SOURCE: The St. Petersburg Times
DATE: Issue #620 (0), Tuesday, November 14, 2000
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TITLE: Key Witness Retracts Pope Trial Testimony
AUTHOR: By Dmitry Madorsky
PUBLISHER: Reuters
TEXT: MOSCOW - The professor accused of selling state secrets to Edmond Pope told a court Friday that information he passed on to the American was available in published textbooks, Pope's lawyer said.


Anatoly Babkin, a professor at Moscow's Bauman State Technical University, refused to speak to reporters as he arrived at the Moscow court building before being called into Pope's trial, which is being held behind closed doors.

Pope's lawyer Pavel Astakhov later said Babkin had retracted statements he had made to investigators, saying he was pressured to sign them soon after suffering a heart attack.

Babkin's retraction could play an important role in a spy case that has sent a chill through relations between the United States and Russia.

The defense has said for weeks that the case against Pope was built on Babkin's statements, which the professor would retract if given a chance to testify. The court had previously said Babkin was too ill to appear.

A prosecutor said Babkin had withdrawn only part of his testimony, and prosecutors have previously said they have other evidence to convict Pope beyond Babkin's statements.

Astakhov said the court had gone through Babkin's evidence on Friday, asking what he denied and what he stuck by. "He said more than once that he rejected it," the lawyer said.

The defense had given the court Babkin's written withdrawal of his testimony, an explanatory letter and a medical note, Astakhov said.

He said the professor had told the court he had never given Pope secret documents or personally taken money from him.

Babkin also is charged with selling secrets on a new torpedo to Pope. Pope says he was simply gathering openly available information. He faces a penalty of up to 20 years in jail if found guilty.

Astakhov said the court had turned down Babkin's offer to present textbooks that include the same information that Pope is accused of illegally procuring from Babkin.

Interfax quoted prosecutor Oleg Plotnikov as saying Babkin had not withdrawn all his testimony.

Plotnikov said Babkin had retracted one phrase in particular: "I knew that Pope was an agent," Interfax reported.

Plotnikov said Babkin had been questioned in the presence of a doctor who said he was fit to testify.

He said that a search of the hotel room where Babkin and Pope were arrested uncovered plans to test a model of the torpedo Shkval in Russia, Interfax reported.

The controversy over Babkin was given a fresh twist over the weekend when NTV television played an audio recording of two men apparently pressuring Babkin to stick to his original testimony.

U.S. President Bill Clinton has personally asked President Vladimir Putin to free Pope, who suffers from a rare form of bone cancer, on health grounds, but Putin has said the decision is in the hands of the court.

TITLE: Teletubbies Take to Russia's Screens
AUTHOR: By Kevin O'Flynn
PUBLISHER: Staff Writer
TEXT: MOSCOW - One is blue. One is green. The other two are yellow and red.


Their target audience can't read, write or speak in complete sentences, but the most famous foursome since the Beatles has already won more than a billion viewers worldwide.

Starting Monday they got even more, when Tinky-Vinky, Dipsy, Laa-Laa and Po - the Russian version of the world-famous Teletubbies - made their 9:35 a.m. debut on RTR.

All 365 existing episodes of "Tele pu ziki," as the show is called in Russian, have been snapped up by the station, the first time a broadcaster here has bought a program part and parcel.

The show, which features the four fluffy figures living in a surreal Teletubby Land - once described in the U.S. press as a "post-nuclear landscape in sunshine" - has been the subject of adult consternation since its British debut in 1997, despite its bankable following.

The Teletubbies - who sport antennas on top of their heads and television screens on their bellies (which occasionally switch on to show films of children) - share their home with real rabbits and a sun in the shape of a smiling face.

The Tubbies' vocabulary, limited to baby talk such as "big hugs" and "eh oh," would seem to be a walk in the park for most dubbers. But for the past few months, four actors in a studio in Moscow have been hard at work adapting the scripts for a Russian audience.

"If you compare it to 'Santa Barbara,' which I also do, then the Teletubbies are easier. If you compare it to Walt Disney films, it's easier," said Grigory Vagner, director of Nota, the dubbing company charged with adapting Tubbies lingo into the language of Push kin and Tolstoy.

Every company that buys the rights to the series - the show is now broadcast in 36 different languages - is given a strict 32-page book of guidelines on how to adapt the program properly.

Nick Kirkpatrick, head of International Program Development at Ragdoll Productions, the company responsible for Teletubbies, has been monitoring the Russian translation and has worked with foreign-language Teletubbies all over the world.

The key challenge in translating the Tubbies, he said, is making sure that the names and the sounds are familiar and reassuring to their local 2-year-old viewers. In Estonia the program is called "Teletupsuds," while in Finland, Tinky-Vinky is Tivii-Taavi and Dipsy is Hipsu. In Russian, the oft-repeated expression "eh oh" - a version of the English "hello" - will become "privyet."

But Ragdoll's close control means that no matter where in the world you tune in, the personalities of the four main characters will be the same.

"If you close your eyes for an instant you should be able to tell who's talking in any language," said Kirkpatrick, who attended the launch of the Russian show on Sunday at Moscow's Gostiny Dvor, where 3,500 children received special invitations.

Still, he admits, the system isn't airtight. "A big problem in the States is that they sound like little babies," he said. "That's missing the point. They're actually characters with integrity."

The Russian version is requiring some tweaks as well. "[The Telepuziki] sound very anxious," said Kirkpatrick of the current product. "I think they're quite exaggerated at the moment."

The program initially caused controversy among adults when it first aired on the BBC. People complained that the show was too repetitive and full of seemingly meaningless pauses - methods the producers defended as meant to hold childrens' attention and help them absorb the material.

"[Adults] didn't understand it because it wasn't for them," Kirkpatrick said. But here in Russia, he added, "people are more accepting of it. They look at it with an open mind."

While Ragdoll has said the program is designed to teach children how to listen and acquire language skills, critics have argued that the show is an obvious attempt to instill a love for television watching in very young children.

But the Russian "Telepuziki" team had only high praise for the project. "Children up to 4 years old don't have that much information about the surrounding world, and this program tries to fill it in," Vagner said.

Sergei Brisitsky, the producer of the dubbing project, agreed. "My younger daughter is already past the age for Teletubbies, but she still watches it with pleasure."

TITLE: Ecogroups Closer to Forcing Plebescite
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Russian environmentalists have moved a step closer to forcing a referendum on the import of nuclear waste from abroad, but some observers said that there was little hope the move would succeed.


At the end of last week, city authorities said they would pass on a petition on the issue, signatures for which were gathered by environmental groups across the country, to the Central Electoral Commission (CEC) in Moscow.

The environmentalists are opposing a move by the Nuclear Power Ministry to allow Russia to import spent nuclear fuel from other countries. Proponents of the idea say that a commercial fuel dump would bring Russia billions of dollars that would work for the cause of nuclear security.

The project can only go ahead if the State Duma amends the law banning the import of nuclear waste. A bill that would do so is tentatively scheduled to be heard Dec. 19. The law as it stands allows Russia to accept spent fuel from other nations for reprocessing - which yields uranium, plutonium and huge quantities of radioactive waste water - if the resulting waste is sent back where it came from.

But environmentalists have repeatedly said that Russia is unable to deal with its own nuclear industry, let alone everyone else's.

The CEC has 15 days to check the validity of the 2.6 million signatures the environmentalists claim they gathered, before asking President Vladimir Putin for a decision on whether or not to hold a nationwide vote on the matter.

According to Alexander Karpov, an ecologist who helped organize the petition in St. Petersburg, the signatures collected here and in the Leningrad Oblast have been declared valid.

This was confirmed on Monday by Tatyana Pastushkova of the St. Petersburg Electoral Commission. Out of 95,676 signatures put forward for scrutiny, only 838 (or 0.88 percent) were rejected - either because the signatory was under 18 years old or for purely technical reasons, such as missing information.

"We were extremely impressed with this result," Pastushkova said. "Normally, we reject a much higher number of signatures."

In the Leningrad Oblast, only 520 signatures were refused out of the 17,912 presented for verification.

According to Dmitry Artamonov, head of the St. Petersburg Society of Greenpeace Supporters, 52 of the 62 regions in which the environmentalists were active have already passed on signatures to the CEC. The CEC is expected to finish its own verification work by Nov. 30. 

If the president allows a referendum to take place, a date could be set for March or April of next year, said Karpov.

But Putin may take the issue to the Constitutional Court to see whether it can be decided by popular vote or not.

Environmentalist Alexander Nikitin welcomed the achievement of the petition's organizers, but said that they would have a tough time clearing all hurdles.

"I expect [the referendum] will encounter serious difficulties," Nikitin said in an interview Monday. "The Nuclear Energy Ministry will do its best to invalidate as many signatures as necessary so that the referendum does not take place, and it will use all its influence to convince the president not to allow it - as well as pushing the Duma to change the law [on nuclear waste imports]."

Nikitin also said that the $20 billion Russia expects to earn from the import of spent nuclear fuel would not be enough to solve the country's environmental problems.

And he said that new technology touted by Deputy Nuclear Energy Minister Valentin Ivanov at a conference earlier this month, which would make reprocessing spent fuel cleaner, existed only on paper.

Ivanov claimed that Russia was developing ways of reprocessing nuclear fuel without ending up by isolating plutonium and uranium.

"What they are presenting as a breakthrough is more old [research that has] a number of weaknesses," Nikitin said. 

"The real motive behind this kind of talk is the Nuclear Ministry's desire to make money. The ministry has slumped from being a scientific and technological center to a commercial enterprise."

But the environmentalists say they won't give up, and will go to the courts themselves if the CEC rejects the petition, according to Artamonov. "Legally, we are entitled," he said.

The signature gatherers also criticized the hoops that have to be jumped through when trying to organize a nationwide vote - on this or any issue.

"Not only does one need a person's name and address, but also his passport information," said Artamonov, "so people who didn't have their passports with them couldn't sign." Many environmentalists set up petition centers outside metro stations or on the streets.

"And this also means that homeless people cannot participate at all, which is an obvious violation of their rights."

TITLE: Nation'sInternet Hosted In City
AUTHOR: By Andrey Musatov
PUBLISHER: Special to The St. Petersburg Times
TEXT: The Internet can beam the contents of your brain from one side of the world to the other. But St. Petersburg's Third Annual Electronic Commerce conference boiled down to palm pressing, as Russia's handful of Internet users tried to find each other and make a connection the old-fashioned way. 


Yet if this loosely organized group continues to grow as it has, experts say that the Russian Internet industry could become a real contender on the world market.

According to some, the Russian Internet has expanded five-fold over the past three years, for a total of 3 million Russians online - and half of that jump has occurred over the last year, said Sergei Timofeyev of the local Internet Media Holding. 

It also makes Russia, with its low rates of Internet connection, one of the best penetration markets in the world. Where North America's Internet -with half of a 250 million population online - has overrun the stock market and already locked out lower-level investors, Russia is fertile territory for "dot.com," or in Russia's case "dot.ru," investment and development. 

But Dan Dougan, director of operations at Jensen Technologies, an offshore programming company operating in St. Petersburg, disagreed. 

"There are four main problems: a low computer penetration rate, low consumer spending, little credit card usage and unreliable logistics systems," he said in an e-mail interview last week. 

"The biggest problem is that there's such a low penetration rate for computer usage in Russia. I have heard estimates of 1 million to 3 million users in Russia - about 2 percent of the population at best."

But after three years of the St. Petersburg e-commerce conference, people come seeking to make connections - and to play catchup with other business people in Russia and around the world. About 200 companies and 250 individual specialists took part. 

The two-day conference, which ran on Thursday and Friday, covered subjects as diverse and simple as software, security and Web pages, as well as more complex subjects like Web portals, Internet connectors, main tendencies, mobile Internet and more. 

"In spite of some technical terms appearing in the speech of participants, the majority of the reports are made especially for intermediate computer users," said Mikhail Novikov, the general director of Admin. Ltd., the company which organized the event.

"Here I'm looking for contacts, and especially I hope to find some ideas in marketing - how to attract people's attention when they come to our virtual shop," said Katerina Demidova, the executive manager of the Latvian Office of Pay Cash, which develops electronic pay systems. 

"During the last few years Russia moved ahead of Latvia in the field of Internet technologies development," Demidova said.

Like many there, Demidova was seeking low-overhead advertising possibilities in posting her own Web page. 

Olga Makartchouk, a consultant with the Personnel BusinessLink recruiting agency, says her business is interested in chasing changes in information technologies. 

"We do not work in the field of e-commerce, but we have a site on the Internet," Makartchouk said in the conference hall on Thursday. 

"The information about us on the Internet is a significant detail that helps us do our business," said Makartchouk. 

"And I'm sure that it is becoming usual business for any company to have a site and follow the latest in information technologies. The conference also gave us many good business contacts."

The conference additionally attracted larger organizations like Leningrad Metal Plant (LMZ), and Caterpillar at Tosno and the Philology Department of St. Petersburg State University. 

According to the organizer Novikov, the St. Petersburg E-Commerce conference is quickly becoming a yearly event not to be missed by techies and would-be techies. 

"All the participants are using the Internet and the most part of them are doing their business there," Novikov said. 

"I consider this annual conference as a very important step in development of Internet trading."

TITLE: Prosecutors Gunning for Gusinsky Again
AUTHOR: By Ron Popeski
PUBLISHER: Reuters
TEXT: MOSCOW - Russia's Prosecutor General ordered financier Vladimir Gusinsky to be arrested for embezzlement on Monday in what could be a new crackdown on post-Soviet media magnates.


The charges against Gusinsky, currently outside the country, were disclosed just after his Media-MOST group clinched a deal with its main creditor, the state-dominated gas monopoly Gazprom to clear some of its debts.

Gusinsky, one of the hugely powerful magnates who helped to bankroll Boris Yeltsin's re-election as president in 1996, heads Media-MOST, Russia's only country-wide independent media outlet. The arrest warrant said Gusinsky was being sought throughout Russia and that he was to be held in detention.

Interfax news agency quoted the prosecutor's press office as saying Gusinsky had deliberately failed to turn up for questioning on Monday.

As a result, the office said, "Investigator [Valery] Nikolayev ... did not feel it was possible to allow the lawyers to take part in the proceedings and to be informed of the resolution outlining charges against Gusinsky."

Lawyer Genri Reznik told reporters Gusinsky was "in Europe" and had no intention of turning up at the request of a court or prosecutor.

Gusinsky's detention for three days earlier this year on similar charges caused an international outcry and raised doubts about the commitment of Yeltsin's successor, President Vladimir Putin, to press freedom.

Gusinsky has accused the Kremlin of using the threat of jail to make him give up his media outlets, which have periodically fallen foul of the Kremlin for critical coverage, particularly of Russia's two campaigns against Chechen rebels.

Media-MOST's NTV television is the most influential source of information in Russia that is outside Kremlin control.

A top prosecutor said Gusinsky could avoid detention if he agreed to be questioned. But Reznik told Ekho Moskvy radio that defense lawyers would launch proceedings on Tuesday against prosecutors over the June detention and the current charges.

Prosecutors said earlier this month that Gusinsky would face charges in connection with attempts to secure credits while companies in his group were facing bankruptcy.

Putin has pledged to take action against the businessmen known as "oligarchs" who made fortunes in the aftermath of the 1991 fall of communism. He praises press freedom, while accusing journalists of engaging in polemics damaging to the state.

A second media magnate, Boris Berezovsky, is due to appear before prosecutors on Wednesday in connection with a profits-skimming scandal involving the state airline, Aeroflot.

A spokeswoman for Berezovsky said she knew nothing of his plans, but he has suggested that he will not return to Moscow for questioning. Another suspect in the Aeroflot case failed to appear before a prosecutor on Monday citing illness.

Media-MOST issued a statement pledging to challenge the "illegal acts" of the Prosecutor General, and to take its case to the European Court of Human Rights in Strasbourg if necessary.

The group was one of several outlets to campaign openly in 1996 for Yeltsin's re-election against a Communist challenger.

The deal announced earlier involves clearing debts of $211.6 million by transferring Media-MOST shares to Gazprom.

A Media-MOST spokesman quoted by Russian news agencies said the agreement would settle outstanding differences, but "does not involve editorial issues of mass media included in the group or personnel matters."

TITLE: IAEA Gives Backing to New Russian Spent-Fuel Reactors
AUTHOR: By Ana Uzelac
PUBLISHER: Staff Writer
TEXT: MOSCOW - The head of the International Atomic Energy Agency, after meeting Friday with President Vladimir Putin, said that he supports Russia's plan to develop a new generation of fast neutron reactors that could run on spent nuclear fuel, including plutonium.


The plan is opposed by Russian ecologists, who say they doubt such a reactor is feasible and that, if developed, it could possibly have devastating consequences for the environment. They also question the government's motives in pushing for the development of such a reactor.

The Nuclear Power Ministry is among those who believe these reactors could solve the worldwide problem of disposing of spent nuclear fuel and prevent the proliferation of nuclear weapons. Plutonium is a by-product of all known nuclear reactors and is only used now in building nuclear weapons.

At the UN Millennium Summit in September, Putin spoke in support of programs for developing these fast neutron reactors, calling the reactors "technically quite feasible."

IAEA director general, Mohamed El-Baradei, described his talks with Putin as "constructive" and said the international agency is also interested in the development of such reactors. The IAEA plans to invest about $2 million in theoretical research during the next three to five years, El-Baradei said at a news conference, announcing that the first session of the international expert group in charge of this will be held later this month in Vienna, Austria.

Environmentalists criticized the plans to develop the reactors.

"So far nobody has managed to construct even a prototype of a reactor that would use plutonium as fuel," Greenpeace nuclear projects expert Ivan Farafonov said Friday in an interview. "These things exist only on paper."

The only operating BN-600 fast neutron reactor in Russia is in the Beloyarskaya nuclear power plant in the Sverdlovsk Oblast - but it does not use plutonium as fuel, Farafonov said.

Valery Melnikov, a plutonium specialist with the ecological organization Zelyony Mir in the Leningrad Oblast, said using plutonium fuel would not be safe.

"If it ever becomes technically possible, we would be able to use only a small part of it, and at the same time we would get enormous quantities of plutonium in the air, water and earth," Melnikov said.

Sergei Kharitonov, also of Zelyony Mir, said the government is using the talk of developing a new fast neutron reactor to lobby for a new law that would allow Russia to make money by importing spent nuclear fuel. Russia now brings in spent fuel for processing, but must send the highly radioactive waste product back to the country of origin for storage.

If State Duma deputies are convinced that the nuclear reactors could work on spent fuel, they might be more likely to change the law, Kharitonov said.

Environmental activists last month submitted 2.6 million signatures to the Central Elections Commission calling for a referendum on allowing imports of nuclear waste. The signatures are still being verified; 2 million are required for a national referendum to be called.

TITLE: Divers Back Home After Retrieval Operation
AUTHOR: By Irina Titova
PUBLISHER: Staff Writer
TEXT: The 12 Russian divers who participated in the body salvage mission aboard the sunken Kursk submarine returned festively to St. Petersburg early Monday morning, bear-hugging their families and spraying each other with champagne, local news reports showed. 


Yury Sukhachyov, head of St. Petersburg Scientific Institute No. 40, where the divers went through mission training, told journalists that the divers would have medical exams and go directly on vacation with their families. 

All will receive government medals, NTV reported. 

The compact, blond diver Sergei Shmygin - who was seen on NTV clowning with his wife and daughter - was the first to enter the submarine. He gave the mission high marks. 

"But it's unpleasant to think about it because we were not seeking gold but our guys," he added.

It was unclear where subsequent press conferences would held with the divers themselves. However, officials from Rubin - which designed the Kursk - have discussed the possibility of a meeting between the divers and the families of the victims. 

The glee of the divers masked the horror they had been witness to more than 100 meters below the surfaces of the Barents Sea, as they worked for 18 days to pull their drowned comrades from the twisted wreckage of the 500-meter-long nuclear sub. In all, the divers - who were operating alongside a Norwegian team of six other divers - managed to bring twelve bodies to the surface. Two of the sailors were carrying notes. 

The mission was conducted from the deck of a huge floating oil rig, owned by U.S.-based Haliburton Oil's Norwegian operation.

The Kursk sank during exercises on Aug. 12 after two explosions on board. Officials had said the crew must have died instantaneously, but notes found by the divers, scrawled in pitch black by the sailors, indicated that at least 23 had survived the blasts. 

The government has spoken of bringing the rest of the wreck to the surface with floatation devices in the spring. 

Sergei Nikonov, the chief diving doctor for the Russian Navy who spoke to journalists at the airport, declared the divers' condition as positive.

Natalya Shmygina, Sergei's wife, said that her husband didn't hide that he had been selected as part of the Kursk salvage mission. 

"However, when I got the news that he was the first to enter the submarine, I couldn't sleep all night," she said to Interfax.

Sukhachyov, the mission doctor, told reporters that his sleep was troubled for a different reason - he doesn't like the idea of the proposed meeting between the divers and the victims' families. 

"It's not worth hurting the people one more time," he said.

The sailors' relatives have a different opinion: "Those divers are heroes," said Roman Kolesnikov, father of St. Petersburg native Dmitry Kolesnikov, whose note, found on his body, sent shock waves across the country. 

"I understand that it's hard for them to talk about what they saw there. But it would be important for us," he said.

Meanwhile, Birger Haraldseid, the Haliburton spokesman for the six divers who worked from the Norwegian side, said he had no comment on their work. 

"We won't expose our people until the Russian side decides to do so," Haraldseid said.

TITLE: New Kursk Governor Lashes Out at 'Jewish Filth'
AUTHOR: By Andrei Zolotov Jr.
PUBLISHER: Staff Writer
TEXT: MOSCOW - The Communist governor-elect of Kursk, Alexander Mikhailov, said that he and President Vladimir Putin are allies working to rid Russia of Jewish "filth," drawing an outcry Friday from Jewish leaders.


Incumbent Kursk Gov. Alexander Rutskoi, whose mother is Jewish, threatened Friday to sue Mikhailov.

Mikhailov won the Kursk governorship in a second round of voting Sunday. Rutskoi was struck from the ballot by a court for election campaign irregularities on the eve of the first round in October.

Mikhailov said in an interview published in Kommersant on Thursday that the Kursk elections had ramifications for all of Russia because it was a "test ground" for fighting the "All-Russian Jewish Congress."

It was not clear if Mikhailov was referring to the Russian Jewish Congress led by tycoon Vladimir Gusinsky.

Mikhailov said Rutskoi was a pointman in the organization and was backed by billionaire Boris Berezovsky, who is also of Jewish origin.

"Today the liberation of Russia of all this filth, which has piled up over 10 years, will start," Kommersant quoted Mikhailov as saying. "In this, the president and I are allies, not opponents.

"Vladimir Vladimirovich [Putin], by the way, is a Russian man. So am I," he said. "And Rutskoi, in case you don't know, has a Jewish mother, Zinaida Iosifovna."

Mikhailov also said he owed his gubernatorial victory for the most part to Putin, who sent his personal psychologist to assist in campaigning.

"Vladimir Vladimirovich has twice sent his personal envoy to meet me," Mikhailov was quoted as saying. "I don't want to give you the name, but it was a woman, Putin's personal psychologist."

A high-ranking official in the presidential administration called Mik hai lov's remarks nonsense, Interfax reported.

"It is complete nonsense, beginning with the fictitious personal psychologist of the president and ending with all the other foolishness," the source was quoted as saying.

The presidential press service declined to comment Friday.

Rutskoi said he would sue Mik hai lov for igniting national hatred.

Communist leader Gennady Zyu ga nov gave Mikhailov a mild reprimand, saying that he should "look into the economy rather than digging up other people's genealogies," Interfax reported.

TITLE: Airplane Hostages Return Safe to Moscow
PUBLISHER: Reuters
TEXT: MOSCOW - A Russian hijacker and his 58 hostages from a commandeered Russian passenger jet arrived in Moscow from Israel on Sunday night to end a 24-hour drama, Russia's Interfax news agency reported.


The hijacker, described by Israeli and Russian officials as being deranged, was flown into Moscow's Vnukovo airport in one Russian government plane, while the 48 passengers and 10 crew from the seized jet arrived unharmed aboard a second plane, the agency said.

The commandeered three-engine Tupolev-154 returned separately after Israeli security forces arrested the offender at Israel's remote Uvda army base in the southern Negev desert earlier on Sunday.

In Israel, a Russian Embassy official said the hijacker was from the Dagestan region on the Caspian Sea. He was initially identified as coming from Russia's strife-torn Chechen region bordering Dagestan.

Russia's Itar-Tass news agency reported from Dagestan that local prosecutors had issued a warrant for the arrest of Akhmed Amirkhanov, a resident of Dagestan's capital Makhachkala, on suspicion of hijacking the plane.

Prosecutor Imam Yaroliyev, speaking on local television, excluded the possibility that the hijacker had smuggled firearms onto the Tu-154 jet. He said the hijacker used firearms deposited by passengers in the plane's storeroom to commandeer the aircraft.

The chief of Israeli military operations, Maj. Gen. Giora Eiland, said the hijacker was overpowered and disarmed after he left the plane on his own initiative at Uvda to meet negotiators.

"It was clear he was not exactly sane. He gave all sorts of ... strange messages. Basically he was concerned that the yellow or Asian race was taking over the white race," Eiland told reporters.

The Dagestan Airlines flight was commandeered on Saturday night en route to Moscow from Makhachkala.

The hijacker initially demanded that the aircraft fly to Tel Aviv. But Israel refused permission for it to land there.

Faced with a reported threat to blow up the plane, Israel permitted it to land instead at remote Uvda and made quick contact with the hijacker, government officials said.

Israeli and Russian officials described the hijacker, in his late 20s, as mentally unstable with motives unrelated either to the Palestinian uprising against Israel, as initially believed, or to the Chechens' guerrilla war for independence from Russia.

On hearing the incident was over, Prime Minister Ehud Barak, who had aborted a trip to see U.S. President Bill Clinton about Palestinian-Israeli violence, turned his plane around again and resumed his journey to Washington.

Russia's Itar-Tass news agency said Dagestan Finance Minister Abdusamad Gamidov was among the passengers.

Danny Yatom, Barak's security adviser, told reporters earlier that the Tupolev had been allowed to land in Israel because the pilot sounded "very pressured" during radio contact.

Maj. Gen. Yom-Tov Samia said the man had threatened the pilot with an explosive device - whether it was a real one was not immediately clear - and grabbed his service weapon.

The Russian Embassy official said the hijacker gave Israeli officials a video tape and two letters - one addressed to the "white world" and the other to the "emperor of Japan" - and complained of "yellow people trying to take over the white race."

TITLE: IN BRIEF
TEXT: Lenin Gets a Bath 


MOSCOW (SPT) - The Lenin Mausoleum on Red Square will be closed to visitors from Saturday until Dec. 25, Interfax reported Friday.

The routine six-week shutdown will allow the team of scientists responsible for the maintenance of Vladimir Le nin's corpse to "carry out measures for preserving it in its current state," said Sergei Devyatov, press secretary of the Federal Bodyguard Service, which is responsible for guarding the mausoleum.

He said the last time such work was carried out was Feb. 2, 2000. The body of the former Soviet founding father is checked during this time for "any irreversible pathological changes," said Yuri Denisov-Nikolsky, deputy director of the center, according to Interfax. 



Kursk Log Not Found


MOSCOW (SPT) - Deputy Prime Minister Ilya Klebanov said Friday that documents recovered from the wreck of the Kursk nuclear submarine earlier this month were not part of the sub's log book, as reported Friday, Interfax said.

In a statement read out by his press secretary, Klebanov said that some media had misinterpreted his words and that only separate bits of technical documentation had been recovered, none of which shed any new light on the accident.

The documents in question had been found in the fourth compartment, while a sub's log is usually kept in one of the first two compartments.



Missile Equations 


MOSCOW (AP) - Russia's nuclear missile chief told Interfax news agency on Monday it would be difficult to persuade Washington not to violate the 1972 Anti-Ballistic Missile treaty and proposed a new way to tackle the impasse.

Hitherto Moscow has said U.S. plans for a National Missile Defense against rogue rockets would violate the ABM treaty, which strictly limits defenses against nuclear attack.

Gen. Vladimir Yakovlev, commander of the Strategic Rocket Forces, stuck to this line but said it would be difficult to persuade the United States to ditch the defense plans altogether and to avoid rewriting the ABM treaty.



U.S. Nabs Rich Russian 


SEATTLE, Washington (AP) - A Russian millionaire living in the United States is being held without bail on charges of income tax fraud.

Valery Shegnagayev, 59, principal owner of a fishing company in Vladivostok, pleaded innocent Thursday to charges that he failed to report about $12.8 million in business funds that were used to buy real estate, luxury vehicles, jewelry and art for his personal use from 1994 to 1997. That enabled him to avoid paying about $3.5 million in taxes, according to a four-count indictment that was issued Oct. 5 and unsealed Thursday.

If convicted, he could face 12 years in prison and $1 million in fines. Trial was set for January.



Security Cuts Approved


MOSCOW (Reuters) - The Kremlin's Security Council approved controversial large-scale cuts to the military Thursday that President Vladimir Putin said were long overdue and essential for Russia's security and limited finances.

Council Secretary Sergei Ivanov said the overall cuts would involve 600,000 people over five years as Moscow sought to create leaner but more mobile, better-equipped and more cost-effective forces. The cuts included Defense Ministry reductions of 365,000 servicemen already announced. Ivanov applied reforms to himself, asking Putin to remove his rank of lieutenant general in the Foreign Intelligence Service, or SVR. Putin agreed to the move, which Ivanov said was to make his Security Council job easier.

TITLE: Overland Rail Plan Announced
AUTHOR: By Masha Kaminskaya
PUBLISHER: Staff Writer
TEXT: St. Petersburg Gov. Vladimir Yakovlev this month approved a plan to build an overland train in the city's southeast, thus bypassing the overloaded metro system and imitating several other cities in Europe and the rest of the world.


But as yet, no definite investors for the project have been announced, prompting reminders of several other big ideas the city has yet to see fulfilled, such as the Ring Road and Flood Protection Barrier.

"It's quite a realistic plan," said Svetlana Ponyatkova, deputy general director of Leningrad Industrial Transport Project, or Lenpromtransproyekt, which is involved in the technical side of the project.

"People living in these [southeastern] districts need it. We all need something different and more comfortable than the metro, which is so deep it has even become dangerous and frightening."

The new line, sections of which are expected to start running by 2003 - the year when St. Petersburg celebrates its 300th jubilee - is being promoted by City hall and Len promtransproyekt.

The line is envisaged as a 21-kilometer track about 5 meters above ground - depending on the terrain - carrying a dozen trains at an average speed of 35 to 40 kilometers an hour.

Compared to trams and buses - which travel at approximately 15 and 20 kilometers per hour respectively - this is quite a speed for the city's public transportation. 

According to preliminary plans, the first track will encircle the city's south and southeast districts, going from near Prospect Veteranov metro station through the region of Kupchino to Obukhovo metro station,

The main part, to be completed later on, will go above Prospect Veteranov itself.

A further development in the plan will connect the northern and southeastern parts of St. Petersburg.

According to Valery Nikolayev, head of the City Transport Committee's productional and technical department, the southeast was chosen as the site for the project for several reasons, including population density, geological conditions, and the lack of public transport in the region.

Nikolayev said that the project required an investment of $150 million dollars, to be paid off over a maximum period of 10 years. He said he was confident that the scheme would be attractive to investors - far more so, at least, than projects such as rebuilding the collapsed section of metro tunnel between Lesnaya and Ploshchad Muzhestva stations in the city's northeast.

"At the moment, it is impossible to calculate what fares [for the new trains] will be, but surely future investors will want their return on the project as soon as possible," he said. "So the fare - at least to begin with - may be quite high."

"That's commercial public transport. It's more comfortable, the service is better. It'll work for those who will be able to afford it."

I'm not sure this project will be so attractive for investors if they have to wait 10 years to be repaid," said Sergey Sevostyanov, the project's chief engineer, in a telephone interview on Thursday. 

"But from the technical point of view, it's not as farfetched as it seems. We've explored underground and on the ground. We're now coming up with a third level, which is just as it should be."

According to Ponyatkova, negotiations are already being held with German, French and Japanese firms as potential investors. In fact, she added, the plan itself was proposed in 1995 by French firm Alsthom, which realized a similar project in Paris two years ago.

TITLE: Metro Stays Collapsed as Finances Stall
AUTHOR: By Vladimir Kovalyev
PUBLISHER: Staff Writer
TEXT: The long-collapsed section of metro tunnel between St. Petersburg's northeastern Lesnaya and Ploschad Muzhestva stations will remain impassable until at least 2002, because of local and federal budget snags and a hung-up loan, the Metropolitan's director Vla di mir Garyugin has announced. 


The tunnel collapse - which cuts off 500,000 city residents from the center via metro - occurred in 1995 because of the pressure of an underground river. Workers have struggled for five years to bore two tunnels from Lesnaya and Plo schad Muzhestva. Now, final repairs stand with the Italian contracting firm Impreglio/NCC International AB. 

But that, said Garyugin at a press conference Friday, is one of the biggest holdups. He said Italian banks were supposed to loan $36 million to the Metropolitan to complete the work. The Russian government, however, refused to guarantee the loan, telling the city to find its own resources, possibly using its buildings as collateral. 

Gov. Vladimir Yakovlev, who made a campaign promise to have the metro functional by 1999, confirmed this in answering an inquiry sent by Legislative Assembly lawmaker Mikhail Amosov. 

"The delay is linked to problems with the Italian loan and lack of federal financing," wrote Yakovlev. 

Amosov poured cold water on the idea of putting up city property as collateral to raise the money. 

"If we used our property as a guarantee, we would have to conduct an audit first, which would simply drag out our time. So we have appealed to President Vladimir Putin for help. ... [W]e still haven't gotten a response," Amosov said in a telephone interview Monday.

But other federal woes beyond loan guarantees are holding up the project - of the 50 million rubles ($1.8 million) St. Petersburg was promised this year from the federal budget, it has only received 5 million. In 2001, however, City Hall plans to spend 300 times that by laying out 1.5 billion rubles. 

"In this situation, everything depends on the federal government, and [Yakovlev] has talked to Putin and the financial ministry several times, so now we are waiting," said Svetlana Ivanova, the governor's spokeswoman. 

Impreglio's representatives refused to comment on the situation, citing a City Hall gag order.

"According to the contract we signed, we are not allowed to talk about the project without City Hall's approval," said Galina Sebryakova, assistant to Impreglio's director, in a telephone interview on Monday.

TITLE: Ivanov Talks Sanctions in Iraq As Tour of Middle East Begins
PUBLISHER: Reuters
TEXT: BAGHDAD, Iraq - Russian Foreign Minister Igor Ivanov arrived in Baghdad on Monday on the first leg of a trip that will take him to Egypt, Israel, the Palestinian territories, Jordan, Kuwait and Saudi Arabia.


Ivanov is the first Russian foreign minister to visit Iraq since 1994.

The Iraqi News Agency said that Iva nov carried a letter from President Vla di mir Putin to Iraq's President Saddam Hussein on "bilateral relations and current developments in the Arab region."

High on the agenda will be UN sanctions imposed on Iraq for its 1990 invasion of Kuwait, UN inspections of Iraq's weapons of mass destruction and the Middle East peace process after seven weeks of violence between Israel and Palestinians.

"Russia and Iraq are conducting an intensive political dialogue, and the visit is part of the dialogue," Ivanov said on arrival, speaking through an interpreter.

"We are concerned about the future of the Middle East peace process, and it is important for us to hear Iraq's point of view on this issue," he added.

Moscow is in favor of a swift end to UN sanctions, and Russia was among the first countries to send humanitarian flights to Baghdad in recent weeks, exploiting a loophole in sanctions which forbid commercial flights.

"We think that it is time to take concrete steps to end the plight of the Iraqi people and lift the economic sanctions on Iraq," Ivanov said.

But he linked lifting sanctions to the resumption of international monitoring of Iraq's weapons of mass destruction.

TITLE: Nuke Plant Reduces Output
PUBLISHER: The Associated Press
TEXT: A nuclear power plant near St. Petersburg is reducing output to protest consumer debts, officials said Friday, prompting grave warnings of blackouts and rationed electricity as winter arrives. 


The four-reactor power plant at Sosnovy Bor, the main electricity provider to northwest Russia, reduced output from three of its four nuclear reactors by 30 percent this week, said Konstantin Ramburger, spokesman for state-run Rosenergoatom, which operates nuclear plants. 

The fourth reactor was already off-line, undergoing repairs. 

Rosenergoatom said running the plant at reduced levels will not pose any danger. Environmental groups have said the reactors are less stable when run at lower power. 

The Sosnovy Bor plant uses Soviet-designed RBMK-1000 reactors of the same type that malfunctioned in the Chernobyl disaster of 1986.

Ramburger said the Sosnovy Bor plant is owed 2 billion rubles ($72 million) by Unified Energy Systems. The country's eight other nuclear power plants are also owed huge debts, and Ramburger said they will also reduce output if UES does not pay up soon.

TITLE: World Bank's Loans to Russia - Just Set To Keep On Coming
AUTHOR: Anna Raff
TEXT: The World Bank funds 33 projects in Russia, at total price of $10.4 billion in loans. Anna Raff takes a closer look to see how that money is spent and what some ongoing Bank projects are doing to the local and national economy. 


IN October, the World Bank announced that, while talks about a new $800 million loan program with Russia would continue, it was unlikely that a decision on a new program would come before the end of the year.


Even if the money never surfaces - as the draft budget anticipated it would - this doesn't mean that World Bank loans will stop flowing into Russia.

To observers, the announcement that the talks had fizzled came as no surprise. Russian officials have already reaffirmed their refusal to take on more loans in 2001.

In addition to the 33 World Bank projects already operating, at a total of $10.4 billion in loans, nine are also in the works. With themes ranging from municipal heating to treasury modernization, the new loans would lend an estimated $912.1 million.

According to the World Bank's strategy for 2000 and 2001, there is an "increased emphasis on the reform of systematic policies and institutions intended to improve the performance of public sector institutions that are critical for public administration and for the development of an environment attractive to investors and conducive to efficient private sector development."

These plans - all of which the Russian government initiated - are big. And they have big budgets. But where does this money go? What is it for? What does it do?

The assessments of upcoming World Bank missions, or groups of experts sent to evaluate the way World Bank money is spent, will determine the fate of future loan disbursements to Russia.



A little background


"Long-term financial aid must be made available also to promote sound industry and increase industrial and agricultural production in nations whose economic potentialities have not yet been developed," said U.S. Treasury Secretary Henry Morgenthau in his closing address to the Bretton Woods Conference in 1944.


"The International Bank for Reconstruction and Development is designed to meet this need."

At the Bretton Woods Conference, representatives from 45 nations agreed to the creation of the International Monetary Fund and the International Bank for Reconstruction and Development, later to be called the World Bank.

Since then, the World Bank has acquired a reputation that has been marked by controversy.

Critics stepped up their accusations that the World Bank and its filial organizations were bringing more harm than good to the nations they were trying to help, after Russia joined the international institutions in 1992.

Russia's newfound membership opened the path to tens of billions of dollars of Western aid meant to pad the transition to a market economy.

Instead, World Bank policies and loan conditions sometimes made the transition path a bumpier one. An especially noteworthy example is the Bank's acquiescence to the loans-for-shares deal that concentrated the country's natural resources in the hands of a few so-called "oligarchs."

"Especially early on, these loans didn't work toward real reforms," said Yevgeny Volk, a political analyst with the Heritage Foundation.

"In fact, a lot of the time, they put the brakes on reform."

The Russian people understand this, Volk said. But those in power continue to support World Bank programs because they see it as an opportunity for "personal enrichment."

According to Michael Carter, the World Bank's Russia representative, the Bank has learned from its past mistakes, and its approach to Russia has changed.

"A fundamental feature has changed in the past few years," Carter said. "The Moscow office has begun to play an increasing role. They [office staff] have taken on more responsibilities for oversight of projects.

A lot of it used to be done from Washington."

About a year ago, the World Bank and the Russian government agreed to measures that would safeguard the use of loan money, according to the Bank's strategy document.

The government agreed to provide annual budget audits to the Bank and also resolved to give "real-time" updates, which are set by events rather than arbitrary time periods, on the money flow within the budget. In addition, the Finance Ministry promised to show that Bank disbursements targeted to priority areas - social expenditures and coal sector reform - are accompanied by money from the federal budget.

"It's easy for them to say this now," Volk said, adding that Russia doesn't need any loans because oil prices are high. "The real time of judgment will come when Russia falls into another crisis, and huge loans once again begin to flow from the Bank."

To put a concrete face on World Bank activities, which are often described in terms of paradigms and increased efficiency, we take a closer look at three ongoing projects.



Capital Markets


The World Bank's investment loans took a beating after the 1998 financial crisis.


The Capital Market Development Project - 67.3 percent, or $89 million, of which was to be financed by World Bank loans - has only been lent $15 million by the Bank.

A comparison of the original project blueprint with today's reality testifies to the unpredictability of Russia's capital markets and the economy as a whole.

In a technical document issued just before board approval in May 1996, a few sentences foreshadow the 1998 August crisis: "Although no municipal issuer has yet defaulted on its obligations, the weak budget management and the revenue-raising skills of municipal officials give cause for concern. A municipal default would be a serious event because of its potential to destroy the confidence of retail investors in what has so far been a less distrusted segment of the securities market."

In 1996, Novosibirsk defaulted on $859,500 of its short-term municipal bonds for a couple of days. In October 1999, Nizhny Novgorod slipped into technical default on its Eurobond issue.

The report goes on to say that the ill-fated GKOs - federal bonds that went into default after the crisis - were one of the most attractive sectors of Russia's fixed-income market.

"In retrospect, that was optimistic," said James Fenkner, equity strategist with Troika Dialog. "In 1996, yields on those bonds were fantastic. It wasn't until 1997 that it became clear that the debt build-up was going to be a problem for Russia. There was a lot of naivete back then. It wasn't just the World Bank, it was almost everybody."

Also a little too optimistically, the report predicted that, "by the turn of the century, market capitalization could be in the order of $100 to $120 billion and annual turnover could reach $50 to $70 billion."

Last month, market capitalization was at about $48 billion, and annual turnover is estimated at $5 to $6 billion.

The loan was meant to help build a comprehensive legal and policy framework for Russia's capital markets as well as improve the efficiency and transparency of the exchange system. Another goal was to ensure the systematic issuance and registration of government bonds.

This part of the project, of course, is no longer viable.

"On a personal level, we were very disappointed," Carter said. "But we are a bank, and it was our portfolio. We had to make some decisions as to how we were going to proceed."

A lot of the money was allotted to basic regulatory infrastructure: $14.5 million to $14.2 billion of that in World Bank loans - was earmarked for computer hardware and office equipment to be used by the Federal Securities Commission. The intent was to modernize the way the commission regulates the market.

With this project, the World Bank also intended to limit the incidence of fraud, misinformation and manipulation in the securities market.

To what extent reductions in these roadblocks can be attributed to the World Bank is unclear, but Fenkner said Igor Kostikov, head of the Federal Securities Commission, is moving the agency in the right direction.

"He's cleaning up the brokerage business and following through with what has been done in the past," Fenkner said.

Much is left to be done, though, he said. For example, there are still no fines set for companies found guilty of insider trading. This is a crime that carries prison terms in the United States, because it destroys the credibility of the market.



Coal


Controversy has also overshadowed the World Bank's involvement in the coal sector. 


Critics have charged that too much money was being spent on the actual privatization process, while not enough went toward worker compensation, safety and retraining.

An internal memorandum obtained from Reformugol, an agency that coordinates government reform initiatives with the World Bank, corroborates this earlier criticism, but said many problems are being resolved.

Of the $800 million approved in December 1997 for the second Coal Sector Adjustment Loan, $150 million still has to be provided. The remaining money is split into two sections: one so-called social tranche of $50 million and a so-called privatization tranche of $100 million. 

A mission is scheduled to arrive later in November to decide on the privatization tranche.

In 1996, the World Bank authorized the first Coal Sector Adjustment Loan, worth $500 million. 

In contrast to their investment loans, the World Bank's structural adjustment loans come out in installments, called tranches, which are disbursed after visiting missions confirm that the set conditions are being fulfilled.

In the case of the Coal Sector Adjustment Loan, the conditions were tied to sector restructuring, such as closing unprofitable mines, privatization of others, as well as to macroeconomic indicators, such as the size of the budget deficit, and budget revenues.

Domestic coal production is concentrated in the Kuzbass, the Krasnoyarsk Oblast and the Far East.

"The government has already put money into the [restructuring] program," Carter said. "They have already proven themselves to us."

Contrary to popular belief, money from structural adjustment loans are not tied to any one sector, in this case coal. Within certain limits, the federal government has leeway in spending its loans. Some of the $500 million coal loan was used to pay pension arrears.

However, this money cannot be used for warplanes, missiles and other military expenditures. 

Some critics say, however, that World Bank funds indirectly finance the war in Chechnya by freeing up other monies for military use.

Others don't see a link. If there was no money readily available from the Bank, the government would not have changed the way it spent money, said Roland Nash, an economist with Renaissance Capital brokerage house.

"Even without the World Bank, the Russian government would have made really bad allocation decisions within the budget," Nash said.

Coal reform began back in 1993 within the federal government after a wave of strikes and political protests by miners, a group historically well organized. At that time, more than 70 percent of the industry's operating costs were funded by subsidies, ranking second only to agriculture.

According to an unpublished Reformugol report put together this year, 80 percent of subsidies were directed toward mines that were operating at a loss.

Mines were always opening and closing during Soviet times, said Natalya Trifonova, spokeswoman for Reformugol. During perestroika, however, there came a point where the government stopped shutting them down. In the early 1990s, about 360 mines were operating. 

Since the government began restructuring in 1993, work has stopped in 159 mines, even though not all of these mines have been completely liquidated. 

About 230 mines are still extracting coal. It is not yet clear how many mines will be closed in the future, because no concrete plans have been confirmed.

Worker layoffs are even more dramatic in their numbers. In 1993, there were 841,000 people employed in the industry. By 1999, this figure was down to 366,000 and is set to decrease even more in the coming years.

By the end of this year, 760 million rubles ($27.3 million) will be spent on the restoration of mining regions and villages that have suffered from mine closures.

Fewer mines means fewer workers. It also means less coal.

This became a point of contention in 1996, when Yury Malyshev, head of the state coal enterprise Rosugol, did not agree with World Bank suggestions to trim annual output by about 100 million metric tons. He and other industry officials blamed the World Bank for the fall in coal output.

But Trifonova of Reformugol said he doubts the sector's trauma could have been avoided. "It was going to happen anyway," he said. "That's clear to everyone now. Without these loans, it just would have been more painful."

In the early days of the reform program, money had to be routed through several banks and several layers of government before laid-off miners received their worker's compensation.

Often, it was lost or misdirected in the process.

Now, officials have set up a system whereby money is wired directly from the federal treasury to miners' bank accounts.

"Coal money is not mixed up with other money in the federal budget," said Sergei Klimov, deputy head of the Coal Committee, on RTR television last summer. "Money that is earmarked for coal has its own special place in the budget, and it is from this fund that money is sent to coal companies and regions."

Under the loan agreement, in order to continue to receive loan tranches, the government is obliged to keep mining regions from becoming ghost towns.

This isn't happening in the Tyl region, where tens of former mining villages have emptied out, the newspaper Vremya MN reported in June.

About 800 families had been living and waiting in emergency shelters since the mines closed a couple of years ago. By June, only a third were left.

In the last four years, 29,000 workers have lost their jobs as a result of streamlining Tyl's energy sector. Of these, 2,230 found other jobs, and another 1,000 are receiving unemployment benefits.

No one knows for certain what has happened to the rest.



Social Protection


Dressed in a black turtleneck, a jean jacket hanging from his chair, Vladimir Trubin - one of the architects of Russia's social reform program - takes a puff of a cigarette while explaining what makes his job easy.


"There are some very smart people who work in the government apparatus," said Trubin, a former Labor Ministry official. "And they make my job easy because they understand everything. 

"And then there are very many stupid people - very many. They also make our work easy because they don't understand anything."

Trubin said a lot is left to be accomplished in making pension, child, unemployment, and need-based - as opposed to status-based - benefits more effective in reaching the segments of the population who need it most.

Trubin is deputy director of the Russian Foundation for Social Reform, a World Bank-funded, non-governmental organization that coordinates changes in the country's multibillion-dollar social benefit system.

Based on continually positive World Bank assessments and miniscule press coverage, social reform can be counted as one of the more successful measures funded by World Bank loans.

"We don't seek out press coverage," Trubin said. "But we are willing to give out any documents requested. Everything in our office is open."

As a part of its work for "a world without poverty," the World Bank approved an $800 million social protection adjustment loan in 1997. Just like the coal loan, it was disbursed in tranches once the World Bank was satisfied with the progress the federal government was making in reforming its social programs. And government was given some breathing room on how this money was applied to the budget.

Later that year, a different kind of social assistance project was approved. This one was smaller - $28.6 million - and primarily offered technical support for the fulfillment of the social adjustment loan conditions.

Now that the $800 million loan has been completely paid out, the Russian Foundation for Social Reform has embarked on other projects using the smaller loan.

One of the most prominent will be the launch of an ongoing survey by the State Statistics Committee at the end of this year. Throughout the next year, 30,000 households across Russia will be asked questions about their incomes and overall financial situation. This survey will be the first of its kind on this scale.

There is also talk of a second social protection adjustment loan, he said. A mission is scheduled to come in November to mull over this possibility.

And that fact that another big loan will only add to Russia's debt burden?

That doesn't concern Trubin very much, because a World Bank loan has much lower interest rates than domestic banks.

"How big these loans are don't worry me," he said. "They help Russia a lot if they are used appropriately. If this money is wasted, then it will only bring harm."

TITLE: Pacific Rim Leaders Tell WTO: Help Poor Nations
AUTHOR: By Kelly Olsen
PUBLISHER: The Associated Press
TEXT: BANDAR SERI BEGAWAN, Brunei - After arguing for two days over how and when to start a new round of global trade talks, Pacific Rim ministers agreed Monday that the WTO should first come up with an agenda that takes into account the needs of poor nations.


The agreement came after foreign and trade ministers from the 21 members of the Asia-Pacific Economic Cooperation forum struggled to bridge a gap between the needs of developed and developing nations.

In a compromise, APEC ministers stopped short of calling for World Trade Organization talks to begin next year, as the United States, Australia, Japan and others were seeking. Instead, they set 2001 as the deadline for agreeing on an agenda, which developing countries led by Malaysia are insisting on before they negotiate.

A final statement urged new trade talks by "the earliest available opportunity." APEC ministers encouraged WTO members "to muster the political will" to agree first on an agenda in 2001, taking into account the needs of poorer countries.

The ministers also said current high oil prices threaten economic development and called for more research into alternative fuels.

Some clung to the possibility that APEC leaders, including President Clinton, could still adopt the 2001 deadline for starting WTO talks when they hold their annual summit beginning Wednesday.

Developing countries led by Malaysia want to make sure the West cannot put environmental protection and labor standards on the table - which they say would harm their ability to compete globally by exploiting their main assets: natural resources and cheap labor.

Those concerns and complaints that the Geneva-based WTO is unduly controlled by rich countries dashed efforts to launch a new round of trade talks last year in Seattle. That meeting ended with ministers divided and enemies of economic globalization rioting outside.

With 137 members, the WTO was created in 1995 on the theory that open markets benefit everyone. Its binding decisions determine how trade is conducted between nations and what restrictions countries can impose to protect their own producers.

The APEC economies, which represent half the world's output, can do no more than urge new WTO talks. But the meetings of the APEC ministers in Brunei on Sunday and Monday showed that the developing nations are refusing to cave in to the wishes of the West.

Poor nations have long complained they are left out of crucial decision-making in global trade deals. Affluent Hong Kong agreed Monday, with Secretary of Commerce and Industry Chau Tak Hay branding the WTO "a clubhouse for the wealthy nations."

APEC was founded in 1989, and Clinton launched the annual meetings in 1993. APEC comprises the United States, Indonesia, Japan, South Korea, China, Australia, New Zealand, Brunei, Canada, Chile, Hong Kong, Malaysia, Mexico, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand and Vietnam.

TITLE: OPEC Decides To Hold Output
AUTHOR: By Neela Banerjee
PUBLISHER: Combined Reports
TEXT: VIENNA, Austria - The Organization of Petroleum Exporting Countries (OPEC) chose the Venezuelan oil minister, Ali Rodriguez Araque, as its new secretary general on Sunday, paving the way for the producers' group to deal with pressing questions of oil output more expeditiously at a time when prices remain stubbornly high. But OPEC put off until January any decision on changing current production levels.


The selection of Rodriguez, which OPEC members made after meeting in informal sessions in their hotel rooms here, was unofficially disclosed by Qatar's oil minister, Abdullah bin Hamad al-Attiyah. It was then announced officially at a news conference on Monday morning. OPEC chose not to hold an official meeting on Sunday in observance of an Austrian day of mourning for more than 150 victims of a cable car fire.

Mehdi Varzi, director of research at Dresdner Kleinwort Benson, praised the selection of a secretary general. "This is very good," he said, "because now they can get to the real matters of production at hand."

Despite oil prices that have stayed above $30 a barrel for months, oil ministers of the 11-member group said they had decided to forgo yet another increase in production now. Late last month, OPEC chose to lift production by 500,000 barrels a day because of the persistent high prices, its fourth increase since March. OPEC nations produced roughly 29.5 million barrels a day in October, according to the International Energy Agency in Paris, or almost 40 percent of the world's crude oil.

OPEC will most likely take up the production question again at a meeting on Jan. 17, Attiyah said.

The main reason the producers' group is reluctant to increase output is that almost none of the members, except Saudi Arabia, have the excess capacity to pump more oil. Moreover, OPEC members fear that yet another increase, in response to constant pressure from importing countries, like the United States, would lead to a glut of petroleum early next year and set off a steep drop in the commodity price of oil.

Production increases take time to work themselves through ports, pipelines and refineries, so their effect on retail oil prices and on national economies is often delayed.

OPEC members maintain that the full effect of their production increases this year has yet to be felt. Indeed, the International Energy Agency forecast on Thursday that at current output levels, crude oil supplies will exceed demand by 1.3 million barrels a day in the first quarter of 2001. Even now, OPEC members, whose economies depend almost entirely on revenue from oil exports, recall how a production increase in late 1997 caused a free fall in the price of oil, driving it down at one point to about $10 a barrel.

So despite the high retail prices now for gasoline and heating oil, if crude oil prices start falling too fast by the mid-January meeting, OPEC may even choose to cut production.

In his opening remarks as secretary general on Monday, Rodriguez said that high prices were being fueled by speculation, high taxes in consumer nations and refining bottlenecks.

"We can only conclude that OPEC has more than fulfilled its role as a reliable oil supplier and that the true reasons for currently high prices lie behind a series of other factors," Rodriguez said.

Rodriguez, 63, who has served as OPEC's presiding officer, will take over as secretary general on Jan. 1. He has spent most of this year trying to calm the oil markets and to unify the cartel. While the markets often treat OPEC pronouncements with skepticism, Rodriguez has built close ties with the oil ministers of several member nations that commonly quarreled among themselves and delayed key decisions.

"This is positive for OPEC because he represents them well," said Falah Aljibury, an independent oil consultant in Palo Alto, California "He is capable of saying diplomatic things to the market, but he leaves the actions to the members, which is what they like."
-NYT, AP, Reuters

TITLE: Hewlett-Packard's Shares Drop by Over 15 Percent
PUBLISHER: Reuters
TEXT: NEW YORK - Technology heavyweight Hewlett-Packard Co. stunned Wall Street on Monday by announcing profits that missed forecasts by nearly 20 percent, two days before results had been expected, and saying it ended talks to buy the PricewaterhouseCoopers consulting business.


The computer and printer maker's stock fell more than 15 percent, further weighing down an already-battered market. The news from Hewlett-Packard extended last week's technology stocks rout, which had been spurred by a revenue warning from personal computer maker Dell Computer Corp.

In early-afternoon trading, Hewlett-Packard shares were down $5 15/16 at $33 3/16, a low unseen since April 1999, and were among the top percentage losers on the New York Stock Exchange. Its drop dragged other computer makers down with it, and the Philadelphia Stock Exchange computer maker index fell more than 4 percent, or 6.08 to 139.62 - a two-year low.

Palo Alto-based Hewlett-Packard reported fourth-quarter earnings far short of Wall Street expectations, citing margin pressures, adverse currency effects, and higher-than-expected expenses.

Hewlett-Packard had not been expected to report its fiscal fourth-quarter results until after the close of trading on Wednesday. Hewlett-Packard Chairman, President and Chief Executive Officer Carly Fiorina said the company decided over the weekend to disclose its earnings early, after seeing the financial results and deciding to end of the merger talks.

Fiorina said she was "very disappointed that we missed our [earnings- per-share] growth target this quarter due to the confluence of a number of issues that we now understand and are urgently addressing. I accept full responsibility for the shortfall."

Hewlett-Packard also said it had terminated talks to buy the consulting business of PricewaterhouseCoopers. Those talks, which came to light in September, were still in progress earlier this month with Fiorina saying she was looking for a better deal than the $18 billion previously under discussion.

"I am unwilling to subject the HP organization to this distraction of pursuing this acquisition any further," Fiorina said during a conference call. "In hindsight I let the PWC opportunity linger for too long."

However, she left the possibility open for a future deal to expand Hewlett-Packard's services business. "We remain convinced that business transformation and technology implementation are inextricably linked in today's market," she said. "We are committed to aggressively growing our services capabilities organically or possibly through acquisition."

Hewlett-Packard reported fiscal fourth-quarter earnings per share of 41 cents, excluding investment and divestiture gains and losses, the effects of stock appreciation rights and balance sheet translation, and restructuring expenses. Analysts had been expecting 51 cents per share, according to research firm First Call/Thomson Financial.

TITLE: IN BRIEF
TEXT: Meat Co. Makes a Bid


NEW YORK (Reuters) - Smithfield Foods Inc., the No. 1 U.S. hog and pork producer, said on Monday it offered to acquire IBP Inc., the No. 1 U.S. meatpacker, for $2.7 billion in stock and $1.4 billion in assumed IBP debt.

Under the deal, IBP stockholders would receive Smithfield stock valued at $25 for each of IBP's shares outstanding, giving them a 19.8 percent premium over the shares' closing price on Friday, Smithfield said.

Under Friday's closing prices, each IBP share would be exchanged for .791 shares of Smithfield Foods, although provisions allow for the ratio to fall to as low as .719 or as high as .878, depending on the closing price of Smithfield common stock.



Cosmetics Sale


DUBLIN, Ireland (Reuters) - German chemical company Henkel said on Monday it was considering entering the bidding for U.S. cosmetics company Clairol, which Bristol Myers is planning to sell.

"We may look at this option," chairman Ulrich Lehner told reporters at a briefing in Dublin.

Henkel announced its nine-month results on Monday and is holding a press conference in the Irish capital.

Bristol Myers said in September that it planned to divest its Clairol beauty products business as it focuses on its core drug units. Clairol could fetch some $4 billion and analysts believe that Procter & Gamble and Loreal could also be interested in it.



Delta Warns Employees


ATLANTA, Georgia (AP) - A Delta Airlines senior executive has warned pilots against causing flight delays intended to pressure the carrier to agree to contract terms sought by the pilots.

"Within the pilot group, there is substantial discussion of potential job action against Delta," senior vice president Dave Bushy wrote in a memo to pilots.

Bushy, who is in charge of Delta's flight operations, said there has been talk of pilots failing to request overtime or making themselves available for reassignment, calling in sick and engaging in slowdowns. 



Giant Japanese Merger


TOKYO (Reuters) - Sumitomo Chemical Co Ltd. and Mitsui Chemicals Inc. said on Monday they were in talks that could result in a merger in a year to create Japan's biggest chemical group and the sixth-largest in the world.

Sumitomo and Mitsui hope to compete more effectively against powerful foreign rivals that are bulking up through mergers and acquisitions, analysts said.

"It is true we are in talks on a variety of possibilities, but we have not yet reached an agreement," said a statement issued by both companies.



Cendant To Buy Avis


NEW YORK (Reuters) - Franchising giant Cendant Corp. on Monday said it had agreed to pay $935 million to acquire the 82 percent of car-rental company Avis Group Holdings Inc. that it does not already own.

Under the agreement, New York-based Cendant will pay $33 cash for each outstanding Avis share. That represents a 10 percent premium over Avis' closing price of $30 on the NY Stock Exchange on Friday. About 25.6 million shares of Avis common stock are not currently owned by Cendant, the company said.

After the transaction, which is expected to close in the first quarter of 2001, Avis will become a subsidiary of Cendant, the companies said.

TITLE: MARKET WRAP
TEXT: U.S. Vote Uncertainty Spooks Local Markets 


Bears trampled stocks to new lows while watching U.S. markets tumble.


Uncertainty over the ultimate outcome of the presidential election in the United States triggered selling in the high-tech end of the market, which is watched as an indicator used to judge the investment appetite of emerging markets.

The NASDAQ plummeted 12.2 percent on the week to 3,028.99, shedding 40 percent from its year high of 5,048.62 on March 10.

The RTS index has given up 22 percent of its value since March 10. It was down 7.4 percent last week to 178.40.

"We can go further down," said Dmitry Roenko, head of asset management with Olma. "This clearly is a bearish trend."

Those following market stats indeed have no call for merrymaking. Trading volumes are growing as the market snowballs in the southern direction at an accelerating pace.

LUKoil's refusal this November to show that its books were audited in accordance with Generally Accepted Accounting Principles (GAAP) standards hit like a bombshell.

Its lame excuses fueled the corporate governance concerns that have plagued the market over the past two years.

The stock dropped like a stone, losing 11.5 percent to $11.20. LUKoil hit its lowest level since the end of February, when it settled at $10.97 Thursday night.

It dragged down the rest of the pack, with Unified Energy Systems losing 9.5 percent to 11.8 cents a share and Surgutneftegaz shedding 4.3 percent to 25 cents a share.

"Oils dragged down UES and other power stocks closer to the end of the week," Roenko said.

Oil stocks were especially weak, even though Brent futures were up 3.8 percent to $32.02, following the Organization of Petroleum Exporting Countries' decision not to raise production at its Nov. 12 meeting.

The only notable exception was Yukos, which defied the trend and finished the week at $2.00 a share, up 2.04 percent.

TITLE: THE TAX ADVISER
AUTHOR: By Tom Stansmore
TEXT: Recently an issue has arisen in St. Petersburg that effects every tax-paying, foreign individual in the city: the infamous Tax Payer Identification Number (INN).


I say infamous because as soon as the concept of an identification number was introduced by Part I of the Tax Code, it immediately was attacked by the Russian Orthodox Church, which took the position that an identification number was degrading to human beings.

A letter of the Tax Ministry from March 10, 2000, addressed to the Holy Synod, the church's governing body, explained the necessity of having identification numbers and seems to have allayed many of the concerns of the Church. It is now common practice for Russian citizens to have an INN number which is placed on all documents submitted to the tax authorities on their behalf.

Because it is the employer that is responsible for withholding personal income tax and social fund contributions on behalf of its employees, Russian citizens often have no direct contact with the Russian Tax Authorities, and it is usually the employer that applies for the INN number on their behalf.

Foreigners who are Russian tax residents, however, are usually employed by an offshore company. As such, they have been responsible for reporting and declaring their taxable income directly to the Tax Authorities, and previously the requirement that they submit an INN on their tax return has not been enforced.

That is, until recently. Conversations with the St. Petersburg tax authorities indicate that they have taken the position that future filings will not be accepted on behalf of foreigners if an INN is not present on the application.

The Moscow tax authorities, however, aren't so sure. Representatives that we've contacted said that that question has been posed in writing to the Director of the Department of Taxation, and a response should be coming shortly. One potential outcome may be that an application for an INN will be required along with next year's tax return.



Tom Stansmore is head of the St. Petersburg Branch of Deloitte & Touche CIS. For more information or advice call Deloitte & Touche at 329-93-10.

TITLE: State Targets Illegal Car Imports
AUTHOR: By Elizabeth LeBras
PUBLISHER: Staff Writer
TEXT: MOSCOW - Regulations designed to stop pervasive evasion of customs duties by citizens importing cars came into force Friday, Anatoly Galaktionov, chairman of the customs control department, announced at a news conference.


He said many people importing cars had not paid any duties at all. The duties range from 10 percent to 15 percent of the value of the car.

"In 2000, out of 7,616 vehicles imported from the West to the Russian border, 4,418 evaded duties," Galaktionov said. "Drivers merely drove off and did not pay."

Izvestia newspaper suggested Friday the new regulations will considerably complicate the matter of purchasing a car abroad because buyers must go to customs offices twice, before and after leaving the country.

Previously, everything was taken care of at the border, where the buyer of the car presented documentation of the purchase.

On the first occasion they will apply to import a car and lodge a hefty deposit in the city where they live. On the second visit they will receive the deposit back if they have paid duties.

The amount of the deposit will vary in accordance with the value and age of their car from 1,000 euros to 15,000 euros ($1,170 to $17,600).

Galaktionov denied that the regulations will merely cause more problems for importers, saying the State Customs Committee had been compelled to act because of the widespread abuse.

"Now the situation is under our control," he said.

"No one should think that the Customs Committee is making its regulations unnecessarily strict or deliberately causing people difficulties," an official of the committee said at the conference.

Commercial banks have been granted licenses for the collection of the deposits. Galaktionov did not reveal which banks had won the tender for the collection of the deposits.

Consumer demand for cars exceeds the supply of cars made locally.

Mihail Tsitsevits, chairman of the board of directors of German auto-show organizers Frankfurt GmbH, told Vedomosti that Russians purchase 1.7 million cars a year, whereas the nation manufactures only 1 million cars annually.

The new regulation is part of the Customs Committee's continued efforts to increase its income from the import of foreign cars.

On Jan. 16, the State Customs Committee closed a popular loophole used to import cars into Russia.

Russian citizens working abroad for extended periods were granted permission to import one car a year without paying customs duties. The exemption was exploited by organized crime groups that forced eligible citizens to serve as car importers.

According to customs statistics, losses to the budget resulting from that loophole totaled $120 million to $140 million last year.

TITLE: Appointment of Director Ends Struggle for Kristall
AUTHOR: By Lyuba Pronina
PUBLISHER: Staff Writer
TEXT: MOSCOW - The five-month battle for control of Moscow's Kristall distillery came to an end last week with the appointment of a new general director - the company's third this year.


Sergei Lukashuk, for four years the chief engineer at the distillery, was elected by the board of directors last Thursday to replace controversial director Alexander Romanov.

The board meeting to elect Lukashuk was called by Rosspirtprom, a newly registered holding company for all state-owned shares in alcohol-producing enterprises, including the state's 51 percent of Kristall. The remaining 49 percent is held by private firms, including Soyuzplodimport, Tekhnogres, and an offshore company located in Cyprus.

"[Lukashuk] is a professional manager with long experience of work at Kristall and is respected by the staff," Rosspirtprom deputy director Natalya Salangina said Monday.

Salangina said that the government decided it was time to rid the distillery of scandal, and chose Lukashuk as a suitable compromise to the rival camps within the company that have been feuding since the board of directors elected Romanov general director in May. 

After some board members objected to Romanov's election, a Moscow court ruled in July that the appointment was invalid, naming Romanov's rival, Vladimir Svirsky acting director. 

Before the July court ruling, Romanov only controlled Kristall's operational management. All production and 90 percent of sales were controlled by Svirsky. But Romanov and his guards occupied the production line in August, while Svirsky was camped out in the head office. The court finally reversed itself Sept. 29, ruling that Romanov was, in fact, the rightful director, although Romanov didn't manage to take full control of the company until mid-October, with the help of riot police and a court bailiff.

"The [rival] groups battled to the death, forgetting why they were elected and that the reason behind a company existing in the first place is making a profit," Salangina said.

"We acted as a mediator and are grateful that common sense prevailed with both sides [with the election of Lukashuk]," she said.

Lukashuk said in a telephone interview Monday that he was surprised by his appointment. "It was completely out of the blue," he said. "I never strived to be general director, but now nominated I have to do the job."

Lukashuk must wait for an extraordinary shareholders' meeting scheduled for Nov. 27 to be officially confirmed in his new post. At that meeting shareholders are also expected to approve changes to Kristall's charter and to downsize its board from 17 to 11, Salangina said, adding that Rosspirtprom is confident it will control a majority of the new board.

TITLE: Competitors Cry Foul at New Telecominvest Deal
AUTHOR: By John Varoli
PUBLISHER: Special to The St. Petersburg Times
TEXT: Telecominvest, a holding company for 36 telecommunications companies in northwest Russia, has struck a strategic alliance with Telia AB, Sweden's largest telecom company, which will invest $250 million in the next three years to build a national GSM mobile phone network.


The deal will increase competition in Russia's lucrative and growing telecom market, but charges of preferential government treatment are already being hurled at Telecominvest, which denies any wrong-doing.

Telecominvest said last week that it chose Telia as its strategic partner after negotiations with another potential partner, Promstroisvyaz, a subsidiary of Promstroibank of St. Petersburg, fell through. An agree ment with Prom stroisvyaz was announced in June, with the bank pledging to invest $100 million in Telecominvest.

"We failed to come to an agreement with Promstroi svyaz in our plans for investing in Russia's regions because the bank is oriented more towards northwest Russia," said Alexei Ionov, spokesperson for Telecominvest's flagship company, Northwest GSM. "We have plans to develop a national network of GSM companies, and Telia is our strategic partner."

Telecominvest recently purchased three Russian regional GSM providers as part of plans to build the national network, called MegaFone. It bought 51 percent stakes in two GSM providers, Mobikom Novosibirsk and Mobikom Khaborovsk, which operate in the two Siberian cities by those names, as well as in Mobikom Kavkaz, in the city of Krasnodar in the Russian south.

Financing will come from existing shareholders as well as a possible public sale of shares next year, said Ionov.

In February, Telia paid $80.4 million to purchase a 25.9 percent stake in the Luxembourg-based First National Holding SA (FNH), the controlling shareholder in Telecominvest. FNH was created by Germany's Commerz bank AG in 1997 as a wholly owned subsidiary.

But Telia recently paid $12 million for another 25 percent stake in FNH, said Ionov, in a private placement. He could not explain the difference in price for an almost equal amount of shares, however, but said one condition for the right to purchase the stake was committing to large-scale investment in Telecominvest.

In addition, by the end of the year, FNH has agreed to pay $45 million to raise its stake in Telecominvest from 75 percent to 85 percent.

This reduces remaining shareholder stakes of Petersburg Telephone Network (PTS), the local telephone monopoly, to 7.65 percent, and St. Petersburg National and International Telephone (SPMMT), the local long-distance provider, to 7.35 percent in the holding.

Up until spring, these government- controlled telecoms held 49 percent of Telecominvest.

Telecominvest would not disclose the amount paid for the three regional GSM providers, but said it is only the beginning of expansion.

"The cell phone business is profitable in other cities besides Moscow and St. Petersburg, and we want to be the leader in Russia's regions," said Ionov.

Telecominvest now has GSM licenses for 77 of Russia's 89 regions, with a combined population of 84 million, more than half of the country's 145 million total.

"Telecominvest is one of three or four groups in Russia that have potential for strong growth," Bo Magnusson, head of Telia's operations in Russia, told Bloomberg news agency. "The Russian economy is developing very favorably, [voice] traffic is increasing and more people can afford to buy mobile phones."

The Russian mobile phone market is now a bitter competition between four players -- Mobile Telesystems (MTS), Russia's largest mobile-phone company, Vim pelcom, the No. 2 cell phone company, and Sonic Duo, a venture between state-controlled OAO Svyazinvest and Sonera Oyj, Finland's largest phone company, as well as Telecominvest.

Russia's cell phone market has about 2.7 million users, and should reach three million by the end of the year. While the growth rate in 2000 was more than 100 percent, in 2001, the number of users will grow by about 80 percent, said Andrei Braginsky, a telecom analyst at Renaissance Capital in Moscow. Moscow has 1.9 million users, while St. Petersburg has about 400,000.

"Most important in this competition for the regional telecom market is to build a national brand name and a national presence," said Braginsky. "The number of [mobile phone] subscribers in the regions is ridiculously low, and growth will come from these regions rather than from mature markets, such as Moscow, which are nearing saturation."

In June, MTS raised $353 million with an initial public offering (IPO) on the New York Stock Exchange. Germany's Deutsche Telecom AG owns a 40 percent stake, while a Moscow-based company, Sistema Telecom, controlled by the Moscow city government, owns a 42 percent stake. The rest of the shares are publically traded.

Though Telecominvest has more licenses than MTS, it is the newcomer to the regional market and admits being behind in developing a national network.

Some analysts say that Telecominvest's expansion appears to be receiving help from friends in high places. The company's MSS-Saratove GSM operator was recently given a GSM license for the Volga region without a tender, and contrary to Telecommunications Ministry practice.

"The process by which licenses are given out by the Telecommunications Ministry is not at all transparent," said Braginsky. "The way Telecominvest got the license for the Volga region was clearly an insider deal."

Leonid Reiman, Russia's Telecommunications Minister, was a founder and former Telecominvest board member. When Reiman took government office earlier this year, he relinquished his board seat at Telecominvest in accordance with Russian law forbidding government officials from having business interests.

Telecominvest denies all charges of preferential treatment.

"Such accusations are inaccurate and I think people are looking for a sensation where there is none," said Ionov. "In Russia, GSM licenses are not given out by tender but simply by application, and we just applied for one."

TITLE: Russian Gas Monopoly Asks for Boost in Rates
AUTHOR: By Yulia Bushuyeva
PUBLISHER: Vedomosti
TEXT: MOSCOW - Natural gas monopoly Gazprom has applied to the Federal Energy Commission to raise its tariffs by an average of 35 percent and asked for the hike be retroactive to Oct. 1.


Because of its monopoly on the local natural gas market, Gazprom's wholesale prices are dictated and regulated by the Federal Energy Commission.

From 1997 to 1999 the average wholesale price for gas was frozen. The commission has since allowed Gazprom 15 percent price rises in October 1999 and April this year. Today the price of gas for industrial consumers fluctuates between 224 rubles ($8.08) and 400 rubles ($14.43) per thousand cubic meters.

Company head Rem Vyakhirev has frequently said that prices on the internal market must be increased by four to five times to make sales profitable. The hike would not have to be made overnight, but could take several years, he has said.

Gazprom needs to invest in gas fields or else gas extraction could fall by 40 billion to 50 billion cubic meters per annum. Gazprom sent its first appeal to the FEC for prices to be raised by 35 percent in August. But the commission rejected the gas giant's appeal.

"Gazprom gave no grounds for why it really needed the increase and we requested additional information," said Vladimir Milov, head of the commission's economic department.

Analysts said the government will gradually move toward granting an incremental increase.

"This is an objective necessity. Gazprom should not be subsidizing the Russian economy by selling gas at prices 10 times lower than in Europe," said Vladimir Nosov, oil and gas analyst at Chase investment bank.

TITLE: Ritek Seeks To Bolster Capital
AUTHOR: By Igor Semenenko
PUBLISHER: Staff Writer
TEXT: MOSCOW - Seeking cash in order to fulfill ambitious plans to triple oil extraction 300 percent in 10 years, LUKoil subsidiary Russian Investment Fuel-Energy Co., or Ritek, on Monday embarked on an aggressive fundraising campaign.


"We will focus on drilling and construction of an oil pipeline in Western Siberia," Ritek vice president Alexander Meleshko said at a news conference.

This will require capital expenditures of 3.1 billion rubles ($112 million) next year and a total of 12 billion rubles until 2005.

Half the funds will come in the form of reinvested profits, while the remainder should be raised on capital markets.

Ritek pumped 50,000 tons in 1992 and increased output to 2.16 million tons of crude last year, three quarters of which came from Western Siberia and the remainder from Tatarstan.

The acute need for cash prompted Ritek to open up its books, list its stock in the Russian Trading System, promise full disclosure of financials in the future and open a Web site (www.ritek.ru).

"We will tap the market with a $10 million corporate bond issue denominated in rubles," Meleshko said.

Ritek's largest shareholders are LUKoil, the nation's No. 1 oil firm, which owns a 50.5 percent stake, and individuals, who hold 27 percent of its shares.

The recent share issuance that took place earlier this year increased LUKoil's stake to a controlling one and reduced oil firm Tatneft's share to 6 percent.

Ritek will probably have a free float of 20 percent to 25 percent of total shares outstanding, most of which is expected to come from individual shareholders.

Company managers own 4.5 percent in Ritek, chaired by LUKoil's president Vagit Alekperov.

Ritek was founded in 1992 to take care of aging wells that oil majors were eager to write off, but it has since expanded its franchise into oil extraction.

"We will not increase the service component of our business, but concentrate on development of our oil resources," said Valery Graifer, managing director with Ritek.

The company already has a negative experience of running a consulting business in the United States, the business was closed amid a lack of demand for Russian oil expertise.

Ritek's reserves stand at 200 million tons under local standards.

U.S.-based oil and gas consulting firm Miller & Lents put Ritek's extractable reserves at 103 million tons as of January 1998, and is performing another audit, which, although incomplete, already shows an increase to 130 million tons to 140 million tons, Graifer said.

TITLE: Minister: Flat-Tax Rate To Be Kept Fixed for At Least 3 Years
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW - A deputy tax minister has promised that the flat income tax of 13 percent due to come into force on Jan. 1, 2000, will not be changed for three years, the newspaper Vremya Novostei reported Friday.


His statement fuels fears that the lower rate - current rates are between 12 percent and 30 percent - is merely a short-term ruse to draw taxpayers to declare incomes.

Deputy Tax Minister Viktor Zubkov was quoted as saying that the tax rate could change after three years and did not rule out a return to a progressive tax rate, in which higher wage earners pay tax at a higher rate.

Zubkov said he was speaking personally as a "human and citizen" and that his is not the official position of the Tax Ministry.

The 13 percent rate would draw incomes "out of the shadows" and increase revenue to the state budget, he said.

For this reason, it will be necessary to keep the rate at 13 percent for three, four or five years, he added.

After that, however, the tax rate will have to be changed, he said, suggesting that 13 percent remain the lowest income tax rate and 20 percent the highest.

Nowhere in the world were income-tax rates as low as 13 percent and in some countries the rate is 40 percent, 50 percent or even 60 percent, he said.

Zubkov's has made similar statements before, and it is not the first time the government's motivation for introducing the 13 percent flat income tax has been called into question.

Deputy Prime Minister Ilya Klebanov said in July that the tax will increase just after corporations stop hiding their true incomes.

However, the architect of the government's tax program, of which the flat tax is a part, Economic Development and Trade Minister German Gref, speaking two days after Klebanov, said that a tax hike may take place "in the long-term future," in eight years to 10 years.

TITLE: Itera's Succes Raises Suspicions
AUTHOR: By Elizabeth LeBras
PUBLISHER: Staff Writer
TEXT: MOSCOW - A small firm called Itera was registered in Jacksonville, Florida, to distribute food and oil products in 1992.


Eight years later, Itera is Russia's third-largest gas producer, a mammoth holding consisting of more than 120 companies and subsidiaries. Its headquarters are in Moscow, but its founders and ownership remain a mystery.

The breathtaking rise of the tiny company is taking center stage among foreign shareholders at gas giant Gaz prom, the world's No. 1 gas producer. Those shareholders fear that lucrative assets have been stripped from Gaz prom to bolster Itera, and they are demanding answers.

"In 2000, Itera intends to produce 20 billion cubic meters of gas - 1,170 percent higher than its production in 1998," foreign shareholders wrote in a recent letter to Gazprom chief executive Rem Vyakhirev.

"But at the same time as Itera's production is growing, the volume of Gazprom's own production is falling.

"Existing information gives reason to believe that Itera's reserves comprise assets acquired from Gazprom," said the letter, obtained by the Financial Times.

The shareholders, represented by Gazprom board member Boris Fyodorov, are hoping that some light will be shed on the gas giant's relationship with Itera at a Gazprom board meeting scheduled for the end of November.

The government is also taking a closer look at Itera, a move that could help shareholders learn the truth. The Audit Chamber, parliament's budgetary watchdog, is investigating Gazprom's export transactions with Itera as part of a larger audit of the gas giant's books.

Additionally, the European Bank for Reconstruction and Development is demanding that Gazprom clarify its relationship with Itera before it approves a $250 million loan.

But in a country infamous for secretive dealings, front companies and nontransparent ownership structures, any answers may be a long time in coming.

The sketchy path that led Itera into natural gas bewilders investors and observers alike.

Two years after its founding, Itera revamped itself into a natural gas supplier and teamed up for the first time with Gazprom, according to Itera officials. The company's initial joint project was to distribute gas from Turkmenistan to a number of countries throughout the former Soviet Union.

In 1998, the company expanded its operations into gas production. In collaboration with Gazprom, Itera began developing deposits of natural gas and gas condensate on the territory of the Yamal-Nenets Autonomous District, just north of the Tyumen region.

Last year Itera was the primary natural gas supplier for Ukraine, Armenia, Be larus, Georgia, Latvia, Lithuania, Mol davia and Estonia, and sold more than 50 billion cubic meters of gas.

An Itera representative said that production and delivery of natural gas accounts for 80 percent of the company's business.

And its gas activities appear to just keep growing.

Under an agreement signed by Tur k menistan and Gazprom on Dec. 17, 1999, Itera is now charged with shipping 20 billion cubic meters of Turkmen gas a year to Uzbekistan, Kazakstan and Russia.

With many former Soviet republics covered, Itera is focusing on subsidiary Intera-Rus to boost domestic deliveries.

The ownership structure of Itera remains a secret, although a number of analysts have suggested that Itera is run by representatives of Gazprom's management or their close relatives.

Major Gazprom stakes are split between the government with 38 percent and foreigners with about 20 percent. The remainder is broken up between smaller Russian investors.

Describing its relationship with Gaz prom, an Itera representative said in an interview that Itera perceives Gazprom as its "strategic partner."

"It can't be otherwise, as Gaz prom owns the main gas pipelines and one of Itera's most important activities is the delivery of 'blue fuel,'" said the official, who spoke on condition of anonymity.

Gennady Krasovsky, an oil and gas analyst at the Nikoil brokerage, said the mere fact that Itera has access to Gaz prom's pipelines confirms that the two companies have a close relationship.

"Gazprom takes some of Itera's transport expenses on its own account," Kra sovsky said.

"Russian oil companies have no access to Gazprom pipelines, but Itera has the right to pump its gas through them," said Krasovsky.

It's impossible for a company to operate in the Russian gas business without the help of Gazprom, he said.

Independent gas producers, however, will soon be granted access to Gaz prom's pipelines. Taking another step to curb Gazprom's monopoly, the government published a resolution on Nov. 8 that allocates at least 15 percent of pipeline capacity to independent producers.

Asked how Itera has become the key supplier to gas markets in the former Soviet Union, the Itera representative said Itera entered those markets after Gazprom was forced to cut off its deliveries on account of chronic nonpayments. The arrangement allows Gaz prom to serve its domestic consumers and fulfill export contracts for deliveries to Europe, the official said.

Konstantin Reznikov, an oil and gas analyst for Alfa Bank, said Gazprom appears to have shifted CIS markets to Itera to concentrate on delivering gas to domestic consumers. Itera, being a private company, has no liabilities like Gaz prom's obligation to deliver cheap gas to domestic consumers, Rez nikov said.

"Itera offered to do this job for some compensation," he said.

Reznikov said the compensation was provided to Itera in the form of rights to Gazprom's gas fields.

A representative at Dragon Capital, a Kiev-based investment bank, said Itera has more success than Gazprom in exacting payments from Ukrainian customers.

In late October, the Ukrainian government reached agreement with Itera to allow it to export electricity to Moldova as payment for its debts to Itera.

The Dragon Capital official, who asked not to be named, said that the bank would "prefer to see these payments made in a more transparent way," namely with more cash payments.

United Financial Group noted in a recent report that the government is behaving more like a concerned Gazprom shareholder and has started to demand that Gazprom raise its standards of corporate governance.

In a clear indication of the government's support for greater transparency at Gazprom, it insisted at a board meeting in June that the company hold shareholders meetings at least once a month.

Further, resolutions passed at a Gaz prom board meeting Oct. 27 showed that the government was growing increasingly critical toward Gaz prom's management. A particularly striking victory for shareholders was a resolution that forbade Gazprom from transferring its assets or diluting its holding in its subsidiaries without the board's prior approval.

Itera has acquired five gas fields in the Yamalo-Nenets region alone that formerly belonged to Gazprom. Total deposits in the gas fields are estimated to exceed 1.5 trillion cubic meters.

Gas analysts said the resolution was an obvious reference to Itera and applauded the clampdown on Gazprom management.

"This is a much closer level of supervision of the company's management by the board than would normally be expected and suggests - at the very least - that the board of the company does not have complete faith in the management's judgment," UFG said in a research note.

To the disappointment of shareholders, however, the Gazprom board did not agree to carry out an investigation of past asset transfers.

Itera is not the only Gazprom-affiliated organization that has been accused of asset stealing. A gas pipe construction company, Stroytransgaz, receives large contracts from Gazprom and acquired a 4.8 percent stake in Gazprom for only $2.5 million.

The Federal Securities Commission is planning to investigate the relationship between Stroytransgaz and Gaz prom, according to Vedomosti.

At Itera, transparency will be a must if the company wants to continue to expand, observers said.

The Itera representative said the company is contemplating an initial public offering on Western markets f a move that would require the disclosure of the company's ownership structure.

TITLE: Wall Street Waiting for Numbers
AUTHOR: By Eric Burroughs
PUBLISHER: Reuters
TEXT: NEW YORK - The still-unfolding drama swirling around the U.S. presidential election will cast a shadow of doubt over U.S. credit markets and should dominate a week that includes key inflation and consumer spending reports and a Federal Reserve policy meeting.


"As long as the political situation is still unresolved, it will take center stage and everything else will pale in comparison," said Charles Lieberman, chief economist at First Institutional Securities LLC in West Paterson, New Jersey.

Shorter-dated treasuries - where nervous investors prefer to park funds in a climate of uncertainty - should continue to benefit as the protracted election wrangling keeps weighing on equity markets, analysts said.

While the election is on everyone's mind, so are interest rates. The Fed meets Wednesday to discuss rates, and while no one expect the Fed to change rates, the focus will be on whether it shifts from its position that inflation remains a threat to U.S. growth.

Since Tuesday's election, the NASDAQ has lost 11.3 percent while the S&P 500 is down 4.6 percent. Likewise yields, which fall when bond prices rise, have dipped 10 basis points or 0.10 percentage points on two-year notes and 15 basis points on five-year notes.

Ed McKelvey, senior economist at Goldman Sachs, said there was "some degree of uncertainty premium" built into the value of treasuries until the presidential victor is determined.

Despite the unfinished election drama, investors face a batch of economic reports that could provide further evidence U.S. economic growth has come off its revved-up pace that forced the Federal Reserve to raise short-term interest rates six times from June 1999 to May to 6.5 percent.

Since then, the Fed has held off but repeatedly warned that inflation remains a near-term threat to the economy's health.

"I think the weight of the evidence next week will show that we have slowed from the robust growth of last year and early this year, and we're doing well in terms of growth," said Michael Moran, chief economist at Nomura Securities.

"The economy's not faltering," Moran added.

The first crucial report comes on Tuesday when the Commerce Department reports on October retail sales, which economists have keenly watched to see if American consumers are still spending at a pace that is robust enough to worry the Fed.

Economists polled by Reuters expect retail sales to fall 0.1 percent, a reversal of the 0.9 percent increase registered in September. After removing volatile auto sales, retail sales are expected to post a 0.2 percent gain, down from a 0.7 percent increase the prior month.

Wednesday's slate of data includes business inventories in September, industrial production in October and the Kansas City Federal Reserve Bank's reading on manufacturing activity for the fourth quarter.

However those reports should be overshadowed by the Federal Reserve Board, whose policy-making committee meets and is widely expected to keep interest rates unchanged. But economists said the question is not whether the Fed tweaks rates, but if it chooses to lift its so-called "inflationary bias."

"If they shift to a neutral stance, the markets would rally," said Daiwa's Moran.

Then on Thursday a key reading on price increases in common consumer goods. The Consumer Price Index (CPI) for October is expected to rise 0.2 percent compared to a 0.5 percent increase in September. Stripping out volatile food and energy components, economists predict the core CPI will rise 0.2 percent compared to a 0.3 percent increase the prior month.

"There's no significant worsening in inflation," said First Institutional's Lie ber man. "That leaves the Fed in a position where it keeps its policy in place."

TITLE: Belarus Buses Cure for City's Run-Down Fleet
AUTHOR: By Andrey Musatov
PUBLISHER: Special to The St. Petersburg Times
TEXT: Belarus' Minsk Bus Plant (AMAZ) is expanding it's presence in the Russian market, signing a deal with Kirovsky Zavod, one of St. Petersburg's oldest factories, to begin assembling buses in the city.


The Interfax news agency reported last week that the plans call for 20 MAZ-103 model buses to be assembled at the plant before the end of the year, with 200 being the predicted total for annual production after that.

But, according to Viktor Ivanov, first deputy general director of Passazhiravtotrans, the city's bus transit authority, this would satisfy only 10 percent of the city's transport needs at the moment. 

In a telephone interview on Monday, Ivanov said that in 1991 there were 4,500 buses in St. Petersburg, while only 2,700 buses are in operation today.

"About half of city buses need to be replaced immediately," he said. "So we need about 1000 buses now, and then about 400 buses annually. But expenditures on public transport will be known only after the passing of the city's budget for 2001." 

The actual assembly of the buses will be the responsibility of the Energiya industrial complex, which is a daughter company of Kirovsky Zavod.

According to Gennady Nikolayev, the head of the bus production department at Energiya, the main components - engines and chassis - will be produced in Belarus, while more minor parts will be manufactured here. This will drop the production cost of the buses by about 10 percent. The price of one bus is between $80,000 and $90,000.

Nikolayev also said that the success of the agreement now depends on negotiations between the company's management and the St. Petersburg administration. It is hoped that the city government will support the project by ordering a significant enough number of buses. 

"To start, the price of the bus will be about the same as for those produced in Belarus, " Nikolayev said "But, when we're more sure the project is working, the prices of the buses will be lower."

"There's no question that we need more buses," Aleksey Blinov, deputy head of the city administration's Transport Committee said in a telephone interview on Monday. "But I've only heard about the deal to assemble the MAZ buses here from the press"

Meanwhile Petroscan, the St. Petersburg-based affiliate of Sweden's Scania, is also constructing a bus-assembly plant in the area. The new plant will be located in Vyborg, about 100 kilometers north of St. Petersburg. 

In May Scania announced that it plans to begin production in November 2000. The company has since said that this date had to be moved back.

This is Scania's second attempt at the Russian market. Seven years ago the company tried to set up a similar project through the creation of a local subsidiary called RusScan. But the project failed because production prices turned out to be too high. 

"Scania buses are twice the price, but they last twice as long," Ivanov said. "On the other hand, MAZ's quality results are also good and they are cheaper - which is the main sellling point in this case."

"The city would prefer cheaper buses so that they can buy more," Blinov said. "From the standpoint of price only buses produced by Likinsky Zavod and MAZ fit the bill." Likinsky Zavod is located in the city of Likino, 70 kilometers to the east of Moscow.

TITLE: Global Eye
TEXT: Old Wounds


The American nation teeters on the brink of constitutional anarchy. The Democratic candidate has narrowly but clearly won the popular vote from an electorate still bitterly divided over the recent impeachment battle, when a rakish, scandal-ridden Southern president was almost ousted by the radical Republicans in control of Congress.


Now confusion reigns over the returns from Florida, where there is credible evidence of vote tampering by the Republican-run state government. The final tally shows the narrowest of margins for the laid-back Republican presidential candidate, the inexperienced governor of one of the country's largest states. The Democratic candidate, a stiff, inept campaigner known more for his exhausting discussions of policy than his ability to glad-hand the folks, is being urged by his supporters to challenge the results to the bitter end.

The year, of course, is 1876. 

For those who believe that history began the day they bought their first copy of Time Magazine (i.e., 99.9 percent of the mainstream media), the electoral morass in America this week comes as a jaw-dropping surprise. But we have been here before. In fact, it's even fair to say that this is where we came in. For the 1876 election changed American politics in far-reaching ways, whose effects could be seen still playing themselves out in the disputed precincts of Florida on Tuesday.

And, sad to say, the results of the current imbroglio will very likely be the same as in 1876: weeks of anguished uncertainty, rancor, court fights and accusations ending in a backroom political deal between right-wing Republicans and a few conservative Democrats to give the presidency to the second-place candidate by a single electoral vote.

The victory of runner-up Republican Rutherford B. Hayes (known forever after as "Rutherfraud") of Ohio over New York's Samuel J. Tilden sealed the fate of America's blacks as second-class citizens. After months of confusion over the returns from Florida and two other Southern states, the radical Republicans in Congress, having failed in 1868 to impeach Tennessee Democrat Andrew Johnson (who, like Bill Clinton, was heavily backed by the newly enfranchised black voters), struck a deal with conservative Democrats. They would end federal efforts to enforce civil rights in the defeated Confederate states and give back local control to the ex-slaveowners in exchange for their support of Hayes.

The deal was done; a special commission was set up to analyze the disputed votes, and, lo and behold, the returns for Hayes were approved. He carried Florida and thus became president by one electoral vote. Black voting rights were then rolled back, hampered or openly abolished as the old Confederates regained control.

Now, 124 years later, the election of runner-up Republican George W. Bush hangs on the outcome of the vote in Florida, where at least 20,000 black votes were thrown out, uncounted, because of alleged ballot "mistakes," where hundreds of black university students were prevented from voting in Miami, and where armed state police set up "security roadblocks" in some black majority areas, in a bristling show of intimidation: all lingering legacies of that 1876 sweetheart deal. And if Bush's narrow, tainted lead is upheld - by courts, Congress or "special commission" - he, like Rutherfraud, will have become president by a single electoral vote.

It seems history doesn't always just repeat; sometimes it positively regurgitates itself.



Comrades in Arms 


Bush's possible election is meant to usher in a "new era of bipartisanship," as the unelected president-elect likes to say. It was no doubt in this new spirit of sweetness and light between the parties that Republican Sen. Trent Lott, the Senate majority leader, publicly prayed for the death of one of his new colleagues on election night: Hillary Clinton.


Brother Lott seemed a tad upset to learn that he will soon be joined in the august temple of democracy by that uppity little bit of stuff, late of the White House, now from New York. After Clinton won a resounding victory at the polls, Lott - yet another worthy heir to that 1876 deal - put on a most gracious display of warm bipartisanship at his Mississippi headquarters, The Associated Press reports.

"I tell you one thing," he told reporters, "when this Hillary gets to the Senate - if she does; maybe lightning will strike and she won't - she'll be only one of 100, and we won't let her forget it!" 

That's all well and good, Trent - but a bit too uncertain. For unlike certain unelected presidents-elect we could name, Senator-elect Clinton knows enough to come in out of the rain. So instead of something iffy like a lightning strike, maybe you should just have a couple of the boys tamper with the brakes on her car or something.



Pen Pal 


In the event that the regurgitated, runner-up Republican candidate does become president, he will make history: not only as just the fourth loser to be awarded the position, or as just the second son of a former president to take office (following John Quincy Adams - who, as it happened, was also the second-place finisher in his race). No, George W. will stand alone in history as the very first convicted criminal ever (sort-of) elected president of the United States.


Bush is actually a repeat offender, having been nicked three times (theft, vandalism and that famous D-Dubya-I). It's the kind of record that, had he been born of a slightly more dusky hue, or of less exalted social station, might well have landed him a life term in prison under the wonderful "three strikes and you're out" rule of American jurisprudence.

But it looks like pinstripes, not prison stripes, for the First Frat Boy as he smirks his way to the White House - not by the will of the people, of course, but by virtue of the Electoral College contraption rigged up by the founding oligarchs to keep the riff-raff from interfering too much with their betters.

Democracy in action! Ya gotta love it!

TITLE: MEDIA WATCH
AUTHOR: By Grigory Bochkaryov
TEXT: Putin's Safety Is a Tool for Handling Press 

ON the morning of Nov. 7, a large motorcade roared past the window of my office here in Rostov-on-Don with lights flashing and sirens blaring. Two buses full of journalists were being accompanied by a police escort to cover an event featuring visiting President Vla di mir Putin. Watching my colleagues fly by, I was struck by the thought of how much things have changed in the last year or so.


It all started a couple of weeks ago when the governor's press service notified the local media that any journalists seeking accreditation to cover the upcoming presidential visit must submit applications (complete with photographs) immediately. But this notice warned straightaway that not everyone who applied would be accredited. It's not our fault, the press office said. "All final decisions will be made by the press office of the president."

And, indeed, by no means did all journalists receive accreditation. However, I certainly have my doubts about the innocence of the governor's press office. Although the head of Putin's press service, Irina Khlestova, bravely took responsibility when she was asked about this matter, she seemed hesitant and contradicted herself when trying to explain the reasons why some journalists were refused.

At that moment, the governor's press secretary, Leonid Kovalyov, stepped in to help her out. Kovalyov explained, for instance, that Sergei Bondarenko, correspondent for Radio Rostov, had been denied because it was felt that he might submit a story to the BBC. "We didn't give accreditation to any foreign journalists, so why should we make an exception for the BBC?" Khlestova asked.

Bondarenko then asked Khlestova, "Do you realize that you are violating Russian law by not accrediting journalists?" "Yes," she answered. "But the president's security program demands this."

She then turned to one of my colleagues from the Mozaika information agency and said, "You, for instance, wanted to attend the president's public appearance at the Don Public Library. But, you know, the room there is quite small and the president's security people won't allow many people." 

"But what about the meeting at the Mayor's Office?" my colleague asked. "They have a huge conference hall, and journalists there aren't going to bother anyone."

"Well, you know, we have developed a certain rule," Khlestova explained. "We only accredit as many local journalists as national journalists."

"So why were two journalists from an unregistered newspaper granted accreditation?" asked another reporter. He was referring to a mysterious newspaper called The Southern Federal District.

Khlestova just stood there in stunned silence as if she didn't have any idea what the reporter was talking about. Then Kovalyov quickly stepped in: "You know, you have to help people out. They are just getting their start, after all."

On the eve of the visit, Khlestova met with accredited journalists for last-minute instructions in the office of the governor's press service. Unfortunately I can't convey everything that she had to say at the meeting, but all of it was related to the president's security. "Don't pay any attention to the president's personal photographer or cameraman," she said. "Follow all written and oral instructions to the letter. Otherwise you may end up face down on the ground or even be shot."

I guess that is the way our president intends to achieve "information security."


Grigory Bochkaryov is a journalist for the Mozaika Information Agency in Rostov-on-Don, for which he wrote this comment.

TITLE: Foreign Policy Will Suffer With a Divided Congress
AUTHOR: By Walter Russell Mead
TEXT: AS the world awaits the outcome of the U.S. presidential election, few have had the time or the emotional energy to look down the road at the longer-term implications of one of the closest electoral contests in U.S. history. At a time when Americans were largely obsessed by the twists and turns of the domestic political soap opera, fewer still were looking at the consequences of the electoral deadlock for foreign policy.


Yet, there will be consequences, and they could be severe. The next four years are shaping up as a time of serious testing for U.S. foreign policy, and a divided Congress and a president with a weak mandate, at best, will find it extremely difficult to navigate the shoals lying ahead.

It won't be the big, obvious challenges that cause the real problems. If Saddam Hussein invades Kuwait again, the United States will once more go to the defense of the oil-rich sheikdom. If China attacks Taiwan, the United States will appropriately respond. Both parties are likely to cling to the long-standing policy of nudging the Palestinians to make a deal with Israel. And U.S. influence in Russia will remain weak.

Consider the Andean region, seemingly bent on disproving all the optimists who just a few years ago predicted that an era of stable democracy was dawning in Latin America. Colombian drug lords and Marxist guerrillas - from a U.S. point of view, the alliance from hell - have fought that country's corrupt and sometimes ill-disciplined armed forces to a standstill, and the violence is spilling over into Brazil, Venezuela, Ecuador and the home of the Panama Canal.

Peru, meanwhile, is flirting with a return to its banana-republic days, Ecuador is closer to political and social meltdown and the president of Venezuela, one of the largest sources of U.S. oil imports, is literally crooning love songs with Fidel Castro on the radio and expounding vague but, from the standpoint of foreign investors, alarming theories of what he calls a "Bolivarian revolution."

Expanding NAFTA or pushing harder to establish a free trade area of the Americas are proposals most of the Washington establishment think have the best chances for stabilizing the region but, again, it is hard to see a politically enfeebled president and a divided Congress mustering the determination to move far down either road.

The news isn't all bleak. In some cases, Republicans and Democrats are more united than their rhetoric suggests. Candidate George W. Bush may have downplayed environmental concerns and attacked the Kyoto Protocol, but world public opinion is worried enough about global warming that, like it or not, the U.S. has to be part of diplomatic efforts to address it. Ditto on AIDS. The humanitarian and economic consequences of the HIV-AIDS epidemic are severe enough that both common decency and self-interest will compel the U.S. to take part in efforts to halt the spread of the disease and to treat those who suffer from it.

The real danger may be that the two parties will hold foreign policy hostage in an atmosphere of partisan bickering. If Congress settles down into trench warfare, the ability of the United States to conduct effective foreign policy could be seriously hampered. Fierce partisans would hold up the confirmation of key officials and ambassadors, block votes on foreign-assistance packages and use all means that Congress possesses to harass and annoy a president lacking a mandate.

Weak leadership also means trouble. When hot-headed domestic lobbies introduce bills with serious foreign-policy consequences, a weak president, combined with a weak congressional leadership, may not be able to block the pander.

What can be done to limit the damage? The answer is relatively simple: The next president must not only govern from the center, he will have to appoint leading representatives of the opposition party to key foreign-policy posts.

This has happened before. The current secretary of defense is a Republican. President George Bush found key places for Democrats in his administration, notably Bernard Aronson, who as assistant secretary of state for inter-American affairs helped win Democratic support for a process that ended the political wars in Washington and the shooting wars in Central America. By working closely with Democrats in Congress, Aronson was able to break the deadlock over issues like aid to the Contras.

Making bipartisan appointments does not mean retreating on questions of principle. There are Democrats, like former Georgia Sen. Sam Nunn, whose hard-line positions on national-security issues please many Republicans.

Presidents with weak mandates can run a strong foreign policy. But they can do so only with help from their political opponents. If the next president remembers this, he will be able to provide effective leadership for the nation no matter how narrow his margin of victory or how many recounts it took to get him into the White House.


Walter Russell Mead is a Senior Fellow at the Council on Foreign Relations and the Author of "Mortal Splendor: The American Empire in Transition." He contributed this comment to the Los Angeles Times.

TITLE: Austrian Tunnel Fire Claims 159 Lives
AUTHOR: By Geir Moulson
PUBLISHER: The Associated Press
TEXT: KAPRUN, Austria - Recovery teams on Monday removed the first bodies of at least 159 people killed after a cable car caught fire as it pulled them through a mountain tunnel toward their ski destination. 


The tunnel finally became free of smoke Sunday, more than a day after the fire that destroyed the Kitzsteinhorn cable car. 

Rescuers entered from the top end to avoid any risk of the car slipping downhill. What they found exposed them to what Salzburg provincial Gov. Franz Schausberger called "a heavy psychological toll."

"It must be said that the salvage operation is extremely difficult," Schausberger told reporters. "It also must be said that it won't be possible to identify the victims by traditional means."

The cause of the fire remained unclear. "We're investigating as far as the cause is concerned - really in every direction," said Franz Lang, chief of Salzburg's criminal police. 

Authorities also were uncertain about the total number of people who boarded the cable car Saturday morning, but said the identities of 159 victims were near certain. Among them were 52 Austrians; 42 Germans; 10 Japanese; eight Americans and three Slovenes. Authorities had names but no nationalities for the remaining 44 missing people. It was believed that the car, with a capacity of 180 people, was full. 

Investigators reported that 29 bodies had been recovered and had begun to arrive in Salzburg to a morgue where forensics experts could do DNA tests. 

Lang said that large parts of the car had melted, making it difficult to separate the bodies from the car itself. 

It is unclear how long DNA tests could take. Under the best of circumstances, tests would take three to four days per person, Lang said. Many of the bodies are charred beyond recognition. 

Officials said 12 people saved themselves from the cable car after they broke its window with a ski. Six people who had been waiting at the top of the tunnel also survived. 

One survivor, Gerhard Hanneseder from the town Gallspach in Upper Austria, told state radio that smoke entered the cabin of the cable car soon after it began its ascent. After the car entered the tunnel, Hanneseder noticed the fire. 

"Then panic spread. We tried desperately to get the doors open. The panic got ever worse. In the meantime the entire cabin was on fire," he said. "By chance, a few of the passengers, using ski boots or ski poles or other implements tried to smash the Plexiglas windows. 

Volunteers had drawn up lists with names of the approximately 2,500 people who had made it up to the glacier slope before the fire and who subsequently returned to their accommodations. 

The disaster was believed to be the worst involving skiers being transported by cable-pulled car to skiing slopes. The death toll surpassed the number killed at the Italian ski resort of Cavalese in 1976, when 42 people died after a cable carrying suspended cable cars snapped.

TITLE: Election Battle Goes to Courts
AUTHOR: By Jane Sutton
PUBLISHER: Reuters
TEXT: MIAMI, Florida - The U.S. presidential battle was set to move into Florida's courts on Monday with lawsuits and disputed votes dragging out the electoral process to choose the United States' 43rd president.


A federal judge will hear Monday a request by the campaign of Republican George W. Bush to halt hand recounts in four Florida counties, and a state judge was to hear a case by supporters of Al Gore requesting a new poll with a less confusing ballot in Palm Beach County.

Bush, who currently holds a razor-thin lead in Florida, and Al Gore were locked in a struggle for the state's 25 Electoral College votes, which will determine who wins the presidency as neither candidate can reach the 270 votes required without them.

Democrats have asked for hand recounts in four Democratic-leaning counties so officials can examine each ballot to decide the voter's intention.

In some cases, voters did not completely punch holes in their ballots, making them unreadable by machine. The officials must decide if incompletely punched holes should count.

Texas Gov. Bush launched a legal bid on Saturday to halt the hand count, arguing that Florida's law governing the process is so vague that it deprives Florida citizens of their constitutional right to have all votes counted equally.

The law leaves it up to each county's three-member canvassing board to decide how and whether to count ballots that could not be read by machines, including punch-card ballots in which the holes were not fully perforated.

Bush's lawsuit said the hand-counting "is not guided by any standards, much less standards that ensure fair and equal treatment of all votes."

To win an injunction halting the recounts, the Republicans would have to show that irreparable harm would occur if they continued. Whatever the ruling, the decision could be appealed, possibly all the way to the U.S. Supreme Court.

In the state court in Palm Beach County, Circuit Judge Kathleen Kroll, elected without opposition in a nonpartisan race, will decide whether the county's "butterfly" ballot design was illegal, and whether a new vote should be ordered.

Some Palm Beach voters alleged in a lawsuit that the ballot confused them and thousands of others into voting mistakenly for Reform Party candidate Pat Buchanan instead of Gore.

Democrats said 19,000 votes in the county were invalidated because voters double-punched their cards, voting for both Gore and Buchanan. The ballot used in Palm Beach County was the only design of its type used in Florida.

TITLE: Zenit Wins Last Game, But Misses Out on UEFA Cup Again
AUTHOR: By Christopher Hamilton
PUBLISHER: Special to The St. Petersburg Times
TEXT: Zenit St. Petersburg closed the soccer season posting a 3-1 win over Rotor Sunday night at Petrovsky Stadium, their first win over the Volgograd side in the Russian Premier Division championship.


It was the kind of match home fans are familiar with. In the final game of the season the team needed a win to keep its mathematical hopes of qualifying for the UEFA Cup alive, and they knew they had to break the curse of Volgograd - a team they have only defeated in Russian Cup competitions, never the championship. Then fans would have to hope that Cheromorets would lose to cellar dweller Lokomotiv Nizhny Novogord.

Zenit came out strong as captain Andrei Kobelev rushed the Rotor goal area in the opening minute, the first sign of the dominating play that Zenit would show in the first part of the game. As Rotor finally appeared to be getting back in the game Zenit took over, scoring three goals in the space of 12 minutes to run away with the game.

Kobelev first took the wind out of Rotor's sails by scoring in the 22nd minute. Kobelev kicked the ball on a bounce from just outside the penalty area and directed the ball in just below the crossbar and over visiting goalkeeper Andrei Chichkin.

Petrovsky's imfamous sector 13 lit up red and green and hardcore Zenit supporters from the Nevsky Front and Jolly Nevsky lit their half of the stadium up with flares and smoke bombs.

Kobelev worked the ball up the left flank and with some fancy footwork, beat two Rotor defensemen and delivered the ball to Maxim Demenko, waiting just outside the goal area, who headed the ball in for a 2-0 lead in the 30th minute.

Kobelev continued to work his magic making a pass to Boris Gorovoi who performed what seemed to be an instant reply of Kobelev's first goal, arcing the ball in just below the cross bar from outside the penalty area in the 34th minute.

Maxim Bondyarenko scored Rotor's lone goal in the match on a breakaway. Zenit keeper Vyacheslav Malefeyev couldn't cover Bondyarenko's kick and let in a weak goal in the 41st minute.

Holding on to a 3-1 lead, the fans became more interested in the regular announcements in the Cheromorets match, which were repeatedly reported as a 0-0 draw, an outcome that would move Zenit into 6th place and the Euro-zone. 

But the announcements only served to get everyone's hopes up as Zenit's so-close-yet-so-far disappointment was delivered with Cheromorets' 2-0 win over Nizhny Novgorod. For the second year in a row, Zenit would just miss out on qualifying for the UEFA Cup.

"Positions in the standings need to be earned. We missed our chance when we didn't win again Voronezh last week, and really earlier when we lost to Lokomotiv Moscow at home," said Zenit head coach Yury Morozov.

"In our season finale we really wanted to say good-bye to our fans with a strong positive game and I am really happy with today's result," he concluded.

While Zenit once again qualified for UEFA's baby competition, the Intertoto Cup, both Morozov and club president Vitaly Mutko have yet to commit to participating.

"We most likely will participate," Morozov said. "This summer we got some great experience when most of the other clubs didn't have anything to do. We have already received a draft of next year's [Russian Premier Division] schedule and there are practically no conflicts with the Intertoto schedule. But the final decision will be made next week by the team's board of directors."

When the board meets on Nov. 31 they will also discuss player contracts. Zenit already announced that it has dropped Roman Berezovsky, Andrei Kondrashev, and Denis Ugarov.



q

MOSCOW - Russia's Premier Division season finished in an uproar on Sunday, with one match ending in protests after a controversial penalty and another seeing a top coach quit after his team was beaten.


There was chaos in Moscow at the end of a game between Torpedo Moscow and Premier Division newcomers Anji Makhachkala to decide who finished third in the table.

Anji players walked off the pitch after referee Yuri Klyuchnikov awarded a dubious penalty against their team in stoppage time with the score at 1-1.

After a short delay, Anji coaches persuaded their players to change their minds and return.

Andrei Gashkin scored from the spot to give Torpedo victory and third place in the table - its first top-three finish since 1991, denying Anji the privilege in its first season in the top flight.

With Spartak Moscow champions with 70 points and Lokomotiv Moscow second with 62, Torpedo took third place with 55 while Anji stayed fourth with 52.

After the match, furious Anji officials said they would file a protest.

There was drama too in Ramenskoye, where Dinamo Moscow also had a chance to take third place - by beating local side Saturn if the Torpedo-Anji match ended in a draw.

Dinamo coach Valery Gazzayev announced he was quitting after his side lost 1-0 to a 75th-minute strike by Andrei Movsesyan.

It was the second time in seven years that Gazzayev, who led Alania Vladikavkaz to the Russian title in 1995, had decided to leave Dinamo following a bitter defeat.

In Vladikavkaz, Spartak, who had already clinched a fifth straight league crown last week, followed a morale-boosting 1-0 win over European Cup holders Real Madrid in the Champions League with a 2-1 away victory over Alania.

Belarus international Vasily Baranov and newcomer Alexander Shchipkov gave Spartak a 2-0 lead in the first half. Defender Igor Tarlovsky pulled one back for Alania after the interval.

CSKA edged city rivals Lokomotiv 4-3 in an entertaining Moscow derby, which also meant little to either side.

Lokomotiv had secured second place for the second straight season last week while CSKA, third last year, was eliminated long ago from another top-three finish after a poor start. 


- Reuters

TITLE: South Africans Outraged By Racist Police Brutality
AUTHOR: By Susanna Loof
PUBLISHER: The Associated Press
TEXT: JOHANNESBURG, South Africa - A videotape showing white police officers setting dogs on three black men, beating them and shouting racial slurs has outraged a nation ashamed of its apartheid past and sharpened debate on the pace of change. 


The videotape, broadcast Tuesday on state television, apparently was filmed two years ago by one of the policemen during the attack. The officers said the attack was staged as a training exercise for the dogs. News reports said the officers later showed the tape for entertainment. 

Since the broad cast, South Af ricans have flooded newspapers with letters expressing outrage, some calling for the death penalty to be reinstated. The story has dominated South Africa's media, even overshadowing the undecided U.S. election. 

Although most South Africans - black and white - have reacted by demanding tough measures to root out police racism, a few wrote to newspapers to support the policemen, underlining the deep divisions that remain in post-apartheid South Africa. 

The six officers were charged with attempted murder Wednesday and remanded into custody until Nov. 17, when they are scheduled for a bail hearing. 

Sally de Beer, a spokeswoman for Police Commissioner Jackie Selebi, said the black men in the attack were accused of being illegal immigrants. The attack took place northeast of Johannesburg, he said. 

The videotape showed the officers punching the men when they tried to defend themselves. The bleeding victims, their clothes in tatters from the dog attacks, were then forced to stand in a line as some of the officers hit them. 

Zizamele Cebekhulu, president of the Police and Prisoners Civil Rights Union, said racism had been institutionalized in the police service and it is very far from ending. 

Although 58 percent of police officers are black, according to official statistics, specialized squads - such as dog units - remain largely white, Cebekhulu said. 

De Beer said there are programs to deal with racism in the police force and that Selebi, after seeing the videotape, is considering more. 

Tuesday's broadcast comes four months after two white police officers received suspended sentences for beating black hijacking suspects and setting a dog on them. The British Broadcast Corp. aired footage of the attack last year. 

Such brutality, common during apartheid years, still occurs regularly, Cebekhulu said. Amnesty International said Friday that it "has continued to receive corroborated evidence ... of the torture and severe ill-treatment of individuals in the custody of law enforcement agents."

Jody Kollapen, a member of South Africa's Human Rights Commission, said the attack indicates the country's hopes of quickly turning into a "Rainbow Nation," where people of all colors live in harmony, were too high.

TITLE: Barat, Arafat Stall on the Details
AUTHOR: By Ramit Plushnick-Masti
PUBLISHER: Reuters
TEXT: JERUSALEM - An adviser to Israeli Prime Minister Ehud Barak said on Monday Palestinian President Yasser Arafat was still interested in peace despite nearly seven weeks of violence that have wrecked negotiating efforts.


An aide to Arafat said the Palestinian leader was ready for any genuine peace process, but accused Israel of seeking a military solution, describing Barak as the arch-foe of peace.

The violence has killed at least 206 people, most of them Palestinians, and crippled a seven-year-old peace process. But streets were relatively calm on Monday. Israeli troops skirmished with Palestinian stone-throwers in two parts of the Gaza Strip and in the West Bank towns of Hebron and Bethlehem, according to Israel radio. No casualties were reported.

Danny Yatom, Barak's security adviser, said it was not clear if Arafat would favor holding a summit with U.S. President Bill Clinton and Barak, and reiterated that the Israeli leader wanted peace talks to resume only if the violence decreases.

"I don't know if Arafat is prepared for a [three-way] meeting or not. I know that Arafat is interested in continuing on the path of the peace process, he prefers the path of the peace process," Yatom said in a radio interview after Clinton's talks with the Israeli prime minister in Washington on Sunday. 

"Barak does not see room to start or to renew peace negotiations in the shadow of this level of violence," he added.

Ahmed Abdel-Rahman said there could be no three-way summit unless Israel changed its policy towards the Palestinians.

"Before any meeting, we demand that Israel recognize that a peace settlement will lead to implementation of UN Security Council resolutions and recognize the right of Palestinians to establish their state with Jerusalem as its capital," he said.

"What's happening now in Israel is that a military government has run over, with its tanks, the political solution," he told Reuters. "Barak is the arch-foe to peace. We won't be partners in a solution that is based on dictation and military force."

Barak, who has questioned Arafat's credentials as a "partner for peace," broke off already deadlocked peace talks three weeks ago, accusing Palestinians of failing to end violence.

Barak said only that he and Clinton had discussed the importance of ending the violence and implementing a truce deal forged with the Palestinians at a summit in Egypt last month.

"Israel strives for peace but a peace that will be reached around the negotiating table rather than through imposing of the will of one side on the other or through international activities," Barak told reporters after the meeting.

TITLE: WORLD WATCH
TEXT: Land Reform Illegal


HARARE, Zimbabwe (AP) - The government will ignore a Supreme Court ruling that declares its land reform program illegal, a government minister said Saturday. 

The Supreme Court said Friday the government has failed to observe legal steps required by laws surrounding the land reform program, which aims to nationalize 3,000 white-owned farms by year's end for resettlement of landless blacks. 

Zimbabwe's Land and Agriculture Minister Joseph Made told state radio that was inaccurate. "We have been doing that all along," he said. 

Made said the government would continue its program despite the court's ruling. 

The court also ordered police to end ruling party militants' illegal occupations of 1,700 white-owned farms. Police have ignored previous court orders to end the occupations. 



Ebola Virus Spreads


KAMPALA, Uganda (AP) - Despite efforts to contain an Ebola outbreak in Uganda, a case of the deadly virus has been confirmed in a third district, a health official said Sunday. 

The new case was found in Masindi, 180 kilometers northwest of Kampala, the capital, said Francis Omaswa, director general of Uganda's health services. Omaswa gave no details except to say that a man diagnosed with Ebola had been admitted to a local hospital. 

Another Ebola victim also died in Gulu, 360 kilometers north of the capital, where the outbreak was first confirmed on Oct. 14, he said. That brings the death toll in the outbreak to 106. 



Estrada Faces Charges


MANILA, Philippines (AP) - For the first time in Philippines history, the House has sent impeachment charges against the president to the Senate for trial, charging Joseph Estrada with taking millions of dollars in illegal payoffs. 

There was no vote by the full House, as had been widely expected. Speaker Manuel Villar said it was unnecessary because more than the required one-third of the members signed a petition endorsing impeachment. 

Opposition congressmen prayed and lit candles near a Philippine flag before walking into the House chamber. They wore peach-colored ribbons to signify their struggle to impeach Estrada. 

Analysts say Estrada barely has enough support to remain in office. Two-thirds of the Senate must vote for removal. Two of the 24 Senate seats are vacant. 

The impeachment process could take months, and opposition groups have demanded Estrada resign to spare an economic crisis. 



Germany Sues U.S.


THE HAGUE, The Netherlands (AP) - Germany on Monday condemned the death penalty as it opened its World Court lawsuit against the United States over the execution of two German citizens last year in Arizona. 

"This form of punishment cannot be justified ethically or legally," said Gerhard Westdickenberg, the German agent at the supreme UN judicial body. 

Nevertheless, the agent stressed that Germany's lawsuit over the case of Walter and Karl LaGrand was not intended to challenge the right of the United States to exercise the death penalty in its own jurisdiction. 

Rather, he said, it is about the right of German and other foreign nationals in U.S. jails to consular representation, which could keep them off death row. 

Westdickenberg noted that an Amnesty International human rights report found that 87 foreign citizens have been condemned to death in America since June 2000. 



'Spider' Spies Acquitted 


BELGRADE, Yugoslavia (AP) - A Belgrade court Monday acquitted a group of alleged mercenaries accused of spying for France and wanting to kill former Yugoslav president Slobodan Milosevic. 

The five-member group, known as Pauk - the Serbian word for Spider - was arrested a year ago and charged with espionage during the NATO bombing campaign. They also were accused of killing two unidentified Kosovo Albanians. 

The formal charges made no mention of the alleged assassination plot against Milosevic. But former Yugoslav information minister Goran Matic had publicly accused the group of wanting to kill Milosevic on the instruction of France's intelligence service, something France has denied. 

Chief Judge Zoran Savic said the group was acquitted because no proof was provided for their alleged espionage and terrorism activities. 



Death Toll Rises 


MEXICO CITY (AP) - The death toll from last month's fire at a glitzy Mexico City nightclub rose to 21 Saturday after a man hospitalized with severe burns died, the government news agency Notimex reported. 

Sparked by short circuits in the light booth, the blaze began before dawn Oct. 20 and quickly spread through the cavernous Lobohombo nightclub - fed partly by flammable decorations that created what investigators described as a "rain of fire."

Many of the dead were located near the club's emergency exit, which was locked with a chain, authorities have said. 

In addition to having only one available exit, the club lacked smoke detectors, a sufficient number of fire extinguishers and a sprinkler system. The building had a faulty electrical system and its fire hydrant wasn't connected to a water supply. 



Bosnia Vote Indecisive 


SARAJEVO, Bosnia (WP) - Bosnian voters failed to grant a clear mandate to a pro-Western, multiethnic, political party in key national and state elections, according to a preliminary vote tally Sunday, confounding the hopes of Western officials for an outcome that would promote political stability. 

But the early results from Saturday's vote also did not rule out the possibility that the Social Democratic Party, led by Zlatko Lagumdzija, a Muslim, could form a coalition to gain a controlling position in Bosnia's national and state parliaments. Such a move could effectively end the lockhold of ethnic nationalists on political power for the first time in nearly a decade. 

The Social Democrats drew most of their support from Muslim voters. Many ethnic Serbs and Croats once again supported the hardline, nationalist parties that have long ruled in the separate territory, which each group dominates.