SOURCE: The St. Petersburg Times
DATE: Issue #729 (96), Tuesday, December 11, 2001
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TITLE: Germans Lend a Helping Hand
AUTHOR: By Irina Titova
PUBLISHER: Staff Writer
TEXT: PAVLOVSK, Leningrad Oblast - "My main problem is that I have only two hands ... " said 20-year-old Judith Hampel from Dresden, Ger many, as she held 14 year-old Mi sha, wrapped in a thin woolen blanket, in her arms.
Despite his age, Misha looks no older than five. He can neither walk nor speak. He looks up trustingly at Hampel as she strokes his hair and speaks to him soothingly in German.
"I'm sorry that I can't give more attention to all the children," Hampel adds, as she huddles with Misha on the floor in the orphanage playroom.
Hampel is one of six German volunteers who arrived in St. Petersburg in September to work at the St. Petersburg Orphanage for the Mentally Disabled in an assistance program set up by the German charity Perspektives.
Each morning, Hampel and the others wake up at 6:30 a.m. to make the suburban train that brings them to Pavlovsk, a suburb about 30 kilometers south of the city. They then spend the day working at the orphanage, which is home to 150 children with severe mental and physical disabilities. Children like Misha.
Perspektives was founded in St. Petersburg in 1992 and is financed by private German charities, including the Kindernothilfe fund. Initially created to help homeless children as one of the least protected elements of society, the organization later turned its focus to aiding mentally disabled children and adults.
"We just saw that these people are in no less need of additional help here," said Margarita von der Borch, the German director of Perspektives.
Over the last nine years, Perspektives has brought more than 50 German volunteers through its projects. They normally come for one-year stints, and this year the organization is hosting 17 in all.
In 1998, the program set up a permanent local office and began attracting Russian volunteers as well. It now has more than 15 local volunteers working in its programs.
In addition to its assistance to the Pav lovsk orphanage, Perspektives works with a home for mentally and physically disabled adults in Peterhof and provides assistance to local families with handicapped children.
The young Germans volunteer for many reasons. Some come for a year after finishing school, to get some life experience before entering university.
Christine Kuhn, 18, and Dortie Grieb, 21, who also work at the orphanage, plan to study medicine and thought that this experience would help them understand their future profession better. Theresia Linsler,19, plans to become a teacher for handicapped children.
Hampel was motivated primarily out of an interest in Russia.
"People in the West don't know much about Russia. They mostly learn about America. I thought that Russia is such a huge country, I should know more about it," she said.
Benjamin Bidder, 21, choose to work at Perspektives as an alternative for serving in the German Army.
Bidder said he never particularly wanted to go to Russia, as he always thought of eastern Europe as gloomy, gray and boring. He had been hoping to be assigned to Israel or Spain.
"However, although I found myself here just by chance, I realized that this is exactly the place where life is anything but boring. It is so different from what we have in [western] Europe, and there are so many things to do here," Bidder said.
Now Bidder works with handicapped teenagers, helping teach them to walk and feed themselves, as well as teaching them to count and the letters of the Russian alphabet. He said that interaction with disabled children frightened him at first, because it was something absolutely new to him.
"Then I realized that these are people just like us, only with different possibilities," he said.
Kuhn has also had her horizons broadened by her experiences at the orphanage.
"The hardest thing for me here is that children die," she said. Several days ago, one of the children she worked with died.
Von der Borch said that the Germans became interested in this particular sphere of activity because they believed that the Russian social system does not pay adequate attention to the needs of the disabled.
"In Germany, most handicapped people are able to live fairly independently in their own apartments, using wheelchairs, special lifts and other tools. Russia lacks these tools, which would make such a life for the handicapped a real possibility," Hampel said.
Liza Kudryavtseva, 26, is a Russian volunteer at Perspektives who recently returned from working on an exchange program in Germany. She also noted that conditions for the handicapped differ dramatically between the two countries.
She said that German disabled children always have disposable diapers, while in Pavlovsk, only those children who cannot move at all have such a luxury.
Perspektives provides a wide range of humanitarian assistance, including food and clothing, to the Pavlovsk orphanage. The organization has also set up a playroom there, as well as a sensory-development room. The organization also helps with repairs and maintenance for the decaying building.
Staff at the orphanage are grateful for all the help, particularly for the presence of the volunteers.
"Now I am not alone taking care of the children," said Tamara Smirnova, a nurse who previously looked after 20 virtually immobile children by herself. "We share both the work and the responsibility."
Linsler is visibly moved as she recalls a conversation she had with two elderly Russian women one morning on the train to work.
"They heard me speaking German and asked me why I was in Russia. When I told them, they said, 'Thank you for coming and helping our children.'"
TITLE: Military Serious About Quotas
AUTHOR: By Nabi Abdullaev
PUBLISHER: Staff Writer
TEXT: MOSCOW - Timur Botagov, 19, was prodded awake one morning by the barrel of a Kalashnikov machine gun. Opening his eyes, he saw two men in police uniforms grinning down at him.
"Get up. You're coming with us," one of them said.
Botagov wasn't allowed to wash his face or even grab a bite to eat before being whisked away in a police jeep. He only managed to slip his passport and student pass into his pocket.
Six weeks have passed since that late October morning and Botagov, a student at the Moscow Institute of Radioelectronics, still isn't back with his family.
Botagov is one of dozens of young men who have been rounded up in recent weeks as part of a joint operation by the Moscow police and the city's military-enlistment offices aimed at fulfilling their quota for the ongoing army draft.
The draft began Oct. 1 and will last until the end of December. Critics say this winter's roundup is reaching outrageous proportions.
"Rounding up army dodgers is standard police procedure in Moscow, but in this draft it has reached a really ugly extent," said Anna Belyakova, a lawyer for the Union of Soldiers' Mothers Committee. "In many cases, boys who have official waivers are forcibly called up."
Since the beginning of December, the Moscow Soldiers' Mothers Committee has registered 15 complaints from parents of conscripts who were forcibly brought to enlistment offices, or voenkomats, from their homes or after being rounded up in the metro. Six of them were full-time university students who can't legally be called up to military service.
"These cases are only the tip of the iceberg because often parents don't know how to react," Belyakova said.
Under the law, police may intervene in rounding up draftees only when a conscript fails to appear before a voenkomat after being handed the call-up notice without a reasonable excuse.
However, the law is often violated by police and voenkomats, desperate to collect the requested number of men for the draft, Belyakova said.
Furthermore, conscription itself is a widely detested practice that President Vladimir Putin has promised to end within the next decade as Russia moves to build a professional army.
But Putin's promise - which echoed a similar pledge made about five years ago by President Boris Yeltsin - is of little comfort to Inna Oleinichuk, whose son Alexei, 21, was recently rounded up.
"We found the call-up notice signed by our son on Nov. 1 - the day when he was taken from us - in the pocket of his jacket that he threw out of the bus window when he was transferred from the voenkomat to the quarantine department," Oleinichuk said. "It means they forced him to sign it in the voenkomat."
Alexei Oleinichuk, a law student, was taken to a voenkomat by a district police officer who said some formalities needed to be straightened out. Several hours later, Oleinichuk called his mother and told her that he was being sent to the army.
His parents rushed to the city enlistment office and waited there for news of their son until late in the evening.
"Suddenly, the gates were flung open and a bus with six boys, including our Alexei, drove out of the voenkomat's yard," Oleinichuk said. "We followed them in our car to the quarantine department in Tushino. At the corner, we approached the bus, and the boys were throwing their passports, watches, gold chains and mobile phones out of the bus window, asking us to pass them on to their families and tell them what was happening."
Asked to comment on such raids at a recent news conference, Vasily Krasnogorsky, the head of the Moscow military-enlistment office, said questions should be directed to the police.
"The relevant authorities take care about following the law, and it is not inconceivable to me that they bother some people and remind them about the necessity of military duty," he said.
For its part, the Moscow police deny any wrongdoing and insist no raids have taken place in the metro.
"These raids in the metro were probably against skinheads," a spokes person for the city police said by telephone. "When we get information about their actions in Moscow, we have to check plenty of young males."
He denied that the police were behaving improperly in forcibly detaining conscripts in their homes.
"It is not the police who decide to bring a person to a voenkomat but the voenkomat itself," the spokesperson said. "Police officers are just attached to the raid group, which is headed by the voenkomat officer."
He said the arrangement was allowed under a decree issued by Mos cow Mayor Yury Luzhkov in March 2000 that stipulates police involvement in enforcing conscripts' attendance at voenkomats.
City prosecutors claim they know nothing about the raids.
"We didn't authorize any police moves," said Olga Trushkova, a city prosecutor overseeing compliance with the law in social issues.
However, the police spokesperson said that when a persistent dodger is caught, he is usually sent to the army without routine checks.
Diederik Lohman, director of the Mos cow office of Human Rights Watch, said that under the law, the authorities have the right to forcibly conscript men who try to dodge military service.
"But those forcibly drafted are practically stripped of their right to appeal the conscript decision," he said.
After turning 18, Russian citizens must uphold their own rights. Not until a conscript is locked in a voenkomat and physically unable to file any legal complaint can his parents do anything to help him.
Defending his rights gets harder when the conscript lands in a military unit.
"As soon as the conscript is there, he is on military service and has to obey orders," said Tatiana Kuznetsova, chairperson of the Mos cow Soldiers' Mothers Committee. "And hardly any commander will like his subordinates stepping up with such an initiative."
She added that forcibly taken conscripts are usually sent to remote locations such as the Far East and eastern Siberia.
Timur Botagov was lucky enough to be sent to Tula. His commander was perplexed to find a full-time student in his unit and sent him back to Moscow.
"We met our boy at the metro station last Monday," Tamara Botagova, Timur's grandmother, said, sobbing. "He was convoyed back to the Moscow enlistment office by one of its officers. We thought the military would give him to us, but they said they needed to fix some paperwork formalities in the voenkomat before letting him out.
"Timur called us at home from there the next day and said he is being sent to serve in Obninsk."
TITLE: Dec. 12 Holiday Has The Country Puzzled
AUTHOR: By Oksana Yablokova
PUBLISHER: Staff Writer
TEXT: MOSCOW - Russia is to take the day off on Wednesday for the 8th anniversary of the first post-Soviet Constitution - a document that more than half the population has never read and in which nearly half has no confidence.
The Constitution Day holiday was first declared by former President Boris Yeltsin in 1994, to mark the December 1993 constitutional referendum that some opposition leaders, including Gennady Zyuganov's Communist Party, had accused the Kremlin of falsifying.
Back in 1994, some State Duma hardliners had refused to recognize Dec. 12 as a public holiday, calling on their supporters to ignore it and remaining in their offices throughout the day.
Now, eight years later when the controversy over the legitimacy of the referendum has died down, a surprisingly large part of the population remains in the dark about what exactly the holiday celebrates.
In a survey released on Thursday by the Public Opinion Foundation, 55 percent of those questioned said they did not know what the Constitution contains, and 47 percent said they consider the Constitution to be a formal document with no influence on the country's life.
Only 28 percent said they regard the Constitution to be good and 8 percent said there was no need to change it, while 38 percent considered it bad and 67 percent said it should be changed.
Calls to amend the Constitution have been coming from above as well. Last week, the issue heated up once again when the newly elected speaker of the Federation Council, Sergei Mi ro nov, spoke out in favor of a constitutional change to extend the current four-year presidential term.
But any changes are problematic at present, as Russia has neither a constitutional assembly - a body allowed by the constitution to make changes to its most crucial chapters - nor a federal law on forming such an assembly.
Two bills pro pos ing two different ways of establishing a constitutional assembly have been awaiting discussion in the State Duma for at least a year.
In the first bill, contributed by Union of Right Forces deputy Boris Nadezhdin, the assembly would consist of 400 members, including the president, members of the Constitutional Court, heads of the Supreme Court and Higher Arbitration Court, 100 experts personally appointed by the president, all members of the Federation Council and 100 Duma deputies.
Prominent human-rights advocate and now Duma deputy Sergei Kovalyov contributed the second bill, suggesting that a 450-member assembly should be elected in a nationwide vote, rather than appointed. Both bills are expected to be discussed by the Duma next year.
TITLE: Putin Visits Greece, Germany
PUBLISHER: Combined Reports
TEXT: HANOVER, Germany - President Vladimir Putin dropped in for lunch at German Chancellor Gerhard Schroe der's "modest but comfortable" home Sunday in a demonstration of the growing rapport between the two leaders.
Putin was on his way back from an official visit to Greece, where his plans to tour historical sites Saturday were disrupted by a wedding and a spell of bad weather.
Putin was in EU and NATO member Greece to pursue deals for expanded energy and military cooperation and spent the last of his three days sightseeing.
He was forced to abandon plans to travel by helicopter to the Orthodox monastic sanctuary of Mount Athos because of strong gales in the area.
Instead, he was driven to the ancient tombs at Vergina, near the northern port city of Thessaloniki, which include the burial site of Philip II, father of Alexander the Great. He was accompanied to Vergina by Greek President Costis Stephanopoulos.
Later Saturday, in Thessaloniki, Putin visited the city's cathedral, the Orthodox Church of St. Demetrius. The trip, under heavy police security, was delayed for 45 minutes because of a wedding at the church.
Putin's visit to Athens on Thursday and Friday caused huge traffic jams as thousands of police officers shut down nearly all roads, avenues and highways leading into the city center. A 15-minute drive in the center took as long as two hours when Putin traveled from the ancient temples atop the Acropolis to the nearby office of Premier Costas Simitis.
"We ask Athenians for their understanding over the traffic problems. We had to take security measures because of President Putin's visit," said government spokesperson Christos Protopappas. "They are measures that have to be taken in all circumstances involving very important people."
During Putin's trip, Greece and Russia signed a string of cooperation agreements, from fighting crime to boosting cultural contacts. But talks focused on ways to expand a network supplying Russian natural gas and possibly build an oil pipeline connecting the Aegean and Black seas.
On his flight back to Moscow on Sunday, Putin stopped over in Schroeder's home town of Hanover for a few hours. It was his second visit to Germany in four months, but decidedly more informal than his September tour when he impressed parliament with a speech delivered in smooth German calling for an end to Cold War thinking.
Dressed casually, Putin complimented Schroeder on his "modest, but very comfortable" home after the chancellor and his wife Doris hosted the president for lunch at their apartment.
Putin said he had appreciated that the Schroeders had lit four candles on their advent ring even though this was only the second Sunday in December, to create a more cosy atmosphere.
Schroeder, sporting an open collar and no tie, said: "I can hardly think of a more pleasant way to spend a Sunday morning."
The two leaders, addressing a news briefing at Hanover airport before Putin got back on his plane, gave away little about their talks, saying merely they had discussed the situation in Afghanistan and the Middle East.
The two leaders are united in a push for self-promotion. Putin's mission to have Russia accepted as an equal partner comes as Schroeder insists Germany should play a diplomatic role more in keeping with its economic might.
Putin pointedly paid tribute to Germany's hosting of talks to create an interim Afghan government.
"You cannot reach a situation with which everyone is 100 percent satisfied, but I think the accord was the optimal outcome that could have been reached," Putin said.
Then, bidding his host a merry Christmas, Putin flew home.
TITLE: Kremlin Is Satisfied With Bonn Afghan Agreement
AUTHOR: By Megan Twohey
PUBLISHER: Staff Writer
TEXT: MOSCOW - Moscow has applauded the interim Afghan government approved by the UN Security Council late last week. And it is no wonder: With ethnic Tajiks, its closest allies in the anti-Taliban coalition, holding the most powerful ministerial posts, Russia stands a good chance of getting what it has long hoped for - a friendly Afghanistan.
But experts warn that long-time allegiances could change once reconstruction money - of which Russia has little to offer - starts flowing into the war-torn country.
"Today's connections to the ethnic factions are important but will not necessarily be there tomorrow," said Sergei Kazennov, an expert on geo-strategic issues with the Institute of World Economy and International Relations. "Who knows how the Tajik ministers will behave when they're in power and when they have different sponsors? I don't think they will behave toward Russia the same way they did in the past."
"The decisions made in Bonn are, excuse my immodesty, a mirror reflection of our position," Defense Minister Sergei Ivanov said Wednesday after negotiators had come to an agreement. "I would like to recall what we said more than a month ago: that we advocate the establishment of a broad coalition representing all ethnic groups."
The Bonn compromise was ironed out after more than a week of talks involving representatives of the Northern Alliance and three exile factions - the Pakistan-based Peshawar group, the so-called Cyprus group of intellectuals and the Rome group, which supports Afghanistan's ousted octogenarian king, Zahir Shah. For now, the distribution of power seems to bode well for Russia. Its closest allies, the Tajiks, have received what experts have called the most crucial posts, with Yunis Qanuni as interior minister, Mo hammad Fahim as defense minister and Abdullah Abdullah retaining his Northern Alliance post of foreign minister.
"These ministers dominate the security relationships," Martha Brill Olcott, a senior associate at the Carnegie Endowment for International Peace in Washington, said. "It's an uphill battle for other groups to gain control."
On Friday, Ivanov met with Tajik President Emomali Rakhmonov in Du shan be to discuss boosting the two countries' cooperation.
"Right now the Americans and Russians have more in common ... and are both genuinely interested in some sort of balanced government capable of keeping Afghanistan from continuing its civil war," said Rustam Shukurov, a central Asia expert and associate professor of history at Moscow State University.
The real battle for control, added Shukurov, will inevitably begin six months from now, when the former king is to convene a traditional council, or Loya Jirga, to ratify a transitional government, paving the way for elections within two years. Meanwhile, the top post in the new government has gone to a long-time ally of the United States, but it is not yet clear how significant his power will be.
According to The Associated Press, interim Prime Minister Hamid Karzai, an anti-Taliban Pashtun leader, helped deliver covert U.S. aid to the mujahedin fighting against the Soviets from 1979 to 1989. Since then, the State Department and Congress have invited Karzai to visit the United States, where three of his brothers live, and supplied Karzai with ammunition and food in his battle against the Taliban this fall.
Shukurov said it was too early to forecast which countries might reap the most economic rewards from a stable Afg ha ni stan, which could become an important route for lucrative oil and gas pipelines.
But several experts said the key factor in determining loyalties in the region would be cash.
"The most powerful weapon the international community has is aid money," said Dmitry Trenin, deputy director of the Moscow Carnegie Center.
Russia clearly understands the importance of aid. On Sunday, a 25-truck convoy crossed into northern Afg ha ni stan from Tajikistan carrying more than 100 tons of food, medicine and other supplies, news reports said.
Staff Writer Natalia Yefimova contributed to this report.
TITLE: Police: Seized Uranium Was Not Weapons-Grade
PUBLISHER: The Associated Press
TEXT: MOSCOW - The Interior Ministry said Saturday that the uranium seized last week when police arrested a half-dozen men allegedly trying to sell it was low-grade material that would have been useless to a nuclear terrorist.
Police seized more than one kilogram of uranium from six suspects, who allegedly tried to sell it for $30,000 to an organized-crime group.
The Interior Mi nistry moved quickly to say that it appeared to be a low-level deal between mob groups and not a bid to sell the material to a terrorist group.
Nuclear experts were called in to analyze the seized uranium, contained in a safe capsule, to determine the exact level of its enrichment and origins.
Officials said Saturday that the results of the analysis showed that the material was relatively low-grade. The suspects had "uranium tablets ... of the kind used in heat-releasing elements of power reactors at nuclear-power plants," Bulat Nigmatulin, deputy nuclear power minister, told Interfax. "Those tablets have nothing to do with weapons-grade uranium even theoretically."
Viktor Zakharov, head of the Moscow region's Federal Security Service, said the material could even be handled with bare hands.
Police arrested the six suspects overnight from Tuesday to Wednesday near a roadside cafe on the Gorky highway 19 kilometers southeast of Moscow. Investigators said the suspects allegedly belonged to the Balashikha criminal gang.
In the economic turmoil following the Soviet collapse, there have been regular seizures of nuclear materials stolen by people who tried to sell them for profit, but all have involved low-active uranium or cesium unfit to manufacture nuclear weapons. Russian officials have repeatedly said that no weapons-grade nuclear materials have been stolen.
TITLE: PM Promises Military Plan
PUBLISHER: The Associated Press
TEXT: MOSCOW - Prime Minister Mikhail Kasyanov discussed plans for army reform on Friday with top military brass and parliamentary leaders and promised the government would come up with a detailed plan by mid-2002.
Kasyanov said the goal of the reform was "a gradual transition to forming army units on a contract basis." There is also wide agreement that the length of service for conscripts should be shortened, he said. President Vladimir Putin has championed plans to trim the 1.2 million-member armed forces by nearly one-third in the next three years and abolish the draft.
Kasyanov said after the meeting that the government would formulate a plan for military reform by mid-2002, in time to set budget levels. The government does not yet know how long it will take to put the reform into action or how much it will cost, Kasya nov said.
Leaders of the liberal Union of Right Forces, who took part in the cabinet session, proposed their plan of a military reform, which calls for an increase in the number of contract soldiers while simultaneously cutting the length of service for conscripts from the current two years to six months in late 2003 or early 2004.
Boris Nemtsov and Yegor Gaidar said the military agreed with their proposals in principle but said the reform would take a longer time - until 2010 - to implement. The cabinet will again review the issue next March, they said.
TITLE: IN BRIEF
TEXT: Radar Blind
MOSCOW (Reuters) - A Russian general said on Monday the military was "radar blind" across two-thirds of the country, and unable for long periods to track flights carrying the top leadership.
Lieutenant General Alexander Shramchenko told the Interfax news agency the situation was so critical that aircraft carrying Russian leaders to Japan could be outside radar coverage for 90 minutes.
"In fact, we do not control the air space from the Ural Mountains to the Kuril Islands," said Shramchenko, whose troops run the military's radar systems.
"There is only a thin line of radar field along the border with Kazakhstan, Mongolia and China," he said.
It is highly unusual for Russia's senior officers to speak publicly about serious deficiencies in the military and could be a calculated bid for more funds for the hard-pressed service.
In the Soviet era, Moscow had more than 100 satellites in orbit for early-warning, intelligence and communications. Now, only four communications satellites are thought to operate and more than 80 percent of the country's "spies in the sky" are past their original operational design date.
Constitutionalists Unite
MOSCOW (SPT) - Four little-known political movements merged over the weekend to form the Constitutional Party of the Russian Federation, a move that its leaders apparently hope will allow it to not only conform to new legislation regulating parties but perhaps win it a few votes.
As it stands now, the new party would have the same acronym as the long-dominant Communist Party, KPRF.
Two hundred delegates from the four movements - Stability and Progress, Russia's Choice, Protection of Women and Live Ring - met at a founding congress Saturday and picked as their leader Vyacheslav Vol kov, a former adviser to President Bo ris Yeltsin.
Yaroslav Ternovsky, who was elected head of the party's political council, said the Constitutional Party's ideology rests on liberal principles. Its mission, he said, is "to protect the constitutional fundamentals of a democratic state." "We are not a party of lawyers, but our goal is to consolidate around the Constitution," Ternovsky told the congress.
The party, which has six months to register with the Justice Ministry, plans to take part in State Duma elections in 2003 and some regional elections.
Not-So-Funny Money
MOSCOW (SPT) - Police in Vladimir are looking for a con artist who tricked a pensioner out of her life's savings by persuading her to swap her rubles for "new" notes bearing President Vla di mir Putin's likeness.
The pensioner handed over 9,500 rubles to a woman in her mid-30s who knocked on her door and said she had been sent from the local savings bank to help the elderly swap their savings in line with a new monetary reform, police said.
Although the pensioner was skeptical at first, the woman talked her into swapping her life savings for 19 500-ruble banknotes bearing Putin's face.
"You remember the notes with Lenin," Yury Nikonorov, police spokes person of Vladimir region, said, referring to Soviet-era rubles. "It looked like them but with Putin."
Police believe that there is a group of people behind the con. Two other such incidents have happened this year.
Presidential Extension?
MOSCOW (AP) - Sergei Mi ronov, the new speaker of the Federation Council, said he would consider backing a constitutional change to extend the current, four-year presidential term.
"If you ask my private opinion, I think that the four-year presidential term is too short for Russia," Mironov, who was elected to the Federation Council post last week on President Vla dimir Putin's blessing, said Friday.
Mironov said that the Constitution could be amended and added that the Federation Council may initiate the changes.
Boris Nemtsov, the leader of the liberal Union of Right Forces party, said he hoped Putin would not seek to have his term extended. "Changes in the Constitution will bring instability, unpredictability and great problems for Russia," Nemtsov said at a news conference.
TITLE: Investors Looking To Send Millions South
AUTHOR: By Yevgenia Borisova
PUBLISHER: Staff Writer
TEXT: MOSCOW - Private investors who attended a two-day symposium in Mos cow last week promised to put nearly half a billion dollars into projects in southern Russia, though in all but one case the precise projects have not yet been nailed down, organizers said.
Igor Vdovin, co-chair of the private National Direct Investment, one of the organizers of the South of Russia symposium, said in an interview Friday that two agreements to cooperate and 40 letters of intent to invest worth a total of $480 million were signed between potential investors, administrations of the regions, symposium organizers and project managers. Winning over the regional administrations was one of the first steps for the potential investors, most of whom were Russian.
"This symposium is a big success," Viktor Krokhmal, deputy to the presidential envoy in the Southern Federal District, Viktor Kazantsev, said in an interview. "We intended to get $500 million during these days. Believe me, in the next two or three months, we will get several billion dollars more for these projects."
The symposium was organized to jump start the federal South of Russia program, which was approved in the summer with the stated aim of attracting 500 billion rubles ($16 billion) worth of investment for hundreds of projects in the next several years. The federal government has pledged to provide 3.8 billion rubles next year, and a still undetermined amount is to come from regional and local budgets.
"We guarantee state support for the investments - both domestic and foreign," Kazantsev said Thursday at the opening of the symposium's first working session. "This program is the first of this sort and must be interesting for investors."
The initial plan spoke of 737 projects, but the symposium's Web site only listed 326 projects. Organizers said more are on their way.
Among the projects are some to build roads, power plants, hospitals and medical clinics - the focus of governmental funding. Private investors are being sought for commercial projects in various sectors.
Among those who announced at the symposium that they were ready to invest were the Vostok-Zapad group, AFK Sistema, MDM Group, NIKoil investment bank and Slovenian telecommunications company IskraTEL.
Only Vostok-Zapad, however, has determined which specific project will get its money. Company President Zhaksylyk Zharimbetov signed an agreement Thursday to invest $23 million into the construction of a factory in Maikop, Adygeya Republic, to make glass bottles and jars.
Zharimbetov, whose company was formed in 1999 out of enterprises located in Russia, Kazakhstan, Ukraine and Lithuania, said Vostok-Zapad also will put $100 million into other projects in the south, including $50 million in the Krasnodar region.
"I chose Adygeya and Krasnodar because I found the best cooperation with the administrations there," Zharimbetov said in an interview.
IskraTEL signed an agreement to invest $70 million into several telecommunications projects in the south, said Mitja Jelnikar, director of IskraTEL's Mos cow representative office.
Some of the money will be invested in Rostov Electrosvyaz, which wants to establish telephone lines in rural districts of the Rostov region, Jelnikar said.
Most of the letters of intent signed at the symposium did not specify the exact projects; investors said they needed time to consider the projects.
Alexander Goulko, managing director of IM Russian Partners, an investment consultancy based in London and Moscow, said that taking time to assess a project is normal.
"Several weeks, maybe two or three months, must pass until something palpable will appear out of these contacts," Goulko said. "We have found a few projects that seem to have good chances to get investors. I hope we will work with these projects."
Cormac Lynch, managing director of NIKoil, said, "I fully expect that we will invest. We have now about 10 companies that have all asked us to make equity investments. Some are very good. Some are not so good. But even if we get one out of the 10, it is very good."
Symposium organizers said 70 investors attended, but they were far outnumbered by the hordes of those looking for investment. Foreign investors also were scarce.
"There are only a few foreign companies here," said Halil Somer, managing director of the Turkish bank Yapi Kredi's Moscow branch. "This is rather a domestic seminar, while I think it should be more internationally oriented."
Goulko said undoubtedly one of the most important results of the symposium is that investors now understand that "administrations are not trying to accumulate money and then distribute it, but they are prepared to assist in the proper spending of private investments. This is basically a breakthrough."
TITLE: Ford Lands Local Contractor
AUTHOR: By Vladimir Kovalyev
PUBLISHER: Staff Writer
TEXT: The Ford Motor Company has signed an agreement with the Russian firm Elast-Technologies this week to provide its new $150-million automobile-production facility in Vsevolozhsk with car mats and anti-splash rubber coverings, the plant's management reported on Monday.
The mats and coverings will be installed in Ford Focus cars that the company is planning to put into production in Vsevolozhsk in 2002.
According to Ford representatives, the details will be made of rubber, instead of the plastic that is generally used in European countries. There will also be alterations to the shape of the parts specifically designed to make them more suitable for Russian winters.
"Elast Technologies developed a new design for carpets of this type, and this was approved by Ford's designers. The quality of the carpets and splash-rubber covering is fully in accordance with strict international criteria relating to their appearance, quality of materials, environmental considerations and cost," said Murrey Gilbert, the general director of Ford's Vsevolozk plant, in a statement released by the plant's press service.
Gilbert also said that the deal was part of the company's attempts to find local producers of parts to go into the production of cars here. He said that 25 specialists working at the factory and in other regions of Russia are actively seeking other local contractors.
The $150-million factory is scheduled to be opened in Vsevolozhsk April 2002.
According to the company's long-term plans, once the Vsevolozhsk plant is up and running, it will produce 25,000 cars a year. Ford is aiming to produce 30 percent of all cars it sells in Russia at the new plant, with a domestically produced Focus costing between $13,000 and $15,000.
TITLE: Alpha Signs $20M Loan Deal
PUBLISHER: Combined Reports
TEXT: MOSCOW - Top-five commercial bank Alfa Bank is overhauling its retail system and focusing on the regions in order to increase its independence from Alfa Group - not to groom it for sale, Alfa Bank Chairperson Mikhail Fridman said Monday.
"We are trying to seriously weaken the link [between Alfa Bank and Alfa Group]. We don't want to be perceived as a bank that only serves the interests of Alfa Group," said Fridman, who is also head of Alfa Group.
To become more independent, "we are trying to widen the spectrum of services, including retail," he said. The bank plans to increase its deposit base from $2 billion in 2001 to $4.5 billion by 2004, said Yevgeny Bernshtam, Alfa Bank's first deputy chairperson.
In a bid to cut costs and pull some of its loss-making retail branches into the black, Alfa Bank plans to open a network of low-cost mini-offices across the country.
Fridman said there are no plans to sell the bank because a suitable buyer - most likely a foreign bank that could offer a suitable price - is unlikely to show strong interest in the Russian banking sector in the near future.
"We would of course agree if, for example, Citibank offered to buy Alfa Bank for $1 billion," he said. "But that won't happen for at least two or three years."
Fridman also said the bank is considering a Eurobond issue of "no less than $175 million" within the next two years. He called the $20-million syndicated loan the bank was granted by Western banks on Friday "the first step toward a Eurobond."
Alfa Bank is paying an interest rate of 375 basis points over LIBOR on the $20-million unsecured loan. The loan, which was arranged by Standard Bank London, will set a new pricing benchmark for pure Russian risk, bankers say.
The new loan will be used to finance trade-related projects for Alfa Bank's customers. The facility, which is guaranteed by Alfa Bank Holdings Ltd., matures 180 days from the date of signing and may be extended for a further 180 days.
- SPT, Reuters
TITLE: IN BRIEF
TEXT: Gazprom, Sibur Swap
MOSCOW (Vedomosti) - Gaz prom plans to take Sibur shares in return for paying off the petrochemical company's debts, Gazprom First Deputy Chairperson Vitaly Savelev said at a press conference last week.
Sibur shareholders voted earlier this year to issue 6.018 trillion ordinary shares worth 48.15 billion rubles ($1.6 billion). Gazprom was expected to pay for its stake, worth 24.396 billion rubles, in cash and assets.
The remaining 23.754 billion rubles ($793 million) are to be paid with equity in the 17 chemicals companies that Sibur manages.
Now Sibur's debt to Gazprom will be converted into shares in the new issuance, Savelev said. Sibur owes about 20 billion rubles ($667 million) to Gazprom.
The companies, according to Sa ve lev, also have a backup plan for paying off Sibur's debt: restructuring it by pledging the holding's liquid assets, while the purchase of the newly issued shares could be partially financed or guaranteed with shares.
Savelev said that in the next 10 days the company will decide what property to take as a pledge.
Iraq Woos Gazprom
MOSCOW (SPT) - Gazprom has received a proposal to take part in developing gas fields in Iraq, Prime-Tass reported a Gazprom board member as saying Friday.
Gazprom has not yet decided on its participation in the project, Alexander Ryazanov told a news briefing.
Earlier this year, Iraq said it was interested in the participation of Gaz prom and petrochemical company Si bur in developing a gas deposit in South Iraq. The field has estimated reserves of 115 billion cubic meters of gas.
Belarus Refinery Sale
MINSK, Belarus (Reuters) - Belarus is considering privatizing its oil-refining sector, and nine Russian oil companies have already placed bids, Deputy Head of the Presidential Administration Leonid Kozik said Friday.
"We have many offers from Russian oil companies worth a total of about $1 billion for five years," Kozik said.
"We are satisfied with the number of bids and would like to have even more to get better profits while privatizing the oil-refining sector," he said.
Kozik said the government was ready to sell the controlling stakes in refineries if investors offered sufficiently attractive terms. He said nine Russian oil companies had expressed their interest in buying out the sector, but gave no details.
Eurobond Payment
MOSCOW (Reuters)-The Finance Ministry said Friday it had paid interest of $73.44 million on a Eurobond and transferred another $24.5 million to the International Monetary Fund as it continues to meet foreign-debt repayments this year.
A Finance Ministry spokesperson said the funds for the 2003 Eurobond coupon were transferred to payment agent Citibank. The IMF cash was sent two days ahead of time as the Dec. 9 due date is a Sunday.
TITLE: It's Time To Redo Privatization
TEXT: TWO events occurred at the end of last month that acted as echoes of a behind-the-scenes war that has been declared by the St. Petersburgers against the oligarch old guard.
First, disgraced minister Nikolai Ak syo nenko returned from vacation and went straight to a government meeting where the Railway Ministry's investment program was being discussed. The minister's appearance was closely watched; after all it was rumored that one month ago Aksyonenko was brought in for questioning directly from his favorite granddaughter's birthday party. They came for him in the evening in a black Volga.
It transpired that, though Aksyonenko had not been able to congratulate his granddaughter properly, he was alive, well and looking well-fed, as befits a minister whose ministry is planning to "assimilate" 161 billion rubles ($5.4 billion).
Second, the Prosectutor General's Office filed a criminal suit against two highly placed customs officials who dared to accuse a chain of furniture stores of smuggling. These stores enjoy the special favor of Yury Zaostrovtsev, deputy director of the FSB and a man who lays claim to the title of economic brain in the new St. Petersburg team.
One can sympathize with the president. In an oligarchic country completely lacking a market, the president has to work not only with substandard human specimens, but with individuals who interpret the law as a means to realize their own grasping instincts.
The two teams differ only in that the oligarchs have charged to the finish line by pushing aside and gobbling up an improbable number of people, while the new St. Petersburgers politely brought Aksyonenko in for questioning in a government Volga.
And you can't say that the new system of the "invisible wars" isn't working. For example, today the wholesale redistribution of property would be impossible, as the party under attack would immediately find protectors. Fights such as these lead not to a change in ownership but to the law-enforcement agencies receiving more money to sort the situation out.
However, this kind of medicine has serious side effects. The more conflicts between the oligarchs, the more money the law enforcement agencies make. The temptation, therefore, arises to provoke conflicts and there are already examples of this.
The new St. Petersburgers have yet to realize their full potential. They could corner the oligarchs with respect to the natural monopolies or call upon the assistance of those who "lost" in previous oligarch wars. And finally, they could simply initiate a redistribution of property, not using quasi-economic means but by fabricating criminal charges.
Is there a way out of this vicious circle? Yes, there is. Major Russian companies should declare (and the president should enforce compliance by all means at his disposal, including his "chekist resources") a new large-scale share issuance, including the sale of controlling stakes to a genuinely broad section of the population. Only a second mass privatization can protect the old oligarchs from a new redivision of property. And only establishing the practice of dividend payments and control over cash flows can guarantee the transparency of business and creation of a real market economy.
Yulia Latynina is a journalist with ORT.
TITLE: Estonia Deserves Kudos For Economic Successes
AUTHOR: By Marko Mihkelson
TEXT: LITHUANIAN television is currently running a program that depicts their neighbors, the Estonians, as arrogant people who like to boast to all and sundry about how clever and successful they are.
The Lithuanians do have a point, as there are several grains of truth in the stereotype that Estonians think highly of themselves, but there are also good grounds for such self-assessments.
In the space of 10 years, Estonia - a country of 1.3 million people and roughly the size of the Netherlands - has gone from being part of a closed and extremely inefficient economic system to being widely acclaimed as the leading transition economy of the former socialist bloc and, according to some economic rankings, as being one of the most promising economies in the world.
A recent example of this is the Index of Economic Freedom produced jointly by the Heritage Foundation and The Wall Street Journal and published last month, which ranks Estonia as the fourth freest country out of 161 (for comparison, Li thua nia occupies 29th place, Latvia 38th, Poland 45th and Russia 131st). The European Bank for Reconstruction and Development also gave the Estonian economy a very positive assessment in its Transition Report published earlier this year. Out of 25 transition countries in central and eastern Europe, Estonia was overall frontrunner in economic and political reforms ahead of Slovenia and Hungary, while Latvia and Lithuania occupied ninth and 16th places, respectively.
And last but not least, Estonia is among the most computerized and Internet-friendly countries in the world. With over 35,000 Internet-connected computers, Estonia is among the 15 leading countries by per capita Internet access, ahead of Germany, Britain, France, Italy and others.
This success story, however, did not happen overnight. Indeed, the very first steps were taken in the late 1980s and early 1990s, while the Soviet Union was still in existence. Several factors assisted Estonia in launching itself on the right path, including favorable initial conditions.
One of the key factors in Estonia's development is its proximity to Finland - one of the better organized and run countries in the world. Estonia's historical closeness to Europe in general and to the Nordic countries particularly helped Estonia's political elite to make the right decisions in the early stages of transition.
General ideas about what constitutes a market economy and the democratic rules of the game spread to Estonia via Finnish television and through other channels. This partially compensated for the isolation brought about by the Iron Curtain, which was for the most part more tightly imposed in Estonia than in Central European countries such as Hungary or Poland.
Geographical proximity and economic ties played an important role in enabling Es tonia to re-orient its foreign trade from the socialist bloc to the West, and later facilitated integration with the West and with the European Union in particular.
An important raft of reforms were implemented under the first two post-independence governments of Prime Ministers Tiit Vahi and Mart Laar. Monetary reforms conducted in June 1992 were a major turning point, creating as they did a solid and stable basis for economic growth.
The first legislation regulating privatization, a law on small-scale privatization, was adopted at the end of 1990 while Estonia was still part of the Soviet Union. Comprehensive legislation regulating the whole privatization process was passed in July 1993. These laws set general guidelines for carrying out privatization irrespective of the size of a company. The Privatization Act stipulated that employees of an enterprise do not receive any special privileges or rights in the privatization process, and that all potential purchasers compete on equal terms. This was possibly the most ambitious privatization program of those adopted in the countries of eastern and central Europe.
More than 75 percent of the GDP is produced by the private sector, while more than 85 percent of formerly state-owned enterprises have been privatized.
Furthermore, a stable currency, stable financial system, low level of taxes and liberal privatization program have helped to encourage foreign direct investment into the country.
The consensus among Estonian investment bankers seems to be that joining the European Union will make Estonia even more attractive for foreign investors. If the Finnish case is anything to go by, then this should indeed prove to be the case. After joining the EU, foreign investments into Finland between 1996 and 1998 increased by a factor of 10.
Foreign businesspeople accustomed to the bloated bureaucracies of former Soviet countries are often surprised at how easy it is to start a business in Estonia. Within a matter of days (and very rarely longer than a month) one can register a new company and the whole process should cost no more than $600. The ease of registration is such that more than 58,000 enterprises have now been registered, making Estonia one of the most enterprising countries in the world (in terms of the number of enterprises per capita).
Estonia has been remarkably fortunate that the gaining of independence in 1991 coincided with the global revolution in information technology. The rapid development and spread of the Internet over the last decade has contributed to making the Estonian economy a lot more dynamic and competitive. For example, Internet banking which was only introduced in the fall of 1997 has already become a commonly used service. At the end of July 2001, the five largest Estonian banks had a total of 375,391 Internet banking clients.
Furthermore, major Estonian companies have clubbed together to accelerate the broadening of Internet access in Estonia. The goal of the project's authors is to make Internet access a public good as of Jan. 1, 2004 (in just the same way that roads are a public good). Thus within about two years, Internet access should be free of charge to all those who wish to have it.
This will provide equal opportunities for Internet use to all inhabitants of Estonia and thus help to break down barriers between rich and poor in the crucial area of information access, as well as further integrating Estonia into the global community.
Marko Mihkelson is director of the Baltic Center for Russian Studies in Tallinn. He contributed this comment to The St. Petersburg Times.
TITLE: Could Russia Afford To Ignore OPEC Pleas?
AUTHOR: By Eric Kraus
TEXT: THE current government discourse on Russia's relations with OPEC is reminiscent of the imperial double eagle, with each head spouting something in total contradiction with what its contralateral twin is saying. Much of the analytical writing on this subject is tending toward the surreal.
First things first. As any half-bright 11-year-old knows, the Russian economy is heavily dependent upon hydrocarbons: Two-thirds of all exports, a huge chunk of government revenues, and essentially all the cash in the local economy come from the sale of oil and gas. Optimistically, the one thing differentiating Russia from the modern industrial economies is a good 10 years of development and at least $500 billion in investment, and oil and gas exports are the one obvious source. To gratuitously imperil this huge potential cash flow in return for a pat on the head from the industrialized countries and the dubious pleasure of watching OPEC squirm would be patent madness.
Various chest-thumping politicos have asserted that OPEC countries have the most to lose, since oil is their sole resource (as opposed to Russia, where it is merely the major one). How unfortunate, then, that Saudi misery is not a bankable commodity for Russia! The OPEC countries simply did not have the option of giving in and cutting alone. To do so would have only impoverished them further, as non-OPEC countries would have quickly pumped more oil to compensate. Moral issues aside, it was simply unrealistic for Russia to expect to be allowed a free ride forever.
It has been argued that, were Russian oil companies to cut back their investment programs, capital expenditure and economic growth would come to a grinding halt, while company valuations would suffer substantial damage. These fears seem seriously misguided: Planned investment in optimizing existing fields could simply be channeled toward development of new oil properties with a longer payback period. Furthermore, outside the oil sector, Russia certainly suffers no dearth of investment opportunities, mostly awaiting the rebirth of a banking system and a more predictable legal framework. Given the immense capital required to rebuild the Russian physical and social infrastructure over the coming decade, as well as the fact that foreign investors are not quite beating down the doors of Russian manufacturers, any restructuring will depend upon cash from oil exports. As for company valuations, it is not intuitively obvious that a company producing 100 barrels at $15 is more valuable than one producing 95 barrels at $25.
Andrei Illarionov has argued that a collapse in oil prices would actually be good for Russia, since it would prevent the "Dutch disease," i.e. dollar inflows from oil exports causing overvaluation of the currency, thus squeezing out local manufacturers. Theoretically, this could be a danger at prices above $30 per barrel. However, as the ruble-exchange rate is blatantly and openly manipulated by the Central Bank, we would first like to see the Central Bank trying to push it down, not up. Nothing suggests that a drop in oil prices below $10 would magically lead to world-class manufacturing facilities springing up in the tundra, and Illarionov's fears that Russia would sicken of the Dutch disease apparently led him to prefer to see the patient die of malnutrition - provided, that is, that he dies in perfect health.
But a deal has been reached. Provided that Russia continues to cooperate with the other oil producers, the breathtaking resurgence of Russia's economy is set to continue - 2002 promises an embarrassment of riches.
Eric Kraus is an economic strategist in Moscow. He contributed this comment to The St. Petersburg Times.
TITLE: Importers Look to Draft Code To Fill In Gaps in Regulations
TEXT: Recent investigations into the workings of the notoriously corrupt State Customs Committee has led to several top-level resignations, at least two indictments and days-long delays at key border checkpoints in the Northwest Region. The government says a new customs code will help fix the problem, but others aren't so sure. Kirill Koriukin reports.
With the St. Petersburg port and checkpoints on the Latvian and Finnish borders clogged with Russia-bound goods, two high-ranking customs officials charged with abuse of power and two others retiring for "health reasons," the need to clear up customs regulations is as pressing as ever.
Even if they want to help, customs officers have no clear instructions upon which to act. And because they don't, the vagueness of the current customs code allows plenty of scope for corruption.
In an attempt to sort out the mess, the cabinet has drawn up a new draft customs code to replace the outdated 1993 document that has bred corruption and stalled trade. By patching another hole in federal legislation, the government hopes to make Russia more investor-friendly and bring the country one step closer to joining the World Trade Organization.
Under the proposed new code, which was introduced to the State Duma on Nov. 19, the State Customs Committee, or GTK, would retain the functions of a "power ministry" but would part with its powers to produce legislation and interpret the law as it pleases. In other words, it would become what it is supposed to be: a law-enforcer rather than a lawmaker.
Importers are keeping their fingers crossed - no one knows exactly what shape the code will take if and when it clears the Duma - but some doubt that it will bring change. So too do some influential legislators.
Interpretations
The main problem with the current customs code is simply that it is not comprehensive enough. As a result, the GTK has had to issue thousands of directives and instructions in cases where the regulations are unclear - the gaps in the code have left them no choice.
The power to interpret vaguely formulated rules arbitrarily has been a double-edged sword for the GTK.
On Nov. 29, the head of customs inspection, Alexander Volkov, and deputy head of the investigations department, Marat Faizulin, were accused by the Prosecutor General's Office of "abuse of power bringing grave consequences" for their investigation of an alleged furniture-smuggling scheme.
As part of the investigation, the GTK temporarily seized the warehouses of two Moscow furniture stores, Grand and Tri Kita, last year and charged the owners millions of dollars in duties that authorities claimed the importers had failed to pay.
However, this fall the stores' owners won several lawsuits against the GTK, recovered some of their money and prompted the Prosecutor General's Office to launch an investigation into the case.
The GTK has stuck to its guns, saying it will stand by the officials and that its actions against the importers were lawful. Meanwhile, the media has been awash with rumors that the furniture importers were rescued by friends in the Federal Security Service, or FSB, who are at odds with the GTK.
Whatever the outcome, the charges are an undoubted setback for the GTK.
Valery Dragonov, head of the Duma budget sub-committee in charge of customs regulations and a former GTK chief, believes that the case emphasizes the need for changes to the Customs Code.
"This just confirms that in such an important and sensitive sphere as customs, [the GTK] should not be the regulator," he said. "Everything should be regulated by law, and then there will be no abuse. These two officials will now have to pay not for acting of their own accord,but for implementing the unscrupulous practices that are in place. It's not the consequences, but the causes of the phenomena that you have to elliminate."
Inconsistencies
While the government has pressed ahead with tax and judicial reform, the Customs Code has lagged behind.
"The Customs Code as it is now is not consistent with the Constitution and the Civil Code and the Criminal Code," said Paul Quigley, head of indirect tax at Deloitte & Touche. "Over the years, the GTK has tried to iron out those inconsistencies by imposing its own regulations. ... The idea was to make the best of a bad job. You try to plug gaps in the legislation and produce various directives in order to avoid the negative impact of the code. ... There is hope that the new code will streamline the regulations."
The lack of clear guidelines has led to different customs posts interpreting the code differently.
"Each region, and even each customs post within a region, often interprets legislation differently," said one Western businessperson. "The result is that an importer may have to present different types of paperwork depending on the officials at each location. This causes delays while the importer tries to understand the peculiarities of a given customs post.
"To make matters worse, once an importer has finally learned which interpretation is being made, it can be changed without notice. Besides, new customs requirements - as opposed to legislation - are frequently introduced with little, if any, notice. Naturally, this causes confusion, delays and great expense," the source said.
The discrepancy between customs practices and the law was highlighted last week when the Constitutional Court ruled that the Customs Code provision warranting confiscation of illegally imported goods should not refer to bona fide purchasers.
This affects, for example, people who bought a car abroad or in Russia without knowing that it had been obtained or imported illegally by a previous owner. Under the present code, customs officials were able to confiscate the car, in effect punishing the car owners for somebody else's crime. Customs officials were usually the ones to hand down the verdict.
Draganov agreed with the ruling.
"I think that the Constitutional Court [ruling] is fair," he said. "For the past few years, bona fide purchasers were the ones punished - very easily. What's more, this wasn't done through courts but by the customs' own rulings, which is absolutely impermissable and runs counter to the Constitution and the Civil Code."
If, as expected, the Duma approves a bill that would make any Constitutional Court ruling a law, bona fide buyers would have recourse to legal action, whether or not the latest ruling is incorporated into the new Customs Code.
Even if the bill doesn't pass, Draganov believes that the problem will be discussed when the draft code goes to the Duma for its second reading.
"I am sure that the second reading debate will inevitably lead to this problem and it will be thoroughly analyzed," he said. "The right to punish a bona fide purchaser also leads to corruption."
Tightening the Screws
This year, the GTK has imposed even more stringent checks at border crossings, which culminated in lines of trucks as long as 15 kilometers being stranded at the Finnish border last month.
These huge logjams were caused by a GTK order to officials in its Northwest branch to perform item-by-item searches of vehicles carrying certain specified goods, including household appliances, furniture and coffee.
Northwest customs officials said the Oct. 24 decision to crack down on certain categories of goods was issued as a result of an inspection carried out at Northwest region border points in early October by federal customs officials. This inspection concluded that millions of dollars were being lost every year from fraudulent customs declarations.
"We discovered that Northwest Customs had been losing about $200 million annually," Irina Skibinskaya, the GTK spokesperson, said in a telephone interview. "Since the more stringent inspections started, tax collection has increased significantly."
The problem is that these clampdowns have also affected law-abiding companies, making it harder than ever for them to get their commodities into Russia.
"This year, especially the last quarter, it has been complicated. The customs procedure has been much slower," said Jussi Kuutsa, director for international operations at Stockmann, the Finnish retailer.
"I don't know why customs have tightened the screws - probably they want to be more thorough in all sectors - but the problem is that this also affects companies which have always operated in line with the law. Generally it has been worsening since the beginning of the year. The customs process used to take a couple of days, now it takes a couple of weeks. Of course after several weeks, there's nothing left of what were fresh foods because you are past the expiry date."
Stockmann has periodically had to warn its customers that there will be no fresh milk, as well as other products, because of customs-clearance problems.
Although the customs crackdown has brought in extra revenue, many believe that overall it will negatively influence the economy.
"You should calculate net losses and consider the interests of businesses, which pay taxes, which also go into the budget," Dragonov said. "The interests of one ministry should not be prior to those of society and the economy as a whole."
"It is especially annoying that this is happening at the Finnish border," he said. "More money was invested in infrastructure on that border than anywhere else. Moreover, Russia has been involved in a lengthy and effective process of unification of procedures, and the level of cooperation with the Finnish customs has always been higher than with the rest of the world. This implies that the customs procedure here was supposed to be simpler and the flow of goods faster. But unfortunately, it's the other way round."
Wranglings
Changes to the customs code were first mooted several years ago, but concrete proposals were not made by Duma deputies until early 1999, when the draft code was adopted in the first reading. For over two years, however, it has been in limbo as government officials have been wrangling over changes to the code for the crucial second Duma reading as the economy and legislation were changing as fast as the cabinet itself.
The main purpose of the rewrite is to bring the code in line with WTO requirements, D&T's Quigley said. However, in the process the government is seeking to eliminate as many contradictions with other Russian laws as possible, he said.
"I hope that the new code will sweep away a lot of [bits and pieces] into the new document. Hopefully, it will be drafted in such a way as to firm up all the anomalies and inconsistencies which the original code contains and then there won't be a need for the GTK to issue as many pieces of additional legislation," Quigley said.
"The expectation is that it will provide a much clearer basis for companies doing business in Russia," he added.
Andrew Somers, head of the American Chamber of Commerce, also said that clarity was key.
"The overriding issue for business is whether or not the code will contain clear, objective standards, on which customs officials make determinations on such matters as the value of the goods, the categories of the goods or whether a customs official will [continue to] have very wide discretion to make his own interpretation," he said.
The Customs Code is percieved as a major step toward Russia's accession to the WTO, and top officials have made statements that its basic provisions were endorsed by the organization.
This appears to be wishful thinking. WTO members said they have not yet seen the draft and that it probably won't come before a meeting of its working group until January. Some WTO members have complained that Russia did not provide them with a copy of the draft or have any consultations with WTO experts about it, a knowledgeable source close to the negotiations said.
As the latest draft code neared completion, the main area of conflict was between the GTK and the Economic Development and Trade Ministry, with the ministry seeking to take away the GTK's powers to exercise hard-currency control and conduct investigations into alleged customs-regime violations.
The dispute was finally resolved at a meeting chaired by Finance Minister Alexei Kudrin on Nov. 12.
In the meeting, the GTK agreed that it would hold on to its enforcement functions, but would cede its authority to set the rules.
Proposals
The new draft code proposes to curtail the powers of the GTK, eliminate most references to other legislation that helped create red tape and room for corruption and bring the Customs Code in line with other new and progressive legislation, such as the Tax Code.
Under the new Customs Code, regulations would be either stated in the code or, where needed, the power to interpret them would be delegated to the government, customs officials said.
The code has become "twice as detailed and clear," GTK first deputy chairman Vladimir Meshcheryakov said at a Nov. 15 news conference. It will also be twice as long because most of the references to other laws are going to be replaced by actual rules to make up to 460 clauses.
There are two factors that support Meshcheryakov's confidence in the new draft code, said Galina Balandina, adviser to GTK head Mikhail Vanin.
One is that there are 12 clauses specifying customs procedure for passage of transport, as opposed to just one clause in the current code.
The draft contains mechanisms for accelerating customs procedures, whereby goods are partially cleared before they cross the border, Balandina said. This would allow commodities to clear customs quickly.
"If a company is transparent to customs, if the officials can knock on their door at any time, the law envisages the most simple mechanisms for customs clearing," Balandina said.
Meshcheryakov said that, under the new code, a customs declaration will have to be processed in three days as opposed to 10 days under the current one.
The new code also adds several new chapters referring to particular spheres, Balandina said. In the current code, rules pertaining to various spheres are just lumped together.
The second factor is that the new draft code protects companies from bureaucratic arbitrariness," by setting a precise description of customs officials' powers, as well as time frames for customs procedures, Balandina said.
"Currently we set the rules of the game, practically in every sphere. For example, the rate of hard-currency exchange for payments and the time frame for payment," Balandina said.
In future, the GTK will not have the authority that it has now to apply the several customs regimes designed for different types of goods at its own discretion, Balandina said. It will have to follow the code, she said.
"Now, the GTK in essence is involved in economic regulation. The amended code would eliminate this approach," she said.
Although the GTK would still be able to enforce the law, these powers would be restricted, officials said. The customs would have two branches - one dealing with law-abiding businesses and the other stepping in to take care of those that do not obey the law.
"A seagull cannot fly with just one wing," Meshcheryakov said.
Wait and See
Reaction to the new draft code has been cautious, and many are reluctant to talk about changes to the code until it has passed into law.
"There is a good Russian saying: 'We'll live and we'll see,'" Stockmann's Kuutsa said. "The issue is how they will implement it and control enforcement."
"The new code is still in a draft form, so we cannot comment on specifics," said Jennifer Galenkamp, head of external corporate affairs at Nestle Food LLC.
"It's no secret that dealing with customs has been one of the tough parts of doing business in Russia," she said. "If this new code is a genuine attempt to reform both the customs process and the institution itself, then naturally we welcome the effort. As always, though, the devil is in the details of implementation. We are reserving judgement until we are convinced that there has been a drop in smuggling and more efficient and transparent customs clearing going on."
Vladimir Aksyonov, corporate affairs director at British American Tobacco Russia, a member of the prime minister's advisory council on foreign investment, was more positive.
"GTK has been changing its approach to large, law-abiding, trustworthy companies, introducing 'white lists,'" he said.
These companies - both foreign and Russian - receive favorable treatment, such as simplified customs procedures.
"If all this is written into the code, we can only applaud this," Aksyonov said.
Stormy Passage
Although the GTK is hopeful that the second Duma reading on the code will take place soon, even the most optimistic forecasts do not envisage this happening until at least mid-February.
Meshcheryakov said he expected no obstacles to the draft's passage.
He also played down the dispute with the Economic Development and Trade Ministry.
"We worked closely and productively with the ministry. This was a constructive dialogue," he said.
However, Duma budget sub-committee head Draganov foresaw problems.
"It is good that the government finally introduced the code to the Duma, but I think in essence it is little different from the previous one," Draganov said.
"The first reading on the draft was so long ago that some of its clauses lag behind economic and social changes. We live in a different era now."
The new code likely still contains over 100 references to other, unspecified legislation, which in itself makes it "a road to nowhere," he said. The GTK still has the authority to issue instructions that interpret the law, and customs officers' powers are still not defined clearly, he said.
"The GTK will retain the powers to interfere with the economic activities of a large number of companies," Dra ga nov said. "Customs officers will still be able to require a company to provide a document that is not specified in the customs code. Here is an opportunity for abuse for you."
"The code still doesn't specify the customs procedure clearly enough to simplify it. It is custom-made for the government, not to serve business and trade," he added.
TITLE: German Trade, Investment Rise
AUTHOR: By Andrey Musatov
PUBLISHER: Staff Writer
TEXT: Economic relations between Germany and Russia have come a long way since the summer of 1998 and the August financial crisis. According to Peter Muerz, Germany's deputy consul general in St. Petersburg, the relationship now is characterized by trade and investment, rather than debt.
This is a bright sign, considering that Russia's Paris Club debt to Germany stands at 44.65 billion marks ($20.28 billion), one-third of the total Russia owes the club.
According to figures provided by the German Consulate, the share of German funds in the $16.15 billion of total foreign investment that Russia registered in 2000 was a little less than 8 percent, which trails only the United States and Cyprus.
Muerz also stresses that the trade situation, even with German economic growth slowing to a near standstill over the second half of this year, is of vital importance to the economic relationship.
"Germany is an export-oriented country, and all of the companies - large and small - will do their best to maintain their export levels," Muerz said Monday. "But the interim situation doesn't influence the export activities of joint companies, so forecasts of only 0.7 percent growth in German GDP for the year 2002 don't worry me that much."
Muerz says that the trade numbers for this year have been impressive enough, with Russian exports to Germany rising by 6.7 percent, while Germany over the first nine months of the year has increased its exports to Russia by 56.8 percent. Taken together, trade volume between the two countries has risen by 21.8 percent.
In money terms, trade between the two countries totaled 44 billion DM ($20 billion) over the first nine months of 2001, and the year-end total should be about 52 billion DM.
"The fact that German exports to Russia have increased by almost 57 percent is a good sign, it shows that Russians again have the money to buy," Muerz said.
Germany has not just focused on gaining access to Russian markets for its goods, but has also established a strong business presence here.
There are over 1,200 companies with German ownership operating in Russia, 680 of which are 100-percent Ger man owned and the remainder being joint ventures.
"This is the result of a number of steps, including an agreement signed in 1999 for the protection and improvement of investments in both countries," Muerz said. "On top of this, we signed an agreement permitting the avoidance of double taxation, so that when a branch of a German-based company pays taxes here, they are not required to do so in Germany."
Muerz, like many foreign representatives and businesspeople, also points to the influence of President Vladimir Putin, who has met with German Chancellor Gerhard Shroeder three times this year already, the latest occasion being a brief stop off in the chancellor's home town of Hanover while Putin was returning from Greece on Sunday.
And Muerz says that many German businesspeople have picked up on the positive attitude, with 70 percent of those in St. Petersburg responding to a consulate survey saying that they planned to expand their business and investment in the city, while none of the respondents noted plans to leave.
Echoing a point that has been made at Northwest Region border points in recent months, Muerz said that the most commonly listed negative point in the survey was the difficulty in dealing with customs. Seventy-three percent of all respondents identified slow processing and high fees associated with customs as the most significant barrier to doing business here.
TITLE: Firms Granted Second Life on Vienna Bourse
AUTHOR: By Victoria Lavrentieva
PUBLISHER: Staff Writer
TEXT: Vouchers, veksels, GKOs - the financial nightmares of the 1990s continue to haunt Russians, who for the most part see the stock market as just the latest in a long line of national pyramid schemes.
Many Germans, on the contrary, have no such fears and will go to absurd lengths not to miss out on one of the world's fastest-growing equity markets - such as buying into bankrupt Russian companies.
And not just obscure ones.
Shares in corporations that became synonymous with scandal in the late 1990s - like Menatep, Inkombank and Chernogorneft - continue to be actively traded on Austria's New Europe Exchange, or NEWEX, even though they are essentially worthless.
A subsidiary of the Frankfurt Boerse, Vienna-based NEWEX was set up last year as a hi-tech specialty exchange focusing on central and eastern Europe. During an average month, it handles trades worth some 300 million euros ($263 million) - the vast majority of which, according to NEWEX officials, comes from stock-crazy Germany.
Thirty-four Russian securities account for about 90 percent of NEWEX's business. In the first 10 months of the year, the 10 most liquid stocks - LUKoil, Gazprom, Unified Energy Systems and seven other Russian blue-chips - did more than $2 billion in turnover.
Yet, some NEWEX customers are actively trading American depository receipts, or ADRs, of insolvent companies that have no assets or fundamental value behind them.
In October, Inkombank and Mena tep, two former banking giants that went belly-up after the 1998 crisis, accounted for nearly a quarter of a million dollars worth of trades.
"It's a common thing for Germans to buy a stock they don't have any information about," said James Fenkner, chief strategist at investment bank Troika Dialog.
"What's even more surprising is that they just don't care," he said.
TITLE: Some Ideas To Improve St. Petersburg Tourism
TEXT: In response to "St. Petersburg: A Great Tourist Destination?," a letter to the editor by Terry Taylor, Nov. 24.
Editor,
I read with interest and some sadness this letter. I believe that the length of the letter indicates Taylor's care and concern for Russia, and my reason for writing stems from similar care and concern. Part of my sadness is derived from the lack of official response to the points Taylor has raised. Does this mean that issues such as this raised in your worthy newspaper do not get attention from any official level?
Recently my son and I spent time in Russia, including several trips to beautiful St Petersburg. My son experienced police treatment similar to that described by Taylor. My son was stopped four times and twice had money stolen from him by the police. The second time, he lost 500 rubles.
When he complained about this treatment, he was threatened with a trip to jail. I was also stopped twice, although no money was stolen from me. Both times, actually, the police were polite, although the last time they interrogated me at length without giving any explanation.
Nonetheless, my son loved St. Petersburg, although the stories he has been telling people since arriving back home are inevitably dominated by descriptions of the police, a fact that may discourage his friends from following his example and visiting the cultural paradise of St. Petersburg.
I also enjoyed my time in the city enough to want to return, perhaps to experience some of the winter there and even to look into some investment possibilities. However, I believe that the investment climate of the region is very much connected to the way that the city treats its guests from overseas.
Many analysts rightly focus on tourism as potentially a major business for St. Petersburg. Not only can it bring money into the local economy, but it can also do much to dispel the unflattering myths about Russia that have been conditioned among Westerners by the media for the last few generations. There is also the benefit of fostering world peace and understanding that comes from bringing different cultures together.
I would encourage local officials, though, to stop thinking about what tourism brings to the city now and to think instead about how much is lost needlessly through the poor treatment of tourists and how these problems can be rectified.
St. Petersburg has much to offer visitors, and I am sure that a few relatively minor changes can bring in many more tourists than the city already has and get them to stay longer and return more often. Here are a few suggestions:
1. Pay the police higher salaries and give them additional training to help them understand the benefits of treating visitors kindly and helping them. The city should also adopt a policy of apologizing to tourists who have been improperly detained and offering them some form of compensation. This would have a profoundly positive public-relations effect around the world, an effect that would help quickly reverse the impact of the negative stories circulating now.
2. Establish a tourist-complaint bureau, where any mistreatment of a tourist by anyone (including the police) could be reported and that would be responsible for acting on those complaints.
3. Set up tourist-information booths throughout downtown to help with small things such as booking tickets and accommodations. The city has a decided lack of English-language information services and this is hampering development.
In my home city, we have "tourist wardens" walking the streets in uniform helping anyone who approaches them or who even looks like they need help, a real, visible indication that our city welcomes and values tourists and treats all of them like VIP guests.
4. Move as quickly as possible to eliminate tourist visas entirely, as is the policy now in, for instance, Estonia for many Western countries.
5. In the meantime, eliminate the tourist-visa invitation requirement and the visa-registration process. In fact, it would be best to have just one type of visa instead of the many different types now available.
6. Reduce, or at least explain apologetically, the huge price differences for museum and theater tickets for foreigners compared to locals. I am not debating the rightness or wrongness of this policy, but am concerned rather with the perceptions that it creates among tourists.
David Phillips
Auckland, New Zealand
No Place To Sleep
Editor,
As an average St. Petersburg citizen who has some experience in traveling, I was moved by Taylor's letter.
There are many interesting thoughts and useful criticisms in this letter, and I sympathize with the author for the bad feelings caused by meeting our police. However, I also got the impression that it was written from a somewhat haughty position and looked at St. Petersburg through a prism of superiority ("I feel more comfortable in St. Petersburg now more than ever. But it is still Russia ...").
I got the impression that the author is used to being respected like a guru. Probably, he works as a manager and has Russian subordinates obeying his every command.
The world is complicated and changes slowly. It takes time and the work of civil society and the changing of attitudes, especially when we are talking about eliminating aggressive or negative attitudes.
Taylor acted correctly during his encounter with the police and lessons can be drawn that apply everywhere, since such incidents can and do happen anywhere, especially when a stranger is walking late at night, perhaps a bit drunk.
Police around the world watch such people and stop them. The police are the police everywhere. We saw what the Italian police did to the anti-globalists. We have seen the way American and French police treat suspected drug dealers. This is a global problem.
I am not justifying anything. Such actions should be punished by the authorities and criticized by the media. Everywhere. I have heard of Russians who had problems with the police in Italy or Barcelona or Prague or Poland. Nonetheless, they like these places and don't go around discouraging people from going there.
According to local statistics, the crime situation in St. Petersburg is similar to those of many other cities of the same size. Many of those cities are attractive tourist destinations.
Of course, the public and the authorities should continue to work against street crime and to upgrade our police force. Of course, we would like to see our police as effective and modern as their counterparts in Helsinki or Vienna.
However, I think that the real brake on the tourist industry in St. Petersburg is not crime or the police, but the shortage of decent 3-star hotels with friendly, English-speaking staff, as well as a generally poor tourism infrastructure.
Alexander Abramov
Saint Petersburg
Lonely Superpower
Editor,
I am a Canadian who is fond of Russia and your newspaper keeps me in touch with and close to what is important in Russia. I thank you for a job well done.
I'm so furious with America's cold policy toward Russia. Whenever relations start to improve, U.S policymakers immediately hit the panic buttons as if they need to keep an enemy out there to justify their super-power arrogance and to ignite weapon races all over again.
Why push Russia away from NATO? Actually, why does NATO still exist and why is it expanding? The Soviet Union and the Warsaw Pact are gone.
The EU has much to gain from economic and military cooperation with Russia, which would help improve global stability. But this doesn't sit well with the United States, which tries to create rifts between Europe and Russia. The expansion of NATO, especially to include the Baltic States, is just one clear example. The goal is to incite fears of Russia.
At the same time, the United States tries to keep Russia from developing relations with India and China.
Russia is helping the United States in Afghanistan, sharing intelligence and providing military support to the Northern Alliance. Plus, Russia has helped convince Turkmenistan, Uzbekistan and Tajikistan to provide support to the Americans. In short, Russian has been 100 percent behind U.S. efforts.
Now, will the United States support Russia? Will the United States pressure Georgia to stop supporting terrorism in Russia? We'll soon find out.
Canada is a member of NATO too, and it is a shame that we have been misguided by such an alliance. We need stronger relations with Russia to counterbalance that very lonely superpower on our southern border.
Alec Azar
Toronto, Canada
Pankin's Right
In response to "Building a 'Free' Press, Just Like America's," a column by Alexei Pankin, Dec. 7.
Editor,
I just finished reading Pankin's column in today's edition. Pankin couldn't be more right. Large corporations own (legally and "morally") the newspapers in the United States, most of which are brown-nosing the White House in order to avoid being "marginalized."
I have long maintained the view that the only reason why Russia and the United States have hated each other for so long is that they are basically so much alike. Both societies and both governments are thriving on the suppression of their people by all kinds of force. There is no difference between a KGB officer who told you that the state was concerned about your mental health and therefore ordered you to check into a sanitarium immediately and some red-neck sheriff in the middle of wonderful America, who would throw you in jail because you didn't leave town quick enough or had the wrong face (colored or whatever). Neither the biggest parade on Red Square nor the waving of the biggest stars and stripes would ever change that.
As far as news is concerned, American television news has been pathetic for anyone with an I.Q. above his or her shoe size for many years. I have for years gotten more information listening to the half-hour Moscow Evening News than listening to all three networks in the United States, which is a waste of time unless you consider stories such as a three-legged dog that saves his owner from burning to death in his bed with a cigarette to be news.
If it weren't for money-grabbing, people-grabbing, corrupt cops and politicians in Russia, I would go so far as to say that there are more civil liberties today in Russia than in America (but don't tell Putin, otherwise he'll think he's done something wrong and sends his goons from his former job all over the country).
There are many ways to prove that, such as true stories of a man being refused an occupancy permit to his own house by the local city council because the house was painted in the wrong shade of white (Laguna Beach, California). Or homeowners' associations who encourage members to spy on each other to check that they didn't leave their garage door open for more than the permitted 10 minutes. The examples are too numerous and too depressing to list.
Nobody would come up with idiocies like that in Russia. Yet in America - the land of the free and home of depraved - it is very much possible. But as long as the country is kept uneducated through an educational system that is second-to-none in stupidity and politics, it will remain happy.
Julius Caesar was right and still is today. As long as there is panem et circenses (bread - fast-food chains - and games - television shows), the people will be happy and will not care who is in power. Those who shout too loud could always been accused of being anti-American (such as Pankin, of course!) or - as the next step - investigated by the IRS, INS, FBI or whoever, until reason is found for them to be accused of terrorist activity (such as writing letters like this one).
Hell, if they can't find evidence, they can always make it up, right? Since you will be tried in secret by military tribunals, who will know the difference?
If secret military tribunals had been used against regular citizens in Mikhail Gorbachev's Soviet Union, there would have been cries of foul play from the Potomac and the Thames. But if America is using the same abusive tactics, then it can justify it anyway it wants. But the only voices of dissent I seem to hear are usually coming from your newspaper. Chris Floyd and his Global Eye are required reading for my home-schooled seventhth-grade son and it has definitely widened his horizons.
To summarize, I totally agree with Pankin and Boris Kagarlitsky. I only worry about how long it would be until someone from the American government will pressure the Russian government to investigate your newspaper for possible tax fraud, illegal bank loans or other fashionable ways of silencing opponents. Thanks for your views, which are always refreshingly different.
Peter Beck
Newport Beach, California
Cheap Shots
In response to Global Eye, a column by Chris Floyd.
Editor,
On the one hand, generally I enjoy Chris Floyd's columns. On the other, I can't help but notice that he never serves up more than critiques and scathing indictments regarding U.S. leadership and foreign policy. Cheap shots, in other words.
I am among those that believe that U.S. foreign policy and U.S. government in general leave a bit to be desired here and there. We are not perfect, and we do not and cannot always do everything right. It's a simpleton's game to criticize us.
Far more challenging is constructive criticism. How, exactly, can the U.S. improve the pernicious policies by which Floyd and others make a living by criticizing? At the same time, if Floyd has the wits to come up with viable alternatives to the U.S. thinking that he so obviously loathes, then he and your newspaper might begin to wield greater credibility among Western thinkers.
In the meantime, please be aware that his words come across as little more than cute whining with nothing useful to offer. He is entertaining, at least. I trust that you don't assume anything beyond that.
Terry Hallman
Tomsk
TITLE: Myths and Facts About Oil and the Economy
AUTHOR: By Andrei Illarionov
TEXT: TODAY, with attention riveted to oil-price movements, fluctuations in the price of a barrel of oil on the London or New York commodity exchanges seriously affect the mood in Russia. When prices fall, media commentators start predicting a crisis, while if there is an upturn the assumption is that things will sort themselves out. Given that markets are volatile, opinions switch back and forth like yo-yos. Moreover, a plethora of myths, delusions and fears has built up around the subject of oil prices.
Alarmist predictions distract our attention from the most important issue.
If you don't heat your house as winter is approaching, then all you can do is hope that the winter won't be too severe. If you don't purchase an air conditioner as summer approaches, you have little option but to hope there won't be a heat wave.
Whether there will be a crisis or whether industrial growth will continue in Russia depends primarily on the economic policies pursued and not on oil prices.
Let's look at the main issues regarding oil prices and economic policy.
1. Can Russia influence world oil prices?
No, it cannot. Given that the United States has been hit by recession, Japan is already firmly in recession, and there is a substantial slowdown in economic activity in Europe, it is completely nonsensical to take any measures to artificially support high oil prices. In conditions of recession, one cannot have high prices.
The Russian government's ability to influence oil prices is negligible. Russia's share of the world oil market is around 10 percent in terms of export volume and a little more than 6 percent by value. But even OPEC, whose market share today is around 40 percent, cannot control oil prices. It is also worth remembering that, over the past decade, our market share has already decreased considerably from 16 percent.
When Russia cuts exports, it simply loses market share. Today, total Russian oil exports to the world market are about 4 million barrels per day. The unused oil-producing capacity in OPEC countries alone is around 4.5 million barrels per day. Even if Russia were to suddenly cease exporting oil completely, its share would rapidly be replaced by oil not only from Kazakhstan and Azerbaijan, but also from OPEC members.
2. Should the government establish limits on the production and export of oil?
No, it should not. It is absolutely inadmissible for the state to interfere in the activities of private oil companies, and to set production and export levels. Such interference undermines the very foundations of a civilized market economy.
3. Is there such a thing as a "fair" oil price?
There is no such animal in the zoo as a "fair" price. The market sets the price of a commodity. Administrative interference in setting prices leads to inefficiency and imbalances. If the oil price is fixed above the market's equilibrium, then it leads to wastefulness and extravagance in the oil and gas sectors, and billions of dollars are spent on unnecessary investment. If the price is below the market's equilibrium, then consumers become wasteful and the energy consumption of national industry increases. Disequilibrium in prices leads to waste either way.
4. Is a high or a low oil price better for Russia?
The Soviet economy developed most successfully in the 1950s and the first half of the 1960s. At that time, the Soviet economy demonstrated very high growth rates. From the mid-1960s we embarked on large-scale production and export of oil, and the more oil we exported, the lower economic growth rates became, until growth rates de facto fell to zero in the 1980s and became negative in the 1990s.
The same rule applies to the last three years. From September 1998 to April 1999, when the oil price was very low (around $10 per barrel), annualized industrial growth was 18 percent, with machine building growing by 50 percent and light industry by 52 percent. When oil prices grew to $20 per barrel, industrial growth slowed to 9 percent. From October 2000 to June 2001, when very high oil prices prevailed, industrial growth fell to 2 percent, and in some months ceased completely.
A low oil price, as it turns out, is a blessing for the Russian economy, stimulating industrial growth and creating jobs.
A $1 drop in oil prices means an increase in GDP growth rate of about 0.9 percent. Low oil prices make it possible to preserve hundreds of thousands, if not millions, of jobs. In the period between September 1998 and April 2000, when the oil price was at its lowest, unemployment fell fastest, with the number of unemployed decreasing by almost 2 million.
5. What happens to the budget if the oil price falls?
If the oil price falls by $1, the budget loses approximately $1.4 billion over the year. If the oil price falls by $5, then the budget loses roughly $7 billion. Is this catastrophic or not? Planned budget revenues for 2002 are $67 billion to $68 billion. If the price of oil falls by $5 per barrel, budget revenues will be reduced by approximately 10 percent to $60 billion to $61 billion. However, even in this case, they will be more than twice as high as revenues for 1999 ($25 billion) and even higher for 2001 (expected to be $55 billion).
There will not in fact be a fall in revenues, but merely a slowing in the growth of budget revenues in dollar terms. Instead of budget revenues growing at 20 percent, they will grow at around 10 percent. Is this a catastrophe?
6. Do we need to cut budget expenditures?
The 2002 budget was calculated on the basis of clearly unrealistic oil prices. If we do not cut budget expenditures for 2002, there is a danger of committing another mistake. In 1998, when world oil prices fell from $16 to $10, the Venezuelan government slashed budget expenditures eight times and the Mexican government 12 times, so that only the most crucial of the state's expenditures were covered. Other oil exporting countries followed similar policies, with the notable exception of Russia. Neither the government nor the State Duma tried even once to introduce amendments to the budget in connection with falling oil prices. The outcome in August 1998 is well known.
7. What should Russia do with OPEC?
OPEC is an unreliable partner. Not long ago, the organization kept inviting us to join the cartel. Lately it has been declaring Russia an enemy and threatening to launch a price war against us. OPEC is an ineffective organization; it is well-known that OPEC decisions on quotas are not adhered to by the cartel's own members. OPEC is a historically doomed organization. In the 1960s and 1970s, OPEC's market share was as high as 73 percent; while today it has fallen to 40 percent and will continue to fall. OPEC's success in controlling oil markets in the 1970s and 1980s was linked to the specific features of the world order in the second half of the 20th century, in particular to the Cold War. This epoch is now history and in the new order OPEC's influence is declining and will continue to decline.
Russia's position in the oil price war indeed looks stronger than OPEC's. Russia has a much more diversified economy and we are less dependent on oil than Saudi Arabia, Kuwait or Venezuela.
8. Will Russia succeed in avoiding a crisis?
The answer to this question can be found not in the price of oil but in the quality of government decisions, i.e. the responsibility and consistency of government policy. In April 2001 in his annual address to parliament, President Vladimir Putin formulated the principles that would enable us to protect the Russian economy and economic policy from world market volatility. The president spoke of the need to form two budgets, the second budget being a stabilization fund. He also spoke of calculating the main budget based on conservative estimates of oil prices. A conservative estimate under current circumstances looks like $10 per barrel rather than $18.50 or $23.50.
An aggressive policy in foreign-debt repayment is also a factor in stability, reducing exposure to external risks. If we adhere to these principles and do not repeat old mistakes or make new ones, the Russian economy will develop irrespective of the oil price.
Whatever the political battle around the 2002 budget, the government will have to cut some expenditure items. It is better that the government does this itself, rather than wait for this to happen in response to market imperatives, as was the case in August 1998.
Andrei Illarionov is economic adviser to President Vladimir Putin. He contributed this comment to The St. Petersburg Times.
TITLE: Is This Incompetence - or Worse?
TEXT: Here's a story of crime, journalism and incompetence that I heard last week at a presentation by the Agency for Journalistic Investigation.
The story begins last autumn when the city was struck by a series of murders. Four people, including an elderly woman and a two-year-old boy, were brutally killed. According to the head of the agency, Andrei Konstantinov, the people responsible for these murders had even more sinister plans in mind.
Konstantinov said that they planned a range of terrorist acts in St. Petersburg "in order to spread panic among people and to earn money by providing safety guarantees."
The agency spent two months tracking down this group. They identified the ringleader, Andrei Telepin, a former student at the St. Petersburg Naval Academy, by scouring the photos of more than 500 cadets. They met suspects and witnesses in sleazy apartments in the outskirts of the city, talking to them and interrogating them.
Now, I don't know exactly how the agency got its information or how it "interrogated" its suspects. However, as I listened to Konstantinov's presentation, I couldn't help but wonder where the police were during all of this. Why were journalists doing the work that law enforcement officers should be doing?
I later asked this question of Vyacheslav Piotrovsky, the chief of St. Petersburg's criminal police. He told me that the police aren't able to pursue such cases "as actively" as journalists can.
"We are bound to act within existing laws, but journalists are more mobile, so we are very interested in cooperating with them in order to get information," Piotrovsky said.
So it is up to journalists to pay $500 to a suspect in order to get a photograph of the ringleader. It is up to journalists to buy Telepin a train ticket to lure him to return to St. Petersburg.
"We told him that we were coaches from a boxing club. The group had tried to kill a boxer once, and we pretended that we wanted to find out if this was a contract hit. He agreed to come and discuss it, but we would have to buy him a ticket," Konstantinov said.
Vyeshnikov was in charge of the operation. He agreed that Telepin would call him as soon as he arrived in St. Petersburg. The police and the prosecutor's office knew about the agency's plan, according to Konstantinov, who said that they informed the police "about every single move."
So here's what the prosecutors did. On the day before the meeting was supposed to take place, Vyeshnikov was detained and charged with kidnapping one of the other suspects, a man who had already been arrested and was in police custody at the time.
To make matters worse, prosecutors spread information about Vyeshnikov's detention through the mass media, including the names and places of work of all the journalists involved.
"We thought: 'Well, that's it,'" Konstantinov said. "[Telepin] or any of his friends could have read about the whole thing in the papers."
Luckily, it turns out that these people don't keep up on the news very well. Telepin arrived in St. Petersburg and met with Vyeshnikov, who had already been released by prosecutors. The police caught up with Telepin and arrested him in the Pribaltiiskaya Hotel.
The prosecutor's office has had nothing to say about the incident. No explanation. No apology. And I'm left desperately hoping that what we are talking about here is merely gross incompetence and not something a lot worse.
TITLE: Chris Floyd's Global Eye
TEXT: Moment by Moment
Black milk of daybreak, we drink it at evening.
- Paul Celan, "Deathfugue"
The children were walking to school. The young people were going out to dance.
The children stepped on a booby trap planted by a soldier. The young people were shredded by the nails of a suicide bomb. They were all blown up, destroyed.
One moment, the force of life animated their biological matter, their brains seethed with billions of electrical impulses, the matrix of consciousness brought the entire universe into being, within them, within each of them, each solitary vessel of knowing.
The next moment, only the matter remained: inert, coagulated, decaying. There was no more knowing, no more being; the universe had come to an end.
Why?
We drink it at midday and morning; we drink it at night.
They would have us believe it is because Ishmael warred with Jacob. They would have us believe it is because this or that Divine Will requires it. They would have us believe it is because ethnicity or nationality or religion or some other arbitrary accretion of history and happenstance must override both the innumerable commonalities of all human beings and the radical, irreplaceable uniqueness of each individual.
They would have us believe anything other than the truth: that everyone and everything will die; that all nations, ethnicities, religions and structures will fall away into rubble, into nothingness, and be forgotten; and that even the planet itself will be reduced to atoms and melt away, like black milk, into the cold deeps of empty space. And in the face of this truth, nothing matters ultimately but each specific, fleeting instance of individual being, the shape we give to each momentary coalescence of atomic particles into a particular human situation.
That's all we have. That's all there is. That's what we kill when we murder someone. That's what we strangle when we keep them down with our boot on their throat.
We drink and we drink.
Is it not time to be done with lies at last? Especially the chief lie now running through the world like a plague, putrescent and vile: that we kill each other and hate each other and drive each other into desperation and fear for any other reason but that we are animals, forms of apes, driven by blind impulses to project our dominance, to strut and bellow and hoard the best goods for ourselves. Or else to lash back at the dominant beast in convulsions of humiliated rage. Or else cravenly to serve the dominant ones, to scurry about them like slaves, picking fleas from their fur, in hopes of procuring a few crumbs for ourselves.
That's the world of power - the "real world," as its flea-picking slaves and strutting dominants like to call it. It's the ape-world, driven by hormonal secretions and chemical mechanics, the endless replication of protein reactions, the unsifted agitations of nerve tissue, issuing their ignorant commands. There's no sense or reason or higher order of thought in it - except for that perversion of consciousness called justification, self-righteousness, which gussies up the breast-beating ape with fine words and grand abstractions.
And so: Israeli soldiers plant a trap to kill schoolchildren. And so: Palestinian assassins slaughter young people at play. And so: Americans rain murder on innocent civilians - more than 150 last week alone - then lie about it brazenly, even though British reporters are there on the ground in the midst of the dead. And so: bin Laden plots murder with "dirty bombs," explosions to spread clouds of deadly radiation. And so: the fine words and breast-beating goes on and on - prosperity, freedom, holiness, security, justice, glory, our people, our homeland, God's will be done, we will prevail.
We shovel a grave in the air where you won't lie too cramped.
Beyond the thunder and spectacle of this ape-roaring world is another state of reality, emerging from the murk of our baser functions. There is power here, too, but not the heavy, blood-sodden bulk of dominance. Instead, it's a power of radiance, of awareness, connection, breaking through in snaps of heightened perception, moments of encounter and illumination that lift us from the slime.
It takes ten million forms, could be in anything - a rustle of leaves, the tang of salt, a bending blues note, the sweep of shadows on a tin roof, the catch in a voice, the press of a kiss, a line of Mandelstam. Any particular, specific combination of ever-shifting elements, always unrepeatable in its exact effect and always momentary. Because that's all there is, that's all we have - the moments.
The moments, and their momentary power - a power without the power of resistance, defenseless, provisional, unarmed, imperfect, bold. The heavy, blood-sodden cycle of war and retribution stands as the image of the world of power. What can serve as the emblem of this other reality? A kiss, perhaps: given to a lover, offered to a friend, bestowed on an enemy - or pressed to the brow of a murdered child.
We drink you at morning and midday; we drink you at night
Both worlds are within us, of course, like two quantum states of reality, awaiting our choice to determine which will be actuated, which will define the very nature of being - individually and in the aggregate, moment by moment. This is our constant task, for as long as the universe exists in the electrics of our brains: to redeem each moment or let it fall. Some will be won, many more lost; there is no final victory. There is only the task.
We drink and we drink.
TITLE: U.S. Focus Now on Search for Bin Laden
AUTHOR: By Chris Tomlinson
PUBLISHER: The Associated Press
TEXT: TORA BORA, Afghanistan - With the hunt for Osama bin Laden now the main focus of the Afghan conflict, U.S. marines moved closer to Kandahar on Monday to search for al-Qaeda fighters. In the east, tribal fighters launched a three-pronged assault on pro-bin Laden warriors defending a mountain hideout. U.S. and Afghan officials regard both areas as likely bin Laden hiding places.
Marines also secured the abandoned grounds of the U.S. Embassy in the heart of Kabul - the first time American troops have been seen in the capital since the Taliban fled last month.
In the south, a column of marines with heavy weaponry and helicopters left their Camp Rhino in the desert southwest of Kandahar. They moved north to what a spokesperson said are "key pieces of terrain" near the city, now under tribal control.
Kandahar, Afghanistan's second-largest city, had been the Taliban's last stronghold before a chaotic surrender Friday, when hundreds of pro-bin Laden fighters fled. The marines have been trying to choke off their escape routes.
The marines were blocking "roads and avenues of exit to capture al-Qaeda and enemy forces," said spokesperson Captain Stewart Upton. "If the Taliban hold their weapons, they will die." He said the marines would not enter Kandahar. Another spokesperson, Captain David Romley, said marines were being wary of unmarked minefields in the sandy and rocky landscape. "The closer you get to Kandahar the more dangerous it gets," he said.
Just after dawn in the east, U.S. air strikes hit Tora Bora, a vast network of caverns and tunnels carved deep into the White Mountains.
After the bombardment, fighters from bin Laden's al-Qaeda organization surfaced from their caves and fired mortars at tribal forces trying to move their aging Soviet-built T-55 tanks forward. Hours later, small squads of tribal fighters launched an attack and advanced along mountain trails under the cover of tank fire.
Hafta Gul, a senior officer in the Eastern Shura's militia, said tribal forces were "attacking from three sides," while U.S. bombing paused to avoid hitting the fighters.
Meanwhile, Pakistani forces were deployed along the border near Tora Bora on Monday to stop al-Qaeda forces from entering the country. Helicopters deployed personnel on mountain ridges to monitor the movement of the Islamic militants, witnesses said.
In Kabul, a marine contingent swept the grounds of the U.S. Embassy while a State Department team went to work inside. The United States closed the embassy in 1989, citing security concerns after the occupying Soviets left Afghanistan and feuding Afghan factions took over the capital.
Citing intelligence reports, U.S. officials, including Vice President Dick Cheney, and some Afghan commanders think bin Laden may be hiding somewhere near Tora Bora. However, other Afghan officials say he has probably fled to mountains near Kandahar. Another fugitive, Taliban supreme leader Mullah Mohammed Omar is also thought to be on the run in the south.
TITLE: Bush Administration Reluctant To Release Bin Laden Tape
AUTHOR: By Scott Lindlaw
PUBLISHER: The Associated Press
TEXT: WASHINGTON - The Bush administration is weighing whether to make public a videotape in which Osama bin Laden says he was pleasantly surprised by the extent of damage from the Sept. 11 terrorist attacks.
On the tape, bin Laden recalls tuning in to the news hours before the attacks, waiting to hear reports about the destruction, a U.S. official said. Bin Laden also says that after the first plane struck, he told those with him that more devastation was coming. U.S. Vice President Dick Cheney said the tape shows clearly that bin Laden was behind the attacks.
A key consideration for the administration is whether releasing the tape would help win over Muslims who doubt the veracity of U.S. claims that bin Laden was behind the attacks.
Senator Bob Graham, chairperson of the Senate Intelligence Committee, said Monday the tape should be made public. "I believe if you have a choice between treating the American people at arm's length and as adults, you treat them as adults, and they should have the opportunity to see this tape," he said.
"It is ... equally important that the world see this tape because there are still some places where there is suspicion about whether there is evidence to link bin Laden to the events of Sept. 11," Graham said. The same stance was taken by senators Joseph Biden, who chairs the Senate Foreign Relations Committee, and Chuck Hagel. "The world needs to see this," Hagel said Sunday.
On the other hand, Gehad Auda, a professor of political science at Cairo's Helwan University, said broadcast of the tape would create a "propaganda splash" but "not cause any turn-around in public opinion."
Cheney said it is not his decision whether to release the tape but indicated there was reluctance to do so. "We've not been eager to give the guy any extra television time," he said.
Cheney confirmed the tape's existence and other officials described the contents on condition of anonymity. The tape provides clear proof the leader of the al-Qaeda network was behind the attacks on the World Trade Center and the Pentagon, the vice president said.
"He does, in fact, display significant knowledge of what happened and there's no doubt about his responsibility for the attack on Sept. 11," Cheney said.
The tape shows bin Laden being interviewed or meeting with a cleric. He speaks in Arabic and discusses the terrorist attacks, according to Cheney, who said he had seen parts of the tape. The al-Qaeda leader expresses surprise and pleasure at the amount of damage done to the World Trade Center, the official said. Another official said bin Laden indicates on the tape he had expected the twin towers to collapse only down to the level of where the planes struck.
Bin Laden's comments show he had specific advance knowledge of the time, method and location of the attacks, the officials said. A third official said the tape suggests the ringleaders of the attacks did not tell all the hijackers that their mission would end in death.
U.S. officials declined to say how the United States obtained the tape, which one described as amateurish and apparently made with a handheld video camera. The Washington Post said it was discovered during the search of a private home in Jalalabad, Afghanistan
Bin Laden has not publicly taken responsibility for the attacks, though he has praised them.
TITLE: WORLD WATCH
TEXT: Fresh Face
TOKYO (AP) - Japanese Crown Princess Masako on Saturday checked out of the palace hospital, cradling her newborn daughter in her arms and giving the public its first glimpse of the royal family's newest member.
Masako and her husband, Crown Prince Naruhito, grinned broadly as the mother held the baby, Aiko, before a bank of television cameras.
The child slept soundly wrapped in a white cloth, with only her face and a shock of hair visible.
After bowing to nurses and doctors, the family left the palace complex in a limousine and proceeded to their residence in central Tokyo. Crowds lined the route, cheering and waving Japanese flags.
Mother and daughter were in good health, a palace official said on condition of anonymity. At home, Aiko was to be placed in a cradle once used by her grandfather, Emperor Akihito, and his three children.
As the eldest son of Akihito and Empress Michiko, 41-year-old Naruhito is heir to the throne. The birth of the princess has intensified discussion of whether the government should abandon the current males-only law in favor of one that would allow a woman to assume the throne.
Ebola Outbreak
LIBREVILLE, Gabon (Reuters) - Gabon has cordoned off a remote forest village to stop an outbreak of the deadly Ebola virus thought to have killed at least 10 people, health authorities said on Monday.
The World Health Organization confirmed during the weekend that at least one of those killed by hemorrhagic fever in the central African country had died of Ebola - which bleeds its victims to death and has no known cure.
"The zone is completely cordoned," Gabon's assistant health director, Obame Edou, said. "A team has left for the area today and the government will not delay in releasing news on the epidemic."
An Ebola epidemic in a nearby area of Gabon killed at least 66 people in 1996. The latest deaths coincide with an outbreak of hemorrhagic fever that has killed at least 28 people in the Democratic Republic of Congo, where Ebola was discovered in 1976.
Ebola is passed on through contact with body fluids. Victims suffer from aches and fever similar to flu before developing severe headaches, stomach pains and diarrhea. Only in the last stages - when the virus eats through victims' veins and arteries and blood courses from their bodies - is it clear that Ebola has struck. In some epidemics, up to 90 percent of victims die within days.
Sophie Goes Home
LONDON (Reuters) - The Countess of Wessex, wife of Britain's Prince Edward, looked frail as she left hospital Monday, four days after emergency surgery for an ectopic pregnancy.
Sophie Rhys-Jones, 36, smiled at reporters and well-wishers as she walked out of London's King Edward VII hospital on the arm of her husband, the youngest son of Queen Elizabeth.
She was clearly still in pain and winced as she stepped into a car.
A Buckingham Palace spokesperson said doctors had given Sophie the all-clear to return to her home at Bagshot, 45 kilometers west of London, where she would rest.
In an ectopic pregnancy, the embryo develops outside the womb. The condition can be fatal if not detected early enough.
Sophie was said to be traumatized by the loss of her unborn baby, but said in a statement over the weekend that she and Prince Edward still hoped to start a family.
Parliament Meets
PRISTINA, Yugoslavia (AP) - Kosovo's first multiethnic legislative assembly in 13 years opened Monday amid tight security and hopes it will help bring lasting peace to the volatile southern Serbian province.
The 120-member assembly brings together deputies from the ethnic Albanian population, a majority in Kosovo, and lawmakers from other ethnic groups, including 22 Serb lawmakers.
"This is a historical day for Kosovo," Hans Haekkerup, the top UN administrator of the province, told the legislators, who were searched before entering the building and had to walk through a metal detector to reach the chamber.
Referring to former Yugoslavia's communist past, he said, "For the first time in history, we are now participating in the opening of a truly democratically elected assembly representing the people of Kosovo."
Nexhat Daci, a member of the moderate Democratic League of Kosovo, was selected as speaker of the parliament.
The legislature will be the third force to govern the province alongside UN officials and NATO-led peacekeepers, who took control of Kosovo in June 1999 after 78 days of NATO air strikes.
The UN administrator reserves the right to veto any decision, and the assembly is not allowed to take up such contentious issues as the final status of Kosovo.
All ethnic Albanian parties want Ko sovo to become independent, but the Serbs insist it remain part of Yugoslavia.
Opposition Win
HARARE, Zimbabwe (AP) - Zimbabwe's main opposition won weekend mayoral elections in a former ruling party stronghold, striking a sharp blow to President Robert Mugabe in a district near his home and birthplace.
Francis Dhlakama of the Movement for Democratic Change won 2,900 votes cast Saturday and Sunday in the farming and textile center of Chegutu, 120 kilometers southwest of Harare, state radio reported.
Stanley Majiri of Mugabe's ruling ZANU-PF party captured 2,452 votes. A total of 5,596 ballots were cast, a turnout of about 27 percent of eligible voters.
Chegutu lies 40 kilometers from Mugabe's birthplace and rural home in Zvimba, neighboring districts long seen as among the most loyal to his party.
The opposition party said its victory showed voters' resilience in the face of intimidation and violence by ruling party campaigners.
"It confirms the quiet but devastating losses being suffered by ZANU-PF," said MDC spokesperson Learnmore Jongwe.
Earlier this year, the opposition won mayoral elections in the western provincial capital of Bulawayo and the southern capital of Masvingo. Mayoral elections in the capital, Harare, must be held before Feb. 11, ahead of national presidential polls before late March.
An opposition victory in the Harare mayoral election would be seen as a major psychological boost for the party, which is mounting the biggest challenge to Mugabe's hold on power since he led the nation to independence in 1980.
TITLE: Ronaldo Breaks Scoring Drought for Inter
PUBLISHER: The Associated Press
TEXT: ROME - Ronaldo scored his first goal in more than two years Sunday, helping Inter remain in first place in the Italian league with a 3-1 victory at Brescia.
"I am overjoyed because this is a great day for me," Ronaldo said.
The frequently injured Brazilian scored the opening goal with a right-footed shot from the edge of the penalty area in the 18th minute. The play was set up by Christian Vieri, who had two goals.
"If we had to lose, better it was on a goal by Ronaldo," Brescia coach Carlo Mazzone said. "There was a great joy and emotion in his eyes when he scored. It was a happy moment for all those who love soccer."
Ronaldo and Vieri, the dream pairing for Inter fans, started together for the first time since November 1999.
Ronaldo's previous goal came Nov. 21, 1999, when he made a penalty kick in Inter's 6-0 rout of Lecce. That was his last full game for Inter.
A torn right knee ligament required two operations and a long rehabilitation. He was sidelined until the start of this season.
Ronaldo received a standing ovation when he scored and again when he left after 66 minutes, his longest performance for Inter since his return.
The victory gave Internazionale 28 points in Serie A, two ahead of defending champion AS Roma and surprising Chievo.
AS Roma won 2-1 at Parma, on a long deflected shot by Diego Fuser. Chievo, rebounding from a 3-2 loss against AC Milan last week, downed Lecce 2-1 on a second-half penalty kick by Eugenio Corini.
At night, AC Milan and Juventus played to a 1-1 tie that left both teams farther behind Inter.
In other games, Lazio defeated Fiorentina 3-0; Udinese downed Verona 2-1; Atalanta rallied past Torino 2-1; and Perugia stopped Venezia 2-0.
England. Thierry Henry hit an injury- time winner as Arsenal came back from two goals down to beat Aston Villa 3-2 on Sunday, halving Liverpool's Premier League lead to three points and moving further ahead of sliding Manchester United.
The day after the Reds lost 1-0 at home to West Ham to fall 11 points off the lead and Liverpool downed Middlesbrough 2-0 to stay clear at the top, Arsenal fell behind in the first half at Highbury to a strikes by former Gunner Paul Merson and Steve Stone.
The second half was only seconds old when half-time substitute Sylvain Wiltord hit back and then two strikes by Henry captured all three points for Arsene Wenger's team.
Two Harry Kewell goals put third place Leeds on the road to victory at Ewood Park before Henning Berg replied for Rovers seven minutes from the end. Robbie Fowler started for the visitor but made little impact.
On Saturday, Liverpool opened up a temporary six-point lead by downing Middlesbrough 2-0 at Anfield with top-quality, long range strikes from Michael Owen and Patrik Berger.
Manchester United manager Alex Ferguson, whose team has won the league title seven times in the last nine seasons, rested big summer signings Juan Sebastian Veron and Ruud van Nistelrooy and again left David Beckham on the bench for the Old Trafford game against West Ham and was punished by a second half strike by Jermain Defoe.
After six losses, Ferguson admitted it would take a miracle for United to now win the title for the eighth time in 10 seasons.
Ipswich stayed stuck to last place after a 1-0 defeat at home to Newcastle on Sunday, the only goal coming from Peruvian international Nolberto Solano after 20 seconds. George Burley's team, beaten 4-1 in the UEFA Cup by Inter Milan on Thursday, has just nine points - four fewer than anyone else.
Spain. Alaves leapfrogged Real Madrid to grab the top spot in the Spanish league Sunday with an impressive 2-0 victory at Zaragoza in the 16th round.
Striker Ruben Navarro hit a goal in each half to allow the season's surprise side to regain the leadership it lost for 24 hours after Madrid's 2-0 victory at Tenerife on Saturday.
In other games, FC Barcelona drew with Celta de Vigo 2-2, Real Sociedad tied Real Betis 0-0 and Deportivo de La Coruna edged Valencia 1-0.
Alaves has 30 points and is a point clear of new No. 2 Deportivo. Real Madrid drops to third with 28 points, level with Betis but with a superior goal difference
Alaves' latest victory, which keeps it top after two consecutive rounds of matches, marks a landmark in its 80-year history. The Vitoria-based club's only previous stay at the top of the standings, way back in December 1930, lasted for just one round.
Navarro confirmed the Basque side's initial superiority when he deflected midfielder Jesus Turiel's long shot into the net from close range in the 34th minute.
The 23-year-old striker then brilliantly extended Alaves' lead three minutes into the second half when he controlled midfielder Pablo Gomez's long ball on the edge of the area and nonchalantly lobbed home.
Zaragoza made little headway against Mane Esnal's resolute side, which has conceded just nine goals this season for the division's best defensive record.
Barcelona is without a league win in four matches after being outplayed by Celta for large periods of a 2-2 draw.
The Catalan side, lacking suspended striker Patrick Kluivert, made an ideal start when midfielder Gabri Garcia netted in the second minute.
Celta dominated until the interval, but Barcelona began the second half in similar fashion when Argentine international Javier Saviola, who turns 20 on Wednesday, squeezed the ball home in the 48th minute for his seventh league goal of the season.
Celta fought back in the 73rd minute when substitute Sergi Barjuan scored an unlikely own goal with his knee.
Brazilian forward Edu Schmidt headed home Alexander Mostovoi's cross for a deserved equalizer in the 84th minute.
In the final minute, Barcelona's Swedish international defender Patrik Andersson was fitted with a neck brace and carried off on a stretcher after being injured making a clearance.
Celta midfielder Valery Karpin was red-carded in injury time for aiming a kick at Barjuan, with whom the Russian international clashed earlier in the game.
Real Sociedad played out an uneventful goalless draw with Real Betis.
The tie ends Betis' three-game winning streak and confirms No. 19 Sociedad's poor home form, the worst in the division with only two wins in eight games.
Germany. Berlin and Schalke, trying to stay within striking distance of the Bundesliga leaders, played to a 0-0 tie Sunday. Berlin, in sixth place, has not lost in seven Bundesliga games. Bayer Leverkusen leads with 39 points, followed by Borussia Dortmund at 37.
TITLE: Kasparov Dominates In Last-Day Blitz Series
AUTHOR: By Robert Huntington
PUBLISHER: The Associated Press
TEXT: MOSCOW - Chess grandmaster Garry Kasparov destroyed Braingames world champion Vladimir Kramnik on Sunday in a series of blitz chess games, walking away with the bigger paycheck on the final day of their exhibition tournament.
Kasparov won 6.5 to 3.5 in the final match of the Botvinnik Memorial Tournament, named after the former Soviet world champion Mikhail Botvinnik.
It wasn't as close as this score would indicate since Kasparov probably missed two other chances to win and Kramnik's only win came in the ninth game after the series had been decided.
"Today was not my day," Kramnik said afterward.
Throughout the tournament, the two grandmasters played 20 games at various time controls for a total purse of $500,000. Kasparov earned $255,000, and Kramnik $245,000.
They drew four games at regular time controls before playing six games of rapid chess. Kasparov and Kramnik each won one game, and the rest were drawn. That left Sunday's 10 rapid games.
Kasparov won the first game and Kramnik was lucky to draw the second. The next three games were drawn. Then Kasparov broke the match open with three consecutive wins. Kramnik won the ninth game and the last game was drawn.
In blitz games, each player gets five minutes for the entire game. With so little time, the quality of play goes down. But the number of errors makes draws less likely so the games become more interesting for average players to watch. They are more tactical and less strategic.
A few blocks away, the rival FIDE World Championship tournament is being held in the Kremlin. Defending FIDE champion Viswanathan Anand of India is pitted against Vassily Ivanchuk of Ukraine in the semifinals, while Russia's Peter Svidler plays Ruslan Ponomariov of Ukraine.
Since 1993, chess, like boxing, has had two world champions. In that year, Kasparov broke away from FIDE and formed the Professional Chess Association. He defended his title under the PCA's auspices in 1993 and 1995. But the PCA was dissolved in 1998.
In 2000, he lost a match to Kramnik, sponsored by braingames.net, an Internet start-up company. Kramnik is scheduled to defend his title next October against the winner of a qualifying event in July.
But Kasparov remains the world's highest rated player with Kramnik second and Anand third.
After the game with Kramnik, Kasparov insisted that the only legitimate world championship match would be a rematch between the two players. This is unlikely to be held since Braingames announced that it plans to hold a qualifying tournament to determine Kramnik's challenger. Kasparov has ruled out participating in any such qualifier.
TITLE: Nebraska in Rose Bowl Despite Final-Game Collapse
AUTHOR: By Richard Rosenblatt
PUBLISHER: The Associated Press
TEXT: With no playoff in place, college football almost always comes up with a wacky way to end the season. It came up with a doozy on Sunday.
Nebraska will play undefeated Miami in the Rose Bowl for the national championship on Jan. 3, thanks to an amazing series of upsets during the last two weeks that lifted the Huskers (11-1) in the final Bowl Championship Series standings.
Not even a last-game 62-36 loss to Colorado could keep Nebraska out of the BCS' title game.
Miami (11-0) finished first in the final standings, and the Huskers beat out the Buffaloes for second place by a scant five hundredths of a point. Oregon was fourth.
"We think the formula is fair," BCS chairman John Swofford said. "Controversy doesn't affect credibility."
Don't tell that to Oregon coach Mike Bellotti, whose Ducks (10-1) will play the Buffaloes (10-2) in the Fiesta Bowl.
"I liken the BCS to a bad disease, like cancer," the usually mild-mannered Bellotti said. "Not to take anything away from Nebraska or Colorado - they're great football teams - but one has two losses and the other didn't win its conference championship. We're No. 2 in both polls, but those things don't have a lot of merit, obviously."
Colorado coach Gary Barnett thought the BCS system worked: "It just didn't work in our favor."
Added Florida coach Steve Spur rier: "As we all know, college football is not the most fair thing without a playoff system."
Thanks to LSU's 31-20 upset of Tennessee in Saturday night's Southeastern Conference title game, Nebraska found itself packing for Pasadena in what turned into a glorious weekend for the HuskerNation. On Saturday night, quarterback Eric Crouch won the Heisman Trophy.
In the final BCS standings, Miami had 2.62 points, Nebraska 7.23 points, Colorado 7.28 and Oregon was fourth with 8.67 points.
Nebraska was No. 4 in the AP media poll and the USA Today/ESPN coaches poll on Sunday, but held a sizable edge over No. 2 Oregon and No. 3 Colorado in the computer portion of the BCS formula.
"Colorado and Oregon are great teams," Nebraska coach Frank Solich said. "Anytime you don't have two clear-cut, undefeated teams, you're going to have controversy."
The final margin was so close that if the Buffaloes were one spot higher in any of the computer ratings, they would have been off to the Rose Bowl instead of the Huskers.
"It's been an extraordinary year, with upsets and unexpected turns," Swofford said. "A great thing for college football. It's brought added interest to the BCS bowl games. Five teams had opportunities to win a game to put themselves into the national championship game. None were able to do so."
TITLE: SPORTS WATCH
TEXT: Looking To Stay
MANCHESTER, England (Reuters) - England captain David Beck ham said Monday his future lay at Man chester United.
"I want to carry on playing for Manchester United," Beckham told the Manchester Evening News. "They are the team I support, they are the team my family support and it is the place where I am most loved by the fans and I love them."
Beckham's contract expires in the summer of 2003 and he has yet to sign a new one.
The 26-year-old midfielder, who was crowned BBC Sports Personality of the Year on Sunday, was again relegated to the bench last Saturday as West Ham United inflicted a second straight Premier League defeat on the champions.
Irish Hire New Coach
SOUTH BEND, Indiana (AP) - Former Georgia Tech coach George O'Leary has been picked to replace Bob Davie, who was fired a week ago as head football coach at Notre Dame. The Irish lost six or more games three times under Davie, whose 35-25 record gave him the third-worst winning percentage in Irish history.
O'Leary led Georgia Tech to a 52-33 record in seven seasons and five straight bowl game appearances.
"My job is twofold, to graduate our athletes and to win a lot of football games," the gruff, no-nonsense O'Leary said. "I'm coming to Notre Da me to win games and win a lot of them. That's what it is all about."
The Irish, who haven't finished in the Top 10 since 1993 and last won a national championship in 1988, hope O'Leary can get Notre Dame quickly back among the country's elite programs.
Final Chapter?
LONDON (Reuters) - World heavyweight champion Lennox Lewis is ready to quit boxing if he beats Mike Tyson in April, the BBC Sport Web site reported on Monday.
"When Muhammad Ali was champion there was also Joe Frazier and George Foreman at the highest level," said Lewis.
"In my era there has been myself, Evander Holyfield and Tyson. I've already fought Holyfield twice so Tyson would be the final piece of the jigsaw," said the 36-year-old Briton at the BBC Sports Personality of the Year ceremony on Sunday evening.
"Once I have beaten Tyson, I'll leave it to the younger guys coming through."
Lewis won back the World Boxing Council (WBC) and International Boxing Federation (IBF) titles last month when he knocked out American Hasim Rahman in the fourth round in Las Vegas.
Bid Back Out
BERLIN (Reuters) - Berlin has decided not to bid to host the 2012 Summer Olympics.
In a reversal of a decision announced on Friday to go ahead with a bid, the local Social Democrat (SPD) party and the Party of Democratic Socialism (PDS), who are set to share power in the city-state, have decided to scrap plans for a campaign.
"But we don't rule out a bid for 2016," SPD mayor Klaus Wowereit told German television on Sunday.
The two left-wing parties have started coalition talks and hope to form a government for the heavily-indebted German capital by mid-January.
The PDS is the successor party to the communist SED that ruled East Germany before the fall of the Berlin Wall in 1989.
Shortly after the Wall fell, the city launched an unsuccessful bid for the 2000 Olympics which were awarded to Sydney.