SOURCE: The St. Petersburg Times
DATE: Issue #1574 (35), Tuesday, May 18, 2010
**************************************************************************


TITLE: Map Fan Jailed On U.S. Spy Charges
AUTHOR: By Alexander Bratersky
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — A Moscow court sentenced a map enthusiast to four years in prison on Thursday for passing classified information to the United States that one report said could help the U.S. military in a missile strike against Russia.
The trial looked unlikely to upset U.S.-Russian relations, which have rebounded since U.S. President Barack Obama announced a “reset” last year and, among other things, ditched a plan to place an anti-missile shield in Central Europe that Moscow saw as a security threat.
But fears of Russia’s vulnerability to a U.S. strike have been voiced in hawkish Russian circles after Obama and President Dmitry Medvedev signed the New START agreement to cut nuclear arms in April, and a retired Russian general warned on Thursday that the country’s air defenses were weak.
The Moscow City Court said cartographer Gennady Sipachyov was convicted of espionage during a closed trial for sending secret maps belonging to the Russian military’s General Staff to the Pentagon over the Internet.
Espionage is usually punished by up to 20 years in prison, and Sipachyov got a milder sentence because he agreed to cooperate with investigators, the court said in a statement on its web site.
The judges ruled that the maps sent to the United States could be used “to increase the accuracy of missile strikes,” RIA-Novosti reported.
The court statement said Sipachyov was detained by Federal Security Service agents in 2008 but offered no further information about him, except for a photograph that showed a middle-aged man with glasses.
Sipachyov worked as a researcher in a defense scientific institute, Rossiiskaya Gazeta reported on its web site.
A court spokeswoman said she would not comment further on the case because it had been closed to the public.
Calls to the U.S. Embassy for comment went unanswered late Thursday afternoon.
According to online map communities, Sipachyov was an avid cartographer who researched both modern and historical Russian maps. Maps designed by him are posted on various specialist web sites.
“If you need maps of 1:100,000 and 1:200,000 scales, please write to Sipachyov, Gennady Stepanovich. … I have exchanged maps with him,” said an anonymous user on the site DSK.ru, dedicated to outdoor and water sports.
Sipachyov’s patronymic, Stepanovich, is matched by the court statement.
Andrei Soldatov, a security expert and head of the Agentura.ru think tank, said Sipachyov’s light sentence signaled that the state wanted offenders to collaborate with the authorities.
“Previously, they wanted to show that the punishment for treason needed to be severe, but today the trend is different,” he said.
The FSB’s web site even urges citizens who collaborate with foreign intelligence organizations to report this to the FSB.
Soldatov said Sipachyov fared better than Igor Sutyagin, a nuclear arms researcher who was detained in 1999 on suspicion of passing military data to a British consulting company and was later sentenced to 15 years in prison for espionage. Sutyagin has said he collected the data from open sources. He was denied parole by a court in Archangelsk on April 30.
Meanwhile, former Air Force commander Anatoly Kornukov warned that Russia’s ability to protect itself from enemy attack was limited because of its aging air defense weapons and dilapidated defense industry.
“Regrettably, our air defense forces only have a limited capability to protect the nation’s security,” Kornukov said at a news conference, The Associated Press reported.
He said Russia was lagging 25 to 30 years behind the United States in developing air defense weapons and was capable of only shooting down 20 out of every 100 intruding enemy planes, compared with up to 98 out of 100 in Soviet times.
“The situation is simply terrible,” he said.
The government, which has plowed enormous sums into the armed forces in recent years, has declared that they are growing stronger. But an ongoing reform of the military by Defense Minister Anatoly Serdyukov has angered some officers.
Sipachyov’s case is not the first linking maps and espionage in post-Soviet history. In 1995, Alexander Volkov, a former colonel who worked for a company linked to the military’s Main Intelligence Directorate, or GRU, was arrested while passing satellite maps of Israel to an official from the Israeli Embassy in Moscow.
Volkov, who claimed that he was unaware of the maps’ secrecy was freed, but a co-defendant, GRU officer Vladimir Tkachenko, was sentenced to three years in prison.

TITLE: Senators Declare Incomes for First Time
AUTHOR: By Natalya Krainova and Alexandra Odynova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Senator Sergei Pugachyov out-earned all lawmakers in the Federation Council and State Duma last year with a declared income of just over 3 billion rubles ($99 million), while fellow billionaire Senator Suleiman Kerimov earned just a quarter of a million dollars, according to newly released income declarations.
More than 500 State Duma Deputies and Federation Council Senators published their income declarations late last week, giving the first comprehensive overview of the wealth of the country’s lawmakers.
While Duma deputies released declarations in the run-up to elections in December 2007, this was the first time that senators have revealed their incomes. The information confirms the upper house of parliament’s reputation as a haven for billionaires, but some members of the lower house also stand out.
Pugachyov, a Kremlin-connected banker who represents the remote Siberian Tuva republic, declared an income of 3 billion rubles plus an apartment and nonresidential premises. For his wife, he declared 4.2 million rubles ($140,000) plus an apartment.
Pugachyov’s wealth was estimated at $1.2 billion by Britain’s Sunday Times in its annual rich list last month, which was released amid reports that he planned to marry London television producer Countess Alexandra Tolstoy.
Yet according to the declaration, neither he, nor his wife, owns a car or any other property. Media reports say Pugachyov lives separately from his wife, Galina, with whom he has two grown sons.
Pugachyov’s declared assets were no match for Amir Gallyamov, a senator for the impoverished Amur region in the Far East. Together with his wife, he owns 13 cars, including a Bentley Continental, three Mercedes Benzes, a Porsche, a Ferrari, a Maserati and three Toyota Land Cruisers. They also own a BMW motorcycle and a snowmobile.
Accordingly, the Gallyamovs need a lot of parking space — their declaration lists five garages and 10 spaces in parking lots.
The couple also own two houses and nine large apartments, ranging in size from 75 to 218 square meters.Yet Gallyamov said he earned just over 2.7 million rubles ($88,000) last year, while his wife earned 11.5 million rubles ($380,000).
Vitaly Malkin, a former billionaire banker who represents the far eastern republic of Buryatia, said he earned more than 70 million rubles ($2.3 million) and owns a plot of land, a house, three apartments, two BMWs and a personal watercraft.
Malkin’s wife earned 9.8 million rubles ($324,000) and declared three plots of land, including one in Italy; two houses, including one in Italy; two apartments; nonresidential premises and three cars, including a Lexus and a Mercedes Benz. Canada’s National Post reported last June that Malkin owned 111 condominiums in Toronto, but the senator declared no assets in Canada.
The Federation Council’s richest member, according to Forbes magazine, is Suleiman Kerimov, with an estimated net worth of $5.5 billion. The secretive Kremlin-connected businessman represents his native Dagestan, one of the country’s poorest regions.
Kerimov said he earned just 7.4 million rubles ($245,000), and his wife collected 646,156 rubles ($21,000). He declared a humble 54-square meter apartment, co-ownership of another apartment, sized only 39 square meters, and about 500 square meters in nonresidential premises.
Kerimov made headlines in 2006 when he crashed a Ferrari in Nice, France, and his income declaration indicates that he still has enthusiasm for fast cars. In addition to three large Mercedes cars and a BMW, he owns a Bugatti Veyron Grand Sport, one of the world’s most exclusive sports cars with a maximum speed of more than 400 kilometers per hour and a price tag of more than 1.5 million euros ($2 million).
In contrast, Federation Council Speaker Sergei Mironov presented himself modestly. Mironov, who represents St. Petersburg, said he earned 2.5 million rubles ($200,000) and owns a tiny 32-square-meter apartment, a trailer and an all-terrain vehicle.
But his wife, who earned only 727,000 rubles ($24,000), owns three apartments with a combined size of 424 square meters.
Some of the figures are likely to raise eyebrows because many of the country’s wealthiest people take considerable steps to avoid being portrayed as elitists who live on yachts or in European mansions instead of staying and working in Russia.
The declarations could also fuel suspicion against absentee lawmakers who take full advantage of job perks, like immunity from prosecution, but spend little time legislating.
The income declarations are part of an effort by President Dmitry Medvedev to crack down on government corruption by requiring officials and their families to disclose their annual earnings and some assets. But critics say the requirements are flawed because they include only spouses and underage children and do not indicate any sources of revenue. The lawmakers’ “lawyers have worked well, and the declarations may have nothing in common with their real revenues,” Alexei Mukhin, an analyst with the Center for Political Information, told The St. Petersburg Times.
In the Duma, the richest deputies appeared to be affiliated with the ruling United Russia party.
Leonid Simanovsky, deputy head of the Energy Committee, made the most money, with 1.18 billion rubles ($40 million). The United Russia deputy served as vice president of Yukos from 1996 to 2001 and is a Novatek shareholder. He owns two plots of land, two houses and a Mercedes Benz S500.
Simanovsky’s wife, who earned 11 million rubles ($364,000), owns two apartments and two cars, a Lexus GS300 and Mercedes Benz ML350.
United Russia Deputy Vladimir Gruzdev, a founder of the Sedmoi Kontinent supermarket chain, was the wealthiest lawmaker according to the 2007 declarations, but this year he ranked second with 936.7 million rubles ($31 million). He and his wife have the largest family income, however, with his wife’s 692.5 million rubles ($23 million).
Speaker Boris Gryzlov, who heads the United Russia faction, declared an income of 16 million rubles ($530,216). He also owns an apartment of 274 square meters, a dacha and two garages with one Mazda car.
Chechen Deputy Adam Delimkhanov, a cousin of Chechen President Ramzan Kadyrov who is on an international wanted list in connection with the killing of a former Chechen commander in Dubai last year, earned only 2 million rubles ($66,150), the amount equal to a deputy’s salary for one year. He has three houses, an apartment and a plot of land. Delimkhanov is one of the few deputies who owns a Russian-made car, a VAZ-2107, in addition to an Opel Senator.
Deputy Alina Kabayeva, the former Olympic gymnast, declared an income of 12.9 million rubles ($427,000), three apartments of 43 to 122 square meters, a 7,169-square-meter plot of land, and a Porsche Cayenne and a Mercedes Benz.

TITLE: IKEA Masters Rules of Doing Business in Russia
AUTHOR: By Rinat Sagdiyev and Anastasia Popova
PUBLISHER: Vedomosti
TEXT: MOSCOW — Swedish retailer IKEA, the biggest owner of commercial real estate in Russia, has been beset by accusations of corruption.
Whether the accusations prove true is uncertain, but what is clear is that the Swedish company has adapted to the rules of Russian business better than Russians themselves.
The IKEA scandal broke out in February. The Swedish newspaper Expressen, citing an internal correspondence among employees of IKEA’s Russian subsidiary, IKEA Mos, which owns and manages the Mega shopping centers, reported that the IKEA Mos management effectively approved a bribe to connect its Mega Parnas shopping center in St. Petersburg to Lenenergo’s power grid.
IKEA Mos didn’t give any bribes itself, Expressen wrote, but “it’s completely clear that the construction firm Renaissance Construction [a general contractor for Mega Parnas and seven other Mega centers], which was responsible for connecting the center, will try to get permission from the authorities using illegal means, with the help of bribes,” IKEA midlevel manager Joachem Virtanen told his managers, IKEA Mos CEO Stefan Gross and chairman Per Kauffman, in August 2009.
The warning didn’t get Gross and Kauffman’s attention. “We are approving the installation of electrical equipment in correspondence with our plans,” Kauffman told Virtanen, Expressen reported. “I’m taking all responsibility for this decision.”
IKEA wouldn’t comment on the memo, but Kauffman and Gross were quickly fired and an internal investigation was opened. Of those involved in the story — Gross, Kauffman, Virtanen, Renaissance Construction and IKEA itself — only Renaissance has commented to Vedomosti. Sergei Yaroshevsky, a company spokesman, said it didn’t deal with connecting buildings to the electrical grid.
An investigation carried out by Vedomosti was unable to get an answer to whether IKEA gave bribes. But it did show that the Swedish company often ends up in corruption-prone situations.

Cash Triumphs Over Evil
Lennart Dahlgren, the first director of IKEA Mos, told Vedomosti how everything started. To build a big shopping center like IKEA or Mega, it is necessary to get more than 300 separate permits, he said.
“If we had waited to receive them all, we would have lost years,” he said. Therefore, he said, the company came to agreements with local authorities that it would begin construction and receive the permits “in the process.” True, the risk was high — bureaucrats took advantage of the situation.
In 2003, IKEA built its first distribution center — a warehouse in the Moscow region town of Solnechnogorsk in which it invested $40 million. Dahlgren said he reached a verbal agreement on its construction with Solnechnogorsk district head Vladimir Popov. “The police unexpectedly showed up at the building site. They halted work, shut everything down, and we couldn’t even go onto the territory,” he said.
Dahlgren tried to get in touch with Popov, but he had disappeared. Eventually, he reappeared and promised to launch construction if IKEA paid 10 million rubles.
“I said, ‘Fine, we’ll pay. We have to build, but on my terms — that the money goes to houses for the elderly,’” Dahlgren said. “I had thought we had reached a deal, but a few days later, Popov arrived and said the deal was off — 10 million was too little, 30 million rubles was needed. Every day we lost thousands of dollars because of the lost work. It was cheaper to pay the 30 million.”
IKEA transferred the money into a charity fund, “announced this to the entire city, to local journalists … and the police left and opened construction,” he said. 
A similar story happened a year later with Mega Khimki. The mall’s opening, scheduled for December 2004, fell through. The regional construction regulator wouldn’t allow the opening because the shopping center operated on reserve generators and a traffic interchange hadn’t been built. IKEA had to build not only two bridges for $4 million (one of which was never launched) but to pledge $1 million for the development of children’s sports.
By June 2006, when Dahlgren was transferred to another position, four Mega malls had been opened in Russia and another six were under construction — not a bad result for three years of working in a new market.

Bombarded With Megas
But the coin has another side: Of the 14 Mega malls, only two opened on time and without any problems.
And the problems were similar everywhere. For example, in September 2006, construction on the Mega Rostov-on-Don shopping center, which was being carried out without permits, was halted for two months. A court fined IKEA Mos 12 days before the opening of its Mega Adygeya shopping center in 2008 for building without an approved plan, and the opening was delayed by a month.
Mega Ufa, construction on which was started in September 2007, has still not been opened. In May 2008, Bashkortostan’s construction watchdog found that part of the work had been completed without the necessary permits.
In Novosibirsk, the construction watchdog found many defects before the opening of the Mega mall there. The agency’s lead inspector, Vitaly Ivlyev, said the complex lacked a heating system, that IKEA had tried to connect the mall to reserve diesel generators and that it didn’t build a traffic interchange, although this wasn’t included in the technical specifications. On the official opening day, only a third of the Mega Novosibirsk complex was completed; the rest took another year to finish.
The situation became even farcical. In 2009, Tatarstan’s construction watchdog suddenly found that IKEA had been working without a use permit — after four years.
In Samara, bureaucrats still won’t let IKEA open a mall that was finished in November 2007. Deputy Economic Development Minister Stanislav Voskresensky dealt with IKEA’s complaints and found that the mall had no permits whatsoever.
At the time, the Samara region administration worked out a plan with IKEA to “bring the Mega Samara family shopping center into accordance with current regulations and to facilitate its exploitation.” In January 2010, IKEA received a confirmed city plan for its land, and in March it got a positive state appraisal of its planning documentation and a permit for construction.
IKEA didn’t respond to any warnings, a representative of the Samara government said, and at the end of 2008, the construction watchdog refused to give a use permit, citing all the violations.
There were no problems, however, with the launch of Mega Belaya Dacha. Its co-owner is former Agriculture Minister and State Duma Deputy Viktor Semyonov.

Deals Are Made 
to Be Broken
Working without documents, IKEA learned how to get by without communicating, but it is also necessary to get connected to the electrical grid. The Swedes leased diesel generators from the company Autonomous Energy Supply Systems, or SAE, during construction and often afterward.
“Not a single IKEA complex in Russia would have been built without using our generators,” SAE owner Konstantin Ponomarev said.
Generators are typically more expensive than hooking up to the grid, but it depends on the bureaucrats.
For Mega Parnas and Mega Dybenko in St. Petersburg, generator rentals lasted for years and ended up in court. IKEA couldn’t conclude an agreement with Lenenergo in time, and both malls, which opened in 2006, operated on SAE generators.
In 2008, the partners began to fight.
Starting in July 2008, IKEA stopped paying, started accumulating debts and refused to return the generators, Ponomarev said indignantly. In August, SAE filed its first suit against IKEA Mos for 130 million rubles.
Ponomarev said he had already filed 10 suits, but wouldn’t say the total amount of debt being sought. So far, according to information in the courts’ databases, Ponomarev has won all the cases.
IKEA didn’t stay in debt: In March 2009, Ingvar Kamprad accused Russian energy firms of cheating the company out of 135 million euros. IKEA also started filing lawsuits, disputing the generator rental agreements on various grounds: sometimes because they were coerced into the deals, sometimes because electrical stations are immoveable property, meaning that the agreement should have been registered with the state. So far, according to information in the courts’ databases, IKEA has lost all such cases.
Nevertheless, Ponomarev has received neither money nor his 112 generators. SAE filed a suit against IKEA requesting the return of its property and won, but IKEA is not hurrying to return the equipment. IKEA’s lawyers have repeatedly requested clarification on the court’s ruling: They ask, for example, what it means exactly to return property “in good working order,” Ponomarev said.
IKEA is trying to get a court order for SAE to remove garbage from the territory of the Mega malls, but the “garbage” is containers with the very same generators that SAE wants to take away, all the while they refuse to give them to us, Ponomarev said.
IKEA refused to comment to Vedomosti on ongoing court cases.

Did Someone Call 
the Police?
In order to feel more confident on the Russian market, IKEA turned to British detective agencies.
One of them was Diligence, the newspaper Expressen said. This agency is well-known in Russia because of a certain project: In 2006, the IPOC fund (whose beneficiary is likely former Communications Minister Leonid Reiman) accused Diligence of obtaining the fund’s confidential documents from KPMG at the request of Alfa Group. At the time, Alfa and IPOC were battling for a blocking stake in MegaFon.
It’s possible that Diligence even worked against Alfa. On the agency’s web site it says that at the request of a leading Western oil firm aiming to purchase a Russian competitor, Diligence investigated who the real owner of the Russian firm was and studied key employees to determine whether it was connected with criminals. After the investigation, the client successfully invested $7 billion.
Such a description could only mean one deal: In February 2003, British BP and Russian TNK, partly owned by Alfa, jointly created TNK-BP.
IKEA’s inquiry was more modest, said a private detective familiar with the investigation. According to an agreement with IKEA, the detectives were to study all court materials and memos concerning the case with Ponomarev and to draw conclusions as to how well founded the judges decisions were.
According to Expressen, Diligence came to the conclusion that Ponomarev’s complaints were legal, so the detectives developed a “criminal strategy” for IKEA against the owner of SAE, suggesting that the case be reclassified as criminal. The newspaper’s site shows a photograph of a presentation of this strategy.
A representative of Diligence’s London office said Expressen’s information was “insinuation.” “The tasks set out for Diligence pertained exclusively to the legal process and contained no assignment to collect compromising information about anybody,” IKEA’s legal department said.
The private detective, who asked to remain anonymous, told Vedomosti about another British agency working for IKEA — Alaco.
Ponomarev knew about Alaco, saying that when the problems between SAE and IKEA began, Alaco’s cofounder Ambrose Carey pestered Ponomarev’s partner, Harry Heikkila, to sell his 50 percent stake in SAE to IKEA. But Heikkila preferred to sell his stake to Ponomarev. (Heikkila and Carey wouldn’t comment about their relationship with IKEA.)

Same as ever
“Formally, IKEA hasn’t always operated in a legal framework, and that’s why it has had problems,” Voskresensky said. “In some regions, the authorities support IKEA because of the new jobs and taxes, and in other places they don’t — and that’s where IKEA’s problems started.”
A source in IKEA gave a more blunt explanation. IKEA just hadn’t notice that Russian legislation has been tightened since 2005, when the City Planning Code was adopted. The company’s employees tried to tell the management of violations in construction, but they were immediately fired, the source said. In 2008, when the company suddenly realized that the shopping centers were built in violation of current law, there was a scandal.
From that moment, IKEA has tried to find its way out of the situation, which it is in because of its own fault, the source said.
“The company is holding an inquiry in connection with accusations by fired employees against the former management of Mega shopping centers,” an IKEA Mos spokesperson said. If any of the accusations are confirmed, the company will take measures to satisfy the corresponding complaints and ensure that similar situations don’t happen again.
The IKEA example is significant from the point of view of changes that are needed in city planning legislation, said Sergei Belyakov, a department head at the Economic Development Ministry.
“Because of the confused procedures of gathering documents, which has taken up to three years, investors are faced with a choice — either spend a lot of time on assessments and agreements and give up investment in Russia, or begin construction and worry about the documents later. The second route became widespread, and IKEA is no exception,” he said.
“Before, many began to build before getting permits, intentionally made violations and paid the fines so as not to delay construction,” said Andrei Zakrevsky, senior vice president at Knight Frank. “If everyone followed the construction legislation, then there would not yet be any IKEAs or other big projects in Russia.”
“The requirements are so contradictory that if you follow all the rules, then no project will be possible to build. It simply doesn’t harmonize,” said Maxim Gasiyev, chief executive of Colliers International Russia. He added that the system of state regulation of the construction sector incites bribe taking.
No one asked by Vedomosti would go on the record to put a price tag on the amount of bribetaking in the sector. But the figures that were named were about the same: If a company builds without a permit, the kickback to officials for getting the right documents could reach 30 percent of the construction costs, and 20 percent to 30 percent for connection to the electrical grid. “No one gives cash bribes. Everything is documented as social support, or part of the work is given to contractors indicated by local officials,” said an executive at Management Development Group.
IKEA’s experience may show that officials’ bribe requests are nevertheless lower. In Yekaterinburg, the local administration in 2004 required that IKEA give 10 percent of the estimated cost of construction ($150 million) to “voluntary funds” for the development of the city’s infrastructure. The event was related on the web site of the former governor of the Sverdlovsk region, Eduard Rossel, whom IKEA manager Dan Shellgren complained about. Rossel then personally took control of the project, and the company didn’t have to pay a dime.

TITLE: In Brief
TEXT: <strong>Actor Romalio Killed</strong>
ST. PETERSBURG (SPT) — The St. Petersburg Prosecutor’s Office has opened an investigation into the murder of actor Tito Romalio, a native of Brazil, it reported in a statement to the press. 
Khamzi Yenikeyev, 43, is to be charged with grievous bodily harm resulting in the death of the victim. Yenikeyev is alleged to have hit and kicked Romalio, 58, on the head repeatedly following an argument in the early hours of May 10 outside a supermarket, the statement reported. It is alleged that the attack was a hate crime.
Yenikeyev was detained at a railway station in the town of Dno, in the Pskov region. He has been arrested and has yet to be formally charged. 
Romalio played secondary roles in a number of Soviet films in the 1950s, 1960s and 1970s, including classics such as “The Boss of the Chukotka Peninsula” and “Amphibian Man.”

<strong>Advocaat Hired</strong>
ROSTOV-ON-DON, Russia (AP) — The Russian soccer federation hired Dick Advocaat as new coach of the national team on Monday.
Advocaat’s appointment was announced by head Sergei Fursenko.
Fursenko said that Advocaat will be on a four-year contract with the main task to qualify Russia for the finals of the European championships in 2012 and the 2014 World Cup in Brazil.
“He knows Russian soccer perfectly, knows all the players and there’s nothing to be explained to him,” Fursenko said.
Advocaat, who unexpectedly quit as Belgium coach last month, has previous experience in Russia — coaching Zenit St. Petersburg to a Russian league title and the UEFA Cup during a three-year stint before being fired last year.
He replaces fellow Dutchman Guus Hiddink, who guided Russia to the 2008 European championship but failed to qualify for this year’s World Cup.
“Dick Advocaat is good because he is a hardworking man,” Fursenko said. “I know it from my own experience.”
Fursenko was president of Zenit in 2006 when he invited Advocaat to coach the club.

TITLE: Protest at Siberian Mine Blast Site, 28 Arrested
PUBLISHER: Agence France Presse
TEXT: MOSCOW — Twenty-eight people were arrested when Russian authorities cracked down on a protest in a Siberian coal-mining town where at least 66 people died in explosions last weekend, officials said Saturday.
Media reports said more than 20 people had been injured late Friday evening after police clashed with the protesters, who had blocked a railroad in the disaster-struck town of Mezhdurechensk.
“Negotiations with regional government officials and police led to nothing. Soon afterwards, riot police began removing people from the railway. Rocks and bottles were thrown at the police,” Russia’s investigative committee said in a statement.
“Twenty-eight participants in the protest were taken to the Mezhdurechensk police station,” the statement said.
The investigators’ statement said that at least six police officers had been injured in the clashes in Mezhdurechensk, located in Russia’s coal-rich Kemerovo region.
Earlier, Russian news agencies quoted Kemerovo police chief Alexander Yelin as saying that 22 people had been injured in the clashes, including 17 police officers and five protesters.
Russia’s private Ren-TV television channel showed dozens of riot police with shields approaching the protesters in the night, while some young men threw rocks in response. It also showed a woman with a bloody face.
The liberal Ekho Moskvy radio station reported that 200 people, including women and children, had blocked the railroad on Friday to demand better working conditions for coal miners after last weekend’s tragedy.
At least 66 people were killed and 24 people remain missing following a pair of methane gas blasts on May 8 in the Raspadskaya coal mine, Russia’s largest undergound coal mine, located in Mezhdurechensk.
The tragedy drew attention to complaints from Russia’s coal miners that they work in dangerous condition for little pay.
“It is the fault of the authorities that they pushed people onto the rails,” Ivan Mokhnachuk, head of Russia’s independent coal-miners union, told Ekho Moskvy on Saturday.
“When people are kept in the dark, when their questions are not answered, when they are left alone, when every day there are dozens of funerals and the authorities do not want to talk, a situation arises where people are displeased,” he added.
State television mentioned nothing about the protests in Mezhdurechensk, which is located in the Kemerovo region of southern Siberia.

TITLE: U.K. Soccer Official Accuses Russia of Bribery, Resigns
PUBLISHER: The Associated Press
TEXT: LONDON — The chairman of England’s World Cup bid and soccer federation quit both jobs Sunday after accusing 2018 bid rivals Spain and Russia of bribery.
David Triesman insisted he was a victim of entrapment and his comments were “never intended to be taken seriously.”
Triesman was secretly taped by the London Mail on Sunday suggesting Spain was planning to bribe referees at the upcoming World Cup with the help of Russia, which didn’t qualify, and then support the Russians’ bid.
“Entrapment, especially by a friend, is an unpleasant experience both for my family and me, but it leaves me with no alternative but to resign,” Triesman said in a statement. “I have immediately informed the FA Board of my decision.”
The newspaper taped Triesman while he talked two weeks ago with Melissa Jacobs, a former aide from his time as a government minister.
The latest in a series of resignations from The Football Association could prove the most damaging, with Triesman’s downfall leaving England’s 2018 World Cup bid in turmoil.
The former civil service aide, who claims to have had a relationship with the married Triesman, secretly recorded their conversations in a restaurant two weeks ago.

TITLE: Russia Denies Intent to Kill Pirates
PUBLISHER: Agence France Presse
TEXT: MOSCOW — The Russian military did not intend to kill Somali pirates who are believed to be dead after being set afloat at sea in a small boat about 10 days ago, a senior commander was quoted as saying Monday.
Navy captain Ildar Akhmerov confirmed earlier reports that the 10 captured pirates and their one dead comrade who had attempted to seize a Russian oil tanker were put to sea in a boat without any navigation equipment.
“We did not have the task of destroying the pirates during the operation to free the tanker. There was one main goal: to free the ship’s crew,” Akhmerov was quoted as saying by the Interfax news agency.
“Our military medics gave the necessary medical help to all of the wounded bandits. We loaded the dead bandit’s body onto one of the pirates’ boats with the rest of the pirates, and sent it to the nearest coast, towards Somalia.”
“We loaded water, food and all their other things — except the confiscated weapons, boarding ladders and navigation tools — into the pirates’ boat,” he said.
“The further fate of the released pirates is not known to us.”
Akhmerov, the commander of a group of warships in Russia’s Pacific Fleet, made the comments aboard the Marshal Shaposhnikov, the destroyer that led the operation to free the captured tanker, Interfax reported.
Marines from the Marshal Shaposhnikov led the daring raid on May 6 to free the tanker, called the Moscow University, after it was seized by pirates from the lawless east African country of Somalia.
The operation was initially hailed as a huge success, but Russia was later embarrassed by reports that it had let the pirates go because of the unclear legal situation surrounding their possible prosecution.
Last week an unidentified senior Russian defence ministry source told state news agencies that the pirates’ boat had failed to reach shore and that they were “evidently” dead.
The oil tanker’s crew of 23 Russian citizens barricaded themselves in a secure cabin when the pirates attacked and were unharmed in the raid.

TITLE: S&P Raises Ukraine’s Credit Ratings to ‘Stable’
AUTHOR: By Tasneem Brogger
PUBLISHER: Bloomberg
TEXT: LONDON — Ukraine’s credit ratings were raised at Standard & Poor’s on improvements in the country’s policy coordination and after a Russian gas subsidy agreement helped boost the government’s debt outlook.
S&P raised the foreign currency sovereign credit ratings on Ukraine to ‘B/B’, from ‘B-/C’, and lifted the local currency ratings to ‘B+/B’, from ‘B/B’, according to a statement Monday. The outlook is stable, S&P said.
The upgrade reflects “improved policy coordination, the stabilization in Ukraine’s external liquidity position and our expectations of an increase in useable foreign exchange reserves relative to short-term debt, and a relatively moderate general government debt burden,” S&P Credit Analysts Frank Gill and Kai Stukenbrock said in the statement.
A $40 billion gas subsidy deal struck with Russia last month will help Ukraine reach budget targets stipulated by the International Monetary Fund to continue its program with the country, and is boosting investor confidence in the country’s debt markets. The economy may grow as much as 4 percent this year, Iryna Akimova, first deputy head of staff for President Viktor Yanukovych, said at a conference in London on Monday.
“The upgrade highlights the moderate change of risk perception towards Ukrainian assets as domestic activity gains pace on the back of a better performing export sector,” said Luis Costa, an emerging market strategist at Citigroup Inc. in London. Should “lower political volatility persist, Ukraine could gain one more notch in average rating terms over the next 12 months.”
A 30 percent reduction in this year’s gas tariffs is expected to reduce the cost of energy imports by slightly less than 3 percent of output on an annualized basis, S&P said.
“A shift to a more sustainable fiscal position on the back of a permanent improvement in the finances of” state gas company “NAK Naftogaz Ukrainy and the social security system could lead to an upgrade, as could a reduction in the country’s vulnerability to terms-of-trade and other external shocks,” S&P said.
The yield on Ukraine’s dollar-denominated bond due 2016 declined 5 basis points to 8.405 Monday. Credit default swaps on Ukraine pared an increase and were trading 7 basis points higher at 594, according to CMA DataVision prices at 2:15 p.m. in London.
Standard & Poor’s cut Ukraine’s rating five times in the past two years and Fitch Ratings cut it three times. S&P last raised the government’s ranking by one level, to B-, six steps below investment grade, on March 12. Fitch lifted its outlook to stable on March 17, affirming its rating at B-.
Ukraine was forced to turn to the IMF in November 2008 as the global financial crisis closed access to capital markets to refinance the $37.9 billion the government says it owes. The debt is equivalent to 28.7 percent of 2010 expected GDP, according to Kiev-based brokerage Dragon Capital.
“We are very happy that S&P paid attention to what is going on in Ukraine,” said Teimour Bagirov, head of Deputy Prime Minister Serhiy Tigipko’s advisory group. “We hope such a step will be followed by other credit agencies. The government will continue doing everything possible to show investors that it seriously aims at reforms and we hope it will be praised not only by credit agencies but also by investors through their acts.”

TITLE: Putin Calls for Budget Cuts
AUTHOR: By Maria Antonova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The government has done well in prioritizing spending during the crisis, but severe budget cuts and systemic reforms will be required over the next three years, Prime Minister Vladimir Putin said Friday.
“We need to do a complete revision of our current obligations and cut ineffective and secondary spending,” Putin said in an unusually long and decisive address to the Finance and Economic Development ministries.
Despite calls by deficit hawks such as Finance Minister Alexei Kudrin to lower social spending as government revenues plunged in 2009, the government maintained its levels of welfare spending by dipping deep into the Reserve Fund, where the government had saved some of its windfall oil revenues over the past decade.
Putin said the high level of spending during the crisis helped Russia avoid protests like those currently rocking Greece, and social and political instability that “limits the opportunities for healthy macroeconomic and general economic policies.”
Last month, Kudrin said government spending would have to come down by as much as 20 percent by 2015.
Next year, the budget deficit is projected at 4 percent if the price of oil is $70 a barrel, but if oil falls to $50 a barrel, the deficit will be 8 percent, “a risky number,” Kudrin said at the meeting Friday.
The 2010 budget will be balanced only if oil averages $95 a barrel, “taking into account that we are also spending the Reserve Fund,” Kudrin said. He predicted that the budget deficit would be 5.2 percent to 5.4 percent this year.
Economic Development Minister Elvira Nabiullina said at the meeting that the ministry was predicting $76 oil through 2011, but Kudrin warned against such optimistic forecasts, saying that in 2009, the Finance Ministry “seriously overvalued its expectations for the price of oil,” balancing the budget with oil at $95 a barrel when the real price was only $61.
To boost budget earnings, the government will consider decreasing tax deductions at a Wednesday meeting where the Cabinet will discuss Russia’s tax policies for the next three years, Kudrin said.  
“For Russia, the norm is a low, even zero budget deficit. Therefore it is important to meet the goal of lowering the deficit to 3 percent in 2012 and to zero in 2015,” Putin said.
The government still depends on revenues from the oil and gas sector for more than 40 percent of its budget.
In order to kick the economy’s dependence on resource extraction, Russia must build a modern economy by eliminating noncompetitive companies, encouraging innovation and preparing state companies for their eventual privatization, Putin said. The government also must tighten control over financial markets and modernize customs policies.
“We need solutions that push state companies to use modern management models. And salaries for their management must be tied to the figures for lowering expenses, raising energy and labor efficiency and introducing new technologies,” Putin said.
The prime minister also called for stronger efforts to suppress inflation, which “should be kept at a low level not only by limited demand but … by consistent government policies,” such as raising labor productivity, cost-cutting and effective anti-monopoly regulation.
Russia must also improve its “unsatisfactory” investment climate and change the focus of its exports from the struggling European markets to the more dynamic developing ones, Nabiullina said.  
Russia’s gross domestic product grew by 2.9 percent year on year in the first quarter of 2010, the State Statistics Service said Friday.  
By the end of the year, GDP growth will be at least 5 percent, Central Bank First Deputy Chairman Alexei Ulyukayev said, adding that he “will be very surprised if the budget deficit will be over 5 percent [of GDP].”
He also predicted that inflation would be near 5 percent by year-end. “In the short term, the situation is not bad,” Ulyukayev said.

TITLE: Investor in Russian Real Estate Plans IPO
PUBLISHER: Vedomosti
TEXT: MOSCOW — Norwegian fund Storm Real Estate, which invests in Russian real estate, may become a public company.
Depending on the economic conditions over the next 12 months, the fund may list on Oslo’s stock exchange, the company said in its first quarter report. The company is giving no details of the deal.
Storm Real Estate was founded in November 2008 (previously, it was called Eastern Property and E-Star Property) to invest in Russian real estate, and is managed by Storm Capital Management.
Eastern Property planned to raise about $350 million to acquire commercial real estate in Moscow and St. Petersburg, promising specifically to purchase Silver Tower (135,000 square meters) in Moskva-City, business center Hermitage Plaza (31,600 square meters) near Moscow’s Mayakovskaya metro station and a warehouse complex (61,000 square meters) on Simferopolskoye Shosse in Moscow.
So far, Storm Real Estate has raised about $90 million, and currently owns two business centers: Gas Field (16,000 square meters) on Ulitsa Obrucheva in Moscow and Grifon (7,000 square meters) on Ulitsa Dostoyevskogo in St. Petersburg.
“A listing would allow [the fund] to attract new investors and, accordingly, resources to develop the company. Besides, it will give it the opportunity to determine its capitalization,” said Artyom Tsogoyev, managing partner at Moscow Central Real Estate Exchange.
Demand for the developer’s stock, including for investors in Russia, is currently modest, said Ivan Manayenko, a department head at Veles Capital. He did not rule out that Storm Real Estate would carry out the listing for a specific investor who demonstrates the necessary requirements.

TITLE: Cosmetics Co. Sees Profit Rise
PUBLISHER: Bloomberg
TEXT: MOSCOW — Kalina boosted profit by 7.3 percent in the first quarter after it introduced new varieties of dozens of brands, the firm said Friday.
Net income rose to 149 million rubles ($4.9 million) from 139 million rubles a year earlier, the company said on its web site. Sales fell 8 percent to 3.31 billion rubles, hurt by the disposal of unprofitable assets at Dr. Scheller Cosmetics, Kalina said in a statement.
Kalina, the country’s largest cosmetics producer, said it introduced 40 varieties in the first quarter and focused on “active promotion.” Kalina also in- vested in distribution.
Kalina said last year that it would retain control of the Dr. Scheller brand while selling the company’s industrial assets in Germany. Sales declined in the first quarter because of Dr. Scheller disposals “related to production and distribution of oral-care products and private labels in Europe,” Kalina said.

TITLE: Stocks, Ruble See Biggest Decline in a Week on Crisis Concerns
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russian stocks and the ruble fell the most in a week as commodities declined on concern that Europe’s deficit crisis will derail a recovery and a report showed that Russian-focused funds posted outflows.
Severstal, the country’s largest steelmaker, lost 3.6 percent after reporting an unexpected $785 million first-quarter loss. The MICEX Index fell 1.9 percent to 1,352.01 at the close in Moscow, paring the week’s gain to 4.9 percent.
The ruble weakened 0.5 percent to 30.16 per dollar by the close in Moscow, bringing its weekly gain to 1.2 percent, and slipped 0.2 percent to 37.79 per euro. 
Lower oil prices will put pressure on the ruble, Chris Weafer, chief strategist at UralSib, wrote in an e-mailed note Friday. Oil retreated as much as $1.68 to $72.72 a barrel in New York.
Emerging market equity funds had a second straight week of redemptions as Europe’s sovereign-debt crisis dented demand for riskier assets and concern mounted that a $1 trillion bailout package would fail, EPFR Global said.

TITLE: In Brief
TEXT: <strong>Customs Union</strong>
MOSCOW (Bloomberg) — Russia will receive 87.97 percent of customs revenue as part of a union with Belarus and Kazakhstan that comes into force on July 1, Prime Minister Vladimir Putin said Friday.
Belarus will receive 4.7 percent of total customs revenue, while Kazakhstan will get 7.33 percent.
	
<strong>TNK-BP Invests</strong>
KIEV (Bloomberg) — TNK-BP plans to invest $800 million in its Ukrainian assets over the next five years, TNK-BP managing director German Khan said Friday.
Part of the sum, $140 million, will be invested this year, Khan said. TNK-BP has invested about $1 billion in Ukraine over the past 10 years.

<strong>Sibur Plant</strong>
MOSCOW (Bloomberg) — Sibur Holding said Friday that it expected to finish construction of a new facility in Western Siberia at the end of 2012, more than doubling polypropylene output.
The plant will produce 500,000 tons of polypropylene a year. Its annual out- put of polypropylene, used in food con- tainers and textile fibers, is now 220,000 tons.

<strong>Sibur, Reliance Deal</strong>
NEW DELHI (Bloomberg) — Reliance Industries, India’s largest private-sector company, and Sibur will jointly manufacture rubber for automobile tires in India, the companies said Sunday.
The two companies have signed a memorandum of understanding to set up the joint venture in India.
The venture will produce butyl rub- ber at Reliance’s integrated refinery site in Jamnagar, India.

<strong>Evraz Capacity</strong>
MOSCOW (Bloomberg) — Evraz Group said Friday that it might close capacity at Czech unit Vitkovice Steel should it fail to win agreement by June 15 on prices for pig iron, a raw material supplied by ArcelorMittal Ostrava.
Evraz will study a temporary or permanent shutdown of steelmaking at Vitkovice should a settlement with the Czech unit of ArcelorMittal not be reached, vice president Alex Agureyev said.

<strong>Sochi Contracts</strong>
MOSCOW (Bloomberg) — Strabag has a very good chance of winning construction contracts for the Sochi Olympics, chief executive Hans Peter Haselsteiner said, Vienna’s Format magazine reported.
Contracts will be awarded in the second quarter, and construction will begin in the third quarter.

<strong>For the Record</strong>
Billionaire Mikhail Prokhorov’s MFK Bank bought most of the $560 million of debt that Sedmoi Kontinent’s owner owed banks, Kommersant re- ported Friday.	(Bloomberg)

--?The EBRD has provided $40 million in two loans to Russian soybean producer Sodruzhestvo, the bank said Saturday. (Bloomberg)

--?Severstal, Novolipetsk Steel and Magnitogorsk Iron & Steel may raise steel prices for automakers by 20 per- cent to 30 percent in July, Interfax re- ported.	(Bloomberg)

--?Turk Hava Yollari, the carrier known as Turkish Airlines, and Aero- flot may form a joint airline company, Referans reported.	(Bloomberg)

TITLE: Rosneft Q1 Profit Goes Up 18 Percent
AUTHOR: By Stephen Bierman
PUBLISHER: Bloomberg
TEXT: MOSCOW — Rosneft, Russia’s largest oil producer, said profit rose 18 percent in the first quarter to the highest level since the economic crisis hit the country 18 months ago, after crude prices advanced and output increased.
Net income climbed to $2.43 billion from $2.06 billion a year earlier, the Moscow-based company said Monday in a statement. That beat the $2.4 billion average estimate of six analysts surveyed by Bloomberg.
Urals, Russia’s benchmark export crude blend, averaged about $75.30 a barrel, up 71 percent from the first quarter of last year, according to data compiled by Bloomberg. Rosneft boosted crude output 8.4 percent to 2.29 million barrels a day in the quarter after starting production at the Vankor field, the country’s largest oil project, in August.
Rosneft expects export tax exemptions on crude produced at the remote Siberian oil field, which the Finance Ministry has challenged, to last for at least this year. The duty rises and falls with oil prices.
“We don’t expect any changes in the near to medium term,” Rosneft Vice President Peter O’Brien said in a telephone interview in Moscow on Monday. “Any changes in 2011 or 2012 we understand will be linked to broader tax reform.”
Output may rise 4.5 percent this year from last year’s 2.18 million barrels a day, O’Brien said.
Rosneft is looking at oil refining assets in Europe after increasing throughput 4 percent to 12.1 million metric tons in the quarter (1 million barrels a day).
“We continue to look at a number of acquisition opportunities in downstream markets where we sell crude oil,” O’Brien said, declining to say whether Rosneft is considering Petroleos de Venezuela’s stake in German refineries or ConocoPhillips’ Wilhelmshaven plant, also in Germany.
Revenue rose 79 percent to $14.8 billion. Earnings before interest taxes depreciation and amortization, or Ebitda, grew 92 percent to $4.44 billion.
“Ebitda outperformance is likely a sign of better cost control or tax breaks in action,” Artyom Konchin, an oil and gas analyst at Unicredit SpA, said by e-mail.
Net income growth was slower than advances in revenue and Ebitda because of a “considerable” foreign exchange gain and low income tax rate in the first quarter of last year, Rosneft said.
Export and mineral extraction taxes, which are tied to oil prices, more than doubled in the period. The state-run oil producer paid $3.98 billion in export duties in the quarter and $2.13 billion in mineral extraction tax. Transportation costs increased by about 41 percent to $1.76 billion.
Daily output at the Vankor field reached 264,000 barrels a day this month, Rosneft said. The field may reach peak output of more than 500,000 barrels a day in 2014, equivalent to 5 percent of Russia’s current output.
Rosneft cut its net debt to $16.4 billion as of April 30, down $2.1 billion from the start of the year, Rosneft said.
The company drew down $998 million in the second quarter from a $15 billion, 20-year Chinese loan facility that makes $5 billion available this year, and repaid $463 million of other loans, according to its financial statements.
Rosneft doesn’t plan to raise debt from other sources this year, O’Brien said.

TITLE: Medvedev Visits Ukraine for Gas Talks
AUTHOR: By Lyubov Pronina
PUBLISHER: Bloomberg
TEXT: KIEV — Russian President Dmitry Medvedev plans to discuss cooperation on natural gas and aerospace with his Ukrainian counterpart, Viktor Yanukovych, during a two-day trip to Kiev that began Monday.
The visit comes after Medvedev on April 21 awarded Ukraine as much as $45 billion in gas subsidies in return for a new lease on the Russian Black Sea Fleet’s base in Crimea. Nine days later, Prime Minister Vladimir Putin proposed “unifying” state-run Gazprom and Naftogaz Ukrainy, Ukraine’s state energy company.
Ukraine moves about 80 percent of Russia’s Europe-bound gas exports via a Soviet-era transportation network. Twice in the past four years, Gazprom, the world’s biggest gas producer, cut supplies to Ukraine during pricing disputes amid strained political ties, reducing flows to Europe.
Medvedev and Yanukovych said Monday at the start of their seventh meeting that talks should send a positive signal to business. The Russian president said trade between the two former Soviet republics had doubled since the start of the year because of the change of leadership in Kiev. “It’s easier for us to talk,” he said.
Russia and Ukraine aren’t talking about a merger of Gazprom, which is worth as much as $200 billion, and Naftogaz, which is worth “somewhat less, with all due respect,” Medvedev said in an interview with Ukrainian media before the visit.
Joint projects and ventures that would bring together production and transit assets, “not through a direct merger, but by combining various elements,” are “entirely possible,” Medvedev said, according to a transcript of the interview that the Kremlin sent by e-mail Sunday.
Gazprom Chief Executive Officer Alexei Miller said on April 30 that the Moscow-based company would consider asset swaps with Naftogaz, as it has done with Germany’s E.ON Ruhrgas AG and Italy’s Eni SpA.
Russia and Ukraine are considering a series of aerospace proposals, including “continued cooperation on individual models,” such as the An-140, a short-range turboprop airplane, and the An-148, a regional jet, both designed by Ukraine’s Antonov.
Russia’s United Aircraft Corp. and Antonov are in direct contact, Medvedev said.
Joint aircraft production “can’t be ruled out,” Medvedev said. “Cooperation on production in the aerospace industry seems entirely logical to me, because our technical bases are very similar, if not to say identical.”
The two leaders will also discuss cooperation on regional and international issues, including security, Medvedev said.

TITLE: Khloponin Supports Caspian Tax Breaks
AUTHOR: By Anatoly Medetsky
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The government’s new envoy to the restive Caucasus, Alexander Khloponin, said Friday that he would support oil companies such as LUKoil in seeking tax breaks for drilling in the Caspian Sea in a statement that gives the issue a political dimension.
“I believe the state must stimulate the economy in all respects, especially in the oil industry, creating conditions for more rigorous investment in this segment,” he said in response to a question from The St. Petersburg Times after a session of the Presidium. “As far as offshore development, I will support these efforts.”
The Kremlin tasked Khloponin, a deputy prime minister and the presidential envoy to the North Caucasus Federal District, with achieving a degree of prosperity in the region and suppressing militant activity in the area’s explosive republics of Chechnya, Dagestan and Ingushetia.
The North Caucasus includes the Russian section of the oil-rich Caspian Sea that would draw much investment from the country’s oil producers if it weren’t for the hefty tax burden, which all but wipes out the prospect of tapping new fields in challenging conditions. LUKoil chief Vagit Alekperov asked for tax incentives after the country’s second-biggest crude producer launched Russia’s first Caspian field last month.
Khloponin’s comment indicated that the government would need to take into account the importance of defusing political unrest in the region when it weighed its tax options.
The presidential envoy said he would submit his proposals for the social and economic development of the region, including tax breaks, by the end of next month. If approved, the strategy will hopefully start working next year, he said.
In a sign of how far Moscow can go to change the situation of frequent attacks on local police and government officials, the Presidium on Friday gave Khloponin the authority to fire federal officials in the Caucasus if he considers them incompetent. The wider powers also enable him to issue immediate orders to officials. The measures are designed to cut the red tape in running the region because they remove the need to agree on such dismissals and orders with numerous federal agencies.
Khloponin said as many as 34 federal agencies now employ 24,000 people locally to run things in the region.
“In fact there’s no coordination among these agencies,” he said. “The goal is to set things right and establish control over what these federal officials are doing there.”
The Presidium appointed the Regional Development Ministry in charge of coordinating federal policies in the region, Khloponin said.
Khloponin said construction and farming were among the most promising industries for the region. All in all, the republics under his supervision have proposed projects worth an “astronomical” 1.6 trillion rubles ($53 billion) through 2020, he said.

TITLE: World Cup Bid Aims to Aid Infrastructure
AUTHOR: By Irina Filatova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Hosting the football World Cup finals in 2018 or 2022 will boost the development of Russia’s sport and tourist infrastructure, First Deputy Prime Minister Igor Shuvalov said Thursday.
“These are immense opportunities for business. … That’s what we call associated infrastructure — hotels, city infrastructure,” Shuvalov said at the presentation of Russia’s bid to host the championship football tournament.
The announcement came as Russia and other countries bidding to host the World Cup prepare to submit their bid books to the International Football Association, or FIFA, on Friday.
Shuvalov, who chairs the committee overseeing the Russian bid, said Russia had every right to host the World Cup because of its vast experience in holding international sports competitions, including football ones.
Shuvalov declined to specify the amount of money to be spent on developing the infrastructure, as well as the proposed budget of the competition, but Alexei Sorokin, chief executive of the Russian Football Union, said the assigned money “would satisfy FIFA.”
Sports, Tourism and Youth Politics Minister Vitaly Mutko said the budget of the project “would be comparable to the budget Germany spent on hosting the World Cup.”
Analysts said Russia might actually need more money than Germany for its World Cup.
“Germany had a more developed infrastructure when it won the right to host the World Cup. Germany didn’t have to do such a big amount of work,” said Andrei Rozhkov, an infrastructure analyst at Metropol.
Russia plans to build 16 stadiums in 13 cities, including Moscow, St. Petersburg, Kaliningrad, Rostov-on-Don, Sochi, Samara and Nizhny Novgorod.
Construction costs for a single stadium range from $70 million to $300 million, Rozhkov said.
Infrastructure projects for the cup will mostly be funded by private investors, Shuvalov said.
Prime Minister Vladimir Putin said last year that hosting the World Cup was “a nationwide task” for the country.
But Russia will develop transport and sports infrastructure even if it loses its bid, Shuvalov said.
“We must do that anyway, because we must make our country better,” he said.
Mutko said that winning the bid to host the 2014 Winter Olympics, which will be held in Sochi, “strengthened Russia’s position” in the competition.
Olympic construction is currently estimated to cost about $12 billion, but preparing a world cup would probably be cheaper, because there will be no need for such a large-scale reconstruction of infrastructure, Rozhkov said.
Russia’s lack of hotels and stadiums may play to its advantage, because FIFA is interested in developing football infrastructure worldwide, and the other bidders already have such infrastructure developed, Shuvalov said.
Also in the running for the 2018 or 2022 World Cup are England, the United States, Australia and two joint bids from Spain-Portugal and Netherlands-Belgium, respectively. The 2018 tournament is tipped to take place in Europe.
Japan, Qatar and South Korea are aiming solely for the 2022 tournament.

TITLE: Google 
To Beef Up Operations
PUBLISHER: Bloomberg
TEXT: MOSCOW — Google plans to recruit more direct sales and operations workers in Russia as the local market for Internet advertising rebounds, Nikesh Arora, head of global sales operations, said Thursday.
The owner of the world’s largest Internet search engine “will keep up with the pace of the market, and as the market evolves, we’ll continue hiring people,” Arora said in an interview.
Google has seen “lots of interest from global advertisers who want to participate in the Russian economy,” he said.
Russian advertising spending increased 5 percent to 46 billion rubles ($1.52 billion) in the first quarter, the Association of Communications Agencies said Wednesday. Internet media led the advance, with ad revenue surging 31 percent to 3.4 billion rubles, according to the association. Ad growth may exceed 10 percent this year as the economy rebounds from its steepest decline on record, said Sergei Piskarev, head of Gazprom’s media arm.
“We like the way our market share is progressing in Russia,” Arora said in the interview. “We offer a unique opportunity” in the country, he added.
Internet ad sales may expand by between 30 percent and 50 percent this year, said Eugene Lomize, head of technology and sales at Yandex.
Google, which competes against Yandex and Rambler in Russia, “hasn’t come anywhere near” exceeding Yandex in market share in the country, Lomize said. Yandex, which has 63 percent of Russia’s Internet search market, is adding sales offices in Russia to tap growing Internet use in the region, he added.
Yandex expects sales growth to outpace the Russian Internet ad market this year, Lomize said. Revenue climbed 14 percent to 8.7 billion rubles in 2009 on higher advertising sales, the company said Feb. 1.

TITLE: An Indispensable Lesson in Macroeconomics
AUTHOR: By Martin Gilman
TEXT: The turmoil last week in global financial markets, presumably precipitated by Greece’s unsustainable debt problems, reminded me of why I studied macroeconomics. As interesting as it may be to study how individuals and families make their choices of what to buy, how much to save and when to borrow, the scale at the level of an entire country is truly fascinating.
Of course, in macroeconomics, the policy choices of governments play a central role in the determination of economic performance. It seems that the Greek government, as well as others in the southern part of the euro zone, allowed themselves to be lulled by the benign borrowing conditions in the euro, their domestic currency, to jump-start growth through debt financing.
Professor Yevgeny Yasin, founder of the Higher School of Economics, five years ago bemoaned the tendency of students to ignore macroeconomics. He assumed that students considered “macro” as something that happened in Russia in the 1990s and would now only be of relevance to economic historians. Ignoring the study of macroeconomics, he felt, was myopic and ahistorical. How right Yasin was!
At the beginning of last year, macroeconomics suddenly became topical again as Russia was plunged into a temporary crisis by capital outflows and a global flight from risky assets.
After the massive injections of Central Bank liquidity and government spending to fill the hole left by the retrenchment of overindebted banks and households in the advanced economies, the global environment has been slowly recovering in the past couple quarters. But now bond holders are increasingly worried about whether sovereign borrowers can really repay, and for good reason. Seemingly isolated cases like Iceland, Ireland and now Greece seem to conflate into more of a systemic crisis, much like how Thailand’s economic problems in July 1997 spread to others in Asia and then eventually to Russia and later to Brazil.
Even if you haven’t studied macroeconomics, the basic problem — as any household that spends too much with borrowed money can tell you — is that growing indebtedness raises the floor for the level of income needed and increases vulnerability should unanticipated costs rise or revenue decline. For countries like Greece — or Russia 12 years ago — the situation is analogous.
This will not end well. With or without support from the International Monetary Fund and partner countries, the austerity required will be politically challenging at best. The markets may remain skeptical as they did in the case of Russia during spring and early summer 1998, despite a $22 billion IMF bailout package announced in July 1998.
Russia had its sovereign debt crisis 12 years ago. The similarities to Greece, for all of the differences, are chilling — especially as the exit strategy beyond the inevitable default itself is not obvious. At least after Russia defaulted on its ruble-denominated debt on Aug. 17, 1998, the ruble was forced into a free float within weeks and lost more than two-thirds of its value by the end of the year. Greece does not have this recourse unless it leaves the euro — a dramatic step with severe and wide-reaching implications.
Unlike most other countries, Russia is now in a sweet spot. Whether it lasts depends in good part on decisions of the government as it formulates its draft 2011 budget and spending plan through 2013.
Russia’s inflation continued to decelerate to a 6.2 percent annual rate in April, whereas China and India worried about accelerating prices. Foreign exchange reserves are rising. Even with last month’s eurobond issue, the first sovereign issue since 1998, Russia’s sovereign debt is now the lowest among the Group of 20 countries as a percentage of gross domestic product.
Can this continue? Of course, there are the usual problems with external forces over which Russia has no control such as oil prices and capital flows. The drop of oil prices by about $10 per barrel last week underscored Russia’s vulnerability in this regard. Even so, compared with the highly indebted advanced economies of Europe, Japan and the United States, many emerging market economies, including Russia, appear to be more attractive. Russia’s external current account surplus may stay at about 4.5 percent of GDP this year. Although this is somewhat less than is expected in China, both Brazil and India are expected to register deficits. And while all of the BRIC countries will run budget deficits in 2010, these will be a fraction of the numbers touted in the United States, Britain, Japan and southern Europe. Meanwhile, Russia’s budget deficit may be a relatively modest 2 or 3 percent of GDP.
If the political class in Russia can stick to its original plan for no growth in nominal budget spending this year and a small reduction in 2011, the country’s financial future should be more serene than implied by the difficult environment for countries in general. Moreover, its relatively robust growth will serve as a modest driver of the global economy and distinguish Russia from many other countries.
At the same time, politicians in Russia may succumb to the usual temptation to raise spending as if high oil prices were a permanent and stable feature of the global economy. 
Russia’s low-debt economy is an important legacy of its 1998 sovereign debt default. But its ability to avoid future debt problems that are crippling other nations is tightly linked to the oil price that sustains the budget. A few years ago, when oil prices were lower, this did not seem to be such a problem. Now, the so-called break-even oil price for the budget is estimated by Troika Dialog at almost $100 per barrel. Clearly, this is not sustainable and sets the country up for a shock at some time in the future. Some tough political decisions are needed to rein in budgetary spending, even if they appear as a cakewalk compared with austerity measures weighing on Greece and other heavily indebted countries.
Like a family, Russia has to decide what is best for the long term. The upside is a country with solid economic growth, a balanced budget and a slightly positive current account in the years to come. Hopefully, a new generation trained in macroeconomics will take its lessons to heart.

Martin Gilman, former senior representative of the International Monetary Fund in Russia, is a professor at the Higher School of Economics.

TITLE: A New and Modern Foreign Policy
AUTHOR: By Dmitry Trenin
TEXT: A supposedly confidential Foreign Ministry document — an intentional leak that was published on Russian Newsweek’s web site this week — has created a stir among diplomats and journalists. Many saw it as a revelation or a signal of a significant and welcome policy shift toward the West. But in reality, this is quite an overstatement.
Contrary to widespread perception, the Kremlin took a defensive rather than an offensive foreign policy position during Vladimir Putin’s second presidential term. From the color revolutions to the 2008 Georgia war, it was under constant pressure and occasional attack from Washington. With the “reset” in U.S. foreign policy under U.S. President Barack Obama, the pressure is now off, and Moscow can return to “business as usual,” which has much more to do with business than traditional geopolitics.
The modernization angle is a more recent development. The global crisis has knocked Russia down several notches and has significantly diminished the hubris that it had shown in the boom years of high energy prices. It awakened the leadership to the harsh reality that Russia is losing ground in the global pecking order by falling behind its industrial, technological and scientific capabilities. All the proceeds from Gazprom’s sales notwithstanding, Russia is sorely lacking what it takes to be a major global economic and political force in the 21st century. Relative energy abundance and nuclear arsenals are simply not enough. The Kremlin was forced to come to terms with the fact that Russia cannot modernize on its own and that it needs Western investment and strong business partnerships with the West.
Once this fact was accepted, the implications were clear. Russia’s foreign policy, as many political analysts had argued all along, should stop covering up the country’s diminishing status with aggressive rhetoric against the West. Instead, Russia needs to attract external resources for modernization.
This transformation is now official. Well done. The next step is to attract the resources to make the transformation possible. It is not hard to see that they are mostly found in the countries making up the Organization of Economic Cooperation and Development — that is, North America, Western Europe, Japan, South Korea, Australia and Singapore. Although BRIC, the Shanghai Cooperation Organization, the Commonwealth of Independent States and the Eurasian Economic Community are all important alliances, it is clear that these groups won’t be able to produce the same investments and business partnerships for Russia as the more established global financial and technology centers.
The European Union, of course, is at the top of the list because of its members’ advanced economies, technological proficiency and physical proximity to Russia. Russia’s links with Germany, France, Italy, the Netherlands and several other countries are so close that it is possible to talk of an emerging pan-European economic community. It is also evident that despite the relatively modest trade turnover between the United States and Russia, the United States holds the key to critical technology transfers that Russia covets. In addition, Japan should be added to the list, particularly to help develop Siberia and the Far East.
Although the Foreign Ministry document looks authentic and, on the whole, solid, it has a few glaring gaps — for example, Britain and Poland were left out for some reason. We may be dealing with an incomplete draft, but the few rough edges can be easily ironed out later. A more important problem is that the very pragmatic, down-to-earth tenor of the paper is not rooted in a grand strategy and avoids the intersection between foreign and domestic policies.
Above all, however, it appears that both the Foreign Ministry and the Kremlin understand that the kind of economic integration that Russia seeks is only possible when the relationship between Russia and the West is fully and securely demilitarized. Competition between the countries will remain for a long time — perhaps forever — but hostility when the relationship must go. Normalization in relations has largely been achieved with Western Europeans, an improvement in Russian-Polish relations is hopefully in the pipeline, while the Baltic States continue to be outliers. Regarding the reset in U.S.-Russian relations, however, there is a lot of work that still needs to be done. Arms control is not enough. What is required is strategic cooperation and collaboration, from joint efforts to stem proliferation of nuclear weapons to joint missile defense projects.
Closer to home, making sure that the outside world views Russia as a democratic state with a social market economy and independent foreign policy will require a lot of heavy lifting, not simply window dressing. Modernization couched in strictly economic and technological terms is too narrow to succeed. Democracy will surely take many years — if not decades — to mature and develop in Russia, but strengthening the country’s political and economic institutions should be the leadership’s immediate priority. More than anything else, this factor will determine whether leading nations accept Russia as a viable and dependable partner.
President Dmitry Medvedev and Foreign Minister Sergei Lavrov deserve praise for making an important step forward. The next steps should include the completion of accession to the World Trade Organization, turning the EU-Russian “partnership for modernization” into the centerpiece of EU-Russian relations, consolidating and expanding partnership with the United States and turning Japan into a “Germany in the East.”
At the same time, focusing on the developed world should not come at the expense of Russia’s important relations with China, India and Brazil or with Kazakhstan and Ukraine. Isn’t this what all other aspiring countries are doing? Russia, welcome to the club.

Dmitry Trenin is director of the Carnegie Moscow Center.

TITLE: An Overdue Alliance
AUTHOR: By Alexei Bayer
TEXT: There is a Russian proverb that explains why everything always takes so long in Russia. “Russians are slow to harness a horse, but once they finally do it, they ride fast.”
Coming to grips with World War II has certainly taken a very long time in Russia. In the West, the 65th anniversary of victory over the Nazis, or Victory in Europe Day as it is known in the English-speaking world, was a fairly minor event. It was rather perfunctorily marked in Europe and almost completely ignored in the United States. On May 8, when it is officially celebrated by the Western Allies, newspapers were more concerned with the unfolding crisis in European financial markets than with long-ago battles on European battlefields. The world has moved on. Controversies about the war have long been consigned to ivory towers and the pages of academic journals.
Russians are miffed at how the U.S. media and public ignored the anniversary. In Russia, preparations for the celebration had gone on for much of the past year, and the occasion was marked by a major military parade and a slew of official festivities.
There were also heated arguments in the mass media and on the Internet as to who won the war — the people or the Communist Party — and whether the brutal collectivization and industrialization of the 1930s helped or hindered the war effort. Everything was endlessly debated — Stalin’s purges of the top ranks of the Red Army, the pact with the Nazis and the Soviet military strategy. It seemed as if every one of the 40 million Internet users in Russia had a passionate opinion about historical events.
The war remains so important for Russians because it is the only major occasion over the past 100 years in which the nation was truly united. Russians feel tremendous pride in defeating Adolf Hitler. This pride, moreover, has a wounded quality, as such national pride often does. Western nations and the United States are often accused of minimizing Russia’s suffering, of claiming too much credit for the victory and of equating Hitler with Stalin. The latter is the worst sin of all because it turns the war, which for every Russian was the ultimate contest between good and evil, into a struggle between two grotesque mass murderers.
Civilized nations came together to oppose Hitler, and the Soviet Union joined their alliance, albeit only out of dire necessity. It was a great tragedy for Russia that after 1945, it once again withdrew from the world community and became its enemy.
Russia’s leaders are at last starting to realize this. There has been official acceptance of Soviet responsibility for the 1940 mass murder of more than 20,000 Polish officers at Katyn. NATO troops participated in the Victory Day parade on Red Square. The West’s contribution to the Soviet war effort, especially the Lend-Lease program from the United States, has been acknowledged.
It has taken Russia a long time to figure out that the only act of national heroism of the past century was achieved in alliance with the West. Having taken 65 years to harness, perhaps Russia will now ride rapidly to rejoin the world community.

Alexei Bayer, a native Muscovite, is a New York-based economist.

TITLE: The Queen’s House on the Neva: A History
AUTHOR: By Anthony Cross
PUBLISHER: The St. Petersburg Times
TEXT: At the eastern end of Palace Embankment, fronting the Neva by the Troitsky Bridge, and before you reach the elegant iron railings of the Summer Garden, there are two mansions that were built in the late eighteenth century and are now merged into one to house the St. Petersburg State University of Culture and Arts. 
Nos. 2 and 4 Palace Embankment are nonetheless associated to this day primarily with two of Catherine the Great’s grandees, Ivan Ivanovich Betskoy (1704-95), renowned for his progressive educational ideas, and Nikolai Ivanovich Saltykov (1736-1816), veteran of the Seven Years War, field marshal, senator, and tutor to the Grand Duke Konstantin Pavlovich. 
Betskoy was the first owner of no. 2, a two-storied house with corner towers that enclosed a hanging garden and was built to his specifications during the years 1784-7. Saltykov, on the other hand, was not the original owner of no. 4, built by Giacomo Quarenghi also in the 1780s for a foreign merchant, although the association of his family with the house was to long outlive that of Betskoy’s with no. 2. It was to be passed down through generations of Saltykovs for more than a century, from 1796 until 1918, earning it the name “the Saltykov Mansion.” 
During this period, but at intervals over many decades, it was to undergo a whole series of changes, both externally and internally. Financial problems forced the family to let part of the house and in 1828 the St. Petersburg News announced that it was available for rent, fully furnished. The lease was taken by the Austrian government for its embassy and in September 1831, after repairs and refurbishment, it became for the next eleven years the residence of the Austrian ambassador Karl-Ludwig von Ficquelmont. More significantly, it provided the setting for two of the most famous salons of the period, reigned over by Ficquelmont’s wife, Daria Fyodorovna, in the evenings, and by his mother-in-law, Yelizaveta Mikhailovna Khitrovo, the daughter of Field Marshal Kutuzov, in the mornings, that were frequented by the cream of Petersburg aristocratic society and the corps diplomatique. Pushkin, a close friend of Khitrovo and her daughter, was a frequent visitor. 
Ficquelmont was recalled to Vienna in 1840 but the Austrians relinquished the lease on the Saltykov Mansion only in 1855, after the outbreak of the Crimean War. In 1863 the lease was taken up by the British government and for a period of fifty-five years, until the beginning of 1918, no. 4 Palace Embankment became the British Embassy and welcomed an unbroken line of thirteen British ambassadors. 
It is probable that even during the period when the mansion was leased to the Austrians, the Saltykovs never ceased to inhabit some part of it. They certainly did throughout the years it was occupied by the British. From evidence dating from the time of later leases (in 1879 and 1904) it would appear that the British leased all the rooms that faced the Neva and almost all facing Suvorovskaya Ploshchad and sharing a party wall with the Betskoy Mansion. The main formal or state rooms were on the second floor (British style), the piano nobile, although confusingly, even in English documents, this is sometimes referred to as the first floor and the real first floor as the entresol or mezzanine. It was on the first floor/mezzanine that the chancery was situated, and it is from that floor that the elegant curved staircase ascends to the state rooms on the second floor. A plan shows clearly the disposition of these rooms and the interflow from the supper and dining rooms into the ballroom and from the ballroom into the drawing and reception rooms. 
The Saltykovs seem to have reserved for themselves the back of the house facing the Field of Mars and partially along the wall facing Suvorovskaya Ploshchad. The wife of the British ambassador at the end of the 1870s refers to Princess Saltykova as “our landlady [who] lives in the back part of this house,” and on another occasion, to her husband as “our landlord and semi-detached neighbor,” explaining that “we can get through our house to his.” In 1867, a three-story gallery had been built across the middle of the courtyard (a fourth storey was added in 1884) and was the de facto dividing line between the British and the Saltykovs, although, of course, the British carriages entered from the Field of Mars, driving under the gallery.
A decade later, a sketch of the embassy appeared in the Illustrated London News. One of the most significant events during the ambassadorship of Lord Augustus Loftus was the marriage in January 1874 of the Duke of Edinburgh to Alexander II’s daughter Maria Alexandrovna. The embassy building was lavishly bedecked and illuminated for the occasion: The fa?ade sported flags and banners of Britain and Russia and large rondels with the initials M and A on either side of the entrance and above the second-floor balcony arches with the device “May every happiness attend them.”
Loftus’s published memoirs are extensive but with regard to Russia very disappointing. It has been noted that “the personal element is small,” and perhaps not unexpectedly, this applies to all that the ambassadors published. It is to their wives and in one unique case to a daughter that we look for glimpses of life in the embassy. Even then, relatively few ambassadresses left memoirs or impressions of their sojourn in the Saltykov Mansion. A notable exception was Hariot, Lady Dufferin, whose husband, Frederick Hamilton-Temple-Blackwood, 1st Marquess of Dufferin and Ava, was ambassador from 1879 to 1881. 
The Dufferins followed the Loftuses as occupants of the “Queen’s house on the Neva;” indeed, they arrived at the beginning of February 1879, when Lord and Lady Loftus were still in residence. It was at this interstice between the Loftus and Dufferin ambassadorships that the whole question of the suitability of the Saltykov Mansion and the terms of its lease became a matter of urgent discussion between the Foreign Office, the Treasury and the Office of Works on the one hand and the landlords — the Saltykovs — on the other. 
On Feb.15 a memorandum was sent to London. It opened with a very positive assessment of the house “which is very healthily and well situated on the Quai de la Cour and is the most suitable House in St. Petersburg for an Embassy; in fact there is none to be had equal to it.” The document also makes clear that the furnishing of the rooms in the mansion rented by the embassy had been the responsibility and at the expense of the incumbent ambassador. The Loftuses had furnished not only all the state rooms on the second floor but also “the Chancery, servants’ rooms and the Kitchen complete together with all the glass, China &c which is required for entertaining.” It was suggested that if everything was purchased by the government from Lord Loftus, then Lord Dufferin “would not require anything but his own pictures, household linen, tea and breakfast services, dessert services and fine glass for dinner, and his own personal property such as books.” In the event, although Lady Dufferin notes that she and her husband finished up by buying “a good deal of Lord A. Loftus’s furniture,” much was also sold at auction.
 However, a Mr Boyce, a surveyor sent out from London, found the positive assessment of the state of the furniture and of the decoration and fittings of the rooms to have been exaggerated. The furniture, he concluded, “comprised scarcely a single suite, and, with few exceptions, consisted of articles apparently purchased from time to time, inferior in quality and considerably the worse for wear.” When it proved impossible to persuade the Saltykovs to undertake repairs other than agreed in the previous lease, essentially structural, then the Office of Works, in addition to providing the state rooms with more suitable furniture, undertook also to do “the painting, colouring, and papering together with the regilding of the walls, ceilings and cornices, which are now absolutely necessary, and the cleaning and whitewashing throughout the house, which is of considerable size.” The new lease was eventually signed in June 1879 at a rent of 15,000 rubles per annum for a period of fourteen years, representing in fact the remaining part of the previous lease plus a further ten years but nevertheless requiring the personal approval of the tsar. 
The embassy was now ready for entertaining on a grand scale, and on 8 January 1880, nearly a year after their arrival in the Russian capital, the Dufferins hosted their “first big dinner,” when they tried out their new cook on twenty-six guests, and, three days later, were inviting a similar number of English-only guests to a dinner that was followed by a dance for ‘the rest of the “[British] Colony”’ and the diplomatic corps. Their highlight was, however, the dinner in honour of the Duke and Duchess of Edinburgh in March, which was soon followed by the Dufferins’ first ball. 
The Dufferins were in Petersburg at a time of increasing terrorist activity. Attempts on the lives on the chief of police and the tsar were followed by the latter’s assassination on 13 March 1881. The embassy with its staircase ‘all draped in black’ received the Prince and Princess of Wales (the future King Edward VII and Queen Alexandra), who had attended the funeral and also invested the new tsar with the Order of the Garter. The lunch attended by the royals and numerous ambassadors was the last great event in the embassy before the Dufferins departed for Constantinople.
It was towards the end of the ambassadorship of Sir Robert Morier that the fourteen-year lease signed during Lord Dufferin’s sojourn was again up for negotiation. In December 1892 it was argued that “St. Petersburg is one of those capitals in which it seems necessary that we should have a permanent residence for our Ambassador. Yet there is no place in which it would be less desirable to invest capital at present either by buying or building.” The “by no means unreasonable” new rent of 18,000 rubles per annum was agreed. Negotiations with Prince Nikolai Saltykov were generally amicable but protracted once more before the new lease, on this occasion for twelve years, was signed on March 20 1894, by which time another ambassador, Sir Frank Lascelles had been appointed. 
Although the idea of finding a different home for the embassy had obviously been mooted earlier, by the turn of the century it had become a burning issue. In 1901 the lease still had four years to run but it is obvious that Sir Charles Scott, ambassador since 1898, and his wife were not happy with the private accommodation the Saltykov Mansion provided. Matters were brought to a head by a report from C. S. Rivers, the Principal Surveyor for Diplomatic Buildings, who had been sent out to inspect the present embassy and to look for possible alternatives. It is a damning report, conveying a good Victorian’s horror at the state of the building in general and of its plumbing and sanitation in particular. Not impressed by the landlord’s inattention to necessary structural repairs, he was truly appalled to find that “the sanitation is positively dangerous to health.”
“The system of drainage is by cesspits with overflows for the liquid contents direct into the Neva,” he wrote. “None of the soil pipes are ventilated — neither are the cesspits. Under these circumstances I am not surprised to hear that sore throats of a diptheric tendency are very common in the Establishment and there have been some cases of pronounced typhoid.”
Rivers provided a long list of recommendations before turning his attention to the courtyard and the buildings within it that were considered part of the embassy. The washhouse had a floor “of wood without drainage, thoroughly rotten and there is a perfect quagmire under it;” the stable on the further side of the courtyard and facing the main building of the embassy was as bad and “the strong effluvia from it enters the windows when they are opened.” The electric wiring was chaotic and “excessive lengths of flexibles have been used to run round some of the rooms, held to the walls by a simple twist round glass or china buttons. The slightest pull would detach the whole.” His overall assessment was that the building “shows evidence of decay generally.” His verdict was that “if the present building were in the market I should not advise its purchase.”
The problem, however, was that alternative properties, particularly houses in such a prestigious location, were hard to come by; building a new embassy would be prohibitively expensive. Back in London, it was agreed to widen the search for a suitable new home. Over the next few months three alternative mansions were considered, two of which were on the English Embankment and had, incidentally, belonged in the eighteenth century to prominent British merchants, but all were ultimately rejected. Eventually it was decided that there was no alternative “but to muddle on with the old house after the drains have been put in order.”
Negotiations were nonetheless protracted because of a dispute with the landlord, who was by this time Prince Nikolai Saltykov’s widow, Anna Sergeyevna, as to responsibility for structural repairs, such as underpinning the ballroom with steel beams. A new ambassador, Sir Charles Hardinge was in post before a new lease was eventually signed on Aug. 27, 1904. The annual rent was 25,000 rubles and the lease was to run from 1 January 1905 for twelve years, with the agreement to renew for a similar term and with the British government being advised, with first option, of any proposed sale of the house.
The princess was still in residence when the time came for consideration of a new lease. It was then, however, 1916 and wartime. This meant that while the purchase of a different house for the embassy was still very much the preferred British option, it was inevitably to be delayed. The ambassador, who was then Sir George Buchanan, in post since 1910, wrote:
“The present Embassy House, though admirable for reception purposes, has many disadvantages. It is situated on one side of the noisiest thoroughfares of the town; the bedroom accommodation is bad, while, as regards the Chancery, the space is so limited that since the war began I have been obliged to place two other rooms at the disposal of the Military, Naval and commercial Attach?s.”
He would “never recommend the eventual purchase by His Majesty’s Government of the present Embassy House” and suggested a lease of only eight years and a search for an appropriate building site after the war. An eight-year lease was duly signed on 26 December 1916. It was to be the last. In June the following year Princess Saltykova asked the British Government to pay the rent to her designated heirs already in London.
Although Sir George in the year before his death published his invaluable memoirs of this period, “My Mission to Russia and Other Diplomatic Memories” (1923), it is to his daughter, Meriel (1886-1959), rather than to him or his formidable wife Lady Georgina that one turns for an evocation of embassy life rivalling that of Lady Dufferin, whose journals, coincidentally, were published during the years that Meriel’s parents were the last British occupants of the embassy.
Meriel’s description in “The Dissolution of an Empire” (1932) of the building and the layout of its rooms is detailed and invaluable: 
“It was an enormous building, spacious and solidly comfortable, though not in the least beautiful. A long flight of steps led from the front door to the first-floor landing, on the left of which were the Chancery offices, and on the right the bedrooms, private sitting-rooms and bathrooms. Beyond this first landing the stairs branched in two circular flights to the second landing, which gave access to my father’s study, the three state drawing-rooms, the ball-room, dining room and big supper room. All the windows of these rooms faced the square or the river, while the passages and landing looked out into the courtyard which was always stacked with huge piles of wood for the furnaces, with the stables, the kitchens, wash-houses and servants’ quarters at the other end.”
A sign of the times was the importing of a car from England complete with English chauffeur to complement the already considerable number of carriages and sleighs under the care of the colorful coachman Ivan, who “had a sublime conviction that everything must make way for him.” The head of the household was, however, William, the ambassador’s butler or chasseur, “who ruled all the others with a rod of iron.” He was in constant attendance on the ambassador, equipped with a large sword and, depending on the occasion, sporting a variety of headgear, including a cocked hat with feathers that made him look like a field-marshal. 
No less a character, not mentioned by Meriel but appearing in other contemporary memoirs, was a Cockney named Havery, who was the chancery servant, whose sense of humor and courage was to lift the spirits of others in the embassy, particularly during the revolutionary days of 1917. He is described amusingly and with particular affection by H. J. Bruce, who arrived in the summer of 1913 as Head of Chancery and who, more memorably, was to woo and wed the Russian prima ballerina Tamara Karsavina. 
Havery had in fact been appointed back in 1904 during the ambassadorship of Sir Charles Hardinge, when his predecessor, an Italian, had been caught red-handed as he attempted to take a wax impression of the key to the chancery safe. Both the ambassador’s memoirs and those of Sir Nevile Henderson (1882-1942), emphasizing the increased Anglo-Russian tension at the time of the Russo-Japanese War, describe in terms worthy of John Buchan the spying activities of the Russians which included breaking into the embassy and the copying of documents but which were inevitably thwarted by British vigilance. This was at a time when “it took nine keys to get from outside the house to the last drawer in the safe in the Chancery.”
Henderson highlights the exacting nature of the work in the chancery and the general low level of staffing in embassies that was only addressed after World War I, when numbers were increased tenfold:
“There were no archivists and no typists. Everything except stamping and posting the letters, for which the Chancery servant was responsible, was done by the diplomatic secretaries themselves. Occasionally we were helped by so-called honorary attach?s, or young men who served for a year or so abroad with a view to broadening their minds for some other future career — generally parliamentary.”
The chancery was the main information conduit between St. Petersburg and London and the work of deciphering and encoding was intensive. Once a week a bag was sent to the Foreign Office, including a weekly summary of minor events compiled by one of the secretaries. Bruce as head of chancery under Sir George Buchanan speaks of his responsibility for “the smooth working of the technical part of the Embassy machine” and how the work soon became “overwhelming, staff inadequate, leave impossible… We spent most of the day and, in later years, much of the night in the Chancery.” Even in pre-revolutionary days, as Henderson recalls, a previous head of chancery “never missed coming to the office for a single day, Sundays included.” The work was so unremitting that “we seldom had an opportunity to travel in the country.” 
Much that Meriel Buchanan writes confirms what has already been gleaned from the diaries of Lady Dufferin, but usually in greater detail and she is far less guarded in her opinions: The “purgatory” of the “at home” days; the endless dinners; the special occasions when visiting British delegations and dignitaries were received at the embassy; the dutiful entertaining of members of the British colony. Notable highlights were the visits of the Parliamentary delegation in February 1912 and of the British naval squadron, commanded by Sir David Beatty, in June 1914, when formal receptions and banquets were organized in the embassy. Perhaps the most poignant of events was, however, the party held at Christmas 1917, when the gaiety was tinged by the doom and gloom of the historical moment:
“On Christmas night we invited the members of the Chancery and of the various Naval and Military Missions, as well as some of our Russian friends who had not yet left, for a party that was to prove itself, I think, the last party ever given in the British Embassy,” wrote Meriel Buchanan. 
“Luckily it was an evening when the electricity was not cut off, so the great glass chandeliers blazed with light, the big rooms were crowded and filled with laughter, and though every officer present had a loaded revolver in his pocket, though there were rifles and cartridge cases hidden in the Chancery, for the moment we tried to forget the ever-present lurking danger, the sadness of approaching good-byes, the desolation and want hidden behind the heavy red brocade curtains which were drawn across the windows.”
Following the departure in January 1918 of the ambassador and his family, the embassy was left with a skeleton staff, headed by Captain F. N. A. Cromie, the naval attach?, who had originally arrived in Russia, or Russian waters, as the commander of the submarine E.19 in 1915. On Aug. 31 1918, the day following the assassination of M. S. Uritsky, the boss of the Petrograd Cheka, in which Cromie and the British were suspected of conspiring, the embassy was invaded by a group of Red Guards. Cromie, trying to prevent their entry and shooting two of the intruders, was himself shot dead at the foot of the grand staircase. Following the raid, the embassy was sealed. The other half of the building, however, continued to be occupied by Princess Anna Sergeyevna Saltykova, who had decided not to follow other members of her family into exile and who, according to Meriel Buchanan, “was to die of want and starvation within the year.”
The stories of possessions left in the embassy and the confiscation of valuables belonging to the Saltykovs anticipate to some degree the next phase in the history of the mansion. H. G. Wells, who had first visited Petrograd (as the city was then known) in 1914, returned for a short visit in September 1920 and stayed with his old friend Maxim Gorky, who had established an Expertise Commission to safeguard confiscated works of art. The mansion became their repository. 
“For greater security there has been a gathering together and a cataloguing of everything that could claim to be a work of art by this Expertise Commission,” wrote Wells. “The palace that once sheltered the British Embassy is now like some congested second-hand art shop in the Brompton Road. We went through room after room piled with the beautiful lumber of the former Russian social system. There are big rooms crammed with statuary; never have I seen so many white marble Venuses and sylphs together, not even in the Naples Museum. There are stacks of pictures of every sort, passages choked with inlaid cabinets piled up to the ceiling; a room full of cases of old lace, piles of magnificent furniture.” 
The Saltykov Mansion was soon to achieve its new identity as the home of a Soviet educational institution which, with some mutations in name and direction, has endured to the present day. In 1925 the N. K. Krupskaya Institute of Political Education moved to its new premises which now incorporated the adjacent Betskoy Mansion, no. 4 Palace Embankment. In 1941 it became the Library Institute, but its activities were immediately curtailed by World War II and the ensuing siege of Leningrad, when it was transformed into a military hospital. The institute re-possessed the building again in 1946 and created on the ground and third floors living accommodation for students. In 1964 it became the N.K. Krupskaya Institute of Culture, by which time Quarenghi’s light green coloring had been restored to the outside walls, which had been painted red in the late nineteenth century. The end of the Soviet regime inevitably invited name changes and the institute was renamed the St. Petersburg Academy of Culture in 1995. Four years later, it achieved university status and is now known as St. Petersburg State University of Culture and Arts.
On the wall inside the entrance hall of the former Beloselsky-Belozersky Palace at the junction of the Fontanka and Nevsky Prospekt, there is a plaque that indicates that during World War I the palace housed the Anglo-Russian Hospital. Perhaps one day, the long presence of the British Embassy in the Saltykov Mansion might be similarly commemorated. 

Anthony Cross is Emeritus Professor at the Department of Slavonic Studies at the University of Cambridge. His publications include “Anglo-Russica: Aspects of Anglo-Russian Relations in the Eighteenth and Early Nineteenth Centuries” and “By the Banks of the Neva: Chapters from the Lives and Careers of the British in Eighteenth-Century Russia.”

TITLE: Deep Sea Oil Spill Endangers Delicate Reefs
AUTHOR: By Jason Dearen and Matt Sedensky
PUBLISHER: The Associated Press
TEXT: NEW ORLEANS — The oil spill in the Gulf of Mexico has already spewed plumes over ecologically sensitive reefs, part of a stalled marine sanctuary proposal that would have restricted drilling in a large swath of the northern part of the vital waterway.
Marine scientists fear that two powerful Gulf currents will carry the oil to other reefs. The eastward flowing loop current could spread it about 450 miles to the Florida Keys, while the Louisiana coastal current could move the oil as far west as central Texas.
The depth of the gushing leaks and the use of more than 560,000 gallons of chemicals to disperse the oil, including unprecedented injections deep in the sea, have helped keep the crude beneath the sea surface. Marine scientists say diffusing and sinking the oil helps protect the surface species and the Gulf Coast shoreline but increases the chance of harming deep-sea reefs, which are seen as bellwethers for sea health.
“At first we had a lot of concern about surface animals like turtles, whales and dolphins,” said Paul Montagna, a marine biologist at Texas A&M University Corpus Christi who studies Gulf reefs. “Now we’re concerned about everything.”
On Sunday, researchers said computer models show oil has already entered the loop current that could carry the toxic substance toward the Keys, the third-longest barrier reef in the world.
The oil is now over the western edge of a roughly 61-mile expanse of 300-to-500-foot-deep reef south of Louisiana known as the Pinnacles, about 25 miles north of where the Deepwater Horizon exploded April 20, killing 11 people and starting the spill that grows by the hour.
The Pinnacles is one of nine coral banks and hard-bottom areas stretching from Texas to Florida that the National Oceanic and Atmospheric Administration tried in 2008 to get designated a marine sanctuary called Islands in the Stream.
This sanctuary would have restricted fishing and oil drilling around the identified reef “islands.” But the plan was put on hold after vehement objections from Republican lawmakers, fishermen and the oil industry.
Scientists have found undersea plumes of oil at the spill as much as 10 miles long, which are an unprecedented danger to the deep sea environment, said Samantha Joye, a professor of marine sciences at the University of Georgia.
These plumes are being eaten by microbes thousands of feet deep, which removes oxygen from the water.
“Deepwater coral are abundant on the sea floor in this part of the Gulf, and they need oxygen,” said Joye, who was involved in the plume discovery. “Without it, they can’t survive.”
Experts say the well’s depth and Friday’s decision by the U.S. Environmental Protection Agency to allow BP to shoot massive amounts of dispersing chemicals deep underwater may help protect vital marshes and wetlands on the Gulf Coast. But the tradeoff may result in significant effects on more sea life.
Oil mixed with the chemical agent can disperse into the water more easily, rather than staying on the surface, where it could bypass deeper banks like Pinnacles, said Edward Van Vleet, a chemical oceanography professor at the University of South Florida.
The downside is that it causes oil to sink, coating corals and other reef organisms and smothering them, he said.
When the dispersed oil is broken into smaller globules, he said they are more easily eaten by smaller reef organisms and can kill them or cause tumors or something else harmful.
Federal officials who oversee marine sanctuaries and fisheries say it’s too early to tell how reefs and other important habitats may be damaged, said Dr. Jane Lubchenco, NOAA’s undersecretary of commerce for oceans.
NOAA, which manages marine sanctuaries, is also responsible for estimating financial costs of the spill on the sea environment and fisheries. The Pinnacles is a significant habitat for sea life vital to commercial fisheries such as red snapper, crab and shrimp.
The creation of a sanctuary across hundreds of miles of the Gulf would not have blocked oil and gas exploration where the Deepwater Horizon exploded, said Montagna. However, he said it could have resulted in stricter environmental regulation for reefs closest to the spill site, and likely less drilling.
“So you can imagine these animals that make a living on rocks, filtering food out of the water, and the dispersants come along and sink the oil; it’s a big concern,” Montagna said.
The area also is breeding ground for sperm whales and bluefin tuna, species not doing well, he said.
Studies published in a 2005 National Academy of Sciences report show that oil mixed with dispersants damaged certain corals’ reproduction and deformed their larvae. The study concluded the federal government needed to study more before using massive amounts of dispersants.
Reefs are made up of living creatures that excrete a hard calcium carbonate exoskeleton.
Depending on the oil exposure, they can be smothered by the pollutants or become more susceptible to bleaching, which hinders reproduction and growth. While the warm temperatures of Florida could speed the recovery of damaged reefs there, some problems could be seen for a decade or more. In the deeper reefs in colder water closer to the spill, the damage could last even longer.
As the spill increases, the oil oozes toward other reefs that stretch from the blowout site eastward to the Florida Keys National Marine Sanctuary.
The Keys exist in relatively shallow water, so the potential exposure to the oil is higher than for deeper reefs, though BP officials say the oil would be more diffused after having broken down during its travel over hundreds of miles.
If oil reaches the Keys, it could threaten one of the country’s greatest underwater natural resources as well as its tourism industry.
Locals throughout the ribbon of islands not only relish their ties to the water but rely on it to help bring in 2 million visitors each year.

TITLE: Iran to Ship Uranium 
To Turkey In Nuclear Deal
AUTHOR: By Ali Akbar Dareini
PUBLISHER: The Associated Press
TEXT: TEHRAN, Iran — Iran agreed Monday to ship most of its low-enriched uranium to Turkey in a surprise nuclear fuel swap deal that could ease the international standoff over the country’s disputed atomic program and deflate a U.S.-led push for tougher sanctions.
The deal, which was reached in talks with Brazil and Turkey, was similar to a UN-drafted plan that Washington and its allies have been pressing Tehran for the past six months to accept in order to deprive Iran — at least temporarily — of enough stocks of enriched uranium to produce a nuclear weapon.
Iran, which claims its nuclear program is peaceful, dropped several key demands that had previously blocked agreement. In return for agreeing to ship most of its uranium stockpile abroad, it would receive fuel rods of medium-enriched uranium to use in a Tehran medical research reactor that produces isotopes for cancer treatment. It was not immediately clear what would happen to the stockpile once the fuel rods were received.
The United States had no immediate comment, but Germany and Britain greeted the news with caution.
Britain’s government said it was awaiting confirmation of the reports on Iran’s deal with Turkey and insisted it remains committed to new sanctions against Tehran.
“Our position on Iran is unchanged at the present time,” Prime Minister David Cameron’s spokesman Steve Field told reporters. “Iran has an obligation to reassure the international community, and until it does so we will continue to work with our international partners on a sanctions resolution in the United Nations Security Council.”
German government spokesman Christoph Steegmans noted that the question remains whether Iran suspends enrichment of nuclear material at home, raising a possible sticking point since the agreement reaffirmed Tehran’s right to enrichment activities for peaceful purposes.
Iran’s Foreign Ministers spokesman Ramin Mehmanparast said Iran will continue to enrich uranium to higher levels despite the deal reached Monday.
“Of course, enrichment of uranium to 20 percent will continue inside Iran,” the official news agency IRNA quoted him as saying.
For months, Iran has haggled over the terms, making counterproposals that were repeatedly rejected by the U.S. and its allies. With the deal announced Monday, Tehran seems to have agreed to almost all of the original terms. However, making the deal with Turkey and Brazil may have been more palatable, allowing Iran to argue that it did not bend to American pressure.
“It was agreed during the trilateral meeting of Iranian, Turkish and Brazilian leaders that Turkey will be the venue for swapping” Iran’s stocks of enriched uranium for fuel rods, Mehmanparast said on state TV.
Washington has cited the Iranians’ intransigence against the original deal as proof of the need for new UN sanctions.

TITLE: Protesters Urge Peace Talks in Thailand
AUTHOR: By Denis Gray
PUBLISHER: The Associated Press
TEXT: BANGKOK — Thailand’s Red Shirts offered peace talks Monday to end raging street battles that have killed at least 37 people in Bangkok as a government deadline demanding the demonstrators vacate a protest zone passed without capitulation.
Helicopters buzzed over the demonstration site fortified with long wooden spikes and tires in the heart of the capital’s commercial district, dropping leaflets ordering anyone inside to leave immediately.
The dead from clashes that erupted last Thursday include the military strategist of the Red Shirts, who succumbed Monday to a gunshot wound from a sniper attack last week. Major General Khattiya Sawasdiphol’s death raised fears of new violence in this Southeast Asian nation, which has been wracked by political turmoil and violence since mid-March.
A luxury hotel was the scene of a heated pre-dawn gunbattle Monday and later closed its doors. Loud blasts reverberated outside the main protest zone through the night as sustained bursts of automatic rifle fire echoed through the once-bustling business and shopping area.
The political conflict is Thailand’s deadliest and most prolonged in decades, and each passing day of violence deeply divides in this nation of 65 million — a key U.S. ally and Southeast Asia’s second-largest economy. Thailand has long been considered a democratic oasis in Southeast Asia, and the unrest has shaken faith in its ability to restore and maintain stability.
The Red Shirts, many of whom hail from the impoverished north and northeast, say Prime Minister Abhisit Vejjajiva’s coalition government came to power through manipulation of the courts and the backing of the powerful military, and that it symbolizes a national elite indifferent to their plight.
A Red Shirt leader, Jatuporn Prompan, said the only hope now to end the violence was intervention by Thailand’s revered King Bhumibol Adulyadej. Another protest leader, Nattawut Saikua, said the Red Shirts are ready to negotiate and to submit themselves to the courts.
Despite the conciliatory words, the Red Shirts also continued to insist they will not stop the protests until Abhisit orders a cease-fire. Red Shirt supporters were also seen gathering in other parts of the city, and in at least one place an activist used a loudspeaker to address a crowd of about 300.
The 82-year-old monarch, hospitalized since September, has remained publicly silent on the crisis unlike decades past when he stepped in to stop bloodshed.
According to government figures, 66 people have died and more than 1,600 have been wounded since the Red Shirts began their protests in March. The toll includes 37 killed, almost all of them civilians, and 266 wounded since Thursday in fighting that has turned parts of central Bangkok into an urban war zone.
“It’s time to return peace to the country. We are ready to move toward peace and the negotiations,” Nattawut said. “The more the situation goes on, the longer people’s lives will be in danger.”
“There is no use for gunshots to be heard in Bangkok right now, because the number of casualties would never bring victory to any side,” he said.
Nattawut also dropped a previous demand for the U.N. to mediate in the talks, saying the government can appoint a neutral body for the task.
However, the government stuck to its stand that the army will not pull back until the protesters stop attacking them. “Talks ... must be based on an end to the attacks on the security officers,” government spokesman Panitan Wattanayagorn said.

TITLE: Afghan Plane With 
44 Passengers On Board Crashes
AUTHOR: By Amir Shah
PUBLISHER: The Associated Press
TEXT: KABUL, Afghanistan — An Afghan passenger plane carrying 44 people, including six foreigners, crashed Monday in a mountainous northern region where poor weather was hampering efforts to locate it, officials said. There was no immediate word on casualties.
Rescuers were on their way to the crash site near the 3,800-meter-high Salang Pass, a major route through the Hindu Kush mountains that connects the capital to the north. The plane, on a flight from the northern city of Kunduz, went down about 100 kilometers from Kabul, said Kabul International Airport Police Chief Mohammad Asif Jabar Khil.
Zemeri Bashary, an Interior Ministry spokesman, said the plane was operated by Pamir Airways, a private Afghan airline. He said the Afghan government asked NATO for assistance.
NATO said a manned fixed-wing aircraft had been dispatched to the last known position of the missing plane but poor weather was hampering the aerial search. Two NATO helicopters have been dispatched to the area, NATO said in a statement.