SOURCE: The St. Petersburg Times
DATE: Issue #1580 (41), Tuesday, June 8, 2010
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TITLE: Putin Wants To Free Russians
To Move
AUTHOR: By Anatoly Medetsky
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Prime Minister Vladimir Putin has ordered federal agencies to simplify the rules for internal migration in a move that could help laid-off Russians to land jobs elsewhere in a country with extremely low labor mobility.
Putin instructed the agencies, including the Federal Migration Service, to make it easier for people to obtain the residence permits that tie Russians to a single address in an echo of the Soviet and tsarist past, the Cabinet said on its web site Saturday.
“People feel like serfs when they move from one city to another,” said Dmitry Poletayev, who tracks migration issues at the Russian Academy of Sciences. “This has remained intact from the Soviet times.”
The order, which Putin signed on June 1, prescribes drafting proposals for people to apply for residence permits by post or online instead of facing often rude and corrupt officials. When the changes take effect, migration offices should either mail back the permits by post or stamp them into internal passports on the same day that a person files to register at a new address.
Currently, the process of getting the stamp involves days of waiting, with the risk of having to bribe the police who, especially in migrant-magnet Moscow, hunt down newcomers — Russians and foreigners — and demand to see residence permits among their identification papers.
Putin said he wanted the proposals by late August. He also tasked the Economic Development Ministry and the Media and Communications Ministry to participate in hammering out the improvements.
Single-industry towns — built around a major steelmaker, defense plant or coal mine — drew a chunk of government cash to support residents last year after the global economic debacle caused many employers to reduce production and lay off staff. Putin and President Dmitry Medvedev have since heralded greater labor mobility as a way to combat high unemployment.
“It’s difficult for a Russian to move to a new job elsewhere,” Medvedev said last year. “That’s why we need to support and encourage this.”
Another reason to ease movement around the country is a contraction of the working-age population that, according to the latest Economic Development Ministry forecast, will shrink by 500,000 people by the end of 2013 despite incoming foreign migrants.
The changes that Putin is seeking would end the disparity between Russians and foreigners, who have been using the simpler residence permit rules since 2007, said Poletayev and Vladimir Mukomel, a social studies researcher with the Russian Academy of Sciences.
In addition to Moscow, migrants mainly choose the Moscow region and the country’s second-largest city, St. Petersburg, as a destination because of the relatively high pay, Mukomel said. Oil- and natural gas-producing regions such as Yamal-Nenets, Khanty-Mansiisk and Tyumen also draw labor from around Russia, he said.
Implemented alone, an ability to settle residence permit issues without excruciating hassles would not bring about much greater worker mobility, Mukomel said. A major problem migrants face is finding affordable housing, he said.
Of all apartments, only 5 percent to 15 percent are available for rent in Russia, according to Leonid Davydov, chief executive of the state-run VTsIOM pollster. The shortage of supply prompts high rates, he said in an article published on the agency’s web site last month.
Compared with the other large economies, Russia is home to some of the most reluctant people to look for a job outside of their native area. An average American moves 13 times in his life and a Briton seven times, but a Russia moves just 1.5 times, Davydov wrote.
Internal migration dropped by 12 percent last year to 1.7 million people, or the level circa 1897, he said.
TITLE: City’s Rivers Top Pollution Rankings
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: St. Petersburg has the most polluted rivers of the Volga-Baltic waterways, according to the results of a research expedition carried out by the international environmental pressure group Greenpeace on the Beluga II ship along one of Russia’s key waterways.
The aim of the expedition was to determine pollution levels in Russian rivers. The findings were published Monday.
“Mercury and oil products are being dumped freely into local waters, which are badly swamped with copper and other heavy metals as well as other toxic pollutants,” said Dmitry Artamonov, head of the St. Petersburg branch of Greenpeace.
“In some of the water samples taken from the Slavyanka River, for example, the concentration of copper exceeds the norm by 22 times, and the levels of mercury are six times above the norm.”
In May, the ecologists took water samples from the Neva River and other local rivers and canals before the ship moved on to Moscow and further along the route. During the course of its one-month journey, Beluga II covered almost 5,000 kilometers of one of Russia’s major waterways.
“With this expedition we wanted to establish the level of pollution in some of the country’s most important rivers; now we are seeking to publicize the results with an eye to persuading regional authorities to enforce a stronger punishment for the illegal discharge of industrial waste into rivers,” said Artamonov. “Also, a ban must be introduced by the authorities which would make it impossible for companies to dump their industrial waste into sewage channels. Sewage treatment facilities are not equipped to cope with industrial waste.”
According to a recent investigation by Greenpeace, large numbers of local companies try to get away with dumping their waste in the sewage channels.
“The issue here is that the city’s water treatment facilities were originally designed to deal with sewage, so all the chemicals automatically end up in local waters,” explains Alexei Kiselyev, head of Greenpeace’s toxic research program. “This dangerous practice has to be stopped as soon as possible.”
Ecologists say the low level of social responsibility in Russia is the direct result of the general inertia and individualism that reigns in Russian society today.
“Most people do not show the slightest interest in things that damage the environment, unless they are directly affected by the consequences,” said Artamonov.
Water pollution has remained a major concern in St. Petersburg since Soviet times. Unlike in most European cities, tap water is not drinkable.
With several water-treatment plants operating in the city, 40 percent of the sewage and industrial waste originating in the city — the highest level in the past 15 years — goes directly into the River Neva and the Gulf of Finland, owing to a shortage of waste treatment facilities, according to City Hall’s statistics. That figure does not include illegal discharges.
Fines for illegal discharges have little or no impact on the problem, as the amounts payable are too small to make a difference to companies. Critics say fines need to be increased drastically, and economic sanctions must be taken against companies that breach environmental standards.
TITLE: Sberbank, VTB Shareholders Bemoan Dividends
AUTHOR: By Irina Filatova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Minority shareholders of Sberbank and VTB Group said Friday that they were unhappy with scant dividends from a rocky 2009, which saw surging bad loans take a bite out of the state-run banks’ profits.
Both companies held their annual shareholders meetings Friday — Sberbank a few hours earlier — and voted to approve far lower dividends than in 2008, before the global financial crisis had severely dented lenders’ earnings.
Sberbank voted to cut its 2009 dividend by more than 80 percent to a total of 2.18 billion rubles ($69 million), compared with 10.99 billion rubles a year earlier. The bank will pay 8 kopeks per ordinary share and 45 kopeks for each preferred share.
“For the near future, we’ll keep this bar of 10 percent of net profit,” Sberbank chief executive German Gref told shareholders, Reuters reported.
The dividend policy caused discontent among stakeholders who complained that Sberbank appropriated a smaller share of its profit for dividends than other banks. Gref defended the figure, however, saying Sberbank shareholders had not been hit as hard as those of other lenders.
“Someone — I won’t say who — posts losses, not profit. No profit means no dividends,” he told shareholders.
Gref was likely referring to VTB, which posted a net profit of 15.3 billion rubles in the first quarter of 2010 after six straight quarters of losses.
But VTB managed a tiny profit to Russian accounting standards for the full year of 2009, and its supervisory board recommending paying 25.5 percent of the sum. The payout of roughly 6 billion rubles ($190 million) means that shareholders will get about 0.06 kopeks per share.
A year before, Russia’s second-largest bank paid 3 billion rubles in dividends, or 11.2 percent of its net profit.
The dividend reductions came after First Deputy Prime Minister Igor Shuvalov proposed a measure last month that would force state-owned companies to pay no less than 25 percent of their net profit in dividends.
Last year, the government waived dividend payments for state companies to help them weather the economic crisis. As a result, the federal budget lost up to 20 billion rubles, according to the Federal Property Management Agency, which holds the state’s stakes in many businesses.
Shareholders were also grumbling Friday as they were asked to approve compensation for the supervisory boards of Sberbank and VTB. About 500 owners attended the meetings, many of whom complained that they would need to take taxis to make it to both, Vedomosti reported.
Sberbank will pay 3.5 million rubles ($111,000) to each of the heads of its supervisory board’s committees, while independent members will get as much as 2.5 million rubles.
Rajat Gupta, managing director of consulting company McKinsey, will receive a record sum of 428,500 euros ($512,000) plus $15,714 in compensation for expenditures he incurred as a Sberbank supervisory board member.
Gupta, who is being investigated in the United States as part of an inside trading probe, withdrew his name from Sberbank’s ballot Wednesday, the lender said, adding that he would stay on as a strategic adviser to the board.
He was replaced by Sergei Shvetsov, head of the Central Bank’s financial markets department.
Meanwhile, a few members of VTB’s board — president Andrei Kostin, Central Bank First Deputy Chairman Alexei Ulyukayev, Aeroflot CEO Vitaly Savelyev and Russian Pension Fund director Anton Drozdov — turned down their compensation.
The four other eligible members of the board will get more than 10 million rubles together.
Officials at VTB and Sberbank said they might start paying bonuses to top managers with their shares.
“We’ll try to bring up the possibility of paying part of the compensation or in full with the bank’s shares for discussion by the supervisory board. I think this idea is not bad,” Gref said.
The options program for three state-owned banks — Sberbank, VTB and Rosselkhozbank — will be passed simultaneously, Ulyukayev said, without giving a timeline.
The atmosphere at the VTB shareholders meeting was extremely stressful, said Alexei Navalny, a lawyer who campaigns for the rights of minority shareholders.
Small-time shareholders were very harsh in their assessments, with some of them calling the bank’s managers thieves, said Navalny, who arrived at the VTB meeting after visiting the meeting in Sberbank.
“Like I expected, the shareholders meeting was held in a very tough and stressful atmosphere. For the first time in my practice … there was not a single positive speech or even a minimum of supporting words for VTB managers,” he told The St. Petersburg Times.
Minority shareholders caused a scandal at the 2008 VTB annual shareholders meeting, calling for management to resign and compensate stakeholders for their losses after a heavily promoted “people’s IPO” in May 2007.
The VTB offering, which attracted $8 billion, was successful for the bank but left more than 130,000 retail investors in the hole after the bank underperformed the market.
The company’s shares had fallen just over 40 percent from the IPO price by June 26, 2008, the date of the meeting — and that was before the stock market crash the following fall.
Last month, Kostin announced a three-year plan to double VTB’s stock price to 15 rubles — slightly above the IPO price of 13.6 kopeks per share. The bank also plans to bring its return on equity, a measure of profit, to at least 15 percent by 2013, according to the plan approved May 26 by the supervisory board.
VTB’s shares closed 3 percent lower on Friday at 7.5 kopeks on the MICEX. The exchange’s benchmark index of 30 stocks fell 1.3 percent.
Navalny called on shareholders to vote against approving VTB’s 2009 financial report and called on the supervisory board to conduct an internal investigation into VTB’s purchase of drilling equipment from a Chinese producer for $650 million in 2007.
The bank’s leasing division lost more than $160 million in payments for agent services of Cyprus-registered Clusseter Limited after buying 30 drilling rigs for lease, Navalny wrote in his blog in December, citing an investigation he conducted.
VTB’s management on Friday said they would not investigate because that was prosecutors’ responsibility, Navalny said by telephone.
The director of VTB’s leasing unit was fired after the scandal broke.
TITLE: Two Policemen Detained for Beating Driver, Burning His Car
AUTHOR: By Alexandra Odynova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Two on-duty policemen have been detained in St. Petersburg after allegedly attacking a businessman and setting his car on fire in revenge for cutting off their patrol car, investigators said Monday.
The case is the latest in a string of violent crimes attributed to the country’s police force, which President Dmitry Medvedev is pushing to reform.
The Investigative Committee said in a statement that a 29-year-old driver was stopped by two men in police uniforms at about 1:20 a.m. on the Zelenogorsk-Ogonki road near St. Petersburg.
According to a preliminary investigation, the officers took 7,000 rubles ($220) from the driver before attacking him for passing them on the road.
“Wanting revenge, they caught up with the car, took the driver’s money and identification and beat him in the woods,” a police spokesman said, Interfax reported.
The driver, identified by the Fontanka.ru news portal as Trans-Service general director Nikolai Predtechinsky, managed to escape and get back to the city, where he sought medical attention.
His Ford Focus was found burned out a kilometer from the scene of the alleged attack, police said.
The Investigative Committee said the detained officers were Anton Korneichik and Alexei Savinovsky, both of St. Petersburg’s Kurortny district precinct.
The two were on duty in their precinct at the time of the purported beating.
A criminal case on abuse of authority charges has been opened, and the officers could face up to four years in prison if found guilty.
Predtechinsky, who was hospitalized with head injuries, could not be reached for comment.
TITLE: Ethnic Circassians Demand Autonomous Region
AUTHOR: By Alexander Bratersky
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Hundreds of ethnic Circassians gathered over the weekend to call on federal authorities to allow their ethnic group to split off from the Karachayevo-Cherkessia republic to form their own autonomous region within the Russian Federation.
The appeal offers a new headache to the federal authorities, who are already struggling with problems of separatism and insurgency in the restive North Caucasus region where Karachayevo-Cherkessia is located.
More then 800 Circassians from various North Caucasus republics and Georgia’s breakaway region of Abkhazia attended a congress Saturday in Karachayevo-Cherkessia’s capital,a Cherkessk, and huge crowds stood outside the meeting hall, Husin Shevkuzhev, an ethnic Circassian who attended the congress, told The St. Petersburg Times.
Along with the call for an autonomous region, the congress urged the Kremlin to replace Karachayevo-Cherkessian President Boris Ebzeyev, an ethnic Karachay, with an ethnic Russian and to end the dominance of ethnic Karachays in the regional legislature, said Shevkuzhev, who heads a local human rights group.
“We are not trying to exacerbate the situation, but we want the authorities to hear us,” he said Sunday.
Kremlin officials have not reacted publicly to the congress’ demands, but Pavel Krasheninnikov, head of the State Duma’s Legislation Committee, said the creation of an autonomous region could only be decided by a referendum.
Krasheninnikov, speaking on Ekho Moskvy radio Saturday, said there was “little chance” that an autonomous region would be formed within a vast country where federal authorities are keen to merge regions rather than create new ones. But, he said, Karachayevo-Cherkessia’s “social problems” meant that the issue could not be merely written off.
Muhammed Cherkesov, head of Adige Hase Cherkess, a group that unites ethnic Circassians in the Caucasus, dismissed the notion of a referendum and said the government could make the decision on its own.
“We have appealed to the federal authorities and are waiting for a decision from them. We do not plan to hold any referendum on the matter,” he said, Interfax reported.
TITLE: Germany, Russia Propose New Security Committee
PUBLISHER: The Associated Press
TEXT: MESEBERG, Germany — German Chancellor Angela Merkel and President Dmitry Medvedev have proposed a joint European Union-Russian security committee aimed at resolving regional crises and conflicts.
Merkel and Medvedev told reporters after a meeting outside of Berlin on Saturday that constant contact between the EU and Russia on security matters needed to progress to a higher level.
“This should help to resolve difficult situations better than in the past,” Merkel said.
Medvedev arrived Friday for a two-day exchange with Merkel at the Meseberg mansion in the countryside outside Berlin.
Merkel and Medvedev said they covered a wide range of issues in 10 hours of talks, including the euro crisis, financial markets regulation and international issues like Iran, Afghanistan and Central Asia.
The proposed new forum, called the EU-Russia Political and Security Committee, should work on the ministerial level, with EU High Representative Catherine Ashton and Foreign Minister Sergei Lavrov in charge, they said in a joint written statement.
Its main purpose should be to “establish ground rules for joint EU-Russia civil/military crisis management operations,” the statement said. In addition, it should work on specific issues, conflicts, and crisis situations, it said.
The first issue to be tackled could be the Transdnestr conflict that has troubled Russia, Ukraine, Moldova and the EU for almost two decades, it said.
The cooperation “could include a joint EU-Russia engagement, which would guarantee a smooth transition of the present situation to a final stage,” according to the statement.
No agreement was reached, however, on lifting visa obligations for travels between Russia and the European Union.
Merkel said Germany has always taken a “careful approach” toward the visa question.
“It is not about postponing this forever,” she added. “We are now at the stage where we will very specifically talk about what needs to be done to lift the need for visas.”
Medvedev reiterated that Russia was ready to go ahead with ending visa obligations.
“If we can agree on this, this will change the quality of our lives,” he said. “This will make us true strategic partners.”
On Iran, he and Merkel declared that the five world powers negotiating with Tehran supported a new set of international sanctions.
Medvedev said “agreement on the sanctions exists,” despite the fact that “nobody wants sanctions.”
“We hope the voice of the international community will be heard by the Iranian leadership,” Medvedev said.
Merkel said sanctions could be passed by the United Nations Security Council “in the near future.”
Russia has been traditionally opposed to sanctions for Iran, a longtime trade partner, but in recent months officials have shown less patience with Iran’s refusal to stop enriching uranium and heed other council demands meant to reduce suspicions over its nuclear aims.
“I am very happy that we can stand here jointly today and say that this is a joint position not only of the European Union, the United States of America and Russia, but also of China,” Merkel said. “That is an important step the international community has made here.”
Moscow has recently joined the other four UN Security Council members — the United States, China, Britain and France — to tentatively back a draft fourth set of UN sanctions against Iran.
TITLE: ‘Technopolis’ Gets Extra $3.5 Bln
PUBLISHER: Vedomosti
TEXT: MOSCOW — The 4 billion rubles originally earmarked for the so-called innovation city in Skolkovo was just the beginning. In the federal budget, another 110.5 billion rubles ($3.5 billion) has been set aside for the project, mostly for construction.
According to calculations provided by the Finance Ministry and the Cabinet in the budget for 2011, 110.5 billion rubles will be set aside for the project through 2015. “These are requests that have come from the presidential commission on modernization,” said a ministry official, who said the sum would likely be adjusted downward.
The president and prime minister will soon have several meetings on expenditures, said someone in the presidential administration, and there will be no separate meeting on Skolkovo. “In any event, this is one of the priority issues,” he said.
In the first four years, spending on the “technopolis” (the term used by the Finance Ministry to refer to the project) will consistently grow, and only in 2015 will expenditures decline — to 8.5 billion rubles.
These figures correspond to the requirements of the foundation managing Skolkovo, said an employee close to the management of the foundation, but much depends on the level of co-financing of innovative projects.
A discussion is ongoing over whether state expenditures will match those of individual investors, or be twice as high.
Viktor Vekselberg, who is coordinating the project, predicted that 50 billion to 60 billion rubles will be needed for the project over the next 2 1/2 years and said that while there are no co-investors, all that money will have to come from the budget.
The main construction will be carried out in 2011-2013, an Economic Development Ministry official said, and this will be the main cost. Most of the budget money will go to construction, including infrastructure, a high-ranking Kremlin official said, although a significant amount is planned for projects and sciences.
Between 25,000 and 30,000 people will live in the technopolis, Vekselberg has said, and there is a preference for low-rise buildings. “Supermodern architecture and design — domestic comforts,” promised Vladislav Surkov, the Kremlin’s curator of the project.
Experts’ calculations show that the cost of the housing and offices for the indicated number of workers in the technology hub is much less than 110 billion rubles and shouldn’t exceed $1 billion.
Artyom Tsogoyev, managing partner of the Moscow Central Real Estate Exchange, said that providing business-class housing to 30,000 people requires about 600,000 square meters, which should cost about $600 million. One worker needs about 4 square meters of office space — this is the European minimum.
In the average three-person family there are two who work, meaning that at least 80,000 square meters of offices are needed, which should cost about $80 million.
The creation of a separate program for financing Skolkovo can be achieved, but it takes time, said Alexander Kogan, deputy head of the State Duma’s Budget and Taxes Committee. It’s simpler just to channel the funding through already existing channels, such as the Investment Fund, the Housing Development Fund and the Housing program. Skolkovo is just the next step on the road to modernization.
Skolkovo’s funding will be commensurate with its importance: Similar budget infusions are being received by other priority programs, such as the Far East development and preparation for the 2014 Winter Olympics in Sochi.
The federal target fund for creating a high-tech technology park will cost 7.65 billion rubles from 2007 to 2010. A total of 553.4 billion rubles was set aside for the program for developing Vladivostok in 2008-12.
With a budget deficit and severe cost cutting, it’s better to put budget money toward programs that have already demonstrated their effectiveness and invest in sectors that are actively developing and have access to external markets, said Yevsei Gurvich, head of the Economic Expert Group.
It’s evident that this is an attempt to force innovation from above, but as yet there have been no signs that there will be any return, Gurvich said.
Anatoly Chubais, CEO of Rusnano and a member of the working group for creating the innovation city, estimated that the output of innovative products from the first 10 projects will reach 100 billion to 200 billion rubles by 2015, and if production is really ramped up, it could reach 1 trillion rubles per year.
About 40 projects have been submitted to the presidential commission for modernization, said a source close to the commission’s leadership.
TITLE: Trespasser Breaches Security At Presidential Residence
AUTHOR: By Natalya Krainova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — President Dmitry Medvedev’s bodyguards have been left red-faced after a senior Moscow region prosecutor breached security at the Gorki-9 presidential residence in an attempt to meet Medvedev, news reports said.
Stanislav Buyansky, the 30-year-old first deputy prosecutor for the Moscow region, managed to enter Medvedev’s residence outside Moscow on May 28, Interfax and Russian News Service reported, citing law enforcement sources.
Buyansky “wanted to meet” Medvedev or his wife and “talk to them,” said a source with the Federal Guard Service, which is responsible for protecting the president and other senior officials, Russian News Service reported. He was found waiting by a chapel on the premises, the source said.
The guards released Buyansky after a scolding, a law enforcement source told Interfax on Friday.
Federal Guard Service spokesman Sergei Devyatov denied that Buyansky had visited Gorki-9, Interfax reported.
But Buyansky, who had worked in the prosecutor’s office since 2001 and was promoted to first deputy prosecutor in August, resigned on the day of the incident for unspecified reasons, Russian News Service said.
Buyansky will not face any charges for his actions, Rosbalt reported Friday, citing a law enforcement source.
Medvedev met with senior United Russia leaders at Gorki-9 on May 28.
Repeated calls to the Moscow region prosecutor’s press office went unanswered Friday.
Criminal psychologists told Interfax that “expansive” people often try to meet senior officials to “solve their own problems,” especially during the spring and fall. June 1 is the first day of the meteorological summer.
TITLE: Poland: Cash Stolen From Crash Victims
AUTHOR: By Monika Scislowska
PUBLISHER: The Associated Press
TEXT: WARSAW, Poland — Polish authorities said Monday that someone stole a credit card from the wreckage of the plane crash that killed President Lech Kaczynski and 95 others in Russia, and the card was then used to withdraw cash.
But Russian authorities denied that any such thing had happened.
Monika Lewandowska, a spokeswoman for Warsaw prosecutors, said the equivalent of 6,000 Polish zlotys ($1,700) was withdrawn from the account of Andrzej Przewoznik, who died in the crash April 10 near the Russian city of Smolensk. Przewoznik was a prominent official who oversaw Poland’s wartime memorials.
Lewandowska said that two cards were stolen and that one was used just hours later, in the first of 11 withdrawals over three days from an automatic teller machine in Smolensk. A second card belonging to Przewoznik was also stolen and there were six failed attempts to obtain money using it, she said.
TITLE: Russians Loath to Bind Love With Pre-Nup Contract
AUTHOR: By Natalya Krainova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Yekaterina, 28, a Moscow-based marketing expert, only signed a marriage contract with her husband after they decided to divorce and needed to split their apartment.
The property had been purchased with her money, but it was listed in both spouses’ names, she said. Yekaterina’s husband ultimately agreed to leave her with sole ownership of the apartment — a lucky outcome after weeks of worry.
“When all is well, you don’t think about such things,” she said in a phone interview, asking that her surname not be given.
According to official state data, of the nearly 1.2 million Russian couples who registered marriages in 2009, only about 25,000 — or about 2 percent — sealed contracts stipulating the terms of a divorce.
A worrying statistic in view of the fact that roughly 58 percent of the country’s marriages eventually falling apart.
In the United States, most estimates show that about 4 percent of couples now sign a prenuptial contract, although the divorce rate there is about 43 percent.
The contracts run afoul of Russia’s more traditional approach to marriage, experts said. Few can bring themselves to strike a bargain over affairs of the heart.
A prenuptial agreement treats the wife and husband as equal parties, which is unacceptable for Russia’s traditional patriarchal view of the family, said Kirill Podyachev, a senior researcher at the Institute of Sociology with the Russian Academy of Sciences.
“Marriage is complete submission of a woman to a man,” Podyachev said in a phone interview, mocking the traditional Russian attitude. “The wife’s duty is to indulge her husband.”
Agreeing on how to end a marriage before it begins also contradicts Russians’ sentimental attitude toward that institution, said Alexander Tesler, a Moscow-based psychotherapist.
“Russians believe that love and a marriage contract are incompatible,” he said.
The country’s legal system only introduced the concept of a prenuptial agreement — or marriage contract, as its known in Russian — in 1996, said Alexander Latseiko, a spokesman for the Federal Notary Chamber.
In the Soviet era, there was little need for prenuptial agreements because most people had very little property to contest in a divorce, Tesler said.
But now, with a growing number of affluent Russians, more couples are deciding to settle a question that they hope will never arise.
In the last five years, the number of new marriage contracts has quadrupled from about 5,000 in 2005 to 25,000 in 2009, Latseiko said.
He said neither social status nor age group were defining factors among those who turn to a lawyer before exchanging vows.
“Marriage contracts are the evidence of the country’s prosperity,” Tesler said.
Legislation on the contracts remains imperfect, however, as it only covers property rights, said Olesya Yermolenko, a lawyer at the Moscow firm Annexus. In the United States and Europe, similar laws also spell out household chores, alimony and the rights to children.
Yermolenko said her law firm drafts marriage contracts — which can be signed after the wedding as well — for two or three couples a week.
The business seems to fluctuate seasonally, she said, with a rise in the prime months for nuptials — March, April, August and September. Married couples think of contracts after holidays, especially the New Year, when “relations in the family heat up,” she added.
The idea is gradually taking hold, as a 2008 survey by Levada indicated. Of the 1,000 urbanites polled in Moscow, St. Petersburg, Yekaterinburg and Novosibirsk, 59 percent approved of splitting property in a marriage contract. Only 13 percent disapproved of it, while 15 percent admitted to not understanding property issues. Thirteen percent were undecided.
Notaries also see an inflow of couples interested in marriage contracts after media reports about famous people wrestling over property, Latseiko said.
Most recently, billionaire Dmitry Rybolovlev has had to assure possible buyers of his Uralkali potash company that he is currently able to sell, since his wife has frozen most of his assets as part of their divorce proceedings in Switzerland.
Moscow tabloids also closely followed the divorce of Viktor Baturin, a prominent businessman and brother-in-law of Mayor Yury Luzhkov, from his wife, pop producer Yana Rudkovskaya. The case hit the headlines in 2008 after Rudkovskaya had court bailiffs seize her husband’s assets.
The media listed valuables such as “a decorative owl,” and “an electric screwdriver,” that were seized in Rudkovskaya’s bid to collect the $53 million settlement she demanded from Baturin.
TITLE: Duma Won’t Punish Absent Lawmakers
AUTHOR: By Alexander Bratersky
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The State Duma will not punish lawmakers who skip parliamentary sessions, despite a recent investigation that found that one-quarter of all deputies and senators are regular absentees.
Pavel Krasheninnikov, chairman of the Duma’s Legislation Committee, said Thursday that a Public Chamber proposal to introduce legal sanctions for lazy lawmakers would be unconstitutional.
“The Constitution says the Duma’s work is governed by its own rules, not by federal law. Let the Public Chamber read the Constitution,” Krasheninnikov, a member of the ruling United Russia party, told RIA-Novosti.
The chamber, an advisory body created in 2005, prepared a list of members of both houses of parliament who are regularly absent.
The list, said to contain about 100 deputies and senators, should have been published this week, but the chamber said Thursday that it decided against doing so.
Public Chamber member Iosif Diskin said the reversal was done out of fear that the list would be used to single out individual deputies and not to change the system as a whole.
“It would be like skimming the cream from milk: Nobody is going to publish this list in full, and some rich people might even try to block the publication of their names,” Diskin, a member of the chamber’s working group that investigated the issue, told The St. Petersburg Times.
He denied reports, however, that the Kremlin had attempted to suppress the list. “All of this is rubbish. I had the impression that the [Kremlin’s] reaction was the opposite,” he said.
But the list has already been leaked to national media, which published several names of Kremlin-connected politicians.
The dubious title of the worst slackers go to Senators Sergei Pugachyov and Lyudmila Narusova, who both represent the remote Siberian republic of Tuva in the upper house of parliament, Noviye Izvestia reported earlier this week.
Pugachyov is a billionaire banker said to enjoy close Kremlin ties, while Narusova is the widow of former St. Petersburg Mayor Anatoly Sobchak, a patron of Prime Minister Vladimir Putin.
President Dmitry Medvedev in April lashed out at absentee lawmakers, calling their behavior “insulting” for voters, and demanded legislation that ensures the dismissal of the worst offenders.
Diskin, who is a deputy head of the Institute of National Strategy, a think tank, said the Public Chamber had proposed exactly such a law and that he was sure that the Kremlin would act swiftly.
He argued that the list contained many wealthy lawmakers, raising the question to them: “Did you enter the Duma just to get immunity [from prosecution] or just for a PR stunt?” he said.
The list contains United Russia Deputy Andrei Skoch and Federation Council Senator Suleiman Kerimov, both billionaires who appear on this year’s rich list of Russian Forbes, Vedomosti reported.
Skoch, who represents the Belgorod region, defended his work by telling the newspaper that a deputy “should work with the people in his region and not sit on his butt all day in his Moscow office.”
The problem came to the fore last week when Ren-TV showed deputies running through empty rows in the 450-seat Duma punching voting buttons for absent colleagues. The footage apparently showed the successful passing of a new drunk driving law with 449 votes, while just 88 deputies were present.
But Nikolai Levichev, head of A Just Russia’s Duma faction, defended the practice.
“If a person votes on request from another deputy with that deputy’s consent, I do not see a problem,” he told The St. Petersburg Times.
He added that his faction has suggested using electronic fingerprints to ensure that only attending lawmakers can vote.
TITLE: Hermitage Says 2nd Lawyer Now Target
AUTHOR: By Alexandra Odynova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — The Interior Ministry investigator who put Hermitage Capital lawyer Sergei Magnitsky
behind the bars where he died was accused Thursday of targeting another lawyer working for the company.
Oleg Silchenko had tried to strip Alexander Antipov, 57, a lawyer who replaced Magnitsky as the legal adviser for Hermitage Capital, of his license by claiming that he falsified evidence in a 2006 tax evasion case, the company said.
Silchenko filed a petition to the Moscow City Bar Association on May 14, requesting disciplinary action against Antipov.
Silchenko has accused the lawyer of faking an 18-page statement from Ivan Cherkasov, former CEO of the Kamia company, which is linked to the case against Hermitage Capital, a spokesman for Hermitage said.
Cherkasov has been self-exiled in London since 2005. The statement is not presently available for legal reasons, but the Hermitage spokesman said it could throw the legal justification for the entire case into question.
“It’s possible that the investigator wanted to push Antipov out of the Hermitage case or to remove the evidence,” said Robert Zinovyev, head of a commission with the Moscow City Bar Association.
“Right after the petition was received, the Bar Association examined the issue, but has not found any confirmation for the allegations,” Zinovyev said.
Silchenko maintained that Antipov falsified a statement he had allegedly obtained from his client in London in September, Zinovyev said.
Antipov said Thursday that he did not want to comment on the issue because the association’s check was still ongoing.
“It might be either a technical mistake or an intentional action. It’s not clear yet,” Antipov told The St. Petersburg Times.
A spokeswoman for the Interior Ministry’s Investigative Committee said they were not going to comment on the issue “today, tomorrow or in the near future.”
Interior Ministry investigators had accused Magnitsky, a partner with the Firestone Duncan law firm, of being directly involved in developing and executing a scheme in which the head of Hermitage Capital, William Browder, purportedly evaded more than 100 million rubles ($3.25 million) in taxes in 2002.
The case was opened after Browder accused senior Interior Ministry officials of stealing more than $230 million in budget money.
Magnitsky died in pretrial detention in November after officials repeatedly denied him medical treatment for illnesses that he developed while waiting nearly a year for his trial to begin.
TITLE: ‘Avatar’ Director James Cameron Proposed Russian Help for BP Leak
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — “Avatar” director James Cameron suggested using Russian deep-sea manned vehicles — Mirs — to fight the oil spill in the Gulf of Mexico, but BP’s management refused, a Russian oceanologist told RIA-Novosti on Thursday.
Cameron, who employed the Mirs when working on his movie “Titanic,” spent a month discussing the idea of using the vehicles with the Oceanology Institute at the Russian Academy of Sciences, said Anatoly Sagalevich, a senior researcher at the institute.
BP refused the proposal because “we’re Russians, and it would be a shock for Americans if we went and fixed something in the Gulf of Mexico with our Mirs,” Sagalevich said.
BP is struggling to stop the spill caused by an explosion and the sinking of a rig on April 22. On Wednesday, Cameron called representatives of the company “morons” who “don’t know what they’re doing.”
TITLE: Sergei Ivanov Says Afghan Drug Trade Threatens World Peace, Advocates Soviet Policy as Example
PUBLISHER: The Associated Press
TEXT: MOSCOW — Deputy Prime Minister Sergei Ivanov said Sunday Afghan drug trafficking should be classified as a threat to international peace and security. The Russian Deputy Prime Minster made his remarks at an Asia security conference in Singapore.
Speaking to defense officials and analysts at an annual Asia security summit in Singapore, Sergei Ivanov, Russia’s Deputy Prime Minister, said the Taliban and other extremists groups that control most of Afghanistan are supported by the illegal drug trade.
“A large part of the population of Afghanistan is involved in the cultivation and production of opium and opium products such as heroin,” he said. “Narcotics have become the important source of financial support for insurgency groups including the Taliban and not only to them.”
Afghan farmers produce 90 percent of the world’s heroin. The opiates are often smuggled north through Central Asia and Russia to Europe, Asia and America, and generate billions of dollars in revenue. In Russia, Ivanov has said that opium consumption is having a destabilizing effect and that 30,000 addicts die each year from narcotics like heroin. The Russian Deputy Prime Minister called for increased international efforts to stem the flow of Afghan opiates at the source.
“The whole international community and, first of all, those who took the responsibility for ensuring peace and stability in Afghanistan, namely the International Security Assistance Force, should make a strong commitment to fight this drug threat,” said Ivanov.
The Deputy Prime Minister’s comments were seen by many at the conference as a criticism of the U.S.-led coalition of NATO states fighting the Taliban in Afghanistan. Ivanov said while the Soviet occupation of Afghanistan in the 1980s may have ultimately failed, it did succeed in cracking down on the drug trade by burning the fields and providing economic alternatives to local farmers. He said today the international community should follow the Soviet Union’s example.
“The Soviet Union invested money in cultivating normal agriculture and then buying the products, the agricultural products at a price higher than the market,” he said. “Of course in the Soviet Union the market price was quite relative.
Ivanov’s criticism of the U.S.-led coalition’s drug policy in Afghanistan is not new. And the coalition has been funding programs meant to encourage farmers to plant alternative crops, such as wheat and cotton.
But Ivanov says more effort is needed and Russia is willing to help. It already provides logistical, transport and intelligence support to international forces in the region. But he said with memories of the Soviet defeat there still strong, never again will Russian soldiers be sent to Afghanistan.
TITLE: Economy Expands At Fastest Pace Since 2008
PUBLISHER: Bloomberg
TEXT: MOSCOW — The economy expanded last month at the fastest pace since November 2008 as companies continued hiring and domestic demand accelerated, according to an indicator based on service and manufacturing surveys published Friday.
Gross domestic product rose an annual 2 percent, recording a third month of gains, after 1.2 percent growth in April, said VTB Capital, which compiles the gauge.
Rising oil prices are helping the economy of the world’s biggest energy exporter grow faster than the government expected, Prime Minister Vladimir Putin said last month. GDP may expand 4 percent this year and 3.4 percent in 2011, the government estimates.
“The GDP indicator suggested that 12-month economic growth almost doubled in May to 2 percent,” Alexandra Yevtifyeva, senior economist at VTB Capital, said in the report. “The May survey also revealed that employment expanded for the second month in a row. Inflationary pressures remain muted in the services sector due to the high degree of competition.”
The economy grew 5.5 percent in April from the same month a year ago, the Economic Development Ministry said May 26. GDP advanced an annual 2.9 percent in the first quarter after contracting 3.8 percent in the last three months of 2009. The economy shrank 7.9 percent in 2009.
“The continued positive momentum in the indicator signaled that the economy will strengthen in the second quarter,” VTB Capital said.
The recovery may be gaining pace this quarter after unemployment in April declined to the lowest rate in four months and retail spending rose to the highest in more than a year.
The jobless rate in April fell to 8.2 percent from 8.6 percent a month earlier, while retail sales rose for a fourth month, jumping 4.2 percent after growing 2.9 percent in March.
Fixed capital investment added an annual 2.3 percent in April for the biggest increase since October 2008. Industrial production rose an annual 10.4 percent in April after a 5.7 percent advance in March.
VTB Capital calculates its indicator by using output measures from its Purchasing Managers Indexes, which are surveys of business conditions in manufacturing and services.
Russian stocks, bonds and the ruble slumped Friday as oil retreated after U.S. payrolls rose less than estimated and a Hungarian official said the state’s economy is in a “very grave situation.”
The 30-stock MICEX Index closed down 1.3 percent at 1,333.49, reversing earlier gains of as much as 2.1 percent. The ruble weakened 1.3 percent to 31.42 against the dollar for its lowest close since May 25. The yield on Russia’s dollar benchmark bonds due April 2020 rose 13 basis points to 5.649 percent. Bond yields move inversely to prices.
Crude oil dropped as much as 3.6 percent to $71.92 per barrel in New York. Rosneft, the country’s biggest oil producer, fell 1.1 percent, while Sberbank, the country’s largest lender, retreated 2.8 percent.
TITLE: Rusnano Bill Passes Reading
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — A bill ordering the reorganization of Rusnano, which will be the first state corporation to become a joint-stock company, passed in a first reading in the State Duma on Friday.
The bill, drafted by United Russia deputies Yevgeny Somoilov and Khafiz Salikhov, says 100 percent of the shares of the newly formed company would initially be property of the state.
If the bill is passed, Rusnano must develop a plan for its reorganization and present it to the government within four months of the law taking effect.
Economic Development Minister Elvira Nabiullina said in March that Rusnano would be followed by Russian Technologies and Vneshekonombank.
President Dmitry Medvedev called for a reform of state corporations, a brainchild of his predecessor, Vladimir Putin, in 2009, saying their model encouraged corruption.
TITLE: New Holland Investor in Court
AUTHOR: By Nadezhda Zaitseva
PUBLISHER: Vedomosti
TEXT: City Hall is trying to exact more than 500 million rubles from the former investor of New Holland after the company abandoned the reconstruction project for the island.
The Committee for City Property Management (KUGI) has appealed to the arbitration court of St. Petersburg and the Leningrad Oblast with a claim to recover 507.7 million rubles ($16 million) from ST Novaya Gollandiya in investment payments to the city budget and $70.8 million rubles ($2.2 million) as a penalty for delays, according to the KUGI press service. Information about the case is available on the arbitration court’s web site.
The investment agreement with the company, which is controlled by Shalva Chigirinsky and Igor Kesayev, was signed in 2006. ST Novaya Gollandiya won the tender with a bid to build a culture and entertainment complex, three hotels, retail outlets and an apartment-hotel on the island for $320 million to a project design by British architect Norman Foster.
So far, the company has paid a total of 13.4 million rubles ($423,000) to the budget. This sum was the deposit for participation in the tender, according to the KUGI press center.
The deadline for completing the project will expire in August this year; the company has requested an extension but was refused, said Anton Buchnev, deputy chairman of the Committee for Investments and Strategic Projects. Due to the fact that the company has violated the interim deadlines, the investment contract, which was concluded in 2006 between KUGI, Rosimushchestvo (the federal agency for state property management) and ST Novaya Gollandiya, was terminated on March 23 this year, he said.
The investor did not attempt to dispute the termination of the contract in court since the company has failed to complete the planned volume of work, Lyudmila Samoilenko, head of the Rosimushchestvo territorial administration confirmed. According to her, the project can be considered as closed; preparations are underway for a new tender, she added.
After the termination of the contract, the company removed the project from Glavgosekspertiza (the general directorate of state expertise) — there is no longer any sense in getting it approved, said a source close to the company.
A representative of ST Novaya Gollandiya declined to comment to Vedomosti.
“A very successful businessman [Chigirinsky] has turned out to be bankrupt,” said St. Petersburg Governor Valentina Matviyenko last month. “He put $70 million [into the New Holland project], but it is now obvious that the project is economically unsound, it needs to be downscaled.”
Matviyenko said that Rosimushchestvo and the state government have not yet decided on the details of a new tender, but St. Petersburg is ready to organize one within two months.
The termination of the contract does not alter the obligations of the investor that were agreed on under the terms of this contract, therefore KUGI’s appeal to the court is standard practice, said Yegor Noskov, managing partner of Duvernoix Legal. If the investor’s assets are insufficient to cover the debt, KUGI will not get the full amount of compensation, even if it wins the court case, the lawyer warned.
TITLE: VTB Group CEO Calls for New Reserve Currencies
PUBLISHER: Bloomberg
TEXT: HO CHI MINH CITY, Vietnam — Exchange-rate swings stemming from Europe’s debt crisis have highlighted the risks of holding existing reserve currencies, and more alternatives are needed, VTB Group chief executive Andrei Kostin said Sunday.
The euro has slumped 16 percent this year and last week sank below $1.20 for the first time since March 2006 after Greece last month tapped a 750 billion euro ($913 billion) emergency-loan package put together by the European Union and the International Monetary Fund.
“The recent financial instability shows, if not the complete failure of currencies like dollars and euros, … the threats which are existing in the present financial system,” Kostin said at a news conference ahead of a World Economic Forum meeting in Ho Chi Minh City. “It led to more discussions of whether we would move to more reserve currencies.”
Russia and China are increasingly settling cross-border trade in their own currencies rather than dollars, Kostin said.
TITLE: Belarus Says It’s Ready to Join Russia, Kazakhstan in Customs Union
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Belarus is ready to join a Russia-dominated customs union on July 1 after outstanding disputes are resolved, Nikolai Snopkov, the country’s economy minister, said Friday.
Last month, Russia and Kazakhstan agreed to launch the union without Belarus after negotiations stalled as Moscow refused to abolish export duties on the oil it sells Minsk, something analysts view as a key incentive for it to join the pact.
The new trading bloc is expected to boost Moscow’s influence in the region but could complicate World Trade Organization membership talks.
“The meeting between Belarussian President Alexander Lukashenko and Russia’s First Deputy Prime Minister Igor Shuvalov confirmed that both sides plan to settle all disputed issues and join the customs union July 1,” Snopkov told reporters, Reuters reported.
Shuvalov visited Minsk last week to mend relations. Lukashenko said after the visit that Belarus was ready to compromise to be able to join the union with Russia and Kazakhstan on time.
Asked whether Belarus is ready to give up its demands for no export duties on oil and oil products, Snopkov said that “most likely, disagreements will be settled.”
But he also referred to a “transition period” for some products, which Economic Development Minister Elvira Nabiullina warned was not yet settled, Interfax reported.
“Until the agreements are signed, it’s too early to discuss that. We need to wait until all of the negotiations are completed before we can say that it will be just like that” with a transition period for some goods,” she told the same news conference.
There is “still time,” however, to solve outstanding issues, Nabiullina said. “We’re open to Belarus signing on to all of the agreements.”
TITLE: In Brief
TEXT: Baltic Plant to Cost $6B
MOSCOW (Bloomberg) — Russia’s Baltic nuclear plant may cost 5 billion euros ($6 billion) to build, RIA Novosti said Monday, citing Maxim Kozlov, head of the project for state-run Inter RAO UES, at a conference in Moscow.
Construction of the power lines from the plant in Kaliningrad, a Russian exclave on the Baltic Sea, would cost from 500 million euros to 1.6 billion euros more, RIA Novosti said. Inter RAO will soon start preparing a feasibility study to present to banks, the news service said.
Kopeika Considers IPO
MOSCOW (Bloomberg) — Kopeika, Russian billionaire Nikolai Tsvetkov’s food retailer, may hold an initial public offering this year or sell the company, Vedomosti reported, citing unidentified people familiar with the businessman’s plans.
Tsvetkov is also considering forgoing the IPO and selling Kopeika to either Wal-Mart Stores or Moscow-based X5 Retail Group, the Moscow-based newspaper said Monday.
VTB Plans Meetings
MOSCOW (Bloomberg) — VTB Group may ask Russia to sell the 8 percent of the lender’s shares that the government bought last year to support the stock’s price, Vedomosti reported, citing unidentified VTB officials.
Russia boosted its stake in the country’s second-largest lender to 85.5 percent last year from 77.5 percent, the Moscow-based newspaper said Monday. VTB officials will hold meetings with investors this month to gauge interest in the stock, Vedomosti said.
Exports, Imports Grow
MOSCOW (Bloomberg) — Russia’s trade surplus in the year through April stood at $65.1 billion, the Federal Customs Service said in an e-mailed statement Monday.
Exports rose to $123.6 billion, or 59 percent more than in the same period last year, while imports increased to $58.5 billion, a 26 percent gain.
Putin Wants Proposals
MOSCOW (Bloomberg) — Prime Minister Vladimir Putin told Russian officials to develop plans to introduce exchange trading for domestic sales of metals and coal to help reduce prices, Vedomosti reported, citing government documents.
The government has until Aug. 1 to submit proposals to Putin for review, the Moscow-based newspaper said Monday.
Baturina Plans Plant
MOSCOW (Bloomberg) — Billionaire Yelena Baturina, the wife of Moscow Mayor Yury Luzhkov, plans to build a 25 billion-ruble ($791 million) cement plant in the Tula region of central Russia, Vedomosti reported, citing Baturina’s Inteko holding company.
Serbian Rail Project
BELGRADE (Bloomberg) — Serbia and Russia reached a preliminary agreement on financing two railway projects for a total of 470 million euros ($561.3 million), Milovan Markovic, general manager of state railway company Zeleznice Srbije said.
“The funds will be used for the construction of the Valjevo-Loznica rail line in the west of the country, which is worth 260 million euros, and for a railway junction in Belgrade which is 210 million euros,” Markovic told B92 television.
TITLE: Gazprom Says It Won’t Use Kovykta
AUTHOR: By Anatoly Medetsky
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Gazprom reiterated on Monday that it had no plans to tap the giant Kovykta field any time soon, leaving the future of the valuable asset, part-owned by BP, on tenterhooks.
BP’s 50-50 venture with Russian billionaires, TNK-BP, agreed to sell the field to Gazprom in 2007 in a deal that collapsed later in the midst of a shareholder feud in the joint company.
The government has recently renewed threats that it would strip TNK-BP of the rights to develop Kovykta — ruining its investment of nearly $1 billion — because the company has been unable to produce as much gas as the license requires. Lower output has been a consequence of a nationwide ban on independent gas exports, which made Gazprom a monopoly for foreign trade of the commodity.
“We don’t see any demand for gas from this field at all in the foreseeable future, both for sales in that region and export deliveries,” Gazprom’s eastern projects chief Viktor Timoshilov said at a news conference.
TNK-BP, which controls Kovykta through a majority stake in license holder Rusia Petroleum, said last week that Rusia Petroleum had filed for bankruptcy because it couldn’t repay loans borrowed from TNK-BP to develop the field. A court may well order the sale of Kovykta’s license as a way to compensate TNK-BP.
With 2 trillion cubic meters of gas under the ground, Kovykta qualifies as a strategic asset under a 2008 law, meaning that only a state-controlled company such as Gazprom could bid for the field. State asset holding company Rosneftegaz has also been named as a potential bidder.
Should the government take the license away, it could hand it over to Gazprom free of charge. Gazprom had said earlier that it wasn’t going to develop Kovykta until 2017, if the company assumes ownership. Kovykta lies close to China to the south, but analysts agree that sales there are a very distant prospect because of disagreements over the price.
Gazprom, which received the license for developing the similarly large Chayandinskoye field in Russia’s far north last year, said it wouldn’t depend on Kovykta to supply China.
“We don’t have the problem of resource base in the region,” Timoshilov said Monday.
Suffering a dip in sales, Gazprom has recently demonstrated much more dedication to its pipeline-building ambitions than it did to investing in new fields.
It announced Monday that its 50-50 joint venture with Greece’s Hellenic Gas Transmission System Operator, or DESFA, will soon apply for formal incorporation in Greece to design, fund, construct and operate the stretch of the South Stream line in that country. The pipeline will carry gas from Russia under the Black Sea to southern Europe, circumventing Ukraine.
Also on Monday, Gazprom denied plans to replace its deputy chief in charge of exports, Alexander Medvedev, Bloomberg reported. Gazprom chief Alexei Miller ruled out the possibility in e-mailed comments after Kommersant reported that the company might remove Medvedev in an effort to change its export policy that led it to charge much higher prices in Europe than its competition.
TITLE: Bank Denies Due Diligence Reports
PUBLISHER: Bloomberg
TEXT: KIEV — Raiffeisen Zentralbank Oesterreich rejected a report that a subsidiary of Sberbank was carrying out due diligence of its Ukraine unit, Raiffeisen Bank Aval.
“These rumors are completely unfounded,” Andreas Ecker, a spokesman for RZB, said in an e-mailed statement.
Interfax-Ukraine reported on Monday that a unit of Sberbank was examining the accounts and assets of Aval, citing Andriy Herus, director of the consulting department at Concorde Capital. Herus referred to sources on the banking market, Interfax said.
Sberbank’s Deputy Chief Executive Officer Anton Karamzin declined to comment during a conference call Monday.
TITLE: McDonald’s Says No Recall in Russia
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW— McDonald’s said the cadmium-tainted “Shrek” promotional glasses that it was recalling worldwide never made it to Russia, but that did not stop the Federal Consumer Protection Service from warning that it was ready to seize the potentially hazardous collectibles.
“If these cups made it to Russia, they will be withdrawn. Moreover, if our citizens bought them abroad, which cannot be ruled out, they will have to stop using them,” watchdog head Gennady Onishchenko told RIA-Novosti on Friday.
The glasses were not available in McDonald’s restaurants in Russia, which only buy glassware from local suppliers, said Nina Prasolova, a spokeswoman for McDonald’s in Russia.
McDonald’s is recalling 12 million glasses — depicting the ogre Shrek, Princess Fiona, Puss in Boots and Donkey — that were sold in McDonald’s restaurants worldwide as a part of the promotional campaign for “Shrek Forever After,” the fourth installment in the animated film series that opened in theaters May 21.
Paint used in the glasses contains cadmium, a carcinogen that can cause bone softening and severe kidney problems, the U.S. Consumer Product Safety Commission said Friday. Cadmium from the glasses can seep onto a child’s hand and then possibly be ingested.
The glasses failed to meet the standards currently being developed by the CPSC. They were produced by a U.S. company that has worked with McDonald’s for the last 15 years, which raised worries over safety of promotional glassware in general, The Associated Press reported.
TITLE: GE Sees Lucrative Opportunities in Russia
PUBLISHER: Combined Reports
TEXT: MOSCOW — General Electric is in preliminary talks to expand its health care and power-generation operations in Russia, in what the company said Friday was a long-term, multibillion-dollar opportunity.
GE chief executive Jeffrey Immelt met Prime Minister Vladimir Putin and other government officials in Moscow on Friday. The meeting also included Russian Technologies chief executive Sergei Chemezov and Inter RAO acting chairman Boris Kovalchuk.
Putin said the country planned a modernization of its health care and power-generation systems, according to comments published on the government web site.
“You found very good spheres to apply your efforts,” Putin said in the meeting, referring to the production of power-generating equipment and medical devices.
GE is the world’s biggest provider of power-generation equipment as well as medical-imaging equipment and health information technology systems. The company has about 2,500 employees in 25 cities in Russia. It began operations in the country in the 1920s to develop electricity systems.
“I think that it will be world-class technology in both cases, with very strong partners,” Immelt said, according to the Russian-language transcript. “That’s why we believe we will be able to start production fairly quickly on excellent products for both the Russian market and for export.”
(Bloomberg, SPT)
TITLE: Russia Fighting for World Wheat Dominance
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russian farmers are making headway in their challenge to U.S. supremacy on the global wheat market, most recently with a sale late last month to Egypt of 180,000 metric tons at $178.5 per ton, or about $13 below the U.S. price.
In the past 11 months, Russia has won 58 percent of Egypt’s regular purchases of wheat, compared with 40 percent the year before, Bloomberg Businessweek reports in its Monday issue. The U.S. share of sales to Egypt, the world’s biggest wheat importer, fell to 8 percent, from 13 percent over the same period, according to Egypt’s General Authority for Supply Commodities.
For Russia, it’s an extraordinary turnaround. As recently as the 1990s, it had to buy wheat from U.S. farmers to feed its people because its farms were so inefficient after decades of ruinous Soviet practices. Then, Russian investors slowly started buying land and introducing modern farming in the country’s fertile “black earth” region near Ukraine and the Black Sea.
In 2002, the country emerged as a major exporter for the first time in decades by selling 15.6 million tons abroad. “Exports suddenly became profitable,” says Arkady Zlochevsky, president of Russia’s Grain Union, a lobby group.
By 2008, global grain prices were reaching record levels, and Swedish, British, Chinese and Korean investors were piling into Russian farmland. Today, Russia exports 14 percent of the world’s wheat, up from 0.5 percent in 2000. The U.S. share of wheat exports has slipped from 26 percent to 19 percent.
Moscow is now making dominance of the wheat market a goal. The U.S. Department of Agriculture predicts that Russia will become the top wheat exporter by 2019.
President Dmitry Medvedev last year ordered the creation of a state company, United Grain, to modernize the storage and shipment of wheat in a $3.3 billion overhaul. United Grain will also pursue export deals in Southeast Asia and Latin America, chief executive Sergei Levin has said. Those regions are traditional strongholds for Australian and U.S. grain exporters.
U.S. farmers are worried. “The Black Sea region is becoming a bigger competitor for us,” said Dean Stoskopf, 54, a wheat grower near Hoisington, Kansas.
Until now, U.S. farmers have commanded premium prices for higher quality, Stoskopf said. U.S. wheat generally has higher protein content than Russian grain and suffers less from insect infestations. That may change as the Russians improve their growing practices and storage facilities, he said.
Some members of Congress want Washington to do more.
“I would not rest on the attitude that we have a great product,” said Nebraska Republican Senator Mike Johanns, who was the secretary of agriculture from 2005 to 2007. “Price is a factor. We should be working on free-trade agreements or very quickly we’ll find ourselves behind.”
Free-trade agreements in certain parts of Latin America and Asia would open up new markets for U.S. wheat. Russia is part of a bigger problem, said Jason Britt, president of Central States Commodities in Kansas City, Missouri. Wheat futures on the Chicago Board of Trade have fallen 34 percent in the past year as stockpiles have grown.
“We are completely opportunistic,” said Kirill Podolsky, 39, chief executive at Valars Group, Russia’s No. 3 wheat exporter. “We ship anywhere there is demand,” he said at his headquarters in Taganrog, a Rostov region port on the Sea of Azov, which connects to the Black Sea.
Valars will supply one-third of the shipment in the Egypt deal. Podolsky founded Valars in 2006 and has spent $250 million on farmland and $108 million on equipment.
Vasily Pechersky, 64, who runs Valars’ 41,230-hectare Sarmat farm, north of Taganrog, said his winter-wheat yield was 4.4 metric tons per hectare, on a par with U.S. yields. He credited his U.S.-made New Holland tractors and harvesters as well as higher use of fertilizers and new technologies.
“One New Holland harvester stands in for two Russian-made ones,” Pechersky said. Russian-made tractors sit to one side, discarded and covered in rust.
Russian farmers still have challenges to overcome, however. Investors such as Podolsky bought land at top prices right before the global financial crisis and are struggling to pay off debts. Valars may sell shares on the market to repay $500 million of debt before investing anymore in farming.
Wheat growing brought “zero” profit in the last marketing year after a plunge in prices, Podolsky said. The Grain Union is asking Moscow for $320 million in subsidies to improve the profitability of exports. Such state aid could help Russia’s growers compete even more ferociously with the United States on price.
TITLE: Wal-Mart Says Price Hinders Takeovers
PUBLISHER: Bloomberg
TEXT: GREENSBORO, North Carolina — Wal-Mart Stores and potential acquisition targets in Russia have disagreed over prices, creating a roadblock to the retailer’s plans to operate stores there, international chief Doug McMillon said in an interview.
“One of the things that has been a hindrance in Russia is just an agreement on price,” McMillon said Thursday. “If you wanted to have some scale to start out, you have to have a willing seller and therefore you have to come together on valuation. Until something is done, it’s not done.”
Wal-Mart, the world’s largest retailer, has pursued several opportunities as it seeks to enter Russia using an acquisition, said McMillon, who has visited the country twice in the past year. Buying a retail chain would give Wal-Mart a faster presence than opening stores on its own, he said.
The retailer has grown to 30 employees in Russia since 2008, when the Arkansas-based company opened an exploratory office in Moscow, said Kevin Gardner, a spokesman.
That team is evaluating how to differentiate Wal-Mart from Russian retailers, Mitch Slape, senior vice president of international business development, told reporters in Rogers, Arkansas, before Wal-Mart’s annual meeting.
“It’s premature to say that we’ve made a decision, one way or the other,” on an acquisition or building stores, Slape said. “The fact that we’ve got a team on the ground is evidence of a commitment to focusing in on getting that right answer.”
McMillon said the presence has also helped them learn more about doing business in Russia.
“We have benefited from having a team in Russia and learning how Russia works,” McMillon said. “What you think about is, what is the risk, and how do you mitigate it? You have to have a plan going in.”
He declined to provide a timeline for Wal-Mart’s expansion into Russia, considering the uncertainty of completing a deal.
“We think, long term, Russia is a big enough market that it’s certainly worthy of attention,” he said. “But we don’t have to be there this year.”
Wal-Mart’s international division is on track to spend $4.5 billion to $5 billion on capital expenditures in the fiscal year that ends Jan. 31, McMillon said, based on the company’s projection on Oct. 22. That total covers new stores consisting of 2.3 million square meters, up from 2.1 million square meters last year.
“If we spend a little bit more than $5 billion, I don’t think I’d get in trouble for it,” he said.
TITLE: Inflation Rate Unchanged Last Month
PUBLISHER: Bloomberg
TEXT: MOSCOW — The inflation rate remained at the lowest level in 12 years in May, the State Statistics Service said Friday, allowing the Central Bank to keep interest rates at a record low as the economy recovers from its worst contraction since 1991.
Inflation was an annual 6 percent, matching the rate in April, when it fell to the lowest since July 1998, the service said.
The median estimate in a Bloomberg survey of 14 economists was for 5.8 percent. Prices advanced 0.5 percent on the month.
Russia posted consecutive declines in the inflation rate every month since August 2009, allowing the Central Bank to cut its main interest rate 14 times in as many months.
Risks of a “significant” quickening of inflation in the comings months were low, the Central Bank said last week as it lowered the refinancing rate by a quarter point to 7.75 percent.
“We expect the pickup in inflation in the second half of 2010 to be very gradual, allowing the Central Bank to keep policy rates low well into 2011,” Anna Zadornova, a London-based economist at Goldman Sachs, said by e-mail.
“The Central Bank may still choose to cut its lending rates by another 25 basis points lower in the late summer, before the headline inflation starts to edge up on the base effects,” Zadornova said.
TITLE: Moscow Ready to Trade CIS Bonds
AUTHOR: By Irina Filatova
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Russian stock exchanges may soon begin trading bonds from former Soviet states, as a step toward transforming Moscow into an international financial center, Finance Minister Alexei Kudrin said Thursday.
“Our stock exchanges are ready for such a … step — to get countries [from the Commonwealth of Independent States] to place bonds. It’s possible in the near future,” he said at a meeting chaired by President Dmitry Medvedev.
Plans for turning Moscow into an international financial center, like New York or London, began gaining traction shortly before the financial crisis hit, but the recession put a temporary halt to the plans.
The Kremlin hopes that making Moscow a hub for global capital will aid in Russia’s development of an innovative economy and help it kick its dependence on natural resources.
Kudrin said Thursday that Moscow’s prospects for becoming a global financial center were good, citing the Global Financial Centers Index, in which Russia is ranked 68th among 75 major financial centers.
He said it was a positive sign that the experts questioned by the survey had included Moscow in the list of global contenders, along with Dubai, Peking and Shanghai.
“We are in the beginning of the list in terms of the potential we have to unlock,” Kudrin said, according to a transcript on the Kremlin web site.
The biannual report, composed by Z/Yen Group and commissioned by the City of London, grades the major financial centers in terms of their competitiveness, based on assessments from international financial services professionals.
Moscow, ranked two spots above St. Petersburg, “does not yet have sufficient depth or breadth as a financial center to be considered a specialist or diversified center,” said the report, which was published in March.
According to the report, Moscow performed poorly in almost all competitive categories, including infrastructure and business environment, where Moscow was ranked 73rd and 71st, respectively.
Kudrin said Moscow was on good footing in its goals as the MICEX was among the world’s top stock exchanges.
He said the exchange was ranked relatively highly in terms of its capitalization, the number of listed companies and trading volume.
To attract the necessary investors, the government is planning a legislative program that will form the legal framework for Moscow’s financial ambitions.
Such legislation, including laws on stock exchanges and trading, will be passed within two to three years, Kudrin said. Medvedev called on the work to be sped up, saying certain priority measures should be expedited.
TITLE: Clash-for-Clunkers Gets Cash Infusion
AUTHOR: By Olga Razumovskaya
PUBLISHER: Special to The St. Petersburg Times
TEXT: MOSCOW — An additional 10 billion rubles ($320 million) will be provided for the “effective” state cash-for-clunkers program in 2010, Prime Minister Vladimir Putin said at a government meeting Thursday.
But Putin also asked for “proposals for a gradual exit from the program next year.”
The cash-for-clunkers program, which has a number of analogues in Europe and the United States, was developed by the Industry and Trade Ministry and offers prospective car buyers 50,000 ruble ($1,600) rebate certificates to purchase new cars in exchange for their old vehicles that would be scrapped.
Viktor Khristenko, head of the ministry, said Wednesday that 175,000 out of the scheduled 200,000 program certificates have been issued so far. The ministry receives about 2,500 applications daily for the vouchers and expects to have issued all of them by the end of the month.
Khristenko said 65,000 new cars have been purchased so far with the help of the program.
“In October, we will use up the 10 billion rubles initially allocated for subsidies to the companies selling those cars,” he said.
The experts called the program effective despite the initial technical issues with speedy voucher issuance and auto dealers. “The fact that the program has worked in a matter of a few months can be considered a success for the government,” said Andrei Komarov, director of automotive practice at PricewaterhouseCoopers Russia.
“An additional 10 billion [rubles] is quite a significant influx. The first 10 billion rubles allowed the government to boost the car market by 15 percent. This will be an additional 15 percent. We are talking about the government’s substantial support of the car market,” Komarov said.
But only the few selected carmakers seem to have benefited from the significant influx of buyers over the past three months. The main beneficiary was AvtoVAZ, whose production accounted for 80 percent of all car purchases made with rebate certificates. The sales of Ladas alone grew by 61 percent to 19,911 cars in May, compared with the same period last year. About half of the 46,333 Ladas sold by AvtoVAZ since the program was launched in March have been purchased with rebate certificates.
Another 20 percent of the certificates were used on foreign cars, Komarov said, adding that they constitute a substantial portion of the market.
Of the few foreign carmakers included in the program, Renault was the most popular one. Most recently, Volkswagen entered the cash-for-clunkers club with its new Polo sedan targeted at Russian consumers.
Metropol analyst Andrei Rozhkov said he was surprised to see the government coming up with additional funding for the project because the market is already on the seasonal spring rise.
“Adding more money to the program in the middle of the hot season for car sales would only heat up the market. It would make much more sense [to do it] in September or October,” he said.
TITLE: Putin Sees $75 Oil, a Chance to Spend
AUTHOR: By Anatoly Medetsky
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Prime Minister Vladimir Putin on Thursday backed an oil price proposal that paves the way for greater federal spending next year when the presidential campaign kicks off.
A Presidium session that he chaired agreed to increase projected budget revenues next year by assuming that Russia’s crude would sell for $75 a barrel on international markets, 25 percent higher than the previous prediction, Economic Development Minister Elvira Nabiullina said.
The move will enable the government to plan for additional revenue of 200 billion to 300 billion rubles, Anton Nikitin, an economist at investment bank Renaissance Capital, told The St. Petersburg Times.
That would equal at least $6.8 billion by the average rate of 29.3 rubles per dollar that the ministry is anticipating next year.
Under the previous assumption, made in the middle of the global recession last year, foreign consumers were to pay an average of $59 for a barrel of the Urals blend of crude. Given that price, the tentative federal budget for next year — which was adopted last year — would bring in 7.5 trillion rubles, or $216 billion by the dollar rate it envisaged.
Finance Minister Alexei Kudrin, a fiscal hawk who had insisted that the revised target price for crude shouldn’t top $70 next year, said late Wednesday that the additional income could go toward reducing the projected 2011 budget deficit of 4 percent.
Nikitin described the prospect of a smaller budget deficit as “unlikely” in an election year, saying expenditures might grow instead. That would make Russia “much more vulnerable to global market conditions than it is now,” he said separately in a note to investors.
The decision to back the bigger crude price outlook is the first time that Kudrin’s conservative outlook has lost out to rosier estimates since Kudrin started as finance minister in 2000, Nikitin said.
The tentative budget for next year calls for 9.4 trillion rubles in spending, drawing the difference from the debt market and the Reserve Fund, the country’s fiscal cushion.
Nabiullina declined to indicate how much the budget revenues would increase next year with the $75 oil. She said the ministry was able to win out over Kudrin’s reservations by convincing Putin and the Presidium, a scaled-down Cabinet, that demand for oil next year would surpass supply because of a global economic upswing of 4 percent.
A ministry chart, released for the Presidium session, showed that the world would need 87.2 million barrels of oil every day next year, exceeding supply by 290,000 barrels.
“There are restrictions for increasing oil supply,” she said after the meeting in response to a question from The St. Petersburg Times.
As upbeat as they are, such expectations are more modest than forecasts by the leading international research agencies and many economic analysts, she said without elaborating.
Risks to the ministry’s scenario include potentially higher exports of Iraqi oil and a decline in the prices for Russia’s natural gas because of increasing production of shale gas in the United States, the ministry said in an overview of its latest economic outlook that the Cabinet published on its web site. A slower global economic recovery would also spoil the picture, the overview said.
The outlook includes the oil price prediction, which is key in calculating the budget, which is heavily dependent on oil revenues.
TITLE: Aeroflot’s Profits in 2009 Triple, But Still Miss Targets
PUBLISHER: Combined Reports
TEXT: MOSCOW — Aeroflot said Thursday that its 2009 net profit more than tripled but came in some way below a target set just two months ago, as full year revenue slumped 27 percent on lower passenger numbers, Reuters reported.
The company said net profit for the 12 months to end December was $86 million, below the $100 million forecast by chief executive Vitaly Savelyev in April. The result was still a vast improvement on 2008.
Aeroflot closed up 1.9 percent at 61.50 on the MICEX on Thursday, having climbed nearly 6 percent in the two previous sessions.
Full year revenue fell 27 percent to $3.3 billion, as passenger numbers fell amid the global economic downturn.
Aeroflot also said earnings before interest, tax, depreciation and amortization fell 11 percent to $461 million, while group debt rose 34 percent to $1.7 billion.
Aeroflot is currently involved in long-running discussions over the future of a 25.8 percent stake owned by media tycoon and former KGB agent Alexander Lebedev.
Lebedev agreed to sell the stake back to the airline for a discounted price of $400 million in January, but has since threatened to back out of the deal because of the holding’s improved value.
The airline may sell 6.3 percent of its own shares that it bought from Lebedev or use the stake to back convertible bonds within three years, deputy chief executive Shamil Kurmashov said Thursday.
Aeroflot declined an offer to buy UTair Aviation, a smaller Russian airline, Kurmashov said.
(SPT, Bloomberg)
TITLE: Sberbank Posts Record Q1 Profits
PUBLISHER: Bloomberg
TEXT: MOSCOW — Sberbank posted a record first-quarter profit, beating estimates, as a rebounding Russian economy allowed the country’s biggest lender to cut provisions for bad loans.
Net income jumped 75-fold from a year earlier to 43.4 billion rubles ($1.37 billion), the Moscow-based bank said on its web site Monday. That beat Citigroup’s 37.9 billion estimate and VTB Group’s 39 billion-ruble forecast. Net interest income rose 12 percent to 129 billion rubles, while operating income more than doubled to 116 billion rubles.
Profit growth was driven by the 40 percent reduction in loan reserves, Leonid Slipchenko, a banking analyst at UralSib Financial Corp. in Moscow, said by phone Monday. “Growth in the level of delinquent debt slowed down significantly.” Russia’s economy expanded for the first time since 2008 in the three months through March, by 2.9 percent, as the world’s biggest energy producer benefitted from record-low borrowing costs and rising oil prices. Sberbank is “more closely linked to the macro than any other bank in this country,” Deputy Chief Executive Officer Anton Karamzin said last month.
Non-performing loans reached 464 billion rubles on March 31, or 8.9 percent of overall lending, from 8.5 percent at the start of this year. Corporate loans shrank 1.2 percent in the quarter, while retail loans fell 1.6 percent.
Sberbank shares pared losses after Monday’s announcement and traded down 0.9 percent to 69.60 rubles on the Micex Stock Exchange at 3:39 p.m., after falling as much as 4 percent. The state-run lender has a market value of about 447 billion.
TITLE: The Reset Has Begun
AUTHOR: By Dmitry Trenin
TEXT: NATO soldiers marching in Red Square on Victory Day. Moscow agreeing on a compromise resolution of the 40-year sea-boundary dispute with Norway. The sight of Prime Minister Vladimir Putin kneeling at the memorial to the Polish officers murdered by Stalin’s regime at Katyn. These are a few glimpses of what the New Europe newspaper two weeks ago described as a kinder, gentler Russia. But three questions immediately arise: Is this real? Why the change? And how to respond to Russia’s new foreign policy?
In this case, what you see is what you get. Russia’s tone, especially toward the United States, began to change last year, but the Kremlin’s support for a fourth version of United Nations Security Council sanctions on Iran demonstrates that, today, there is real substance. Moreover, surrendering territorial claims in the Arctic — the stakes in the dispute with Norway — is no small matter.
Putin’s joint visit to Katyn with Polish Prime Minister Donald Tusk in April was, of course, symbolic. But serious conversations between the two men started in September, during Putin’s visit to Gdansk to mark the 70th anniversary of the beginning of World War II. The kneeling act was also followed, just three days later, by Russian officials going out of their way to help investigate the air crash in Russia that killed Polish President Lech Kaczynski and scores of Polish dignitaries, and to pay respects to the victims.
An apparently genuine internal Foreign Ministry document, which was published in Russian Newsweek on May 10, made it clear that the Kremlin now prioritizes relations with the United States and Europe. All of this is a far cry from the 2007 Victory Day parade on Red Square, when then-President Putin compared President George W. Bush’s policies to those of the Third Reich; or when Russia resumed strategic bomber air patrols in 2007 along the Norwegian coast and into the North Atlantic and the Caribbean; or President Dmitry Medvedev’s address to the nation on Nov. 5, 2008 — the day after Barack Obama was elected U.S. president — when Medvedev threatened to deploy Iskander short-range missiles in Kaliningrad.
Four factors have contributed most to this positive reversal: the Georgia war of 2008, the global economic crisis, the Obama factor and China’s relentless rise.
The Georgia war demonstrated how quickly relations with the United States could deteriorate, almost to the point of reviving the Cold War, leaving Russia isolated and in a generally weak position. The economic crisis destroyed illusions of sustained energy-fueled growth and the hubris that went with it.
Moreover, the Obama administration, by having reset U.S. foreign policy, removed the principal irritants in Russian-Western relations — the prospect of NATO enlargement to Ukraine and Georgia, close relations with Georgian President Mikheil Saakashvili and plans for deploying elements of a strategic missile defense system in Central Europe. Obama also showed genuine respect and openness to Russia.
Finally, as China has become more confident and assertive, its shadow over Russia has grown longer and thicker.
Faced with this situation, the Russian leadership sees both new dangers and new opportunities, which are often intimately interlinked. The country’s backwardness vis-a-vis not only the West, but also some of the emerging powers drives home the need to modernize Russia’s technological base. But where is the money for that?
Russia’s worsening credit rating and the tougher borrowing terms in the international market are forcing Russia to compete harder for capital. Obama’s openness and pragmatism have turned the United States into a partner, but it is uncertain how long he will stay in the White House and how strong he will be in the future. China is both a market and a partner, but this partnership looks increasingly tilted in China’s favor.
So Russia needed to adjust its foreign policy. Passionate defense of Russia’s diminished status makes less sense than practical efforts to stop the country’s decline and enhance its real power. Multipolarity exists, but Russia is not much of a pole. Summits of the BRIC leaders are still held, but the real focus of Russia’s policy is the member countries of the Organization for Economic Cooperation and Development, which have technology and money. Russian foreign policy’s new central task is to channel those resources to the country’s modernization drive.
Still, there are important caveats. The Russian government’s concept of modernization is too narrow to succeed. Unless the basic conditions for doing business in Russia improve substantially and until the government starts to modernize itself, technology transfers will have little effect.
Putin himself has furnished proof of that. Speaking recently at the Russian Academy of Sciences, he said the Soviet economy was structurally incapable of using most of the technological secrets acquired through KGB-style industrial espionage. Without an independent judiciary, secure property rights and a check on corruption, Putin’s modernization will mimic Brezhnev’s.
The West has broadly welcomed Russia’s new line. Obama has sent a nuclear energy cooperation agreement with Russia to Congress, while the European Union has offered a “partnership for modernization.” Both want Russia to complete its accession to the World Trade Organization.
This is crucial. There can be no better foundation for modernization than WTO membership. When this is achieved, the next steps are a permanent normal trade status for Russia in the United States and practical moves toward a pan-European free-trade area between the EU, Russia, Ukraine and other countries. Europe’s potentially most effective instrument to help Russian modernization is gradual abolition of the visa regime with Russia.
The time to act is now. Within a few years, when it becomes clear to the Russian leadership that modernization conceived as technological innovation is too narrow to succeed, important choices will have to be made. Either the scope of modernization will be broadened, or modernization will be aborted in favor of regime preservation. Forward-looking elements in Russia will require compelling arguments if their case is to prevail.
Dmitry Trenin is director of the Carnegie Moscow Center. © Project Syndicate
TITLE: Cracking Down on Corruption
AUTHOR: By Jonathan D. Nelms
TEXT: Aggressive enforcement of anti-corruption laws, particularly the U.S. Foreign Corrupt Practices Act, or FCPA, is more than ever forcing multinational companies to avoid business practices and business partners that raise corruption risks. It is a fact that Russian companies seeking to do business with U.S. and other foreign companies will be scrutinized by prospective partners seeking assurance that their cooperation will not be tainted by improper payments.
Russian companies must act now if they wish to serve as agents, consultants or other service providers for U.S. companies, if they hope to enter joint ventures with U.S. partners, if they seek to position themselves as takeover targets or merger candidates for U.S. suitors, or if they seek to list shares on a U.S. stock exchange or otherwise undertake business in the United States.
The FCPA prohibits offering, giving or authorizing anything of value — whether cash or other tangible property or intangibles such as personal favors — to any non-U.S. official, including individuals serving state-controlled commercial enterprises, political party or political candidate to obtain some business advantage. The statute also requires companies to keep accurate books and maintain internal controls designed to prevent or detect improper payments.
Why is this relevant? First, non-U.S. companies are also subject to the FCPA if they conduct business in the United States, if their shares are listed on U.S. exchanges, or if they act on behalf of a U.S. company in connection with an illicit payment to a foreign public official.
Mercedes-Benz’s affiliate in Russia recently became the first Russian-based company to face criminal charges under the FCPA. It pleaded guilty in a Washington courtroom on April 2, agreeing to pay more than $27 million in criminal fines to settle charges arising out of bribes paid to Russian officials or relatives of Russian officials, in many cases through shell companies registered in the United States and into or through bank accounts located in the United States.
Second, Russian companies seeking to do business with U.S. partners and others subject to the FCPA must not present compliance risks that outweigh the potential benefits of cooperation. Faced with evidence that a partner is paying or considering bribes in connection with its business, the U.S. company must undertake an internal investigation that can take years to complete and cost tens of millions of dollars. Criminal and civil fines and remediation can add millions more. Given these risks to their reputation and to their bottom line, companies are increasingly saying “no” if they even suspect that a partner may subject them to risks of FCPA liability.
How can Russian companies make sure that they are saying “yes” instead of “no”? First, they must deal with potential compliance problems as quickly as possible and resolve any issues before their prospective partners begin performing due diligence. Second, it is important that companies institute strict and enforceable internal policies to regulate the use of cash, payments to charitable and political organizations at the request of public officials and the questionable use of intermediary companies.
All companies doing business in Russia should make a commitment to integrity and transparency. This means that if they make or made illicit payments or provided other benefits to any public officials, these practices must stop and remedial methods must be taken as soon as possible.
Russian companies must be committed to the elimination of illicit payments, and the institution of internal controls should be embodied in a comprehensive anti-corruption compliance program. This must be supported by leadership and updated as the company’s business and anti-corruption rules evolve. Employees must believe that there will be real rewards for compliance in terms of compensation and advancement, and there must be real consequences for failure to comply.
Russian companies must ensure that third parties with which it does business are legitimate companies, capable of performing the services for which they were contracted, and not merely conduits for improper payments. To the extent that a third party is connected to a government official, it should be confident that he will not misuse his position for the company’s benefit.
To be sure, compliance with these recommendations involves a major commitment of time and resources and may make conducting business more difficult — particularly in the beginning. But experience shows that the time and resources necessary to resolve problems arising out of official or commercial bribery are much greater.
The commitment to investigating and prosecuting bribery around the world by U.S. and other authorities is a relatively new phenomenon, but it doesn’t appear to be going away soon. Be prepared.
Jonathan D. Nelms practices in the International Trade & Compliance Group at Baker & McKenzie
in Washington.
This comment appeared in Vedomosti.
TITLE: The Future Tense
AUTHOR: By Richard Lourie
TEXT: With sudden urgency the Kremlin has decided that Russia must modernize its economy to survive in the 21st century, and to do so it must attract capital and know-how from abroad. There are some built-in time parameters to the situation. Russia will hold a presidential election in 2012 and host the Winter Olympics in 2014. Both events will be viewed as judgments on Russia’s progress. The elections can demonstrate political and social progress, while the games will display the country’s wealth and panache. It will also highlight Moscow’s ability to provide security at the games. Sochi is dangerously close to the volatile North Caucasus.
The presidential election, just 20 months away, is more immediate and important. Whoever is elected will serve a six-year term instead of the four-year term served by previous presidents. Vladimir Putin’s expected election as president in 2012 will be interpreted to mean that Medvedev’s election in 2008 was only a sop to the Constitution. The real power had remained semicovertly with Putin and will remain overtly with him until 2024, assuming his re-election again in 2018.
Foreign capital might find this scenario attractive. Putin is a known entity and identified with stability. The promise of 12 years of consistency and continuity, along with other inducements, could well attract the capital — financial and intellectual — that modernization requires. But that prospect will seem less attractive if the elections are tarnished by violence and obvious fraud. Apart from the moral repugnance of such spectacles, investors cannot feel assured by a government that is not confident enough to accept its own popularity as indicated by polls. A lack of democracy might not scare them away, but a lack of confidence just might.
Both Russia’s lack of a free media and fair elections are subject to a relatively quick fix. Free-ranging political programs allowing opposition figures to voice their views should be allowed on national television as soon as possible. If the current leadership is afraid that an hour of opposition leader Garry Kasparov could prove a tipping point, they are out of touch with the reality of their own country and hardly fit to lead a modernization campaign. There is no political figure who could win more than a few points from either Putin or Medvedev in a fair election. A truly free and fair election would allow Russia to score huge points in the global arena — and at little cost with virtually no risk.
That’s not the case with the judiciary, whose lack of independence and integrity is likely to trouble potential investors more than the lack of free media or elections. Since commercial disputes are adjudicated in the courts, there has to be a reasonable assurance of fairness in this sector. Unlike the media and electoral system, the legal system needs more time to demonstrate reform. But the Kremlin could score a huge victory in one sweep if, for example, former Yukos CEO Mikhail Khodorkovsky is released from jail soon or after his current prison term is complete and if his second trial ends in acquittal. In addition, a few of those who ordered the murders of prominent journalists must be brought to justice. The sight of important heads rolling would be a signal that the campaign for modernization is for real. Peter the Great would have approved.
Richard Lourie
is the author
of “The Autobiography
of Joseph Stalin”
and “Sakharov: A Biography.”
TITLE: Top Bass Comes To City For Festival
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: German singer Rene Pape, arguably the world’s most charismatic bass, is in town this week for two performances at the Mariinsky Theater.
Pape, who gained international fame singing sophisticated characters such as Mephistopheles (“Faust”), King Marke (“Tristan und Isolde”), Wotan (“Der Ring Des Nibelungen”), Boris Godunov (“Boris Godunov”) and Gurnemanz (“Parsifal”), appeared in Wagner’s “Tristan und Isolde” as King Marke on Monday, and will return to the stage on Wednesday as Wotan in “Das Rheingold” at the Mariinsky Concert Hall as part of the annual Stars of the White Nights festival.
The singer feels close to the art of opera as it gives him the opportunity, in his words, to reinvent himself. “I am truly drawn to the characters I perform — priests, demons and kings — each of them has his own complex inner world, complicated relationships with those around him and many secrets from the past — skeletons in the closet, so to speak,” Pape said in an interview with The St. Petersburg Times.
Asked to comment on his own voice, which has been described as “black diamond” by some European critics, Pape refuses to verbalize its qualities, yet he says that his strength as a performer lies in his “ability to give joy to the audience.”
“I am an artist by nature in the sense that I need an audience and its live response,” he said. “Honestly, that is the only thing I go on stage for — to feel the audience’s reaction and to sense that they are happy.”
A regular at the Bayreuth Festival, Pape, who is often regarded as the world’s top Wagnerian bass, believes that Wagnerian audiences are special and differ significantly from other opera audiences.
“Wagnerian audiences are somewhat mad,” the artist said. “What would you think of someone who said he was going to cycle from St. Petersburg to London, say? Maybe you would smile at him to his face, but then tap your head with your finger. That’s exactly how normal people regard lovers of Wagner’s operas that last for hours at a time. Moreover, after listening to a five-hour-long, immensely emotional and tense opera, people feel overwhelmed and experience a kind of exhaustion; after performances I often see that members of the audience are exchanging their opinions passionately. But I understand them well, of course!”
Even today, Wagner’s music is prohibited in Israel on the grounds that it is associated by some with Hitler and the Nazis, while in many countries in Europe, politicians and musicians turn their noses up at the names of some Soviet composers. Pape believes banning or rejecting musical works solely on political grounds is despicable. The singer feels talk about the alleged political power of music is nothing but speculation.
“Music simply holds power over people. Full stop,” he said. “You can’t perform music according to some political framework — they say that today we can permit ourselves to return to some composer without looking at the past. A piece of music may age in terms of its artistic and aesthetic content, but never because it is politically incorrect. The words may lose currency, but not the notes.”
As for people who exploit the theme of ostensibly “politically loaded” pieces of music and politicians who prohibit the music of certain composers on ideological grounds, Pape says all of this is no more than political games and the manipulation of public consciousness.
Pape first came to Wagner’s operas at the age of 23 after meeting Georg Solti, one of the greatest conductors of the 20th century. The friendship with maestro Solti had a profound effect on the young Pape, both artistically and personally.
Meeting Solti marked the first breakthrough in the singer’s career. The conductor, himself renowned in the Wagner repertoire, saw the performer’s potential, especially in Wagnerian roles, and helped to develop it.
“Moreover, and this is equally important, he helped me develop as an individual and attain a kind of spiritual balance,” Pape said. “Solti was old enough to have been my grandfather, and he behaved with me like a very close friend, almost like a relative. As a person, there was much about him I found intriguing and I admired his sense of humor.”
Mexican tenor Rolando Villazon has admitted that his stage characters help him to deal with difficult situations in his own life. He makes deliberate use of group therapy techniques, trying to imagine how Alfredo (La Traviata), Don Jose (Carmen) or Rodolfo (La Boheme) would resolve their own problems in life.
Pape, by contrast, makes sure to keep his demonic characters at a safe distance when he is off stage.
“In life I am a very quiet and philosophical person,” Pape explains. “I smile a great deal and, on the whole, have a very positive attitude to life. However, the possibility of getting under the skin of characters rocked by passions affords me the opportunity to exist on another plane, looking at the world through different eyes and sensing heightened emotions. It’s another matter that after a performance I don’t let my demons come back to me in my dreams. That’s a question of professionalism. I can switch off.”
In 2005, the singer appeared in the title role in Dmitry Chernyakov’s production of Mussorgsky’s “Boris Godunov” for the Berliner Staatsoper. His character was described as “A brother of Putin, whose tortured conscience is written on his face from the beginning” by one bold German reviewer.
Pape had a hard time during rehearsals. Dmitry Chernyakov does not speak German, and the performer had to speak to him through an interpreter, which made it harder for the men to understand each other. “But the production was absolutely phenomenal,” Pape said. “Chernyakov is a very talented stage director, and I really loved his contemporary and ironic view of Russian history.”
From Pape’s point of view, Boris Godunov — as well as King Marke and Wotan — are complete “losers,” regardless of all their wealth, crowns, scepters and authority.
“Of course they are: They are tortured and consumed by emotions that are far from good!” the singer explains. “They are all unhappy lonely people who have nothing to say to anyone else. One of the most terrifying things that can happen to anyone is when he or she has no one to trust. Loneliness is the price they must pay for their power over those who surround them. Of course, Wotan is a mythological character while Boris Godunov is a historical one, though they have a great deal in common, despite Wotan’s elusiveness and omnipresence. These people are simultaneously looking for love and power, which is, essentially, an impossibility.”
TITLE: Auction Houses Target Russian Buyers
AUTHOR: By John Varoli
PUBLISHER: Bloomberg
TEXT: A reclining nude portrait, Orthodox icons and Faberge jewelry are lined up to attract Russian billionaires in London sales this week that may raise as much as 59 million pounds ($86 million).
Four auction houses — Sotheby’s, MacDougall’s, Christie’s International and Bonhams — hope for a continued recovery in prices as collectors arrive in the U.K. capital, the main center of Russian art sales.
“Russia’s economy is clearly in recovery and oil prices are up,” William MacDougall, co-director of MacDougall’s, said in an interview. “The main dark cloud is the Greek debt crisis. While it raises problems for euro-denominated assets, it should be good for fine art, which is a safe haven.”
Collectors from emerging markets such as Russia and China have been buying the best examples of their countries’ art heritage at recent sales, while the other international Impressionist and modern works have been selling for record prices.
“Classical 19th-century paintings continue to be the strongest sector,” MacDougall said. “Early 20th-century modernism is also strong where good provenance trumps authenticity concerns.”
The four auction houses raised 29.1 million pounds during London’s Russian week in 2009, half that of the year before. In April this year, Sotheby’s and Christie’s in New York sold $18.5 million in Russian art.
“The sales results in 2008-2009 were nothing like as bad as doom-mongering merchants were predicting,” said London-based collector and dealer James Butterwick. “The words to describe the market are consolidation, stability and improvement.”
Sotheby’s has Faberge works and Imperial porcelain among 615 lots with a presale top estimate of 28 million pounds. The most expensive is Ivan Shishkin’s oil on canvas “The Dark Wood” (1876), which may make 1.5 million pounds.
A pair of Imperial porcelain vases from 1841, part of a German collection, has a top estimate of 1.2 million pounds. This is the first time the vases are up for public sale.
“Many works are on the market for the first time and several are new discoveries,” said Jo Vickery, head of Russian art at Sotheby’s in London.
MacDougall’s, which specializes in Russian art, offers 553 lots with a presale estimate of as much as 15.9 million pounds. The top item is by Georgia’s Niko Pirosmani, whose “Arsenal Hill at Night” has an estimate of 900,000 pounds to 1.2 million pounds.
Vasily Polenov’s landscape “Boat on the River” (1879), from a Swiss collection, is for sale for the first time in more than 70 years with a top estimate of 650,000 pounds.
Nikolai Roerich’s “The Black Gobi” (1928), from a U.K. collection, could fetch as a much as 700,000 pounds.
Christie’s has 552 lots with a top estimate of 11.2 million pounds. Its top lot is Mikhail Klodt’s “Riverside Farm” (1858), with an estimate of 700,000 pounds to 900,000 pounds. Zinaida Serebriakova’s “Reclining Nude” (1930) has an estimate of 400,000 pounds to 600,000 pounds.
Bonhams offers 258 lots with an estimate of as much as 4 million pounds.
TITLE: Cherkizovsky Framed
AUTHOR: By Anna Malpas
PUBLISHER: The St. Petersburg Times
TEXT: This week, Ren-TV started a new drama series set at what used to be Moscow’s biggest clothing and goods market, Cherkizovsky. The channel says the show, “Cherkizona: Disposable People,” is the first “honest” depiction of the market, which was closed down by the authorities last summer amid a storm of publicity.
The drama features a doctor, Sergei, who loses his young daughter, Dasha, after she slips out of the car while he buys a fan belt at the market. He descends into some kind of underworld to find her.
He meets homeless beggars, Central Asian workers who sleep in a maze of underground passages and seemingly friendly traders who think nothing of selling rotten meat or smuggling drugs in boxes of fruit.
“It’s just Sodom and Gomorrah,” one visitor complains.
In the first episodes, Sergei manages to lose his daughter not once, but twice. The hapless security guards find her, but then leave her alone in their office with a sleeping blood-stained junkie. When they return, both are gone.
A trader, Lilya, takes pity on Sergei and lets him sleep in her den inside a freight container. Meanwhile, she negotiates a dodgy deal to resell meat that has rotted in a broken-down freezer. “I get a buzz from this, I’ll sell it all,” she boasts. She dupes a naive trader into buying the lot after adding vinegar and spices and plumping it up with chemicals in a filthy outbuilding.
Lilya also sells a batch of Uzbek migrants to the genial owner of a Caucasian restaurant. “Can your men hold their tongues?” he asks, before getting them to heave boxes of oranges, with a drugs ampoule stuffed inside each fruit.
Increasingly desperate to find his daughter, Sergei descends into the “snake pit,” a network of dark tunnels furnished with bunk beds but without sanitation, where the market workers live. “There are whole neighborhoods here underground,” he is told.
Workers at the real Cherkizovsky were also rumored to live in a vast underground bunker. That might be hard to believe, but then again, there is a wartime bunker museum next door. The market grew up in the 1990s on a sports ground that was designed to disguise the bunker.
Close to Izmailovsky souvenir market, Cherkizovsky was a claustrophobic, overcrowded network of stalls selling cheap Turkish and Chinese clothes, household goods and food.
“A state within a state” is how the show’s title song describes the market. It was said workers never had to leave the real Cherkizovsky, since the market provided everything, from cafeterias to hairdressers to brothels.
The multimillionaire who controlled the market, Telman Ismailov, once invited Jennifer Lopez to sing at his birthday party. He is a nattily dressed man with a taste for jeweled rings.
The market was closed in June 2009 after Prime Minister Vladimir Putin publicly castigated officials for making no arrests in a smuggling case involving Chinese goods at the market.
The closure came shortly after Ismailov opened a luxury hotel in Turkey and invited Sharon Stone to the party in a flamboyant gesture. He has since agreed to invest in hotels for Putin’s pet project, the Sochi Olympics.
Although the market setting is inspired, the “Cherkizona” show doesn’t really ring true so far.
The show’s makers have built a realistic-looking market set and hired Central Asian extras to push trolleys. They even slip in shots of stray dogs and giant rats.
But it would probably be impossible to capture the sheer seediness of Cherkizovsky.
TITLE: Long Road to Oil Cleanup Looms Over Gulf
AUTHOR: By Jay Reeves and Ray Henry
PUBLISHER: The Associated Press
TEXT: GULF SHORES, Alabama — A wellhead cap at the bottom of the Gulf of Mexico is slowly pinching off a geyser of oil spewing from the earth, but there’s no containing much of the crude that’s already escaped, a reality becoming increasingly evident on the region’s beaches.
The battle to contain the oil is likely to stretch into the fall, the government’s point man on the spill warned. The cap will trap only so much of the oil, and relief wells being drilled won’t be completed until August. Meanwhile, oil will continue to shoot out.
To Kelcey Forrestier, a 23-year-old biology graduate visiting Okaloosa Island, Florida, it was already clear Sunday that the spill and its damage will last long into the future.
“Oil just doesn’t go away. Oil doesn’t disappear,” said Forrestier, of New Orleans. “It has to go somewhere and it’s going to come to the Gulf beaches.”
Lifeguards found a “very minor” set of fingernail-size tar balls over the weekend on the western edge of the island about 35 miles east of Pensacola, marking the easternmost point oil has been discovered ashore.
The spill’s harmful environmental effects also appear to have spread to Texas, with the government saying Sunday that dead, oiled birds were reported for the first time in that state. A wildlife report issued Sunday by the government command center in Robert, Louisiana, says two dead birds with oil on them were found in Texas, but didn’t elaborate on the circumstances. Dozens of dead, oiled birds have been found in other Gulf states, the majority of them in Louisiana.
Jim Suydam, a spokesman for the Texas General Land Office, which has been monitoring the spill, said he hadn’t heard about the birds and that the oil was still 100 miles from the Texas-Louisiana border.
Officials reported Sunday afternoon that a sheen of oil was spotted about 150 miles west of Tampa, though they did not expect the slick to reach the western Florida peninsula in the near future.
BP said Monday that the cost of the response has reached about $1.25 billion. The company said the figure does not include $360 million for a project to build six sand berms meant to protect Louisiana’s wetlands from spreading oil.
The prospect that the crisis could stretch beyond summer devastated residents along the Gulf, who are seeing more and thicker globs of oil appear all along the coast.
The floors in Ruth Dailey’s condominium in Gulf Shores, Alabama, are already smeared with dark blotches of oil, she said, and things are only going to get worse.
“This is just the beginning,” she said. “I have a beachfront condo for a reason. With this, no one will want to come.”
A couple of miles away, workers cleaning sand at a state park finished their work and left their refuse on the beach in the way of the incoming tide.
“Waves are washing over plastic bags filled with tar and oil. It’s crazy,” said Mike Reynolds, a real estate agent and director of Share The Beach, a turtle conservation group.
Environmental and consumer rights advocate Erin Brockovich planned to visit southern Louisiana on Monday to speak to people who say they’ve been sickened by dispersants used to break up the oil spill.
At Pensacola Beach, Florida, the turquoise waves were also flecked with floating balls of tar. Buck Langston, who has been coming to the beach to collect shells for 38 years, watched as his family used improvised chopsticks to collect the tar in plastic containers.
“Yesterday it wasn’t like this, this heavy,” Langston, of Baton Rouge, Louisiana, said Sunday. “I don’t know why cleanup crews aren’t out here.”
Coast Guard Admiral Thad Allen, overseeing the government’s response to the spill, has expressed similar frustration, ordering cleanup crews to the Alabama coastline after surveying the scene from the air. But he acknowledged the relative futility of their efforts.
“It’s so widespread, and it’s intermittent,” he told The Associated Press on Saturday. “That’s what’s so challenging about this. Everyone wants certainty. With an oil spill like this, there isn’t any.”
Since it was placed over the busted well on Thursday, the cap has been siphoning an increasing amount of oil. On Saturday, it funneled about 441,000 gallons to a tanker on the surface, up from about 250,000 gallons it captured Friday.
But it’s not clear how much is still escaping from the well, which federal authorities have estimated was leaking between 500,000 gallons and 1 million gallons a day. Since the spill began nearly seven weeks ago, roughly 23 million to 50 million gallons of oil have leaked into the Gulf.
TITLE: Israel Kills 4 Militants In Waters
Off Gaza
AUTHOR: By Aron Heller
PUBLISHER: The Associated Press
TEXT: JERUSALEM — Israeli naval forces shot and killed four men wearing wetsuits in the waters off the coast of Gaza on Monday, and a militant group said they were members of its marine unit training for a mission.
The attack was the latest escalation in tensions over the 3-year-old blockade of Gaza. It came a week after Israel raided a Gaza-bound flotilla carrying humanitarian supplies and hundreds of activists protesting the closure of the Hamas-ruled Palestinian territory. Israeli soldiers killed nine activists in a clash on one of the flotilla boats, bringing fierce international condemnation and new pressure to ease the blockade.
Vice President Joe Biden said Monday the U.S. is closely consulting with Egypt and other allies to find new ways to “address the humanitarian, economic, security, and political aspects of the situation in Gaza.” He spoke in thae Egyptian Red Sea resort of Sharm El-Sheikh after meeting Egyptian President Hosni Mubarak.
The closure has been in place since 2007, when the Islamic militant Hamas seized the territory and it has kept out all but basic humanitarian goods. Israel and the West consider Hamas a terror group responsible for firing thousands of rockets at Israel and carrying out hundreds of attacks, including suicide bombings. Hamas does not recognize Israel’s right to exist.
Israel hoped the blockade would weaken Hamas, prevent the entry of weapons and bring pressure for the release of an Israeli soldier captured in 2006, but those objectives have yet to be achieved.
The latest clash took place early Monday. The Israeli military said a naval force spotted the Palestinians in the waters off Gaza and opened fire. It claimed the forces had prevented an attack on Israeli targets.
The Palestinian militant group Al-Aqsa Martyrs’ Brigades said the four killed were members of its marine unit who were training in Gaza’s waters. Al-Aqsa, a violent offshoot of Palestinian President Mahmoud Abbas’ Fatah faction, made the claim in a text message sent to reporters in Gaza. Four bodies were retrieved and taken to a hospital in central Gaza, said Moawiya Hassanain, a Palestinian health official. The Palestinian naval police said two people were still missing.
“The bloody escalation today is a desperate attempt by the occupation government to divert the world’s attention away from the massacre committed against the flotilla,” Hamas spokesman Sami Abu Zuhri told reporters in Gaza.
The flotilla clash has brought renewed international focus on Israel’s blockade of Gaza, which Egypt has also enforced along its border with the impoverished coastal strip.
The killings seriously damaged Israel’s relations with Turkey, which had been its closest ally in the Muslim world. Turkey unofficially supported the flotilla and eight of the nine activists killed were Turkish citizens. One held dual Turkish-American citizenship. Turkey has said it will reduce military and trade ties with Israel and shelved discussions of energy projects. It has also threatened to break ties unless Israel apologizes.
TITLE: N. Korea Promotes Kim Relative in Shuffle
AUTHOR: By Sangwon Yoon
PUBLISHER: The Associated Press
TEXT: SEOUL, South Korea — North Korean leader Kim Jong Il’s brother-in-law was promoted and a premier who apologized for a currency debacle was replaced Monday in a rare parliamentary session with strong signs that the secretive nation was preparing a hereditary succession of power.
Kim was shown on Pyongyang’s state-run television presiding over the session, sitting behind a desk in the middle of a long line of parliamentarians. The scene was shot from a distance, so it was difficult to assess the health of the 68-year-old Kim, believed to have suffered a stroke two years ago.
The rubber-stamp parliament, or the Supreme People’s Assembly, usually meets once each year to approve bills vetted by the ruling Workers’ Party. The body met last April, and no reason was given for holding Monday’s unusual second session.
But the session came amid worsening economic woes, pressing succession issues and a South Korean campaign to get the United Nations to punish Pyongyang for a ship attack in March that killed 46 sailors. North denies sinking the ship, and state-run media did not say whether parliament discussed the issue, which the South has taken to the United Nations.
Pyongyang’s official Korean Central News Agency said the lawmakers approved a major leadership reshuffle.
The most notable change was the promotion of Kim’s brother-in-law, Jang Song Thaek. He was named vice chairman of the all-powerful National Defense Commission, which makes security policy. Jang is widely believed to be a key backer of the North Korean leader’s third son, Jong Un, who several analysts think will be his father’s successor.
Jang is married to Kim’s younger sister and is said to be poised to play a kingmaker role. Many believe he may lead a collective leadership after Kim’s death until the new leader takes over.
Yang Moo-jin, a professor at Seoul-based University of North Korean Studies, said, “Electing Jang Song Thaek to the post of vice-chairman officially appoints him as No. 2 in facilitating stable succession of power.”
He added, “With this post, he has been given all responsibility and rights to secure a stable structure for future succession.”
The new premier was identified as Choe Yong Rim, a parliament member who replaces Kim Yong Il, Pyongyang’s official Korean Central News Agency reported.
The former Premier Kim offered a rare public apology in February after a failed currency revamp triggered social unrest and starvation. Last November, citizens were ordered to turn in a limited number of old bills in exchange for new, redenominated currency in an apparent bid to reassert its control over a growing market economy.
But the measure left people with worthless bills while inflation surged because state-run shops couldn’t keep up with demand.
The new premier, Choe, is a seven-time incumbent member of the North’s parliament who serves as chief secretary of the Pyongyang City Council of the Workers’ Party. The Moscow-educated Choe, 81, was seen accompanying leader Kim Jong Il when he met former South Korean President Roh Moo-hyun in Pyongyang for a historic summit in 2007, according to Seoul’s Unification Ministry.
Koh Yu-hwan, a North Korea expert at Seoul’s Dongguk University, said that the premier job usually goes to someone with more economic expertise. Koh said that the North Korean leader’s youngest son has reportedly worked together with Choe on a construction project and they are apparently close.
“It’s notable that Choe, who is more of a political figure, has taken the seat,” Koh said. “Appointing a more politically inclined figure to the position can be seen as a move tied to the succession issue.”
TITLE: Seven Killed In Ohio Tornado
AUTHOR: By John Seewer and Meghan Barr
PUBLISHER: The Associated Press
TEXT: MILLBURY, Ohio — A community whose high school was destroyed the day before graduation by a tornado that killed seven people, including the valedictorian’s father, rescheduled the ceremony as residents sifted through houses in many cases reduced to rubble.
The tornado was part of a line of storms that ripped through the Midwest on Saturday night and Sunday, destroying dozens of homes and an emergency services building in northwest Ohio.
Storms collapsed a movie-theater roof in Illinois and ripped siding off a building at a Michigan nuclear plant, forcing a shutdown. But the worst destruction was reserved for a strip up to 300 yards wide and 10 miles long southeast of Toledo left littered Sunday with wrecked vehicles, splintered wood and family possessions.
The tornado that hit Wood and Ottawa counties had estimated winds of up to 165 mph and was by far the most severe of four confirmed tornadoes to strike northern Ohio on Saturday, Will Kubina, a National Weather Service meteorologist in Cleveland, said Monday.