SOURCE: The St. Petersburg Times
DATE: Issue #1570 (31), Tuesday, May 4, 2010
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TITLE: Wal-Mart Rethinks Russian Strategy
AUTHOR: By Anatoly Medetsky
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Wal-Mart, the world’s biggest retailer, may opt to build its own stores in Russia in addition to buying an existing chain, a source familiar with the situation said Thursday.
Working under the radar, Wal-Mart’s Moscow office is looking at these two strategies rather than focusing solely on an acquisition, the source said.
The option of a purchase is “only a small part of the story,” the person said, asking for anonymity because he was not authorized to discuss the matter with the press.
A Wal-Mart spokesman said only that the company still considered Russia a promising investment prospect, declining to discuss specific plans.
“We … are studying the appropriate means of entering the market,” said Konstantin Dubinin, the retailer’s Moscow-based corporate affairs director.
The company has had an office here since the fall of 2008, and it expanded its staff earlier this year. They are currently on the 19th floor of the Northern Tower in the Moskva-City business district.
If Wal-Mart chooses to go it alone, it may construct its stores in three sizes: 15,000 square meters; 8,000 square meters; and of smaller floor space, the source said.
Retailers such as France’s Auchan and St. Petersburg-headquartered Lenta already boast hypermarkets of about 15,000 square meters, while Magnit is betting on 8,000-square-meter stores. Even so, the formats are believed to have plenty of room to grow.
Should Wal-Mart build new stores, it will likely do the work itself, targeting locations in high-density residential areas, the source said.
Wal-Mart, known for its inflexibility in standards, would have to rebuild any property if it were to buy existing premises, and it would want to change relations with suppliers, said Sergei
Vasin, an analyst at investment company Metropol.
“They would buy no more than the land and the building,” he said. “Why then pay extra for the brand name and logistics system?”
Wal-Mart has been in no rush to enter Russia since late 2007, when it resumed talk of making the move. Its international vice president, Juan Figuereo, said at the time that the chain was looking for a local partner for assistance.
Retail chains including Lenta, Kopeika, Karusel and Mosmart have since been named as potential targets for a takeover, although a deal has yet to materialize.
After months with no visible progress, Wal-Mart’s chief in Russia, Stephen Fanderl, left the company in October. The chain’s stalled expansion was the reason, Kommersant reported, citing people close to Fanderl.
“They are incredibly slow — slower than anyone could ever dream of or realize,” the source told The St. Petersburg Times.
On the other hand, French rival Carrefour in October abruptly decided to pull out of Russia after just four months here, a move attributed to lack of any growth or acquisition prospects.
“Hypermarkets are a very underdeveloped segment,” Vasin said. “I still don’t understand why Carrefour left.”
Wal-Mart’s waffling may stem from the price for an entry ticket, he said.
“Seeing demand from foreign chains, perhaps the Russian players are asking for prices that are too steep,” Vasin said.
TITLE: Austrians See Kadyrov Links in Murder Case
AUTHOR: By Nikolaus von Twickel
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Investigators probing the murder of a Chechen refugee in Vienna have uncovered strong trails that lead straight to Ramzan Kadyrov, opening the unprecedented possibility that Austria might press charges against the Chechen president.
Among the evidence are photographs and documents that show that the man suspected of organizing the January 2009 killing of Umar Israilov knew Kadyrov personally and had been in close contact with one of his aides, media reports said this week.
Gerhard Jarosch, a spokesman for Vienna prosecutors, confirmed the reports Thursday but denied speculation that his agency would decide about an indictment soon. “We are working on this now, but I cannot say when we will be finished,” he told The St. Petersburg Times.
But prosecutors are nowhere close to pressing charges against Kadyrov, Jarosch said by telephone from Vienna. “We would first have to decide about opening an investigation against him.”
Kadyrov vehemently denied that he had anything to do with the crime, complaining that it has “become fashionable” to blame him for everything. “If somewhere a cow goes missing, it is now common to accuse Kadyrov,” he said in comments released on his web site.
He also said Israilov had left many blood enemies in his native Chechnya, suggesting that they were responsible for the killing.
But a report by the anti-terror unit of Vienna police names Otto Kaltenbrunner, a Chechen refugee living in Austria, as the “main contracted offender” and Kadyrov and his aide Shaa Turlayev as the “principal offenders,” according to excerpts published by Peter Pilz, a Green party deputy in the Austrian parliament.
Kaltenbrunner is one of three Chechen suspects currently imprisoned in Austria. He has been living in the Austrian town of St. P?lten as a political refugee and adopted a German name according to a local law, Jarosch said.
The police report gave his original name as Ramzan Edilov. It also names the other suspects as Lecha Bogatyryov, Turpal-Ali Yeshurkayev and Muslim Dadayev.
Bogatyryov — whose name is transliterated into German as Letscha Bogatirov — is accused of being the killer, having fired at least two fatal shots into Israilov. He has managed to flee Austria and return to Russia, Jarosch said.
Yeshurkayev and Dadayev are both imprisoned on suspicion of being accomplices. Investigators believe that Bogatyryov and Yeshurkayev confronted Israilov after he stepped out of a grocery shop close to his Vienna home on Jan. 13, 2009. The two then chased him through the street in broad daylight and shot at him several times.
Dadayev is accused of driving the getaway car.
Reports in Austrian media have suggested that the three left behind a trail of evidence, including footage in a video surveillance camera, gunpowder on their clothes and cell phone calls.
Kaltenbrunner’s phone contained a photo in which he and Kadyrov are embracing each other, Vienna’s Falter magazine reported earlier this week.
Investigators also traced one of his calls to Turlayev, The New York Times reported.
Turlayev, a former rebel fighter who went over to Kadyrov’s pro-Moscow government, has been implicated in organizing a contract killing before. Khavazhi Yusupov, a former bodyguard to Isa Yamadayev, said in a video published last week that Turlayev and Kadyrov had ordered him to kill his boss last year.
But Jarosch, the prosecutors’ spokesman, said the police report did not carry conclusive evidence.
He pointed out that the report said “it is to be assumed that Israilov’s murder really was ordered from the very top (Kadyrov).” To conclude that Kadyrov gave a definite order to kill is exaggerated, he said: “There is no evidence for such an order.”
But Pilz, the Austrian lawmaker, said this probably reflected political pressure. “There are strong efforts from the government to keep Russian government officials out of the investigation,” he told The St. Petersburg Times on Thursday.
Earlier media reports that suggested that Israilov was killed in a dispute over $450,000 were probably part of that effort, he said.
An Austrian paper reported last year that the money, which stemmed from criminal activities, was taken by Israilov when he fled from Chechnya to Austria.
Pilz also said there were signs that two key witnesses for the case were dead. One of them, Salman Muvlayev, was shot last fall in Azerbaijan, he wrote on his web site. The other, Artur Kurmakayev, has been reported missing, he added.
Muvlayev and Kurmakayev were the main informants who told Austrian police that an attempt on Israilov’s life was planned, Pilz said.
Kremlin spokespeople were unavailable for comment Thursday. But Vladislav Belov, an analyst with the Moscow State International Relations Institute, said the government should have no reason to fear even an indictment against Kadyrov.
As a full member state of the European Union, Austria has the right to charge him, Belov said.
“If there are substantial and logical reasons, they should indict him. And the government should cooperate, for only this will improve cooperation with European law enforcement authorities,” he said.
TITLE: Anti-Governor Slogan Sparks May Day Ban
AUTHOR: By Sergey Chernov
PUBLISHER: Staff Writer
TEXT: City Hall stopped democrats from marching on May Day because they were carrying a banner calling for the dismissal of St. Petersburg Governor Valentina Matviyenko.
Despite having a City Hall-issued permit for the demo, the group of 700 to 1,000 democrats — including representatives of Yabloko, Solidarity and smaller parties and groups — were surrounded and stopped by the police on Saturday at the gathering point near Oktyabrsky Concert Hall on Ligovsky Prospekt and were not allowed to march along Nevsky, the city’s main throughfare, as scheduled.
The rally was curbed on the orders of Alexander Vashurin, an official of City Hall’s law, order and security committee, who claimed that a giant banner reading “Fire Matviyenko!” and small green flags reading “St. Petersburg Without Matviyenko,” along with anti-Prime Minister Vladimir Putin posters and anti-Matviyenko chants and leaflets “did not correspond to the stated objective of the event,” the deputy chair of Yabloko’s local branch, Alexander Shurshev, said Monday.
Thousands take part in May Day demos in the city every year, ranging from pro-Kremlin parties to anarchists. Participants march along Nevsky toward different destinations in the city, where they hold stand-up meetings.
Shurshev said that the democrats had stated “defense of citizen’s rights” as the demo’s objective, and said they had done so many times before and had never had problems about the slogans used.
The activists turned the banner around so that only the blank reverse side of it was visible, but were not allowed to move on. Surrounded by the police, they chose to hold a stand-up rally on the spot, which lasted for about an hour until Vashurin presented Yabloko’s local leader Maxim Reznik with a printed document declaring the rally illegal.
After reading the order to protesters, Reznik announced an “ongoing campaign for the dismissal of Matviyenko” and asked them to leave. At around the same time, 150 to 200 activists rallying at Pionerskaya Ploshchad, the site of the democrats’ scheduled stand-up rally and concert, were ordered to disperse by the police, which they did.
Shurshev said the democrats would either sue the officials or file a complaint with the prosecutor regarding the ban.
A group of 180 anarchists and anti-fascists were also surrounded by OMON special-task officers, who let them go after negotiations. “I explained that I was one of the official organizers and said we were not aiming for any provocations, extremist slogans or clashes with the Nazis,” anarchist Dmitry, who declined to give his last name, said Monday.
Wary of possible arrests, due in part to an incident at last year’s May Day demonstration when more than 100 anarchists were detained for no apparent reason, as well as a police raid Friday of their headquarters, the anarchists formed a “black bloc” — a tightly-packed formation of people ready to resist, Dmitry said.
According to him, anarchists came to the defense of one of their comrades whom a plain-clothes officer — identified by marchers as an anti-extremist Center “E” officer — attempted to detain at the beginning of the march.
On Friday, the police raided the squat where the anarchists had gathered to prepare for the demo — and listen to a punk concert. OMON broke the windows of a two-story building on the Petrograd Side occupied by the anarchists, broke in and arrested about 40 people, Dmitry said.
Taken to three different police precincts, the detainees were released several hours later, except three who were held until the following day. One activist was charged with disorderly conduct. The police also confiscated a number of May Day posters and banners. On Saturday, no other group — including the ultra-right, who marched with anti-immigrant and nationalist banners and portraits of Stalin — did not report any problems with City Hall or the police.
The police estimated the number of May Day demo participants at more than 15,000 and said that no public order violations had been registered, Interfax reported.
TITLE: Greenpeace Ship to Test Water Quality
AUTHOR: By Galina Stolyarova
PUBLISHER: The St. Petersburg Times
TEXT: The Greenpeace ship Beluga II arrived in the city on Monday as part of its research expedition along the Volga-Baltic waterway aimed at determining pollution levels in Russian rivers.
On Tuesday and Wednesday ecologists will take water samples from the Neva River and other local rivers and canals before the ship moves on to Moscow. During the course of its one-month journey, Beluga II will cover almost 5,000 kilometers of one of Russia’s major waterways.
“With this expedition we want to establish the level of pollution in some of the country’s most important rivers, and publicize the results with an eye to persuading regional authorities to enforce a ban on the illegal discharge of industrial waste into rivers,” said Dmitry Artamonov, head of the St. Petersburg branch of Greenpeace.
In the meantime, Greenpeace has published the results of a survey about the environmental policies of enterprises in St. Petersburg and the Leningrad Oblast.
According to Artamonov, only 13 out of 173 enterprises that received Greenpeace questionnaires early this year provided all the information requested by the ecologists. The majority of companies failed to report the volume and composition of their pollutants.
A number of companies, including Talosto, Parnas M, Baltimor-Neva, Lenta, Metro, Karusel and Perekryostok ignored the survey altogether, while others, such as the St. Petersburg Metropolitan and St. Petersburg Radiotechnical Equipment Factory, said they regarded this information as confidential and therefore could not disclose it.
The few companies that shared the information included Coca-Cola, Kirovsky Zavod, Admiralteiskiye Verfi, Ford Motor Company and Krupskaya Confectionery.
“Large numbers of local companies try to get away with dumping their waste into the sewage channels,” Artamonov said. “The issue here is that the city’s water treatment facilities were originally designed to deal with sewage, so all the chemicals automatically end up in local waters. This dangerous practice has to be stopped as soon as possible.”
Ecologists say the low level of social responsibility in Russia is the direct result of the general inertia and individualism that reigns in Russian society today. “Most people do not show the slightest interest in things that damage the environment, unless they are directly affected by the consequences,” Artamonov said.
Water pollution has remained a major concern in St. Petersburg since Soviet times. Unlike in most European cities, tap water is not drinkable. Before 1978, the city had no water-treatment facilities at all.
Even now, with several water-treatment plants operating in the city, 40 percent of the sewage and industrial waste originating in the city — the highest level in the past 15 years — went directly into the River Neva and the Gulf of Finland, owing to a shortage of waste treatment facilities, according to City Hall’s annual report for 2007. That figure does not include illegal discharges.
In 2004, city authorities said only 25 percent of untreated waste was being pumped into the river.
Ecologists stress that since 2000, the volume of unauthorized industrial discharge has grown despite the fact that such practices are illegal and could lead to the temporary suspension of all operations by the company responsible.
Fines for illegal discharges have little or no impact on the problem.
“Companies prefer to pay fines of anything between 20,000 and 40,000 rubles ($680 to $1,365) rather than install expensive filtration systems,” said Vera Izmailova, spokeswoman for Vodokanal, the St. Petersburg municipal water utility. “Fines need to be increased drastically, and economic sanctions must be used against companies that breach environmental standards.”
The head of the St. Petersburg branch of the State Environmental Protection Watch, Sergei Yermolov, said his office has only four inspectors and no legal right to initiate an inspection.
“An inspection can only be prompted by an official report about a discharge. We’re not allowed to just show up at a factory and demand that they install a filtration system,” Yermolov said.
TITLE: In Brief
TEXT: 2 Killed in Dagestan
MAKHACHKALA, Dagestan (SPT) — A suicide attacker set off a car-bomb blast that killed at least two police officers and injured seven others Thursday, a Dagestani police spokesman said, Reuters reported.
The bomber detonated the explosives after police stopped his car at a checkpoint about 100 kilometers north of Makhachkala, the spokesman said. Two traffic officers were killed and six other officers were injured, along with 11 civilians, he said.
Army Draftees
MOSCOW (SPT) — Students should be drafted into mandatory military service after their freshman or sophomore year, and the age limit for draftees should be raised to 30 from 27, Vasily Smirnov, deputy head of the General Staff, said on Thursday.
Giant White Roaches
MOSCOW (SPT) — Moscow Mayor Yury Luzhkov said Thursday that the underground Neglinka River posed no risk to the Bolshoi Theater but he warned that the river was crawling with 10-centimeter albino cockroaches.
“They do not want to be touched by man. I tried, but they jump into the water right away. They are good swimmers,” he said, Interfax reported. He was speaking at the opening of the theater’s restored facade.
Sutyagin’s Appeal
MOSCOW (SPT) — An Arkhangelsk regional court will consider an appeal Friday from researcher Igor Sutyagin, who was sentenced to 15 years in prison for espionage in 2000 and was denied parole in March, Sutyagin’s family said.
Rights activists call his case the start of a campaign against researchers.
TITLE: Officials Appeal Drop Of Bribery Charges
AUTHOR: By Alexander Bratersky
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Bribery charges were dropped Thursday against the daughter of a dean at Moscow State University, law enforcement officials said, as accusations swirled that a high-level United Russia official lobbied for the case to be closed.
Polina Surina, 26, was released after two days in custody on charges of attempting to receive a 35,000 euro ($46,000) bribe from a would-be student seeking fast-track entry, city investigators said. She teaches in the economic theory department of the university’s school of government, which is headed by her father, Alexei Surin.
If convicted, she would have faced up to five years in prison.
Nina Ostanina, a State Duma deputy for the Communist Party, said Thursday that she believed Surina was released because Duma Deputy Speaker Vyacheslav Volodin, a senior leader in United Russia and a professor at the school of government, intervened on her behalf.
Ostanina told The St. Petersburg Times that she had written to Prosecutor General Yury Chaika asking that he investigate whether Volodin pressured investigators to drop the charges.
“I wanted Chaika to take this case under his personal control,” she said. “All of this shakes the credibility of the United Russia party and the state.”
Ostanina said investigators told her that they were pressured by the central district of the City Prosecutor’s Office to close the case. In addition to teaching, Surina is also closely connected to United Russia and has worked on various political campaigns for Volodin, she said.
The Moscow branch of the Investigative Committee said Thursday that it disagreed with the central district prosecutor’s office, which announced that it was dropping the charges.
A spokesman for the committee said it had sent an appeal to Moscow’s top prosecutor.
A spokeswoman for Surin’s office at Moscow State University’s school of civil service declined to comment on the case. Volodin and Surina could not be reached for comment.
While Surina and Volodin both teach at the same school, they are in different departments. Volodin — who studied engineering and has a law degree from the Presidential Academy of State Service — is a professor in the state building department, which was created last year.
Moscow State University’s school of government includes a number of political heavyweights among its professors. Other department heads include Mikhail Shvydkoi, a former culture minister, and Viktor Danilov-Danilyan, a former natural resources minister.
The school of government is one of the university’s most prestigious, as students are able to get internships with parliamentary committees and in the presidential administration.
TITLE: Right to Charge U.S. Parents Sought
AUTHOR: By Alexandra Odynova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Russia will demand the right to file charges against U.S. parents who abuse or neglect adopted Russian children during treaty negotiations aimed at unfreezing adoptions after a U.S. mother returned her 7-year-old adopted son to Russia.
A U.S. State Department delegation held initial talks about the treaty with Russian officials at the Foreign Ministry on Thursday, and the main negotiations are scheduled for May 12, the office of the children’s ombudsman said.
It was unclear when an agreement might be reached.
Russia froze adoptions after Artyom Savelyev was sent unaccompanied on a plane to Moscow on April 8 with a note from his U.S. mother that said he was violent and psychologically unfit.
Children’s ombudsman Pavel Astakhov said Thursday that the Russian side would make sure that the treaty better protected the rights of adopted children and allowed Russian prosecutors to bring criminal charges against U.S. parents who were abusive or negligent.
“The agreement will create a legal basis for the continuation of international adoptions and, most important, empower Russia to demand that the adoptive parents observe the legal rights and interests of the child, up to the criminal prosecution of violators,” Astakhov said, Interfax reported.
Russian negotiators will also seek the creation of a single agency to handle all issues relating to the transfer of Russian children to foreign parents, including follow-up questions about the well-being of adopted children, Astakhov said in a statement on his office’s web site.
“This agreement will take into account the rules of the Hague Convention, but it will significantly expand its borders,” Astakhov said, referring to the Hague Convention on Intercountry Adoption, an international agreement between signatory countries on best adoption practices.
He said the treaty should stipulate that all adoptions are carried out through accredited agencies, except in cases where the child was adopted by relatives, and that the adoptive parents receive psychological testing and training on child-rearing.
He said Russia’s demands have been compiled in a draft treaty.
The head of the visiting U.S. delegation, Michael Kirby, told journalists Thursday that the delegation had not received the Russian draft treaty but stressed that both sides would strive to reach an agreement.
The negotiations were initially scheduled for April 19 and 20 but were postponed after a volcanic eruption in Iceland suspended many trans-Atlantic flights.
U.S. Secretary of State Hillary Clinton raised the issue of child adoptions during a telephone conversation with Foreign Minister Sergei Lavrov earlier this week, U.S. State Department spokesman Philip Crowley said Wednesday. He did not elaborate.
Some 3,500 Russian children are currently in the process of being adopted by about 3,000 U.S. families, according to the Joint Council on International Children’s Services.
TITLE: Drunken Siberian Holds Mayor Hostage
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — A drunken sanitarium worker took a Siberian mayor hostage with two hand grenades and tried to storm a law enforcement building before police commandos arrested him Thursday.
No one was injured in the incident.
Igor Golubev, 39, a resident of the Irkutsk region town of Usolye-Sibirskoye, jumped into the car of Mayor Yevgeny Kustos, unpinned the grenades and ordered the mayor to drive to the office of local prosecutors and investigators, Irkutsk regional investigators said in a statement. Kustos said Golubev, a former leader of the Liberal Democratic Party’s local branch, said to him, “Let’s go kill the prosecutor — he doesn’t react to complaints,” Komsomolskaya Pravda reported.
When the car reached the destination, the mayor managed to get into the building first and order security guards to lock the doors.
Investigators and prosecutors were evacuated through a staff exit.
Golubev handed the grenades to his elder brother after he was surrounded by the police, Komsomolskaya Pravda reported, without explaining how the brother arrived at the scene.
Golubev faces possible charges of seizing a hostage with the use of a weapon and illegal weapons possession. If charged and convicted, he faces up to 15 years in prison for the first charge and up to four for the second.
Separately, a 73-year-old woman from the Siberian city of Omsk injured a local prosecutor with an ax that she threw at him after he refused to accept a complaint Tuesday, Omsk prosecutors said.
TITLE: Interior Ministry to Cut Its Office Staff by 50 Percent
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The Interior Ministry will fire half of the staff at its central office by December, with the candidates for dismissal to be announced by Sept. 1, Interior Minister Rashid Nurgaliyev said Thursday.
Nurgaliyev said the ministry would help all officers whom it intends to fire during the reform to find new jobs.
After a series of corruption scandals and violent crimes involving police, President Dmitry Medvedev ordered a broad reform of the 1.2 million-member Interior Ministry in December. In February, he signed a decree ordering the Interior Ministry to develop a legal framework for the reform and submit it to the State Duma by year-end.
Speaking to the Duma’s Security Committee, Nurgaliyev said the national police force would be reduced by 20 percent in the next two years, though officers who make the cut will get a threefold salary hike.
By 2012, the average officer will be paid 35,000 rubles ($1,200) a month, while a district criminal investigator would receive 55,000 rubles, he said. About 90,000 police officers quit the force every year, with low salaries of $600 to $800 per month cited among the main reasons.
“We are not going to put up with this situation,” Nurgaliyev said, RIA-Novosti reported.
Federal authorities will allocate 3.7 billion rubles ($130 million) within the next two years to construct housing for police reassigned to new regions, he said. The ministry is also planning to restructure its universities to eliminate and combine several of them, and they will be accepting half as many students.
TITLE: Blast Kills 2 in Kabardino Balkaria
AUTHOR: By Alissa de Carbonnel
PUBLISHER: Agence France Presse
TEXT: MOSCOW — A bomb blast Saturday in Russia’s volatile south that killed a 94-year-old World War II soldier cast a shadow over nationwide May Day celebrations led by Communists, many of them war veterans.
President Dmitry Medvedev moved quickly to order a federal probe into the blast that left another 22 people injured in the North Caucasus region of Kabardino Balkaria, where the Kremlin is battling a tenacious Islamist insurgency.
The explosive device rigged to a timer was set off around 12.15 pm (0815 GMT) above the VIP box at a hippodrome in the regional capital Nalchik, a spokeswoman for the local investigative committee told AFP.
“During a horse race ... on the occasion of the celebrations an explosion went off in the VIP lodge of a magnitude equivalent of 3-4 kilograms of TNT,” the spokeswoman, Tatiana Nauzhokova, said.
“One man has died in hospital from his injuries,” she said.
Russian news agencies said the victim who died in hospital, Saidly Shibzukhov, was a 94-year-old veteran of World War II, known in Russia as the Great Patriotic War.
A list of 23 people wounded in the blast including Shibzukhov, whose date of birth is listed as 1916, was released on the emergency services’ web site.
TITLE: Putin Suggests Gas Merger With Ukraine
AUTHOR: By Maria Levitov and Anna Shiryaevskaya
PUBLISHER: Bloomberg
TEXT: MOSCOW — Prime Minister Vladimir Putin proposed uniting state-run Gazprom and Ukraine’s state energy company, Naftogaz Ukrainy, while seeking closer political and economic ties with the neighboring country.
“We talked about integration in nuclear energy, and we can do the same thing with gas,” Putin told reporters Friday in Sochi, southern Russia, after meeting with his Ukrainian counterpart, Mykola Azarov, for the third time in 10 days. “I propose unifying Gazprom and Naftogaz.”
Last week in Kiev, Putin suggested forming a nuclear energy holding company between the two former Soviet Union republics after Russia agreed to invest as much as $45 billion in Ukraine in fuel subsidies in the next decade.
Russia offered Ukraine a $1 billion discount on nuclear fuel and joint ventures in atomic power technology if Ukraine signs a 25-year fuel contract, Sergei Kiriyenko, head of Russian state nuclear holding company Rosatom Corp., told reporters in Sochi on Friday.
Ukraine moves about 80 percent of Russia’s Europe-bound gas exports via the Soviet-era transportation network. The world’s biggest gas company, Gazprom cut supplies to Ukraine, reducing flows to Europe, twice in the last four years because of pricing disputes amid strained political ties.
“This is part of Russia’s campaign to extend influence in Ukraine and would achieve its long-held ambition to control the transmission of gas,” Chris Weafer, chief strategist at UralSib Financial Corp., said by phone.
Russian and Ukrainian officials will meet after the May holidays to discuss merging the companies, Gazprom Chief Executive Officer Alexei Miller told reporters in Sochi. Gazprom is ready to consider asset swaps with Naftogaz, he said. To expand into global markets, Gazprom has swapped assets with Germany’s E.ON Ruhrgas and Italy’s Eni SpA.
Naftogaz has assets in gas production, transportation and underground storage, from exploration to end user, that interest Gazprom, Miller said.
Control over Naftogaz’s large gas storage capacity in western Ukraine would allow Gazprom to fine-tune flows to Europe according to demand, Mikhail Korchemkin, director of East European Gas Analysis in Malvern, Pennsylvania, said by phone. The Russian export monopoly meets about a quarter of European gas needs, and seeks to boost that to 32 percent.
The proposal to unify the companies was met “with an enthusiastic positive response” at a meeting of officials from the two countries Friday, Miller said.
The proposals weren’t discussed, Unian reported, citing the Ukrainian prime minister’s spokesman, Vitaliy Lukyanenko. The government will consider “the impromptu” and study specific proposals, the Ukrainian news agency said.
Naftogaz spokesman Dmytro Marunych declined to comment when called by Bloomberg News.
Russia last week pledged $40 billion to $45 billion of investment in gas supply subsidies during the next 10 years in exchange for Ukraine extending its lease to a navy base on the Crimean Peninsula to 2042. Putin cut the gas export tax for Gazprom to compensate for the gas price discount to Ukraine.
Putin called the agreement, reached two months after Ukraine elected Viktor Yanukovych as its new president, an “expensive” necessity.
Relations between the countries had grown strained under Yanukovych’s predecessor, Viktor Yushchenko, who had pledged closer ties with Europe and the North Atlantic Treaty Organization, angering Russia.
“Russia wants to strengthen and develop its success on the political level with an economic success,” said Volodymyr Omelchenko, an analyst at the Kiev-based Razumkov Center for Economic and Political Studies. “This can only mean one thing — absorption of Naftogaz by Gazprom.”
The Russian gas export monopoly needs to work with Ukraine to keep transit fees low, allowing it to invest in its planned Nord Stream and South Stream pipelines to Europe, Omelchenko said.
South Stream, owned by Gazprom and Eni, may be unnecessary if Gazprom gets control of Naftogaz, Korchemkin said. Nord Stream, designed to link Russia and Germany under the Baltic Sea, earlier this month entered the construction phase.
Putin started pushing South Stream after the first gas dispute with Ukraine led to a cutoff to clients in Europe in 2006. Last week he traveled to Vienna to seal Austria’s participation in the project, which would bypass Ukraine by crossing under the Black Sea and up the Balkans to central and southern Europe.
Russia is on track with South Stream and may also increase capacity of Nord Stream, if needed, Putin said last week.
TITLE: Russia May Reduce Foreign Borrowing
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russia may decrease foreign borrowing plans by $13 billion this year and increase domestic debt sales by the same amount, Deputy Finance Minister Dmitry Pankin said.
The figures are still preliminary and will depend on the size of the budget deficit this year, he told reporters in the Black Sea resort of Sochi on Friday.
The government originally planned to cover half of its borrowing needs on the local market and half abroad, Pankin said earlier this month. Russia raised $5.5 billion last week in its first international bond offering since defaulting on $40 billion of domestic debt in 1998.
If Russia had delayed the debt sale by a week, it wouldn’t have gone ahead “because the market was gone,” Pankin said.
Russia is turning to domestic debt markets as declining yields and ruble gains make the market more attractive. The budget gap may reach between 6 percent and 6.8 percent of gross domestic product this year, compared with last year’s shortfall of 5.9 percent, the country’s first deficit in a decade.
Russia will cut plans to borrow abroad to $7 billion a year in 2011 and 2012, from $20 billion planned earlier, Pankin said on April 24.
The deficit might shrink to “closer to 3 percent” of GDP in 2010, from 6.8 percent currently planned, if the price of oil stays above $70 per barrel and economic growth accelerates above 3.5 percent, he said.
TITLE: Gazprom Posts Q4 Profits of $10.6 Bln
PUBLISHER: Bloomberg
TEXT: MOSCOW — Gazprom posted an eightfold increase in profit Thursday as fuel consumption in Russia and Europe started to recover and finance expenses fell.
Net income in the fourth quarter rose to 309 billion rubles ($10.6 billion) from 37.5 billion rubles ($1.28 billion) a year earlier, the company said Thursday. That beat the average estimate of 212 billion rubles in a Bloomberg survey of six analysts. Third-quarter net was 175 billion rubles.
“The results reflect the recovery in demand in Russia and Europe,” said Maria Radina, a gas analyst with Nomura International. “Everything is good, not bad. There are no reasons to worry.”
Exports to Europe, hurt by the economic crisis, picked up in the second half to increase by more than 19 percent in the fourth quarter from a year earlier, Gazprom said in January. Russian demand has also risen with economic growth and colder weather, Bank of America Merrill Lynch said in February.
Earnings before interest, taxes, depreciation and amortization rose to $11.3 billion from $10.5 billion a year earlier, Radina said. EBITDA is a relevant indication of profitability because it was not affected by one-off items such as an asset swap with E.On Ruhrgas last year, foreign-exchange volatility and a loss in 2008 as a stake in Gazprom Neft declined in value, she said.
Gazprom shares closed up 2.3 percent at 174.45 rubles.
Sales volumes rose “on the back of a record decline in the gas price in Europe,” Radina said.
An average price for Gazprom’s gas in Europe stood at $287.50 per 1,000 cubic meters last year, compared with $407.40 per 1,000 cubic meters in 2008, Gazprom said. Revenue fell 9 percent to 2.99 trillion rubles in 2009.
Sales probably dropped to $580 billion in the fourth quarter. Gazprom reported only annual earnings and restated sales for 2008. Analysts said Gazprom excluded operations by German trading subsidiary Gazprom Germania last year.
Gazprom sells gas to Europe under long-term contracts linked to crude and oil product prices with a lag of up to nine months. Urals reached a record-high level of $142.50 in July 2008 before plummeting to as low as $34.32 in December the same year. The gas export monopoly agreed to adapt contracts earlier this year after a rise in spot-market supplies to Europe at lower prices. Gazprom, which aims to supply 32 percent of Europe’s gas in 2020 from about a quarter now, said it will give weight to spot prices in its contracts.
Gazprom said Thursday that it considered temporarily reducing the “take-or-pay” limit during a “significant decrease of demand for gas and excessive supply.” The reduction will be compensated by additional purchases in the future when gas demand recovers.
“The significant change of market conditions makes it justifiable to revise prices under the long-term contracts,” Gazprom said.
Finance expenses declined 71 percent to 58.2 billion rubles after the ruble strengthened.
Net debt rose 35 percent to 1.37 trillion rubles in the year ending Dec. 31, the company said.
Gazprom boosted proven gas reserves about 2.2 percent last year through exploration and including estimates for the Kruzenshtern offshore field, the company said. Proven reserves under SPE-PRMS methodology rose to 18.6 trillion cubic meters at the end of last year from 18.2 trillion cubic meters a year earlier.
TITLE: In Brief
TEXT: Watchdog Slams Nestle
MOSCOW (Bloomberg) — Russia’s consumer watchdog accused Nestle’s local plants of violating sanitary rules on production, air pollution and worker safety.
Several plants received repeated warnings, said Lyubov Voropaeva, a spokeswoman for the consumer safety service, confirming comments made by its head, Gennady Onishchenko, to the state-run RIA Novosti news service Thursday.
“Nestle rejects the allegations,” the Swiss company’s Russian unit said Friday in an e-mailed statement. “Its production activities comply with Russian and international food safety legislation.”
Copyright Abuse
MOSCOW (Bloomberg) —The U.S. listed China and Russia as the world’s worst offenders in failing to protect copyrights and patents, saying pirated movies and music worldwide cost American companies revenue.
The U.S. Trade Representative’s annual report on patent and copyright infringement also calls out Thailand, Canada and India to toughen legal protections and crack down on those making illegal copies.
“Intellectual property theft in overseas markets is an export killer for American businesses and a job killer for American workers here at home,” U.S. Trade Representative Ron Kirk said in a statement Friday.
Troika in Trouble
MOSCOW (Bloomberg) — Troika Dialog, Russia’s oldest investment bank, violated competition rules in asset management, the country’s Federal Anti-Monopoly Service said Monday.
FAS said the bank’s asset-management division published “misleading information” on its web site advertising its services for individual clients, according to a statement. The bank is facing a fine of as much as 500,000 rubles ($17,200), according to the statement.
Troika disputed the statement, spokeswoman Maria Zhog said by telephone from Moscow. Zhog declined to elaborate because the bank hasn’t received official notice from the regulator.
RusAl to Sell Bonds
MOSCOW (Bloomberg) — United Co. RusAl, the world’s largest aluminum producer, said a unit plans to sell as much as 30 billion rubles ($1 billion) of bonds to refinance borrowings and reduce funding costs.
The plan is to sell the debt in two tranches of 15 billion rubles each, with the coupon rate to be determined later, the Moscow-based company known as RusAl said in a statement to the Hong Kong stock exchange Monday. The offer is subject to final approval by the board, it said.
RusAl, controlled by billionaire Oleg Deripaska, completed Russia’s biggest corporate restructuring last year and became the first Russian company to list in Hong Kong. The moves reduced debt and tied most of the aluminum producer’s cash flow to repayment of borrowings.
RusHydro Looks Abroad
MOSCOW (Bloomberg) — RusHydro, Russia’s biggest hydropower utility, plans to acquire stakes in foreign companies starting next year and paying with stock, Interfax said, citing Deputy Chief Executive Officer George Rizhinashvili.
RusHydro’s units will buy some of the Moscow-based utility’s shares and use them in swaps, the news agency said.
TITLE: The Dangers of Nuclear Disarmament
AUTHOR: By Sergei Karaganov
TEXT: Russia and the United States have signed the New START. Officially, the treaty cuts their weapons by one-third; in reality, each party will only decommission several dozen.
Nevertheless, the treaty is a considerable achievement. It normalizes political relations between the two countries, thereby facilitating their further cooperation and rapprochement.
The return of strategic nuclear weapons to the center of world politics increases Russia’s political weight and highlights the field in which Russia can still assert itself as a superpower. It also gives a political boost to U.S. President Barack Obama, cast as the most constructive and progressive U.S. president for decades and possibly for many years to come.
After the treaty was signed, the United States hosted a nuclear nonproliferation summit, a landmark event for the Obama administration, which has made the fight against nuclear proliferation a trademark policy. The few accords reached at the summit, although welcome, are not as significant as the impression the summit created that world leaders are ready to work together to confront nuclear proliferation.
But debates about the role of nuclear weapons in the modern world, as well as in the future, are only beginning. The world system on which past discussions of nuclear weapons were based has become almost unrecognizable, calling into question the adequacy of the mentality and concepts inherited from that system.
The heart of the matter is this: It is obvious that nuclear weapons are immoral. An A-bomb is millions of times more immoral than a spear or sword, hundreds of thousands of times more immoral than a rifle, thousands of times more immoral than a machine gun and hundreds of times more immoral than salvo systems or cluster bombs.
But nuclear arms also have a significant moral distinction. Unlike other weapons, they are an effective means of preventing the large-scale wars and mass destruction of people, property and cultures that have plagued humanity throughout recorded history. To reject nuclear weapons and strive for their elimination is, no doubt, a moral aim, at least in the abstract. But it is feasible only if humanity changes.
Apparently, the advocates of eliminating nuclear weapons believe that such change is possible. I do not. Indeed, the risks of a world without nuclear weapons — or only a minimal number of them — are tremendous.
Nuclear deterrence — a threat to kill hundreds of thousands or millions of people — is a concept that does not fit into traditional morals. Yet it has worked, preventing catastrophic wars while making people more civilized and cautious. When one pole of nuclear deterrence weakened because of Russia’s political decline in the 1990s, NATO, a defensive union of democratic and peaceful states, committed aggression against Yugoslavia. Now that Russia has restored its capability, such a move would be unthinkable. After Yugoslavia, there was an unprovoked attack on Iraq.
In a nearly perfect world, Russia and the United States would not need large nuclear stockpiles. But cutting nuclear weapons to a bare minimum in the current conditions would give a big advantage to small nuclear powers, which will see their nuclear potential gain near-parity with larger states.
Moreover, reducing nuclear weapons to a minimum might theoretically enhance the usefulness of missile-defense systems and their destabilizing role. And even nonstrategic missile-defense systems, the deployment of which might be useful, will be questioned.
If stockpiles of tactical nuclear weapons are reduced, as some U.S., European and Russian experts have proposed, the opponents of Russia’s ongoing military reform will have even more reason to object to reconfiguring the country’s conventional armed forces away from confrontation with NATO toward a flexible-response capability vis-a-vis other threats.
Similarly, if the United States withdraws its largely nominal tactical nuclear weapons from Europe, U.S.-European strategic ties would weaken. Many Europeans, above all in the new NATO member-states, would then demand more protection from the mythical Russian Leviathan.
The world community seems to be losing its strategic bearings. Instead of focusing on the real problem, namely the increasingly unstable international order, it is trying to apply Cold War-era concepts of disarmament. At best, these are marginally useful. More often, they are harmful in today’s circumstances.
What is most needed nowadays is clear thinking about how to live with an expanding club of nuclear states while keeping the world relatively stable. To this end, the two great nuclear powers need a coordinated deterrence policy toward new nuclear states. Simultaneously, they should offer guarantees to non-nuclear states that might feel insecure. In the first place, it is necessary to fill the growing security vacuum in the Middle East. China, the world’s rising strategic player, might join this policy, though it currently ranks third in terms of military power.
Arms-control talks are mostly needed for rendering national arsenals more transparent and for building confidence between the great powers. That is all there is to their usefulness.
So, instead of mimicking Cold War-era treaties, it is necessary to launch an international discussion about the role of military force and nuclear weapons in the world as it is now evolving. We might then eventually recognize that eliminating nuclear weapons is not just a myth but a harmful myth, and that nuclear weapons are a useful asset that has saved, and may continue to save, humanity from itself.
Sergei Karaganov is dean of the School of World Economics and Foreign Affairs at Moscow State University — Higher School of Economics. © Project Syndicate
TITLE: Lenin’s Loss Is Stalin’s Gain
AUTHOR: By Boris Kagarlitsky
TEXT: Several years ago, I taught political science at a technical college. Why future engineers were required to study political science is anybody’s guess, but perhaps it replaced the mandatory Soviet-era course on the history of the Communist Party.
I asked one student to come up to the front of the class to describe what he knew about Vladimir Lenin. We’re not talking here about French philosopher Michel Foucault, or even Aristotle, but a leader who had a very important role in 20th-century history — not only in Russia but all over the globe.
“Lenin lived in the 19th century,” he said.
Technically speaking, the young man was correct. Lenin did live a little more than half of his life in the 19th century.
“Lenin fought against the tsarist regime,” the student managed to pull up out of his memory. Gathering courage, he continued: “He managed to overthrow the tsar, and he was able to do this while living abroad. After the Bolshevik Revolution, he returned to Russia in an armored train car, became friends with Josef Stalin and died.”
And that was the end of his narrative.
I went straight to the administrator and submitted my letter of resignation.
These days, I often recall that student whenever I read the results of opinion polls about Lenin’s role in history, listen to leftist intellectuals argue about the legacy of 1917 or consider the debate over whether to remove Lenin’s body from the mausoleum on Red Square. The issue is not so much that official propaganda tends to shape public opinion toward Lenin or that a whole generation is coming of age that doesn’t even know who Lenin was. The real problem is that a vast and rapidly growing number of people are incapable of doing any serious critical thinking whatsoever.
If people know nothing about Lenin, they can always learn. But if they have no desire to learn and can’t process meaningful information, then it is largely irrelevant what they think about this or that politician of the past. When people don’t know how to think in general, it is a very serious problem for society as a whole.
The dumbing-down of the masses is the primary achievement of the last two decades of so-called “reform” in Russia. Society has changed radically, and the mechanism by which cultural identity is formed has been seriously undermined, if not completely destroyed.
The cultural institutions of the Soviet era have been demolished, and that legacy has been stripped away from most people’s consciousness. But it has not been replaced by a new culture. More or less civilized forms of thinking have been destroyed along with Soviet culture. We can keep laughing for a few more years, but after that, it will not be funny anymore.
It is very revealing that public opinion polls show Lenin falling in popularity ratings even while Stalin is steadily gaining. If attitudes toward the leader of the Bolshevik Revolution are worsening, it is not because of the atrocities of the Russian Civil War from 1917-23 or the authoritarian measures he took. After all, respondents associate Stalin with far greater violence and rigid authoritarianism. Or at least those factors do not spoil people’s opinion of the Stalinist era.
What was the result of liberal intelligentsia’s struggle with Lenin’s ideology? Stalin’s pragmatism won.
Boris Kagarlitsky is director of the Institute of Globalization Studies.