortgage bonds, with the aim of pushing down interest rates on mortgages.
“In order for mortgages to become cheaper, rates should fall to 10 to 11 percent,” he said. “We have two sources for that purpose — the National Welfare Fund and pension savings being managed by Vneshekonombank.”
Putin said Thursday that the average mortgage rate of 14.5 was “too much.”
The prime minister also repeated pledges to provide support for the labor market, as the situation there was “very strained.”
The government will give 36 billion rubles in 2010 in order to support employment, Putin said, adding that it was less than in 2009, but was nonetheless “a significant sum.”
The country’s jobless rate was 7.7 percent in October, up from the September figure of 7.6 percent, the State Statistic Service said Friday.
In January, the government presented a 43 billion ruble employment stimulus package to fund region-specific job retraining programs, relocation assistance, small business development and job creation.
TITLE: Medvedev Reprimands United Russia
AUTHOR: By Nikolaus von Twickel
PUBLISHER: The St. Petersburg Times
TEXT: United Russia got a new program, membership of the country’s most prominent female politician and broad praise from its leaders at the party’s 11th congress this weekend. And it got a dressing down from the president.
The party, which dominates Russian politics and counts Prime Minister Vladimir Putin as its chairman, replaced the long-standing cornerstone of its policy, known as Putin’s Plan, with the less personalized Russian Conservatism.
But the platform of socially oriented conservatism — United Russia’s first ideologically coherent program since its creation a decade ago — appears to run counter to Dmitry Medvedev’s stated desire to modernize the country’s economy and political system.
Those contradictions appeared on full display Saturday, when Medvedev subjected United Russia to his strongest criticism yet, indirectly accusing the party of election manipulation and broadly painting its members as bureaucrats intent on keeping power.
The speech was Medvedev’s second major one this month. In his Nov. 12 state-of-the-nation address, he set out a broad path for the country’s modernization, primarily in the economy. In St. Petersburg, Medvedev followed up on his calls for political modernization, saying United Russia needs to step up and reform itself and put a halt to “administrative excesses” within.
“United Russia can only achieve change if it changes itself — I believe that is obvious,” he told the more than 600 delegates and 2,000 guests.
In his clearest reference yet to the massive allegations of fraud in last month’s regional elections, Medvedev said the party must learn to win fairly.
“The party … must learn to win, in fact we all need to learn how to win in an open contest,” he said.
The opposition cried foul after the Oct. 11 elections brought massive gains for United Russia, and in a step unprecedented this decade, the Duma’s three opposition parties boycotted the lower house of parliament for several days.
But the protests soon collapsed and party leaders expressed satisfaction after Medvedev promised election law reforms in his state of the nation, which critics called window dressing.
Medvedev suggested that the misconduct came from regions where party officials were confusing democratic procedures with administrative ones.
“Sadly, some regional divisions of United Russia … show signs of backwardness and concentrate their political activity on intrigues and games within the apparatus,” he said. He demanded that those responsible be fired, saying “such people need to go, as do some other political customs.”
He also suggested that party officials needed a lesson in democracy, arguing that “democracy does not exist for the party — be it the governing or opposition. It exists for the people.”
Renewing his warning that United Russia’s position as the ruling party was not a “lifetime privilege,” Medvedev directed party officials to not lose touch with voters.
United Russia controls a large enough majority in the Duma to change the Constitution, and it also controls most of the country’s regional assemblies and the Federation Council, the upper house of parliament.
Putin, who is not a party member, despite being party chairman, used his speech to focus on the party’s role in formulating economic policy. He did, however, warn members against seeing the party as an “elite, prestige club” for furthering careers rather than the public’s interests.
TITLE: United Russia Congress Marred by Gap in Platform
AUTHOR: By Irina Titova
PUBLISHER: The St. Petersburg Times
TEXT: The colorful picture of United Russia’s congress on Saturday was slightly darkened when two participants of the forum fell three meters into a gap between the platforms in the congress hall. The incident happened a few minutes before the beginning of the forum’s opening and the Russian president’s speech.
The unlucky forum participants were Deputy City Governor Alla Manilova and Dmitry Ananyev, a member of the Russian Federation Council and co-owner of Promsvyazbank.
After the incident, Manilova was hospitalized, but rumors of a spine injury were not confirmed, Rosbalt reported. The deputy governor, who controls the work of the city’s culture, education, science and mass media committees, continued her activities from hospital, the news agency reported.
Onlookers were left shocked by the fall of Manilova, who left the area supported by other people.
Ananyev, who fell down the gap a few minutes before Manilova, was luckier, and was not injured. He even attempted to climb back onto the platform, but failed because it was too high.
The falls appeared to be caused by shortcomings in the event’s organization. The upper part of the platforms had no railings and generally appeared shaky and unstable.
United Russia ushers repeatedly warned photographers and reporters standing on the upper part of the platform that they should move slowly and carefully, and by no means jump.
After the incidents involving Manilova and Ananyev, organizers finally fixed railings to the platform and several security men began to watch the area.
Andrei Vorobyov, head of United Russia’s executive committee, promised to establish the causes of the incidents and to find those responsible. He said the party would have questions for the company that had been hired to prepare the hall for the congress. Vorobyov declined to name the company, Kommersant daily reported.
TITLE: Matviyenko Finally Joins Country’s Ruling Party
AUTHOR: By Irina Titova
PUBLISHER: The St. Petersburg Times
TEXT: On the eve of Saturday’s United Russia congress, St. Petersburg Governor Valentina Matviyenko joined the party and became a member of its Upper Council.
Matviyenko, who for a long time abstained from entering the party, said she had always felt drawn to it, and that she was “behaving honestly” in joining United Russia now, according to a statement on the city government’s web site.
“Six years ago, St. Petersburg residents voted for me at the elections as an unaffiliated governor. For that reason I did not consider it possible to join United Russia and by so doing show a preference for one political structure,” Matviyenko said in her statement.
“However, I never concealed my liking for the party. Today, when many things in St. Petersburg and in Russia have changed, the political system has been improved,” she said.
“Today, a civilized multi-party system has in effect been established in the country, including the opposition parties A Just Russia, the Communist Party and the Liberal Democratic Party,” Matviyenko said. The governor said that in such circumstances, she was behaving honestly by formalizing her relationship with United Russia, the party with which as governor she has long had a constructive working relationship.
Boris Vishnevsky, a member of the St. Petersburg branch of the Yabloko party, said that “there was nothing surprising” in the fact that the governor had finally joined the party.
“It has always been clear that the governor supported this party, and the party supported her. So, as an honorable person she was bound to become a member,” Vishnevsky said.
Some media reports have suggested that Matviyenko’s decision to enter the party was related to the govenor’s ambition to win a third term.
TITLE: Standup Comic, Radio Host Trakhtenberg Dies Aged 41
AUTHOR: By Irina Titova
PUBLISHER: The St. Petersburg Times
TEXT: Popular showman and radio host Roman Trakhtenberg, who died in Moscow on Friday while on air during his show on Radio Mayak, will be buried in his home city of St. Petersburg on Tuesday.
Trakhtenberg, 41, died from a heart attack during his three-hour radio program titled ‘Trakhty-Barakhty’ on the popular Radio Mayak station.
An ambulance was called when the radio host told his colleagues that he felt unwell. The ambulance crew tried to save his life but failed.
Another radio host, Sergei Livadny, wrote in his blog on Monday that a possible factor behind the tragedy was that Trakhtenberg had lost a lot of weight recently in a short space of time.
Trakhtenberg had said on air that he had lost 40 kilograms during the last three months and that he felt very good about it, Livadny wrote on his blog, Novye Izvestiya daily reported.
Trakhtenberg, a radio host and showman, was known for his crude sense of humor and highly individual style.
His act was founded on an encyclopedic knowledge of jokes. In one of his radio programs, callers would begin telling him a joke and he would have to finish it. It was only on rare occasions that Trakhtenberg didn’t know the punch line.
Trakhtenberg was born in St. Petersburg and studied at the Vaganova Ballet School for two years. He later sang with the Leningrad Radio and Television Children’s Choir.
On graduating from school, Trakhtenberg enrolled at the philology department of Leningrad State University, dropping out in 1987, shortly before being drafted into the army. After that he studied at the city’s Krupskaya Culture Institute.
In 1997 Trakhtenberg began to work as artistic director, host and standup comedian at St. Petersburg’s notorious Khali-Gali club, famed for its risque cabaret show. He later went on to work in radio and television, primarily based in Moscow.
From 2000 to 2004, he hosted his own program on the popular Russian music radio station Europa Plus, and from 2003 to 2006 he also worked as an anchorman on Russian music TV channel MuzTV.
From 2003 to 2008, Trakhtenberg owned the Trakhtenberg cafe, where he staged his own shows.
From 2008, he worked as a radio host on the Trakhty-Barakhty program at Radio Mayak together with co-host Yelena Batinova.
Trakhtenberg leaves behind a wife and two sons.
The entertainer will be buried at the January the Ninth Cemetery in St. Petersburg. The memorial service will be held in the city’s Radio House at 27 Italyanskaya Ulitsa from 11 a.m. to 1 p.m.
TITLE: Gorbachev Mulls Return
AUTHOR: By Mansur Mirovalev
PUBLISHER: The Associated Press
TEXT: MOSCOW — Former Soviet leader Mikhail Gorbachev criticized Kremlin policies Friday and toyed with the idea of attempting a political comeback.
Gorbachev said that corruption and overdependence on oil exports have aggravated the impact of the global economic crisis on Russia.
Gorbachev said his concerns about Russia are prompting him to consider a more active role in politics.
TITLE: NBP Members Arrested Near Party Conference
AUTHOR: By Sergey Chernov
PUBLISHER: Staff Writer
TEXT: Sixteen opposition activists and one reporter were detained as part of a police crackdown during the United Russia party congress in St. Petersburg on Saturday. The detainees were taken to three different police precincts and were released hours later after the ruling party’s meeting had ended.
Eight activists, most of whom belonged to Eduard Limonov’s banned National-Bolshevik Party (NBP), were detained as they walked toward the Lenexpo Exhibition Complex, where the congress was being held, to deliver a petition to President Dmitry Medvedev.
A reaction to Medvedev’s pro-modernization statements, the letter called on the president to dismiss Prime Minister Vladimir Putin and the Russian government and fire all the members of United Russia from state positions, describing the Putin-led governing party as a “party of bureaucracy and corruption” that is “putting the brakes” on modernization.
The other demands included freeing political prisoners and adhering to the constitutional rights to freedom of assembly and free elections.
After walking from Vasileostrovskaya metro station to Lenexpo, at 11.25 a.m. the group was stopped on Bolshoi Prospekt by OMON special-task police, who after five minutes of discussion and I.D. checking put eight activists and Zaks.ru reporter Maria Meshcheryakova into two police vehicles and drove them to Police Precinct 60, where they were charged with jay-walking.
Those detained also included Andrei Pivovarov of Mikhail Kasyanov’s Russian People’s Democratic Union, an organization that also put its signature to the letter, alongside the Oborona democratic movement.
NBP local leader Andrei Dmitriyev, who led the group, was charged with disorderly conduct, he said by phone on Monday. However, a journalist from The St. Petersburg Times who witnessed the detention observed that the petitioners were walking on the sidewalk and were stopped before the crossing, and that Dmitriyev did not use “profane language” or “harass passers-by,” despite the charges.
About an hour later, four more NBP activists were detained on the same spot, taken to Precinct 18 and charged with jay-walking.
Later still, at 3 p.m., another four NBP activists, who managed to get through multiple police posts and I.D. checks close to Lenexpro, unfurled a banner reading “May You All Be Damned!,” lit flares and briefly blocked the adjacent Nalichnaya Ulitsa.
They were detained, taken to Police Precinct 30 and charged with violating regulations on public events and failing to follow a police officer’s orders.
The police denied any politically-motivated detentions. “I have no information about the detention of opposition activists,” a police spokesman said on Monday. “There were some standard detentions, as usual.”
TITLE: Navy May Lose Avrora 'Party' Ship
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: The Defense Ministry is deciding the fate of the legendary Avrora cruiser, which is currently officially part of the Russian Navy and may be turned into a branch of the Russian Naval Museum.
Earlier this month, Admiral Vladimir Vysotsky, the chief commander of the Russian Navy, issued a special decree banning any entertainment and other events not directly connected to fleet activities on board the vessels of the Russian Navy.
The decree followed an investigation into the circumstances of a controversial party held aboard the famed Cruiser Avrora in June 2009 during the St. Petersburg Economic Forum. The party was organized for Russian multi-billionaire Mikhail Prokhorov’s Russian Pioneer magazine.
“The investigation has shown that the permission given by the naval authorities to the Russian Pioneer party contradicted both the military charter and the Russian legislation on protecting historical heritage,” said Alexander Kalinos, an aide to the Chief Military Prosecutor.
“That entertainment event created a potentially risky situation, when cultural valuables aboard the cruiser could have been damaged.”
Numerous Economic Forum VIP guests, including Prokhorov himself and St. Petersburg Governor Valentina Matviyenko, were present at the banquet.
A video of the party, whose program included a rock concert, was published on the magazine’s web site and received massive circulation on the Internet.
TITLE: Technicality Foils Ministerial Candidate at Conservatory
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: The St. Petersburg State Conservatory rector election saga is dragging on as the elections that had been scheduled for Nov. 26 were canceled owing to a technicality.
The Culture Ministry session held to approve violinist and conductor Sergei Stadler for the position failed to assemble enough members to pass a decision. Stadler, who is opposed by large numbers of the conservatory’s staff, is the only candidate standing in the election.
The conservatory has not been able to elect a new rector since the summer of 2008 when composer Alexander Chaikovsky was ousted from the job after a ministerial inspection found financial irregularities and 15 million rubles ($638,000) unaccounted for.
After Chaikovsky’s dismissal, deputy Dmitry Chasovitin automatically became acting rector but the Culture Ministry decided to intervene and place Stadler in the job.
The intervention ignited a fierce confrontation between Stadler and many members of staff.
The Culture Ministry’s protege is not a very popular figure at the conservatory. When he was officially introduced to the conservatory’s academic council in June 2008, the staff held an emergency meeting within hours of the announcement and unanimously voted against the appointment. The faculty argued that the new rector, who had earlier worked at the Conservatory’s Opera Theater, is unprofessional.
During the past year, many professors at the conservatory who had been in the know about the Culture Ministry’s plan to back Stadler tried hard to convince Moscow not to put the violinist forward and to stop pushing him, considering his unpopularity among the staff. Their efforts have so far been fruitless.
Some of the professors were insulted by the Culture Ministry’s persistence over the issue.
“I think it is wrong of the Moscow officials to interfere with the conservatory to such a great extent,” said singer Irina Bogachyova, who teaches at the conservatory. “Since our abilities to teach and perform have never been questioned, we should feel free to elect whomever we find appropriate for the role of our rector. Imposing any proteges on us is unnecessary.”
At present, most of the rebels seem to have given up. Stadler is not even facing any rivals at the elections. In comparison, in October 2008, during one of the first attempts to hold an election, one of three candidates for the post, Alexei Vasiliyev, the rector of the Rimsky-Korsakov classical music college, withdrew his name in unclear circumstances. Insiders then speculated that Vasiliyev was threatened and forced to withdraw. Later, Stadler’s only competitor was pianist Pavel Yegorov who could boast neither the strong backing of the authorities (as can Stadler), nor popularity with conservatory’s staff (as could Vasiliyev) but eventually Yegorov fell out of the game as well.
Pavel Khoroshilov, deputy Culture Minister, is hopeful and enthusiastic about Stadler’s future at the conservatory. “All speakers at the Culture Ministry’s session were most positive and supportive about Stadler’s qualifications and competence,” he said. “I very much hope that the conservatory will elect its rector in the nearest future. For our part, we will make every effort to assemble another session with the eye to officially approve Stadler’s candidacy.”
The venerable musical institution has changed leaders four times during the past five years. The turbulence began when Vladislav Chernushenko, who had been the conservatory’s rector for almost twenty years, lost his job amid accusations of negligence, mismanagement and embezzlement.
TITLE: Controversial Priest Gunned Down in Church
AUTHOR: By Alexander Bratersky
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Hundreds of mourners gathered Sunday to pay their respects to Father Daniil Sysoyev, a Russian Orthodox priest famous for his missionary work and criticism of Islam, after he was gunned down in his church last week. Church insiders said the attack, which happened late Thursday in southern Moscow, could have been the work of radical Islamists, who had regularly threatened him for preaching to Muslims. Law enforcement officials said they believed religion was the primary motive in the killing.
The 35-year-old Sysoyev, who led the St. Thomas Church on Kantemirovskaya Ulitsa, was shot point-blank four times by an unidentified man wearing a medical face mask, police said. He was severely wounded and died in an ambulance.
Vladimir Strelbitsky, a 41-year-old who was nearby during the attack, was also shot and remains hospitalized in serious condition.
Citing sources with knowledge of the matter, Interfax reported that the killer called out to Sysoyev twice shortly before the shooting. Viktor Kupriyanchuk, the church’s elder, told Kommersant that the killer burst into the church shouting, “Where’s Sysoyev?” When Sysoyev stepped forward from behind the altar, the assailant shot him several times and attempted to flee.
The shooter encountered and wounded Strelbitsky on his way out of the church, Kupriyanchuk said.
Investigative Committee spokesman Vladimir Markin said “witness accounts were collected indicating that Father Daniil had long received threats because of his religious activity.”
In February 2008, Sysoyev said on television that he had received “10 threats via e-mail that I shall have my head cut off,” unless he stopped preaching to Muslims. “As I see it, it is a sin not to preach to Muslims.”
Sysoyev was a popular blogger, who also wrote against cults in his LiveJournal blog. An ethnic Tatar, he was a fervent critic of Islam, arguing that coexistence between Christians and Muslims was not possible.
“How can we create a union with people who see a territory not governed by sharia law as a land of war?” he said in an interview on Ekho Moskvy radio in 2005.
In one of his books, “Marriage to a Muslim,” Sysoyev spoke against intermarriage between Muslim and Christians, saying such unions were only possible if Muslims converted. Writing in his blog about the anniversary of the Bolshevik revolution earlier this month, Sysoyev said Christians should not even sit at the same table with Communists, comments that angered many on the left.
Although in his books and speeches he tried to refrain from radical remarks often used by the Orthodox Christian right, religion experts said Sysoyev often crossed that line while clashing with his opponents.
“Many of his texts strayed far from political correctness. He often balanced on the edge,” said Alexander Soldatov, a religious commentator and editor of the Credo.ru religious news service.
News of Sysoyev’s death was met with cheers on Internet forums for radical Islamists, with some acknowledging that they had dreamed of knifing him to death personally.
The official leaders of the Russian Islamic community condemned the murder, and Orthodox leaders called for calm.
“We are against any extreme act or act of terror, and we consider the killing of an Orthodox priest a terrible sin,” Ravil Gainutdin, chairman of the Muftis’ Council of Russia, told reporters Friday.
Patriarch Kirill, head of the Russian Orthodox Church, extended his condolences to Sysoyev’s family and called on investigators to solve the murder.
“The killing of a priest in a church is a challenge to divine law and the desecration of a sacred place,” he said in a statement.
Sysoyev’s funeral will be held at 10 a.m. at the Church of the Holy Apostles Peter and Paul, in Yasenevo, after which Kirill will perform the conclusion of the all-night vigil. Sysoyev will be buried at the Kuznetskoye Cemetery in western Moscow.
And while some religious experts told The Moscow Times that the patriarchate had been distancing itself from the outspoken priest, he was popular and respected among the lower-ranking clergy. Sysoyev’s supporters were collecting signatures on a petition over the weekend asking Kirill to make sure that his missionary work is continued.
Father Boris, who leads an Orthodox church outside Moscow, told The St. Petersburg Times that he admired Sysoyev’s books and that he believed the priest was a victim in a war against Christianity unleashed by Muslims.
“When I was reading them, I understood that it will end like this,” he said. “There is a war, and people are being shot. Then they leave the trenches to go to battle. Father Daniil has left his trench.”
TITLE: 2010 Work Permit Cuts Planned
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The Federal Migration Service said Friday that it would cut the number of job permits available to foreigners next year to just less than 2 million people, down from an initial 3.8 million at the start of 2009, after the economic crisis severely cut demand for foreign labor.
Alexei Lomkin, the service’s director for foreign labor migration, said the initial quota would be 1.3 million, with the rest of the permits available as a reserve, Interfax reported. The 2009 quota — eventually lowered to 2 million people — was only 65 percent fulfilled, he said.
Fyodor Karpovets, the service’s chief in Moscow, said the city would have a quota of 250,000 permits, including a reserve of 80,000. That is down from more than 392,000 permits this year, he said.
TITLE: Magnitsky Buried, 2nd Autopsy Denied
PUBLISHER: Combined Reports
TEXT: MOSCOW — Relatives and friends on Friday buried Sergei Magnitsky, the key witness in a tax fraud battle whose sudden death in prison prompted an outcry from rights activists.
Prosecutors said Magnitsky, 37, died Monday of heart failure. Mourners blamed the country’s notorious prison system for not properly attending to the medical needs of the lawyer and father of two.
Magnitsky had been an adviser to Hermitage, once the country’s biggest investment fund and now embroiled in a bitter legal battle with Russian authorities, while he worked at law firm Firestone Duncan.
“Doctors have a duty to treat people who are sick … and they simply did not treat him,” said Magnitsky’s brother-in-law. “In this way, they killed him, but I don’t know whether they did it intentionally.”
Relatives have said Magnitsky had suffered from stomach ailments since he was taken into prison almost a year ago.
Hermitage said in an e-mailed statement that prosecutors had rejected a request for an independent autopsy.
Irina Dudukina, a spokeswoman for the Interior Ministry’s investigative committee, which announced the death, was not immediately available for comment after business hours.
Magnitsky’s mother and lawyers had requested the separate autopsy, Hermitage said in the statement.
“The relatives have well-grounded doubts about the objectivity” of an autopsy “supervised by the investigators and prison representatives who repeatedly refused to provide Sergei with medical assistance and drugs,” it said.
Justice Minister Alexander Konovalov said there was no evidence that a crime had been committed in Magnitsky’s treatment and challenged activists to provide facts to back their accusations, Interfax reported Thursday.
Magnitsky had been a suspect in a tax evasion case against Hermitage’s co-founder Bill Browder, a U.S. citizen who was refused entry to Russia in 2005 on national security grounds.
(SPT, Bloomberg)
TITLE: In Brief
TEXT: Tax Bill Revised
MOSCOW (SPT) — The State Duma on Friday officially approved a revised bill on the transportation tax, which leaves in place the current base rate, after a wave of criticism forced the Duma to recall an approved bill that would double the tax.
The government had to backtrack on its intentions to double the rate of the transportation tax, which is key to funding some regional budgets, after protests from car owners, opposition parties and eventually the Kremlin. On Friday, 312 deputies — all from United Russia — voted to pass the revised measure, while the other parties in the Duma had 131 votes against the measure.
Gryzlov on Tower
ST. PETERSBURG (SPT) — State Duma Speaker Boris Gryzlov said Friday that the Okhta-Center should be built in St. Petersburg, but that a better location should be chosen, Itar-Tass reported.
The controversial 400-meter high skyscraper should be constructed on Vasilyevsky Island, where it could function as a lighthouse, or on the territory of the Rzhevsky range outside the city, Gryzlov told reporters at a United Russia forum in St. Petersburg.
Cosmonaut Dies
MOSCOW (AP) — Spaceship designer Konstantin Feoktistov, the only non-Communist space traveler in the Soviet space program, died Saturday at the age of 83.
The Russian Space Agency said in a statement Sunday that Feoktistov died of unspecified causes in Moscow. In 1964, he traveled aboard the Voskhod spaceship as part of the first group space flight in history.
Feoktistov played a key role in the development of the Voskhod, but approval of his flight met resistance from the Politburo, since Feoktistov was not a Party member at the time. Until 1990, Feoktistov helped design Soviet spaceships and stations such as Soyuz, Progress and Mir.
Rubin Take Title
ST. PETERSBURG (SPT) — Rubin Kazan on Saturday claimed its second straight Russian league title with one game to spare after a 0-0 draw with Zenit St. Petersburg.
Rubin has 60 points from 29 games in the 16-team league, putting it out of reach for second place Spartak Moscow. Spartak lost 3-2 to crosstown rival CSKA on Saturday to sit five points behind. Zenit and Lokomotiv Moscow are tied for third with 51.
TITLE: 2 Fired From GM Plant After Go-Slow
PUBLISHER: Vedomosti
TEXT: The management of General Motors’ St. Petersburg plant has fired two workers for carrying out a “go-slow” strike — union leader Yevgeny Ivanov and member Olga Shafikova.
Ivanov received his pink slip on Friday, the day after the union met with the management of the plant and was denied all of its requests, Ivanov said. Shafikova found out about her layoff the day before, when she failed a routine medical checkup, he said, adding that the management was happy with her health the year before.
Shafikova declined to comment.
According to his discharge documents, Ivanov was fired for “absence from work for more than four hours without a legitimate excuse.”
Ivanov said he requested on Oct. 21 that the management give him safety instructions for working with load-lifting machinery and copies of documents certifying that he took the safety lessons and passed examinations permitting him to work.
“After a day, they didn’t show me the documents, and throughout this time I was at work but wasn’t working, because I consider the layoff illegal, which I will prove in court,” he said.
“We will get them to restore those laid off to their jobs and are going to appeal to the prosecutor’s office with a complaint,” said Stanislav Tokarev, Ivanov’s deputy.
GM spokesman Sergei Lepnukhov confirmed that Ivanov was laid off, but declined to reveal the reasons for his firing. “If an employee thinks that his rights are violated then he can appeal to the courts,” he said.
“If in the course of a medical checkup a worker is found to be unfit to carry out his duties, he is offered another position if there is one. At the moment, there are no open positions at the factory,” factory representative Yulia Boicharova said.
Ivanov said the layoffs were a response to union activity. Two weeks ago, the workers began a “go-slow strike,” in which production, according to Ivanov, was cut 30 percent, from 90 to 60 automobiles per day.
Workers want a guaranteed yearly raise of eight percent, a 40-hour work week and two weeks of discretionary vacation instead of one week.
A union leader cannot be fired for fulfilling his union responsibilities during work time, but there should be some evidence confirming Ivanov’s rightness, said Natalya Neverovskaya, a partner at Unicomlegal. She added that courts often side with workers in order to avoid a dominance of unemployment.
TITLE: Putin Calls for Lower Mortgage Rates
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Prime Minister Vladimir Putin on Thursday called for interest rates on mortgages to be lowered, saying the rates shouldn’t exceed 11 percent.
“Of course, 14.5 percent — this is the average mortgage rate today — is too much for citizens of the country. In order for mortgages to become more affordable for more people, we need to aim for the rate to be no more than 10 percent to 11 percent,” Putin said at a meeting of Vneshekonombank’s supervisory council.
The Mortgage Lending Agency last week put the average fixed mortgage rate in dollars at 14.8 percent, while the average fixed rate in rubles was 18.1 percent.
“This can’t be done by means of a directive,” Putin said, according to a transcript posted on the government web site. “I propose today that we think about how we can support the trend of lowering the rate on mortgage lending.”
To that end, the government will allow up to 20 percent of the Pension Fund, which is managed by VEB, to be invested in mortgage bonds issued by Russian banks, Putin said. As VEB currently controls 690 billion rubles ($29 billion) of the Pension Fund, that works out to a maximum investment of about 138 billion rubles.
“I know that the bank’s leadership’s relationship to this isn’t simple because you can’t make very much money on [mortgage bonds], but this is the basic function of this financial institution,” Putin said, adding that the funds should be invested “very carefully.”
TITLE: AvtoVAZ, Renault Accord Planned for End of Week
AUTHOR: By Anastasia Ustinova
PUBLISHER: Bloomberg
TEXT: MOSCOW — AvtoVAZ, Russia’s biggest carmaker, said it plans to sign a partnership accord on Friday with shareholder Renault as the government demands help with overhauling the unprofitable manufacturer.
The agreement will include terms of support for the Tolyatti-based company, Igor Burenkov, a spokesman for AvtoVAZ, said in a phone interview. Prime Minister Vladimir Putin may sign documents related to the carmakers during a trip to Paris this week as long as the companies reach a “relevant” agreement, Dmitry Peskov, Putin’s spokesman, said by telephone last Friday.
AvtoVAZ is 25 percent-owned by Renault, France’s second-biggest carmaker, with Russia’s government and Moscow-based investment bank Troika Dialog each holding another 25 percent. Russia would “welcome” Renault taking a controlling stake in AvtoVAZ, while the state may seek other partners should the French investor fail to join a rescue, First Deputy Prime Minister Igor Shuvalov said on state television Nov. 15.
Putin said on Nov. 5 that, in addition to 54.8 billion rubles ($1.9 billion) of state aid that Russia has already pledged, AvtoVAZ needs investments of five billion rubles to produce “competitive” models. Christian Esteve, a Renault executive on AvtoVAZ’s board, said on Nov. 2 that the French company had an agreement in principle to maintain its holding by transferring technology in lieu of cash.
Burenkov, confirming an Interfax news agency report citing AvtoVAZ marketing chief Maxim Nagaitsev on the planned signing, declined to provide further details. Axelle de Ladonchamps, a spokeswoman for Boulogne-Billancourt-based Renault, couldn’t immediately be reached for comment.
Renault paid $1 billion for 25 percent of AvtoVAZ in 2007, when the Russian manufacturer’s stock cost about 50 rubles a share. AvtoVAZ fell as much as 84 kopeks, or 5 percent, to 15.95 rubles, and was down 2.3 percent in Moscow trading on Friday, valuing the carmaker at about $790 million.
TITLE: Bank Loses License After Theft Scandal
PUBLISHER: Vedomosti
TEXT: MOSCOW — The Central Bank said Thursday that it withdrew the license of Kuban Commercial Bank, which was implicated in a scheme to steal 1.25 billion rubles ($43.5 million) from the Pension Fund.
The order to withdraw the license was signed Wednesday after the Central Bank’s supervisory officials were required to cut short a seminar in Anapa to return to Moscow, bankers and an acquaintance of one of the Central Bank officials told Vedomosti.
On Friday evening, Kuban, which has own capital of 42 million rubles ($1.5 million), received a transfer, based on fraudulent documents, from the Pension Fund’s accounts at the Central Bank. The 1.25 billion rubles were designated for “renovating infrastructure of the Pension Fund.”
The Central Bank later recovered all the money.
Kuban’s license, however, was pulled because of substantial inaccuracies in its financial statements and the organization’s inability to satisfy its creditors’ demands over financial liabilities, the Central Bank said in a statement.
TITLE: In Brief
TEXT: Cosmetics Sales ‘Flat’
MOSCOW (Bloomberg) — Russian cosmetics sales will change little through the first half of 2010, after remaining “flat” this year in ruble terms, Concern Kalina Chief Executive Officer Alexander Petrov said.
Sales of high-end cosmetics declined this year, while the low-end market expanded, Petrov said on a conference call Monday.
Kraft Eyes Cadbury
MOSCOW (Bloomberg) — Kraft Foods is seeking Russian regulatory approval to acquire Cadbury’s local unit, the Federal Anti-Monopoly Service said.
Kraft made the request to take over Dirol Cadbury on Nov. 9, the watchdog said in a statement on its web site dated Nov. 17. The regulator said it requested more information for Kraft and agreed to extend the review period by two months, without giving a specific date.
Mine Clearing Begins
MOSCOW (Bloomberg) — Nord Stream started clearing mines at the bottom of the Baltic Sea for the Gazprom-led gas pipeline venture, Simon Bonnell, senior engineer at the group, said Sunday, Interfax reported.
The clearing was to begin Sunday 30 kilometers south of Helsinki in the Gulf of Finland by blowing up a Soviet mine dating back to World War II, the news service said.
Aeroflot Calls for Law
MOSCOW (Bloomberg) — Aeroflot has asked the government to require politicians to fly only on Russian airlines, Chief Executive Officer Vitaly Savelyev told a transportation conference in Moscow on Friday.
Moldova PM Urges Loan
YALTA, Ukraine (Bloomberg) — Moldovan Prime Minister Vlad Filat urged his Russian counterpart Vladimir Putin to expedite talks between the two countries’ governments on a loan.
“For Moldova, this aid would be very important, taking into account the political situation and crisis” in Moldova, Filat said in Yalta on Friday. Russia may lend Moldova up to $150 million, Finance Minister Alexei Kudrin said during a visit on Oct. 9.
Stake Swap Planned
YALTA, Ukraine (Bloomberg) — Russia and Ukraine may swap minority stakes in their aircraft design companies to jointly produce new planes, Ukrainian Prime Minister Yulia Tymoshenko said late Thursday.
Ukraine and Russia want to cooperate in the design and production of An-140, An-148 and An-148-100 aircraft, Tymoshenko said, adding that she “welcomes” resuming the An-70 transportation plane project.
PIK Stake Increased
MOSCOW (Bloomberg) — Billionaire Suleiman Kerimov raised his stake in Russian property developer PIK Group to 45 percent from 25 percent, Vedomosti newspaper reported Monday, citing unidentified people familiar with the matter.
Kerimov in April acquired 25 percent of PIK as part of the company’s debt restructuring, Vedomosti said.
Post Office to Cut Jobs
MOSCOW (Bloomberg) — Russian Post plans to cut at least 8 percent of its employees, or about 33,000 jobs next year, the state-run postal carrier said on its web site Monday.
Overdue Loans to Rise
MOSCOW (Bloomberg) — Russia’s central bank expects the share of commercial loans that are overdue to reach 9 percent by the end of the first half of 2010, Interfax reported, citing Bank Rossii department head Alexei Simanovsky.
The rate may reach 7 percent by the end of this year, according to the news service.
Assets Swap On Cards
MOSCOW (Bloomberg) — AFK Sistema, billionaire Vladimir Yevtushenkov’s holding company, agreed to swap assets with Russia’s state-run telephone operator Svyazinvest, Sistema said in a regulatory filing Monday.
Sistema may trade its stake in wireless company Sky Link and the 25 percent of Svyazinvest held by Sistema’s Comstar United TeleSystems unit in exchange for shares in Moscow City Telephone and debt relief, Sistema said.
EBRD Invests in Bank
MOSCOW (Bloomberg) — The European Bank for Reconstruction and Development agreed to buy 12 percent of Promsvyazbank for about 4.6 billion rubles ($160 million), the Moscow-based lender said in an e-mailed statement Monday.
The investment, in new shares, will be the EBRD’s biggest in a Russian lender, Promsvyazbank said. Commerzbank also bought shares, enough to keep its stake at about 15 percent.
Athletes’ Wealth Listed
Nov. 23 (Bloomberg) — Maria Sharapova defended her title as Russia’s best-paid athlete, earning an estimated $24 million in a year in which injuries limited the former tennis No. 1 to a sole tournament title, Finans magazine said.
Almost all of the 22-year-old’s annual income came from sponsorships, including $7 million from Nike, $6 million from Canon and $5 million from Motorola, the Moscow-based magazine said on its web site Monday. Utah Jazz basketball forward Andrei Kirilenko, 28, was second at $15.3 million.
The combined income of the 25 highest-paid Russian athletes climbed 10 percent to $164 million last year, Finans said. Sixteen of the biggest earners play hockey, and all three women in the top 25 play tennis.
The other five athletes on the list are soccer players, led by Arsenal striker Andrey Arshavin, 28, who earned about $11.3 million, including endorsements with companies including PokerStars.net, Finans said. The estimates don’t include tax payments or investments, according to the magazine.
TITLE: Kudrin Sees Oil Price Decreasing
PUBLISHER: Bloomberg
TEXT: MOSCOW — Oil prices may decline from a “somewhat artificial” level as governments reduce stimulus spending, Finance Minister Alexei Kudrin said Friday.
The current price is favorable for Russia and acceptable to the world, Kudrin told reporters in Yalta, Ukraine.
“I think at some point the price may go down,” Kudrin said. “The price may decline if steady economic growth doesn’t resume” by the time that governments roll back anti-crisis measures and central banks cut rates.
Russia, the world’s largest oil and gas producer, depends on energy sales for about 70 percent of its export revenue. Urals crude, the country’s benchmark export blend, has rebounded 82 percent from the start of the year, to average $76.40 a barrel this month. That is about half of the July 2008 record high.
Oil prices in excess of government estimates will help narrow this year’s budget deficit and enable the government to maintain stimulus spending, Kudrin said Oct. 21. Russia’s 2010 budget deficit outlook assumes that crude will average $58 a barrel and rise to $60 in 2012.
Russia should avoid a sudden removal of stimulus measures to support the domestic economy, the Organization for Economic Cooperation and Development said in a report Thursday. The economy will probably expand 4.9 percent in 2010, while output will contract 8.7 percent this year, it said.
TITLE: Putin, Tymoshenko Reach Gas Agreement
AUTHOR: By Anatoly Medetsky
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Prime Minister Vladimir Putin has agreed to an important concession in the gas trade with Ukraine, heading off the threat of a dispute that could disrupt transit to Europe this winter.
After talks with Ukraine’s Prime Minister Yulia Tymoshenko that ended almost at midnight Thursday, Putin announced that the neighboring countries would revise their gas trade contract to meet Ukraine’s requests and preserve the fragile delivery arrangement.
“I am sure we need to value what we have achieved, rather than destroy it and fall again into a crisis and chaos,” he said at a news conference in Yalta, a Black Sea resort town in Ukraine.
Hard-hit by the crisis, Ukraine has found that it doesn’t need as much gas as it is obliged to buy from Russia under a contract that the countries signed in January. Russia has so far waived billions of dollars in noncompliance fines stipulated by the take-or-pay clause, but Ukraine has insisted on changing the contract to reduce its import requirements.
The changes would mean that Ukraine would no longer face the threat of penalties next year, Putin said.
Ukrainian President Viktor Yushchenko has estimated that his country will have run up fines worth $8.5 billion by the end of this year for importing 40 percent less gas than it had initially asked for. Putin reiterated Friday that Gazprom would not charge the fines to Ukraine, though it plans to with other European buyers.
“Keeping in mind the special nature of the relations between Russia and Ukraine … a decision was made not to seek these sanctions,” Putin said. “I want to state this again in public: There will be no sanctions.”
He didn’t say why Ukraine was special, but he apparently referred to the close historical ties between the countries.
Putin and Tymoshenko defended the terms of the contract as “standard” for Gazprom’s other European customers and fair for Ukraine. Yushchenko, who like Tymoshenko is running in the January presidential elections, has said the contract was tilted in favor of Russia because it didn’t carry penalties for Gazprom for reducing the amount of gas that it transits through Ukraine this year.
The agreement between Moscow and Kiev clears one of the potential hurdles for the safety of European supplies, said Andrew Neff, an analyst with IHS Global Insight.
“There was no denying that the potential for a new ‘gas war’ between the two countries hung heavy over the summit, which ended with news of a compromise geared to prevent just that,” he said by e-mail from Washington.
Risks, however, still remain, he said.
“The threat of a rupture in the fragile peace in the bilateral gas relationship remains salient, with Ukrainian politics likely to provide the spark in any new gas conflict,” he said, referring to the upcoming elections.
Moscow appears to have picked sides in the election campaign. Putin praised Tymoshenko as a good negotiating partner for his government Friday in a sign that she is a presidential candidate whose victory would please Russia.
“We feel comfortable working with Tymoshenko,” he said. “I believe that relations between Russia and Ukraine have grown more stable and stronger over the time that we cooperated.”
TITLE: Urals Crude Falls to 6-Month Low on Increased Production
PUBLISHER: Bloomberg
TEXT: MOSCOW — Urals oil, Russia’s benchmark export crude, fell to the lowest price in six months as weakening refining margins reduce demand and increasing OPEC production boosts supplies of alternative oil types.
Urals traded at $1.08 per barrel less than Dated Brent on Friday, compared with a discount of $1.05 on Thursday, according to data compiled by Bloomberg. That’s the biggest discount since May 8.
“A lot of refiners are trying to run down stocks as far as they can, and we see very weak margins,” said Alexander Poegl, an analyst at JBC Energy in Vienna. “In addition to weak demand, you have more medium sour crude coming out of OPEC.”
The Urals price in the Mediterranean also declined. A cargo for delivery in Augusta, Italy, cost 92 cents less than Dated Brent, compared with an 88 cent discount Thursday. That’s the biggest discount since May 19.
Demand for Urals, a so-called medium sour crude type, has dropped as the profitability of turning the crude into products such as gas oil and fuel oil remains close to negative.
The refining margin for cracking Urals in Northwest Europe was 67 cents a barrel Thursday, according to Bloomberg estimates. It has averaged 42 cents over the past month.
Rising supply of crude from the Organization of Petroleum Exporting Countries is also crimping demand for Russia’s export blend because it is a similar quality to Urals and offers a better value for refiners, according to Poegl.
“Their hunger for other sour crude types such as Urals is less,” he said. “OPEC’s continuously weaker compliance adds more medium sour crude into the market.”
OPEC oil production rose for a seventh month in October, as compliance with output quotas dropped, the producer group said in a report last week.
TITLE: Dealers Fear Flood Of Used Cars Imported Via Belarus
PUBLISHER: Vedomosti
TEXT: MOSCOW — The customs union with Belarus and Kazakhstan could lead to a flood of cheap used cars onto the Russian market, threatening to crush domestic auto production.
The union’s three members are supposed to have unified duties as of Jan. 1. The changes will synchronize tariffs for all legal entities, but the unification for individuals will need to be agreed under a separate deal by July 1, 2010, when all customs points between the countries will be closed.
From January to June, Belarussian citizens may import hundreds of thousands of cars to resell in Russia after the borders are opened, Alexei Tereshchenko, strategy director at the Russian and Belarussian dealership Atlant-M, said Friday.
After New Year’s, dealers in Belarus will be in an unenviable position. Tariffs on new cars will jump to Russian levels — 30 percent of the cost, but no less than 1.45 euros ($2.15) per cubic centimeter of engine capacity — from 0.6 euros to 0.7 euros per cubic centimeter now, depending on engine size.
For individuals, the Belarussian tariffs will be several times lower than in Russia, and the older the car, the bigger the difference, Tereshchenko said. For example, clearing a luxury car that’s five to seven years old in Belarus is almost 10 times more expensive in Russia. For cars that are five to seven years old with a 2.5-liter to 3-liter engine, the tariff in Russia is 5.8 euros per cubic centimeter, while in Belarus it is just 0.6 euros.
And running cars is already a well-developed business in Belarus, he said, adding that of the 200,000 cars imported annually, just 40 percent are imported by companies.
“Russia could get enough cars via Belarus to make Russian dealers uncompetitive for at least a year,” Tereshchenko said. New Russian-assembled foreign models such as the Toyota Camry and Volkswagen Passat, which cost about 900,000 rubles ($31,100), will be competing with two-year-old and three-year-old luxury models like the Audi A6 and Mercedes E-Class from Belarus, which now cost 1.6 million rubles ($55,300) for second hand vehicles in Russia.
Any midrange foreign car that is three years old to six years old imported from Belarus will be cheaper than a new Lada, he said. The only way to prevent a flood of cars is to get the government to force a simultaneous unification of the corporate and individual duties, Tereshchenko said.
“As soon as we hear about the increase in customs duties for individuals, we’ll import extra cars in the first half into Belarus, and then we’ll either sell them in Belarus, where the prices will rise because of the tariffs, or even better, in Russia,” said the director of a Belarussian company that imports cars by registering them to individuals during customs clearance. He told Vedomosti that it costs 5,400 euros to import into Russia a 10,000 euro car that’s three years old to five years old with a 2-liter engine. In Belarus, the same car would cost 800 euros at customs.
Russian dealers have not discussed the problem, said Oleg Moseyev, financial director of AvtoSpetsTsentr. “If we have an agreement on a customs union, then surely the Russian government won’t allow the import of cheap cars from Belarus,” he said.
Oleg Datskiv, head of the Autodiler.ru portal, said the danger for Russian dealers was real. AvtoVAZ would simply halt operations, he said, while the used car market would be obliterated.
TITLE: Unemployment Rises on End of Seasonal Demand, Industrial Slump
AUTHOR: By Alex Nicholson
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russia’s unemployment rate rose in October as a slump in industry accelerated and a seasonal increase in employment came to an end.
The rate rose to 7.7 percent, or 5.8 million people, from 7.6 percent in September, the Moscow-based Federal Statistics Service said in a preliminary estimate sent by e-mail. The numbers aren’t adjusted for seasonal swings. The figure matched the median estimate in a Bloomberg survey of 10 economists.
President Dmitry Medvedev has warned that joblessness remains “a clear challenge” even after the rate fell from an eight-year peak of 9.4 percent in February. More than one million people are at risk of being made redundant, in addition to those laid off since the economic crisis started, he said on Nov. 12.
Manufacturers are struggling to stay profitable as banks rein in credit, hampering investment even as demand picks up for commodities, Russia’s chief export. Manufacturing slipped back into contraction in October, according to VTB Capital’s Purchasing Managers’ Index, as job cuts and inventory depletion gained pace. The economy contracted an annual 8.9 percent in the third quarter, after a record 10.9 percent slump in the second.
“Acceleration in job shedding and inventory depletion” hurt output, said Dmitri Fedotkin, an economist at VTB Capital in Moscow, in the VTB report.
Industrial production contracted 11.2 percent from a year earlier after the decline eased to 9.5 percent in September, the statistics service said on Nov. 17.
At particular risk are hundreds of so-called company towns across Russia, where about 16 million people depend on one main company for employment and social benefits, Medvedev said.
“In the coming months we must take steps to prevent a sharp drop in living standards in the monocities,” Medvedev said in his Nov. 12 address.
Higher prices for commodity exports mean the country will enjoy a stronger rebound next year than first thought, the Organization for Economic Cooperation and Development said on Thursday 19. Gross domestic product will expand 4.9 percent in 2010 compared with a June forecast for 3.7 percent growth, the OECD said.
TITLE: Deripaska in Talks On Range of Assets
AUTHOR: By Yuriy Humber
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russian Billionaire Oleg Deripaska, whose United Co. RusAl is seeking to restructure more than $14 billion of debt, is in talks with potential investors in his construction, airport and financial-services businesses.
“We are seeing renewed interest in some of our assets, including stakes in our businesses, from a growing number of investors from Russia, China, Singapore, the United Arab Emirates and western Europe,” Timur Supataev, head of investment at Deripaska’s Basic Element holding company, said in e-mailed response to questions on Saturday.
“We are in the middle of negotiations.”
RusAl, the world’s largest aluminum producer, is planning an initial public offering in Hong Kong to help repay its borrowings. Deripaska, 41, last year gave up stakes in builder Hochtief and autoparts maker Magna International that were held as collateral by lenders as the value of his investments tumbled. He also cut his RusAl stake.
Basic Element seeks to maintain control of its assets, which are all poised to return to profit next year as the effect of the global financial crisis wanes, Supataev said.
“All companies generate stable revenues,” he said. “Many of them have already recovered from the crisis and are marginally profitable. We are not interested in selling shares in our businesses, let alone giving up control, at crisis-level prices.”
The economy of the world’s biggest energy producer is recovering as global demand for commodities supports exporters and local consumption rebounds. The record 10.9 percent economic contraction in the second quarter eased to 8.9 percent last quarter.
“Some economic sectors attract investors because they have reached the bottom and one doesn’t have to be a financial guru to expect a steep recovery,” Supataev said. “With partners we intend to take advantage of the economic situation and get leading market positions by taking over distressed assets.”
On top of the talks with potential investors, Deripaska will extend an option to buy back 25 percent of Strabag, Austria’s biggest builder, until the end of 2010, Basic Element said in an e-mailed statement Monday. He will pay 45.9 million euros ($69 million) for the extension, Vienna-based Strabag said in a separate statement on its web site.
Earlier Thursday, Der Standard newspaper said Deripaska could afford to buy Strabag’s stake back from investors this year. Strabag declined to comment on the report.
Deripaska is also in talks to swap his stake in Samara-based aircraft maker Aviakor for shares in state-owned United Aviation Corp., Yekaterina Pankova, a spokeswoman for Basic Element’s machinery division, said by phone Monday.
The holding company would get 0.2 percent of United Aviation for 75 percent of Aviakor, Kommersant reported Nov. 19. Basic Element would retain 10 percent of Aviakor, which makes the 52-seater AN-140 jet, the Moscow-based newspaper said.
RusAl’s IPO will “absolutely” proceed this year, the company’s chairman Viktor Vekselberg said last week. RusAl plans to sell a 10 percent stake to investors in the offering.
TITLE: Norway Fund Excludes Norilsk Nickel
AUTHOR: By Meera Bhatia and Josiane Kremer
PUBLISHER: Bloomberg
TEXT: Norway excluded Russia’s GMK Norilsk Nickel from its sovereign wealth fund, saying the world’s largest producer of the metal is contributing to extensive environmental damage.
“Emissions from the company are the direct cause of forest death and other serious, visible damage to the natural environment in the Norilsk area,” Norway’s Finance Ministry said Thursday in an e-mailed statement. “This is deemed to be in breach of the ethical guidelines for the fund.”
The oil fund is Europe’s largest stock investor and has holdings in about 7,900 companies worldwide. The Finance Ministry decides what companies to exclude based on recommendations from an ethics council. Before Thursday, it had dropped 28 companies, including Wal-Mart Stores. A decision to ban a company is made public after shares are sold.
Norilsk spokeswoman Erzhena Mintasova couldn’t be immediately reached for a comment. The shares fell 141.91 rubles, or 3.3 percent, to 4,104 rubles in Moscow, valuing the company 782 billion rubles ($26.2 billion).
High emissions of sulfur dioxide and heavy metals from Norilsk’s activities on the Taymyr Peninsula, located in the Arctic in Siberia, have caused “extensive, lasting damage” on the vegetation and waters, the Finance Ministry said.
Norway, the world’s six-largest oil exporter, divested its holding as of Oct. 31 after a decision on Aug. 31. The $442 billion fund, the world’s second-largest sovereign wealth fund, set up an ethics council in 2004 to ensure it doesn’t invest in companies with activities that breach human rights, involve corruption or create environmental damage.
As of the end of last year, the fund held 0.39 percent of the shares in Norilsk.
The Finance Ministry said Norilsk acknowledged that the environmental damage is “severe” and that “a speedy and effective solution of the environmental problems was impossible without shutting down operations for a lengthy period,” according to the statement.
TITLE: Ilyushin Considers IPO On Hong Kong Exchange
AUTHOR: By Alex Anishyuk
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Ilyushin Finance Corporation said Friday that it may list shares in Hong Kong next year, following hot on the heels of United Company RusAl, which hopes to list on the Chinese exchange by the end of the year.
“IFC is considering listing [shares] on the Hong Kong stock exchange,” said Vasily Prutkovsky, vice president of United Aircraft Corporation. “The issue was discussed during a meeting of the board of directors, and the board did not reject the idea.”
Ilyushin could float up to 16 percent of its shares in 2010, Prutkovsky said.
Ilyushin, an aircraft-leasing company, is co-owned by billionaire Alexander Lebedev’s National Reserve Corporation, which owns 25.83 percent, and United Aircraft Corporation, with 31 percent. He said Ilyushin was currently considering two ways to raise cash: selling part of Lebedev’s stake in Ilyushin to Vneshekonombank or an additional share issue.
No specifics are available, as the company has only started preliminary discussions, but a final decision on the IPO will be made in the first quarter of 2010 at the earliest, said Andrei Lipovetsky, a spokesman for Ilyushin.
The announcement comes as aluminum giant RusAl is preparing to list up to 10 percent of its own shares in an initial public offering on the Hong Kong Stock Exchange — the first Russian company to do so.
Ilyushin could be the second, as Hong Kong appears to be a lucrative market for Russian stocks, but it may be a better option for the aircraft-leasing firm to try to secure a state loan.
“Hong Kong stocks were on the rise throughout 2009 and show high levels of liquidity,” said Nikolai Podlevskikh, chief analyst at Zerich Capital Management. “Besides, Russian planes are traditionally popular in Asia, so IFC stocks could see some interest from local investors.”
Nevertheless, a state loan would be a more secure and easier way to get the relatively small amount of capitalization the company needs, Podlevskikh said.
“If we assume that the company floats 16 percent of the stock, it would be easier to get roughly $100 million from the state, which isn’t a huge amount, instead of preparing a pile of documents for the IPO and facing unclear prospects,” he said.
Ilyushin’s market value was estimated at 20 billion rubles ($694.5 million) by Ernst & Young as of April 1.
“On the other hand, the announcement to carry out an IPO in 2010 may be an attempt to stake out a claim to further conquer the capital markets,” he said.
Ilyushin, founded in 1999, leases commercial aircraft and provides export financing. The company reported a turnover of 2.2 billion rubles in 2008, less than half the 4.9 billion rubles that it reported in 2007.
TITLE: Polyus Shareholders Backtrack
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Two major shareholders of Polyus Gold on Friday backtracked on their proposal to sell a 5 percent stake in the company, citing unfavorable market conditions.
The sale was canceled because of a lack of demand at the offered price range of $28 to $29 per depositary receipt, a market source told Interfax.
Mikhail Prokhorov’s Onexim Group and Suleiman Kerimov’s Nafta-Moskva had announced the previous day that they wanted to sell 2.5 percent stakes each, in the form of shares or American Depositary Receipts.
Shares in Polyus, Russia’s largest gold miner, fell 3.76 percent Thursday as news of the planned sale emerged. The stock rebounded Friday after the sale was called off, rising 3.9 percent to 1,601.24 rubles ($55.22).
Experts say the drop in price may have soured the deal for Prokhorov and Kerimov, leading to the cancellation of the sale. “I don’t think the shareholders particularly wanted to sell anyway,” UniCredit analyst Marat Gabitov said. “The discount is usually 10 percent to 15 percent, but they were only offering 5 percent. Polyus shares are approaching all-time highs and investors would not have found that an attractive proposition in these conditions.”
Nafta-Moskva owns 36.88 percent of Polyus, while Onexim controls about 30 percent and associated shareholders another 10 percent.
The owners are likely to return to the idea in the future if the gold market remains healthy, said Nikolai Sosnovsky, an analyst at UralSib.
As for their initial reasons to sell, “perhaps they felt that with gold at a peak, and the market capitalization of Polyus quite high, it was time to exit with profit,” Sosnovsky said.
TITLE: Kudrin: VEB Transformation Less Costly Than Predicted
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Turning Vneshekonombank into a joint-stock company is possible, but any change in status won’t require one trillion rubles ($34.6 billion) as claimed, Finance Minister Alexei Kudrin said Thursday.
“We haven’t appropriated this money in the budget for next year. I think that such a large sum will not be needed,” Kudrin said at a news conference, Interfax reported.
VEB head Vladimir Dmitriyev said Saturday that the bank was ready to change its status as ordered by President Dmitry Medvedev but that it needed to raise about 1 trillion rubles in order to make its activity compatible with banking legislation. Kudrin said the Finance Ministry had not received Dmitriyev’s assessments.
Central Bank First Deputy Chairman Alexei Ulyukayev said Thursday that the government was considering different options for VEB, the most probable being to turn it into either a financial agency or a joint-stock company.
“Transforming VEB into a commercial bank is only one of the options,” Ulyukayev said, adding that the government would make a final decision on the bank’s new status.
Medvedev’s economic aide Arkady Dvorkovich said earlier this month that Vneshekonombank and two other state corporations, Russian Technologies and Rusnano, would likely lose their status as state corporations as early as 2010.
“As far as state corporations are concerned, I think they have no prospects in the current environment,” Medvedev said in his state-of-the-nation address.
“Those that work on commercial, competitive terms should become modern, open joint-stock companies controlled by the state. In the future, they shouldn’t be held in the public sector and should be opened to private investors.”
As a state corporation, VEB is subject to neither the capital requirements that banks are obliged to keep nor the financial reporting standards that joint-stock companies are bound by.
TITLE: Incomes Recover, Lack Of Funds Hinders Production
AUTHOR: By Paul Abelsky
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russian consumers are benefiting from a stronger ruble that has boosted incomes and offset tight credit while a lack of investment is hampering a rebound in manufacturing, a series of economic reports showed Friday.
Real disposable incomes posted the biggest jump in more than a year last month and retail sales rose from September, signaling consumer demand is returning following October’s 3.4 percent gain in the ruble against the dollar.
The economy of the world’s biggest energy producer is showing signs of recovery as a return of global demand for commodities supported exporters and domestic demand rebounded after the ruble rose to the strongest level this year. Russia’s record 10.9 percent economic contraction in the second quarter eased to an 8.9 percent decline last quarter.
“Household consumption is stabilizing after lagging behind the rest of the economy,” said Olga Naydenova, an economist at Otkritie Financial Corp. in Moscow. She expected a broader improvement in indicators last month as “people have learned to adapt to the changing situation, and budget spending on social needs also helped.”
Disposable incomes climbed a monthly 6 percent in October and rose 3.9 percent compared with the same period last year, the biggest annual jump since September 2008, the Federal Statistics Service said. Retail sales rose 3.2 percent from September and declined 8.5 percent on an annual basis compared with a 9.9 percent drop the month before.
The government has made spending on social needs, including benefits and pensions, a priority of its stimulus program, which deployed 2.5 trillion rubles ($86.4 billion) to bolster the economy with tax breaks, loan guarantees and subsidies.
Service industries, which account for about 40 percent of the economy, rose for a third month in October, advancing to the highest since September 2008, VTB Capital said on Nov. 5, citing its Purchasing Managers’ Index.
“Although the economy is no longer declining, it is too early to speak of a recovery,” Alfa Bank analysts led by Yekaterina Leonova said in a Nov. 18 report. “Signs of improvement are still very fragile and do not constitute a trend.”
The ruble appreciated 3.4 percent against the dollar for its second consecutive monthly gain in October. Imports account for about 49 percent of the consumer goods sold in Russia, the government estimated last year.
A stronger currency has increased spending power for the domestic market as “it transfers incomes into people’s pockets,” said Clemens Grafe, chief economist at UBS in Moscow.
Wage declines also eased last month as exporters returned to profitability. Wages fell an annual 4.5 percent in October, compared with a 4.9 percent decline the previous month. Retail sales have fallen for nine consecutive months, the longest period of declines on record.
Rebounding consumer demand isn’t reflected in the country’s manufacturing sector. Russia’s industrial slump deepened in October as companies failed to build up inventories and credit remained tight even after eight central bank interest rate cuts since April.
TITLE: British Airways Cleared of Tax Evasion Charges by Arbitration Court
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The Supreme Arbitration Court cleared British Airways of tax evasion Tuesday, in a ruling that could have repercussions for foreign airlines operating in Russia.
The Federal Tax Service accused the airline of not paying 716,044 rubles ($24,700) in taxes taking into account differences between the exchange rate that the company used when it converted its income into pounds from 2004 to 2006 and the official Central Bank rate.
The court found British Airways not liable for the tax claim, citing a 1994 Russian-British agreement that prohibits double taxation for companies that don’t have permanent representation.
The company, however, is now appealing a second tax case, in which the Federal Tax Service is demanding payment of 30.4 million rubles in value-added taxes on revenues received from cargo transportation.
In both cases, the airline argued that under a 1957 British-Soviet agreement, it wasn’t required to pay taxes on any income that was converted into pounds and transferred to its main office.
“We do not know for sure whether the Supreme Arbitration Court took into consideration the 1957 agreement in its ruling on the first case, because we’ve only seen the substantive provisions,” said Stepan Guzey from the Vegas Lex law firm, which represented the company’s interests. “If it did, we can be sure it will not satisfy the tax service’s claims on the second case, as BA should not pay any taxes in Russia according to that agreement.”
The 1957 agreement has never been in the focus of court proceedings, Guzey said, and the fact that the Soviet government did not levy a VAT tax at the time could make it a difficult case for the court.
“In my opinion, the court and the tax regulators cannot decide whether that agreement should be applied today,” he said. “However, it wasn’t denounced so far, so we hope it will be considered properly.”
TITLE: An Avoidable Murder
AUTHOR: The Wall Street Journal
TEXT: Prime Minister Vladimir Putin’s regime earlier this week proved to be an even colder and darker place than what a Russian winter alone can offer.
Ethicists may debate when not preventing a death becomes murder. But one doesn’t need a Ph.D. to conclude that the death of Sergei Magnitsky was just that — a state-sanctioned murder.
Don’t expect Moscow to recognize it as such, however. It doesn’t have to. Magnitsky’s demise can be attributed to “natural causes”: toxic shock, heart failure or rupturing of his abdominal membrane, depending on which Russian official you ask. All as natural as the will to power.
The 37-year-old lawyer and father of two died in a pretrial detention center in Moscow on Monday, having been incarcerated for nearly a year on trumped-up tax evasion charges. His real crime was to claim widespread corruption by officials while defending Hermitage Capital Management against fraud. In 2008, Magnitsky gave formal testimony naming Interior Ministry officers involved in Hermitage’s case. Shortly after, he was arrested by a team of the same officers named in his testimony, according to Hermitage. Over the last year, Magnitsky’s detention conditions worsened the longer he refused to fabricate a story against Hermitage. In other words, Magnitsky died fighting for the rule of law.
Magnitsky made numerous official complaints of his treatment, including a 40-page report to the prosecutor general’s describing squalid conditions, treatment bordering on torture, the onset of gallbladder stones, pancreatitis and a severe digestive ailment.
“Prior to confinement, I didn’t have these illnesses or at least there were no symptoms,” he writes in the report, detailing how repeated requests for treatment were ignored.
When Magnitsky’s lawyers came to see him at the Butyrskaya prison on Monday, they were told he couldn’t leave his cell due to the state of his health. And yet Interior Ministry spokeswoman Irina Dudukina said there was no record of health problems in Magnitsky’s file.
With this new milestone, Moscow consummates the marriage of brutality and revisionism. Contemporary Russia is almost comically weak when viewed from the West, which once feared Moscow would destroy the world. But that doesn’t mitigate the merger of Stalinism with Putinism, nor the tragedy that means for the Russian people.
This comment appeared as an editorial in The Wall Street Journal.
TITLE: Licensed to Kill
AUTHOR: By Jamison Firestone
TEXT: In the summer of 1993, I set up a law firm in Moscow with an American friend, Terry Duncan. All of the lawyers were Russians. They were the brightest of the bright. Young Russian lawyers from the best schools who believed in Russia, the rule of law and the future of their country. We shared a common vision: Russia was the place to be. History was being made, and we were at the center of it. Law mattered, Russia had a bright future, and lawyers and law were central to that future.
One of those young men who shared this vision and passion was Sergei Magnitsky, who worked with me for more than 10 years. I believe that he was killed in prison by corrupt law enforcement officers.
There are those who would question my use of the word killed. Some would call it an overreaction. It is not.
Magnitsky testified against a group of Interior Ministry officers who we believe stole more than 5 billion rubles from the Russian treasury. One month later, those same officers arrested Magnitsky on completely false charges that made no legal sense. They held him in prison in horrible conditions. When Magnitsky’s health deteriorated, they denied him access to doctors, medicine and a routine but critical operation. He died Monday evening.
Magnitsky did not die by chance. He died because corrupt Interior Ministry officers killed him: They knowingly imprisoned an innocent man, destroyed his health and denied him access to medical treatment. Maybe the ministry just wanted to put pressure on him. But when detained people are tortured, they sometimes die, and in this case the people applying the pressure become killers.
Magnitsky’s story is all the more terrible because it is now routine. Let’s be honest, the so-called law enforcement agencies are detested by everyone and respected by no one. Corrupt officers routinely open criminal cases against the innocent, imprison people, kill people and steal with impunity. They are not above the law: They are the law. They are in effect licensed to kill.
One of the most interesting things about reading the articles and Internet blogs about Magnitsky’s death is how universal this opinion is. Nobody believes the Interior Ministry, and everyone understands that Magnitsky was effectively killed, and that he is just another of the many victims of the country’s abuse of police powers.
“Russian law” has become an oxymoron.
When are these crimes carried out by law enforcement agencies going to stop? When are we going to take back this country from the gang of criminals in uniform that has decided that it is the law?
Although I support President Dmitry Medvedev’s statements about fighting legal nihilism and corruption, he should publicly acknowledge that law enforcement agencies and the courts are now the main forces that threaten the ordinary citizens of this country.
Medvedev asks Russians not to give up hope and fall into legal nihilism, and then he allows a bunch of bandits in uniforms to rule over us. Corrupt officers steal and kill, and the government does nothing. Occasionally a statement is made about how the president or prime minister cannot interfere with law enforcement agencies, but law enforcement agencies are now Russia’s largest problem. They are the enforcers of the new mafia. If Medvedev is not prepared to interfere, who will? The few who try to interfere, like Magnitsky, die.
I write this article with a profound sadness that goes deeper than losing a friend. I have watched the profession of law in Russia descend into something that is absolutely meaningless. What is the use of being a lawyer when there is no law? I have watched countless young idealistic lawyers learn through experience that in a growing number of situations there really is no law in Russia. I have watched law enforcement agencies and courts increasingly become agents of thieves and chase into exile, imprison and kill many of the people whom Russia needs most. This is the real face of the “dictatorship of the law.”
I do not think that there is anything shocking in what I am now saying other than the fact that I am saying it openly. And that in itself says a lot about the state of Russian law. Truthfully, I am afraid while writing this article. In today’s Russia, such an article can be deemed “suicidal.” My friends would say it is an invitation to be charged with a crime or for the government to deport me. Maybe they are correct, but if they are, then Medvedev has failed miserably.
I have spent this week after Magnitsky’s death speaking with friends and clients and with scores of people whom I had never met before. All of us are stunned. We detest the people who did this to Magnitsky and who routinely do this to others. We are angered and outraged by a system that stands by silently and allows this to continue. We are confused as to why Medvedev who says all the right things does absolutely nothing.
These are not the words of a dissident. These are the words of someone who is fighting for rule of law, whose Russian and foreign friends have died for this country and of a patriot who loves this country. It’s time to revoke law enforcement agencies’ license to steal and kill and to end Russia’s dictatorship of the law.
Jamison Firestone is an attorney and managing partner of Firestone Duncan, which has offices in Moscow and St. Petersburg.
TITLE: Overpopulated With People and Cars
AUTHOR: By Alexei Bayer
TEXT: The best known sentence in Nikolai Gogol’s “Dead Souls” is “What Russian doesn’t enjoy a wild ride!” Almost 170 years since the book’s publication, it remains true. Russia’s traffic fatalities, which are bound to exceed 25,000 for 2009, are nearly 10 times higher than in Britain on a per vehicle basis.
But the quote has a sardonic ring for Muscovites stuck in horrific, life-devouring traffic snarls. While the economic crisis has reduced highway deaths by nearly 20 percent, Moscow traffic jams have actually worsened. It sometimes takes up to five hours to drive around the Garden Ring.
The private car was the death-knell of communism. Even before individual apartments were built in the 1970s, tiny Moskvich and Zhiguli models offered ordinary Soviet citizens the first refuge from communal life. Ironically, private cars now sit for hours on end in giant communal parking lots — standing cheek by jowl, since no one in Moscow pays attention to driving lanes.
Russians seem to like density. Even in uncrowded places, people leave each other no space. When waiting in line, they tend to breath down the necks of the people in front of them. In villages, houses stand in clumps, never spread out.
But today’s traffic jams have nothing to do with Russia’s traditions and everything to do with the post-Communist economy. The population of Moscow stands at more than 10 million. Another 5.6 million live in the Moscow region, and about 5 million reside temporarily or illegally in and around the capital. At 20 million, the conurbation represents 15 percent of the country’s population. It is roughly the size of Greater New York, but the United States has more than twice Russia’s population and much less land.
Economists specializing in development claim that overpopulated cities in many African and Latin American countries are both a sign of poverty and its major cause. Mexico City has almost as many people as Greater Moscow. Cairo is home to 15 percent of Egyptians, and Lagos accommodates 15 percent of Nigerians.
The mono-city model characterizes countries that rely on economic aid from the West and those that are heavily dependent on natural resource exports. Egypt, for example, gets about 1.5 percent of its gross domestic product in the form of U.S. military and economic aid. Nigeria, a major oil exporter, also receives aid and borrows massively abroad. The money is then divvied up by the ruling elites, while some crumbs reach the poor in Lagos.
Poor countries have seen cities expand, but their overall population is exploding, too. Even though Moscow has grown 50 percent over the past decade, Russia’s population has actually shrunk. Since the collapse of communism, Russia has all but abandoned its desire to become an industrial power, choosing instead the path of least resistance — relying on its petrodollar gusher. The revenues are funneled to the state and then distributed as budgetary spending. The closer you are to the seat of power, the better your chances to divert some of the money into your own pockets.
Moscow siphons not only the lion’s share of money from the rest of the country, but its most talented and ambitious people as well. Muscovites have multiplied and grown rich at the expense of the rest of the country. Some 20 percent of all cars in the giant country are concentrated in Moscow. Is it any wonder that they spend most of the time in traffic jams?
Alexei Bayer, a native Muscovite, is a New York-based economist.
TITLE: The Taxing Business of Joined-Up Government
AUTHOR: By Tom Stansmore
TEXT: For those who have been employers in Russia, it is common knowledge that pregnant women and young mothers are the most protected of all groups under the Labor Code. Not only is it virtually impossible to dismiss them, but they also enjoy fully compensated extended maternity leave for up to three years.
I should probably point out now that in no way is the intention of this article to disparage this group or the rules protecting them. As the general director of an outsourced accounting firm, it is my (honest to god) pleasure to work with many Russian women. On occasion, the inevitable joyous event occurs, babies are made, and my employees need time off for the maternity process and, when the timing allows, we welcome them back when they wish to restart their professional careers. Although this is a requirement of Russian law, I’d like to think that I would do the right thing anyway.
The inspiration for this article came when I questioned one of my senior accountants about an official looking letter on her desk. She explained that the letter was a request by the tax authorities to correct a personal tax declaration in which she had deducted the costs associated with the birth of her daughter. These costs, the letter suggested, could not be used to reduce the taxable base.
The Russian Tax Code provides that treatment granted by medical establishments of the Russian Federation are a deductible expense for personal income tax purposes if the amount of the services is below 38,000 rubles ($1,320). In cases where the cost of these services is above this amount, there is an additional provision stating that:
“For expensive types of treatment in medical establishments of the Russian Federation, the amount of tax deduction shall be accepted in the amount of actually borne expenses. The list of expensive types of treatment shall be approved by a decision of the Government of the Russian Federation.”
For my accountant, the correspondence with the authorities started when she got a formal response regarding her personal income tax declaration. The letter, received in August of this year, stated that because the birth (which cost 20,000 rubles) was without complications and therefore not included in the list of expensive types of treatments, she was not entitled to the deduction. In brief, the authorities had applied an incorrect provision of the Tax Code to deny a refund on income tax paid on fees charged by the maternity clinic.
The amounts are mostly symbolic in nature (she is claiming a refund on the income tax paid on the 20,000 rubles, which amounts to all of 2,600 rubles). Nevertheless, we have a legal system that is justifiably geared to protecting young children and the mothers who look after them and obliges business to finance it, yet the authorities themselves deny these benefits to those who need them the most.
After receipt of the first letter my accountant called the authorities and was told that it was a position of principal that the costs of births not be deductible (at least those without complications). In summary, they were forced to take the awkward position that a birth without complications is not a medical treatment and therefore not a deductible expense.
My accountant then responded with a formal letter disagreeing with the position of the authorities and recently received the second response stating the same position as in the first: a birth without complications is not a medical treatment.
I’ve recently become a father for the second time in this country and attended the event. To us laymen (and women) out there, a birth sure seems to be a medical treatment of some sort. It takes place in a birth clinic where there are doctors and nurses, the clinic has all the hallmarks of a medical establishment with machines to monitor the mother and the baby. Depending on the situation, an anesthetic may be administered to the mother (but refused to the father), there are special visiting hours, everyone (including visitors) has to wear medical face masks and special gowns to prevent contamination of the place. It sure seemed like a medical center when I was there.
It is apparent that the authorities themselves do not believe in the validity of their own position in this case and with additional correspondence we are quite certain that my accountant will receive the 2,600 rubles. Unfortunately, this is a common tactic applied by the authorities — we see it in relation to VAT and corporate profit tax declarations all the time — who do not believe that taxpayers are sufficiently confident of their positions or willing to spend the time and resources necessary to stand up for such deductions.
The reason I’m writing about this and the reason my accountant pursued the issue for as long as she did has nothing to do with 2,600 rubles. It’s about the principal. The authorities in this country are notorious for piling on documentary requirements that strangle small businesses and adding to the “us versus them” nature of the system. Here, however, is a situation where the very people who are supposed to be the beneficiaries of the system are caught in the same mentality that condemns it from evolving into something better.
Tom Stansmore is the general director of Emerging Markets Group.
TITLE: In the Spotlight
AUTHOR: By Anna Malpas
PUBLISHER: The St. Petersburg Times
TEXT: In sitcom world, the policemen are jolly and journalists can easily afford to live in spacious Stalin-era apartments. But in the harsh new world of Channel One drama, the bailiff is knocking and there’s no chance of help from Elvira Nabiullina.
This week, CTC’s new sitcom “The Voronins” — a version of “Everybody Loves Raymond” — went head to head with “Dormitory Suburb,” a new family drama on Channel One that is more like the gritty British soap opera “EastEnders.”
The makers of “Dormitory Suburb” promise that “nothing is made up. Only real stories and modern problems.” That’s a bit of an exaggeration, but it is groundbreaking for a channel that once ran a show about a policeman with a talking dog.
Ilya comes back to visit his family after disappearing for 17 years. He has made lots of money in some unspecified — and possibly illicit — way while his brother Andrei toils away at a car repair shop and his mother, Anna Nikolayevna, works at the checkout in a supermarket.
Andrei gets a visit from a debt collector who reminds him that he has skipped payments on a loan for two months. “I took out the loan before the crisis,” Andrei complains. “You need to go to the [Economic Development] minister, to Mrs. Nabiullina. They’re working on a plan for small businesses,” the debt collector says sardonically, telling him to pay up in two weeks. Ilya swans in with his iPhone and offers Andrei a briefcase full of crisp dollars, but in a heroic gesture, Andrei refuses. “At your age, that’s practically a medical diagnosis,” Ilya remarks unpleasantly.
After buying a swanky apartment in a nearby luxury high-rise, Ilya invites all his family for a dinner with waiter service. But only his mother turns up. Meanwhile, there’s trouble at the Little Basket supermarket, as the new management is bringing in redundancies and Anna Nikolayevna’s colleague at the checkout has a nasty glint in her eye.
It’s a relief to switch over to “The Voronins,” which is a remake of “Everybody Loves Raymond” — a sitcom about a sports journalist with a wife and children who lives across the road from his parents and policeman brother.
In the Russian version, the families live in adjoining apartments in a Stalin-era block and even share a balcony. The journalist, Kostya, has cosy chats with his wife, Vera, in their IKEA bed and worries that she is too good for him. She wears pretty dressing gowns, hangs up endless laundry for their three children and loves crying over “Titanic.”
Next door, his overweight policeman brother, Lyonya, lives with their pension-age parents. “It’s just a temporary thing,” he tells a pretty nurse who comes to treat his back pain. He’s a nice policeman who plays with his niece and nephews (two painfully cute blond twins) and doesn’t bring home any briefcases full of crisp dollars.
The brothers compete to please their irascible father, who tells off Kostya for spending “half my pension” on an expensive aquarium as a birthday present. Things go wrong when one of the tropical fish dies and Kostya worries that he is reminding his father of his mortality — but of course he’s more interested in the sport on television.
The elderly parents spar — the wife buys her husband a mohair sweater and warns him that she bought it on sale and can’t take it back. “No return or exchange, that’s what her father told me on our wedding day,” he jokes.
There’s no harsh wind of modernity here. When Kostya’s father grumbles about the tropical fish, he says, “I feel the same way about the fish as I do about the world economic crisis: I don’t give a toss.”
TITLE: Historic Vyborg Building Crumbles Through Neglect
AUTHOR: By Anders Mard
PUBLISHER: Special to The St. Petersburg Times
TEXT: Suffering from a lack of attention from the local authorities, the unique architecture of Vyborg’s Old Town could soon be eroded if international organizations fail to give their support to preservation work, according to a local preservationist.
The cobblestones of Krepostnaya Ulitsa run straight through the center of the medieval town of Vyborg in the Leningrad Oblast. Seven hundred years of Swedish, Russian and Finnish history is concentrated in these cramped quarters.
Vyborg’s old cultural heritage is unique — a fact reflected in the buildings themselves. Vyborg is one of the few cities in Europe to boast almost every architectural style to be found on the continent since the 1300s.
But times are changing. In recent years the economic upswing in Russia has led to a construction boom in Vyborg, as in so many other Russian towns and cities. And the pressure to replace the old heritage with more modern buildings is growing.
Krepostnaya Ulitsa’s finest building is called Domus. It is a grand structure with five floors, which was designed by the Finnish architect Karl Hard af Segerstad in 1903. Most of the architecture in the Old Town is characterized by older Finnish styles — the legacy of a time when Vyborg, while being part of either Sweden or the Russian Empire, was inhabited primarily by Finns. Nowadays, around eight out of ten houses in the Old Town are in a poor state of repair.
Domus received minor damage during the Second World War. The building was still inhabitable in the 1980s. Now the house is in a state of total dilapidation that not even the green safety netting that covers it can hide.
“What we can see here is the result of the city’s cynical policy of privatization,” explained architect Viktor Dmitriyev, standing on the street and looking at the decay.
Dmitriyev has lived in Vyborg since 1953. From 1991 to 2004 he worked at the State Preservation and Maintenance Office for Cultural and Historical Sites. Today, his successor is based in St. Petersburg. The city of Vyborg does not even have a bureaucrat responsible for the oversight of the city’s architectural heritage.
“I am ashamed for Russia about this,” Dmitriyev said. “I am so ashamed that I have even started to limit my contact with foreigners.”
According to Dmitriyev, in the early 1990s, one investor hoped to turn Domus into a medical clinic catering for Finnish clients. An investment contract was agreed with the city and the company began renovation work.
“But the investors pulled out when it suddenly turned out that the city had not transferred the legal ownership status,” said Dmitriyev.
Activists have claimed that a major obstacle to preservation has been the way in which the city allows companies to rent property. According to Oleg Gardeyev, coordinator for the Inhabitants of the Karelian Isthmus Association, contracts are valid for just eleven months, and are renewed each year. If the contracts were for 12 months or for longer the company would be obliged by law to start restoring the buildings.
A new investor was only found for Domus in 2004, but in order for the building to be sold the authorities first had to register it as city property. To do so, the city first had to make an inventory of items of cultural and historical significance. The job went to Dmitriyev.
“We noted down everything we found in the interior,” Dmitriyev said. “All the stoves, the cast iron grills and the various details. As a result, Domus is one of the few houses in the old town to have an official inventory of what should be restored.”
When Dmitriyev visited the building later that year he found that many of the period details had already been stolen, the city having failed to secure the building. The investor again dropped out of the renovation project.
This summer, Domus was badly damaged in a fire. A flimsy safety net around the fa?ade now billows in the wind and the doors are barred. Nevertheless, the building can easily be entered from the back. It is only when you are standing inside the house that you realize the magnitude of the disaster. The interior has been brutally vandalized: The old tile stoves are broken, the inner courtyard is reminiscent of a jungle, the rooms full of junk. Unsurprisingly, the building has long been popular with both drug addicts and artistic photographers.
“The city sold the building to a private individual in October,” Dmitriyev said. “To this day, no one knows what the new plans [for the building] are.”
As a result of the inventory that Dmitriyev created in 2004, the buyer is now obliged to restore the building. Nevertheless, Dmitriyev is pessimistic, claiming that both the fire damage and vandalism have made it easier for the new owner to ignore their obligations.
“The city will probably propose that most of the items on the inventory be deleted,” said Dmitriyev. “Again it will ignore its responsibilities.”
Dmitriyev believes that in a best-case scenario, the exterior of the building alone will be properly restored. In general, he is pessimistic about the future of the Old Town, believing that outside help is needed.
“The city doesn’t have the necessary skills to handle the challenge [of adequate restoration],” Dmitriyev said. “Why not involve UNESCO? Vyborg belongs to different cultures and our city is an international affair!”
TITLE: Gunmen Launch Attack In Philippines
AUTHOR: By Jim Gomez
PUBLISHER: The Associated Press
TEXT: MANILA, Philippines — Dozens of gunmen abducted and fatally shot at least 21 people in the southern Philippines on Monday — a massacre that appeared related to local politics.
There was no claim of responsibility for the bloodshed in the predominantly Muslim region wracked by political tensions between rival clans ahead of elections. It was the worst such mass killing in the area in years.
A convoy of vans carrying about 40 people was hijacked in Maguindanao province, about 560 miles (900 kilometers) south of Manila, and army troops later found the bullet-riddled bodies of 13 women and eight men, regional military commander Maj. Gen. Alfredo Cayton said.
It was unclear if there were any survivors. An army and police search was under way for the other hostages, which included the wife and relatives of a politician seeking to become provincial governor and local journalists.
The identities of the gunmen were unknown but victims’ relatives blamed political rivals in national elections slated for May 2010.
Philippine elections are particularly violent in the south because of the presence of armed groups, including Muslim rebels fighting for self-rule in the predominantly Roman Catholic nation, and political warlords who maintain private armies.
The decades-long Muslim insurgency has killed about 120,000 people since the 1970s. But a presidential adviser, Jesus Dureza, said Monday’s massacre was “unequaled in recent history.”
“There must be a total stop to this senseless violence,” he said, recommending a state of emergency be imposed in the area to disarm all gunmen. “Anything else will not work.”
About 100 gunmen had stopped the convoy, military spokesman Lt. Col. Romeo Brawner said.
The group comprised the wife of Buluan township Vice Mayor Ismael Mangudadatu, along with his two sisters, followers and several local journalists. They were traveling to nearby Shariff Aguak township to file Mangudadatu’s nomination papers for the position of governor of Maguindanao province, Brawner said.
Mangudadatu, who was not in the convoy, said his wife and relatives were among the dead. He accused his political rivals belonging to a prominent clan for the massacre. Representatives of that family did not comment on the allegations.
Mangudadatu said his wife, Genalyn, called him by mobile phone shortly before she and her entourage were abducted.
“She said ... they were stopped by 100 uniformed armed men ... then her line got cut off,” he said.
Maguindanao is part of the Autonomous Region in Muslim Mindanao, which was created as part of a 1996 peace agreement with a large Muslim rebel group.
Army troops went on full alert in Maguindanao to prevent retaliatory killings, Cayton said.
TITLE: At Least 104 Dead in Chinese Mine Blast
AUTHOR: By Cara Anna
PUBLISHER: The Associated Press
TEXT: HEGANG, China — Grieving miners’ families demanded answers Monday from mining officials about the underground gas explosion that left at least 104 men dead in northeastern China.
The massive blast Saturday in Hegang city in frigid Heilongjiang (pronounced HAY-long-jeeahng) province erupted at night when some 500 miners were working below ground. Most escaped, but 104 were confirmed dead and an additional four were missing and feared dead, the official Xinhua News Agency reported Monday. The search for the missing men continued, it said.
The explosion at the Xinxing coal mine, which belongs to the state-owned Heilongjiang Longmei Mining Holding Group, was the deadliest in China’s mining industry in two years, and has highlighted how heavy demand for power-generating coal comes at a high human cost.
At the gates of the mining company’s offices, family members and friends confronted mining officials with questions until some of them were escorted into an office by police, security guards and other officials.
“Why don’t you tell us anything?” one shouted. “Not even a phone call!”
Inside the room, Liu Shujiu, whose 38-year-old husband Zhang Shulai was among the victims, broke down in tears as she sat in a chair.
“Why haven’t they told us anything?” she wailed. “We had to hear from others at the mine.”
A mine official, who — like many Chinese officials — refused to give his name for fear of government reprisals, held up a list of miners’ names and tried to calm the crowd: “There are certainly deaths. You don’t take it well, we know. But there’s a process. I feel as bad as you,” he said, pausing before admitting that the delay in informing family members was a mistake.
“In this, we were wrong,” he said.
Liu said mining officials had brought her rice but little information over the weekend. She said officials have given families no information about the details and circumstances of the blast.
Liu said mining officials had brought her rice but little information over the weekend. She said officials have given families no information about the details and circumstances of the blast.
“We thought the state mines were safe. Why did he die?” she said. The couple have a 9-year-old daughter, whom she had not yet told. “How do I tell her that her father is not coming home?”
Another woman, whose husband Hou Yibin was among the dead, remained seated and silent. She was later laid across some chairs with an intravenous drip in her arm as a nurse hovered nearby.
Initial investigations showed the mine’s management failed to evacuate workers promptly after an extraordinarily high gas density was detected in the pit, Luo Lin, the head of China’s State Administration of Work Safety, was quoted as telling Xinhua on Monday.
“The accident has again revealed many problems in colliery management — it is a lesson we must all learn,” Luo said, adding a thorough probe would determine the exact cause of the explosion, which he said started with a gas leak in one of the shafts and was worsened by poor ventilation.
TITLE: Facebook Photos Lose Canadian Insurance Benefits
PUBLISHER: The Associated Press
TEXT: BROMONT, Quebec — A Canadian woman on long-term sick leave for depression says she lost her benefits because her insurance agent found photos of her on Facebook in which she appeared to be having fun.
Nathalie Blanchard has been on leave from her job at IBM in Bromont, Quebec, for the last year.
The Canadian Broadcasting Corp. reported Saturday she was diagnosed with major depression and was receiving monthly sick-leave benefits from insurance giant Manulife.
But the payments dried up this fall and when Blanchard called Manulife, she says she was told she was available to work because of Facebook.
She said her insurance agent described several pictures Blanchard posted on Facebook, including ones showing her having a good time at a Chippendales bar show, at her birthday party and on a sunny holiday.
Blanchard said Manulife told her it’s evidence she is no longer depressed. She’s fighting to get her benefits reinstated and says her lawyer is exploring what the next step should be.
Blanchard told the CBC that on her doctor’s advice, she tried to have fun, including nights out at her local bar with friends and short getaways to sun destinations, as a way to forget her problems.
Manulife wouldn’t comment on Blanchard’s case, but did say they would not deny or terminate a claim solely based on information published on web sites such as Facebook.
TITLE: Four U.S. Troops Killed in Afghanistan in 24hrs
AUTHOR: By Heidi Vogt
PUBLISHER: The Associated Press
TEXT: KABUL — Bomb attacks and a firefight killed four U.S. troops in 24 hours in Afghanistan, the military said Monday, adding to the growing toll as NATO and the U.S. consider whether to send more forces to the war.
Three of the Americans died in southern Afghanistan on Sunday, NATO said in a statement. Two of them were killed in a bomb attack and the third in a separate firefight.
The statement said a bomb killed the fourth American in the east Monday.
The deaths bring the number of Americans killed in Afghanistan in November to 15. October was the deadliest month for U.S. troops in the eight-year war, with 58 dead.
Meanwhile, Afghan officials said three Afghan soldiers were killed by a roadside bomb in southern Helmand province.
The Defense Ministry said the bombing occurred on Sunday in Musa Qala district. It did not give further details and it was not clear if there was any connection between the Afghan deaths and the American deaths.
In Brussels, NATO said Monday it wants allied nations to commit more forces to Afghanistan ahead of a U.S. decision on whether to send more troops.
NATO Secretary-General Anders Fogh Rasmussen is in the midst of intense negotiations on getting more troops, equipment, funding and other resources for the newly established NATO Training Mission, spokesman James Appathurai said.
NATO currently has about 71,000 troops in Afghanistan, nearly half of them American. The U.S. military also has another 36,000 soldiers in Afghanistan who serve outside NATO under independent command.
The Obama administration is considering military proposals to send 10,000 to 40,000 additional U.S. troops to Afghanistan next year. An announcement is expected in the next two weeks after months of deliberations over the war.
Afghan President Hamid Karzai, inaugurated Thursday for a second five-year term, wants more U.S. help to secure his country against the Taliban-led insurgency.
Although several allies have said they will dispatch some reinforcements, most NATO nations have so far shied away from making firm commitments.
TITLE: Leaks Challenge Blair Version of Iraq War Buildup
AUTHOR: By David Stringer
PUBLISHER: The Associated Press
TEXT: LONDON — Leaked British government documents call into question ex-Prime Minister Tony Blair’s public statements on the buildup to the Iraq war and show plans for the U.S.-led 2003 invasion were being made more than a year earlier, a newspaper reported Sunday.
Britain’s Sunday Telegraph published details of private statements made by senior British military figures claiming plans were in place months before the March 2003 invasion, but were so badly drafted they left troops poorly equipped and ill-prepared for the conflict.
The documents — transcripts of interviews from an internal defense ministry review of the conflict — disclose that some planning for the Iraq war had begun in February 2002. Maj. Gen. Graeme Lamb, then head of Britain’s special forces, was quoted as saying he had been “working the war up since early 2002,” according to the newspaper.
In July 2002, Blair told lawmakers at a House of Commons committee session that there were no preparations to invade Iraq.
Critics of the war have long insisted that Blair offered then-President George W. Bush an assurance as early as mid-2002 — before British lawmakers voted in 2003 to approve U.K. involvement — that Britain would join the war.
The leaked documents are likely to be supplied to a public inquiry established by Prime Minister Gordon Brown to scrutinize prewar intelligence and postwar planning, and which will hold its first evidence sessions later this week.
Brown appointed ex-civil servant John Chilcot to lead the panel, which will call Blair and the current and former heads of Britain’s MI6 intelligence agency — John Sawers and John Scarlett — to give testimony in person.
According to the Sunday Telegraph, military leaders used the defense ministry review to criticize government departments over their failure to plan for reconstruction work once Saddam Hussein had been deposed.
“We got absolutely no advice whatsoever. The lack of involvement by the FCO (Britain’s Foreign and Commonwealth Office), the Home Office and the Department for International Development was appalling,” the newspaper quoted Brig. Bill Moore as saying in his statement.