SOURCE: The St. Petersburg Times
DATE: Issue #1576 (37), Tuesday, May 25, 2010
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TITLE: Kasyanov Testifies Yukos Case Is Political
AUTHOR: By Alex Anishyuk
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Former Prime Minister Mikhail Kasyanov said Monday that he approached then-President Vladimir Putin three times for an explanation on the Yukos crackdown before Putin indicated that it was because Yukos owner Mikhail Khodorkovsky had bankrolled the Communist Party.
Kasyanov, who was fired by Putin and is now an outspoken critic of the Kremlin, spoke for the first time about the meeting with Putin while testifying on Khodorkovsky’s behalf in a Moscow court.
Khodorkovsky and a second Yukos owner, Platon Lebedev, are being tried on embezzlement and money-laundering charges in a second trial that could add 22 years to the eight years they are already serving for a conviction on fraud and tax evasion charges in 2005.
Kasyanov told the Khamovnichesky District Court that the changes were politically motivated and contradicted the everyday practices of oil companies.
“By the end of 2003, I had a clear understanding that both were arrested under political motives,” he said.
Kasyanov said he tried to talk with Putin after Lebedev was arrested in July 2003 and Khodorkovsky was arrested in October that year, but Putin refused to discuss the issue with him. Only on the third try did Putin reply, he said.
“I asked Putin to clarify what he knew about the situation, but he refused twice, and then he gave me an answer,” Kasyanov said.
“He said Yukos financed Yabloko and the Union of Right Forces, political parties that it was allowed to finance, but also the Communist Party, which it wasn’t allowed to.
“Then I asked him what he knew about the charges brought by the Prosecutor General’s Office, and he replied that the Prosecutor General’s Office knew best.”
Khodorkovsky was detained just weeks before State Duma elections in a crackdown that his supporters say was Kremlin punishment for Khodorkovsky’s political and commercial ambitions.
Yabloko and the now-defunct Union of Right Forces, liberal parties that lost their Duma seats in the December 2003 elections, have acknowledged being partially financed by Khodorkovsky. Speculation surfaced at the time of Khodorkovsky’s arrest that he had also supported the Communist Party, which won a scant 13 percent of the vote, its worst showing in years, but the Communists denied it.
A Communist Duma deputy, Sergei Obukhov, said Monday that he knew of no instance of his party accepting money from Khodorkovsky.
“The information on our funding is open and transparent, and no one has found any evidence of our party being funded by Yukos so far,” he told The St. Petersburg Times. “If you find any evidence, please show it to us.”
Yabloko leader Sergei Mitrokhin said that Khodorkovsky had funded his party for about a year, until his arrest, and that the arrangement had received Putin’s blessing.
“The information was public and the money was transferred in an open manner. No dummy companies were involved,” Mitrokhin said by telephone.
“It is true that at the time there was a rule, an unofficial one, of course, that Putin assigned companies to fund certain parties. Everyone got funds with his permission,” he said.
Calls to the cell phones of former Union of Right Forces leaders Boris Nemtsov and Irina Khakamada went unanswered.
Putin’s spokesman Dmitry Peskov said he had no knowledge about the conversation described by Kasyanov and could not confirm whether it had taken place and, if so, what had been discussed.
Khodorkovsky last month asked the court to summon Putin along with more than 250 other witnesses, but the court rejected the request as “premature,” noting that Khodorkovsky himself was still testifying at the time.
The court, however, agreed to summon several members of Kasyanov’s Cabinet, including Industry and Trade Minister Viktor Khristenko and Sberbank chief executive German Gref, who are supposed to testify next month.
Kasyanov on Monday seemed to confirm speculation that Putin and Khodorkovsky had a falling out as the result of a meeting the two attended with other business leaders in February 2003.
“In 2003, during a meeting between Vladimir Putin and businessmen, Mikhail Khodorkovsky spoke about openly corrupt deals like, for example, the acquisition of Severnaya Neft by Rosneft,” Kasyanov said.
“The president’s reaction was extremely harsh. He said Yukos wasn’t privatized in a transparent manner, either. Starting from that point, I got the feeling that the authorities were going after businesses,” he said.
State-owned Rosneft bought Severnaya Neft, a minor oil company, from Senator Andrei Vavilov in early 2003 for $600 million, a price that analysts said amounted to double the market price.
Kasyanov said his own disagreements with Putin regarding his policies started shortly after the meeting. Putin fired Kasyanov in February 2004.
Turning to the ongoing trial against Khodorkovsky and Lebedev, Kasyanov derided prosecutors’ charges that the two stole 350 million metric tons of oil worth $30 billion between 1998 and 2003.
“The volume reported [to have been stolen], the 350 million metric tons of oil, is comparable to the amount that Yukos could drill,” he said. “But talking of a theft on this scale — my answer is no, that just can’t be true.”
Prosecutors summoned 51 witnesses, including former Yukos senior executive Alexei Golubovich and former bankruptcy commissioner Eduard Rebgun, before wrapping up their case in March. But none directly confirmed that they had witnessed oil theft.
Speaking about the essence of the charges, Kasyanov said it was normal practice for the subsidiary to sell oil to the parent company at a discount.
“Of course those were the internal prices. They differed from those on European stock exchanges and were significantly lower,” he said. “It’s hard to imagine that the oil price in Omsk would be the same as, for example, in Rotterdam.”
He said eight of the other nine companies that drilled 90 percent of the country’s oil and gas did the same.
In terms of tax payments, he said, Yukos consistently ranked in the middle or better in comparison with other oil companies. He said he wasn’t informed about any problems regarding Yukos at the time.

TITLE: Medvedev Hints Tower Is Too Tall
AUTHOR: By Irina Filatova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — President Dmitry Medvedev has urged St. Petersburg authorities to reconsider the height of the controversial skyscraper that Gazprom plans to construct in the city.
Medvedev gave no direct orders about the Okhta Center, but his office sent a letter to St. Petersburg Governor Valentina Matviyenko reminding her “of the need to fulfill the Russian Federation’s international obligations,” Medvedev’s spokeswoman Natalya Timakova said Friday.
UNESCO, the United Nations’ cultural arm, opposes the construction of the Okhta Center, saying the 403-meter tower may spoil the skyline in the city’s historical center, which is listed as a World Heritage site.
The Kremlin letter, signed by presidential aide Sergei Prikhodko, was also sent to the Federal Service for Protection of Cultural Heritage, said the service’s head, Alexander Kibovsky.
He said Medvedev highlighted an appeal by UNESCO’s World Heritage Committee to suspend all work on the construction of the Okhta Center and consider “alternative options concerning its height.”
Fulfilling these recommendations is important “for a constructive dialogue with UNESCO and to prevent damaging Russia’s reputation,” the letter said.
UNESCO, which has been tracking the situation with the Okhta Center since 2006, has warned that St. Petersburg may be struck off the World Heritage list if the tower is erected.
Last year, the World Heritage Committee passed a resolution calling for the project’s implementation to be halted.
UNESCO experts visited the construction site in March, but this did not change their position, which they reiterated in a report presented to Medvedev by Foreign Minister Sergei Lavrov.
Matviyenko’s spokesman Alexander Korennikov confirmed that the city administration had received Medvedev’s letter.
“The recommendations it contains will, of course, be carefully considered in compliance with the current legislation,” he said, Itar-Tass reported.
Kibovsky said the project might undergo changes taking into account UNESCO’s position.
He said this was normal practice because “every region has its own Okhta Center.”
“There are always steps back regardless of the investor and the amount of money invested,” Kibovsky said at a Kislovodsk conference on the preservation of historical sites Thursday, Interfax reported.
Cultural and Business Center Okhta, the Gazprom Neft subsidiary that is developing the tower, will comply with all legislative procedures required to obtain the construction permit for the Okhta Center, said the company’s spokeswoman, Tatyana Yuryeva.
“No construction is being carried out on the site, and the project is being negotiated within the framework of the Russian legislation. Our company will act within the legal framework,” she said by telephone from St. Petersburg.
Yuryeva said the construction site was located outside St. Petersburg’s historical center and UNESCO’s protection zone.
The legislation limits the height of the buildings in the district selected for the Gazprom tower to not exceed 100 meters. But the St. Petersburg government passed an ordinance in September bending this rule for the Okhta Center.
Culture Minister Alexander Avdeyev said Friday that the decision to build the skyscraper “might be reconsidered and annulled.”
“My position has not changed. The decision by St. Petersburg’s government regarding the building’s height violates the federal legislation,” he told Itar-Tass.
The Okhta Center has been in the works since 2005, and its budget was estimated at 60 billion rubles ($1.9 billion). Gazprom planned to finish construction by 2016.
The project does not violate Russian legislation, said Okhta Center architect, Filipp Nikandrov.
The tower poses no danger to the city’s skyline because it is located more than five kilometers away from the historical center, Nikandrov said.
“This is much farther compared with most European capitals where the modern vertical dominants are located closer to the historical ones,” he said.
UNESCO’s World Heritage Committee declined to comment on Friday.

TITLE: Artists Take Up Brushes to Protect Gardens
AUTHOR: By Sergey Chernov
PUBLISHER: Staff Writer
TEXT: Local artists held a collective open-air painting session Monday in an attempt to save the historic Lopukhinsky Gardens on the Petrograd Side from plans to build a multistory hotel on the site. 
Participants came with easels to paint the park’s picturesque trees, duck pond and early 19th-century wooden mansion.
“When I heard on Ekho Moskvy [radio] what was happening here, I decided that painters should do something about it,” said artist Boris Zabirokhin, who came up with the idea of the protest.
“How long we should tolerate this? It’s time to take up our brushes and go outside.”
Zabirokhin said he was sad to see classic St. Petersburg being demolished and rebuilt in a distasteful way, and was prompted to take action over the Lopukhinsky Gardens, which are close to the House of Artists where his studio is located.
“I paint from life, and when I walk by places that were important, I suddenly see that they have disappeared or been rebuilt,” he said.
“I want to paint the city I love; I don’t want to paint a city that I don’t like. If it is unloved, everybody will leave except for mid-level managers, traders and bureaucrats. The [city’s] spirit will be lost.”
The developer RBI plans to build a multistory hotel at the location, claiming that the site it bought on the park’s territory is not formally part of the park. 
City Hall’s town-planning and architecture committee granted RBI permission to construct a hotel up to 33 meters in height on the land in December. St. Petersburg Governor Valentina Matviyenko expressed her support for the project in January.
Zabirokhin, who had with him ten sketches of historic sights that have since vanished, sees the source of the problem in the commercial interests of the authorities.
“Only land that can bring dividends is of interest to them,” he said.
“If they are given free rein, they will build houses on the Field of Mars and chop down trees in the Summer Gardens — they just don’t give a damn, although they pretend that they love the city. These people came from elsewhere; they don’t belong here.”
Artist Vladimir Shinkaryov said the Lopukhinsky Gardens, which are located at the junction of Kamennoostrovsky Prospekt and the Malaya Nevka River, were one of the very few places in the city that hadn’t changed during the past 30 years.
“It’s precious because of this,” he said.
“It’s a beautiful little corner right in the city center. It could be spoilt by a streetlamp, not to mention a hotel building.”
Shinkaryov said St. Petersburg should remain the preserve of 19th-century architecture for which it has achieved international recognition.
“I am amazed that we are still listed as a UNESCO Heritage site,” he said.
“What we have now is a total decline in taste. The people who build these hotels are catastrophically lacking in taste, for some reason. Even nails are now nailed in such a way that they’re ugly and unaesthetic. That’s why the best strategy is to leave everything as it is.”

TITLE: Kremlin Seeks Ban On Gifts for Officials
AUTHOR: By Nikolaus von Twickel
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Bureaucrats will be banned from accepting gifts, officials will lose their immunity and bribe-takers will have their assets seized as part of the Kremlin’s efforts to stamp out corruption.
Kremlin spokesman Alexei Pavlov confirmed on Friday that Kremlin chief of staff Sergei Naryshkin has ordered the Justice Ministry to work out the changes.
The proposed measures address three recommendations set by the Council of Europe in 2008 that the government has to address by the end of June, when it submits a compliance report to the Strasbourg-based human rights group.
The Justice Ministry has been ordered to draft the necessary legislation by June 1, Vedomosti reported Friday.
Pavlov declined to elaborate on the amendments. Spokespeople for the Justice Ministry did not answer repeated calls for comment Friday. A spokesman for the State Duma’s Legal Affairs Committee said that none of the reforms had submitted to his committee.
The Council of Europe’s anti-corruption body, the Group of States Against Corruption, or GRECO, made 26 recommendations in a country-evaluation report released in December 2008. The report found that “corruption is a widespread, systemic phenomenon in the Russian Federation.”
Russia, which joined GRECO in 2007, is under no obligation to fulfill any of the recommendations, but it is supposed to submit its first compliance report by June 30.
Recommendation 22 calls for eliminating “the practice of accepting substantial gifts of any form in the public administration” and “for the abolition of the legal justification for such gifts.”
A reform of the Civil Code sponsored by President Dmitry Medvedev last year limited the value of gifts to 3,000 rubles ($100). Under the latest measure, accepting gifts would be banned completely, Vedomosti said.
Recommendation 14 calls for an amendment to the Criminal Code to allow the confiscation of proceeds from all corruption cases, including property.
Article 104 of the Criminal Code currently excludes confiscations in cases involving bribery in the public sector and abuse of authority.
Recommendation 6 calls for a reduction of “the categories of persons enjoying immunity from prosecution to the minimum required in a democratic society.” The report does not specify this minimum, but in the analytical section its authors express concern “about the large number of beneficiaries of immunities” in the country.
Currently, immunity from prosecution is enjoyed by a wide range of officeholders, presidential candidates, former presidents, parliamentary candidates, electoral commission members and lawyers.
It is unclear which groups will lose the privilege.
The country will fulfill only 12 of the 26 recommendations, Vedomosti quoted an unidentified Duma staff member as saying.
Given the country’s level of corruption, even 12 should be considered a success, said Yelena Panfilova, head of the Russia office of anti-corruption watchdog Transparency International.
“These are recommendations and not orders. When they were prepared … it was unclear whether Russia would meet any of them,” she told The St. Petersburg Times.
Among the recommendations, she said, is the strengthening of the role of civil society. “Things like this cannot be solved with laws and orders,” she said.
She added that the big problem in Russia was not a lack of legislation but implementation and enforcement of existing laws.
Medvedev has made fighting corruption a hallmark of his presidency and revived largely dormant initiatives that started under his mentor and predecessor, Prime Minister Vladimir Putin.

TITLE: Chess Group Loses Home
AUTHOR: By Alexander Bratersky
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The Russian Chess Federation has been evicted from its premises after refusing to back Kremlin aide Arkady Dvorkovich in his bid to elect Kalmyk President Kirsan Ilyumzhinov to a new term as head of an international chess organization.
The security guards at the Central House of Chess Players building in downtown Moscow were replaced and its rooms were sealed Friday, Anatoly Bakh, the federation chairman, told Ekho Moskvy radio.
Bakh said the takeover was orchestrated by Dvorkovich, who chairs the supervisory board of the Russian Chess Federation.
Bakh and Dvorkovich were unavailable for comment Sunday.
In April, Dvorkovich said Russia would support Ilyumzhinov’s re-election as president of the World Chess Federation, or FIDE, which he had helmed since 1995.
But last week, the federation supported a bid by former chess champion Anatoly Karpov instead.
Dvorkovich has said the federation’s support for Karpov lacked “legitimacy” on technical grounds.
Ilyumzhinov has ruled Kalmykia, one of Russia’s poorest regions, since 1993, but his term in office expires this year. The Kremlin has not said whether President Dmitry Medvedev will reappoint him.
Oleg Smolin, a State Duma deputy with the Communist Party and an avid chess player, said Ilyumzhinov had lost the Kremlin’s support and the FIDE post was supposed to be a “consolation prize.”
Karpov’s candidacy is supported by a number of European sport federations, as well as Garry Kasparov, his former rival turned liberal politician.
In a May interview with the Ogonyok magazine, Karpov said he wanted to “restore the prestige” of FIDE.

TITLE: Volgograd Bridge Stages Surreal Dance
AUTHOR: By Alex Anishyuk and Maria Antonova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — A new seven-kilometer bridge over the Volga River has staged a surreal dance, sending cars swirling and bouncing in gale-force winds in a puzzling accident that prompted President Dmitry Medvedev to order an investigation Friday.
The bridge has not been damaged and will be reopened Tuesday morning, Governor Anatoly Brovko said.
The bridge spanning the Volga River was tested over the weekend by a fleet of KamAZ trucks and ultrasonic devices as inspectors checked for signs of damage, Brovko told reporters Monday. The tests concluded that the bridge was “structurally sound,” and it will reopen to passenger cars at 6 a.m. on Tuesday, he said.
A commission formed by the Prosecutor General’s Office on orders from President Dmitry Medvedev will still inspect the bridge, however. The commission was ordered to investigate the incident, which occurred for about half an hour, and make sure that all construction rules were followed prior to the bridge’s opening.
Users on a local Volgograd forum wrote that they would still use the bridge, which can shorten some trips by as much as 67 kilometers. “I will use it as needed, but I will keep the seatbelt unbuckled and won’t lock the doors,” one woman wrote.
Additional equipment will be installed on the bridge to monitor conditions and close off bridge access in case of repeated shaking, the regional administration said. Experts who inspected the bridge after the incident also recommended installing wind shields that could change the bridge’s aerodynamics.
The vibrations “show the high aerodynamic stability and reliability of the structure,” Volgomost, the company behind the bridge’s construction, said in a statement Monday, RIA-Novosti reported. The company called the vibrations “the first of their kind” anywhere for beam-type bridges.
The wobbling of the expensive bridge, which began operating in Volgograd eight months ago thanks to the government’s much-touted road construction program, is raising questions about the quality of the work bought with the federal money.
No one was injured when the road turned into rolling waves of asphalt for about a half hour Thursday evening. The bridge itself remained intact, proving immune to the buckles that rose up to one meter high, officials said after examining it. Not even the paint cracked, they said.
“I was driving to my country house when my car started bouncing like a ball,” a motorist wrote on a Volgograd Internet forum after being caught in the accident. “I thought something was wrong with the suspension.”
When the bouncing intensified about 20 minutes later, a handful of drivers rushed to the nearest police outpost, he said. The police immediately stopped traffic.
Deputy Transportation Minister Oleg Belozyorov, who arrived at the scene Friday as the head of a team of engineers, said the bridge most likely had reacted to strong winds that reached speeds of up to 18 meters per second Thursday.
Volgograd Deputy Governor Igor Pikalov suggested that the reason could have been an earthquake, but Belozyorov dismissed that theory.
“Experts agree that it is the dynamics of the air,” Belozyorov told reporters. “When wind gusts hit a certain resonance zone, they result in these kinds of consequences.”
Wind gusts were the most likely cause of the accident, said Vladimir Parshin, chief engineer at Transmost, a bridge construction company that was not involved in the Volgograd contract. He blamed the wind, despite recognizing that the beam bridge over the Volga River is more robust than suspension bridges that have been known to collapse in stormy weather.
“The spans in the Volgograd bridge are rather long, so theoretically it could be less wind-resistant than other similar structures,” he told The St. Petersburg Times. “In any case, this sounds like a precedent for this type of bridge.”
The wind must have been blowing at a certain angle to cause such resonance oscillations, Pikalov said.
“Specialists believe this is a unique case,” he said.
Medvedev ordered the control department of the presidential administration and the Prosecutor General’s Office to look into the design and construction of the bridge, Kremlin spokeswoman Natalya Timakova said.
The bridge — which cost 12.3 billion rubles, or $396 million, mostly in federal funds, to build — complied with all the industry standards, Pikalov said. The contractors collected “all the [necessary] signatures,” he said.
In response to the accident, Volgomost, the general contractor for the bridge, said it had inspected the structure and found it in perfect shape. In a statement on its web site, it described the structure as “one of the most reliable” bridges.
Giprotransmost, a Moscow-based company that designed the Volgograd bridge, could not be reached for comment Friday.
The bridge took 13 years to build because of delays in financing and in 2004 was included in the Federal Roads development program for 2002-2010. The ruling United Russia party volunteered to oversee the construction at the time.
First Deputy Prime Minister Sergei Ivanov opened the bridge at a formal ceremony eight months ago.
The government has been funding construction of roads and bridges under its Federal Roads program. Lately, the program has also been touted as a countercrisis measure.

TITLE: St. Petersburg Gets New Charity Store
AUTHOR: By Irina Titova
PUBLISHER: The St. Petersburg Times
TEXT: A large charity store named Spasibo! (Thank you!) has been opened by a group of volunteers on 9th Sovetskaya Ulitsa.
The store copies the format of charity stores that have already been successfully operating in the U.K. and many other countries for more than 50 years.
“It’s quite a successful, unusual and highly motivated kind of help,” Yulia Titova, coordinator of the new charity, was cited by Fontanka as saying. “After visiting such stores in England, we decided to introduce them here.” 
“In Russia, charity is still in a fairly primitive, underdeveloped form,” said Titova. “It’s mainly about requests for cash donations for certain charity events or undertakings. However, many people aren’t prepared to hand over their money. The aim of the charity store is also to collect money, but through an interesting and profitable exchange of clothes,” she said.
Titova said that in March, the group opened a similar children’s section at Zvyozdnaya metro station, but people also gave them a lot of clothes and other items for adults. The volunteers sold them successfully over the Internet and began to develop plans for a larger store catering for both children and adults. 
The store essentially operates as a secondhand clothes store, with the goods on offer consisting of donations.
Spasibo! comprises children’s and adult departments, selling clothes, footwear, accessories, books, home appliances and many other items.
In addition, customers will be able to buy tickets to charity festivals and concerts.  
The money received will go to a foundation that treats children with heart disease. The foundation is based in Moscow, but provides assistance to children all over Russia.
Numerous artists and designers have already made contributions to the project, with their works being distributed through the store and 40 percent of the proceeds going to the charity. 
The store will also promote events focusing on recycling, and will have its own wastepaper and used battery collection point. 
Titova said items would be sold for token prices ranging from 10 to 500 rubles ($0.30 to $16.50).  
The store has storage facilities where staff can sort the items they receive, so that whatever is unlikely to sell can be reused in other ways or sent on to other charity organizations. The store cooperates with the Salvation Army, which helps the city’s homeless, and gives some children’s clothes to the Zhizn (Life) center, which helps single pregnant women.
St. Petersburg’s Spasibo! store is located in the courtyard of number 22, 9th Sovetskaya Ulitsa. In order to gain access to the courtyard, visitors must press the entry code of 136 or enter through the next building’s archway.
Visitors can reach the store by taking the metro to Ploshchad Vosstaniya or Chernyshevskaya stations, or by taking the number 5 or 11 trolley-bus, or 181 or 74 bus from Ploshchad Vosstaniya/Mayakovskaya metro station and getting off at Skver Galiny Starovoitovoi. The store is open from 11 a.m. to 7 p.m.

TITLE: Abducted Sailors Are Healthy
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Two Russian sailors abducted from their ship off Cameroon are in good health and may have been taken by their captors to neighboring Nigeria, said the ship’s owner and the Seafarers’ Union of Russia, Reuters reported.
Unidentified gunmen raided the Greek-owned cargo ship North Spirit on May 16 while it was at anchor off the port of Douala, taking the captain and chief engineer in an attack that analysts say marks an expansion in the range of West African piracy.
The pirates also attacked a nearby Lithuanian vessel, Argo, seizing that ship’s captain and robbing its safe.
The captain of the North Spirit “was allowed to make a call last night and said he and his crew mate were alive and in good health,” said Vadim Ivanov, spokesman for the Seafarers’ Union of Russia. “He said they had been taken by sea to Nigeria.”
The captain, Boris Tersintsev, is from Vladivostok. The other kidnapped Russian, Igor Shumik, was aboard the Arctic Sea ship that mysteriously disappeared in a purported pirate attack last summer.
The North Spirit raid is the latest in a string of pirate attacks in the Gulf of Guinea, a region stretching from the Guineas in the northwest to Angola in the south, that is an increasingly important source of oil to Western markets.
Negotiators hired by the insurance company of the Greek ship owner, Balthellas Chartering, are trying to make contact with the pirates to secure the sailors’ release.
“They are trying to start [negotiations], but the pirates haven’t contacted them yet,” said Panayotis Nikoletos, Balthellas’ operations manager.

TITLE: Migrant Workers to Have Fingerprints, Photos Taken
PUBLISHER: Bloomberg
TEXT: MOSCOW — The authorities plan to fingerprint, photograph and license migrant workers in a bid to shrink the shadow economy and boost tax revenue, the government’s official Rossiiskaya Gazeta newspaper reported.
The new rules will apply to about 1.2 million of the estimated 3 million foreigners who work as nannies, builders, drivers, cooks and other jobs classified as “temporary” by the Federal Migration Service, the newspaper said Friday.
Such workers will have to buy licenses good for between one and three months, while so-called highly skilled workers, mainly those who earn more than 2 million rubles ($64,000) a year, will be excluded from the new requirements.
President Dmitry Medvedev is seeking to turn Russia into a “white-collar” country, Vladislav Surkov, Kremlin first deputy chief of staff, said in March.
One million skilled-job vacancies went unfilled in Russia last year because of a lack of qualified workers, the World Bank said in a report in March. At the same time, because of a shrinking labor force, Russia will need 12 million immigrant workers within 20 years, the bank said.
While cracking down on foreign laborers, the authorities plan to make life easier for workers who are better educated and skilled to help lure investment from abroad.
The government wants to react quickly to “painful points” flagged by investors, Deputy Economy Minister Stanislav Voskresensky told reporters May 7. One way to do that is to relax visa requirements for “highly skilled” workers, Voskresensky said.

TITLE: As Costs Mount, Cabinet Uses Creative Accounting
AUTHOR: By Anatoly Medetsky
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The Cabinet on Thursday backed a plan to pack all federal spending into long-term programs in an effort to drastically cut the costs of running the country after it exhausts cash reserves inherited from years of an oil boom.
Government officials, however, were tight-lipped about exactly how the new way of managing federal outlays would work when it is first applied to the budget in 2012.
“It’s about moving to state programs as a key tool of long-term planning,” Finance Minister Alexei Kudrin said about the plan after the Cabinet meeting.
“That’s how we are moving — in a revolutionary way, in fact — to an analysis of all the options available for the government to achieve specific goals,” he said.
Next year’s budget will not consist of only long-term programs because officials have yet to determine what programs the country needs and how to put them together, Kudrin said.
Budget spending for 2012 is expected to slide to 9.7 trillion rubles ($321 billion) from this year’s projected 9.9 trillion rubles.
The plan, which has been in the works since at least February, will allow the government to revise its spending commitments, “mercilessly cut out the expenses that are ineffective or of secondary importance” and look for the least expensive options, Prime Minister Vladimir Putin said last week.
The changes may represent a cover for reducing investment spending in the face of growing social payouts and a gaping budget deficit, said UralSib economist Vladimir Tikhomirov.
Nonbudgetary funds are used to pay compulsory medical insurance and pensions, among other things.
Tikhomirov also noted the vagueness of the plan. “There are many points of view but little clarity about how it will work in practice,” he said.
The cash pot saved from the record intake of oil export revenues, the Reserve Fund, will run out early next year at the latest, Kudrin said recently.
In an earlier effort to set more specific goals for federal spending, the Cabinet began drafting three-year budgets in 2007. That apparently proved insufficient.
“We have a lot of overlapping and parallel spending on the same targets,” Putin said in a speech at the State Duma last month.
What’s more, the Education and Science Ministry has no influence over education expenses by the other agencies, while the Health and Social Development Ministry is in the same position in terms of health care, he said.
“Education and health care spending is spread throughout various ministries — quite a bunch of them — but the ministries that are in charge can’t influence the policy of allocating and using the money,” Putin said.
By funneling all spending through federal programs, the Cabinet will tighten control over the fiscal flows and have a chance to redirect them where it sees them most needed, he said.
Tikhomirov suggested that the measure would mean that the Finance Ministry would enjoy greater scrutiny over expenses. The government now spends about 10 percent of the federal budget on long-term programs.
Setting off on an austerity campaign, the government may instead want to devote more attention toward developing competition among contractors that bid for various state projects, said Peter Westin, chief economist at the Aton brokerage.

TITLE: United States Removes Sanctions Linked to Iran
PUBLISHER: The Associated Press
TEXT: WASHINGTON — President Barack Obama’s administration has removed sanctions against three Russian organizations that the United States had previously accused of assisting Iran’s effort to develop nuclear weapons. Penalties against a fourth Russian entity previously accused of illicit arms sales to Syria were also lifted.
The timing of the decisions, published in Friday’s Federal Register but not otherwise announced by the State Department, suggested the possibility of a link to U.S. efforts to win Russian support for a proposed new UN Security Council resolution expanding sanctions against Iran over its nuclear program.
State Department spokesman P.J. Crowley denied that the decision to lift the sanctions was meant to win Russian support for additional Iran sanctions. He said, however, that it reflected the fact that “Russia has over time adapted its approach to Iran” and has shown restraint in certain arms deals with Tehran.
“So we felt that as Russia shared our concern about Iran and was willing to support the kinds of arms restrictions that are in the draft [UN] resolution, we felt confident that we could remove these penalties while protecting our nonproliferation interests,” Crowley said.
While the United States did not lift the sanctions in exchange for Moscow’s support in the UN, the two actions “are connected in the sense that clearly the actions Russia has taken over time have demonstrated that they take the situation with Iran seriously,” he added.
When Secretary of State Hillary Rodham Clinton visited Moscow in March, Prime Minister Vladimir Putin publicly complained to her about a range of U.S. government sanctions against Russian companies. In private, Putin and other Russian officials raised with Clinton the specific issue of removing U.S. sanctions on Russian entities accused of supporting Iran’s nuclear and missile programs.
Two of the Russian entities — Dmitry Mendeleyev University of Chemical Technology and the Moscow Aviation Institute — had been sanctioned in January 1999 under a 1994 executive order authorizing such action. 
The order was aimed at organizations determined to have contributed to a foreign country’s development or production of weapons of mass destruction or missiles capable of launching such weapons.

TITLE: Grabovoi Offers New Miracle
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Grigory Grabovoi, a self-proclaimed miracle worker who promised to resurrect Beslan children, was released on parole Friday and has offered to use his “powers” to help victims of the Raspadskaya mine blasts.
Grabovoi was whisked away from prison gates in a new BMW sedan driven by his wife, Yelena, as policemen barred the media from the prison entrance.
Grabovoi had “mended his ways,” his lawyers said earlier.
But he will continue his “healing practices,” Grabovoi’s lawyer Vyacheslav Konev told the Perm Regional Court on Thursday.
Grabovoi could help locate miners missing in the Raspadskaya mine in Kemerovo region, free of charge, Konev said.
Twin explosions on May 8-9 killed 90 people, including 23 people who are missing and presumed dead.
Grabovoi gained notoriety in 2004 when his claims to resurrect the dead — for a price — attracted several mothers of the 180 children killed in a terrorist attack on the Beslan school.
In 2006, Grabovoi voiced plans to run for president, but his political career was cut short by his arrest on fraud charges. He was sentenced to 11 years in 2008, but the term was reduced to eight upon appeal.

TITLE: Mosfilm Arrives in the Digital Age With Web Service
AUTHOR: By Yuri Pushkin
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Mosfilm, the leading state-owned film studio, has launched an online service that will eventually offer 2,500 old and new movies. Thirty films with English subtitles will go up on the site in the next few weeks as the movie studio hopes to attract an international audience.
“We never sold our film rights to anyone, and now we can offer all our movies in a new media to new generations,” said Mosfilm’s international affairs and projects coordinator, Sergei Simagin.
“War and Peace,” “Walking in the Streets of Moscow,” “Incredible Adventures of Italians in Russia” and “Ivan Vasilyevich Changes Occupation” are among the classic films that will go up with English subtitles.
The service is accessible at www.cinema.mosfilm.ru, with the current catalogue featuring 142 movies ready to be viewed and downloaded. Another 150 films will be available by July with the rest to follow.
Created in 1920 through the nationalization of two private film studios, Mosfilm is the oldest film company in Europe. It played host to some of the biggest Russian and Soviet-era film directors such as Andrei Tarkovsky. His internationally acclaimed “Ivan’s Childhood” is already available for download.
Movies available on the studio’s web site can be accessed for free on a daily timetable, similar to that at a movie theater, or can be watched online at one’s discretion for 25 rubles (90 cents). Users can also download movies to keep for 65 rubles ($2.20) apiece.
Mosfilm says that they are trying to stay ahead of the pirates by keeping prices “lower than those of street vendors with much better quality.”
Illegal sharing of video content over the Internet has become the entertainment industry’s global nightmare. Today YouTube plays host to scores of illegal uploads of films such as “Schindler’s List,” “E.T.” and the “Rambo” trilogy, among hundreds of others. Members of Russia’s Facebook counterpart, Vkontakte, are able to view thousands of pirated copies of domestic and foreign movies translated into Russian or in their original languages.
While some studios have tried to combat file sharing through the courts, others such as Mosfilm and America’s Hulu — mutually owned by the ABC, NBC and FOX television networks — have chosen to embrace the Internet revolution by putting their content, with high-quality video and audio, online for free or minimal fees.
Until recently, Hulu, which streams all shows and movies from the three major networks with additional material coming from smaller cable channels, has been doing so free of charge. But the online service plans to charge $9.99 for premium content more than five weeks old.
Internationally respected directors Ken Loach and Yann Arthus Bertrand recently decided to put their films online. Loach uploaded his whole body of works onto YouTube while Bertrand’s documentary about Earth, titled “Home,” has been available on the site since its release in 2009.
Unlike Hulu, which is currently available only in the United States and the United Kingdom, Mosfilm is aiming for bigger global audiences. In the past, many of Russia’s most powerful films did not make it to Western screens because of a lack of subtitles and poor international distribution.
“Mosfilm has a lot of showings abroad. We recognized that we have a lot of foreign interest in our films, and we want to make them accessible to as many people as possible,” Simagin said.
The site already features an English version. It also has plans to upload movie versions with subtitles in French, German, Spanish, Arabic and Japanese as well as in English.
Mosfilm’s existence through most of last century’s historic events may prove to be the studio’s biggest attribute. After the Soviet victory over Nazi Germany in World War II, Mosfilm captured the people’s sacrifice and patriotism in many films dedicated to the era.
Some of the biggest and most memorable movies about the Great Patriotic War, such as “6 O’Clock After the War” (1944) and “The Ballad of a Soldier” (1959) can be viewed on the site right now.
Nostalgic Russians at home and abroad, along with international viewers wanting to see Moscow before it was decorated in advertising billboards and neon lights, can revisit what the city was through classical films featuring the country’s capital, such as “I Walk Around Moscow” (1963) featuring a young Nikita Mikhalkov.
Other classic films featuring Moscow, already available on Mosfilm’s site, are the Academy Award-winning “Moscow Doesn’t Believe in Tears” (1979) and “Pokrovskiye Gates” (1980).
The studio’s most recent feature films such as last year’s “Ward No. 6” and “Vanished Empire” (2008) can be seen today, and new releases will be uploaded once their cinematic runs are over. If the site proves to be a success, Mosfilm may expand its catalogue to include Western films as well.
There are no silent films on the site at the moment, although Sergei Eisenstein’s “Battleship Potemkin” will go up in July and others will follow.

TITLE: The Pros and Cons of Being a Russian Beauty
AUTHOR: By Anna Malpas
PUBLISHER: The St. Petersburg Times
TEXT: This week, a former Miss Russia beauty queen, Anna Malova, was arrested in New York as she came out of a pharmacy, on suspicion of forging prescriptions for painkillers.
The “leggy, blond beauty” was arrested as she walked out with 85 Vicodin painkiller pills, after her psychiatrist tipped off police that Malova had swiped blank prescription forms, the New York Daily News wrote.
“Malova proved to be ever the fashionista — even in handcuffs,” the tabloid wrote. “When she was pinched, she was wearing a black fur-lined coat and skinny jeans and was toting a Burberry plaid umbrella.”
It’s a sad story — particularly as the Long Island Press reported that this was Malova’s second arrest in three months for the same offense. And it shows that life is not easy for former beauty queens.
Malova has been away from Russia ever since the late 1990s. She won her Miss Russia title in 1998 and made the semifinal of Miss Universe that same year. She was a relative veteran at Miss Russia, aged 26, and had already bagged such titles as “Miss Baltic Sea 1994” and the “Face of Shaping,” the 1990s aerobics-like craze.
For those interested, she has green eyes and blond hair, and her vital statistics during her Miss Russia days were a perfect hourglass: 92-61-92.
Express Gazeta wrote that she was once the girlfriend of film director Yegor Konchalovsky, son of Andrei Konchalovsky.
In a video of the Miss Universe semifinal, Malova struggles a bit to answer the inane question posed by the presenter with appropriate inanities, probably because her English skills were still basic. The tall blonde wears a tiny black dress and heels.
U.S. media reported that Malova had qualified as a doctor in Russia — perhaps resulting in her skills with forging prescription forms — but did not get a license to practice in the United States.
Kommersant wrote that she was already studying in the United States in 1998 and that she paid for her Miss Universe dress by working at a New York modeling agency.
Things seem to have gone well for her initially. She was photographed as a model for jewelry company Chopard. In 2004, she was linked to philanthropist George Soros. “He was seen more than once in the company of the Russian beauty,” Kommersant wrote, hinting that he may have even bought her a villa.
There are photographs of her posing next to luminaries such as pop singer Michael Bolton and actress Mira Sorvino, although it’s unclear whether she was an invited guest to the charity galas or was working as a decorative hostess. The pictures seem to dry up after about 2006, though.
Malova is not the first Russian beauty queen to get into a spot of trouble.
In 2002, Miss Universe 2002, Oksana Fyodorova, was formally dethroned after failing to carry out her round of universe-saving duties.
She blamed a contract she hadn’t understood and the scarring experience of doing an interview on The Howard Stern Show, where she was questioned about her attitudes toward anal sex.
Former policewoman Fyodorova has not done too badly for herself back in Russia. She co-hosts a children’s television show, “Good Night, Little Ones,” featuring animal puppets. It may not have been the stuff of her girlish dreams, but she at least plays the love interest in a video by chubby pop/opera singer Nikolai Baskov.
Miss Russia 2009, Sofia Rudyeva, was revealed to have done a nude photo shoot for a U.S. soft-porn magazine when she was just 15. Rudyeva told Komsomolskaya Pravda that she was pressured into posing, after being told that she would have to pay thousands of dollars in fines if she didn’t agree to pose for the shots.

TITLE: FDI Falls 17.6% In Shaky Q1
PUBLISHER: Bloomberg
TEXT: MOSCOW — Foreign direct investment slipped an annual 17.6 percent to $2.6 billion in the first quarter, the State Statistics Service said Friday, on an uneven economic recovery from the economy’s worst contraction since 1991.
Overall foreign investment, including credits and flows into the securities markets, advanced 9.3 percent from a year earlier to $13.1 billion as portfolio investments more than doubled, the service said in a statement.
The ruble gained 2.8 percent against the dollar in the first quarter, its third gain in four quarters, and jumped 8.4 percent against the euro. Cyprus was the largest foreign investor in Russia, followed by the Netherlands, Luxembourg and the U.K.
Russia suffered a plunge in long-term foreign investment even as its currency and stock market benefited from speculative capital inflows. Russian equity funds had net inflows for 12 consecutive weeks through early May, fund tracker EPFR Global said May 7.
FDI plummeted an annual 41 percent to $15.9 billion last year while overall foreign investment fell 21 percent from a year earlier to $81.9 billion.

TITLE: Lufthansa Sees Delivery of 1st A380 Plane
AUTHOR: By Irina Titova
PUBLISHER: The St. Petersburg Times
TEXT: Travelers from St. Petersburg will soon have the chance to fly to Tokyo, Beijing and Johannesburg on the new Airbus A380 after Germany’s flagship airline Lufthansa saw the delivery of its first A380 in Frankfurt last week. 
The aircraft — the biggest passenger plane in the world — is the first of 15 that Lufthansa has ordered from Airbus in preparation for launching routes to Tokyo, Beijing and Johannesburg.
On Wednesday it completed its official delivery flight from the Airbus aerodrome in Hamburg to Frankfurt’s airport.
“The delivery marks the dawn of a new era in flying for the airline’s passengers,” Lufthansa CEO Wolfgang Mayrhuber said at the delivery ceremony at the Airbus aerodrome in Hamburg-Finkenwerder.
“Passengers can look forward to a very special flight experience onboard the A380,” Mayrhuber said. He said that Lufthansa had decided to expand its fleet with the new A380s to provide more capacity and growth for the company.
“We want our fleet to be modern, including in terms of ecology and comfort,” he said.
Mayrhuber said Tokyo and Beijing would be the first destinations for Lufthansa’s A380s because the airline is “seeing particular growth potential on those markets.” Passengers flying from St. Petersburg, which offers no direct scheduled flights to Tokyo or Johannesburg, will be able to fly on the A380 after changing at Frankfurt airport.
The aircraft, which has a capacity of 526 passengers, boasts low noise emissions and relative ecological efficiency — the A380 requires three liters of fuel per passenger per 100 kilometers, and produces 50 percent less noise than other planes due to its Rolls-Royce Trent 900 engines. 
The luxuries of the First Class cabin, which contains eight seats on the upper deck, include heat-regulating blankets and Van Laack pyjamas. Sound-absorbing curtains partition off the rest of the cabin, and special sound-insulating material in the aircraft’s outer skin and sound-absorbing carpeting ensure it is the world’s quietest First Class cabin, according to Lufthansa. The upper deck also houses 98 Business Class seats.
The 420 Economy Class seats give passengers an additional five centimeters of room and more legroom at knee level due to an innovative seat design. All the seats are equipped with personal monitors, and for the first time, external video cameras will be used to transmit images taken from the tailfin perspective to the monitors. 
The aircraft is also equipped with the first air humidification system of its kind to be installed on a commercial aircraft.
Tom Enders, Airbus’ CEO, said the evacuation test for the A380 undertaken in 2006 had broken aviation history recordings, with a total time of 78 seconds.
The A380 will enter scheduled service with Lufthansa on June 11 on the Frankfurt-Tokyo route, initially flying three times a week. In July, when Lufthansa receives its second A380, the flights will become daily. In August the A380 will fly to Beijing, and in October to Johannesburg.
First Class tickets on the A380 to Tokyo will cost 12,174 euros, while Business Class fares are set at 3,676 euros and Economy Class at 825 euros.
Chen, a Chinese passenger on A380’s first ceremonial flight from Hamburg to Frankfurt, said she liked the aircraft “for its big size and comfortable facilities.”
“I like it because it’s not noisy,” she said.

TITLE: Gazprom Buyers Push for Flexible Contracts
PUBLISHER: Bloomberg
TEXT: BERLIN — Germany’s Wintershall Holding and France’s GDF Suez said Friday that they were in talks with Gazprom to gain greater flexibility in their long-term contracts, in part to take advantage of lower prices on the spot gas market.
Wintershall wants to lower or delay volumes of gas its trading ventures buy from Gazprom under long-term deals, Rainer Seele, chairman of the German company, told reporters.
“We think that we should have flexibility to react to oversupply, so we are going to reduce the volumes,” Seele said. “We don’t want to reduce the volumes and give away, but to shift to take the volumes later.”
European utilities such as E.On and GDF Suez buy most of their gas under supply contracts linked to the cost of crude or oil products that are valid for as long as 30 years. The accords have take-or-pay clauses requiring them to accept minimal volumes, even when demand drops, or pay a penalty.
BASF unit Wintershall and Gazprom are shareholders in the Wingas, WIEH and WIEE trading ventures. Take-or-pay commitments will not be changed, Seele said.
Wintershall started the talks with Gazprom in February, and the negotiations take time because the gas market “doesn’t stand still,” Seele said. Volume flexibility will let Wintershall buy gas on the spot market, where prices are lower than under long-term contracts linked to crude price, he said.
GDF Suez deputy chairman Jean-Francois Cirelli said Friday that his company was also in talks with Gazprom and other suppliers on revising contracts. GDF Suez wants to adjust gas prices and volumes to reflect the “current market situation,” he said at the gas conference in Berlin.
Gazprom, the world’s biggest gas producer, earlier this year agreed to adjust long-term supply contracts for some customers, including E.On, during the economic crisis. GDF Suez buys about 80 percent of its gas under multiyear contracts, Xavier Perret, the French utility’s general delegate in Russia, said last year.
Gazprom, which supplies about a quarter of Europe’s gas, agreed to give weight to moves in the spot market where prices fell last year, leading consumers to buy less fuel under long-term contracts.
E.On chief executive Johannes Teyssen said May 11 that there was a need for further renegotiations of the utility’s long-term gas contracts.
“A strong decoupling between long-term and spot prices persists, and in the coming months may further deepen,” Domenico Dispenza, president of the Eurogas industry group, said in Berlin. “Further discussions could therefore be expected should this situation persist.”
Stanislav Tsygankov, head of Gazprom’s international business department, declined to comment on any talks with customers. He said he was not aware of talks with GDF Suez, when asked by reporters at the conference.
“The ideology is the same,” Tsygankov said. “I don’t rule out that they are going with a coordinated position.”

TITLE: Stocks Rise With Oil After Hitting Six-Month Low
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russian stocks jumped the most in more than a week as the price of oil rose for a second day Monday, boosting the outlook for producers.
Rosneft, the country’s biggest oil company, climbed as much as 2.3 percent. Sberbank, its largest lender, added 1.8 percent. The 30-stock Micex Index advanced as much as 1.8 percent, its biggest intraday jump since May 13, before paring gains to trade 0.4 percent higher at 1,269.76 as of 1:11 p.m. in Moscow. The advance trimmed declines from the gauge’s April 15 high to 17 percent.
Oil, Russia’s key export earner, climbed as much as 1.3 percent on speculation that China, the world’s second-largest oil consumer, may delay measures to cool its economy. It last traded up 0.5 percent at $70.40 a barrel.
“Oil has risen and that’s put the market in a calmer mood,” said Maxim Oreshkin, head of research at Rosbank, by phone from Moscow on Monday. “But concerns remain. Any downward movement in the oil price could push down stocks and the ruble.”
Russian stocks tumbled last week, sending the Micex to a six-month low, on concern an uncoordinated response to market turmoil in Europe would scupper a global recovery. Germany’s parliament on May 21 approved the country’s portion of a $1 trillion European bailout plan, easing concern that the European Union’s deficit crisis will slow global growth.
??The economy could grow by about 4 percent annually in the next two years, even as the country tries to keep inflation low, the government press service said Sunday in a statement distributed to news agencies.
Prime Minister Vladimir Putin was scheduled to meet with his ministers to discuss macroeconomic and social issues on Monday, Interfax and RIA-Novosti reported, citing the press service.

TITLE: Market Hinders Polish Leverage With Gazprom
PUBLISHER: Bloomberg
TEXT: WARSAW — Poland’s rising demand for gas and lack of a competitive market for the fuel may prove obstacles for the country to negotiate lower prices from Gazprom, Rzeczpospolita reported.
Gazprom has agreed to apply a new pricing mechanism in contracts with those countries that have “liquid and competitive markets,” deputy CEO Alexander Medvedev said in an interview, the newspaper reported. “Such a situation exists in Germany, but there the market has a different structure than in Poland.”
Polskie Gornictwo Naftowe i Gazownictwo, Poland’s dominant gas company, has a right to negotiate the price for the fuel every three years under the current contract, and the rates have not changed since 2006, Rzeczpospolita reported. 
The company plans to meet Gazprom, which supplies Poland with more than 60 percent of its gas, to discuss the pricing formula, the newspaper reported, without citing anyone.
“We don’t observe a decline in demand, but rather an increase” in Poland, Medvedev said, adding that Poland was Gazprom’s fourth-largest buyer in Europe.
PGNiG could save $80 million a year applying the German-style pricing formula, the Warsaw-based newspaper reported, without saying where it got the estimates.

TITLE: In Brief
TEXT: <strong>Steelmakers Hike Prices</strong>
MOSCOW (Bloomberg) — AvtoVAZ, Russia’s largest carmaker, said steelmakers Severstal and Magnitogorsk Iron & Steel will raise prices 25 percent from June while they continue negotiations over longer-term charges.
“After Severstal stopped shipments, we had metal stockpiles sufficient for several days only and had to temporarily agree on higher steel prices while negotiations are taking place,” AvtoVAZ spokesman Igor Burenkov said by phone. “The steelmakers demanded a 25 percent increase from June 1 to the year-end, declining to sign supply agreements otherwise.”
Prime Minister Vladimir Putin criticized steelmakers Monday at a meeting with Igor Artemyev, the head of Russia’s antitrust watchdog, for seeking to raise prices.

<strong>Drilling Rules Assessed</strong>
MOSCOW (Bloomberg) — Russia may tighten offshore drilling rules after BP’s oil spill in the Gulf of Mexico, as the country decides who can work on its continental shelf.
“Most likely there will be a tightening” of regulations, Energy Minister Sergei Shmatko told reporters near Moscow on Monday. 
Russia, the world’s biggest energy exporter, plans to tap its offshore resources — located in the Arctic, the Caspian and the Far East — as mature western Siberia fields start to run dry. The government is working out criteria for allowing companies to work offshore, and experience is “important,” Shmatko said.

<strong>AvtoVAZ Stake Reviewed</strong>
MOSCOW (Bloomberg) — Russian Technologies may raise its stake in Russia’s biggest carmaker, AvtoVAZ, to more than 40 percent by converting debt, Chief Executive Officer Sergei Chemezov said Monday to reporters in Moscow. Renault will retain a blocking stake in AvtoVAZ, he said.

<strong>Lukoil Seeks Loan</strong>
MOSCOW (Bloomberg) — Lukoil asked shareholders to approve a loan from Sberbank equivalent to as much as 150 billion rubles ($4.8 billion), the Moscow-based oil producer said Monday.
The loan would be for no more than 10 years and have an interest rate of no more than 12.45 percent for ruble borrowing or 8.01 percent for dollar debt, the company said on its web site Monday. Shareholders will vote on Lukoil’s proposed guarantee for the loan to a financial unit at a June 24 annual meeting.

<strong>Oil Checks Planned</strong>
MOSCOW (Bloomberg) — Russia’s industrial safety watchdog said it plans unscheduled checks of oil refineries in the Saratov and Penza regions.
The inspectors will check 11 refiners in central Russia from Tuesday until June 11, the watchdog known as Rostekhnadzor said on its web site.
Deputy Prime Minister Igor Sechin in February ordered greater control over oil refining and shipments in Russia, the world’s largest oil producer.
Rostekhnadzor will check compliance to license terms, safety and payments for environmental studies.

<strong>Coal Duties Considered</strong>
MOSCOW (Bloomberg) — Russia may cancel import duties on coking coal to allow domestic steelmakers to meet their fuel needs after deadly blasts at Raspadskaya disabled the country’s largest mine earlier this month, Vedomosti said, citing government documents.

TITLE: Naftogaz Seeks Gas Production Assets
PUBLISHER: Bloomberg
TEXT: KIEV — State energy company Naftogaz Ukrainy is keen to gain access to Russian gas production assets as it holds talks about forging closer links with Gazprom, chief executive Evhen Bakulin said Friday.
“We are definitely interested,” Bakulin told reporters in Berlin when asked whether Naftogaz would like to obtain gas assets in Russia. “And in Turkmenistan, too.”
Prime Minister Vladimir Putin offered to merge Gazprom with Naftogaz at an April 30 meeting with his Ukrainian counterpart, Mykola Azarov. Naftogaz moves about 80 percent of Russia’s Europe-bound gas exports via its Soviet-era transportation network, which Moscow has sought to control. Ukraine wants to resume buying gas from Central Asia and is seeking to import the fuel through Russia’s pipelines.
“We are working on the market with all companies, all countries,” Bakulin said. “We are actively working in Egypt — why should we not work in Russia?” He declined to specify any particular assets.
Naftogaz, which currently pumps about 100 billion cubic meters of gas per year, is seeking to upgrade its pipelines. The system’s annual capacity is 142 bcm of gas, and the company wants Russia and the European Union to cooperate on upgrading the pipelines, which may cost as much as $4 billion, Bakulin said.
Ukraine can increase the capacity of the pipeline by 50 bcm without investments, Bakulin said. Naftogaz is now seeking confirmation from both Russia and the EU about the volumes that will be moved through its pipelines.
“One of the priorities for the company and country as a whole is maintaining the volumes of gas transit through Ukraine’s system at the pre-crisis level of at least 120 bcm a year, with a further increase, if needed,” he said.
Naftogaz plans to boost the volume of gas in storage to at least 22 bcm by the end of this year, from 13 bcm now, Bakulin said. The company will probably produce 20 bcm itself this year, he added.
Speaking on Ukrainian state television Friday, Azarov said Naftogaz might show a “small” profit by the end of this year, after decreasing its budget gap to the current 6 billion hryvnas ($757 million).
Ukraine has focused on relations with Russia since Viktor Yanukovych took office in February and formed a Cabinet in March. Last month in Kiev, Putin suggested forming a joint nuclear energy holding company after Russia agreed to cut gas prices for Ukraine by 30 percent through 2019.

TITLE: Belarus in Debt to Gazprom
PUBLISHER: Bloomberg
TEXT: MOSCOW — Gazprom said Friday that Belarus was refusing to pay agreed prices for fuel supplies, with the country already owing $192 million for its gas this year.
The debt expanded by $55 million after Beltransgaz, the state pipeline operator half-owned by Gazprom, underpaid on Friday, Gazprom spokesman Sergei Kupriyanov said.
Beltransgaz spokesman Vladimir Chekov did not answer his office or mobile phones when called by Bloomberg.
Putin said in March that Belarus would receive $4.2 billion in Russian subsidies this year through below-market gas prices and tax-free oil deliveries. Gazprom also paid $625 million this year for 12.5 percent of Beltransgaz, whose pipelines carry about one-fifth of Russia’s Europe-bound gas exports.
“Beltransgaz decided to pay for supplies not at the contract price, but at a price it determined by itself,” Kupriyanov said. At the current rate, the debt may reach $500 million to $600 million this year, he said. “The unfolding situation concerns us greatly.”
Belarussian Energy Ministry spokeswomen Lyudmila Zenkovich declined comment, Interfax reported.
The comments came as Prime Minister Vladimir Putin was meeting in St. Petersburg with counterparts from the Eurasian Economic Community, including Belarussian Prime Minister Sergei Sidorsky.

TITLE: Putin Says Customs Union Delayed
AUTHOR: By Maria Antonova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Prime Minister Vladimir Putin on Saturday conceded that a Russian-led customs union with Belarus and Kazakhstan would not come into force by the planned July 1 deadline, casting serious doubts on Moscow’s commitment to the plan.
Several key disagreements were not resolved Friday when Putin met with the Belarussian and Kazakh prime ministers in St. Petersburg, including Moscow’s desire to keep protectionist measures for its auto and aerospace industries.
The union “cannot come into full force,” Putin told Mir, a television channel for the Commonwealth of Independent States, in an interview posted on the government’s web site.
“If we allow this or that product into our customs zone, de facto without import duties, this will have long-term effects. … In essence, it would jeopardize whole industries in Russia,” Putin said.
Analysts had been skeptical about the union’s chances for success, often citing Russia’s intermittent enthusiasm for joining the World Trade Organization. Moscow submitted its application to join the WTO in June 1993 — nearly 17 years ago — and remains the largest economy outside the bloc.
Regular trade disputes with Belarus have also hampered negotiations on the customs union.
On Friday, Putin said 18 more agreements would need to be signed before the July 1 deadline. The three states previously agreed to introduce a common external tariff and set up rules and customs duties by that time.
Now, Moscow will seek to establish the common economic zone by July 1, 2012, six months later than previously planned, Putin said in the interview.
The remarks indicate that his suggestion a day earlier to enlarge the customs union, potentially to include six new states, may have been premature.
“I don’t know of a single Eurasian Economic Community member who would not want to join the work of the customs union,” Putin said at a meeting of the group in St. Petersburg on Friday.
Besides Belarus and Kazakhstan, the EEC’s members are Kyrgyzstan, Uzbekistan and Tajikistan. Armenia, Moldova and Ukraine have observer status.
In comments at the meeting, Ukrainian Prime Minister Mykola Azarov did not express any eagerness to join the customs union, saying only that he hoped bilateral trade with its members “would not change for the worse,” Interfax reported.
Ukrainian President Viktor Yanukovych indicated last week during a meeting with President Dmitry Medvedev that Ukraine, a WTO member, would pursue further economic integration with the European Union rather than with Russia.
Kazakh Prime Minister Karim Masimov said the union helped increase his country’s trade with Belarus by 50 percent since last year.
“Not everyone supports the customs union, and there are opposing viewpoints in Kazakhstan as well, but I and the president of Kazakhstan are sure that it will benefit our economies and honest entrepreneurs,” he said.
Putin praised the union’s progress, saying it “has grown out of its purely economic format and is becoming a new geopolitical reality.” He also called it the main driving force of integration between CIS countries.
Russia will gradually remove barriers to free migration of labor within the zone and “measures to protect the domestic market that were introduced during the crisis,” he said.

TITLE: Weighing Up the Local Options for Healthcare
AUTHOR: By Olga Kalashnikova
PUBLISHER: The St. Petersburg Times
TEXT: Having to go to hospital in any foreign country is inevitably a stress, and Russia is no exception. While Russians are used to the system and know how to operate within it, it may seem like a quagmire of unfamiliar medical practices, bureaucracy and corruption to foreigners. Moreover, patients who speak little or no Russian are likely to get little understanding or sympathy at state clinics. 
“I have never experienced medical treatment in Russian hospitals or clinics, but a number of friends who have been to Russian clinics spoke of subpar conditions and equipment,” said Elizabeth, a student from the U.S. who was treated in a private clinic in St. Petersburg when she fell ill while studying in the city. 
Foreigners are also frightened by the possibility of being given the wrong treatment and unknown methods that could make their health complaint worse. 
“Although you know you’re just being hysterical, there’s always the thought that the non-English speaking doctor is going to anesthetize you with no more than a couple of shots of vodka before proceeding to amputate your right leg — when all you had was an ingrowing toenail,” joked a representative of the American Medical Clinic & Hospital. Beneath the humor, there is however a grain of truth.
Such fears can turn minor ailments into more serious complaints, if patients fail to go to the doctor in time. Consequently, foreigners often solve their medical problems with a visit to so-called “Western-style” clinics. 
“We need such clinics in Russia, as Russian state medical treatment undeniably differs from foreign systems in the diagnostic and treatment processes,” said Nadezhda Alexeyeva, the head of the Association of Private Clinics in St. Petersburg.
The phenomenon of “expat clinics” in St. Petersburg emerged 10 to 15 years ago. Such clinics were mainly aimed at providing emergency treatment with effective methods to help patients to recover in a short space of time. 
“The clinic should help the patient by running all necessary tests, providing diagnostic procedures, and by finding a suitable treatment and doctor as quickly as possible,” said Maria Makarenko, client network manager at EuroMed clinic. 
The primary service offered by “Western-style” clinics is multilingual staff. 
“Medical problems are fully confidential, so using an interpreter is not desirable,” said Makarenko.
Patients of private clinics should expect to receive a high standard of treatment and comfortable surroundings. All medical reports are written in accordance with Western formats, and doctors generally have experience of working in hospitals abroad and of European standards of medical treatment.
“And of course, personnel take into account the psychological differences between Russians and foreigners,” said Yefim Danilevich, general and medical director of the American Medical Clinic & Hospital. “Doctors are familiar with the style of communication with patients that is the norm in Western countries: Open information and detailed explanations.” 
“I was treated very well at the ‘Western’ clinic,” said Elizabeth. “All the doctors were Russian, but most spoke fairly fluent English. All had some medical experience or training outside of Russia. The doctors were respectful and forthcoming about my condition. I thought the standard of care was as good if not better than at many clinics and hospitals I’ve been to in the U.S.”
The attitude and service is a feature that attracts not only foreigners. If years ago, most clients of “Western” clinics were foreigners, nowadays more and more Russians are choosing to use their services.
“I heard lots of stories about attitudes to pregnant women in state hospitals, and I was afraid to go there — I wanted to have good service and treatment in order to feel stable psychologically,” said Anastasia, who gave birth to two children in a “Western” clinic in St. Petersburg. “I believe we have good doctors in state clinics, but you have to know how to get access to them,” she added. 
Such services do not come cheap. Many patients of private clinics are covered by their insurance, and all their bills are paid directly by their insurance company. 
“The reason I went to a ‘Western’ clinic was due to the fact that my insurance company only covered my expenses at a few clinics in St. Petersburg — all of them ‘Western,’” said Elizabeth. “Additionally, I had heard a number of horror stories about the medical care in Russian hospitals, which deterred me from going there other than in a serious emergency.”
“Foreign patients can face additional problems that should be solved by the clinic — travel arrangements for relatives, ticket and hotel reservations, and visa support in case the patient has to stay in Russia longer than they had planned,” said Makarenko. “It is important to provide medical evacuation to the patient’s native country.”
In this respect, clinics face other problems, which often supersede medical issues.
“[Such problems include] the form of evacuation — air or ground ambulance, schedules, international relations between countries and simply the mentality of the patient,” said Anna Plekhanova, deputy PR and corporate culture director at Emergency Medical Consulting.
“There was an incident when a Russian woman — now a Canadian citizen — emigrated with her daughter to Toronto,” she said. “The doctors recommended that her daughter be transported under general anesthetic. There were long days of cooperation with German, Turkish and Finnish airlines, with the Canadian visa department in Moscow, customs services and bank clerks. It was quite difficult to get the bureaucratic machine in motion, but we did it.” 
Emergency Medical Consulting also offers to repatriate bodies, in a worse case scenario. 
Doctors from ‘Western’ clinics offer aftercare to patients, providing remote consulting even after patients have been transported home, according to specialists from the American Medical Clinic & Hospital.
“The medical care in some Russian state hospitals is not as good as it could or should be,” said Elizabeth. “Also, I can imagine it would be quite frustrating and difficult for a non-Russian speaking foreigner to go to a Russian hospital, where there is not some sort of guarantee that they will be understood by the doctors. The western-style clinics cater to a very specific demographic — wealthy Russians and foreigners lucky enough to have a good insurance policy, or a policy through their country’s government.”
Providing medical care to foreigners requires additional skills and experience for which there is no need in state clinics, EuroMed representatives said. 
“A foreign language–speaking doctor is a fairly expensive luxury that is not useful if they don’t work constantly with foreigners,” said Makarenko. 
“That’s why western-style clinics that work with foreigners are certainly necessary in Russia.”

TITLE: Analysts Slam Unethical Medical Advertising
PUBLISHER: The St. Petersburg Times
TEXT: About 25 percent of medical advertising in Russia is unethical or non-informative, analysts say.
The MedPharmConsulting health and beauty advertising agency which conducted research into the topic said that “every fourth medical advertisement requires correcting, violates ethical norms regarding patients, or is inaccurate in its use of terms and slogans, alienating potential clients.”
This is particularly true of major medical advertising campaigns, in which advertisers frequently use unusual ways to attract clients’ attention, the agency said.
Analysts say the use of high quality creativity in medical advertising may have a positive effect, but that “it should be accurate and consider all ‘underwater stones’ connected to the perception of medicine and medical services provided by clients.”
Before launching major advertising campaigns, their content should be thoroughly tested on different target groups to optimize the information and achieve the maximum effect, MedPharmConsulting said.
“In medicine it is extremely important to consider the possibly ambiguous attitude of clients to advertising information provided,” said Oleg Makarov, general director of MedPharmConsulting. 
“In this sector, one wrong word or image may elicit a significantly negative reaction, thereby decreasing the effectiveness of the whole advertising campaign,” Makarov said.

TITLE: Yandex Offers Search In Other Languages
AUTHOR: By Anastasia Golitsyna
PUBLISHER: Vedomosti
TEXT: MOSCOW — Yandex launched its new foreign-language search engine on Wednesday, in a move aimed at taking on Google.
Yandex opened the alpha version of a search engine for foreign web sites at Yandex.com, spokesman Ochir Mandzhikov said. The search engine began indexing international sites two years ago and has so far catalogued more than 4 billion pages in foreign languages, with 80 percent of those pages in English.
On the Russian site, Yandex.ru, a filter was installed allowing users to search only on foreign sites, and its search for dot-com sites will become a “testing platform for the worldwide Internet.”
Yandex has publicly stated that it has a full-fledged search on foreign sites, said Vladislav Kochetkov, chairman of Finam. It turns out that the search engine is ready to compete globally, primarily with Google. This is a significant event for the Russian Internet, Kochetkov said.
According to data from comScore, in 2009 Yandex was the seventh-largest search engine in the world by number of search queries. The top three are Google, Yahoo! and Baidu.
Four billion foreign pages for worldwide competition isn’t much. According to Yandex, world search engines have indexed about 100 billion pages. Yandex has indexed 5.25 billion pages in Russia and the Commonwealth of Independent States.
In 2008, Google said it had catalogued a trillion sites. Among them are many duplicates, or sites that redirect users to an advertisement or with deleted information, said Victor Lavrenko, founder of the Nigma.ru search engine. There are only tens of billions of useful sites, he said. A Google representative declined to comment.
These 4 billion pages will help Yandex keep some Russian users from defecting to foreign search engines and competitors, said Igor Ashmanov, a partner at Ashmanov & Partners.
The search engine gives away 1.5 million to 2 million users every day through the links it places at the bottom of each page of results (“search for the same thing in other search engines”), Ashmanov estimates.
To stay competitive, Yandex should index 20 billion pages and advertise abroad in order to compete with worldwide search engines, Lavrenko said.
Yandex has the technology to take its service to a world-class level, it only needs equipment and programmers, Lavrenko said. This will cost several million dollars — not much for the search engine.
The company, however, does not intend to advertise its search in the West, as the service is for Russian users, Mandzhikov said.

TITLE: Judges Find Way Around New Law
AUTHOR: By Anastasia Kornya
PUBLISHER: Vedomosti
TEXT: MOSCOW — Legislation prohibiting the arrest of businessmen won’t help many of them, as courts are refusing to acknowledge that some suspects were engaged in entrepreneurial activity.
Vedomosti has obtained a copy of the Tverskoi District Court’s decision extending the arrest of Alexander Volkov, director of Eurasia Logistics, who was accused of fraud and property laundering, as well as document forgery committed as part of an organized group. The Interior Ministry’s Investigative Committee said that in 2006-08, Eurasia helped Mukhtar Ablyazov, former head of BTA-Bank, take out loans he never intended to return.
Volkov was arrested in March, along with three other Eurasia Logistics employers. But in April, a law backed by President Dmitry Medvedev was enacted prohibiting arrest for economic crimes, including fraud charges, if the fraud was related to entrepreneurial activity.
But Volkov was not released from custody. On April 30, the court extended his arrest until September. The judge, Sergei Podoprigorov, who also ordered the arrest of Sergei Magnitsky — a lawyer who died in pretrial detention in November — decided that the circumstances mandating Volkov’s arrest had not changed and that his charges were criminal, not economic. A court decision extending the arrest of Denis Vorotyntsev, a lawyer for Eurasia Logistics, explained that the crimes in question were committed with the intent to create a Ponzi scheme, the goal of which was obtaining loans, not real entrepreneurial work.
Interpreting the law this way will allow courts to ignore the ban on arrests of businessmen — all they need to do is claim that the crime is not related to entrepreneurship, Volkov’s lawyer Yelena Oreshnikova said. In Volkov’s case, the court ignored the fact that the credits were invested in real estate projects, she said.
Anna Usachyova, spokeswoman for the Moscow City Court, refused to comment on the decision of the Tverskoi court.
Taking out loans meets the definition of “entrepreneurial activity,” but the problem is that judges never refuse requests from prosecutors and investigators, said Yury Kostanov, a lawyer, adding that there was a reason why judges, as well as corrupt police officers, were accused by the U.S. Congress of oppressing Magnitsky.
The legislation has led to the release of Boris Sokalsky, chairman of the board of NEP Bank, accused of illegal banking, and Alexander Gitelson, owner of VEFK Bank, charged with extra-large-scale embezzlement and money laundering. The Investigative Committee closed the case against Mikhail Gutseriyev for a lack of evidence of wrongdoing, and the Investigative Committee under the Prosecutor General’s Office dropped charges against Igor Linshits, former owner of Neftyanoi Bank, for the same reasons.
Supreme Court Chairman Vyacheslav Lebedev said no data on the effect of the arrest ban for entrepreneurs is presently available, but the Supreme Court has already requested that local courts provide statistics on the issue. Lebedev said he does not expect a lot of cases to fall under the new law.
Custody decisions are usually changed on appeal. The Moscow City Court on Monday canceled the decision of the Basmanny District Court, which on April 15 extended the arrest of Natalya Grishkevich, a department manager of the Pension Fund arrested in a graft case, and released her on 7 million rubles ($231,000) bail. Last week it overturned the ruling of the Tverskoi court, which refused to release Andrei Kagramanov, arrested on charges of illegal banking, citing recent law changes for this decision.
But these are isolated cases, said Robert Zinovyev, a lawyer. The court administration has already given the judges informal instructions not to acknowledge the entrepreneurial nature of activities for suspects who need to be arrested, he said.
Judges are also reluctant to refuse arrest warrants because they are afraid of losing their jobs without severance pay. Magistrates face strict punishment for releasing suspects: Three judges received formal warnings in September for granting bail to Yekaterina Leladze, a defendant in the Tri Kita case. Lyubov Rumyantsev, an ex-judge of the Kuzminsky District Court who in 2004 released Andrei Khovanov, former head of the Citi-Energo company, is still under investigation.
But Olga Makarova, the Odyntsovsky District Court judge who left Vera Trifonova, a businesswoman, to die in pretrial prison, was allowed to file a voluntary resignation. Judge Yelena Stashina, who extended Magnitsky’s arrest, has not faced any charges.

TITLE: Raspadskaya Mine Pledges Supplies to 6 Local Clients
PUBLISHER: Bloomberg
TEXT: MOSCOW — Raspadskaya on Friday pledged to maintain supplies to six domestic clients as it faces slumping sales, protests by workers and investigations into fatal explosions at its biggest mine.
The six steelmakers include two units of Evraz Group, one owned by Mechel and another by Magnitogorsk Iron & Steel Works, Raspadskaya said in a statement. “Raspadskaya will consider supplying other traditional customers as soon as output recovers,” it said.
Raspadskaya on May 19 declared “force majeure” on supply contracts, allowing it to miss agreed deliveries, after the blasts that killed 90 miners and rescuers. The explosions on May 8 and 9 that ripped apart Russia’s biggest underground mine may stall ambitions among coking coal producers to expand exports of the steelmaking raw material to Asia, just as prices soar.
Deputy Prime Minister Igor Sechin will host a meeting this week to try to stabilize domestic coking coal supplies, his aide, Rustam Kazharov, said by phone. Sechin recommended that producers curb exports to satisfy the needs of local steelmakers, Interfax reported Thursday.
Kazharov declined to comment on the news report.
As many as 3,000 people met in the center of Mezhdurechensk on May 14 to demand “fair pay” after the mine was shut, said retired worker Vladimir Chernykh, who spoke to reporters on behalf of protesters at the gathering.
“I lost four colleagues from my crew in the disaster,” miner Vladimir Taminen, 44, said in an interview. “People are taking risks and neglect safety to earn more. The reality is there is practically no other job here.”
Dmitry Novozhilov, 20, another miner at Raspadskaya, said his co-workers who fled following the blasts described how they had to step over bodies to escape.
“I came to the mine the day after the blasts,” Novozhilov said. “It looked terrible. The five-story administrative building and the lift equipment had been crushed as though by some giant hand. Hardware and concrete were scattered all over the surrounding mountains.”
The 9-million-metric-tons-a-year mine in Kemerovo may take years to rebuild, chief executive Gennady Kozovoi said. Reviving the facility, which employed about 4,000 people, may cost about 5 billion rubles ($160 million), Kemerovo Governor Aman Tuleyev said.
Raspadskaya produces coal at two smaller mines in the region.
Sales of coking coal concentrate will tumble to 255,000 metric tons in June from a monthly average of 760,000 metric tons so far this year, Raspadskaya said. It will “reconsider” export sales to focus on domestic buyers, the company said.
“If the situation’s not resolved, we’ll lobby for export duties,” Sergei Shatirov, a Federation Council senator for the Kemerovo region and first deputy of its Industry Committee, said last week.
Raspadskaya and domestic rivals Mechel and Sibuglemet have targeted Asian markets in the past two years to diversify sales as local demand faltered.
Igor Volkov, director of Raspadskaya’s flagship coal mine, was charged with criminal negligence over the explosions, the Investigative Committee of the Prosecutor General’s Office said Thursday.
Raspadskaya fired him within the week.

TITLE: Central Bank Allows Dollar Reserves to Swell
PUBLISHER: Bloomberg
TEXT: MOSCOW — The dollar’s ascent against the euro may be stifling Russian efforts to challenge the greenback’s dominance as a reserve currency, with policy makers in Moscow allowing the dollar’s share of foreign reserves to swell.
The Central Bank “changed the currency structure of reserves,” raising the U.S. currency’s share by 3 percentage points to 44.5 percent, BNP Paribas said May 18, citing Central Bank numbers on the final months of last year. The euro’s portion fell 3.7 points to 43.8 percent. The figures, part of the Central Bank’s annual report to parliament, aren’t official yet, said a Central Bank spokesman who declined to be identified, citing bank policy.
It’s “very much a case of economic rationalism trumping bellicose politics,” said Neil Shearing, an emerging markets economist at Capital Economics. “With the euro likely to fall further over the coming quarters and a general retreat to safe havens likely to boost the dollar, expect more of the same.”
The euro has dropped 18 percent against the dollar since Nov. 25 on investor concern that policymakers may fail to contain Europe’s debt crisis. Central Banks have probably lost $300 billion this year on the euro and may consider cutting holdings of the currency, Stephen Jen, a managing director at hedge fund BlueGold Capital Management, said May 6.
The dollar’s share in Russian reserves will probably account for “50 percent, maybe more” of the total by the end of this year, said Yulia Tseplyayeva, head of research at BNP Paribas.
“We must be prepared for changes to the allocation of various currencies on the market because the global situation isn’t very stable,” Economic Development Minister Elvira Nabiullina said Thursday. The Central Bank has a “sensible currency diversification,” she said. “I don’t think substantial changes need to be made here.”
Russian policymakers have been devising alternatives since the credit crisis erupted that would allow the world’s biggest energy supplier to reduce its reliance on the dollar. Officials in Moscow have been backed by BRIC peers seeking to limit the dollar’s dominance in the $8.36 trillion of global reserves.
India said in July that the world economy was too reliant on the dollar. China and Brazil in April last year joined Russia in discussing the creation of a new supranational currency.  
President Dmitry Medvedev has pushed for the creation of regional reserve currencies and in July produced a prototype coin for a “world currency,” which he said was needed to stabilize the global economy.  “Common sense tells you that Russia’s rhetoric doesn’t always correspond to reality,” said Nikolai Kashcheyev, head of research at Sberbank’s treasury department. “What we are seeing now is the Central Bank trying to balance reserves after skewing them toward euros.”
A euro decline to $1.22 would wipe out gains from reserve managers’ efforts to diversify away from the dollar into the European currency, Jen wrote in a May 6 report. China may have lost $80 billion and Russia $14 billion, according to that note. The euro traded as low as $1.21 on Wednesday.
Arkady Dvorkovich, an adviser to Medvedev, said May 12 that it would be “absolutely incorrect” to assume that the Central Bank had suffered losses on the scale suggested by Jen and said returns must be calculated over a longer time frame.  

TITLE: Going From Putin’s Frown to Medvedev’s Smile
AUTHOR: By Fyodor Lukyanov
TEXT: The “secret plans” of the Kremlin and Foreign Ministry to improve relations with the West is a topic of heated discussion among foreign policy analysts and journalists. This was sparked by the appearance of a Foreign Ministry document released to Russian Newsweek last week on how Russia could exploit certain external factors to help modernize the country and strengthen its position in the global arena.
The document assumes that the global financial crisis has created new conditions in which the traditional global leaders — the United States and the European Union — are losing their advantage and new global power centers are emerging. Russia should take advantage of these trends and should create “alliances for modernization” to promote its own development and strengthen its positions domestically and globally.
But the West is not the only focus of the document. It puts particular importance on integrating the economies of the former Soviet republics, opposing attempts by forces outside the region to weaken Russia and using the crisis to extend its economic influence into the Baltic states “given the sharp fall in their investment attractiveness for the EU states and the serious drop in value of their assets.” In addition, the document takes a firm stance on Russia’s strategic interest in the Arctic and on “limiting access to the Arctic by players from outside the region, including NATO and the European Union.”
One of the document’s main leitmotivs, however, is that Russia should take advantage of the fact that the West is becoming weaker and less self-confident. Russia should assist the EU in solving its major international problems in exchange for addressing the Kremlin’s concerns and proposals on a new European security architecture. The main message for Europe is that Russia wants closer business and political ties with the EU, but on an equal basis.
There were no surprises in the list of countries that Russia considers a priority. Russia is placing its bets on Germany, France, Italy and Spain, while relations remain chilly with Britain. The final draft of this document will include an expanded list of priority countries and “national interests” once industry lobbyists have had their say.
The document has interesting references to China, suggesting that Russia “pay special attention to the growing role of China in international affairs, including the impact that activities by Beijing have on our global and regional interests.” That is probably the strongest language that Russia can afford to use publicly to express its concern over China’s steadily growing influence. This section of the document also mentions that Russia enjoys leverage in the United Nations Security Council where “under current conditions, the Chinese more frequently need our support than we need theirs.”
Furthermore, Moscow expects to receive concrete economic benefits in return for supporting Iran, Syria and Cuba — states subjected to international pressure and sanctions. At the same time, Moscow apparently wants to avoid the type of experience it had with Libya. After Tripoli voluntarily gave up its nuclear weapons program, cooperated with the West on cracking down on global terrorism and was removed from the West’s list of pariah states, it promptly forgot the support it had received from Russia during all the years that it was on that list.
The Foreign Ministry took a firm stance toward Russia’s strategic interests in the Arctic and the former Soviet republics, areas where the Kremlin feels the most pressure from the West, it is clear that the document places high priority on strengthening business interests with the West. But this is nothing new. For most of his presidency, Vladimir Putin attempted to establish business relations with his Western partners on a mutually beneficial basis. Starting with the now-forgotten idea of “debt for investment” in 2000 and ending with the desire to build relations based on an energy “asset swap” in 2005, all of Russia’s proposals envisioned an intensive rapprochement with the West.
But all of these plans fell through. The United States and the EU were focused on ideological, political and economic expansion, while Russia was repeatedly turned away by the West. Competitiveness, envy and inflammatory rhetoric eclipsed rational, pragmatic approaches. Europe and the United States had planned to base their relations with Russia on the idea of common values, but Moscow decisively rejected that approach. In addition, Putin’s style of behavior and peculiar sense of humor did not go over well in the West. Putin, who has always despised international political hypocrisy and who considers public candor to be a virtue, only managed to find a common language with a handful of Western politicians who shared his views. That was not enough to achieve closer overall ties with the West.
But relations are more balanced now. Both sides have de facto recognized the limits of their own capabilities. The West does not have the resources to dominate the former Soviet republics, and Europe is drowning in its own problems. Russia has recognized the vulnerability of its economy and has set realistic priorities. This means that the Kremlin should step back from its former obstinate positions and be more amenable to compromise.
President Dmitry Medvedev made a revolutionary statement during an interview with a Danish journalist in late April. When asked what face Russia should present to the outside world, Medvedev smiled and said, “It must be one that I have now: a smiling face. If this is the face of Russia, that of someone who smiles at other countries, I think that it’s the right one.” What’s more, Russia should not “gnash its teeth at anyone, get angry, sulk or feel offended,” Medvedev said. No Russian leader had ever spoken that self-critically.
Russia’s relations with the West really are changing, but not because of any new strategy in Moscow. The Foreign Ministry document sets forth the same objectives and now defines them even more clearly than before. But the tactics are becoming more flexible. More specifically, Russia is now ready to offer “rewards” for constructive relations with the West in addition to its habitual and overused “retaliation” for destructive relations. Examples are the revised approaches to the Unites States, Poland and Ukraine.
If Putin’s policy was largely defined by the motto of “whoever offends us won’t last three days,” a quote he made in 2000, then 10 years later Medvedev has formulated a more positive version: “Smile at those who smile at us.” This latest attempt at pragmatism might prove to be more productive — that is, if unforeseen domestic or external factors do not interfere.

Fyodor Lukyanov is editor of Russia in Global Affairs.

TITLE: Barbarians at the EU Gates
AUTHOR: By Daniel Gros
TEXT: The euro area is being confronted by a fundamental crisis, and attacks on financial speculators will do nothing to resolve that problem. The European Council of Ministers had to promise hundreds of billions of euros to its financially imperiled member countries, even though the European economy as a whole is not really in crisis. On the contrary, most surveys and hard economic indicators point to a strong upswing, with the one country that is in really serious trouble, Greece, representing only 3 percent of the area’s gross domestic product.
Nevertheless, the crisis poses an almost existential challenge to the European Union — and has required such huge sums — because it directly implicates the key underlying principle of European governance: the nature of the state. The case of Greece has raised the simple but profound question: Can a member state of the EU be allowed to fail?
One view is that the state is sacrosanct. The EU has to intervene and help any errant member get back on its feet. But this view assumes that all member states adhere to the union’s underlying economic values of fiscal prudence and market reform. Problems could arise only because of unanticipated shocks, temporary local political difficulties and — the favorite culprit — irrational markets.
Applied to Greece, this view implies that the country’s fiscal crisis resulted from an overreaction by world financial markets to local political difficulties (excessive spending by the Greek government before last year’s elections). Moreover, it implies that the crisis is fully under European control, and that the European authorities have elaborated a comprehensive plan that will resolve all of Greece’s fiscal and structural problems. Hence the official — let’s say “Southern” — refrain: “The International Monetary and EU plan will succeed. Failure is not an option.”
The alternative view is more pragmatic and rules-based. This “Northern” view starts from the premise that member states remain sovereign units, and that it is possible that a member country does not implement a necessary economic-adjustment program. This view is embodied in the “no bailout” clause in the euro’s founding document, which stipulates that each country is responsible for its own public debt. Failure then becomes an option if the country concerned violates the single currency’s basic rules.
Financial markets do not participate directly in this debate, but they have much skin in this game. Any holder of Greek debt, especially long-term debt, must calculate the likelihood that Greece’s political system will prove strong enough to push through the reforms needed to enable the country to service its debt fully (and on time).
The collective judgment of financial markets on any government’s economic and fiscal policy is expressed in the risk premium that the government must pay on its external debt. Doubts in financial markets lead to higher risk premiums, which make it even more difficult to finance a government that is already facing financial problems. Financial markets are often wrong in their judgments. But they are a fact of life that cannot just be wished or regulated away.
One might object that the distinction between Southern and Northern views is academic nowadays, because failure really isn’t an option, given that it would trigger a disastrous reaction in global financial markets. But the European Council also created a Task Force under President Herman Van Rompuy to elaborate concrete proposals for reforming the monetary union.
The key choice for this group is simple: Should they direct their efforts solely at preventing failure (including open-ended fiscal support), or should they also prepare for the failure of a member state in order to mitigate the consequences if that should happen?
The first choice is bound to imply elaborate measures designed to deliver “more of the same” — a strengthening of the Stability and Growth Pact, for example, with more provisions for economic policy surveillance and cooperation. But this approach has no answer to the fundamental question: What if the framework does not work? So long as EU leaders cannot answer this question, financial markets will continue to harbor doubts about the euro’s long-term stability.
The euro zone cannot stabilize in political and economic terms without a solid framework for crisis resolution and an ability to deal with sovereign default by a member state. The view that member states cannot be allowed to fail logically implies that a political or at least a fiscal union must underpin the euro.
This is the choice that European leaders now confront: a radical step forward toward political or policy integration or a clear framework to deal with the consequences of a member country’s failure to abide by the fundamental rules of the monetary union. No amount of money will allow European leaders to fudge this issue.

Daniel Gros is director of the Centre for European Policy Studies. © Project Syndicate

TITLE: Seize the Day
AUTHOR: By Richard Lourie
TEXT: Russia is always behind, and the usual reasons for this include geographical unwieldiness, the drag of the unassimilated past and top-down control that discourages innovation.
Like Peter the Great’s opening to the West, the Soviet drive to overtake and surpass the decadent West stemmed from the awareness of being dangerously behind. Now, it finally dawned on someone — probably President Dmitry Medvedev — that a Russia built on exporting energy and other natural resources did not have much of a future. And in the high-speed, high-tech 21st century, the future has a way of arriving much faster than expected. There clearly wasn’t enough capital and know-how inside the country to modernize the economy, so they would have to be attracted from outside, mainly from Europe and the United States, though Asia and Brazil also figure in.
According to a document leaked to Russian Newsweek, Russian foreign policy should now be reoriented to serve the interest of modernizing the economy. The document has a long, mind-numbing title reminiscent of the Soviet era: “Programs for the Effective and Systematic Implementation of Foreign Policy Factors for the Purposes of the Russian Federation’s Long-Term Development.” The word that jumps out from that bureaucratic miasma is “long-term.” Perhaps the ruling elite needed to stabilize the country, or perhaps they only wanted to rip off the country while the ripping was good. Whatever the case, the ruling elite showed little sign in the last decade of giving Russia’s long-term interests the slightest thought. Now, apparently, that is changing.
Nothing much may come of all this, of course. A few showy deals may be made before old habits and vested interests reassert themselves. But this may also prove a pivotal moment in history, a chance for Russia to shed its old skin. Two very large and important things must occur for any such change to take place.
First, Russia must realize that changes in foreign policy are not enough. Domestic change needs to happen as well. Foreign banks and companies may be offered advantageous terms, but if Moscow does not respect its own businesspeople and the laws on its own books, why should foreign firms believe that they will fare any better if push comes to shove? In that respect, former Yukos CEO Mikhail Khodorkovsky’s hunger strike last week protesting pretrial detention for economic crimes was fortuitously timed with The New York Times’ article on the mortal dangers of Russian journalism. A reasonably free press and a reasonably free judiciary are not just humanist ideals but safeguards for commerce, providing predictability. This is probably more important in attracting capital than, say, backing the U.S. position on Iran. The old Russian saying, “Beat your own so others will fear you,” needs to be turned around: Respect your own so others will trust you.
The second factor that could make this a pivotal moment is for the United States and the West to realize the dimensions of the opportunity. That may have already begun. In the May/June issue of Foreign Affairs, Charles Kupchan argues in “NATO’s Final Frontier: Why Russia Should Join the Atlantic Alliance” that “including former adversaries in a postwar order is critical to the consolidation of great-power peace.” The problems are enormous here — including China’s reaction to a NATO reaching its borders — but so are the opportunities since NATO members must practice “democracy, individual liberty and the rule of law.”
Nothing is clear yet except that a moment of great opportunity is emerging. After swift, judicious analysis, it should be seized.

Richard Lourie is author of “The Autobiography of Joseph Stalin” and “Sakharov: A Biography.”

TITLE: South Korea Cuts Trade to Northern Neighbor
AUTHOR: By Jean Lee
PUBLISHER: The Associated Press
TEXT: SEOUL, South Korea — South Korea’s president cut trade to North Korea vowing the country would “pay a price” for a torpedo attack that killed 46 sailors, and promised to haul its impoverished neighbor before the UN Security Council.
The White House offered its full support for South Korea’s moves, and U.S. Secretary of State Hillary Clinton discussed with China, a veto-wielding permanent seat holder on the Security Council, how best to handle the precarious situation.
North Korea has benefited from trade with South Korea, though not to the point where its economy has become dependent on its rival. Pyongyang’s trade with close ally China, for example, is bigger.
“We have always tolerated North Korea’s brutality, time and again. We did so because we have always had a genuine longing for peace on the Korean peninsula,” President Lee Myung-bak said in a solemn speech to the nation from the halls of the country’s War Memorial.
“But now things are different. North Korea will pay a price corresponding to its provocative acts,” he said.
Lee also pledged to prohibit North Korea’s cargo ships from passing through South Korean waters — in retaliation for the March 26 sinking.
The South’s measures will cost North Korea about $200 million a year, said Lim Eul-chul, a North Korea expert at South Korea’s Kyungnam University.
Lee called it a “critical turning point” on the tense Korean peninsula, still technically in a state of war because the fighting ended with a truce, not a peace treaty.
Clinton warned of a “highly precarious” security situation in the region, and said North Korea’s neighbors, including Pyongyang ally China, understood the seriousness of the matter. 
Clinton would not say whether such action would include new international sanctions against the North, and said she was engaged in intense consultations with China and other nations about the next step.
“We are working hard to avoid an escalation of belligerence and provocation,” Clinton said.
So far, China has refrained from criticizing the North, which it supplied with troops during the Korean War.
The sinking of the Cheonan near the Koreas’ western maritime border was South Korea’s worst military disaster since the three-year Korean War. An international team of investigators said last week that a torpedo fired from a North Korean submarine tore the ship in two.
Pyongyang disputes the maritime border unilaterally drawn by UN forces at the close of the war, and the Koreas have fought three bloody skirmishes there, most recently in November.
Defense Minister Kim Tae-young said the U.S. and South Korea would hold anti-submarine military exercises in the waters soon. The U.S. has 28,500 troops in South Korea — a major sore point for the North.
South Korea’s military, on guard to defend the nation from further North Korean aggression, will also resume blaring anti-North Korean propaganda back over the border — a sensitive practice suspended in 2004 amid warming ties, officials said.
Lee called the sinking of the Cheonan yet another example of “incessant” provocation by communist North Korea, accused in a 1983 attack on a presidential delegation that killed 21 people and the bombing of an airliner in 1987 that claimed 115 lives. 
North Korea routinely denies involvement in the attacks, and has steadfastly denied responsibility for the Cheonan sinking. Naval spokesman Col. Pak In Ho warned last week in comments to broadcaster APTN that any move to retaliate or punish Pyongyang would draw “all-out war.” 
Pyongyang regularly issues belligerent warnings of war if provoked by the South or the U.S. 
As Lee spoke Monday, North Korea’s main newspaper, the Rodong Sinmun, called the investigation results an “intolerable, grave provocation” tantamount to a declaration of war. The North Korean military also warned it would open fire at any propaganda loudspeakers installed in the Demilitarized Zone. 
“More powerful physical strikes will be taken to eradicate the root of provocation if (South Korea) challenges to our fair response,” a commander said, according to the North’s official Korean Central News Agency.

TITLE: Jamaican PM Vows Action Over Violence
AUTHOR: By Anthony Foster
PUBLISHER: Agence France Presse
TEXT: KINGSTON — Jamaica’s prime minister vowed tough action against a frenzy of gang violence in Kingston, imposing a state of emergency to curb armed supporters of an alleged druglord sought by the United States.
Premier Bruce Golding said that criminals “will not be allowed to triumph”, as gang members rampaged through the capital, clashing with police and burning a police station to the ground. At least one death was reported.
Gunmen from various communities across the Caribbean nation of 2.8 million had joined with criminal elements, police said, in a bid to protect reputed gang leader Christopher “Dudus” Coke, who faces a US extradition request.
Golding said the state of emergency in Kingston “will be a turning point for us as a nation to confront the powers of evil that have penalized the society and earned us the unenviable label as one of the murder capitals of the world.
“We must confront this criminal element with determination and unqualified resolve,” he said.
A police officer and a civilian were wounded by gunfire in street clashes and four police stations came under attack, police said. One police station was set ablaze after police abandoned it having run out of bullets, they added.
People were urged to move out of the roughest neighborhoods and sections of Kingston came under siege as armed men roamed the city, taking on policemen who attempted to clear roadblocks that were popping up at various points.
Police said gangs had stockpiled a large cache of weapons, including big-gauge rifles, all apparently to protect Coke and stop his extradition on drug and gun trafficking charges that could put him away for life.
Coke, 42, is the reputed leader of the Shower Posse gang with branches all over the United States. He also heads the Tivoli Gardens community, which Prime Minister Golding represents in the Jamaican Parliament. The United States accuses Shower Posse members, under Coke’s direction, of having sold marijuana and crack cocaine in New York City and other areas of the United States, funneling profits back to him.
Amid the fury of Coke’s supporters, the state of emergency was slapped on Kingston and St. Andrew after Golding held an emergency meeting of his cabinet earlier Sunday and will last for at least a month.
“The threats that have emerged to the safety and security of our people will be repelled with strong and decisive action,” Golding promised in his address.
Though Golding signed the extradition request for Coke, reversing an earlier decision, the petition is pending a final court decision before which Coke is required to attend a hearing.
For local Kingston residents, Coke is more like a godfather. 
Thousands marched through the city Thursday chanting, “Leave Dudus alone, leave Dudus alone.” 
“He is next to God,” one demonstrator said. “Just like how Jesus died on the cross for us, we are willing to die for Dudus,” said another.

TITLE: Schoolboy Climbs Everest
AUTHOR: By Tini Tran
PUBLISHER: The Associated Press
TEXT: BEIJING — An eighth-grader from California who became the youngest climber to reach the top of Mt. Everest said Monday he hopes his achievement will encourage young people worldwide to dream big.
“I’m doing this to inspire other kids, hopefully across the world, to get outdoors and to set goals in life. I’m doing this to set an example for them,” said 13-year-old Jordan Romero in an interview by satellite phone from the 21,320-foot (6,500-meter) Advanced Base Camp where his team had returned after reaching the top on Saturday.
On Saturday, Jordan succeeded in scaling the 8,850-meter peak, the world’s highest, accompanied by a team that included his father, his stepmother and three Sherpa guides.
Before him, the youngest climber to scale Everest had been Temba Tsheri of Nepal, who reached the peak at age 16.
The climb had its tough moments, the teen said, especially after he developed stomach cramps on the final ascent.
However, when the group finally reached the top, Jordan recalled touching the colorful prayer flags draped at the peak before standing with his arms outstretched, yelling in exultation.
“I was so happy that all of us as a team, both my parents and all our Sherpas, had made it to the summit,” he said. “I was happy about that ... that I had accomplished something so unbelievable. It was a feeling that will definitely be with me for the rest of my life.”
His next step was to call his mother, Leigh Anne Drake, who lives in California, with the news.
“The first thing I said was, ‘Mom, it’s your son calling from the top of the world.’ Right away, I heard on the other line just craziness going on,” he said.
Jordan’s success means he remains just one climb away from his overall quest of reaching the highest peaks on all seven continents. The final peak is the 4,900-meter Vinson Massif in Antarctica, which he hopes to tackle at the end of the year.
The curly haired teenager, from the San Bernardino Mountains ski town of Big Bear, California, said his parents have been supportive of his dream ever since he was inspired at age 9 by a mural in a school hallway that showed the highest mountains on the seven continents.
“That mural just fascinated me so much. My dad picked me up from school and I said, ‘Dad, I want to climb the seven summits,’ and that was it,” Jordan said.

TITLE: British Petroleum Acknowledges Public Frustration Over Spill in Publicity Blitz
AUTHOR: By Greg Bluestein and Matthew Brown
PUBLISHER: The Associated Press
TEXT: BARATARIA BAY, Louisiana — The executive in charge of fighting a Gulf of Mexico oil spill acknowledged Monday everyone is frustrated at BP’s failure to plug the ocean gusher more than a month into a disaster that is spreading damage in Louisiana’s wetlands, including miring pelican colonies.
Doug Suttles, chief operating officer at BP PLC, went on all three U.S. network morning talks shows with the same message: BP knows frustration is growing that it hasn’t been able to halt the spill of millions of gallons of oil from a well that blew out after a rig explosion April 20 off the Lousiana coast.
“We are doing everything we can, everything I know,” Suttles said on the NBC “Today” show.
The Obama administration questioned BP’s competence Sunday, when Secretary of the Interior Ken Salazar told reporters he was “not completely” confident that BP knows what it’s doing.
“If we find they’re not doing what they’re supposed to be doing, we’ll push them out of the way appropriately,” Salazar said.
Asked about Salazar’s criticism, Suttles said BP is working with experts from other oil companies and the government to find a solution.
“What I do know is, everyone is frustrated. I think the people of the region are frustrated. I know we are, I know the government is,” Suttles said on NBC. “The fact that it’s taken this long is painful to everybody.”
Suttles said on ABC’s “Good Morning America” that BP’s next shot at plugging the well this week stands a very good chance of success. But he said the global oil company has more plans in case the latest efforts fails, like several before it.
BP plans to use heavy mud and cement to stop the breach, a maneuver called a top kill. Suttles said on the CBS “Early Show” the effort should start Wednesday morning and they’ll know the same day if it works. 
BP said Monday its costs for responding to the spill had grown to about $760 million, including containment efforts, drilling a relief well to stop the leak permanently, grants to Gulf states for their response costs and paying damage claims. BP said it’s too early to calculate other potential costs and liabilities.