SOURCE: The St. Petersburg Times
DATE: Issue #608 (0), Tuesday, October 3, 2000
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TITLE: Trial Over Babitsky's Alleged False Documentation Begins
PUBLISHER: The Associated Press
TEXT: MAKHACHKALA, Russia - Andrei Babitsky, a Russian radio reporter who works for U.S.-funded Radio Liberty and was detained in Chechnya earlier this year, arrived in Dagestan on Sunday on the eve of his trial for carrying false documents.


Babitsky was detained in Chechnya in January for lacking a permit to report from the war zone, and was turned over to men described as Chechen rebels in exchange for captured Russian soldiers.

Following the swap, Babitsky eventually resurfaced in the custody of officials in Makhachkala, in the neighboring Russian republic of Dagestan. He was charged with carrying a forged Azerbaijani passport.

His trial is scheduled to open on Monday. Even if found guilty, he won't go to prison because his case falls under an amnesty granted this spring, his lawyer Genri Reznik said. However, he does face a fine or two years of community service.

Babitsky and Reznik have claimed that the fake passport was supplied by the supposed rebels. After their arrival in Makhachkala, Babitsky and Reznik picked up some documents from the court house to prepare for the trial.

The Russian government has severely curtailed independent reporting on the Chechen war, trying to prevent journalists from traveling unescorted and reporting the rebels' side.

The New York-based Committee to Protect Journalists on Saturday urged the government to drop the charges against Babitsky.

"This trial is the latest tactic in a concerted Russian government effort to punish Babitsky for his critical coverage of Chechnya," Joel Simon, the committee's deputy director, said. "This strategy is also intended to discourage other journalists from filing independent reports on the Russian war effort."

TITLE: Regions Confronting Loss of Tax Revenues
AUTHOR: By Anna Raff
PUBLISHER: Staff Writer
TEXT: MOSCOW - While Moscow and St. Petersburg are hiking taxes to plug budget holes left by the new Tax Code, some of the country's other strong regions are scratching their heads wondering how to make ends meet next year.


None of the regions knows how much money it will receive from the federal government because the nation's 2001 budget has not yet been ratified. The regions do know, however, that if President Vladimir Putin had not signed Part Two of the Tax Code, their budget revenues would have been much higher.

Moscow will lose 35.3 billion rubles ($1.27 billion) and St. Petersburg 6 billion rubles, according to officials in both cities.

What the other regions will lose is as yet unknown.

Sergei Zhuzhgin, spokesman for Tyu men region Gov. Leonid Ro ketsky, said the region is still calculating its losses, but they will be substantial.

"Of course, we will suffer," Zhuzhgin said by telephone from the region's capital, Tyumen. "But the federal government has good reasons for centralizing funds."

Tyumen - along with many other regions - is not planning to increase any taxes or introduce any new ones to make up for budget shortfalls due to new tax legislation, but the regions' coffers will take a hefty hit from certain provisions in Part Two of the Tax Code that were signed into law by Putin over the summer. 

The legislation cuts turnover tax from 4 percent to 1 percent and repeals the housing maintenance tax, both major revenue sources for the regions. The federal government has also decided that its share of regional taxes will increase from 50 percent to 70 percent.

Needless to say, not all of the regional governors are pleased with the new status quo.

"When we passed the second part of the Tax Code, we were promised that the redistribution of taxes would stay 50-50," said Mikhail Prusak, governor of the Novgorod region, earlier this week at a meeting of the Federation Council, in remarks reported by Vremya Novostei.

"Now we are being told that the budget is being formulated based on the new Tax Code for which we voted," he said. "The government just happened to forget about its promise."

The Khanty-Mansiisk autonomous region, part of the Tyumen region, will have to hand over 15 billion rubles ($539 million) of expected revenues of 20 billion to 23 billion rubles to the federal budget next year because of the new split, Zhuzhgin said. 

The federal government has promised Tyumen officials that they will be reimbursed for shortfalls in the local budget.

It is still unclear what form those payouts will take and the matter is currently under hot debate in the Federation Council and the State Duma.

To what extent the regions can rely on the government's promises will probably be determined by what strategical alliances they can form with the Kremlin down the road, said Sergei Ryzhenkov, an expert in regional politics at the Institute for Humanitarian-Political Research.

"Unfortunately, a lot depends on politics, not on what is written in some economic tract about the budget," Ryzhenkov said.

Different regions will come out as favorites as the budget process unravels and which ones are winners won't be evident for at least another year, he said.

The economic health of the nation could also play a large role in determining disbursements, he added. A healthy economy would mean enough money for all, while a capricious economic downturn could annihilate any current surpluses.

St. Petersburg is one of the regions hanging onto a fragile surplus that could be threatened by an economic swing. Its 2001 budget projects revenues of 41.2 billion rubles and expenditures of 40.2 billion rubles, St. Petersburg Deputy Gov. Viktor Krotov announced at a news conference Friday.

St. Petersburg - which holds the federal status of region - is making up for losses under the revised Tax Code by increasing automobile and gambling taxes. The car tax alone will jump 80 percent.

But St. Petersburg is being forced to leave some projects - like the city road fund - without cash in order to come up with its 1 billion ruble surplus.

The city expects to get 3.54 billion rubles for the fund from federal coffers, Krotov said.

The city of Nizhny Novgorod is taking promises of federal funds with a grain of salt, said Yelena Bukareva, head of the city's budget planning committee.

She estimates that the city will lose about 1.6 billion rubles next year.

"There will be cuts in expenditures," Bukareva said. "But we are not looking to raise taxes."

She said, though, that the budget planning was in a preliminary stage and that the city would have a clearer idea of its plans in late October.

Mikhail Delyagin, director of the Institute of Problems of Globalization, said raising taxes is an unpopular measure that many regions want to avoid. While some regions just don't have the option.

"There are strict limitations on the government level as to how much regions can tax," Delyagin said.

Moscow, like St. Petersburg, is looking to post a budget surplus next year. To do so, however, the city approved Wednesday a 5 percent profit tax that is expected to add 16 billion rubles to the budget next year.

Under the law, every region has the right to introduce a profit tax of up to 5 percent. Many regions, such as Tyumen, have had the law on their books for years.

The Moscow City Duma also on Wednesday hiked the sales tax from 4 percent to 5 percent. That increase is expected to bring in an extra 3.2 billion rubles.

While uncertainty runs high in some regions over their budgets, a handful of regional officials remain upbeat about the tax changes.

Tyumen region's Zhuzhgin said he views the losses less as a financial nightmare and more as a sign that the federal government is "putting things in order."

"Before, a lot of this money was stolen or disappeared," he said. "With such a large amount of money, corruption was endemic."

Despite any short-term pain, the changes are ultimately a step in the right direction, he said. 



Staff writer Vladimir Kovalyev contributed to this report.

TITLE: Kremlin Proposes Yugoslav Summit
AUTHOR: By Ana Uzelac
PUBLISHER: Staff Writer
TEXT: MOSCOW - As tensions grew in Yugoslavia ahead of contested runoff elections next weekend, President Vladimir Putin offered on Monday to preside over talks between the two embittered presidential candidates.


The offer, which incumbent Yugoslav President Slobodan Milosevic and opposition candidate Vojislav Kostunica have not yet accepted, invites the two men to come to Moscow to discuss their country's future.

"As president of Russia, I am prepared to receive in the next few days in Moscow both candidates who have gone through to the second round ... to discuss means of finding a way out of the current situation," Putin said in a statement. 

The wording suggested that the Kremlin was backing Milosevic's view that Kostunica had not secured enough of the vote for an all-out victory in the first round of elections last month. Western leaders say Milosevic rigged the voting to hide the fact that Kostunica had won hands down.

In an apparently coordinated move, the Foreign Ministry hinted Monday in a separate statement that it considered the results of the disputed first round valid.

Kostunica said Monday that he had to discuss Putin's offer with members of his opposition party before reaching a decision, Reuters reported.

Milosevic made no comment on the offer. Instead, he lashed out at his opponents on Yugoslav television, accusing them of using bribery and blackmail to organize strikes that have crippled Yugoslavia in recent days. 

On Monday, tens of thousands of workers walked off their jobs while tens of thousands of students took to the streets in protest of the results of the Sept. 25 presidential poll.

The opposition says Kostunica won the presidential election with 51.34 percent of the vote. The State Election Commission claims Kostunica fell just a little more than 1 percent short of the majority needed for a first-round victory.

Putin's invitation Monday came after Yugoslav officials ignored an earlier proposal to send Foreign Minister Igor Ivanov to conduct talks with both sides.

Borislav Milosevic, Yugoslavia's ambassador in Moscow and the brother of President Milosevic, said recently that there were "no grounds" for Russian mediation, Interfax reported.

But Yugoslavia's democratic opposition welcomed the offer to meet with Ivanov and sent documents to Moscow meant to prove that electoral fraud had taken place.

While siding Monday with Milosevic over the results of the first round, the Foreign Ministry appeared to be hedging its bets by acknowledging that many people in Yugoslavia disagreed with the outcome.

"Counting votes and verification is clearly a matter for the Yugoslav people [to resolve]," Foreign Ministry spokes man Alexander Yakovenko said in a statement.

In Athens, the Greek Foreign Ministry said Russia could end up playing a role in resolving the dispute. The ministry said it was in talks with Russia and France on drawing up a plan under which observers from the three countries would recount votes, Reuters reported.

Officials at the Foreign Ministry in Moscow could not confirm the report.

Meanwhile in Belgrade, Kostunica angrily blasted the Kremlin over what he called its indecisiveness.

"The Russian policy has so far been indecisive and reluctant, I would say unnecessarily so," Kostunica said at a news conference in Belgrade, according to Reuters. 

"The Russians don't have a specific and concrete position on the situation in Yugoslavia," he said.

Observers in Moscow said that Russia has not adopted an official opinion about the presidential elections and that Putin's invitation looks like a half-hearted bid to polish Russia's reputation as a diplomatic power. 

With Putin flying off on a four-day trip to India on Monday, there was little chance that a meeting would be held before the Oct. 8 runoff, they said.

"Russian diplomats and the president still don't know what to do with Yugoslavia," said Alexander Pikayev, an analyst at the Moscow Carnegie Center. "The crisis there took them by surprise, although it was quite obvious something was about to happen."

But the mood among the Russians seems to be slowly shifting against Milosevic. Most of the middle-level Foreign Ministry diplomats consider Kostunica to be an acceptable alternative to Milosevic, said a Western diplomat who tracks Russia's role in Yugoslavia.

"I think our politicians know that Kostunica is a man they can talk to," agreed Pikayev. "But they are suffering from the '80s syndrome - they're afraid that like other East European countries, Yugoslavia once freed from a totalitarian regime will turn its back on Russia and join NATO."

"Milosevic is Russia's last ally in Europe," said Sergei Mikhailov, deputy director at the Center for Political and Social Studies in Moscow. "Despite rhetoric, he's not particularly liked by the Russian political elite. But the diplomats are still reluctant to accept Kostunica, whom they do not know."

Russia, unlike other European countries, still has some leverage over the Yugoslav president. Russia is Yugoslavia's only source of oil and gas, and it invested millions of dollars into the reconstruction of the nation after the NATO bombings last year.

Also, Russian generals seem to be the only military officials left in Europe who maintain contact with their Yugoslav counterparts. Earlier this year, Yugoslav Defense Minister Dragoljub Ojdanic managed to travel to Russia and return home despite the fact that a warrant had been issued for his arrest by the UN International War Crimes Tribunal.

But in the end, Moscow's influence is limited, and it will ultimately be the Yugoslav people who will decide whether Milosevic stays or goes, Mikhailov said.

"I think everybody, our government included, understands that Milosevic's time is over," he said. "Russia understands that Yugoslavia needs changes and that those changes are not possible with Milosevic."

TITLE: Crooked Cops Arrested in Moscow Carjacking Scam
AUTHOR: By Simon Saradzhyan
PUBLISHER: Staff Writer
TEXT: MOSCOW - Police said Friday they have busted a gang of armed carjackers, including three policemen, who flagged down expensive cars in Moscow and held their drivers hostage until the vehicles could be sold.


The 10-member gang had managed to hijack and sell at least 10 vehicles since March before being arrested last week, said Kirill Mazurin, spokesman for the Criminal Investigation Directorate of the Moscow police force.

The gang targeted the latest models of Mercedes and Lexus off-road vehicles and trucks with valuable cargo, he said.

The carjackers were led by two professionals - Ser gei Lyashevich and Anatoly Moiseyenko, who were arrested for stealing cars in 1996, but acquitted by the Supreme Court and released at the beginning of this year, Ma zurin said.

He said three Moscow policemen were among the carjackers but he would not identify them. According to Kommersant, they were officers in the traffic police. The newspaper identified two of them as Lieut. Sergei Petavkin and Yury Smetyuk.

The trio took turns flagging down expensive cars, according to Mazurin, who described how police believe the gang operated.

Having stopped a car, one of the crooked cops would invite the driver into his own vehicle for further checks. Once in the back seat, the driver would be handcuffed and a wool knit cap would be pulled over his head.

The driver would then be drugged and whisked away to a hideout in the Moscow area, where he would be kept while the gang sold the hijacked vehicle to black-market dealers.

Each car was usually sold for $20,000 to $30,000, the police spokes man said.

Mazurin said police have evidence that the gang sold at least 10 vehicles, including one that belonged to a relative of Moscow music producer Yury Aizenshpis, although the real number is believed to be much higher.

The suspects were nabbed after police detectives filmed them hijacking a truck carrying coffee on Ulitsa Talalikhina on Sept. 22, Mazurin said.

They remain in custody and will be charged with armed hijacking and illegal possession of arms, he said. They were armed with a rifle and a TT pistol.

Police acknowledged there is little drivers can do to avoid becoming victims of such a crime.

"I don't really know what advice to give to drivers in such cases, because you run the risk of being fired on if you ignore a policeman's order to stop," Mazurin said. "All I can recommend is to abstain from offering any resistance - just obey them because your life is more valuable."

An official at the Interior Ministry's secret Inner Security Directorate, which hunts for crooked policemen, agreed. "It is always better to wait it out and then report the case to us or any police unit once it is over," he said.

The directorate received 40,000 complaints of alleged crimes by policemen in 1998. More than 4,000 of these complaints led to investigations, said the deputy head of this directorate, Sergei Shchadrin. Only 53 traffic police officers were convicted and 502 fired in 1998.

TITLE: IN BRIEF
TEXT: Manager Shot


n ST. PETERSBURG (SPT) - Vla di slav Vasiliev, the 33-year-old manager of a firm called Toner was shot and later died Monday in central St. Petersburg, city prosecutors told Interfax. According to the prosecutor's assistant, Gennady Ryabov, Vasiliev was on his way to his office when the shooting occurred, the agency reported. 

A man about 20 to 25 years of age opened fire from what appeared to be a Makarov pistol, the agency quoted Ryabov as saying. 

The suspect also grabbed Vasiliev's bag and fled the scene. Vasiliev died of four bullet injuries on the way to the hospital, Interfax said. 

Vasiliev's colleagues said they doubted any money was in the stolen bag, the agency reported. 



4 Dead in Fire


n ST. PETERSBURG (SPT) - Four people perished over the weekend in a gas fire in St. Petersburg's Kalininsky district, RIA news agency reported Monday. 

According to firemen on the scene, one infant died in the fire, but two other children were saved and are currently undergoing treatment at a St. Petersburg hospital, RIA reported.



Research Ship Back


n MOSCOW (AP) - Russia's continental shelf may be bigger than previously believed, researchers said Saturday upon returning from the country's first major state-sponsored expedition to the Arctic Sea since the Soviet era.

The ship Academic Fyodorov returned Saturday to the northern port of Murmansk after a six-week journey, Itar-Tass news agency reported. 

Vladimir Kryukov, director of the state-run company that led the expedition, said the results of research in the area of the Mendeleyev rise "could be a serious argument for expanding Russia's continental shelf" by more than 1.2 million square kilometers, pending UN approval, Itar-Tass said. 

Kryukov said the ship studied areas that previous researchers had not been able to reach. The report did not explain what the researchers found. 



Gas Supplies Off


n MOSCOW (AP) - Russians huddled in parkas indoors and ate cold meals in a Siberian city and a southern province Saturday after a natural gas utility turned off the tap because of debts. 

Residents of the Siberian city of Omsk told state-connected ORT television that they looked forward to riding public transport because it was the warmest place in town. 

Store managers said demand for electric heaters, stoves and teapots had spiked since the gas was shut off. Independent NTV television said talks between city officials and natural gas monopoly Gazprom on resuming gas and fuel oil supplies had stalled. Gas supplies have also been cut sharply to the entire southern region of North Ossetia.



Sergeant Runs Amok


n MOSCOW (AP) - A Russian army sergeant suddenly opened fire on fellow servicemen in a Ural Mountains city early Saturday, killing two and wounding six before he fled, news reports said. 

Alexei Skorobogatykh, 20, was on duty as a guard at a magnesium plant in Solikamsk in the Perm province when he started shooting at his comrades, state-run RTR television said. Independent NTV television said the plant was connected to the defense industry. 

Skorobogatykh escaped with a Ka lash nikov rifle and several rounds of ammunition, the reports said. The wounded soldiers were in satisfactory condition in a nearby hospital. It was unclear what prompted the rampage.

TITLE: CEC Cracks Whip on Local Election Irregularities
AUTHOR: By Vladimir Kovalyev
PUBLISHER: Staff Writer
TEXT: The Central Electoral Commission has conducted an audit revealing that several of Russia's 89 regions are operating under legislation that is in contradiction to federal law, and has vowed to bear down on them to bring them in line with centralized nationwide norms. 


Among the most egregious offenders in this arena is St. Petersburg, according to the Moscow-based research group Renaissance Capital, legislation in the Northwest region's capital city "excited serious apprehension."

At issue is a nationwide push on the part of the central government and its proxy governors general to create a codified and homogenous set of laws applicable across all of Russia's 11 time zones. 

The announcement - that regions will comply or else - came last week, following a CEC meeting in Moscow where regional leaders tried to retool their legislation and bring it into the Kremlin's fold. 

Though St. Petersburg may have provided one of the strongest examples in the nationwide evaluation, the CEC audit, carried out between May and September, showed that the gap between federal and local legislation throughout all of Russia's regions is a chasm.

"The question is even more troubling considering that regional elections will be taking place in 38 regions before the end of year 2000," said Olga Zastorozhnaya, the CEC representative at the commission meeting on Friday.

Zastorozhnaya said the results of the CEC audit will be sent to regional governors general, to the Prosecutor General's Office and to heads of regional parliaments and executive powers.

"This way the measures to make local legislation corresponded with federal legislation will be more efficient," she said.

Viktor Cherkesov, governor general of the Northwest region, and who is based in St. Petersburg, was not available for a comment on Monday despite repeated efforts.

Renaissance Capital analyst Yaroslav Lissovolik said the regional elections will be followed by a process of concentrating power in the center - meaning Moscow.

"This is a very serious step, according to the goals mentioned by the Kremlin," he said in an interview. 

As for St. Petersburg, there exist hundreds of contradictions with federal legislation, according to Alexander Krasnyansky, a local Electoral Commission official. 

"The problem is that there is an election law in St. Petersburg that was passed long before 1997, when new federal election legislation was introduced," said Krasnyansky in a telephone interview on Monday.

Local legislation, for instance, does not ban candidates participating in the Legislative Assembly and municipal elections from using money taken from sources other than the candidate's election fund. 

"As a result, there are large amounts of illegal cash circulating during elections among candidates, and we cannot do anything about it," Krasnyansky said.

"We tried to introduce some changes in 1998, but lawmakers refused because they did not need this right before the Legislative Assembly elections," he added. 

Aside from that, local election legislation does not have a cohesive process of checking signatures submitted by candidates. 

"Now that all the major elections have passed, I can say this - because if people knew this trick, many would use elections just to get the right to use the so-called election fund, Krasnyansky said. 

"They would easily win their case if they knew that the Electoral Commission cannot ban their registration due to fake signatures, because it doesn't have the right to do this according to local legislation." 

Krasnyansky also said the St. Petersburg Electoral Commission tried to offer legislators at least four draft laws to change the contradictions, but failed because according to local legislation the St. Petersburg Electoral Commission has no right to initiate draft laws. The commission could not be reached for comment on this. 

Anatoly Kalinin, the head of the Legislative Assembly's committee on electoral legislation, said it would take about three months for legislators to make the necessary changes and bring the local laws into accord with the laws of the state.

"There are many inconsistencies, and that violates the rights of the voters. These inconsistancies must be examined - they have existed since Yeltsin's time," said Alexander Titkov, regional political expert at the Carnegie Endowment for International Peace, based in Moscow.

"It is not a case of one leader - like Cherkesov - being harder than another. These things just need to be brought in line with federal legislation, or chaos will continue to develop."

TITLE: Contract To Recover Kursk Crew Signed
AUTHOR: By Tom Rymer, Andrey Musatov and Anna Badkhen
PUBLISHER: Staff Writer
TEXT: Russia on Monday signed a contract with a Norwegian subsidiary of the Halliburton energy service company to help recover the remains of the 118 seamen who died aboard the Kursk submarine.


Under the contract, signed in St. Petersburg by Halliburton AS and Russia's Rubin military design bureau, Halliburton will train and assist Russian divers in the retrieval of the Kursk crew. 

The Kursk was shattered by an explosion and sank during naval exercises in the Barents Sea on Aug. 12. The submarine now lies 108 meters below the sea surface.

Rubin director Igor Spassky said that the need for foreign help in the operation pointed to a deficiency in the Russian submarine program.

"The preparations for this operation have shown that, over the last 10 to 12 years, we have paid too little attention to submarine technologies," he said. 

Spassky said Rubin had discussed the rescue operation with eight firms before reaching the agreement with Halliburton.

Rubin had initially negotiated with Stolts Offshore, a joint Norwegian-Scottish firm, which had been involved in initial rescue efforts when the Kursk sank in August. Spassky said Russia backed away because the company was asking too high a price.

He would not say how much Stolts had wanted.

Both Spassky and Halliburton AS officials on Monday refused to release the financial details of their agreement.

Birgir Haralldseid, communications manager for Halliburton AS, said that the company's divers would leave on Wednesday from Norway for the Barents Sea. The voyage would take about 10 days, he said.

Upon their arrival, six Norwegian divers will train 12 Russian divers on the techniques and equipment to be used for the retrieval. 

Haralldseid said the duration of the training would depend on the learning skills of the Russian divers.

"To ensure a safe operation is the main concern," he said.

The Russians will then be lowered to the sub, while the Norwegians will be monitoring the operation from a diving bell. The divers will retrieve the bodies and load them into a container, which will be lifted to the surface and transferred to a Russian ship.

The divers will cut seven holes in the hull of the Kursk to enter the boat, Spassky said.

Spassky said it would be impossible to bring back all the remains because most of the vessel's compartments were destroyed in the Aug. 12 explosion. 

Russia decided to go ahead with the retrieval even as the dead seamen's relatives pleaded to postpone the operation and scientists warned that the retrieval is dangerous.

Alexander Nikitin, an environmentalist and nuclear fleet specialist, said the cuts made in the boat during the recovery are likely to cause the submarine to fall apart when it is raised next summer. 

Last week, 78 relatives of the dead crew signed an open letter to President Vladimir Putin to delay the recovery because they did not want more men to "risk their lives." 

The circumstances leading to the Kursk's sinking remain unknown. Deputy Prime Minister Ilya Klebanov, who is heading the investigation into the accident, has identified three possible causes: an explosion on board the submarine, a collision with another vessel, and a collision with a World War II mine. 

Halliburton AS is a subsidiary of the Texas-based Halliburton which was once run by Dick Cheney, a former U.S. defense secretary and George W. Bush's running mate in American presidential elections this fall. 

Cheney has a long history of working in Russia and throughout the former Soviet Union. Last year, he lobbied for a $489 million loan from the U.S. Export-Import Bank for Tyumen Oil Co. - even though TNK was at the time accused of violating shareholders' rights and U.S. Secretary of State Madeleine Albright was declaring the proposed deal a violation of national security.

TITLE: Pedophile Porn Perpetrators Wallk Free Under Amnesty
PUBLISHER: Combined Reports
TEXT: MOSCOW - Police have released two suspects in an international pedophile ring under an amnesty, because Russia does not have a special law against distributing child pornography, a police official said Friday.


The international pedophile ring has dominated headlines in Italy this week after police there arrested eight of the group's clients and said they were investigating 1,700 people.

Moscow police uncovered the ring, arresting three suspects in February with "large amounts of pornographic video material involving children," said police spokesman Kirill Mazurin.

Italian police have said some of the Russian videos included footage of children being raped and tortured to death.

Mazurin said one of the three Russian suspects had participated in sex acts with children on the tapes. He was sentenced to 11 years in prison.

But the two other suspects were charged only with distributing pornography. They were released automatically under an amnesty bill in May. 

Meanwhile, the news director of Italian state television's primary station resigned Sunday, taking the blame for allowing graphic images of child pornography to be aired in a prime-time report. 

The broadcast, which was seen by more than 7 million people, stunned the entire country. In the ensuing uproar, RAI-TV came under attack from the Vatican, parliament, the president, the prime minister, politicians on both the left and the right, family and child advocates, and a host of other news organizations. 

Gad Lerner, who had been at the helm of RAI-Uno just three months, tendered his resignation on Thursday, the day after the broadcast. But the governing board of RAI-TV refused to accept it. 

Despite that vote of confidence, Lerner, a veteran journalist many had hoped would inject new life into state TV's news operation, said Sunday he was quitting. 

RAI-Uno announced his decision at the beginning of the prime-time news Sunday. 

An anchorman and two assistant news directors lost their jobs over the Wednesday night broadcasts. 

Both RAI-Uno and RAI-Tre used similarly graphic footage of naked children and a video clip of a man apparently having sex with a little girl.

TITLE: State Council's Role Still Vague After 1st Session
PUBLISHER: Reuters
TEXT: MOSCOW - The State Council, an advisory body set up as part of President Vladimir Putin's moves to curb the power of the regions, held its first session Friday with local leaders predicting it would play a big role in state affairs.


The council's creation was largely viewed as an attempt to soothe the regional leaders, who lost their automatic right to sit in the Federation Council under Putin's reforms and can be removed by the president if deemed to have broken laws.

Its powers remain vague, but participants in the 2 1/2-hour session said it would be an advisory body, meeting quarterly to inform the Kremlin of developments in the 89 regions.

Putin said the State Council was not meant to replace either the State Duma or the Federation Council but nevertheless had a role to play in Russia.

"The optimal arrangement would appear to be the one proposed at the moment - a consultative body headed by the president," Putin told the session.

"Though the status of the State Council would seem modest, it can be a highly influential body in the country," he said.

Regional leaders emerging from Friday's meeting said they did believe the State Council had a role to play.

"We need such a body, even if it is consultative," St. Petersburg Gov. Vladimir Yakovlev said on NTV.

"This is a direct discussion of what goes on in the regions. I think the president should know about this first hand."

Moscow Mayor Yury Luzhkov, loosely allied with Putin after opposing his allies in last year's general election, said the body would be "much more efficient" than the upper house from which regional leaders have been evicted.

TITLE: Putin Makes Historic India Visit
AUTHOR: By Oleg Shchedrov
PUBLISHER: Reuters
TEXT: NEW DELHI - President Vladimir Pu tin, the first Russian leader to visit India in nearly eight years, flew to New Delhi on Monday to forge a "strategic partnership" with the world's most populous democracy, boost trade and sell arms.


Putin's Il-96 touched ground at Delhi's military airport, Palam, at around 7 p.m. local time, six months after U.S. President Bill Clinton visited India to build ties with the increasingly important political player in Asia.

"The delay does not mean that Russia has neglected cooperation with India," Putin said in a televised interview shown by key Russian channels on Sunday night. "It was simply due to our domestic circumstances."

The two nations enjoyed warm relations during the Soviet era, when New Delhi and Moscow had a largely patron-client defense supply relationship.

In the first years after the collapse of the Soviet Union in late 1991, Russia mainly focused on developing relations with the United States and Western Europe. But the honeymoon went sour as Russia's economic crisis erupted in 1998 and a pro-West government was replaced by a more nationalist-minded administration, which started rebuilding a network of ties to balance Moscow's relations with the West. India and China are the key targets in these plans.

Putin has made clear he did not see the "strategic partnership" with India, which will be formalized in a pact during his visit, as a rivalry with the West, or with the United States in particular.

"Russia can only welcome improving relations between India and other countries, including the United States," Putin said. Nuclear-capable India believes a closer relationship with Moscow will reinforce its international standing.

"While building closer links with the United States, India cannot neglect Russia," independent strategic analyst Brahma Chellaney wrote in an opinion column last week.

"Despite Russia's present fragility, its strategic importance for India has not declined," he said.

As opposed to Boris Yeltsin, whose foreign policy was often dominated by ideological considerations, Putin focuses on areas where Russia could benefit politically or economically.

Bilateral trade between India and Russia grew 17.2 percent in the first half of 2000 compared to the same period a year ago.

TITLE: Court Rejects Exxon Mobil's Appeal
AUTHOR: By James Vicini
PUBLISHER: Reuters
TEXT: WASHINGTON - The U.S. Supreme Court rejected on Monday an appeal by Exxon Mobil Corp. over the $5 billion punitive damages verdict against it for the 1989 Exxon Valdez accident, the nation's worst oil spill.


The justices let stand a U.S. appeals court ruling that the award against the oil giant in a civil lawsuit brought by Alaskan fishermen and other plaintiffs should not be set aside because of irregularities during jury deliberations.

In 1989, the Exxon Valdez tanker was grounded in Prince William Sound, spilling millions of gallons of oil off Alaska's coast. The accident polluted more than 1,610 kilometers of shoreline, disrupted fishing and damaged the environment.

The appeal centered on the misconduct of court bailiff Don Warrick, who escorted the jury during the 1994 trial and the deliberations.

A dissenting juror, Rita Wilson, had become emotionally distraught on the 32nd day of deliberations, right before the Labor Day weekend.

When the jurors returned from the holiday weekend, Warrick approached another juror and said the jurors were "really having problems" with Wilson, the juror later testified at a hearing before the judge.

The bailiff then pulled out his gun and took out one of its bullets and said something about "putting Rita out of her misery," the juror said. He said he took it as a tasteless joke rather than as a threat or serious suggestion.

The judge and then the appeals court ruled that Exxon Mobil had failed to prove that the jury had been prejudiced by Warrick's misconduct.

In its Supreme Court appeal, Exxon Mobil said: "This case involves the fundamental right to a fair and impartial jury."

The Supreme Court denied the company's appeal without any comment or dissent.

TITLE: Trillion-Dollar Mizuho Megagroup Debuts
PUBLISHER: Combined Reports
TEXT: TOKYO - Japan's Mizuho Financial Group made its official debut on Friday as the world's first trillion-dollar banking group and said its goal was to join the ranks of the world's top five financial players.


The megabank group was born when three top Japanese commercial banks, Dai-Ichi Kangyo Bank, Industrial Bank of Japan and Fuji Bank, came under the umbrella of a joint holding company, Mizuho Holdings Inc.

"Mizuho does not only become a financial group that enjoys overwhelming superiority in the home market, but also wins a ticket to be a top-five power player on the global financial stage," said Katsuyuki Sugita, president and co-chief executive officer of Mizuho Holdings.

Speaking at the opening ceremony, Sugita said the group's strength lies in its solid client base in Japan and its ability to offer integrated financial services, as well as increased information technology investment in growth business arenas.

The three banks that will form Mizuho had combined assets of 134.4 trillion yen ($1.25 trillion), wresting the title of world's biggest bank from Germany's Deutsche Bank

But bigger may not mean better, analysts said.

"I don't think Mizuho will be able to compete with foreign banks in the overseas market anytime soon," said Nozomu Kunishige, senior banking analyst at Lehman Brothers. Low business efficiency and a lack of clout in the high-margin investment banking business are often cited as prime drawbacks.

"Still, it will have new business chances based on its solid client base at home," he said

Mizuho has a total 28.5 trillion yen worth of outstanding lending to major companies and holds individual deposits of 31.1 trillion yen. Both are the biggest in Japan. It has business relations with 81 percent of listed companies throughout Japan.

The huge size of its operations could help Mizuho cement its lead in the domestic industry, but analysts question whether size will matter if it slows down the pace of much-needed restructuring.

Credit rating agency Standard & Poor's Corp. on Friday warned of mounting challenges for Mizuho, including the sheer complexity of a three-bank tie-up, their relatively small weight in profitable retail businesses, weaker capital quality compared to other major Japanese bank groups and weak earnings capacity.

S&P said the group's big franchise would help it fight increasing competition in the industry while diversifying portfolios outside of traditional corporate lending. But it added: "It will take time to improve the banks' financial profiles to levels on par with that of their international peers."

Earnings, S&P said, will continue to be pressured by asset quality problems.

Despite its mammoth size, Mizuho is expected to be less profitable than global peers that have nurtured lucrative revenue streams by building investment banking and asset management units.

Mizuho aims for a return on equity of 12 percent in the year to March 2006, up from 4.2 percent in 1999-2000 but still below top foreign banks that have ROEs of more than 20 percent.

TITLE: MARKET WRAP
AUTHOR: Igor Semenenko
TEXT: THE RTS index was up 10.6 percent last week to 199.08 in sluggish trading, recovering some lost ground after three weeks of straight losses in which it shed 25 percent. The RTS index nose-dived to 179.98 from a high of 240.66 in the first three weeks of September.


Just a month ago when the market was storming the 250 resistance level, brokers hoped the RTS index would end the year closer to 300, but the foundations were shattered after three weeks in the red.

"I think that 250 is a realistic target for the RTS index this year, so we are looking at 300 sometime in 2001," Andrei Galperin said.

Brent futures dropped 4.5 percent to $29.84 per barrel on the week after the United States tapped its strategic oil reserves and Saudi Arabia mapped out plans to increase supply of crude to international markets.

Emerging markets staged a recovery as oil prices sank and the U.S. market edged up at the start of the week.

But fears over low corporate earnings in the third quarter sent the Dow Jones and the NASDAQ in a southern direction closer to the end of the week, paving the way for losses in the emerging world at the start of this week.

"The RTS will not decouple from the U.S. market in the short term," said Alexander Zakharov of Alfa-Bank. "We will follow S&P futures, corporate earnings reports and oil prices."

Russia's old faithful - Unified Energy Systems, LUKoil and Surgutneftegaz - were up 10 percent to 12 percent.

Aeroflot soared 53 percent to 28 cents per share after announcing plans to tap international capital markets with a Global Depository Receipts program worth 20 percent of its stock in November this year.

Norilsk Nickel jumped 21.6 percent to $7.72 after its management set on a marketing campaign with Deutsche Bank to soothe investors' concerns over restructuring.

GAZ leaped 36.4 percent on rumors of a buyout.

TITLE: Bell's Latest Company Moves In on Office Phone Market
AUTHOR: By Bruce Meyerson
PUBLISHER: The Associated Press
TEXT: NEW YORK - Ma Bell is now a grandma.


This past weekend, exactly four years after AT&T gave birth to Lucent Technologies with the spin-off of its communications equipment business, a third generation was born as Lucent officially spun off the part that makes office telephone systems, creating an independent company named Avaya Communications.

Much like Lucent and the seven Baby Bells created in the 1984 breakup of AT&T's local phone monopoly, the newest member of the clan is hardly a baby of a company.

Avaya begins life as a publicly traded company with 30,000 employees, nearly 1 million customers in 90 countries, and about $7.5 billion in annual revenues - large enough for Standard & Poor's to grant immediate membership in the S&P 500 index of the biggest U.S. companies.

And since Lucent is the United States' second most widely owned stock with about 5.3 million shareholders, nearly all of whom are getting Avaya stock as a special dividend, Avaya instantly becomes the third most widely held stock with about 5 million share owners, including 3 million individual investors. Metlife remains No. 1 with about 9 million shareholders; AT&T is pushed back to No. 4 with about 4.8 million.

Avaya's stock, which will trade under the symbol "AV" on the New York Stock Exchange, opened on Monday at $22.88 per share, giving the company's 278 million shares an initial market value of about $6.4 billion.

However, despite the lavish birthright, Avaya is being cast into rough circumstances that could mean an inauspicious start rather than a charmed existence. 

As heir to the business that made "Merlin" a standard in office phones, Avaya is born a leader in what's become a very stagnant market. Last week, a research firm named the Phillips Group reported that shipments of new corporate phone systems dropped 16.2 percent in the second quarter compared with the same period in 1999 - the first significant drop since 1993.

"The characterization Lucent made of us being slower growth versus other things in portfolio was absolutely true. We were also lower [profit] margin," said Don Peterson, the former chief financial officer for Lucent, chosen to be president chief executive for Avaya.

"Our business right now is larger in slower growing segments. But that doesn't define the opportunities," said Peterson, pointing to faster-growing parts of Avaya such as the unit that produces software for customer calling centers and for unifying office communications systems like voice mail and e-mail.

Avaya's target addressable market is estimated to grow from $182 billion in 1999 to $333 billion in 2003, or an average of 16 percent a year, according to a recent report by George Kelly, an industry analyst for Morgan Stanley Dean Witter. But while the phone system portion of that pie is seen growing only about 1 percent a year over that stretch, the unified messaging business is projected to grow 71.5 percent a year and the call center business is expected to grow 30 percent a year, the report said.

Meanwhile, although Avaya is the top seller of phone systems in the United States, and the world's top supplier of call center and voice messaging systems, overall the company has only a 4 percent share in all its markets combined.

"We have a terrific opportunity to participate in that growth and to take some share away from other people, and we don't have to do that in an enormous way," said Peterson. "If our market share goes from 4 percent to 6 percent as we grow with the market, that's a tremendous market share."

To accomplish that, Avaya plans to increase spending on research and development from about 6.5 percent of its revenues to 9 percent.

But perhaps the most important task facing the new company will be an all-out marketing assault to forge a new brand name and corporate identity. The campaign, budgeted at $50 million over the next nine months, was launched in recent weeks with high-profile TV commercials during the U.S. Open tennis tourney and Monday Night Football.

TITLE: Watchdog Fines Mitsubishi For Cover-up of Car Defects
PUBLISHER: The Associated Press
TEXT: TOKYO - Mitsubishi Motors Corp. was ordered to pay a $36,975 fine by a Tokyo court Monday in only the second-ever case by industry regulators against a Japanese automaker for hiding reports of defects in its cars.


The widely expected verdict was handed down by the Tokyo District Court three weeks after the Ministry of Transport accused Japan's No. 4 automaker of systematically hiding complaints from drivers.

Ministry officials had said that they would not seek harsher penalties because none of the defects that Mitsubishi Motors failed to report to regulators was known to have caused any deaths. The defects included failing brakes, leaky fuel caps and faulty clutches.

In a statement Monday, the company apologized for the cover-up, which resulted in the belated recall of 620,000 cars and trucks and led company President Katsuhiko Kawasoe to announce his resignation as part of a management shake-up.

The only other Japanese automaker to have been fined for a recall-related offense also received what amounted to a slap on the wrist.

Fuji Heavy Industries was ordered to pay $12,941 in 1997 after the maker of Subaru cars was found to have secretly repaired more than 900,000 defective cars and trucks without reporting the defects to the government.

The cover-up by Mitsubishi Motors, which agreed recently to sell a 34 percent stake in its business to Germany's DaimlerChrysler SA, was exposed when Transport Ministry officials found complaints from consumers stuffed in employee lockers during a surprise inspection of the company's headquarters earlier this year.

Mitsubishi Motors later acknowledged it had been hiding complaints and quietly repairing defective vehicles since at least 1977.

Consumer reaction to the scandal has been muted in Japan, where protests against product liability and boycotts are rare. Sales at Mitsubishi Motors have been unaffected.

TITLE: Oil Prices Climb Higher Amid Renewed Tensions
AUTHOR: By Michael Georgy
PUBLISHER: Reuters
TEXT: LONDON - Oil prices moved higher on Monday, boosted by renewed tensions between Iraq and Kuwait and signs that the European Union will not follow the U.S. lead in releasing emergency oil reserves to cool off the market.


Traders were also watching a storm in the Gulf of Mexico which was adding an element of uncertainty to the market.

International benchmark Brent crude for November delivery moved up a dollar higher to $30.84. U.S. light crude futures were up 96 cents at $31.71.

The rise came amid fresh tensions between Iraq and Kuwait, which were helping push prices up again after a two-week pullback from 10-year highs at $34.98 for Brent.

Kuwait accused Baghdad of stealing large quantities of Kuwaiti oil through a pipeline laid during Baghdad's 1990-91 occupation of the Gulf Arab state.

The allegation came one day after Kuwait made a request to the United Nations to take urgent steps to stop what it sees as the threatening behavior of Iraq.

Deputy Prime Minister and Minister of State for Cabinet and Parliament Affairs Mohammed Sharar said on Monday Kuwait had satellite pictures and field evidence to back up its claims.

"A recent scientific study ... proves the falseness of Iraq's claims that Kuwait was stealing Iraq's oil and pictures show exactly the opposite of that. They prove that the Iraqi regime is the one that planned and carried out the theft of Kuwait's oil, and the evidence is in the Kuwaiti desert," he said.

He was speaking after the government's weekly cabinet meeting Sunday.

Last month, Iraq accused Kuwait of stealing its oil from a border field and vowed to take measures in response. Kuwait has strongly denied the charge.

The United States responded to the Iraqi claim with a warning that it would use force if Baghdad threatened its Gulf Arab neighbors.

Iraq, which has been cranking up production despite stringent UN Sanctions, is seen as an oil market wild card because a politically calculated halt to Baghdad's exports would rattle the volatile market.

But Iraq told the market last week that it would not disrupt oil exports under the UN's oil-for-food deal.

While Middle East developments were helping keep a bullish tone to the market, dealers also said the European Union governments' failure to agree on Friday to follow the lead set by the United States and to sell strategic petroleum reserves was also helping to strengthen prices.

Spain and Fran ce had backed a controlled release of contingency reserves to tame runaway prices near 10-year highs but toned down their arguments after Germany express ed doubts.

A final decision is not expected until a summit of EU leaders in Biarritz in the middle of October.

"Tensions between Iraq and Kuwait and the decision of the EU not to release reserves are strengthening prices," said Christopher Bellew, an oil dealer at Prudential-Bache.

Hurricane Keith weakened on Monday but still pounded the coast of Belize with fierce winds, and traders were watching whether it would go to the U.S. Gulf and threaten production of oil and natural gas there.

Leading OPEC producer Saudi Arabia moved to alleviate fears about the stubborn price rally last week, saying it would pump enough oil to stabilize the market.

OPEC's output hike of 800,000 barrels per day (bpd) has now kicked in, and the market is also bracing for the extra 30 million barrels of oil that the United States said it would release from its Strategic Petroleum Reserves.

The United States is scrambling to try to build heating oil supplies for the peak-demand winter season, an explosive issue at the top of the agenda during an election year.

TITLE: Analysts Question Smolny Budget Figures
AUTHOR: By Vladimir Kovalyev
PUBLISHER: Staff Writer
TEXT: The St. Petersburg regional administration unveiled its draft budget for 2001 on Friday, forecasting a budget surplus for the first time in the city's history, but grumbling about federal financial plans.


Some analysts, however, raised questions as to how the City Finance Committee had arrived at its figures, and said that some of City Hall's bigger projects would still be drastically short of funding.

According to the draft, total income for next year is set at 41.2 billion rubles ($1.48 billion), with spending set at 40.2 billion rubles, said the head of the Finance Committee, Vice Gov. Viktor Krotov.

The resulting surplus of 1 billion rubles (about $36 million) will be used to pay back part of the city's debts, estimated to stand at 18.5 billion rubles (about $668 million) in total. External debts, including Eurobonds and foreign bank credits, currently account for 82 percent of all city debt, which next year will be reduced by 8 percent, said Krotov.

"Compared to last year's budget, the city's income has grown by 9 percent. This is the result of St. Petersburg's economic growth which has developed this year far more than we had forecast," Krotov said at a press conference on Friday.

The 2000 budget was originally estimated at 34.1 billion rubles (about $1.2 billion) but was increased this autumn to 38.2 billion rubles with a surplus of 1 billion rubles (about $36 million). 

While the city administration has this year trumpeted improved tax collection, Demid Golikov of the Leontief Center in St. Petersburg said that the projected surplus may be a matter of creative accounting.

"The budget surplus ... could have come from unaccounted income reserves or by setting the projected dollar exchange rate too high," Golikov said.

"If this kind of practice is taking place, it should be avoided," said Yaro slav Lissovolik, an analyst at Renaissance Capital Research in Moscow, in a telephone interview Monday.

"Any investor who has serious intentions toward the city would easily find this out and would leave."

Krotov said that the 2001 draft budget places as much emphasis on social spending as previous budgets. Spending in the social sphere will rise by 43 percent compared to this year, to reach 1.3 billion rubles (about $47 million), culture would get a 29 percent increase to reach 234 million rubles, and education would go up by 19 percent to a total of approximately 1 billion rubles.

But Krotov said that the new Federal Tax Code would deprive the city of billions of rubles. Indeed, the new code has annoyed many regions, since it takes away some of their more lucrative sources of revenue.

Most worrying for the regions are:


. A cut in turnover tax from 4 percent to 1 percent, including the abolition of the road users tax, which was at 2.5 percent (with 0.5 percent going to state coffers).

. Housing maintenance tax is to be repealed.

. From an 85 percent to 15 percent split of VAT between the center and the regions respectively, all VAT will now go to the state.


"The road users and housing taxes have for a long time been sources of claims and tensions for businesses over here [in St. Petersburg], because they are based on revenues and not on profit," said Tom Stansmore, head of the St. Petersburg branch of Deloitte & Touche. "So for companies with small profit margins, this tax is extremely expensive."

"In my opinion, it is a good thing that these taxes are going, but I am sure local officials are very sorry to see them go because they are such major sources of revenue."

"The road users tax was huge money," said Maxim Tsygankov, a Deloitte & Touche tax specialist. It was particularly punitive for companies with a series of production stages, with each factory or operations point getting hit by the tax, he said. "It was stifling a lot of industries." 

According to the 2001 draft federal budget, the tax revenue divisions between the regions and the center will be established as 70 percent to 30 percent in favor of the center, a significant change to the previous 50-50 division.

With this apparently in mind, Krotov implicitly acknowledged that spending on road construction, repairs, and on projects such as the flood protection barrier and the high-speed ring road linking St. Petersburg with European road networks, were going to suffer.

For the city's existing roads, Krotov said he expected the federal budget to come up with "between 3.5 and 4 billion rubles" - a figure some observers described as preposterous.

"If the federal budget is passed [in the form in which] it was introduced to the State Duma for its first reading, St. Petersburg will have very serious problems," said Alexander Shishlov, a Yab loko faction Duma lawmaker, in a telephone interview on Monday.

"Previous years have shown that [Moscow] doesn't fulfill its obligations. Krotov's expectations are unrealistic at best," he said.

And Krotov himself said that the federal budget was earmarking a mere 500 million rubles ($18 million) for the flood protection barrier - a dam - which needs a sum more in the region of $660 million, according to city officials.

"This is not sufficient spending. It is not even enough to maintain the current conditions at the dam," Krotov said.

To make up for the loss in revenue, City Hall is planning to increase the local car tax by up to 80 percent, as well as a twofold hike in gambling tax.

Krotov added that the city budget might undergo some alterations, depending on the nature of the state budget when it is finally passed. The Duma is set to begin debate on the budget on Friday. A Renaissance Capital Research report released on Monday predicted that the budget would squeeze through.

Alexander Zvyagintsev, head of AVK, a local investment analysis group, said that it is too early to say yet whether the draft budget will be changed before being submitted to the Legislative Assembly for approval.

But he was reassuring on St. Petersburg's financial situation.

"St. Petersburg has always been a stable region, so there is no reason to panic," he said.

TITLE: IN BRIEF
TEXT: India's New Telecom


NEW DELHI, India (AP) - The Indian government Sunday reportedly converted its monopoly fixed-line telephone service provider into a new telecom company that would compete with private enterprises.

With an equity capital of $1.08 billion and 400,000 employees, Bharat Sanchar Nigam Limited will be India's largest state-owned company. The government will continue to have 100 percent equity in the new corporation, the United News of India said.

The formation of BSNL from the government's former Department of Telecom Services invited strong protests from telecom department employees and a three-day crippling telecom strike last month. Labor unions see the move as a first step toward privatization and fear job losses. 



IPO's Burning cash


NEW YORK (Reuters) - A survey of Internet companies using data from Pegasus Research International found that 273 of the 339 firms surveyed burned more cash than they took in, spending $1.8 billion in the first three months of 2000, according to an article in Barron's Oct. 2 issue.

The survey calculated the rate at which the companies were consuming cash in the second quarter and then projected ahead to estimate when each Internet company would use up the cash it had available as of June 30.

In the second quarter, 86 of the 273 companies that burned through their cash were poised to run out of money within the next 12 months.



Japanese Phone Merger


TOKYO (AP) - Three Japanese telecoms companies completed a planned merger on Sunday, beginning business as the second-largest competitor in an industry dominated by the former government monopoly Nippon Telegraph and Telephone Corp.

The new entity, KDDI, unites Japan's largest overseas carrier and two newer companies serving the country's long-distance and mobile-phone markets.

Announced last December, the merger is one of several high-profile deals that have been encouraged by recent measures to deregulate Japan's long-protected telecoms industry, second in size only to that of the United States.

TITLE: Pipe Plants Become Targets As Oil Export Plans Abound
AUTHOR: By Elizabeth LeBras
PUBLISHER: Special to The St. Petersburg Times
TEXT: MOSCOW - Powerful financial groups are taking over the nation's pipe-building plants.


On Tuesday, the Petrokommerz bank and the financial group of Avtobank and Stilteks jointly announced the acquisition of a 36 percent stake in the Seversk pipe plant for $20.5 million and have expressed their intention to increase their interest in the plant to a controlling stake of 51 percent plus one share.

The plant, located near Yekaterinburg in the Ural Mountains, makes pipes that are used in extracting oil, and Petrokommerz bank is 75 percent owned by LUKoil, the nation's No. 1 oil firm, which has huge fields in northern Russia's Timan-Pechora region and the Caspian Sea that it wants to bring into production soon.

Neither LUKoil nor Petrokommerz bank would comment on the purchase.

In a separate development on Wednes day, trading company Alfa-Eko, which is part of the Alfa Group holding that includes Tyumen Oil Co., announced in a statement that it had gained control of a blocking stake in Tagmet, the Taganrog Pipe Plant located on the Azov Sea.

A blocking stake is 25 percent plus one share and allows a shareholder to veto board decisions it doesn't like.

Earlier this year, MDM-Bank purchased a controlling stake in the Volzhsk pipe plant in the Volga region.

Part of the reason for the interest in the pipe plants is that they can be used to transport oil, oil products and natural gas, which are the nation's main source of export income. Windfall profits from high world oil prices in the last year have filled oil firms' coffers with cash they are now using to expand production.

In addition, Caspian Sea oil production is coming on stream and there are several plans to export it via pipelines. The Volzhsk plant is producing pipes for the Caspian Pipeline Consortium, which is building a 1,580 kilometer pipeline from Tengiz, Ka zak stan, to the Russian Black Sea port of Novorossiisk.

Tagmet and Seversk are important players in the nation's pipe industry. According to Nikoil brokerage, the Seversk plant is No. 4 by output and controls 8 percent of the market. Tagmet is No. 5. Both companies have seen their productivity and profits soar this year.

Analysts have varying explanations for the increased interest in purchasing pipe plants.

Svetlana Smir nova, metals analyst for Renaissance Capital investment bank, said there is "a general process of consolidation" in the nation's ferrous metals industry, and pipe-building plants represent an "acquisition target for powerful groups." Pipe-building factories are generally easier to acquire than steel plants, she said.

Steel plants primarily serve the export market and are more attractive to investors, and have long since been acquired by powerful interests, Smirnova said. Pipe factories, on the other hand, being primarily oriented toward the domestic market, had not had major shareholders before now and were hence easy targets for financial groups, she said.

However, it is not clear if the acquisition of the stake in the Seversk plant is part of Petrokommerz's strategic plans or if it is actually LUKoil that wants control over the plant.

Smirnova said the Seversk purchase could represent an attempt by Petro kom merz and the Avtobank-Stilteks group to create a vertically integrated company.

This seems logical considering that the Avtobank-Stilteks group owns the metallurgical complex NOSTA, a metals giant in Novotroitsk in the Orenburg region, 1,200 kilometers southeast of Moscow and coal assets in the Kuzbass region of western Siberia.

Mikhail Ar mya kov, metals analyst for Nikoil, said that LUKoil had no interest in controlling the Se versk plant.

However, Smir nova said that by holding a minority share in the plant, LUKoil will be able to influence the prices of pipes.

The Segodnya newspaper reported that as a result of Pertrokommerz's purchase of the stake in the Seversk pipe plant, the plant had become part of LUKoil's financial-industrial group. 

Moreover, the newspaper said that control over the plant will allow LUKoil to increase its independence from the state-owned pipeline monopoly Transneft, which stipulates quotas for the pumping of oil through its system.

TITLE: FSB Accuses East Line of Smuggling
PUBLISHER: Reuters
TEXT: MOSCOW - Russia's FSB domestic security service on Friday accused the country's second largest cargo airline of smuggling contraband consumer goods from China.


The accusation came more than a week after masked FSB officers raided East Line's headquarters at Domodedovo airport 30 kilometers outside of Moscow,

The investigation followed an Ilyushin Il-76 cargo plane, leased by East Line, being found earlier this year to be carrying 22 tons more cargo than was reported on customs documents.

East Line has acknowledged the incident, which occurred after one of its planes was forced to make an emergency landing in the Siberian city of Irkutsk, but denied any wrong-doing, insisting the investigation was the result of some mistake.

"East Line has never carried contraband. I believe this is a mistake which will be cleared up," East Line general director Amiran Kurtanidze said following the raid.

But the FSB said suspicions were raised again when after the raid on East Line's headquarters, two of the airline's planes were abandoned by their crews en route from China at airports in Siberia and central Russia.

It said they were found to be carrying a total of 29 tons of illegal cargo.

TITLE: UES Acquires 'Large' Stake In TV Channel
AUTHOR: By Alexander Tutushkin, Yelizaveta Osetinskaya and Anton Charkin
PUBLISHER: Vedomosti
TEXT: MOSCOW - No. 1 oil firm LUKoil has sold a large stake in second-tier television channel RenTV to national power giant Unified Energy Systems, a LUKoil official said.


The source in LUKoil management, who did not wish to be identified, confirmed that a sale had taken place but would not reveal the size of the stake. He also refused to say how much UES had paid.

LUKoil had owned a 75 percent stake in RenTV.

RenTV was valued last year to be worth $30 million to $42 million by a Western investment company.

Officials at UES were coy Thursday about the sale.

"No documents registering the transaction have been registered," said UES spokes man Andrei Trapeznikov. 

"RenTV is making a film about our 80th anniversary. Representatives of the company often come to see me and I go to see them. And that's all there is to it."

A member of the board of directors of a regional energy company said the buyer was one of UES' subsidiaries.

"The deal really has been signed and the buyer was a UES structure," he said. "It purchased a controlling block rather than 75 percent."

RenTV's programs reach all the big cities: St. Petersburg, Nizhny Novgorod, Samara, Yekaterinburg, Kazan, Novosibirsk, Vladivostok, Saratov and Rostov-on-Don. Its potential viewers number some 70 million, and it broadcasts in a digital format.

Gallup Media puts RenTV's share of the nation's viewing public at 3.5 percent to 3.7 percent. In Moscow, RenTV is part of a cable network with 2.5 million subscribers (about 7.5 million viewers).

Before the purchase, UES only owned the Energia Rossii paper. Its regional energy companies have shares in local papers, television companies and information agencies.

The sale left some observers baffled.

"I have no idea why UES would buy RenTV," said Sergei Vasiliev, general director of Video International's media service.

"In terms of its capability for carrying advertising, the company is unattractive. We don't even include it in our market reports," Vasiliev said. "If Chubais needs to resolve PR tasks in the regions, then he needs to buy a station there."

TITLE: Big Find Reported At Sakhalin 1 Field
PUBLISHER: Combined Reports
TEXT: MOSCOW - A significant amount of crude oil has been found at a field located off the Far Eastern island of Sakhalin, U.S. oil giant ExxonMobil announced.


The company said Thursday that a test well, Chaivo 6, had flowed at a test rate of 6,000 barrels per day.

Chaivo is located about 600 kilometers north of Yuzhno-Sakhalinsk, the statement said.

The field is part of the Sakhalin 1 project being developed by an international consortium led by ExxonMobil subsidiary Exxon Neftegas Ltd.

ExxonMobil said the project "represents a world-class oil and gas development opportunity. Development planning and discussions on government assurances necessary to allow the project to go forward continue to progress."

Earlier, Japan's Sakhalin Oil and Gas Development Co. Ltd., or SODECO, confirmed the find.

SODECO has a 30 percent stake, while state oil firm Rosneft and its affiliates own a combined 40 percent stake in the field.

(Reuters, AP)

TITLE: Europay Seeks To Boost Its Card Security
AUTHOR: By Patricia Heffernan
PUBLISHER: Staff Writer
TEXT: MOSCOW - Prompted by last year's widespread fraud at automatic teller machines within the Russian banking system, Europay has launched an ambitious new security system designed to protect its customers' private account information.


Europay is the leading card payment company in Europe and manages the MasterCard brand, as well as the Eurocheck, Cirrus and Maestro automated payment systems. And along with Visa it is the most widely used payment system in Russia.

At least 250 Visa and Europay customers in Moscow had their bank accounts cleared out by ATM fraud last year via cards made with stolen information. The security breach, which was first reported by The Moscow Times last October, was eventually traced back to a card fraud ring that had penetrated Russia's Union Card processing centers.

Estimates of the losses that resulted range from $200,000 to $1 million.

At the time, both Visa and Europay made statements to the effect that the fraud ring had been neutralized, but are only now taking concrete steps to introduce tighter security measures.

In May, Europay signed an agreement with British Telecom and Dutch telecom giant KPN to establish the Virtual Private Network, or VPN, which is designed to protect ATM transactions.

VPNs typically use the Internet as the transport backbone to establish secure links with business partners, extend communications to regional and isolated offices and significantly decrease communication costs.

Prior to the advent of VPNs, the only other options for creating this type of communication were expensive leased lines or frame relay circuits. Internet access is generally local and much less expensive than dedicated Remote Access Server, or RAS, connections.

Sixty percent of Europay affiliated Russian banks will begin using the VPN system by the end of the year and the remaining 40 percent will be converted in 2001, Europay said.

Most Russian banks heavily promote Europay because it offers them the best deal, said Vladislav Bochkov, a Probiznesbank representative who analyzes the credit card market.

"[Europay's] cards are more widespread in Russia than rival cards such as Visa," he said.

Andrei Koroleva, chief representative of Europay in Russia, insisted that no additional burden would be placed on banks. "No strict time limit for the installation of the system for member banks has been established, and we're trying to make the transition as inexpensive and comfortable as possible," he said in a statement.

About 70,000 MasterCards are in circulation throughout Russia, including credit and charge cards, a figure up over 40 percent from a year ago, according to Liz Phillipe, a public relations representative for MasterCard.

Russian users of MasterCard's debit card, Maestro, total 1.75 million.

Visa's Moscow spokeswoman, who declined to be named as a matter of policy between the credit card company and its local public relations firm, said Visa's main local competitor is MasterCard, and the two are jockeying for first place.

"Visa is probably No. 1 in Russia," she said.

Visa has 2 million cardholders and more than 200 issuing banks, she said.

Visa plans to beef up its own security measures by introducing so-called "smart chips" - in place of the current magnetic strips - on cards by 2005. Smart cards have evolved as powerful portable microchips capable of transmitting data and electronic fingerprints in a silicon repository the size of a thumbnail.

Despite the move to increase security, analysts caution that no matter what hi-tech measures each payment system puts in place, they can easily be thwarted by good, old-fashioned Russian corruption, in the form of over the counter bribes to overworked and underpaid tellers, who have easy access to the very information that credit card companies are trying so desperately to protect.

TITLE: New Zealand Looks to Russia To Help Solve Milk Shortage
AUTHOR: By Alla Startseva
PUBLISHER: Staff Writer
TEXT: MOSCOW - A New Zealand company that has a hefty chunk of this nation's dairy-product market is considering starting production in Russia for export.


Officials of the New Zealand Dairy Board said last week they are impressed by the way the economy is developing and are thinking of expanding activities in the Commonwealth of Independent States.

"There is a shortage of butter all over the world," said Paul McGilvary, managing director of NZDB Europe, at a news conference Wednesday.

The average price of milk has risen about 30 percent on world markets this year because production is not keeping up with demand, the NZDB said.

Even in New Zealand, demand for milk is higher than the country can supply, so local products may be on sale in New Zealand one day, NZDB directors said after an inspection tour of Russia.

A spokesman at the Agriculture Ministry said the nation's 140 dairy factories satisfy local demand. Some milk products are exported, but mostly as humanitarian aid, he said.

Wimm-Bill-Dann, the leading local competitor of NZDB, has no plans to export milk products yet, said Yulia Belova, Wimm-Bill-Dann's press secretary.

NZDB directors declined to be more specific about plans or potential partners.

"The visit to Russia offers an opportunity for the directors of NZDB to get a first-hand insight into this important market, to review current business development and opportunities for strategic initiatives both in Russia and elsewhere in the CIS," said Harry Bayliss, NZDB's deputy chairman.

The CIS countries are the second-largest butter market in the world after Britain, the NZDB said.

In the last financial year, the CIS consumed 60,000 tons of NZDB butter, down almost 40 percent from 1998 sales, and accounted for 5 percent of the total company sales, Bayliss said. CIS sales totaled $85 million, he added.

In the CIS, the NZDB operates as New Zealand Milk, a consumer and food service arm that markets butter under the leading Anchor and Doyarushka brands.

In Moscow, 43 percent of customers regularly buy Anchor butter, according to the A.C. Nielsen research agency. In 1999 the comparable figure was 46 percent, and in 1998 it was 35 percent.

The other arm is NZMP CIS, which delivers dairy products such as dry milk, protein and frozen cream.

NZMP said that demand for such products has been rising in the CIS due to increasing substitution of imports and the growth of competition between local producers on the consumer market.

TITLE: Taganrog's Share Gains Reveal Dark Downside
AUTHOR: By Igor Semenenko
PUBLISHER: Staff Writer
TEXT: MOSCOW - Managers of the Taganrog Pipe Plant spent the late summer months watching their plant's stock price soar - it climbed 730 percent in August alone - as unknown hungry buyers gobbled up every available share.


Now that those buyers have revealed themselves - as subsidiaries of the financial powerhouse Alfa Group and the Ukrainian pipemakers Interpipe - Taganrog managers are offering alarmed defiance. 

"[Our company] has entered the sphere of interests of various oligarchic groups that are trying to take it over," warned a statement issued over the weekend by managers of TagMet, as the company is known for short.

In a telephone interview, TagMet's director, Sergei Bidash, said his management team fears a hostile takeover by the Alfa and Interpipe groups, and accused the newcomers of corruptly manipulating the nation's courts so as to "destabilize" TagMet's business. 

Bidash was referring to an injunction he said the Alfa Group won to halt a TagMet share float planned for August. Bidash said that the share float - the company's fourth - would have seen shares sold at a ruble apiece, but would now be dropped. Instead, Bidash said, the company would apply for a new share issue - with 152 million new shares, representing 30 percent of outstanding shares, and with each selling for four rubles instead of one.

Bidash said TagMet shareholders had a "preemptive right" to buy proportionally into the fourth share issue. 

But Bidash suggested vaguely that it might be possible to cut the Alfa crowd out of a fifth share issue. He said TagMet was holding talks with a large Russian gas producer and a Russian oil company, offering each a 10 percent stake, and that the remaining 10 percent stake could go to TagMet plant managers.

Industrial pipe manufacturing is enjoying an oil-led renaissance, as booming oil and gas companies plan expansion, and finds in the Caspian Sea and elsewhere spur plans for new pipelines. TagMet, a factory in the Azov Sea town of Taganrog, is conveniently close to export routes like that of the planned Caspian Pipeline Consortium, and this year its profits and productivity have soared.

That has attracted the attention of others seeking a good investment. And the Alfa Group subsidiary Alfa-Eco last week announced triumphantly that it had acquired a 25 percent stake in TagMet - enough to veto TagMet company decisions. Alfa-Eco announced that it wanted the corresponding status of a seat on Tagmet's board, and is seeking an extraordinary shareholders' meeting in the fall.

"Alfa-Eco owns 25 percent of TagMet's shares," says the text of a statement circulated on behalf of Alfa-Eco. "We want to make investments in the company and would like to have a member on the [TagMet] board to make sure the money is spent accordingly."

"We are trying to negotiate with the company managers, but they are afraid of losing control over the plant," said Arkady Kulikov, a member of the board of the Interpipe investment group. Kulikov said Interpipe was working in concert with the Alfa Group.

TITLE: Creditors at SBS-Agro Cry Foul at Debt Deal
AUTHOR: By Igor Semenenko
PUBLISHER: Staff Writer
TEXT: MOSCOW - A group of private clients of former banking giant SBS-Agro on Friday demanded a review of the terms of a deal drafted under the auspices of the state's Agency for Restructuring Credit Organizations, or ARKO, to settle the bank's debts.


"You are afraid of tackling the dealings of the tycoons and are therefore trying to make a settlement at the expense of the small people," said Yury Par filov, head of SBS-Agro's private creditors committee at a meeting with ARKO's officials Friday.

SBS-Agro's debts to households total 6.15 billion rubles (about $1 billion at the time when the bank sank in 1998). ARKO, which took over the bank at the end of 1999, repaid all creditors who were owed less than 20,000 rubles ($700), representing 12 percent of the value of the claims.

Others were offered a restructuring scheme that includes an upfront payment in cash and issuance of bonds with a maturity of three to 20 years.

The government did not act on restructuring the bank for more than a year, giving managers plenty of time to remove its assets. The bank was handed to ARKO at the end of last year.

"Now ARKO is forcing us to sign an amicable agreement, but this agreement, first and foremost, smacks of a robbery under the cover of the government," says a letter that was forwarded by Parfilov to the Central Bank on Thursday.

Challenging ARKO's authority, the creditors' group started a Web site at www.sbs-agro.nm.ru, urging creditors to vote against the agreement drafted by the agency, which is to be discussed by the creditors on Nov. 16.

The letter posted on the Internet calls for an alternative creditors' meeting to be held Nov. 1.

Individual clients are mostly concerned with a loan worth $750 million issued to Agroprombank on Dec. 30, 1998, in defiance of a Central Bank ruling in September that year that prohibited SBS-Agro from making any banking transactions.

The loan issued to Agroprombank left SBS-Agro but did not arrive in Agroprombank, which was declared bankrupt several months later.

Separately, the group also claims that ARKO should seize Alexander House, named after the former head of SBS-Agro, Alexander Smolensky. The Center for Strategic Research led by German Gref before he became economic development and trade minister used the house to develop an economic strategy earlier this year.

The building, however, is still classified as an unfinished construction in city records and therefore cannot be seized. In addition, documents that link it to either Smolensky himself or SBS-Agro are missing.

Other pieces of Smolensky's empire are also a thriving industry.

Card-processing company STB recently launched a massive advertising campaign to tap household savings by offering special products to students, users of municipal transportation systems and Internet shoppers.

A 65 percent stake in STB belonged to SBS-Agro, but it was later transferred to owners whose identity the STB officials have refused to disclose. In a similar way, about 40 subsidiaries and 100 private apartments in Moscow that were owned by SBS-Agro or placed with it as collateral are out of the creditors' reach.

Separately, the Society for Mutual Lending, or OVK, a successor to SBS-Agro, keeps opening retail outlets both in Moscow and in the provinces. SBS-Agro owns 8.19 percent in OVK, according to the Central Bank.

Numerous court appeals by private clients were either ignored or acted against the creditors' interests.

For example, bailiffs gave auctioneers a total of 1,320 items seized in SBS-Agro offices in March 1999.

These were sold for a meager 59,000 rubles ($3,000), including 97 personal computers, which together fetched 2,910 rubles, the equivalent of $150 at the exchange rate of the time.

"Instead of seizing the assets as they should have, the bailiffs also agreed to the debt rescheduling scheme proposed by the bank," said Armen Akopyan, a member of the private clients group.

The agreement suggested repaying a total of 10.2 million rubles in 1999, about 0.2 percent of the bank's debts to private clients.

In private, government officials admit they are unable to put SBS-Agro's house in order.

"Even if we dispute the legality of the $750 million deal between SBS-Agro and Agroprombank, it will cause nothing else but a public outcry," said Dmitry Tarasov, head of the department of banks of federal significance with ARKO, at a meeting Friday. "The money is out of reach."

ARKO officials also cited the example of the infamous Natsionalny Kredit Bank that was declared bankrupt five years ago, but whose private creditors were not repaid even though the bank owned assets that could be sold.

When asked about their willingness to seize SBS-Agro's assets, ARKO officials said, "Show us the money and then we will seize it."

ARKO has disputed a deal worth $6 million with Zoloto-Platina Bank and won a victory in a court case in which one of Smolensky's companies tried to take over bonds kept by SBS-Agro that had a face value of $13 million.

Their patience exhausted, private depositors went to the prosecutor's office in May and filed a lawsuit against the former management of SBS-Agro, but the government took no action.

"There is a lot of work and it is premature to talk about the lawsuit's prospects," said investigator Igor Tyu kov of the Moscow regional branch of the Interior Ministry in a telephone interview Friday.

ARKO on Friday agreed to pay the creditors group a commission if account holders seize former assets of SBS-Agro. However, no formal agreement has yet been signed.

"What I do not understand is whether ARKO wants to bankrupt the bank or restore its solvency," Akopyan said. "You cannot do both things at one time."

TITLE: Is Cox Report an Intentional Misunderstanding of Russia?
AUTHOR: By Alan Rousso
TEXT: THE House of Representatives Speaker's Advisory Group on Russia did not bother to involve any Democratic members and has timed the release of its report to have the maximum negative impact on Vice President Al Gore's presidential campaign. 


That's a shame, because the country very much needs to re-examine its Russia policy, and much of what the group, headed by Rep. Christopher Cox, R-California, has to say would make an important contribution. 

The main criticisms the report makes about U.S. policy under the Clinton-Gore administration - that diplomacy was over-personalized, bad news ignored or downplayed, a small group of Russian reformers relied upon too heavily, corruption taken too lightly and democracy subordinated to macroeconomic reform - are not so much wrong as overstated. 

Yes, mistakes were made in the effort to assist in Russia's historic transformation, but the size and complexity of the task were so enormous that some mistakes were inevitable. 

The bigger problem with the way the report conveys these facts is that it leads the reader to believe that the main actors in this drama sat in Washington rather than Moscow. It is the height of arrogance to proclaim that the Russians deserve little or no credit for what goes right in their country and bear little or no blame for what goes wrong, and that is the message of the Cox report. The only thing missing is a chapter blaming faulty Clinton-Gore policy for Russia's underwhelming performance in international soccer tournaments. 

Unfortunately, the type of balanced statement that appears almost as a footnote to the report's lengthy diatribe against the Clinton team - "It is quite correct that Russia is responsible for its own decisions and was never America's to lose - or for that matter to win - [but] to the extent that U.S. policy made a difference in Russia, it made conditions worse, not better" - is eclipsed by ridiculous chapter titles like "1998: Years of Bad Advice Culminate in Russia's Total Economic Collapse." Indeed, the drafters of the report commit many of the same errors attributed to Clinton-Gore: The group ignores inconvenient facts, spins evidence to rally support for its partisan point of view, fails to integrate the views of other less partisan analysts and crafts a lawyerly but tendentious case against its main culprit, Gore. 

Yet the problems in the Cox report go deeper. The main attack is launched at the point on which Clinton and Gore are less vulnerable: the U.S. transition assistance effort. Meanwhile, the most damaging policy decisions, concerning the international environment created around the fragile Russian state, are left almost untouched. In their zeal to demonstrate how the Clinton administration failed the Russian people, the group misunderstood how the administration, with a lot of help from the Russians, failed to manage U.S.-Russia relations. Clinton-Gore did far more damage with their decisions to enlarge NATO, revise the alliance's strategic concept, bomb Serbia and Iraq and move to abrogate the Antiballistic Missile Treaty by developing a national missile defense than with their assistance to corrupt Russian officials who systematically impoverished the Russian people and created a self-serving economic elite. 

The Cox report argues that the Clinton-Gore team's flawed efforts at the level of Russian domestic politics so poisoned the Russian population's sentiments toward the United States that cooperation on worthwhile international projects like NATO enlargement, NMD and intervention in the Balkans became impossible. But the connection between the domestic and international initiatives was far blurrier than acknowledged, and the causal arrows probably pointed in the other direction. 

The report turns repeatedly to public opinion data showing that NATO enlargement and NMD had no real resonance among the general Russian population, whereas bad policy advice on privatization of state assets hurt the image of the United States more directly. 

This reflects a failure to understand how policy is made in Russia. The Russian people still are treated as subjects rather than citizens, and their views didn't count for much in Boris Yeltsin's Russia. This goes back too many centuries to pin it on Clinton and Gore. 

The foreign policy and strategic elites mattered far more in the policymaking process, and their revulsion at NATO enlargement and Kosovo was unequivocal. Overall, elites in Moscow were more favorable toward the Clinton-Gore approach to assisting Russian reform (as the report makes clear, they profited enormously) than the population that suffered its consequences. The Cox report is right to worry about the consequences of a long-term decline in U.S.-Russian relations, but it is wrong in the conclusions it draws about what caused that policy failure. Shifting the emphasis exclusively to American complicity in Russia's distorted transition from communism will not improve U.S.-Russia relations.


Alan Rousso is the director of the Carnegie Endowment for International Peace based in Moscow. He contributed this comment to the Los Angeles Times.

TITLE: Canada Mourns Ex-PM Trudeau
AUTHOR: By Patrick White
PUBLISHER: Reuters
TEXT: OTTAWA - In an unprecedented outpouring of grief, several thousand Canadians paid their last respects to former prime minister Pierre Elliot Trudeau as his coffin lay in state in Parliament on Sunday.


As of Sunday afternoon, 15,000 Canadians paid tribute to Trudeau, police said. On Saturday, another 25,000 people packed Parliament until the early hours to pay a silent but highly emotional tribute to Canada's most influential and charismatic politician. Trudeau was prime minister from 1968 to 1979 and from 1980 to 1984. He died of cancer on Thursday in his hometown of Montreal at the age of 80. A state funeral will be held on Tuesday.

Canadians young and old lauded the former prime minister.

"I came to pay tribute to Mr. Trudeau, a great Canadian and great prime minister. We basically grew up with Mr. Trudeau as he was prime minister for over three decades," said Mark Pearson of Ottawa.

Others said they came to Ottawa because Trudeau made them proud to be Canadian.

"He was a great leader. When he came to power in 1968, the country had just celebrated its 100th anniversary and it needed to be revamped," said Salim Sachedina, who moved to Canada from Tanzania in 1965. "Trudeau brought dynamic changes."

Sachedina particularly recalled Trudeau's 1982 adoption of the Canadian Charter of Rights and Freedoms, which guarantees certain civil rights, and the repatriation of the country's Constitution from Britain that same year.

"He brought the pride of being Canadian. We were very bland politically until the 1960s,'' said Sachedina.

Some who grew up while Trudeau was in power said they also liked him because he was a visionary and a contradictory man.

"Whether you liked him or hated him, he did things based on what he felt was right. He did things that were great and did some terrible things as well, but he had the respect of people for his conviction and vision," said Paddy Moore, an Ottawa citizen. "He sums up who we are as Canadians: We have these contradictions in ourselves. Nobody is perfect."

Trudeau, born on Oct. 18, 1919 in Montreal, studied at Harvard University, France's Ecole de Sciences Politiques and the London School of Economics.

With a piercing intellect that made him popular in the conservative French-speaking province of Quebec of the 1950s, Trudeau was named justice minister in 1967, before winning the 1968 general elections.

After his election, Trudeau declared French and English the official languages of Canada, giving a badly needed help to the country's French-speakers. He also led the fight to legalize abortion and homosexuality.

His tenure as prime minister included a successful battle against separatists in his native Quebec. In 1970, he imposed the War Measures Act to crush the terrorist Quebec Front of Liberation and he helped Canadian unity forces beat separatists during the 1980 referendum on Quebec's independence.

TITLE: Muted Celebrations Mark 10 Years of German Reunification
AUTHOR: By Colleen Barry
PUBLISHER: The Associated Press
TEXT: BERLIN - Hans Dietrich Genscher pulls back the curtain in his suite in the elegant Adlon Hotel to reveal a panoramic view of the Brandenburg Gate and the glass-domed Reichstag, Germany's parliament. 


"Herrlich!" he exclaims. Magnificent. 

Anyone would appreciate the private, close-up view of two of Germany's most famous - and symbol-laden - landmarks, no one more so than Genscher, the foreign minister whose energetic capital-hopping helped allay the fears of the superpowers and secure German reunification 10 years ago.

Tuesday's milestone anniversary is a bittersweet one for the architects of the new Germany. Helmut Kohl, the "unity chancellor," is in disgrace, felled by scandal over a party slush fund and denied a place of honor at the main celebration.

Genscher's reputation, on the other hand, is intact. Germany's longest-serving foreign minister is also retired, but is well remembered for the tireless and skillful diplomacy that led a satirical magazine to dub him "Genschman," a Germanic play on Batman.

Because he was born in what would become East Germany under Soviet occupation, ending the divide had been a personal crusade for him - a "matter of the heart," as he puts it.

Genscher never gave up the dream, and he was the first Western diplomat to herald the "historic opportunities" presented by Mikhail Gorbachev's reforms of the former Soviet Union in the 1980s.

"As far as I was concerned, it couldn't go fast enough, because we didn't know how long the window of opportunity would be open," Genscher says.

The view from his window today takes in two of the most striking symbols of Berlin's return to normality after 40 years as a divided city - the Brandenburg Gate, once a link in the concrete wall that ran through the city, and the Reichstag, defunct as a democratic legislature since Hitler's time, now the seat of united Germany's parliament.

But the cars streaming through the Brandenburg Gate and the tourists spiraling along the walkway through the Reichstag's glass dome signify more. For Genscher, they mean the end of Europe's division into Cold War blocs, and its march toward becoming a peaceful, borderless continent.

"Dividing people into boxes was a 20th-century experience," Genscher said. "Yet the European experience was always a common one. Whether it was music or painting or poetry, everything was considered European. ... Though they were products of national states, they were shared across borders."

At 73, the jowly Genscher has assumed the role of elder statesman enjoying the luxury of reflection. And his reflections are in demand as the voice of reunification during the events that will culminate Tuesday in a national celebration in Dresden, the city that was flattened by Allied bombing in World War II and then held in the communist grip for 45 years.

That role ought to have fallen to 70-year-old Kohl. Just a year ago he still enjoyed hero status for melding Germany into one. But then scandal engulfed his party, the Christian Democrats. 

There have been revelations of off-the-books campaign funds, money laundering and an investigation by parliament into whether decisions were bought during Kohl's 16 years in power. For months, Kohl secluded himself from public life. When he reappeared in parliament, he was verbally bullied by political opponents into leaving. He was left off the speakers' list at the Dresden event because of the scandal, so he is refusing even to show up.

Still, Kohl is using the anniversary to rehabilitate his legacy and reach out to East Germans. At a function organized by supporters, he portrayed himself as a leader who did not shy away from seizing a historic opportunity, and tweaked the left-leaning government now in power for not having shared his belief in reunification.

He acknowledged that he underestimated the pain and burdens of eastern Germany's transition to capitalism, but asked who could have done better.

"I knew no one back then who had a master plan in his desk," Kohl told the gathering. "We leaped, we reached our goal, and we also made mistakes."

Yet, there are signs that a decade on, East Germans are feeling more at home in the new Germany. Nearly 60 percent say they feel better off - up from 32 percent in 1993, according to a poll in the weekly Die Zeit on Thursday.

The poll also presented evidence that East and West Germans, despite four decades of vastly different political systems, are reaching a common view on the state's role; most - 64 percent in the east, 71 percent in the west - say the state should allow maximum freedoms and let individuals take greater personal responsibility for their lives.

TITLE: Violence on West Bank Streets Continues
AUTHOR: By Deborah Camiel
PUBLISHER: Reuters
TEXT: JERUSALEM - Fresh Israeli-Palestinian street battles flared early on Monday as President Clinton appealed for an end to the bloodiest wave of violence between the two sides in four years.


Officials in both warring camps said in separate statements on Sunday there was agreement to stop fighting, but clashes were reported at several flashpoints in the West Bank and Gaza Strip hours after a cease-fire proposed for Monday evening.

At least 29 people - 27 Palestinians, an Israeli Arab and an Israeli soldier - have been killed in four days of violence, medical and military officials said.

Nabil Abu Rdainah, an aide to Yasser Arafat, said Clinton telephoned the Palestinian leader and "reiterated his concern for the need to continue to exert all efforts to put an end to the deterioration and speedily save the peace process."

Israeli Prime Minister Ehud Barak also spoke with Clinton and "made it unequivocally clear that the Palestinian Authority, and its head [Arafat], must put an end to the violence via a determined and aggressive effort," Barak's office said.

The U.S. leader, trying to seal his presidency with a Middle East peace deal, failed to broker a treaty between Israel and the Palestinians at the Camp David summit in July.

The Israeli military took the street battles to a new level on Sunday by using attack helicopters to fire at Palestinian protesters, witnesses said.

Israeli tanks also rumbled on the outskirts of the West Bank town of Nablus, where a soldier was shot dead on Sunday in a firefight outside a holy site, but Israeli military spokesmen said they did not open fire.

Opening up a new front, hundreds of Israeli Arabs took to the streets of several northern towns in the Jewish state to pelt police with rocks and bottles to demonstrate their support for their Palestinian brethren.

Violence also erupted in Jaffa, next to Tel Aviv, when Arab youngsters threw stones at police and Israeli motorists.

Israel's Channel Two Television reported at midnight that the disturbances had reached the remote Negev Desert in southern Israel, where it said Israeli bedouin had clashed with troops.

In an emergency session late on Sunday called after the fighting did not let up, the Palestinian cabinet pointed an accusing finger at Israel.

"The Palestinian leadership ... demands that the Israeli side immediately halt all fire against our people and to end the siege with tanks and personnel carriers on our cities and towns and to open all roads," the statement said.

The Israeli-Palestinian diplomatic stalemate deteriorated into violence after Israeli Ariel Sharon visited the shrine Muslims call Al-Haram al-Sharif, the site of the biblical Jewish temples in Jerusalem.

Sharon's show of claimed Israeli sovereignty over the area in East Jerusalem - captured by Israel in the 1967 Middle East war and at the center of the current peacemaking deadlock - ignited Muslim anger.

Sharon has been reviled by many Arabs since the 1982 Israeli invasion of Lebanon, when he was defense minister, and the 1983 massacre by Lebanese Christian militiamen of hundreds of Palestinians in the Beirut refugee camps of Sabra and Shatila.

An Israeli commission of inquiry found Sharon "indirectly responsible" for the killing, which occurred as Israeli troops surrounded the camps. Forced to resign as defense chief, he said he had been branded unjustly with "the mark of Cain."

Now leader of the main opposition Likud party, the former general has blamed the Palestinians for the current clashes, saying they hoped to reap diplomatic gain through violence.

TITLE: Protesters Claim Prague Victory
AUTHOR: By Mike Scollon
PUBLISHER: Special to The St. Petersburg Times
TEXT: PRAGUE, Czech Republic - As the Czech capital recovered from raging street riots that disrupted the annual International Monetary Fund and World Bank summit, hundreds of protesters paraded through the streets Thursday and Friday in a peaceful celebration of their "win" over the international lending institutions.


They also called for the release of "political prisoners" being held in Czech jails and accused police of abusing many of the hundreds of protesters detained. Police denied the accusation.

An American woman, though, was hospitalized with injuries she suffered when trying to escape from a police station while she was being interrogated, The Associated Press reported, citing a police spokesman. The woman jumped out of a second-floor window as police were telling her she was facing charges of attacking a public official, the spokesman said.

Police said Thursday that 18 foreigners and two Czechs have been charged for their role in the violent protests, in which 850 demonstrators, including 330 foreigners, were detained. It was unclear how many were still being held.

Members of Initiative Against Economic Globalization, or INPEG, a Czech umbrella organization of protest groups, said Friday at a news conference that many of the protesters who were detained described being beaten in jail or deprived of food and water. But INPEG members failed to follow through on promises to make some of the detained protesters available to talk to reporters. Police denied that protesters were mistreated in custody.

INPEG also said that 350 to 400 protesters were injured in the clashes with the 11,000-member police force. Police have said that 51 officers and 18 protesters were hurt.

The bulk of the violence occurred on Tuesday's "Global Day of Action," when about 10,000 protesters took to the streets in a bid to disrupt the start of meetings at the Prague Congress Center.

In a prolonged battle, police fired tear gas and water cannon at the protesters, who hurled cobblestones and Molotov cocktails.

Some of the protesters made it within 100 meters of the center and, before being pushed back, succeeded in blocking all of its exits. Delegates were eventually escorted to a nearby subway station and evacuated in special metro cars.

In the end, the delegates held closing ceremonies a day early and most were out of the city by Wednesday night - leading protesters to claim victory.

"They were morally broken because they had to leave by metro - probably for the first time in their lives," said Boris Kagarlitsky, a Moscow political analyst.

A critic of IMF lending to Russia, he had come to Prague to voice his dissatisfaction with the work of the lending institutions.

As Prague recovered from the violence, city workers and merchants continued to pick up the pieces Friday.

In the regions closest to the Congress Center, where the delegates of the 182 member states met, patches of cobblestone were missing from sidewalks, graffiti spoiled buildings, billboards and metal fences were absent after having been uprooted or torn down to buttress protesters' front-line fortifications, and patches of scorched earth remained where bonfires - and occasionally cars - burned Tuesday.

Losses to the city have been estimated to be in the hundreds of thousands of dollars, as opposed to expected economic benefits in the region of $200 million to $400 million.

"I don't think there was any victory, I think it was tragic," said World Bank President James Wolfensohn at the lending institutions' final news conference Thursday. "The legitimate voice of concern and people who came for dialog were significantly damaged by the people on the streets."

Lost among the chaos were the issues of the meetings, dubbed to be the "most successful ever" by the delegates, but which largely produced little.

Much of the discussion of the meetings centered on reducing world poverty, debt relief for heavily indebted poor countries and the effect that high oil prices was having on the world economy and smaller countries trying to develop their economies.

In reports released at the start of the closed-door sessions, which began Sept. 19, the IMF and World Bank addressed Russia and other fiscally troubled East European countries by saying: "Arguably, in these difficult cases, a different approach might have worked better."

Russia has received no aid from the IMF thus far in 2000, but in general both the IMF and World Bank trumpeted the country's serious intentions of reforming the legal and financial systems and addressing corruption.

Others expressed serious doubt about the role of the international lending institutions.

"The World Bank and the IMF have put a lot of money into Russia and we don't know where it has gone - and that is rather troubling," said Alexander Sutyagin of the St. Petersburg branch of the environmental group Greenpeace.

But Sutyagin said he was happy that he was able to put some of his concerns on the table during the meetings.

"It is much easier to create some sort of dialog with the World Bank and IMF than it is with representatives of the Russian government," he said.

INPEG and others distanced themselves from the violent fringes of the protest movement, but said that overall, considering that protests were held in 40 cities worldwide, the protest was successful. "The outcome in Seattle and Prague will be a very good argument for violence, which is not a good thing," said Kagarlitsky.

TITLE: WORLD WATCH
TEXT: Falun Gong Protests


BEIJING (Reuters) - Hundreds of followers of the banned Falun Gong spiritual movement marred China's National Day celebrations Sunday with huge protests in a packed Tiananmen Square, witnesses said.

Police detained several hundred Falun Gong members, kicking, punching and pulling them by the hair as they herded them onto buses after protests broke out all around the vast plaza crammed with tourists.

The defiant protests on the 51st anniversary of Communist rule highlight Beijing's failure to stamp out the group, which has set an alarming precedent with its relentless campaign of civil disobedience since it was banned last year.

One group unfurled a red banner saying "Falun Gong is good" below a huge portrait of Chairman Mao Zedong looking over the square, but plainclothes officers soon wrestled them away.

Others among the largely elderly or middle-aged protesters assumed the lotus position or formed human chains, and many waved and signaled to puzzled onlookers as they were whisked off to a police station nearby.

Falun Gong has now become a major thorn in Beijing's side, winning sympathy from other religious groups and dissidents and adding fuel to Western criticism of its human rights record, especially on freedom of religion.



China Slams Vatican


BEIJING (Reuters) - China accused the Vatican on Monday of "cutting open historical scars" by canonizing 120 Catholic martyrs, and provided details of crimes committed by two of the saints it says were China-hating sinners and spies.

In the latest tirade against the Vatican, the official Xinhua news agency said the Holy See was trying to subvert China's state-backed Catholic church and incite its followers to revolt.

The Chinese government has exploded in anger with the Vatican for canonizing 87 Chinese and 33 missionaries on Sunday, saying the act glorified a century of Western imperialism in China.

Pope John Paul said making saints of the martyrs, who the Vatican says died for their faith between 1648 and 1930, should be seen as honoring Chinese, not defending colonialism.

A spokesman for China's State Administration of Religious Affairs cited examples of "monstrous crimes" they committed against the Chinese people, including a man he said slept with all the brides of his followers.

"Did they represent God's 'true love' to the Chinese people like the Vatican said?" asked the spokesman, whom Xinhua did not identify.



Suplicy Takes Sao Paulo 


SAO PAULO, Brazil (AP) - A left-wing politician was the apparent winner in Sunday's mayoral voting in Brazil's biggest city, but she failed to gain enough support to avoid a runoff, according to unofficial results.

With 90 percent of Sao Paulo's 7.1 million votes counted, Marta Suplicy of the Workers Party had 37 percent, while her two nearest contenders were virtually tied with about 17.5 percent each, the Sao Paulo State Electoral Tribunal said.

Nationwide, nearly 110 million voters went to the polls in 5,559 cities and towns to elect mayors and 60,332 city councilors.

A Stanford-educated psychologist, Suplicy first won national attention years ago with frank talk about sex as a TV personality. As a congresswoman, she raised conservative eyebrows for her outspoken defense of abortion and gay rights.

A Suplicy victory in Sao Paulo - the country's economic and financial nerve center - could give the Workers Party an important showcase for the 2002 presidential elections.



Coal Mine Explosion


SHANGHAI, China (AP) - Rescuers who have dug through tons of rock were trying Monday to contact 52 coal miners missing underground five days after an explosion in southern China that killed more than 100 people, officials said Monday.

Rescuers were still looking for signs of survivors from the blast Wednesday in the Muchonggou coal mine in Guizhou province, said an official of the mine office.

"They don't hear any sound from inside the mine," said the official, who would not give his name.

Rescuers have found 107 bodies, said an official of the provincial executive office who gave her name only as Miss Peng.

China has the world's deadliest coal mines. More than 2,730 miners died in the first six months of the year, according to government statistics.



Suharto's Son in Court


JAKARTA, Indonesia (AP) - The youngest son of ex-dictator Suharto disobeyed a summons to surrender himself to prosecutors Monday and be imprisoned for corruption.


Lawyers for Hu tomo "Tommy" Man dala Putra, 37, however, promised he would appear before state prosecutors on Tuesday. Even so, they indicated they would try to keep their client from being taken into custody. They did not elaborate.

Attorney Nudirman Munir said his client failed to comply with Monday's summons because he had not received a copy of the Supreme Court's verdict - but now he has, and he will appear before prosecutors on Tuesday.

"We will see what happens then," Nudirman said.

Tommy was sentenced to 18 months in prison on Sept. 22 by the Supreme Court, which overturned an earlier acquittal by a lower court.

It found him guilty of making money through a property deal with the state's main food supply agency. Prosecutors said the 1997 deal, made when his father was still in power, had cost the Indonesian state $10.8 million.



Women to the Front


LONDON (Reuters) - British Defense Minister Geoff Hoon said Monday that women should be allowed to fight as part of front-line infantry forces.

In an interview with The Times newspaper, Hoon said that unless senior officers could show that women would pose a risk to operational effectiveness, they should be treated as equals in infantry as well as air force and naval positions.

"Women are already serving in front-line jobs in the armed forces, with artillery units, as fighter pilots and on warships, which means they are just as likely to be in a position to kill people in combat as men are," Hoon said.

Hoon, who in January lifted a ban on homosexuals in Britain's armed forces, said the same arguments were being used against having women in front-line infantry positions as were used against allowing gays into the military.

But since the ban on gays in the armed forces had been lifted, there had been no reports of any significant difficulties with their inclusion, he said.

Front-line combat duty is open to women soldiers in Canada, Israel, Norway and the Netherlands.

TITLE: Duval of Old Is Back, But Can He Rival Tiger?
AUTHOR: By Doug Ferguson
PUBLISHER: The Associated Press
TEXT: PINE MOUNTAIN, Georgia - David Duval could barely bend over to stick a tee in the ground the last time he was fit enough to play golf. Ten weeks later, he was strong enough to hoist a trophy over his head. 


Next up is whether he has enough game to challenge Tiger Woods. 

Duval took a step in that direction Sunday in the Buick Challenge, looking very much like the player who won 11 times in a span of 34 tournaments - big drives, crisp irons, pure putting and a strong back. 

"Today was the best I've felt in a long, long time," Duval said after closing with a 7-under 65 for a two-stroke victory over Jeff Maggert and Nick Price. "Even though I had a chance to win the Buick Classic and the Masters and British Open, I never felt as good as I did today." 

He was mentally sharp from the longest hiatus of his young career. It wasn't long before the rest of his game fell in line. Despite a sloppy bogey on the 14th hole that dropped him three strokes behind and seemingly ended his chances, Duval plugged ahead and came up big on the holes where Maggert and Price faltered. 

With birdies on three of the last four holes, he finished at 269. 

"My mind was fresh coming in here," Duval said. "I didn't know what to expect from my golf swing. I thought I could win. I can't tell you I expected to play as well as I did." 

Two strokes behind with three holes to play, he hit a three-quarter wedge into 2 feet for birdie on the 17th. Maggert and Price, in the final group behind him, both came up short in the thick, sticky rough and failed to save par. 

Duval, not knowing he had a one-stroke lead because he decided not to watch the scoreboard, crushed a drive on the 432-yard closing hole, leaving him only a wedge into the green where the pin was tucked behind the front bunker. 

His approach covered the flag, spun back slightly on the crusty, Bermuda green and stopped 4 feet from the hole. Back in the fairway, the posture spoke volumes - Price had his hands on his hips, Maggert had his arms folded as he stared at the ground. 

While Duval won 11 times in 18 months, he had gone just as long since his last victory, the BellSouth Classic outside Atlanta in March of last year. During that time, Woods has won 15 times, including four majors, and left everyone in his wake. 

Perhaps the search for Woods' next rival will return to Duval, who was No. 1 in the world ranking just 14 months ago. 

"Eighteen months ago, everyone was asking what was wrong with Tiger," he said. "Memories are short out here, as they are in every sport. We all know Tiger Woods is the best player in the game, and we all have to play better golf." 

Duval earned $414,000 for his 12th career victory, joining Woods (24) and Phil Mickelson (16) as the only other active players to have won that much before turning 30.