SOURCE: The St. Petersburg Times
DATE: Issue #1585 (46), Tuesday, June 22, 2010
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TITLE: Anti-Putin Pamphlet Draws Crowds
AUTHOR: By Sergey Chernov
PUBLISHER: Staff Writer
TEXT: Oppositional leader Boris Nemtsov caused a stir in central St. Petersburg on Friday when hundreds came to get a free copy of his anti-Putin report and his autograph. 
Nine hundred and sixty copies of the report, titled “Putin. Results. Ten Years,” which lists incidences of corruption and abuse of power during 10 years of Vladimir Putin heading the country and government, were gone within minutes, and Nemtsov and several nearby activists were swamped by people eager to obtain a copy and an autograph.
“I can’t recall such interest, not to say frenzy over our report,” Nemtsov, a former deputy prime minister of Russia and a leader of the Solidarity democratic movement, wrote on his blog Friday. Nemtsov was in Strasbourg and unavailable for comment by phone Monday.
Nemtsov came to St. Petersburg to present the report, which he co-wrote with economist and oppositionist Vladimir Milov, amid the high-profile St. Petersburg Economic Forum. He announced the signing session and pamphlet handout near Gostiny Dvor on Nevsky Prospekt, St. Petersburg’s main street, after large numbers of copies were seized by the police and five distributors detained.
The police, who arrived at the scene in large numbers before the event was due to begin, limited themselves to crowd control measures without making mass arrests.
“It was clear even to them that to arrest Nemtsov amid the Economic Forum, with a lot of foreign media in town, would cause a big scandal,” local Solidarity leader Olga Kurnosova said Monday.
One activist who handed out pamphlets close to a police bus was detained on the grounds of having no ID with him and released two hours later without charges.
Kurnosova attributed the event’s success largely to earlier actions by the police, who seized a truck carrying 100,000 copies of the report on Shpalernaya Ulitsa near the offices of the Yabloko Democratic Party on Wednesday, the eve of the first day of the Economic Forum.
The police said that the truck was initially stopped for traffic violations, after which inconsistencies in the cargo’s documentation were discovered, Interfax reported. The police then confiscated the pamphlets.
Kurnosova said she was told that the pamphlets had been sent for expert analysis to define whether or not they contained extremism. The copies had not been returned to their owners by Monday evening, she said.
On Thursday, Nemtsov said that another 100,000 copies of the pamphlet — one million copies of which were printed — had been seized by the police, while the web site 
www.putin-itogi.ru, carrying a full version of the report, was crashed by hackers. 
Earlier Friday, five Solidarity and United Civil Front activists were detained while carrying copies of the report that they intended to deliver to participants of the Economic Forum, which was held at Lenexpo. Kurnosova said they were detained and charged with distributing a mass periodical without including details of where it was printed.
“It was a completely idiotic situation,” Kurnosova said.
“I’m sure there will not even be a court hearing, because the charges have nothing to do with reality; the report has nothing to do with mass periodicals. Besides, it did have print data information.”

TITLE: City Reaps Rewards of Economic Forum
AUTHOR: By Irina Titova
PUBLISHER: The St. Petersburg Times
TEXT: City Hall signed contracts for more than 50 billion rubles ($1.63 billion) and received financial guarantees from Sberbank for infrastructure projects for about 100 billion rubles ($3.25 billion) at this year’s St. Petersburg Economic Forum.
“We reaped a very good harvest at the forum; we didn’t expect the results would be on such a high scale,” said St. Petersburg Governor Valentina Matviyenko.
The major contract signed at the forum was a concession agreement for the construction of the Orlovsky tunnel under the River Neva to connect the Smolnaya and Sverdlovskaya embankments.
The contract for the tunnel, whose construction has been delayed for years, was signed between City Hall and Nevskaya Concession Company. The construction is to begin in 2011, and is due to be completed by early 2016. The cost of the project is expected to total about 45 billion rubles ($1.46 billion). Matviyenko said the project was so important for the city that it would be good to complete it even earlier.
“This project is long awaited; it appeared on the city’s general plan back in the 1960s. Now we’ve got the real technical possibilities to realize it,” Matviyenko was quoted by Fontanka as saying after signing the project. “So let’s not make it slow down. I think we can decrease the length of the construction period.”
The project for the tunnel has changed from when the tunnel was first proposed. Initially, it was planned to build two parallel tunnels for traffic going in different directions, while the project now envisages the construction of one tunnel divided by an inner partition into two floors.
Deputy Governor Yury Molchanov said the alteration would reduce the cost of the tunnel. Construction of two tunnels was set to cost investors and the city budget about 60 billion rubles ($1.95 billion), while the new plan would cost about 44.7 billion rubles ($1.45 billion), Fontanka reported.
Investors said that apart from the construction details, nothing would change in the project. The tunnel will be about a kilometer long and will have a capacity of 60,000 cars per day.
When the tunnel opens, the city’s bridges will be raised for an hour longer than they currently are, which will help to significantly increase the traffic flow of the Volga-Baltiisky water route.
The financing of the project has also been revised. At the forum, Sberbank confirmed that it would put up 25 billion rubles ($814 million) for the project. Molchanov said the money would be extended as a loan to the investor. The city budget and the state investment fund will each allocate 33.3 percent of the total sum as planned.
French construction company Vinci and First Quantrum port construction company will invest in the project in equal shares.
Sberbank and the city signed several other agreements on financing St. Petersburg’s other key infrastructure projects: the Western High-Speed Diameter road and the Overland Express train from Pulkovo airport. The state bank will issue up to 60 billion rubles ($1.95 billion) for the Western High-Speed Diameter, 11 billion rubles ($358 million) for the Overland Express, and up to eight billion rubles ($260 million) for the construction of a new waste-processing plant in Yanino, just outside the city.
“Taking into account the reliability of Sberbank, we can be sure that these projects will be realized,” said Matviyenko.
Admiralteiskiye Verfi and United Shipbuilding Corporation also signed an agreement on plans to transfer the production facilities of Admiralteiskiye Verfi’s shipyard from Novy Admiralteisky Island, located close to the center of the city, to St. Petersburg’s suburb of Kronshtadt.
The project will free up 17 hectares of land in the city center that can be used for residential, commercial and social construction, the governor said.
The new location will be an improvement on the shipyard’s current cramped conditions and will allow production to be modernized.
The move of Admiralteiskye Verfi is planned to take place in several stages. First, a bridge will be built from Vasilyevsky Island to Novy Admiralteisky Island to improve transport access to the Vasileostrovsky and Admiralteisky districts. The construction of the bridge is due to begin next year and be completed by 2013. Then the transfer of the shipyard’s facilities will begin, and should be completed within six to eight years. The project is valued at about 20 billion rubles ($650 million).
RusHydro company, which also signed an agreement on collaboration with City Hall, is planning to build a wind park in St. Petersburg. The alternative energy source is set to become a part of the city’s energy system.
In addition to the project contracts signed at the forum, the defense industry company Almaz-Antei Concern concluded an agreement with City Hall on the opening of a northwest regional center for the concern. The project, worth 15 billion rubles ($488 million), envisages the construction of a machine-building technical park to design and produce high-tech military and civil parts at the Obukhovsky plant.

TITLE: President Medvedev Offers Promise of Change
AUTHOR: By Nikolaus von Twickel and Irina Filatova
PUBLISHER: The St. Petersburg Times
TEXT: President Dmitry Medvedev raced between panels and podiums this weekend to make the case that change in Russia is afoot, promising to reduce taxes and barriers to foreign capital to attract an urgently needed “investment boom.”
“We have changed — first of all because the whole world has changed,” Medvedev said in his keynote address Friday to a packed hall of Russian and foreign investors at the St. Petersburg International Economic Forum.
The message, which Medvedev repeated in a second speech Saturday, echoed recent Kremlin signals that it was adopting a friendlier foreign policy. Medvedev kicked off the theme earlier this year when he said Russia should display a smiling face instead of gnashing teeth that frighten others.
Medvedev on Friday announced a lower capital gains tax on long-term direct investment starting in 2011 and a huge reduction in the number of strategic companies with restrictions on foreign investment.
Plans to exempt investors from long-term capital gains taxes were first presented by the Finance Ministry in March in hopes of stimulating private equity and venture capital investment. But reports at the time said this would only apply to shares of companies not traded on exchanges.
Strategic industries like energy, aerospace, defense and media have been limited for foreign investment since a 2008 law that requires foreign companies wishing to invest to seek special permission from a commission chaired by Prime Minister Vladimir Putin.
Medvedev said he had signed a law on Friday morning that reduced the number of strategic enterprises from 208 to 41.
The new law will also reduce the number of so-called federal unitary enterprises from 230 to 159, he said.
Known by their acronym as FGUPs, these enterprises have been criticized as stifling competition and inviting wasteful government spending. Last year, the Federal Anti-Monopoly Service proposed eliminating all those that aren’t involved in strategic sectors.
Medvedev said that if conditions remained favorable, corporate taxes would be further reduced in the coming years. He said he had ordered the government to set up a new investment fund focusing on modernization where every ruble in state cash would be supplemented by 3 rubles from the private sector.
The president acknowledged that economic reforms could not be achieved by orders from above. Instead, he said, the government should focus on creating favorable overall conditions. “The state should not tear apples from the tree of economics. What it should do is help to grow our apple orchard, to develop our economic environment,” he said.
Forum participants reacted positively to the speech.
“His commitment to reforms … was very well received, not only among foreign but also among Russian business leaders,” Klaus Schwab, executive chairman of the World Economic Forum, told The St. Petersburg Times.
Dominique Cerutti, deputy CEO of NYSE Euronext, said that while the task ahead was formidable, he believed the country’s leaders were up to it. “The leaders in Russia are just incredible. The more I meet with them … the more I’m impressed,” he said in an interview.
Former World Bank president James Wolfensohn said that while Medvedev was openly addressing the right problems, the country now needed new approaches to solve its overly heavy dependence on natural resources.
Above all, he said in an interview, the government should pay more attention to changing the education system. “If you don’t do that, then your ability to confront the technological challenges becomes much less,” said Wolfensohn, who now works as a consultant.
Medvedev announced a state-sponsored exchange program to send more Russian students to the world’s leading research institutions. He also reiterated plans to make Moscow a global financial center and to make the ruble a global reserve currency.
French President Nicolas Sarkozy, who visited the forum on Saturday, called for closer cooperation with Europe. “The idea that Russia must protect itself from Europe and that Europe must protect itself from Russia is [an idea] of the past,” he said in a speech.
Other participants were more critical. In opening remarks Thursday, Swedish Foreign Minister Carl Bildt pointed to the country’s dismal performance in the latest Global Competitiveness Report, were Russia dropped 12 spots to No. 63 out of 137 this year, and in Transparency International’s corruption index, where it is firmly rooted near the bottom. “There are quite substantial problems that need to be addressed in Russia,” Bildt said.
Medvedev said nothing about who would govern the country after his presidential term ends in 2012. He did not mention his mentor, Prime Minister Vladimir Putin, with whom he has shared a tandem of power since 2008.
Putin, who stole headlines during last year’s forum when he berated factory owners in the nearby town of Pikalyovo for not paying wages, kept a markedly low profile this year, visiting factories in the Yaroslavl region on Friday and hosting talks with Croatian Prime Minister Jadranka Kosor on Saturday.
On Friday, opposition leader Boris Nemtsov handed out copies of his pamphlet “Putin. Results” to passers-by in central St. Petersburg. Earlier in the week, city police confiscated some 200,000 copies of the pamphlet, which criticizes Vladimir Putin’s 10-year rule as president and prime minister. (See story, page 1. )
Alexander Lebedev, the outspoken billionaire and media tycoon, said the political system should change, too. “Why do we keep fearing changes in the judicial system, elections, parties and parliament? Without a competitive playing field in politics, we won’t get very far,” he said on the sidelines of the forum, Kommersant reported.
Medvedev said in a second address Saturday that while economic changes would necessarily lead to political ones, the political changes should not change the system. “The economy cannot change while political structures remain absolutely stiff. But we will retain our values and adhere to our traditions and to the Russian Constitution,” he said.
Thomas Graham, an adviser to former U.S. President George W. Bush on Russia, said the pace of change had definitively picked up under Medvedev. “There is much more open debate, and [the government] is trying very hard to present a different Russia,” he told The St. Petersburg Times.
Graham said the situation was “not ideal” with human rights and media freedom, but there was visible progress. As an example, he pointed to the Internet. “You can find a full range of opinions online,” he said.
Washington-based Freedom House ranked Russia 175 out of 196 countries in its annual report on global press freedom this spring, and Internet usage in the country stands at about 30 percent, far below Western levels, while an even smaller fraction of people use the Internet as a source for political information.
Medvedev said in his speech Friday that information technology was a key factor for democratization and that he hoped Internet usage would reach 90 percent over the next few years.
Many of the forum’s panels focused on the Kremlin’s determination to push high technology, most notably with the project to establish an “innovation city” at Skolkovo outside Moscow. The plans naturally pleased those businesses affected. “The atmosphere was very good,” Telenor CEO Jon Fredrik Baksaas said after attending a closed-door meeting between Medvedev and business leaders Friday.
Baksaas said connecting most of the population to the Internet by 2015 was realistic if 3G and 4G high-speed wireless networks were expanded.
Medvedev held several closed-door meetings with top executives of large international companies Friday.
Subhanu Saxena, a global executive committee member of Novartis Pharma, said he liked “the very open environment” of the meeting.
Some debates, however, descended into outright boredom, perhaps most notably at Friday’s plenary session. Wall Street Journal editor Robert Thomson, who moderated the panel, wasted the opportunity to confront Medvedev with a hard-hitting question by asking him vaguely whether deflation was better than inflation, whereupon the president replied with an equally vague “it depends.” Thomson had just conducted a wide-ranging interview with Medvedev, which was published Friday.
Forum frustration was also felt by journalists when they learned that for security reasons they were barred from attending events if Medvedev was in attendance or close by. In a bizarre twist, that also affected Saturday’s panel on the future of the media, meaning that while journalists were debating their own future, interested reporters were forced to watch via online transmission without a chance to ask questions.
At Friday’s gas market discussion, the forum’s “change” theme received a decidedly conservative treatment as panelists said new forms of energy and natural gas would not challenge Gazprom’s market share.
Deputy Prime Minister Igor Sechin offered a staunch defense of the export monopoly’s pipeline model, disparaging the chances of alternative energy and saying U.S. supplies of shale gas were unlikely to dent sales to Europe.
The panel’s moderator, Morgan Stanley chairman Rair Simonyan, jokingly suggested that Daniel Yergin, chairman of Cambridge Energy Research Associates, could shorten his remarks because Sechin’s report had repeatedly cited his research.
More than 50 deals worth in excess of 15 billion euros ($18.5 billion) were signed at the forum, Kremlin economic aide Arkady Dvorkovich told reporters Sunday, referring to investment agreements, mergers and acquisitions and sales contracts.
“Lumping these figures all together isn’t quite correct,” he said. “But if we try to calculate the overall volume of various agreements that were reached, then it’s in excess of 15 billion euros.”

TITLE: Boy’s Murder Won’t Derail Adoption Treaty
AUTHOR: By Alexandra Odynova
PUBLISHER: The Associated Press
TEXT: MOSCOW — The stabbing death of an 8-year-old adopted Russian boy in the United States will “add determination” to efforts to quickly reach a U.S.-Russian agreement on adoptions, the Foreign Ministry said.
The body of Kirill Kazakov, named Jackson Attuso by his adoptive parents, was found stabbed multiple times with his throat slit after he went biking with his parents and twin brother in a park on June 11 in St. Francisville, Louisiana, the ministry said Friday.
The suspected killer arrested by police was identified as high school student Trevor Reese, 16. Local news reports said Reese turned himself in shortly after the apparently random killing.
News of the boy’s death surfaced as negotiators put the last touches to the adoption agreement, which Moscow demanded after a U.S. mother sent her 7-year-old adopted Russian son back to Russia unaccompanied on a plane in April.
“Against the backdrop of the recent tragic incidents involving Russian children adopted in the U.S., [Kazakov’s death] only adds determination in getting the Americans to restore order to adoptions, primarily through the soonest possible conclusion of an appropriate bilateral agreement,” Foreign Ministry spokesman Andrei Nesterenko said in a statement.
Before April, Moscow had raised concerns about the deaths of 17 Russian children at the hands of their adopted parents over the past 15 years.
Nesterenko complained that U.S. authorities had failed to notify Russia about Kazakov’s death promptly.
“We noticed that, contrary to the rules in force, our diplomatic missions were not formally informed about the death of Kirill Kazakov, who remained a Russian national after the adoption by the American family,” he said.
He said the boy’s death was not related to domestic violence and called for the killer to be brought to justice.
A U.S. judge has ruled that Reese, who turns 17 on July 31, can be tried as an adult for first-degree murder but cannot be sentenced to the death penalty because of his young age, The Associated Press reported.
West Feliciana Parish Sheriff Austin Daniel told local WAFB television that Reese made no attempt to escape and approached a carpenter in the neighborhood where he lived and told him to call 911 because he had stabbed a child.
Police were trying to identify a possible motivation for the killing.
The boy’s parents had adopted him, his twin brother and a third Russian boy.
Children’s ombudsman Pavel Astakhov, who is helping negotiate the new U.S.-Russian agreement on adoptions, said the parents might be liable for negligence. “It is clear that this tragedy was possible only because of a lack of parental control over the adopted child,” Astakhov said, RIA-Novosti reported.
A final round of talks on the adoption agreement is expected to be held in September, and a treaty might be ratified by the State Duma by the end of the year, an unidentified Russian negotiator told Itar-Tass on Friday.
U.S. families have adopted more than 14,000 children from Russia over the past five years, including 1,500 last year.

TITLE: Soccer Player Arshavin Launches Own Brand
AUTHOR: By Irina Titova
PUBLISHER: The St. Petersburg Times
TEXT: Andrei Arshavin, a soccer player with Russia’s national side and London’s Arsenal Football Club, launched his own clothes brand in St. Petersburg on Friday.
Arshavin said that he had developed the idea of creating his own brand as he fought against counterfeited goods being sold under his name.
“I hope my soccer activities will help to promote the brand,” Arshavin was quoted as saying by Interfax. “I will take part in the project, but soccer will remain in first place until the end of my career.” 
Arshavin said that he hoped to further expand the range of goods being produced under his brand in the future, but added that no alcohol or cigarettes would be produced in his name.
The soccer player said he was not afraid of any possible comparisons with British player David Beckham, who has worked extensively publicizing goods and brands in the fashion industry.
“Beckham became a brand long ago, and I don’t think that’s done him any harm,” Arshavin said.
Dmitry Mikhailov, the general director of Legenda, the firm managing the brand, said that the company is at present looking for partners, and that many firms had already expressed an interest. 
“We’ll be signing contracts in the near future,” Mikhailov said.
Mikhailov said the firm intends to sign agreements with Russian clothes manufacturers. The designs will be in a casual style and will include three lines — children’s clothing, young fashion and classic clothing for men.
The firm will also produce a range of souvenirs. 
Mikhailov said one of the founders of the company would be Arshavin’s mother Tatyana, and that the rights to the brand would remain in Arshavin’s possession.
The logo for the new brand features a black-and-white silhouette of Arshavin holding his forefinger to his lips — the gesture that the soccer player makes when celebrating his goals.
Arshavin was born in St. Petersburg and began playing for St. Petersburg’s premier side, Zenit, in 2000. In 2009 he moved to London’s Arsenal Football Club.

TITLE: Witnesses: Police Attack Uzbeks
AUTHOR: By Sergei Grits and Yuras Karmanau
PUBLISHER: The Associated Press
TEXT: NARIMAN, Kyrgyzstan — Kyrgyz government forces swept into an ethnic Uzbek village Monday, beating men and women with rifle butts in an assault that left at least two dead and more than 20 wounded, witnesses told The Associated Press.
The allegations were among the strongest Uzbek claims of official collusion in ethnic rampages that killed as many as 2,000 people last week and forced nearly half of the region’s roughly 800,000 Uzbeks to flee.
The operation in the village of Nariman on the edge of the main southern city of Osh will likely discourage the Uzbeks from returning, and fuel tensions ahead of a crucial vote on a new constitution Sunday.
Kyrgyzstan’s interim President Roza Otunbayeva said the ethnic violence was triggered June 10 by supporters of former President Kurmanbek Bakiyev seeking to derail the constitutional vote. The United Nations along with Washington and others have strongly backed the referendum, a necessary step before parliamentary elections can be held in October.
The capital, Bishkek, was also tense Monday because of fears of new unrest before Sunday’s vote. By mid-afternoon, most shopkeepers had packed up their wares and covered their store windows with metal shutters. Residents trace the fears back to a tape released by the government weeks ago on which two men identified as Bakiyev’s son and brother are heard discussing plans for causing public unrest in Bishkek on June 22.
Kyrgyz authorities said they conducted the sweep in Nariman to track down suspected criminals that had taken refuge in the village. They said seven people were detained on suspicion of involvement in the killing of the head of the local police precinct a week ago.
They did not immediately comment on the Uzbek charges of violence and brutality, but released images of men lying face down on the ground in a courtyard as uniformed troops armed with assault rifles stood by.
Emil Kaptaganov, the interim government’s chief of staff, said that two people had offered resistance and were killed, and that 23 asked for medical assistance following the sweep in Nariman.
Aziza Abdirasulova of Kalym-Shaly, a respected human rights group based in the Kyrgyz capital, provided the same casualty count. She said she believed the mostly ethnic Kyrgyz police were taking revenge for the killing of their chief. “They were driven by revenge and were acting like wild animals,” she said.
There have long been tensions between the two ethnic groups, both Sunni Muslims but speaking different Turkic languages. The Uzbeks, traditional farmers and traders, have been more prosperous than the Kyrgyz, who come from a nomadic background. In June 1990, hundreds were killed in a land dispute between Kyrgyz and Uzbeks in Osh.
Nariman is a relatively wealthy village of single-story adobe houses right outside Osh, its big and affluent households surrounded by orchards and fields. A handful of ethnic Uzbek refugees from Osh fled to Nariman during the unrest, and the villagers put up three circles of barricades to stop attackers from entering.
Madina Umarova, a 45-year-old resident of Nariman, said the troops wore brand-new uniforms and beat dozens of people, two of them to death. She named the victims as Sharaf Dustmatov and Kobil Turgunov.
“In each house, they would beat men and women with rifle butts,” Umarova said. “Soldiers set my passport on fire, they said we would not need them anymore.”
Another victim was 69-year-old Odiljon Turgunov, who died of cardiac arrest as soldiers yelled at his family, his daughter Sanobar Abdullaeva told the AP.
A funeral litter waited for his body at the entrance to his house for burial before sundown, according to Muslim rites.
Ethnic Uzbeks have accused security forces of standing by or even helping ethnic-majority Kyrgyz mobs as they slaughtered people and burned down neighborhoods. Military officials rejected allegations of troop involvement in the riots and said the army didn’t interfere in the conflict because it was not supposed to play the role of a police force.
Hundreds of thousands of Uzbeks remain in grim camps on both sides of the Kyrgyz-Uzbek border, fearing to come back despite shortages of food and water and bad sanitary conditions. Their reluctance to return could undermine Sunday’s referendum, seen as essential for the nation’s stability.
“Instead of calming people down, (the authorities) are just creating disturbances. Nobody will go back home now, the refugees are afraid,” said Mamyr Nizamov, head of an Uzbek council of elders in Osh. “When they come, the soldiers all say the same thing: that we have not earned our Kyrgyz citizenship and then they tear up our passports.”
Another Nariman resident, Alik Umorov, showed a fresh wound on his head, saying that a policeman beat him, took his cell phone and all his cash and stripped him of his passport.

TITLE: In Brief
TEXT: <strong>Bank Robber Arrested</strong>
ST. PETERSBURG (SPT) — A man suspected of attempted bank robbery was apprehended on Friday, Fontanka.ru reported. 
On Thursday night an attempt was made to rob Gazprombank on Komendantsky Prospekt. The front door locks were forced, but the arrival of police on the scene prevented the thief from getting inside. The detained suspect, a 23-year-old guard working at the bank, was allegedly armed.    

<strong>Hash Stash Seized</strong>
ST. PETERSBURG (SPT) — The St. Petersburg office of the Federal Narcotics Control Department (FNCD) said it had seized 320 kilograms of Afghan cannabis on Monday, Interfax reported. Three Azeri citizens were arrested in the raid, the authorities said. 
“The drug dealers were hoping to make 96 million rubles ($3.1 million) from the sale of this amount of hashish,” officials from the FNCD said, Interfax reported.
The drugs were hidden in granite slabs that were packed in wooden crates. The pressed hashish had markings proving its Afghan origin, the FNCD officials said.
According to the officials, the narcotics had initially been shipped to Iraq, and then on to Astrakhan, from where they were transported to St. Petersburg. 

<strong>Ship Ruins Found</strong>
ST. PETERSBURG (SPT) — Divers of the Liepajas exploration group have discovered the remains of a large wooden ship in the Baltic Sea. 
There are indications that the wreck is the 18th-century Russian ship the Moskva, Valery Kravtsov, head of the Liepajas group, told Interfax.
The divers have retrieved metal nails that are being examined to determine the age of the ship. The expedition is now looking for cannons, of which there were about 60 on the Moskva, some of which have already been located. The Moskva was built at the Admiralty in St. Petersburg and set sail in 1715. The ship took part in the final stages of the Great Northern War against Sweden.

<strong>EXPO 2020</strong>
ST. PETERSBURG (SPT) — St. Petersburg may host EXPO, a world fair that would attract thousands of visitors to the city in 2020, Governor Valentina Matviyenko said at the St. Petersburg Economic Forum last week. 
Matviyenko said that a large congress center not far from Pulkovskoye Shosse is already under construction and a similar facility is planned for the Strelna region to the south of the city.
Plans and research for both projects have been completed and building will begin in 2011. “We believe that St. Petersburg can be considered a suitable venue for EXPO 2020 when these projects are completed,” Matviyenko said. Matviyenko did not rule out that one of the centers could be used as a new venue for the Economic Forum in the future. 

<strong>Mussolini Essay Banned</strong>
MOSCOW (SPT) — Ufa’s Kirovsky District Court has banned “The Doctrine of Fascism,” an essay by late Italian dictator Benito Mussolini, for being extremist, Interfax reported Friday, citing local prosecutors.
The essay, which is to be added to the Justice Ministry’s list of extremist materials, is currently available online, the Ufa prosecutor’s office said in a statement.

<strong>Cop Jailed for Killing</strong>
MOSCOW (SPT) — Moscow police officer Anver Ibragimov was sentenced Friday to 15 years in a maximum-security prison for beating to death a young Abkhaz native near the Kuzminki metro station in southeastern Moscow in November, Interfax reported.
Investigators say Ibragimov and two other policemen, all drunk, attacked two Abkhaz natives and one of them, Eduard Gurtskaya, later died in hospital.

TITLE: Medvedev, Obama To Meet in the U.S.
AUTHOR: Lyubov Pronina
PUBLISHER: Bloomberg
TEXT: MOSCOW — Dmitry Medvedev and Barack Obama will try to jumpstart economic links this week as Russia’s president travels to Silicon Valley and Washington, building on improved political ties after the U.S. “reset” relations.
Medvedev, who plans to build a Russian “Silicon Valley,” goes to California on Tuesday to meet with technology leaders as Cisco Systems pledges to “dramatically” increase investment in Russia. He goes to Washington for talks with Obama on Thursday. The presidents will also meet with business leaders, including Boeing Chief Executive Officer Jim McNerney.
Since Obama called for a reset in relations with Russia last year, the countries have signed a nuclear arms reduction treaty and agreed to increase cooperation in Afghanistan. Russia also supported a U.S.-led proposal for sanctions against Iran. Both the Kremlin and White House say Medvedev’s visit is a chance to push that cooperation into the sphere of business.
“We’ve made progress on political and security issues of late and now we have a chance to make a parallel progress on some very important economic issues, an economic reset,” Robert Hormats, U.S. undersecretary of state for economics, energy and agriculture, said Thursday in an interview at the St. Petersburg International Economic Forum.
The $18.4 billion of trade between the U.S., the world’s biggest economy, and Russia, the largest energy exporter, doesn’t reflect the potential relationship between the two countries, Russian Economy Minister Elvira Nabiullina said.
The U.S. is Russia’s eighth-largest trading partner, with crude oil, aluminium, titanium and fertilizers accounting for more than 80 percent of the goods shipped to the U.S., according to ministry statistics.
“We are interested in accelerating investment cooperation,” she said Thursday at the St. Petersburg forum. “We are interested in attracting U.S. direct investment for modernizing and diversifying our economy.”
Medvedev must convince U.S. investors they can make money in Russia and the state will protect their interests, said Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow.
“He needs to leave the U.S. having firmly planted the notion that Russia is, after all, not the mixture of Orwell’s vision of 1984 and Mafia Central that many Americans think it is,” Weafer said.
The Obama administration has suggested calling this week’s visit “a summit of innovation,” Foreign Minister Sergei Lavrov said Saturday.
The 44-year-old Russian president has made diversifying away from energy exports and improving the investment climate his primary policy goals. He named billionaire Viktor Vekselberg and Craig Barrett, former CEO of Santa Clara, California-based Intel Corp. as co-chairmen of his plan to build a technology hub in Skolkovo, outside Moscow.
U.S. technology companies will pledge to participate in the Skolkovo project during the Silicon Valley visit, billionaire Vekselberg said Saturday in St. Petersburg.
Emerging from a meeting with Medvedev in St. Petersburg, Barrett said Intel and Chicago-based Boeing are interested in Skolkovo. Vekselberg said talks are also underway with Google, Microsoft and Cisco.
“I suspect he will learn something, see some good examples there that will help to sharpen his resolve,” Barrett said of Medvedev’s trip to California. “Whether that visit does something back here in Russia I think you just have to wait and see.”
As Medvedev moves on to Washington, Boeing is expected to sign an agreement to sell more than $3 billion of 737s to Russia, Alexander Shokhin, president of the Russian Union of Industrialists and Entrepreneurs, said in an interview Thursday. Shokhin heads a delegation of businessmen who will meet with their U.S. counterparts and both presidents on Thursday.
Moscow-based Russian Technologies Corp., which controls an alliance of six domestic carriers, this month chose Boeing to supply at least 50 narrow-body planes. 
Sergei Kravchenko, head of Boeing’s operations in Russia, declined to comment on any future deals, saying that CEO McNerney will be among those attending Thursday’s meeting.
Russia is also seeking U.S. participation in the development and production of a heavy-lift cargo plane, an idea Medvedev raised during Obama’s visit to Moscow last July. The government needs funding and customers to resume production of the Soviet-designed Antonov-124, which carries outsized cargo for anyone from the military to pop stars.
The project could become “the largest cooperation effort between the two countries since the International Space Station,” Alexei Fyodorov, CEO of Moscow-based United Aircraft Corp., said in an interview Wednesday.
The U.S. would have to lift restrictions on access to technology for a project of this scale to succeed, said Shokin of the Union of Industrialists.
Medvedev has repeatedly said he is counting on the Obama Administration to support Russia’s bid to join the World Trade Organization after 17 years.
For a real improvement in trade prospects, the U.S. must drop the Jackson-Vanik amendment, said Mikhail Margelov, chairman of the Foreign Affairs Committee in Russia’s upper house of parliament.

TITLE: Berezovsky Wins $52.6 Million in Court
PUBLISHER: Bloomberg
TEXT: MOSCOW — Boris Berezovsky, the Russian billionaire with U.K. political asylum, won a $52.6 million judgment Monday against a former employee who defaulted on a loan for an oil-trading business.
Ruslan Fomichev, his business partner Vasily Peganov, and their trading company Anstead Holdings must repay $47 million plus interest on a 2003 loan from North Shore, an offshore entity set up by Berezovsky, Judge Guy Newey ruled Monday in London’s High Court.
The dispute arose after nearly half of the loaned money was frozen by Swiss authorities as part of a probe into embezzlement claims against Berezovsky related to the Russian carrier Aeroflot, according to court documents. Fomichev claimed the contract could be avoided because Berezovsky failed to warn him that the money could be frozen if it were deposited in Switzerland. Newey disagreed.
“A contract cannot be rescinded for misrepresentation” unless the borrower “was induced to enter into the contract by the misrepresentation,” Newey said in the 86-page judgment. “North Shore’s claims against Mr. Fomichev and Mr. Peganov succeed.”
Fomichev worked for Berezovsky in various capacities from about 1995 to 2008, court papers show. His trading business had revenue of as much as $150 million in 2002, the year before the loan was made, according to court papers.

TITLE: Crude Rises to $78 a Barrel, Driving Stocks to New High
PUBLISHER: Bloomberg
TEXT: MOSCOW — Russian stocks advanced to their highest level in more than a month Monday as crude rose above $78 a barrel and metals rallied after China signaled an end to the yuan’s fixed rate to the dollar.
Lukoil, the country’s second-biggest oil producer, added 2.4 percent, and mining company GMK Norilsk Nickel gained 3.1 percent. Severstal, the nation’s largest steelmaker, jumped 7.2 percent. The Micex Index rose 2.5 percent to 1,401.3 as of 4:09 p.m. in Moscow trading, its highest intraday level since May 13.
The People’s Bank of China said it may allow the yuan to strengthen, boosting demand for nations who sell products to the world’s third-largest economy. The central bank indicated it’s abandoning the 6.83 yuan peg to the dollar adopted during the global financial crisis to shield exporters, a sign policy makers see the global economy recovering.
“The market should be well supported today, on the back of a positive reaction to China’s” announced currency shift, John Heisel, a sales trader at Citigroup Inc. in Moscow, said by telephone. “Oil names should rally on the back of crude’s major jump.”
Severstal and Evraz Group, Russia’s two largest steelmakers, both surged by the most in over a month. Novolipetsk Steel gained for the first time in four days, rising 2 percent to 86.8 rubles.

TITLE: In Brief
TEXT: <strong>Popov to Keep Shares</strong>
MOSCOW (Bloomberg) — Russian billionaire Sergei Popov said he doesn’t plan to sell shares in MDM Bank, Russia’s second-biggest non-state lender.
Popov, 38, said he’s postponed an initial public offering of Siberian Coal Energy, the country’s largest producer of coal for power stations, which he co-owns, until at least the fall after markets slumped. Michel Perhirin, MDM’s former chief executive officer, said the bank would consider a share offering after 2009 in an interview with Bloomberg Television in 2007.
“We’ll keep the bank private,” Popov said in an interview in St. Petersburg on Saturday. Popov controls 56 percent of MDM after the lender merged with Novosibirsk-based Ursa Bank, according to MDM’s website. Forbes magazine valued Popov at $5 billion this year.

<strong>Gazprom Neft Invests</strong>
MOSCOW — Gazprom Neft, the oil arm of the world’s biggest gas producer, plans to invest 500 million euros ($620 million) to upgrade a Serbian refinery in the next two years, the Russian company said.
Gazprom Neft will install a hydrocracking unit at the refinery, part of Naftna Industrija Srbije, at a cost of about 396 million euros by the third quarter of 2012, the company said in an e-mailed statement Monday.

<strong>Deripaska Forecast</strong>
MOSCOW (Bloomberg) — Billionaire Oleg Deripaska’s forecast for a potential aluminum shortage and record global car output predicted by Carlos Ghosn mean the world’s second most-used metal may be about to rebound.
Smelters will shut this quarter because about 70 percent are unprofitable after aluminum fell as much as 27 percent in two months, said Deripaska, chief executive officer of United Co. Rusal, the largest producer. Ghosn, CEO of Renault and Nissan Motor Corp., expects car production to gain about 11 percent this year. Transportation is the biggest use for aluminum.

<strong>OGK-4 Income Down</strong>
MOSCOW (Bloomberg) — OGK-4, the Russian utility controlled by E.ON AG, said net income declined 11 percent last year from 2008 to 5.52 billion rubles ($179 million) as the economy shrank the most on record.
Revenue climbed 13 percent in the period to 42.9 billion rubles under international accounting standards, OGK-4 said on its web site.

<strong>RusAl Shares</strong>
MOSCOW (Bloomberg) — United Co. RusAl’s so-called cornerstone investors will probably hold shares after the lock-up period even as the stock plunged 30 percent since it started trading in January, the Russian billionaire chief executive officer of the world’s largest aluminum company said.
“I think they will hold,” Oleg Deripaska said in an interview in St. Petersburg on Saturday. Deripaska said he wasn’t aware that key investors were thinking of selling RusAl shares. 
New York hedge-fund manager Paulson & Co., Hong Kong billionaire Li Ka-Shing, Malaysian tycoon Robert Kuok and Nathaniel Rothschild backed RusAl’s $2.24 billion initial public offering in Hong Kong as so-called cornerstones. They are guaranteed shares in return for a pledge not to sell them for six months after RusAl starts trading. Vnesheconombank, Russia’s state-lender, took 30 percent of the offering.

TITLE: Rosneft Prepares Investors for End to Major Tax Breaks
AUTHOR: By Anatoly Medetsky
PUBLISHER: The St. Petersburg Times
TEXT: The tax discount on Rosneft’s crude exports from East Siberia will likely end at the start of next year, chopping off a thick slice of the state oil producer’s would-be profit, Deputy Prime Minister Igor Sechin said Friday.
Chief executive Sergei Bogdanchikov, whose future in the post remained in doubt after Friday’s annual shareholders meeting, said the change would not slow down investment in the region, where it operates its largest field, Vankor.
Rosneft, the world’s second-largest oil company by reserves after ExxonMobil, has gained the most from the current zero duty on exports from difficult new deposits in East Siberia. TNK-BP and Surgutneftegaz are also reaping benefits from the tax holiday, which the government may replace with a tax discount in July.
Sechin, who is also Rosneft’s chairman, reiterated on Friday that companies would pay the full export duty once they are making a profit of at least 15 percent on their operations in the region.
“Rosneft will move over to that arrangement starting next year,” Sechin said in closing comments at the shareholders meeting.
Energy Minister Sergei Shmatko, speaking separately at the St. Petersburg International Economic Forum, also said the change was a possibility, although he put the threshold at 16 percent.
The profit per share at Rosneft, the country’s biggest taxpayer, would drop by as much as 21 percent in that case, Deutsche Bank analyst Pavel Kushnir said in a note to investors.
Rosneft’s shares closed up 0.7 percent in Moscow, slightly lagging the benchmark MICEX Index’s gain of 0.9 percent.
Under the latest government proposal, the interim discounted duty would measure 45 percent of the regular duty and not apply to the portion of the oil price that is below $50 per barrel.
Bogdanchikov said Rosneft, which has sunk 247 billion rubles ($8 billion) into Vankor to date, would continue to invest to raise output, even if the higher duties kicked in. The company plans to spend $2.6 billion developing the jumbo field this year.
“I am sure the government will make investment an attractive decision,” Bogdanchikov told reporters on the sidelines of the general meeting. “We mustn’t lose the investment rhythm. If we cede some of the market, others will take over. Go try winning it back later.”
Rosneft expects Vankor’s output to account for an impressive 10 percent of its anticipated total of 118 million tons this year, he said.
Minority shareholder CNPC, China’s largest oil and gas producer, asked a written question at the meeting about how the potential increase in the export duty would affect the price for East Siberian oil, which has been a hit in Asian markets.
Bogdanchikov replied only that there had been no decision yet on the increase.
Rosneft plans to invest 385 billion rubles ($12.4 billion) this year, including 184 billion rubles of its profit. The rest will come from such sources as a $15 billion loan from China that Rosneft is going to draw down this year. Rosneft, in return, agreed to long-term exports to China.
Bogdanchikov, whose contract as Rosneft CEO expires June 29, was elusive about his future at the company, as was Sechin. The meeting, where the state controls 85 percent of the vote, re-elected the entire board including Bogdanchikov and Sechin as its chairman.
The session of the new board, however, did not discuss the contract, an issue that is part of the board’s purview under changes approved by the company last year. Bogdanchikov appeared upbeat Friday, often beaming smiles when fielding questions from reporters.
Russian wire service reporters, trying to divert his attention from chatting with shareholders during a break in the meeting, kept saying they brought him good news from Sechin, who had said separately earlier that day that the government had not considered a replacement for Bogdanchikov.
“Are you sure it’s good news?” Bogdanchikov joked, when he was finally ready for questions.
Bogdanchikov has been Rosneft president since October 1998, and speculation about his future there has cropped up repeatedly in recent years.
In an unusual twist, Rosneft held its annual meeting outside Moscow for the first time. The move resulted in a smaller turnout, with just 205 shareholders registered for the event, compared with 875 last year.
Some of Rosneft’s regular critics, however, made the trip to voice their concerns. One shareholder, Dmitry Udalov, asked whether independent directors on the board, who are appointed by the government, are genuinely independent. He noted that Rosneft was making a substantial deposit this year at the bank of one such independent director, VTB chief Andrei Kostin.
Company officials said there was no conflict of interest. 
Bogdanchikov defended the meeting’s location, saying the company wanted to get closer to its shareholders in and around St. Petersburg, who represent some 13 percent of the total. Moscow and the surrounding region is home to 20 percent of all shareholders.
“We are a mobile company,” he said at a news conference to a question from The St. Petersburg Times. “What makes shareholders here worse than those in Moscow?”

TITLE: Sanofi-Aventis Opens New Insulin Factory in Oryol
AUTHOR: By Irina Filatova
PUBLISHER: The St. Petersburg Times
TEXT: Sanofi-Aventis, Europe’s biggest drug maker, reopened an insulin plant in southwestern Russia under its own banner on Saturday, in a move hailed by the government as a step toward increasing the country’s pharmaceuticals self-sufficiency.
The Sanofi-Aventis Vostok plant, located in the Oryol region, 350 kilometers southwest of Moscow, will produce human and analog insulin — medicines Russia is currently importing from Germany — as well as a new model of insulin-delivery pens.
The most difficult decision for pharmaceuticals companies entering emerging markets is deciding where to invest, and a key factor is government policies aimed at modernizing the pharmaceuticals industry, said Olivier Charmeil, Sanofi-Aventis’ senior vice president for East Asia.
“And it’s very clear that one of the priorities of the [Russian] government is definitely health care,” he said at the opening ceremony, held at the St. Petersburg International Economic Forum.
Sanofi-Aventis’ acquisition of the plant last year was welcomed by the government as a step toward increasing the country’s medical self-sufficiency. Replacing medical imports with domestic products is part of President Dmitry Medvedev’s plan to modernize the country’s pharmaceuticals industry, one of his five priority sectors for modernization.
Industry and Trade Minister Viktor Khristenko said Saturday that Russia’s pharmaceuticals industry needed 188 billion rubles ($6 billion) of investment over the coming decade, adding that the government would appropriate as much as 120 billion rubles of state funds for research and development.
“We are ready to provide financial resources to pharmaceutical companies. … The development of Russian pharmaceuticals will not go through without help from the state,” he told reporters at the forum, Reuters reported.
The Sanofi-Aventis facility will become a base for expanding production in the country, as the company hopes to eventually start manufacturing other products in its portfolio, said Patrick Aghanian, the company’s chief in Russia.
“We hope it will be the base for expanding into other therapeutic areas. … We have a big portfolio of cardiovascular products [and] oncology products, not to mention generics,” he told The St. Petersburg Times in an interview after the opening ceremony.
Sanofi-Aventis has been producing a vaccine for poliomyelitis in Russia since 2008 and is likely to expand production, Aghanian said.
By the end of the year, the company hopes that the factory will be re-equipped to begin production on a new model of the insulin pen, which will be disposable and replace the old refillable model the plant is currently producing.

TITLE: Gasunie Chief to Spearhead South Stream
AUTHOR: By Anatoly Medetsky
PUBLISHER: The St. Petersburg Times
TEXT: ST. PETERSBURG — Gasunie’s outgoing chief, Marcel Kramer, will lead Gazprom’s efforts to build the South Stream undersea pipeline to Europe, giving the world’s biggest gas producer another international business leader to lobby a controversial project.
Gazprom previously hired former German Chancellor Gerhard Schroeder to oversee another undersea pipeline, Nord Stream. The project’s construction in the Baltic Sea started in April after protracted debate and protests in states that had to approve its passage through territorial waters.
Both pipelines were conceived to diversify gas export routes away from unreliable transit countries, notably Belarus and Ukraine. But the South Stream project, which would pass beneath the Black Sea, will cost too much to recoup the investment, industry insiders argue.
“We can’t do anything that’s not competitive,” South Stream board director and chief executive Kramer told The St. Petersburg Times, defending the plan on the sidelines of a news conference where Gazprom chief Alexei Miller announced the appointment.
Kramer conceded that he was unaware whether the cost of carrying the gas under the water would be higher than shipping it overland through Ukraine, which has invited Russian and European Union investment in expanding its transit network.
Even so, such pipelines have long enough life spans — some 30 to 40 years — to make a return on the money spent building them, said Kramer, who helped construct a major underwater pipeline from the Netherlands to Britain as head of Gasunie, the Dutch natural gas infrastructure and transportation company.
Kramer will officially start in his new South Stream capacity Oct. 1, after resigning from Gasunie at the end of August. Gasunie announced that he would be leaving in April.
He told reporters that it was a “great honor for me to work for Gazprom and its partners” on the project.
Currently, Italy’s Eni is the only other investor, although France’s EDF, the world’s largest nuclear energy producer, agreed Saturday to join the project by the end of this year. It will take “at least 10 percent” from Eni’s 50 percent holding, the three companies said in a joint statement.
Kramer, who will turn 60 in August, joined Gasunie in 2003 after 12 years with Norway’s Statoil and several other international positions. Under his tenure, Gasunie built a major pipeline to Britain, BBL, and became a shareholder in Nord Stream, where he is also a board member.
Miller indicated that South Stream might change course to exclude Bulgaria, which had disappointed Russia by dragging its feet on other energy projects, such as construction of an oil pipeline and a nuclear power reactor. Instead of surfacing near Bulgaria’s city of Varna, the pipeline could run to Romania, Miller suggested.
“As for Romania, I mean studying the feasibility of a major transit pipeline to Serbia,” he said, adding that choosing the route would preclude a Bulgarian section.
The current plan is to lay the pipeline to Serbia — and on to other southern European customers — through Bulgaria. Gazprom and partners will complete the feasibility study in three months at most, Miller said, adding that Romania was also offering broader cooperation in the energy field.
Gazprom estimates South Stream will cost at least $28 billion to build and come on line in December 2015.
Miller also hinted that the undersea portion of the pipeline could pass through Ukraine’s economic zone of the Black Sea, rather than through Turkish waters as planned. He linked the option to the outcome of the ongoing merger talks with Ukraine’s national energy company, Naftogaz Ukrainy.
Asked by The St. Petersburg Times about the chance of laying the potential pipeline to Romania through Ukrainian waters, he said enigmatically that Naftogaz would automatically become involved in South Stream, should it become one company with Gazprom.
As a first stage in a merger, Gazprom wants to set up a 50-50 venture with Naftogaz that would pull together assets including Ukraine’s gas transit network and production units with a major Gazprom field, Miller said. The venture will be possible only if the company agrees on an eventual merger, he said.
Ukrainian poilticians have been reluctant to agree to such a deal, which would see the much smaller Naftogaz virtually swallowed up by Gazprom.
Also on Saturday, France’s GDF Suez agreed to buy 9 percent in Nord Stream from Germany’s Wintershall and E.On Ruhrgas, the companies announced in a statement. The German partners will each cede 4.5 percent of their current 20 percent stakes. Gazprom holds 51 percent of Nord Stream, while Gasunie owns the remaining 9 percent.

TITLE: Russia Reduces Gas to Belarus
AUTHOR: By Anna Smolchenko
PUBLISHER: Agence France Presse
TEXT: MOSCOW — Russia reduced natural gas supplies to Belarus on Monday after Minsk failed to settle a debt, brandishing again the country’s energy clout and raising the spectre of supply disruptions to Europe.
The flow of Russian gas to Europe via Belarus was not immediately interrupted after the reduction, Belarus’s energy ministry said.
But analysts warned of “a new gas war” and said the Kremlin move was aimed at punishing its wayward neighbor, whose maverick President Alexander Lukashenko has irritated Moscow by dropping his dependable loyalty in favour of a quest for closer ties with the European Union.
Russian President Dmitry Medvedev told the chief of Russian gas giant Gazprom, Alexei Miller, to close the tap on Russian gas supplies after Belarus failed to settle nearly 200 million dollars (160 million euros) in debt.
Medvedev told Miller to reduce gas supplies to Belarus after the Gazprom chief said Belarus, which is heavily dependent on Russian subsidies, had failed to come up with money and instead was offering equipment and machinery to cover the debt.
In a humiliating broadside at Lukashenko, Medvedev said he should come up with hard cash — and not goods — to pay the bill.
“Gazprom cannot accept anything towards the payment of the debt, neither pies nor butter not cheese nor pancakes nor other means of payment,” Medvedev said.
“From 10 a.m. Moscow time on June 21, 2010, we are introducing a regime of limiting supplies of Russian gas to Belarus by 15 percent of the planned daily volume,” Miller said in televised remarks.
Miller said talks were continuing but that the gas cuts would be increased to 85 percent in the coming days if a solution to the conflict is not found.
Anatoly Filonov, the deputy Belarussian economic minister who led the gas talks in Moscow, said the “talks were continuing”.
He reiterated Minsk’s claim that Gazprom owed Belarus more than 200 million dollars for gas transit to Europe.
The European Union closely watches gas disputes between Russia and its ex-Soviet neighbours after a row between Moscow and Kiev led to supplies of Russian gas to Europe via Ukraine being cut off for two weeks early last year.
Belarus transports about 20 percent of Russia’s western-bound gas exports.
Gazprom has insisted the cut would not affect its European clients and analysts say the impact of any potential European gas disruptions would not be serious in the summer due to lower gas demand.
Valery Nesterov, a gas analyst at Troika Dialog, said the dispute risked damaging the gas giant’s already battered reputation.
“The use of gas as an instrument of political pressure is continuing,” he said.
Renaissance Capital analyst Alexander Burgansky said that “a new gas war looms with Belarus” but said the dispute was likely to be over by autumn.
Miller said gas supplies would be cut “gradually, day by day, proportionally to the volume of the debt.”
Gazprom said last week Belarus owed it 192 million dollars in unpaid debts and gas exports would be reduced by 85 percent if the debt was not settled.
Gazprom says Belarus unilaterally chose to pay for gas supplies at last year’s prices and last week gave Minsk five days to pay off the debt.
Lukashenko says Belarus should pay less for oil and gas if the two countries are serious about ramping up economic cooperation.
Russia and Belarus have been building a single customs bloc but Lukashenko stayed away from a key meeting last month, forcing Russia and Kazakhstan to launch the customs union without Belarus.

TITLE: Oligarch Khodorkovsky Gets Boost During Trial
AUTHOR: By Simon Shuster
PUBLISHER: The Associated Press
TEXT: MOSCOW — Imprisoned tycoon Mikhail Khodorkovsky received a boost in his embezzlement trial on Monday when a former government minister told a Moscow court that the massive theft the magnate is charged with could not have taken place without official knowledge.
Once Russia’s richest man, Khodorkovsky has already served six years of an eight-year sentence for tax evasion. As his release date approached last year, prosecutors hit him with the new charges of embezzling of $25 billion in petroleum products. If convicted, the 46-year-old Khodorkovsky faces up to 22 more years in prison.
The three hours of testimony by German Gref, who was minister of economic development when the crackdown against Khodorkovsky began in 2003, may not sway Russia’s notoriously weak court system. But they showed that some of Russia’s top insiders are prepared to take the stand in defense of the embattled oligarch.
“Checking on such matters was not part of my job, other agencies exist for that ... However, if embezzlement had been discovered, I would have been made aware of it,” said Gref, a liberal economist who is currently chairman of Sberbank, Russia’s largest bank.
Outside the courtroom, Khodorkovsky’s lawyers described Gref’s statement as a major victory.
“It shows that at the time when this oil was allegedly being stolen, the government did not know it. So for prosecutors to claim now, many years later, that this oil was then being embezzled looks all the more unreasonable,” defense lawyer Konstantin Rifkin said.
Monday’s hearing was unusual in that the court allowed Khodorkovsky to question Gref, who was deputy head of the State Property Ministry when Khodorkovsky took control of the Yukos oil corporation.
Through the small window in the defendant’s cage, Khodorkovsky, who has served most of his sentence in a Siberian prison, stuck to a technical line of questioning, appearing nervous at the chance to interrogate a man so close to his perceived enemies in the government.
Gref drew snickers from the court audience when he was unable to answer whether he sat on the board of a state pipeline company, but he admitted that it was perfectly legal for Yukos to buy oil at steep discounts from its subsidiaries — one of the methods the prosecution is claiming that Khodorkovsky used to embezzle the oil.
The new trial is becoming a who’s who in Russian politics. Last month former Prime Minister Mikhail Kasyanov testified on behalf of Khodorkovsky — calling prosecutors’ charges “absurd” — and on Tuesday former energy minister Viktor Khristenko is scheduled to take the stand.
Khodorkovsky’s lawyers have tried to call Prime Minister Vladimir Putin as a witness, as well as numerous other officials who have direct knowledge of the state’s campaign to dismantle Yukos.

TITLE: Finance Minister Kudrin Says Gas Price and Retirement Age Going Up
PUBLISHER: The St. Petersburg Times
TEXT: Russians face higher gasoline prices and a longer slog until retirement, Finance Minister Alexei Kudrin said, signaling potentially unpopular changes as the country heads towards elections.
Like many nations, Russia is suffering from a pension fund deficit, with a hole exceeding 1 trillion rubles ($32 billion).
“This will inevitably lead to the retirement age being increased. It is even difficult to debate. When we decide this — in a year, in two, in five — is not as important now as the fact that we will have to do it,” Kudrin said Friday at the St. Petersburg International Economic Forum, Reuters reported.
The comments suggest that Russia’s leaders — who face parliamentary and presidential elections in the next two years — may be faced with some unpopular decisions. Kudrin also signaled that Russians may have to deal with higher gasoline prices and thus inflation, proposing that excise duty on gasoline be increased by three rubles per liter during the next three years.
Earlier in the week, Kudrin said an excise tax on gasoline was among the possible sources of extra cash for the budget as Russia strives to reduce its deficit.

TITLE: BP Chief Hayward Plans Trip to Russia
PUBLISHER: Agence France Presse
TEXT: LONDON — BP chief executive Tony Hayward is planning a trip to Russia to reassure President Dmitry Medvedev the oil giant is not on the verge of collapse, the Financial Times reported Monday.
Hayward will meet with Medvedev and tell him that BP can meet the cost of the liabilities from the Gulf of Mexico oil spill, said the paper, without citing a source. The timing of the trip has not been finalised, it added.
The company last week announced a 20-billion-dollar compensation fund to deal with claims arising from the spill.
BP is present in Russia through TNK-BP, the third largest oil producer in the country, accounting for roughly a quarter of BP’s global production.
Hayward’s decision to visit Russia came after Medvedev expressed concern last week over the future of the company, in a newspaper interview.
“What I know is that BP will have to pay a lot of money this year,” the president was quoted Thursday as telling the Wall Street Journal.
“Whether the company can digest those expenditures, whether they will lead to the annihilation of the company or its breakup into pieces is a matter of expediency.”
As well as being saddled with the huge clean up and compensation costs, the oil firm’s credit worthiness has been slashed and its shares have slumped on the stock market in the wake of the spill.
The environmental disaster began on April 20, when a explosion ripped through the Deepwater Horizon rig, killing 11 workers.
Hayward’s recent efforts to pacify American anger have proved disastrous, and the oil chief was under fire again Sunday when U.S. politicians blasted him for attending a yacht race.
Media reports that he went to the race off the Isle of Wight, the day after he was removed from management of the oil leak disaster, drew fierce criticism from the U.S. administration.

TITLE: Modernize or Marginalize
AUTHOR: By Anders Aslund and Andrew Kuchins
TEXT: Now that the global financial crisis has abated, this is a good time to take Russia’s pulse. We have just edited a book with 12 chapters written by Russians and Americans. The consensus from the authors was clear: Russia has weathered a perfect storm of oil price decrease, reversed capital flows and political isolation following the August 2008 war with Georgia. Russia’s short-term prospects appear neither dramatic nor problematic.
Yet Russia faces serious structural challenges in the long-run. The book’s authors unanimously concluded that the current system is no longer suitable for the challenges ahead and is facing a dead end. This includes the economy, politics, the rule of law, Gazprom, the Commonwealth of Independent States, foreign relations in general, foreign economic relations and the armed forces.
This discussion is reminiscent of the one in the 1970s about how the Soviet Union would transition from “extensive” growth based on the mobilization of resources to “intensive” growth based on increased efficiency and productivity. The big difference is while reform of the Soviet economic system was not possible, reform of the current state-capitalist system is. In some cases, such as in the military, reform has already started. But if Russia is to succeed in the long run, it urgently needs more comprehensive restructuring.
The good news is that Russia has substantial assets — natural resources and human capital — and huge potential for further change. These changes are not going to be easy, but if they happen the country will be able to capitalize on the true value of its assets.
One of the most profound structural problems facing Russia’s future development is the erosion of federalism, the inevitable result of consolidating so much authority in the Kremlin under the power vertical model. Other broad areas of structural concern are the rule of law, state regulation of enterprise and innovation. Disturbingly, corruption has gotten worse since 2000. One consequence is that big companies are given an unfair advantage over small firms. This hampers the development of small businesses, which are important drivers of innovation in the West, as well as in Bangalore and other global technology centers. Apart from the software industry, Russia’s high technology is concentrated in large state corporations.
Rampant corruption is arguably the largest factor obstructing the country’s ability to develop its infrastructure. Another of Russia’s great problems is demography. President Dmitry Medvedev captured the scope of the problem when he said: “Every year there are fewer and fewer Russians, alcoholism, smoking, traffic accidents, the lack of availability of many medical technologies, and environmental problems take millions of lives. And the emerging rise in births has not compensated for our declining population.”
Important reforms are taking place in the military, where Defense Minister Anatoly Serdyukov is pushing ahead despite strong resistance from the officer corps.
In foreign policy, Russia’s current dilemma is: modernize or marginalize. It makes little sense for Russia to oppose the West. Instead, it should aspire to emulate and join the West. Russia does not have the resources to pursue a separate course. Arguably, the most important issue is whether Russia finally will be able to accede to the World Trade Organization. The country has little to gain from the development of the Customs Union with Kazakhstan and Belarus, which would instead represent Russia’s marginalization.
The current strategic outlooks of Russia and the United States vary greatly. U.S. President Barack Obama has gone out of his way to reset U.S.-Russian relations. The key line in his big speech at Moscow’s New Economic School on July 7, 2009, was: “America wants a strong, peaceful, and prosperous Russia.” The U.S.-Russian relationship has improved considerably since its low point following the war with Georgia, but its potential remains unfulfilled.
At present, the Russian leadership has a great opportunity. While it is evident that the current economic model cannot deliver sufficient growth in the next several years and the main problems are plain, the Kremlin does not face any apparent immediate internal or external threats. Therefore, the Russian government can launch reforms if it finds the political will and courage to do so.
But, of course, reforms always involve costs, not least to the insiders. The big question for the next couple of years is whether the stark analysis of Russia’s shortcomings, which have been largely overlooked by the country’s leaders, will prompt adequate reforms.

Anders Aslund and Andrew Kuchins, along with Sergei Guriev, are co-editors of the new book “Russia After the Global Economic Crisis.”

TITLE: In Need of 6-Year Plans
AUTHOR: By Richard Lourie
TEXT: The ripples from the BP oil spill in the Gulf of Mexico have reached the Kremlin. President Dmitry Medvedev said: “After such accidents, people will definitely direct their intellectual potential toward creating alternative sources of energy. And they will create them, rest assured.” In other words, the oil spill threatens not only to put BP out of business, but Russia as well.
In Medvedev’s vision of things, Russia is confronted with a stark choice: modernize or perish. In some sense, his words are echoes of U.S. President Barack Obama’s Oval Office speech of June 15. The oil addicts have to change their ways and so do the pushers.
But to create what Medvedev calls a “highly technological economy” takes time. How much time does Russia need? And, more important, how much time does it have?
We live in an age of contagion. Sentiments — especially panic — travel at the same electronic speed as information and capital. The fates of nations pivot with breathtaking swiftness. On the same day as Greek bonds were reclassified as “junk,” $1 trillion worth of mineral wealth was revealed to lay beneath the surface of Afghanistan. Suddenly Europe looks shaky, while desolate Afghanistan has a future.
Since situations can change with such alarming speed, an ideal leader is one who can respond with the appropriate combination of deliberation and dispatch. Former U.S. President George W. Bush and former Vice President Dick Cheney are obvious examples of leaders who reacted too quickly without good information, whereas Obama creates the impression of someone who ponders too much when he should be quicker off the mark. Prime Minister Vladimir Putin and Medvedev reacted too quickly in Georgia but bided their time intelligently last week when the Kyrgyz provisional government called for Russian military intervention.
To create that “highly technological economy” requires long-term planning and intelligent investment. Education becomes vital to national security. Meanwhile, Russia’s cadre of excellent teachers is dwindling, and it is not clear how replacements will be found when the prospects are better elsewhere.
There are no quick fixes to the problem. Solutions can’t be imported, but Russia has some time. If the country is going to be based on a “power vertical,” that vertical must also assume some of the responsibilities that come with power. To some degree, the Soviet vertical did just that. The Soviet Union produced plenty of good scientists and plenty of good teachers to train subsequent generations. In an open letter to Medvedev earlier this year, 400 scientists from the Russian Academy of Sciences warned: “If young people are not brought into science in the next five-to-seven year period, plans to create an innovative economy can be forgotten.” Let’s call “five to seven” six.
What Russia needs now are six-year plans. A six-year plan will, of course, coincide with the new length of the presidential term. A presidential candidate will run not on vague promises and rousing rhetoric but on a specific set of programs designed to avert the doom Medvedev foresees and even recapture some measure of national greatness. That six-year plan will, at the end of a leader’s term, serve as a measure of his achievement or failure.
But the country needs reforms that change society. Otherwise, the result may be no more than a modernized Russia where you can pay bribes with your cell phone.

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

TITLE: A Growing Class of Workaholic Russian Freelancers
AUTHOR: By Olga Razumovskaya
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW — Polina Greus, a junior research associate in economics at Moscow State University, started freelancing as a textile artist by chance.
About four years ago, Greus stumbled across an ad for doll-making courses in the now-closed building of Detsky Mir, the FAO Schwarz of Moscow. She had walked into the store to pick up something for her 2-year-old son, Kolya, and ended up signing up for the courses.
Today, each doll takes her about two weeks to finish if she works a 9 to 5 schedule.
Greus, who is expecting her second child this September, finds freelancing a good way to earn a few extra rubles. She sells her dolls for about 4,000 rubles ($130) apiece.
“This, naturally, is only a fraction of my salary at the university, however small,” Greus said. “Freelancing is a way to express myself, and if I get some money for it, all the better.”
No one keeps track of Russia’s exact number of freelancers — the consultants, independent contractors, temps, part-timers, contingent employees and the self-employed who set their own hours and often work from home. But experts agreed that their number — a class of unusually hardworking people who care more about their work than their pay — has soared amid the economic recession.
Full-time freelancers account for 500,000 to 600,000 people in Russia’s 70 million-member work force, triple the figure before the recession hit in late 2008, said Denis Strebkov, a sociologist from the Higher School of Economics who co-authored a study on freelancers last year that is considered Russia’s most authoritative work on the issue.
The 1 percent of the work force who identify freelancing as their primary source of income is miniscule compared with the roughly 30 percent of the population in the United States and the European Union.
A recent study by Kelly Services, an international HR management company, suggested that there are even more freelancers in Russia. Among 5,500 people polled by the company in Russia’s biggest cities, 31 percent identified themselves as freelancers or self-employed.
The high disparity between the two studies might be explained by differences in terminology and polling methods, said a spokesman for Kelly Services, Artyom Davydov. But he confirmed that the number of freelancers had soared amid crisis-related layoffs.
Russia’s largest online portal for freelance workers, Free-lance.ru, alone boasts more than 600,000 members, or twice as many as 18 months ago. Kadrof.ru, another web site for freelancers, has about 2,000 visitors a day, said its founder, Sergei Antropov.
Twenty-two percent of Russian freelancers work solely as freelancers, while 44 percent continue to hold a full-time job, according to Strebkov’s study of freelancers, which was released last year by the Higher School of Economics in cooperation with Free-lance.ru. Other categories of Russian freelancers include students (18 percent of them have various freelance work), entrepreneurs (8 percent) and housewives (5 percent).
Fifty-eight percent of all Russian freelancers are young — between 18 and 26 — while only 6 percent are 41 or older. More than half of all freelancers have university degrees. Freelancers are concentrated in Moscow (30 percent), St. Petersburg (11 percent) and the Moscow region (5 percent), while the rest are scattered across the other 80 regions.

A 12-Hour Work Month

St. Petersburg native Vyacheslav Yakovlev only partially fits the profile of a typical freelancer. He holds a university degree but at 56 is older than most.
“In my line of work, the youngest professional is at least 45,” he said.
A chemist by training, Yakovlev has found a lucrative post-retirement career in freelancing full-time for pharmaceutical companies. Ten to 12 hours of work per month is enough to support all of his needs, he said, declining to provide a specific income figure.
He did say, however, that specialists like him, of whom there are about a dozen in all of St. Petersburg, according to his own estimates, earn about 1 percent of what pharmaceutical companies make on the substances that the chemists synthesize.
Yakovlev lives as he likes, waking up between 7 and 8 a.m. every day, and spending about four hours working out: Depending on the time of year, he could be playing soccer, swimming or skiing. 
After a few hours on the computer, he proceeds to the actual synthesis of chemical compounds. Several milligrams — enough to fit in a thimble — of the substances that he produces at home or in a laboratory are then sent to pharmaceutical companies through one of the dozen middlemen that operate on the market.
“We all know each other, so trust isn’t an issue,” he said.
Not all freelancers make as much money as Yakovlev, with salaries varying drastically by region and occupation. But successful freelancers find their income comparable to and often exceeding that of full-time employees.
According to the Higher School of Economics study, 50 percent of all full-time freelancers earn up to 25,000 rubles ($800) per month, 30 percent earn 25,000 to 50,000 rubles and 20 percent earn more than 50,000 rubles.

Pay Takes a Back Seat

The most popular industries among freelancers are the IT sector, design and multimedia, followed by work with texts, business consulting and engineering.
For most of them, interest in the work takes precedence over the salary. Many have tried their hand at various freelance gigs. Greus, the doll maker, flirted with journalism in college, worked on the political campaign trail, made hats and even wrote a science fiction book.
The preference of interest in their work over income puts freelancers in sharp contrast with traditional full-time workers, 96 percent of whom identify their salaries as their top criterion in choosing a workplace, Strebkov said.
“This makes freelancers a different breed of people,” he said.
This set of values unites Russians with freelancers from other countries. They show much more initiative at work, tend to be workaholics and care about job stability much less than the average Russian, said Andrei Shevchuk, Stebkov’s co-author on the study.
Many of them, like Yakovlev, call themselves “free artists” or “freelance artists.” They set their own schedule and choose the kind of work they would like to do. The more experienced the freelancer, the pickier they get and the higher their salary, the study found. Most freelancers tend to be night owls and do the bulk of their work in the afternoon or at night.

Pitfalls of Freelancing

But this freedom of work often comes at a cost. The top complaint for freelancers — both Russian and foreign — is the unpredictability of their incomes. Even if a project pays well, salary delays are frequent, and half of all freelancers fear that they will be cheated by their work associates.
These are among the main reasons why freelancers prefer to stick with familiar, reliable work associates.
“When I do sell my dolls, it is mostly to friends, people I know or at special exhibits for textile artists,” Greus said.
Yakovlev, too, always works with the same middlemen.
Freelancers get no work benefits or future pension accumulations, however small. They often run into obstacles when trying to get a loan at a bank, applying for a visa to go abroad or doing anything that requires documented sources of income.
Unlike in the United States, where freelancers often act as independent contractors and can easily access all information about the taxes they have to pay, Russian freelancers lag behind on legalizing their work.
“Only 12 percent of all freelancers sign a contract with companies,” Strebkov said.
He said only 9 percent of all freelancers are registered as individual entrepreneurs, which is legally required for all freelancers who work “systematically.”
Many do not pay taxes and hope that the money they receive through Internet payment systems like Webmoney or Yandex Money will never surface with Russian tax authorities.
“Not paying taxes stems from a lack of knowledge about one’s responsibilities and possibilities,” said Irina Davidovskaya, deputy director of the Tax Consultants Chamber, a professional association of Russian tax advisers.
“An absence of transparent income makes it impossible to get tax credits, like the possibility to get a real estate tax credit when purchasing a home,” she said.
Russian residents are supposed to pay 13 percent of their income in taxes and 30 percent if they are not tax residents who have lived in Russia for more than 183 days during a calendar year. Taxes are usually deducted by employers or subtracted by contractors. If they fail to do so, it is the freelancer’s responsibility to file a tax return.
Few freelancers register as entrepreneurs or file appropriate tax forms, even fewer realize that they may be eligible to file taxes under the simplified tax system paying as little as 6 percent of their income and that, depending on their occupation, they may be eligible for anywhere from 20 percent to 40 percent of tax deductions for expenses, Davidovskaya said.

TITLE: Mayors Ousted by Arrival of New ‘City Managers’
AUTHOR: By Nikolaus von Twickel
PUBLISHER: The St. Petersburg Times
TEXT: When Yekaterinburg’s mayor gave his annual address to the city legislature two weeks ago, he had some rather unusual news.
“I do not exclude that this will be my last speech in this capacity,” Arkady Chernetsky told the 35 deputies.
“This is no tragedy,” he said, adding that he would not resign.
Chernetsky, who has governed the city of 1.3 million since 1992, is the target of a political campaign to oust him that observers say he won’t be able to resist much longer.
“He was very emotional, and it was obvious what immense pressure he is under,” said Leonid Volkov, an independent local lawmaker who was present during Chernetsky’s speech.
Last week, the ruling United Russia party introduced a bill into the Yekaterinburg legislature that would abolish direct mayoral elections. Instead, the mayoral title with its ceremonial functions would pass over to the speaker of the legislature, while the task of running the administration would be given to a hired professional with the conspicuous title of “city manager.”
United Russia’s attempt to introduce a so-called “double-headed system” in Yekaterinburg, Russia’s fifth-largest city by population, is a reform that has already been implemented in several major cities. Direct mayoral elections have been abolished in Nizhny Novgorod, Chelyabinsk, Ulyanovsk and Izhevsk.
Critics say city managers will be much easier to fire, while mayors under the new system will be totally dependent on governors, who usually control United Russia at the regional level.
The reform is being deplored by opponents as a step to bring Prime Minister Vladimir Putin’s “power vertical” concept of top-down government to the municipal level.
As president, Putin abolished direct elections of governors, triggering criticism that he was rolling back democracy in the country.
Since the scrapping of gubernatorial elections came into force in 2005, mayors are the most senior local officials still elected to office. 
Analysts said regional bosses, who are now nominated by the president and approved by regional legislatures, are the driving force in the attempt to do away with elected mayors.
“These governors do not want to and cannot rule together with freely elected mayors,” said Yekaterina Yegorova, head of the political consulting firm Nikkolo M and a veteran insider of the country’s political scene.
Others say it is merely a manifestation of United Russia’s drive to monopolize the country’s politics. In the last regional elections in March, support for United Russia slipped in several places — most prominently in Irkutsk, one of Siberia’s largest cities, where a Communist candidate was elected mayor.
“They just fear their own weakness,” said Oleg Shein, a State Duma deputy with the Just Russia party.
United Russia officials interviewed by The St. Petersburg Times were adamant that any changes would only be introduced after thorough debate and public hearings.
Yelena Chechunova, speaker of the lower chamber of parliament for Sverdlovsk, the region whose capital is Yekaterinburg, defended the city manager model as more democratic and preferable in fighting corruption.
“It makes it easier to dissolve relations with an administration head who does not cope with his duties,” said Chechunova, who serves as secretary of United Russia’s Sverdlovsk branch.
Yekaterinburg’s current model is that of a strong mayor, she said. “We are now discussing the introduction of an alternative model. … It is the municipality’s right to chose between one model or another,” Chechunova said in e-mailed comments.
Nizhny Novgorod Mayor Vadim Bulavinov, who hopes to retain his title as mayor of Russia’s third-largest city and to become speaker of its legislature when his job is split with a new city manager after the summer break, said each model of governance had its pluses and minuses. “What is important is that the people profit from it and not any politician,” he said in e-mailed comments. 
Some critics have called the reform unconstitutional, but Anatoly Lokot, a Communist deputy and member of the State Duma’s Local Self-Government Committee, said that while deplorable, there was nothing illegal about it.
The federal law on local self-government stipulates that mayors must be elected by the popular vote or by members of the local legislature. If elected by the local legislature, the mayor automatically becomes its speaker and cannot run the local administration at the same time. Consequently, Lokot said, that job goes to an appointed city manager.
Lokot said the trend of abolishing mayoral elections signaled a growing conflict between Putin, who heads United Russia, and President Dmitry Medvedev in the run-up to the 2012 presidential election.
“We are seeing a strengthening of the interests on Putin’s side and their influence on local politics,” he told The St. Petersburg Times.
Despite his more liberal credentials, Medvedev has also helped weaken the position of mayors. Last year, he signed a law that empowers local legislatures to oust mayors on charges such as mismanagement, neglect of duties or losing the respect of lawmakers. The president also granted new powers to governors to fire mayors.
The new rules have lead to the ousting of the independent mayors of Murmansk and Smolensk.
(Moscow and St. Petersburg, the country’s two largest cities, have not had mayoral elections since the scrapping of gubernatorial elections because their leaders hold the status of governors.)
Georgy Bovt, a co-leader of the Right Cause liberal opposition party, said local opposition groups were the only hope to oppose the United Russia-led mayoral reform. “This tendency will continue as long as no one opposes it wholeheartedly,” he said.
Right Cause has been organizing rallies across the country in recent weeks to demand the preservation of direct mayoral elections.
In some cities, the opposition has been successful. Lawmakers in Surgut voted 14-5 against introducing the reform last week, the Ura.ru web site reported. The deputies acted in defiance of Khanty-Mansiisk Governor Natalya Komarova, who had said city managers should be introduced in all of the region’s towns. 
In Yekaterinburg, United Russia might face defeat as well. Chernetsky, who was re-elected mayor for a four-year term in 2008, has made it clear that he will not leave without a fight.
“Introducing city managers is a trend we get from the highest echelons of power,” he told lawmakers two weeks ago. “I don’t want to be a city manager or a mayor in this system.”

TITLE: Late Polish President’s Twin Heads for Runoff
AUTHOR: By Monika Scislowska and Vanessa Gera
PUBLISHER: The Associated Press
TEXT: WARSAW, Poland — The socially conservative twin of the late Polish president was headed for a runoff Monday with the moderate, pro-European leader who took his brother’s place after he died in a plane crash.
The outcome is expected to shape the country’s direction on a wide range of issues, including the adoption of the euro, welfare reform and even its mission in Afghanistan.
Jaroslaw Kaczynski and interim President Bronislaw Komorowski will face each other on July 4 after neither was able to muster the 50 percent required for outright victory.
Kaczynski’s policies are essentially identical to those of his deceased brother and he would be widely expected to pursue the same platform. Lech Kaczynski was killed along with his wife and 95 other people when a plane carrying dignitaries crashed while trying to land in heavy fog in Smolensk, Russia, on April 10. Many called it the worst tragedy to strike Poland since World War II.
Lech Kaczynski, often considered the less forceful and charismatic of the two brothers, favored a strong welfare state and was skeptical of closer ties to the EU. The Kaczynskis’ base is made up of older, rural and observant Catholic Poles who favor upholding the country’s strict abortion laws and oppose gay rights.
Komorowski is a leading member of the pro-European Union, moderate Civic Platform party, which governs the country. He has pledged to work closely with the government to adopt the euro in about five years, end the unpopular military mission in Afghanistan and promote pro-market reforms.
Observers say the close results should spur Komorowski to invigorate his lackluster campaign and seek new supporters. Worried former President Lech Walesa — a longtime foe of the Kaczynski twins — pledged his support.
The president is elected for a five-year term separately from the prime minister and his government. Although many of the duties are symbolic, the president can veto laws and, as commander in chief, has influence over foreign military missions.
As president, Komorowski would give Prime Minister Donald Tusk’s government a green light for further pro-market reforms in this eastern European country of 38 million — the largest of the ex-communist countries to join the European Union in recent years.
Based on more than 94 percent of voting stations reporting, Komorowski had 41.22 percent of the votes and Kaczynski had 36.74 percent, the State Electoral Commission said. Turnout there was 54.85 percent.
Full official results were expected later in the day.
Political analyst Wojciech Jablonski said the results were a defeat for Komorowski’s campaign team, which was drawn from Tusk’s governing Civic Platform party.
“If they don’t breathe life and energy into the campaign, Kaczynski will win, just like in the 2005 elections,” Jablonski said, referring to Lech Kaczynski’s unexpected win then over favored Tusk.
Komorowski needs to find more backers, most likely among voters for center-left candidate Grzegorz Napieralski, the third place winner Sunday who won almost 14 percent of votes — a stronger than expected showing.
Already on Sunday Komorowski, 58, asked Poles for more support and specially congratulated Napieralski, whose Democratic Left Alliance is the heir to the former communist party. It was a notable gesture from a former anti-communist.
Kaczynski, a former anti-communist himself who has made it a mission in recent years to root former communists out of public life, also made a point of praising Napieralski in his speech Sunday night. He noted that Napieralski had made a constructive gesture of proposing talks on reforming the health system.
Napieralski said he will travel and meet with his supporters before deciding who to endorse.

TITLE: NATO Says 4 Dead In Crash
AUTHOR: By Heidi Vogt and Rohan Sullivan
PUBLISHER: The Associated Press
TEXT: KABUL, Afghanistan — A military helicopter crashed during an early morning operation in southern Afghanistan on Monday, killing three Australian commandoes and an American service member, officials said.
Two other international troops were killed Sunday in separate bombings in the south, NATO announced without specifying nationalities. One of them was an American, according to a U.S. spokesman Colonel Wayne Shanks.
The Taliban claimed they had shot down the helicopter, but NATO said there were no indications of enemy involvement.
The Australian government said three of the dead were Australians, and U.S. Lieutenant Colonel Joseph T. Breasseale said the fourth service member killed was American.
Australian Air Chief Marshal Angus Houston said seven other Australian soldiers were wounded, two of them badly.
“This is a tragic day for Australia, and for the Australian defense force,” Prime Minister Kevin Rudd said in a statement to Parliament. “We know our mission in Afghanistan is hard, but this mission is critical for our common security.”
There were 15 people aboard the helicopter, 10 of them Australians, according to Australian Defense Minister John Faulkner.
Australia has some 1,500 troops in Afghanistan. Monday’s deaths take Australia’s military death toll in Afghanistan to 16.
The crash comes in a particularly deadly month for NATO forces. With the most recent deaths, at least 59 international troops, including 36 Americans, have died so far in June. That puts June among the deadliest months for international forces in the nearly nine-year war. The deadliest month so far for the military alliance was July 2009 when 75 troops, including 44 Americans, were killed.
The rising death toll underscores the precarious situation for Afghanistan’s international allies as violence has ramped up this summer.
The United Nations plans to pull some of its approximately 1,000 foreign staffers from the country in the next three months, according to a UN report issued last week. The world body has been facing recruitment and housing problems since it tightened security for staffers in the wake of an attack on a residential hotel in Kabul in October where UN election staffers were staying. Five UN employees died in the attack.

TITLE: High Radiation Levels Detected 
On Korean Border
AUTHOR: By Hyung-Jin Kim
PUBLISHER: The Associated Press
TEXT: SEOUL, South Korea — Abnormally high radiation levels were detected near the border between the two Koreas days after North Korea claimed to have mastered a complex technology key to manufacturing a hydrogen bomb, Seoul said Monday.
The Science Ministry said its investigation ruled out a nuclear test by North Korea, but failed to determine the source of the radiation. It said there was no evidence of a strong earthquake, which follows an atomic explosion.
On May 12, North Korea claimed its scientists succeeded in creating a nuclear fusion reaction — a technology necessary to manufacture a hydrogen bomb. In its announcement, the North did not say how it would use the technology, only calling it a “breakthrough toward the development of new energy.”
South Korean experts doubted the North actually made such a breakthrough. Scientists around the world have been experimenting with fusion for decades, but it has yet to be developed into a viable energy alternative.

TITLE: New Agers, Neo-Pagans See Stonehenge Solstice
AUTHOR: By Andrew Khouri
PUBLISHER: The Associated Press
TEXT: SALISBURY, England — Thousands of New Agers and neo-pagans danced and whooped in delight Monday as a bright early morning sun rose above the ancient stone circle Stonehenge, marking the summer solstice.
About 20,000 people crowded the site on Salisbury Plain, southern England, to see the sunrise at 4:52 a.m., following an annual all-night party.
The event typically draws thousands of alternative-minded revelers to the monument, as they wait for dawn at the Heel Stone, a pockmarked pillar just outside the circle proper, which aligns with the rising sun.
Unlike previous recent years, when the sunrise has been obscured by cloud — the bright sun bathed the monument in orange and gold on Monday.
“One time in maybe 10 we get a decent sunrise, and that was a good one,” said Simon Banton, a 45-year-old education volunteer for English Heritage, the body that manages the site.
As the sun rose, a woman climbed a rock in the circle center and blew a horn, welcoming in the longest day of the year north of the equator. Drums, tambourines, and cheers reverberated in the background.
“It means a lot to us ... being British and following our pagan roots,” said Victoria Campbell, who watched on, wearing a pair of white angel wings and a mass of multicolored flowers in her hair. The 29-year-old Londoner, who works in the finance industry, also said that “getting away from the city” was a major draw.
“It is stunning,” said Stewart Dyer, a 43-year-old National Health Service worker and dancer on his first trip to the solstice celebration. “To actually be able to dance amongst the stones, to be able to touch the stones, to be that close to such an ancient monument is unbelievable.”
The annual celebrations at Stonehenge, about 130 kilometers southwest of the capital, are a modern twist on solstice celebrations which were once a highlight of the pre-Christian calendar. They survive today largely in the form of bonfires, maypole dances and courtship rituals.
Andy Barrett, a 62-year-old restaurant owner from Kent, said he has been coming to solstice celebrations at Stonehenge for decades.
“It’s amazing. The wonderful thing is all these people experiencing it and wondering what this was all for trying to work out in their own minds — what was it all?” he said.
Stonehenge’s origins remain a mystery, but theories suggest the grounds were part of a huge astronomical calendar. Others say an ancient sun worshipping culture aligned the structure with the midsummer sunrise and the midwinter sunset. The site was used as a cremation cemetery since its inception, archaeologists say, but it is unclear if that was its main function.
“The truthful answer is we don’t know exactly what it was for,” said Amanda Chadburn, an archaeologist with English Heritage, which manages the site.
Whatever its origins, the construction of Stonehenge — built with massive stones drawn from up to 240 kilometers away — gives insight into an ancient culture, Chadburn said.
The World Heritage site was built in three phases between 3000 B.C. and 1600 B.C. It is one of Britain’s most popular tourist attractions with more than 850,000 visitors a year. The solstice is one of the few times access is granted inside the stone circle, which has been roped off since 1978., following years of erosion and vandalism.

TITLE: Preserving Traditions: Estonia’s Island of Kihnu
AUTHOR: By Sergey Chernov
PUBLISHER: Staff Writer
TEXT: The small Estonian island of Kihnu lies off the beaten track, and is a real treat for visitors who do not like crowds of tourists, prefer to travel on their own or in a small group, want to immerse themselves in ancient culture or simply relax on the beach or in the woods.
Lying off the southwest coast of Estonia, Kihnu is one of 1,521 islands belonging to the Baltic nation, of which Saaremaa, with an area of 2,673 square meters, is the largest. Despite its smaller size, Kihnu’s diverse nature and unique, UNESCO-protected traditional culture, which managed to survive occupation and the Soviet rule, make it a fascinating destination.
The island’s cultural traditions have survived intact, mainly due to its isolation from the mainland and the strong community spirit of the Kihnu people, who are famous for their traditional clothing and Kihnu dialect, which is quite distinct from the standard Estonian language.
For former Soviet citizens who were sent to “help collective farmers” every year as a student, the island has a bittersweet retro feel to it, especially when traveling along cross-country roads in
an open truck or using some of the island’s more rural outhouses.
Ancient yet working Soviet Lada cars, Izh motorcycles or small Belarus tractors can be seen everywhere on the island, though Western cars and trucks are also visible.
Administratively, Kihnu belongs to the county of Parnu — one of Estonia’s 15 counties — whose center is Parnu, “Estonia’s summer capital” and the country’s best-known seaside resort
town.
Located in the Kihnu Strait in the Gulf of Riga, Kihnu is now accessible by ferry from the port of Munalaid (50 minutes) or Parnu (2 hours 15 minutes).
In winter, people drive over the ice to reach the island, but when the ice is fragile, the only way to reach Kihnu is by plane from Parnu Airport (15 minutes).
Measuring 16.4 square kilometers (7 kilometers long and 3.3 kilometers wide), Kihnu is the seventh largest island of Estonia, with a population of less than 600 people, who live in the island’s four villages. To the east lies the village Lemsikula, which is home to the island’s harbor, where ferries and yachts arrive, while the airport (a former Soviet military aerodrome), post office and main stores are located in the northern Saarekula village.
Rootsikula in the south is home to the island’s lighthouse, a 29-meter white conical metal tower with a round beacon and a red roof built entirely of metal plates made by the Dividale Company in Staffordshire, England, and shipped in parts to the island in 1864. Next to the lighthouse is an automatic weather station and a memorial stone dedicated to the legendary seafarer Kihnu Jonn, the island’s most famous son.
Linakula in the west is home to the island’s only hospital, school, local history museum, church, and new community center, which also houses the island’s library and rural municipality government. The center replaced an older one that burned down in 1999.
There are no police on Kihnu, but a police officer from Parnu visits the island once a year and imposes fines if finds any violations, according to locals.
The island, which rose from the sea 2000 to 3000 years ago, was first mentioned in documents in 1386.
The abundance of fish in the waters surrounding Kihnu has determined one of the Kihnu people’s main occupations — fishing. About 60 professional fishermen live on the island now, catching primarily Baltic herring, but also perch, pike, sea trout and Baltic cod.
Another traditional occupation, seal hunting, is now forbidden due to the decline in the population of ringed seals, of whom about 1,000 remain on the strait, and grey seals (2,900). The animals can be seen on islets and rocky elevations in the open sea.
The age of seafaring, for which Kihnu’s men were famous before World War I, has passed, while farming has become the domain of the island’s women.
Although warfare did not reach Kihnu during World War II, almost one third of the island’s population (then 378 people) fled to the west from the advancing Soviet army, reaching the nearest Swedish island of Gotland on their boats through the Irbe Strait.
Unlike the large island of Saaremaa, Kihnu, which was hidden in the Gulf of Riga, had no strategic potential, so the Soviet military presence on the island was minimal, limited to a small unit to look after the military aerodrome.
Under the Soviets, the island’s fishermen were celebrated in documentaries and newspaper articles. In keeping with the party line, the islanders were united into a collective fishing farm called Noukogude Partisan (The Soviet Guerilla), which was closed in 1973 to comprise part of a larger collective farm Parnu Kalur (The Fisherman of Parnu), whose central office was located in Parnu.
The Kihnu people retain largely fond memories of the 1960s, when they became relatively rich — as far as was possible under Soviet rule. The Soviet Guerilla boasted three trawlers, which went out as far as the North Sea, and collective labor was not a foreign concept for the islanders. But reforms in the 1970s were unpopular as officials who were unfamiliar with Kihnu started to take authoritarian, misinformed decisions about life on the island.
Despite forced Russification under the Soviets, including bans on speaking the Kihnu dialect and wearing traditional clothing in schools, the Kihnu people have retained their unique traditional music, songs, dance, games, handicraft and clothing. (The Russification policy conducted under Tsar Nicholas II before World War I was even more severe, with the Estonian language banned from the school completely.)
Traditional Kihnu skirts are still worn on a daily basis today, even by younger islanders. During a break at the island’s school in May, of six girls who came outside for fresh air, three were wearing the striped skirts.
The colors of the stripes are a complex system of codes revealing the wearer’s marital status, motherhood or other family indicators. Red is the color of youth and happiness.
Kihnu Jonn is the most famous Kihnu native. His feats were described by the Soviet-era official Estonian author Juhan Smuul in a play called “Jonn of Kihnu, or the Wild Captain” (1965) and the subsequent film “Wild Captain” made at Tallinnfilm studios in 1971. Jonn is respected as being the first Estonian to sail the oceans as a captain in the late 19th century.
The local guesthouse Rock City takes its name not from the KISS song, but from one of Kihnu Jonn’s ships.
Enn Uuetoa (the seafarer’s full Estonian name) drowned in 1913, when his ship sank near Denmark. His remains were brought to the island from Denmark in 1992 and buried near the main gate of the Kihnu cemetery. The Kihnu Museum just across the road is home to an exposition devoted to him, complete with a life-size wax figure.
Housed in a former school building in Saarekula village since 1974 and thoroughly renovated in 2009, the museum provides an insight into the island’s history, culture and everyday life (items on display include an old Soviet-era school desk) and introduces famous Kihnu natives, including the teacher and folklorist Theodor Saar, who chronicled the local dialect, culture and customs, silversmith Peeter Rooslaid and renowned Kihnu naive artist Jaan Oad, who died in 1984.
Oad, reproductions of whose work are presented alongside other Kihnu naive artists in one room of the museum, fled from the Soviets to Sweden in 1944, along with hundreds of other Kihnu people, before settling in Canada.
Most of his works deal with life on Kihnu as he saw it before his escape. After his death in Toronto, his works were given by his heirs to Estonia and are kept in Tallinn’s archives.
Postcards with Kihnu naive artists’ paintings are sold at the museum, along with books and island handicrafts including handkerchiefs and woolen gloves and socks with local patterns.
UNESCO proclaimed Kihnu’s cultural space and traditions to be a Masterpiece of the Oral and Intangible Heritage of Humanity in November 2003. 
Kihnu’s cultural space also includes the smaller island of Manija Island (less than two square kilometers), located 7.5 kilometers away, where some 20 families moved from Kihnu when offered farming opportunities during the period of the First Estonian Republic in 1933.
The museum also houses the offices of the Kihnu Cultural Space Foundation, launched in January 2004. The foundation is financially supported by the Estonian Ministry of Culture.
The foundation, whose priorities have been the development of the Kihnu Museum, the inclusion of Kihnu culture in school programs and the resurrection of local wedding traditions, have produced a number of publications including an ABC book of Kihnu dialect, which is now used at the local school.
At the Metsamaa village center, which is housed in an old farm, local guides use a long line of dolls dressed in different traditional clothes to tell visitors exactly what each skirt pattern means.
Skirts donated by the women of Kihnu and Manija decorate the United Nations headquarters in New York as part of an installation by Estonian artist Anu Raud, which the former president of Estonia Lennart Meri presented as a gift to the UN in 1995.
Weddings are the source of Kihnu’s most important rituals and the subject of extensive research. Weddings traditionally last for three days and involve music, songs, poetry and handicrafts, with rituals dating back to pre-Christian times.
Kihnu’s best-known and most active folk ensemble, Kihnumua, has existed for more than 50 years. The band has a flexible lineup, featuring local women of various ages performing songs and dances (some of whom knit simultaneously), while its leader, Kihnu culture expert Katrin Kumpan introduces musical numbers, explaining the stories and customs behind them. Kihnumua was awarded the European Culture Prize in 1999.
Kihnu is covered with meadows, broadleaf trees, pine groves and junipers, which are home to hares, foxes and hedgehogs. There are no large wild animals like on the Estonian mainland or larger islands. The waters of the Kihnu Archipelago are home to gray and marbled seals.
Kihnu is also home to a large number of different birds. The islanders build wooden homes for mergansers, semi-domesticated water birds, whose eggs are then eaten and used in cooking cakes.
Estonian cuisine is famous for its simple and filling dishes, but unsurprisingly, Kihnu’s cuisine is based on fish.
Every farm visited had its own smoking oven that produces delicious smoked sprats or perch. A traditional fish lunch, featuring fish soup and smoked fish, is a must for visitors to the
island.
Islanders produce superb homebrewed beer, which is generally offered to visitors for free, because EU rules require them to buy a special license in order to sell the drink.
The only church on Kihnu was rebuilt from an old Lutheran church when the islanders converted to Russian Orthodoxy in exchange for purely material promises of good plots of arable land from the Russian Tsar in 1846/47.
According to one version, the Tsar failed to fulfill his promises, though another version says that the islanders received some tax discounts. Today Kihnu belongs to the Apostolic Orthodox Church of Estonia.
The island does not have its own priest, and the church opens only on religious holidays when a visiting priest from Vorumaa comes to conduct the sermon. Christianity on Kihnu has not replaced more ancient beliefs, however, but happily co-exists with them.
Kihnu’s tourism industry is still developing. There is no hotel on the island, but several guesthouses and tourism farms offer rooms, meals, traditional sauna and other services, such as a guided fishing trip or tour of the island in a truck. Private folk concerts can be ordered at a cost of 1,950 EEK ($154) per 45 minutes via the local tourism company Kihnurand (www.kihnurand.ee).
There are several bike rental facilities on the island, though it is small enough to be easily explored on foot.

The St. Petersburg Times was a guest of the Estonian Tourist Board, Enterprise Estonia (13/15 Liivalaia, 10118 Tallinn, Estonia. Tel: +372 6279 770).

INFORMATION

How To Get There
Ferry from the ports of Munalaid or Parnu during the navigation season; airplane from Parnu during the winter (www.parnu-airport.ee). There is also the option of renting a yacht with a captain and crew from Parnu to Kihnu and back (www.sailingparnu.ee/rental). A two-day trip for six to 12 people costs from $514 to $1,000.
From St. Petersburg, Eurolines (www.luxexpress.eu) and Ecolines (www.ecolines.net) operate bus services to Tallinn, and Estonian Air (www.estonian-air.ee) flies to Tallinn.
From there, there are regular buses and trains to Parnu.

Where To Eat
Kurase Cafe, Saarekula,
Tel.: +372 52 55 172,
www.kihnurand.ee

Where To Stay
Tolli Tourism Farm, Saarekula,
Tel.: + 372 52 77 380,
www.kihnutalu.ee
Rock City Guesthouse pub, Saarekula,
Tel.: + 372 44 69 956,
www.rockcity.ee
Kuraga Bed and Breakfast,
Rootsikula, Tel.: +372 52 914 92,
www.kuraga.eu