SOURCE: The St. Petersburg Times
DATE: Issue #736 (2), Tuesday, January 15, 2002
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TITLE: Mironov Moves To Raise City's Status
AUTHOR: By Vladimir Kovalyev
PUBLISHER: Staff Writer
TEXT: Federation Council Speaker Sergei Mi ro nov announced plans to submit a draft law that would secure for St. Petersburg reimbursement for the costs it incurs in its role as Russia's second capital. If the bill becomes law, it could mean an additional several hundred million dollars annually for the local budget.
 
Mironov's draft, which is currently undergoing legal expertise in the Federation Council's legal commission, does not envision the transfer of state agencies or ministries to St. Petersburg.
 "There is no discussion of moving any ministries to St. Petersburg," said Lyud mila Fomicheva, Mironov's spokes person, in an interview last week. "This is only about refunding the money that the city spends to host various visits, conferences and events organized by the government."
 According to Article 1 of Mironov's draft, the city of St. Petersburg and Leningrad Oblast will be obliged to provide the federal government "with plots of land, buildings, estates, residential space and communal and transportation services" for such events. 
 Article 3 stipulates that expenses incurred will be fully reimbursed by the federal government, which must allocate funds for this purpose in its annual budget.
 City Hall spokesperson Alexander Afanasiev said that Governor Vla di mir Yakovlev had been pushing for such reimbursement from Moscow for many years.
 "Now, St. Petersburg fulfils these functions for free," Afanasiev said in an interview last week. 
 "No document sets out these 'capital' functions, and now [President Vla di mir] Putin has become used to bringing various [world] leaders to St. Petersburg," Afanasiev said. "But the status of the city as a place to host such events has not been determined officially."
 Afanasiev also pointed out that a number of federal offices, including the State Heraldic Commission, which oversees the preparation of state symbols, and the Russian Maritime Register of Shipping, which monitors the technical condition of ships, are already based in St. Petersburg.
 "In addition, there are many institutions in the city that are in the federal sphere of responsibility, such as the State Hermitage Museum," Afanasiev said.
 Although it remains unclear exactly how much money the city can hope to recoup if Mironov's bill is adopted, it is expected that the amount will be similar to what Moscow receives for fulfilling similar functions, according to Vladimir Churov, deputy head of the City Hall External Affairs Committee.
 "Some things must be clarified about such visits organized by the government, such as the repair of official residences and roads leading to and from the Pulkovo airport zone. At present, the airport is renovating this area at its own expense," Churov said Monday.
 Although Churov declined to name a specific figure for the amount that St. Petersburg spends on such functions, he said that his committee believed the federal budget should pay St. Petersburg $1.5 million annually to cover rent payments for foreign consulates located in the city.
 "The consulates are based here for free on the grounds that Russian consular offices abroad do not pay rent either. But, according to the law, it is the federal government's responsibility to compensate these expenses," Churov said.
 City officials from Moscow say that the federal budget does not fully compensate Moscow for its expenses in real money. According to the 2002 federal budget, the government will transfer to the Moscow city administration shares in federally owned companies with a market value of 6 billion rubles ($200 million) "to cover some of the expenses made by the city in providing the functions of a capital."
 "In 2000 and 2001, the scheme looked about the same with the same amount of money mentioned. But I can't say in what way this money went into the city budget," said Anna Smir nova, an assistant to a deputy in the Mos cow City Duma, in a telephone interview Monday.
 Some local officials were skeptical that the bill would be adopted.
 "This law will never pass," said Boris Vishnevsky, a Legislative Assembly adviser from the Yabloko faction, on Monday.
 "We've been trying to push this law through such a law since 1996. There are plenty of people in Moscow who think that St. Petersburg is doing well enough and who would be extremely happy to block this kind of law," Vishnevsky said.
 "It is very simple for Mironov to come up with such an idea to stoke his public-relations campaign," he said.
 In Moscow, Vladimir Zhirinovsky, the leader of the Liberal-Democratic Party of Russia faction in the State Du ma, told Interfax Monday that Mi ro nov's initiative was "just ordinary lobbying of the interests of his hometown."
 Konstantin Kosachev, a Duma de pu ty with the Fatherland-All Russia faction, said that it would be unfair to pass such a law specifically for St. Petersburg. 
 "In my view, other cities also fulfil these functions: the administrative centers of the federal districts, for example," Kosachev said.
 At the same time, a federal Audit Chamber report issued late last month alleges that the St. Petersburg city administration has not properly spent the money that it has been allocated by the federal government for renovating historical monuments that are under federal control.
 The report states that the Finance Ministry transferred to the city 162.4 million rubles ($5.4 million) for such purposes in 2001. However, 15 projects costing a total of 43.7 million rubles ($1.5 million) were not financed out of this money.
 In addition, the report alleges that City Hall overpaid for consulting services, spending a total of $2.3 million for such services.
 "If St. Petersburg is going to fulfil some functions of a capital, those functions should be financed [by the federal budget]. This money should be under City Hall's control, but an oversight mechanism must be created to monitor how it is used," said Legislative Assembly Deputy Leonid Romankov on Monday.

TITLE: Who Owns Little Cheburashka?
AUTHOR: By Alexander Bratersky
PUBLISHER: Special to The St. Petersburg Times
TEXT: MOSCOW - Cheburashka, the Soviet-era book and cartoon character who could be considered Russia's answer to Mickey Mouse, has unexpectedly and somewhat belatedly hit the big time in Japan - but any celebrations have been marred by a legal battle over the proceeds.
 
Eduard Uspensky, author of the 1966 book that inspired the animated films, is seeking to sue U.S.-based distributors Films by JOve over use of the Cheburashka name and image in merchandising in Japan. Meanwhile, animation giant Soyuzmultfilm wants to annul the contract under which it sold Films by JOve film distribution and merchandising rights for 30 years.
 While Cheburashka has been struggling on home turf to compete with foreign newcomers like Pokemon and Teletubbies, the cute, furry creature managed to become a hit in Japan last year after Japanese film distributors bought screening rights. 
 Japanese audiences were won over in spite of - or perhaps because of - the 1969 film's use of hand-made puppets, an endearingly old-fashioned touch compared to the high-tech animation techniques of today. The ''small animal, unknown to science," who is found in a box of oranges and then meets the lonely and intelligent Crocodile Gena, became an instant celebrity in one of the most sophisticated markets of the animation world.
 T-shirts, toys, note pads and other merchandise featuring Cheburashka and Crocodile Gena have since been selling like hot cakes both in Japanese cinemas and on the www.cheb.tv Internet site.
 Kaori Tanabe, a spokesperson for Japan-based Petit Grand Publishing Inc., which deals with Cheburashka merchandising in Japan, said in an interview that Cheburashka films had been shown in 15 cinema across the country, with one theater alone taking as much as 37,000,000 yen or about $280,000. Merchandise is sold at the screenings, Tanabe said, with about 30,000 Cheburashka books and 20,000 stuffed toys sold so far.
 Tanabe added that five more theaters are expected to show Che bu rash ka films this year. 
 Cheburashka first achieved fame in the Soviet Union thanks to Eduard Uspensky's 1966 book "Krokodil Gena i Ego Druzya" or "Crocodile Gena and his Friends." 
 "Thank God Cheburashka became popular in Japan," Uspensky said in an interview. "Cheburashka can become a friend of children in every country, but the bad thing is that he is marketed by people who want to steal money, thinking they are beyond the reach of Russian retribution."
 Uspensky's grievances are with former Soviet actor Oleg Vidov and his wife, American journalist Joan Borsten, who are the owners of the Los Angeles-based Films by JOve production and distribution company. In 1992, the company entered into a licensing agreement with the old Soviet animation giant Soyuzmultfilm, which gave Films by JOve distribution rights for all countries except former Soviet states. The contract covered 1,200 animated films produced between 1936 and 1991, including the four Cheburashka films, which were made in 1969 and 1970. 
 According to Borsten, the contract included the payment of more than $500,000 in acquisition fees, advance of legal fees to protect the studio copyright around the world amounting to $400,000 to date, and payment of 39.5 percent of profits. She said the 30-year agreement covers merchandising rights.
 Soyuzmultfilm's new management is trying to annul the contract.
 "This contract is an extortionate one that has destroyed the national heritage," said Soyuzmultfilm's deputy director Vyacheslav Shelobreyev, adding that the contract, signed by ousted former director Sergei Skulyabin, has been the subject of numerous court appeals by the studio's new management.
 "We know that we have an absolute right to own the collection," Shelobreyev said.
 Uspensky, who agrees with Soyuzmultfilm's claims, is however more concerned about the merchandising rights. He said that his own company, OOO Cheburashka, registered the word "Cheburashka" as the character's name and his image with state patenting agency Rospatent in 1997, and that his company owns rights for all of his books' characters. Uspensky's other claim is that Cheburashka books were illegally printed in Japan. 
 "[Vidov] has rights for the film - which, while semi-legal, is a fact," Uspensky said. "But when he offered me a percentage from merchandising, I said that I hold all rights for Cheburashka. My lawyers sent him a copy of my contract with the studio, which doesn't say anything about the transmission of rights." 
 The image that Uspensky patented with the Cheburashka name is reminiscent of an image created by animation artist Leonid Shvartsman.
 Shvartsman, 80, is a former leading Soyuzmultfilm artist who worked with Uspensky on a Cheburashka film. The film image of Cheburashka created by Shvartsman became the most widely recognized one, and it differs from the one that appeared in Uspensky's first book in 1966 and those in books that continue to be published in Russia. Some contemporary incarnations even have Cheburashka in a skirt.
 In an interview, Shvartsman said no one can copy his style, not even Uspensky.
 "There is a writer called Uspensky, but an artist called Uspensky does not exist," said Shvartsman.
 According to Russian laws on trademark and patents, Shvartsman cannot claim any money for the use of the image, since he created it when he was on staff at the studio, which owns all of his rights. His only right is to have his name published together with a reproduced image.
 Borsten, however, said that her company included Shvartsman in the Japanese merchandising contract. 
 "We didn't have to do this, but we felt it was morally right," she said.
 Borsten said her company's copyright lawyer told her that Russian trademarks are good for Russia only.
 "He said in his experience Uspensky's claims would not hold up in Western countries or Japan because it is clear that he did not create the image of Che burashka, at least not the one in the movie, and that he cannot interfere with our using the name of the movie and the name of the character in relation to exploitation of the movie," Bors ten said in an email interview.
 Vidov said the word "Cheburashka" is not Uspensky's creation, since it originally appeared in the Russian language dictionary by prominent scholar Vladimir Dal in 1863. The dictionary says "Cheburashka" is "a children's doll that wakes up when pushed."
 Yevgeny Arievich, a patent specialist and international partner with Baker & McKenzie, said that he "feels doubts" about Uspensky's legal rights to patent Cheburashka's image as a trade mark. 
 "A book description is not enough to claim rights, since according to this description you can draw a character in five different styles," Arievich said.
 Uspensky has already won several cases against foreign and local companies that used his characters without his permission. He previously filed a suit against the Krasny Oktyabr chocolate maker, which had manufactured Cheburashka candies.
 Sergei Zatitsky, a head of Russia's Multimedia and Digital Networks Society (ROMS), which represents Uspensky's interests in Japan, said the company will sue the distributors for illegal use of intellectual property. Lawyers have been to Japan and prosecutors have been investigating the legality of use of Uspensky's Cheburashka trademarks. Uspensky is one of the founders of ROMS.
 "It is a very serious case," Zatitsky said. "Russia is accused of piracy and stealing, but this is a case in which our children's national treasure has been stolen."

TITLE: Revamped Council Prepares for Debut
AUTHOR: By Natalia Yefimova
PUBLISHER: Staff Writer
TEXT: MOSCOW - The revamped upper house of parliament is to kick into action this week with a varied bunch of newly tapped senators - including hard-nosed businessmen, regional leaders and former cabinet ministers.
 
Analysts say the new delegates, 177 in all, will work hard to lobby the interests of the groups that backed their appointments, but most agreed that, when it comes to passing key legislation, the chamber is unlikely to defy the political will of the Kremlin.
 "The Federation Council is even more controllable than the State Du ma," said Nikita Tyukov of the Center for Political Information. 
 Kremlin-connected political analyst Sergei Markov agreed that, in most cases, the senators would be compliant.
 "On all politicized or politically ideological issues, they will all support the Kremlin as long as the Kremlin has a clear, firm position," he said.
 The overhaul of the chamber, which will hold its first session Wednesday, was an important part of President Vladimir Putin's efforts to centralize authority and rein in the country's powerful governors. In accordance with an August 2000 law penned by the president, regional governors and parliamentary speakers, who have made up the chamber since 1995, were to be replaced by the start of this year with their appointees. Unlike the previous Federation Council members - who juggled their parliamentary duties with obligations in their home regions - the new senator corps will work on a full-time basis.
 Since the revamp was announced, various influential groups have been scrambling to secure seats for their own people, and most appointments have been described as trade-offs involving the presidential administration, regional leaders and big business.
 As a result of this horse-trading, most of the 146 senators approved as of Monday fit into one or more of several overlapping groups: regional leaders, big business, Kremlin proteges or former cabinet officials and "honorary retirees," such as the handful of governors who gave up their gubernatorial posts to clear the way for more powerful - usually Moscow-backed - candidates.
 Many observers have paid particular attention to the business contingent, which includes such corporate heavyweights as the deputy CEO of oil major Yukos, Leonid Nevzlin (Mordovia), Transaero CEO Alexander Pleshakov (Penza), Gazprom regional coordinator Leonid Lushkin (Bryansk) and Norilsk Nickel executive Leonid Bindar (Tai myr). Like Duma deputies, the senators must give up their commercial activity for the duration of their term.
 Some of these senators, like Bindar, represent regions where their companies have major interests. But most have been delegated from small regions to which they have virtually no connections.
 In a radio interview last week, the Federation Council's speaker, Sergei Mironov, naively argued that the 30 or so businesspeople now in the chamber would not use their new political clout to lobby their commercial interests "because the firms they represent are successful enough as it is."
 But Leonid Smirnyagin of the Mos cow Carnegie Center said the relationship between powerful corporate executives and the regions they represent is a mutually beneficial one: The businesspeople get an enviable platform for lobbying their interests, along with immunity from prosecution, while regional leaders - who were demonstratively distanced from Moscow in 2000 - get a representative with clout in the capital.
 Tyukov agreed that the weakened regions and their high-profile representatives had a symbiotic relationship, with influential senators in high demand. "No one from some small autonomous district, no matter how great he is, has even one-tenth the connections that a Muscovite has," he said.
 He added that many of the poorer regions may have likewise received direct or indirect financial aid from their new senators.
 Some of the legislation to be considered this year, like the reform of the natural monopolies, will have a powerful impact on businesses across the board, but Tyukov and Mar kov both said that an open clash between senators and Putin's government was unlikely.
 Markov said that some of the economy-related legislation to be considered by parliament had "enormous potential" for igniting discord, but as long as the Kremlin's position was clear and unequivocal, the presidential administration would retain full control of the Federation Council's decision-making. 
 This control will largely be guaranteed by senators like the Kremlin's public-relations guru, Mikhail Margelov (Pskov); deputy head of the government apparatus, Alexander Torshin (Marii El); and, perhaps, Kremlin-connected oligarch Sergei Pugachyov (Tyva). These men, and others like them, also represent small or politically insignificant regions with which they have no evident ties.
 Other senators with connections to the Kremlin and the cabinet include tested technocrats like Alexander Bushmin, a deputy finance minister under Alexei Kudrin, and former Energy Minister Alexander Gavrin. 
 The coming year promises to bring volumes of important legislation. One example is the law on a constitutional assembly, the only body that can make major changes to the Constitution with relatively little hassle. 
 One change that has been repeatedly suggested by Mironov is the extension of the presidential term from four to five or seven years. Thorny legislation on reforming natural monopolies and the housing-maintenance sector will also be considered, along with bills on the painful issue of agricultural land sales.

TITLE: Arbitration Court Orders TV6 Shut Down
AUTHOR: By Sarah Karush
PUBLISHER: The Associated Press
TEXT: MOSCOW - In what is widely seen as a blow to media freedom in Russia, the country's top arbitration court on Friday ordered the closure of TV6, the last national television network outside the government's control. 
 
The decision, ending a closely watched, eight-month legal battle, is the second major defeat for a group of prominent journalists who worked at the NTV channel and fought its April takeover by state-controlled Gazprom. After the takeover, they joined TV6, a smaller station that is majority-owned by Boris Berezovsky. 
 The judges of the Higher Arbitration Court made their Friday ruling in response to a bankruptcy suit brought by minority shareholder LUKoil-Garant, a pension fund owned by LUKoil. LUKoil-Garant, which holds a 15 percent stake in TV6 and which is itself minority-owned by the state, demanded the station be liquidated because it failed to bring a profit. 
 Judge Eduard Renov told Interfax that TV6 should be liquidated because for three years it had operated in violation of a law requiring that a company's assets balance out its debts. 
 But TV6 maintains that whatever problems the company once had, it is now profitable, and argues that a new law that took effect this year bans minority shareholders from bringing bankruptcy proceedings against a company. LUKoil lawyers argued that the decision should be made under the old law, since they initiated proceedings last year. 
 TV6 journalists and lawyers accused the judges of carrying out the Kremlin's orders in a bid to eliminate critical voices. 
 "This is judicial tyranny, judicial revenge," TV6 director Yevgeny Kiselyov said on Ekho Moskvy radio.
 The case has prompted international concern about media freedom in Russia. Of Russia's four major networks, TV6 provides the most critical reporting about President Vladimir Putin and the war in Chechnya - a role that NTV played before the takeover. 
 In Washington, White House press secretary Ari Fleischer issued a statement Friday saying that the U.S. administration was "disappointed" by the decision. "It is unfortunate that there has been the strong appearance of political pressure on the courts during these proceedings," he said. 
 The Russian Journalists Union said Friday's ruling would harm television stations across the country that broadcast TV6 and have "far-reaching consequences for media freedom." 
 Yevgeny Volk, a Moscow-based political analyst with the Heritage Foundation, warned: "The examples of NTV and TV6 have forced many journalists to practice self-censorship." 
 Those who defected to TV6 from NTV - including some of the country's most popular and experienced journalists - were criticized at the time for allying themselves with Berezovsky. 
 Berezovsky was influential in Boris Yelt sin's Kremlin, but has fallen out of favor under President Vladimir Putin. TV6's association with the tycoon may have speeded its downfall, Volk said. Be re zovsky lives abroad evading corruption charges he says are politically motivated. 
 Friday's decision is final, although lawyers for the station said they may ask the Constitutional Court or the European Court of Human Rights to rule on its legality. 
 Further decisions on how TV6 will be dissolved will be made during a shareholder meeting scheduled for Monday, station spokesperson Tatyana Blinova said. 
 The station was still broadcasting Friday, and TV6 lawyers said its broadcast license should be annulled only after the liquidation, which must be carried out within six months of the first appeals ruling, made in November. 
 LUKoil-Garant reiterated Saturday that it wanted to bid for the station's broadcasting license and might hire back some of TV6's journalists. 
 "The fund is ready to join efforts with the TV6 staff for participation in this tender [for the license] and, in the case of victory, hand over a considerable package of shares to the personnel for joint work to create a new image for the channel," the fund said in a statement. 
 The statement did not elaborate on what it meant by a "new image" or give any details.
 There was no comment from the Kremlin on Friday's decision. But Press Minister Mikhail Lesin, who is accused of helping orchestrate the NTV takeover, issued a statement Friday congratulating journalists on the upcoming Russian Press Day. 
 "Freedom of press in our country and the possibility to express one's point of view have long ago stopped being a declaration and turned into an everyday reality," said the statement, carried by Itar-Tass.

TITLE: Ministry Rebukes U.S. Diplomats for Pasko Support
PUBLISHER: Combined Reports
TEXT: MOSCOW - The Foreign Ministry slammed U.S. diplomats in the Far East port of Vladivostok for taking part in protests to demand the release of journalist Grigory Pasko, news agencies reported Monday. 
 
A Foreign Ministry note sent to the U.S. Embassy in Moscow accused U.S. diplomats of taking part in the rally and making incorrect public statements about the judicial system, Interfax said. 
 A ministry official quoted by Interfax said the note had called the U.S. diplomats' behavior "a breach of generally recognized international norms."
 Last week, officials from the U.S. Consulate General in Vladivostok attended a rally outside the Vladivostok offices of the Federal Security Service, which brought the case against Pasko. Pasko was a journalist with the Pacific Fleet's newspaper at the time of his arrest in 1997. 
 The military court found Pasko guilty of passing military secrets to Japan, sentencing him to four years in a high-security prison. He will appeal the verdict. 
 The military prosecutor's office has also appealed, saying Pasko's four-year jail term was too lenient. 
 "This is a case of freedom of speech and expression," U.S. diplomat Alexander Hamilton said at the rally. "America is concerned with the future of Russia in general because after Sept. 11 we became not only friends, but almost like allies."
 Itar-Tass quoted the Foreign Ministry message as saying the incident could force the ministry to take "corresponding measures in the relationship with American diplomats." It gave no details. 
 Neither the Foreign Ministry nor the U.S. Embassy were immediately available for comment. 
 In St. Petersburg last week, Federation Council Speaker Sergei Mironov added to the criticism of the military-court verdict, describing as groundless Pasko's conviction for telling Japan about the navy dumping toxic waste in the Sea of Japan. 
 Demonstrators gathered outside the Vladivostok FSB offices holding posters reading: "We want truth about the nuclear crimes of the Pacific Fleet" and "Bring to trial corrupt admirals, not journalists."
 The FSB brought the case against Pasko. 
 "I think a precedent will be created. Some positive decision must be taken," Pasko's wife, Galina, bundled up against sub-freezing temperatures, told RTR television. "Justice must triumph." 
 Officials from the U.S. Consulate General in Vladivostok also attended the protest. 
 After a 40-minute rally, the protest - organized by several local environmental watchdogs working together for Pasko's cause - moved on to other offices involved in the case, such as the military court and the prosecutor's office.
 The FSB denounced the protest as a "well-organized political action in no way related to justice."
 Mironov last Wednesday reiterated criticism of the case that he first made in late December. 
 "As a citizen of Russia, I think the man has been convicted for no good reason," Mironov said. "If a military secret affects hundreds of thousands of people, or even millions, and affects the health of their children, I don't think there should be any punishment for violating such a secret." 
 Pasko's defense was built on a law stipulating that information about environmental dangers could not be classified. 
 Human-rights groups have also spoken against the verdict. Amnesty International this week called for his release and said his prosecution appeared "motivated by political reprisal for exposing the practice of dumping nuclear waste." 
 Four protesters were detained at a rally against the verdict at FSB headquarters in Moscow on Monday.
 
 <i>- Reuters, AP </i>

TITLE: IN BRIEF
TEXT: Emergency Landing
 

MOSCOW (AP) - A Russian airliner flying from Germany to Siberia made an emergency landing Monday and ran off the runway, landing in large snowdrifts.
 Pilots of the Tupolev-204 aircraft operated by Sibir Airlines realized they might miss the landing strip in the western Siberian city of Omsk due to heavy crosswinds but made the landing anyway because the airliner was low on fuel, said Oleg Shulmin, spokesperson for the airline.
 The plane ran 435 meters off the runway, but no one was hurt because large snowdrifts surrounding the airport softened the landing. The plane can carry up to 176 passengers.
 The flight, which originated in Frankfurt, had been scheduled to fly to another Siberian airport, in Novosibirsk, but the airport there denied it permission to land because of rough weather, Shulmin said.
 
 
Mine Blast Kills 5
 

MOSCOW (AP) - Firefighters extinguished a fire Monday that erupted in a northern Russia coal mine after a methane explosion that killed five workers.
 Twelve miners were hospitalized with burns, said Viktor Beltsov, spokes person for the Emergency Situations Ministry.
 The methane exploded at a depth of 1,000 meters Sunday afternoon during repairs, Interfax news agency reported. It ignited a fire in the Vorkutinskaya coal mine in the mining city of Vorkuta, a Siberian city above the Arctic Circle.
 The bodies of the dead were brought to the surface by Monday, officials told Interfax. The cause of the blast was under investigation.
 Last year, 122 mining-industry workers were killed throughout Russia.
 
 
Back Into Space
 

MOSCOW (AP) - Russia will carry out its first space launches this year late next month, sending a military satellite into orbit then launching another with supplies bound for the International Space Station, the Defense Ministry said Saturday. 
 After the Feb. 27 launch from the Ple setsk site of a Kosmos satellite, a Progress cargo space vehicle will head the next day from the Baikonur cosmodrome in Kazakstan to the space station, defense officials told ITAR-Tass news agency. The ship will be carrying several tons of equipment, fuel, water and food. 
 Another three launches are scheduled for March, two with commercial satellites and another to orbit a military satellite.
 
 
Russia Seeks Accord
 

MOSCOW (AP) - Russia expects a formal accord with the United States on deep nuclear-weapons cuts to be reached by May or June, a Russian general leading talks with U.S. officials next week said Saturday.
 "The central issue of the Washington consultations will be the development of a new agreement between Russia and the U.S. on the reduction of strategic offensive arms," Colonel General Yury Baluyevsky told reporters in Moscow, according to Russian news agencies.
 The agreement should be ready by the time U.S. President George W. Bush visits Russia in late May or early June, said Baluyevsky.
 "It should be a legally binding document that will clearly outline the mechanism of controlling the process of reduction," he said.
 A senior U.S. official said Thursday that the Bush administration would be willing to codify cutbacks with a statement or even a treaty, provided there would be no tortuous Cold War-style negotiations. 



TITLE: U.S. Fund Misspent $1M on Staff Perks
AUTHOR: By Matt Bivens
PUBLISHER: Special to The St. Petersburg Times
TEXT: WASHINGTON - Auditors say a handful of Americans working in Moscow on a high-profile U.S. aid project showered more than $1 million on themselves in the form of taxpayer-funded fine dining, tennis games, golf-club memberships, vacations to warmer climes and tickets to the theater and the symphony.
 
The Americans were running the Defense Enterprise Fund, a body created by the U.S. Congress in 1994 and, over the years, entrusted with $66.7 million. The DEF was to make hard-headed investments into &quot;conversion&quot; - meaning into projects that somehow moved an institution or its personnel out of the Soviet military past and into the free-market future.
 But according to an audit published on New Year's Eve by the Pentagon's Office of the Inspector General, the DEF spent &quot;at least&quot; $35.6 million solely on the management of that $66.7 million - or about 53 percent of the fund. The audit quotes a government official who says &quot;acceptable&quot; money-management costs typically range from 1 percent to 2 percent of a portfolio's size. 
 Nor did spending 53 cents of every dollar on managing investments bring very exciting returns. Today, the audit says, the DEF's investment portfolio is worth just $11 million, plus about $4 million in cash. Of the $35.6 million spent on money-managing, auditors only identified about 3 percent spent on questionable staff perquisites. The rest was paid either in salaries to DEF staff or in fees to outside companies for management, consulting, accounting or legal work. The audit does not identify what the outside firms were paid.
 As bad as that sounds, the audit broadly hints that reality could well be worse. The audit states that employees of Siguler Guff - a New York-based company with an active Moscow office, Russia Partners, that is now managing the DEF - &quot;destroyed an unknown quantity of records prior to the start of this review&quot; in the fall of 2000.
 Neither Siguler Guff nor the DEF board's legal counsel returned calls and e-mail messages seeking comment.
 Generally, auditors complain that the DEF kept poor financial records - this despite the fact that the fund's work was high-profile and diplomatically delicate, and despite occasional critical media reports and questions in Congress.
 Finally, auditors note that they only looked closely at three years, 1997-1999. That is a period that the DEF's defenders have in the past championed as a time of cleaning up after sloppy and free-spending ways at the fund from 1994 to 1996. It's also a period atypical for including the August 1998 ruble crash, which inaugurated layoffs and thrift at the DEF.
 Among DEF spending from just the examined period of 1997-1999, the audit highlighted: 
 
. $537,400 in unreasonable pension-fund payments to American employees. The DEF made contributions to pension funds equal to 19 percent of salaries - a rate about four times what American financial, insurance or real estate companies typically contribute, the audit says. 
 . $106,800 for an office membership in the Moscow Country Club. 
 . $35,500 to send one employee to a management course in London, and $4,000 for employee vacations to Scotland and the Middle East. 
 . More than $200,000 to house one expat employee, equal to a monthly housing allowance of about $7,800. For comparison, the audit says that U.S. State Department guidelines put the maximum Moscow housing allowance at $2,292/month. 
 . $95,800 for employee meals and entertainment while not traveling, and $29,500 on first-class air fares. 
 . $15,000 for a loan to &quot;the general director of a DEF investment partner and his wife&quot; that was never collected or repaid. 
 . $900 for a subscription to the Mos cow symphony, $700 for an employee to play golf at a prestigious resort, $500 for theater tickets, $300 for tennis fees.
 
However, while auditors are critical of such spending, and draw unfavorable comparisons to accepted government practices, they also note repeatedly that the usual rules don't apply.
 That's because the DEF is one of 11 &quot;enterprise funds&quot; set up by Congress to help seed the growth of free-market economies across the former Soviet Union. At one point, such funds represented a third of all U.S. aid to the former Soviet bloc. The chairperson of each fund was appointed by the president of the United States. Congress gave the funds millions of dollars to &quot;invest&quot; - and with it unusual freedoms from government oversight, on grounds that they would be more effective venture capitalists without such &quot;red tape.&quot;
 &quot;Congress did not set up the controls you normally have,&quot; said an official with the Pentagon's Office of the Inspector General in an interview Friday. &quot;Normally in government you have cost controls for federal grants. ... The purpose of this report is to show that this is what happens when the government doesn't put any rules out.&quot;
 If that sounds like a recommendation, the auditors say it's not - the audit makes no recommendations. In fact, because there were no clear rules, the DEF's spending may not have broken any. In a written pre-publication reply to the audit, Major General Robert Bongiovi, representing the Pentagon office that oversees the DEF's work, suggested the very first sentence of the audit's introduction should state that &quot;Defense Enterprise Fund expenses were not found to be in violation of the terms of the grant.&quot;
 In April, The Moscow Times, sister newspaper to The St. Petersburg Times, reported that the DEF made a series of ill-fated and ill-considered investments - a failed scheme to coax gold out of trash, a bungled telecom venture that led to behind-the-scenes feuding between the U.S. and Russian governments - before firing nearly its entire staff in 1999 and falling dormant.
 Among those who kept their jobs was the fund's former top Moscow official, Richard Nordin, now an employee of Siguler Guff. Nordin signed off on many of the expenses the audit cites, and defended some of them in interviews in the spring. He is still in Moscow managing the DEF's portfolio, and in November he was appointed to the Moscow Country Club's board of governors, as chairperson of the Golf Committee.
 Among those claimed in the final round of firings was Matthew Maly, an American of Russian descent who complained to the DEF board of mismanagement and extravagant living by his superiors, in particular Nordin. Maly's believes his whistle-blowing has damaged his career and questions whether the board of the DEF investigated his concerns in good faith.
 In particular, Maly said in an e-mail reply to questions about the audit that he wonders what has come of a criminal investigation the Pentagon is conducting into the DEF. 
 The Pentagon would not comment on that investigation other than to confirm its existence. But as The Moscow Times reported in April, defense investigators are studying, among other things, Maly's allegations that DEF managers bribed Russian government officials. Maly said he has never been contacted by the Defense Department's criminal investigators.

TITLE: U.S. Slams Russia Over Use of Force In Conflict
PUBLISHER: Combined Reports
TEXT: The United States on Thursday accused Moscow of using &quot;overwhelming force&quot; in its battle with Muslim rebels in Chechnya, ending a post-Sept. 11 trend of avoiding criticizing Russia's campaign there. 
 
The sharp words came a day after Moscow announced results of one its bloodiest crackdowns in the secessionist province for a year, saying it had killed 92 rebels in a month. 
 &quot;The latest information on Russian operations in Chechnya indicates a continuation of human rights violations and the use of overwhelming force against civilian targets,&quot; State Department spokesperson Richard Boucher told a news briefing on Sunday. 
 The chief Kremlin spokesperson on Chechnya, Sergei Yastrzhembsky, said the casualties were inflicted in a host of settlements southeast of Groz ny and that five Russian service personnel were killed and 24 others wounded. 
 He gave no figure for civilian deaths, which have been almost impossible to verify independently. Human-rights groups routinely place the figure in the thousands, however.
 A State Department official said the U.S. assessment that civilians had been targeted in the attacks on settlements including Argun and Tsotsin-Yurt was based on reports from Russians on the ground, including members of the Memorial human-rights group that has worked to document abuses in Chechnya. 
 Boucher's words were a rude awakening after months of muted Western comments on Chechnya since Sept. 11, in contrast with the regular ear-bashings Moscow had earlier received at international gatherings and bilaterally for the scale of the campaign. 
 Boucher said Washington would continue to urge both sides to pursue political negotiations, adding that the lack of a solution and &quot;the number of credible reports of massive human-rights violations, we believe, contribute to an environment that's favorable toward terrorism.&quot; 
 His remarks sounded like a sharp rebuke to Armed Forces Chief of Staff General Anatoly Kvashnin who ruled out talks with the main Chechen separatist leaders on Thursday. 
 &quot;It is clear that there are terrorist factions in Chechnya with ties to al-Qaeda and international terrorism networks, and as part of the war on terrorism we're cooperating with the Russians on cutting off those kinds of ties,&quot; Boucher said. 
 &quot;Unfortunately, the Russians have not pursued the initial and encouraging contacts with Chechen separatists,&quot; he added. 
 In a statement by the Kremlin information office released late Friday through Itar-Tass, Moscow rejected Boucher's remarks and said it regretted the tone of his statement. 
 The report also quoted Chechnya's head prosecutor and prime minister as denying any human-rights abuses occurred during the operations in the region around Argun. 
 As it has done since the Sept. 11 attacks, Russia equated its campaign in Chechnya with the U.S.-led coalition against terrorism. 
 &quot;Our experience in Chechnya and America's experience in Afghanistan show how hard it is sometimes to reach terrorists and to prevent any harm on civilians. Nevertheless, that is the goal of Russia and the United States,&quot; the Kremlin said, Itar-Tass reported. 
 
 <i>- Reuters, AP </i>

TITLE: Moscow Begins Air Assault
PUBLISHER: The Associated Press
TEXT: VLADIKAVKAZ, North Ossetia - Federal troops launched an aerial assault with bombers and helicopters against rebels across Chechnya and closed off roads to a southern district capital for special operations to root out militants, officials said over the weekend. 
 
Helicopters rocketed rebel positions in Chechnya's southeast, Itar-Tass reported. Gunships destroyed a rebel winter camp and killed 10 fighters, an army spokesperson told Itar-Tass. 
 Aircraft also bombed the Itum-Kale and Nozhai-Yurt regions, and helicopters struck the Vedeno region while artillery was used in four other districts, an official in the pro-Moscow Chechen administration said Saturday.
 In Moscow, the head of the air force said bad winter weather was complicating pilots' ability to find rebels in Chechnya. 
 &quot;The snow hinders the ability to detect rebel bases and camps from the air,&quot; General Anatoly Kornukov said, Interfax reported. &quot;Practically all combat missions require triple-checking of targets.&quot; 
 Still, at the end of last year &quot;the intensity of aviation operations in Chechnya grew due to special efforts to neutralize the remnants of rebel formations,&quot; he said. 
 A road leading to Shali was blocked Thursday and more than 150 people across the province were detained on suspicion of participation in rebel activities, an official in the pro-Moscow Chechen administration said Friday. Troops also used artillery in the Shali district, he said. 
 Armored vehicles were stationed in the center of Shali and traffic prohibited, Interfax cited local officials as saying. The operation under way there &quot;is of a targeted nature,&quot; the officials said.

TITLE: Local Politico Grabs Second Railway Job
AUTHOR: By Alla Startseva
PUBLISHER: Staff Writer
TEXT: MOSCOW - An ally of President Vladimir Putin will reportedly take over the No. 2 spot in the powerful Railways Ministry, a move that would strengthen the hand of the so-called St. Petersburg clan as it continues to usurp key posts from Yelstin-era holdovers. 
 
Citing sources in both the railways and transportation ministries, Interfax reported Monday that the order to replace Alexander Tselko with Vladimir Kuz netzov &quot;would appear today or tomorrow.&quot;
 Kuznetzov, currently a department head in the Transportation Ministry, worked alongside Putin in the administration of former St. Petersburg mayor Anatoly Sobchak in the early 1990s.
 Putin fired Ni ko lai Askysonenko - a key member of former President Boris Yeltsin's &quot;Family&quot; of insiders - as railways minister two weeks ago and replaced him with Gennady Fadeyev. However, analysts say that the appointment of Fadeyev may be temporary, as he is 64-years-old and nearing retirement age and is not known to be close to Putin.
 &quot;[Putin] appoints those whom he knows. It is the main principle of an intelligence-service agent to trust only those who you know,&quot; said Alexei Musakov, head of the St. Petersburg Center of Regional Development think tank.
 Musakov said Kuznetsov's appointment would mirror the earlier appointment of Vladimir Yakunin to the post of deputy transport minister. &quot;Yakunin is [a former] intelligence-service officer and a long-time Putin ally,&quot; he said. 
 &quot;Nothing happens by chance,&quot; he added.
 In October, Aksyonenko was charged with abuse of office, and just three days later Kuznetsov, 45, was appointed head of the Transportation Ministry's department in charge of coordinating all kinds of transportation systems with the Railways Ministry, a so-called &quot;natural monopoly&quot; with annual revenues of $12 billion.
 The appointment fueled speculation in the media that Kuznetsov would soon be taking over the Railways Ministry.
 From 1998, Kuznetsov was the head of the Oktyabrskaya Railroad, a unit of the ministry that oversees, among other things, the St. Petersburg-Mos cow corridor.
 But Kuznetsov was fired from the post by Aksyonenko in May 2000. The official reason was &quot;systematic failure to fulfill duties.&quot; A few months later, however, the reason was officially ammended to &quot;on his own accord,&quot; after Putin appointed him a deputy presidential envoy to the Northwest Federal District.
 Making way for Kuznetsov by replacing Aksyo nen ko with Fadeyev - at least temporarily - is a sign of &quot;a very fragile balance between two political groups,&quot; said Yevgeny Volk, a political analyst at the Heritage Foun dation think tank.
 During his first day at work Fadeyev emphasized the problems of the industry's structural reforms, saying that the first stage of the reform must be completed this year.
 However, the Federal Security Service, or FSB, has been hampering the restructuring, the concept of which the government adopted last summer.
 According to the Economic Development and Trade Ministry, the FSB is the only party among those involved that has refused to sign the key draft bill that would give most of the ministry's most valuable infrastructure to joint stock company Russian Railways Co.
 The issue is complicated by the fact that the country's rail system is closely involved in the country's defense system.
 &quot;Special services have always been involved into the economic issues of Russia. It has not been so openly during past few years, but with Putin such services strengthened and so increased its influence on the economy,&quot; said Volk.

TITLE: Megafon Wins Race for National Coverage
AUTHOR: By Larisa Naumenko
PUBLISHER: Staff Writer
TEXT: Politically connected upstart cellular operator Megafon, the nation's third-largest provider, has beaten bigger rivals Vimpelcom and Mobile Telesystems in a race to secure the right to operate in all seven of the nation's so-called &quot;super regions.&quot;
 
St. Petersburg holding Telecominvest, which owns a 31-percent stake in Megafon, said Monday that the Communications Ministry had granted the company the license for the central region, which surrounds but does not include Moscow.
 Megafon, which already operates in the capital, will now be able to offer its services to the country's entire population of 144 million people. 
 &quot;We are proud that Megafon has become the first real all-Russia operator,&quot; Te lecominvest spokesperson Andrei Kli mov said.. 
 The company's other shareholders include two leading Nordic operators - Finnish Sonera and Swedish Telia - and Moscow investment boutique LV Finance. The Megafon holding was founded just six months ago and owns the nation's third-largest cellular operator, local operator North-West GSM.
 Analysts said Telecominvest's political connections with the Communications Ministry and the Kremlin were behind Megafon's regulatory victories. 
 &quot;It's certainly the best politically connected operator in the sector,&quot; said 
 Ari Krel of United Financial Group. &quot;Senior officials in the Communications Ministry are also involved in this Megafon outfit. They are making political decisions that benefit them in a commercial way.&quot;
 Telecominvest was created in 1994 by St. Petersburg Telephone Network, or PTS, which was run by Valery Yashin, as company president, and Leonid Reiman, as his deputy. After fellow Petersburger Vladimir Putin became president, Reiman was appointed communications minister. Yashin became head of state telecom holding Svyazinvest.
 In granting Megafon the license for central Russia, the ministry deviated from its approach of not issuing a third GSM license in regions with less than 10-percent user penetration. Central Russia has a population of 27 million people and just 2 percent penetration, with more than half of subscribers belonging to the country's No. 1 operator, MTS. 
 &quot;The biggest benefits that Megafon will get from this license are medium- to long-term in nature,&quot; Krel said. &quot;It will have an important marketing edge by being able to service its subscribers throughout the whole country without having to rely on other networks.&quot;

TITLE: Swedish Group Buys Stake in STS
AUTHOR: By Larisa Naumenko
PUBLISHER: Staff Writer
TEXT: MOSCOW - Swedish-based media group Modern Times Group AB said Monday it is buying a 36.3 percent stake in StoryFirst Communications Inc., a U.S. media-investment group that owns 75 percent of the STS television network and six radio stations across Russia.
 
&quot;This investment continues our international expansion and complements our acquisition of the Darial TV channel in Russia last year,&quot; Hans-Holger Albrecht, president and CEO of MTG, said in a press release.
 MTG operates both free-to-air and pay TV channels in nine countries, along with an Internet portal and teletext services. The company also offers financial news and information services. The media giant acquired a 75-percent stake in Russia's Darial TV network in April. 
 MTG declined to say how much it offered for the stake. But Peter Dahlander, a media analyst at the Carnegie investment bank in Stockholm, estimated the figure at around $20 million.
 &quot;If you go to an emerging market, depending also on what type of the political risk you would see, price sales multiples are coming down substantially, compared with those in a developed market,&quot; said Dahlander.
 StoryFirst operates stations in eight major cities, with STS broadcast nationally through 156 affiliates with a total viewership of 75 million. 
 The company is one of the few profitable TV networks in Russia, after its sales grew 128 percent in 2001. The company refused to give concrete figures, saying only that operational profit was in &quot;six figures.&quot;

TITLE: IN BRIEF
TEXT: Russia, Poland Trade
 

MOSCOW (SPT) - Trade volume between Russia and Poland was more than $5.6 billion in 2001, compared with $5.5 billion in 2000, Interfax reported the Economic Development and Trade Ministry as saying.
 Russia's exports to Poland in 2001, according to a ministry press release, totaled $4.6 billion, a $41 million year-on-year increase, while Poland's exports to Russia totaled less than $1 billion, a $95 million year-on-year increase. 
 Poland is Russia's 10th-biggest trading partner, the press release said, accounting for 3.7 percent of Russia's imports. Russia is Poland's third-biggest trade partner, accounting for 7 percent of its turnover.
 Energy accounts for 80 percent of Russia's exports to Poland, while machines and equipment account for 3 percent, chemicals, 4.5 percent and Metallurgy, 5 percent. 
 Russia imports mostly agricultural products (43 percent), followed by industrial chemicals (17 percent), machines and equipment (12 percent) and retail products (5 percent). 
 
 
Rosneft Profit Falls
 

MOSCOW (SPT) - State oil company Rosneft said Monday that profits decreased 9 percent year on year in 2001, although it posted a 6.1 percent increase in revenues.
 The company reaped profits of 28.19 billion rubles ($926 million) on revenues of 93.02 billion rubles ($3.05 billion) in 2001, according to Russian accounting standards.
 Rosneft spokesperson Alexander Stepanenko attributed the profit decrease to the fall in oil prices.
 "We extracted more oil, but we were only able to sell it at a lesser price," Stepanenko said. "Our increased transportation costs ate into our margin."
 In 2001, Rosneft pumped 14.94 million tons of crude oil-and-gas condensate, a 11.7 percent increase over 2000. In Soviet times, the state oil operators were notorious for pumping as much oil as possible regardless of the cost. 
 
 
UAZ Output Drops
 

MOSCOW (SPT) - Output at Ulyanovsk Automobile Plant, or UAZ, fell 14 percent year on year to about 71,000 vehicles in 2001, Prime-Tass reported the company as saying Monday. 
 UAZ produced more than 35,000 cars, 6,000 trucks, 18,500 buses and 11,400 special-purpose vehicles. No comparable figures for 2000 were provided. 
 Exports accounted for 8 percent of total output in 2001. 
 Output in ruble terms rose 8.8 percent year on year to 6.9 billion rubles ($226.7 million). Russia's inflation was 18.6 percent in 2001. 
 The company said earlier that it had planned to produce more than 86,000 vehicles in 2001 and increase annual output to 150,000 vehicles by 2006. 
 
 
SUAL Closes Mine
 

MOSCOW (SPT) - No. 2 aluminum producer SUAL Holding announced Monday it would close its Southern Urals bauxite mine, which incurred losses of about $2 million in 2001. 
 The holding will develop a liquidation plan by March and then launch negotiations with the regional authorities and creditors, including the local power company, Chelyabenergo.
 High energy costs - and Chelyab energo's refusal to lower energy tariffs - have played a significant role in the holding's decision to close the mine, which produces almost 300,000 tons of bauxite annually and employs about 900 workers, a SUAL official said.
 SUAL instead will use bauxite from its mines in the Timan-Pechora region.
 
 
Ruble Falls
 

MOSCOW (Reuters) - The ruble eased against the dollar Monday, although the Central Bank tried to counteract strong dollar demand from bank clients by selling hard currency, dealers said.
 The weighted average of the ruble in the unified session of eight exchanges, the basis for the Central Bank's official next-day rate, slipped to 30.4491 per dollar from a previous 30.4399.
 Dealers said the Central Bank sold about $150 million to $200 million in the unified session, where overall turnover was $241.01 million. It offered the dollar at 30.4399 to 30.4499.
 They said the Central Bank - which has intervened every day since the start of 2002 trade - had spent about $800 million in the previous three trading sessions. Dealers said the Central Bank looked set to make the ruble firmer in the next few days. 



TITLE: Enron Inquiry To Look at Rumors of Insider-Trading
AUTHOR: By H. Josef Hebert
PUBLISHER: The Associated Press
TEXT: WASHINGTON - The timing of an accounting firm's memo directing the destruction of documents raises the serious possibility of obstruction of justice, says the chairperson of a U.S. Senate committee investigating Enron Corp.'s collapse.
 
Senator Joseph Lieberman said Sunday he was troubled that a lawyer at Arthur Andersen & Co., Enron's accounting firm, directed the destruction of Enron documents. The memo from a lawyer was dated Oct. 12, 2001, when Andersen and executives of the energy giant &quot;knew that Enron was in real trouble and the roof was about to collapse on them,&quot; Lieberman said.
 Representative John Dingell, senior Democrat on the House Commerce Committee, said Monday that the panel's investigation will focus on allegations of insider trading, &quot;payoffs for the company executives who were permitted to sell&quot; their Enron stock and &quot;most importantly, the fact that papers were destroyed and there were instructions to do so.&quot;
 &quot;There's pretty strong evidence of insider trading, there's clear evidence of failure to file honest and correct reports,&quot; Dingell said on CBS' &quot;The Early Show.&quot;
 Two cabinet members, meanwhile, said they had seen no need to inform President George W. Bush of telephone conversations they had with Enron Chairperson Kenneth Lay in late October and November as Enron was struggling to maintain its credit rating.
 Commerce Secretary Don Evans said Sunday he discussed the calls with Treasury Secretary Paul O'Neill, who also had been contacted by Lay, and later told Andrew Card, White House chief of staff, but that Card never informed the president.
 Lay called Evans on Oct. 29 to see what the administration might do to help Enron with its problems, said Evans, but he offered no assistance. O'Neill, who described his call as &quot;a heads up&quot; from Lay on Enron's financial situation, also said he offered no assistance.
 Andersen, one of the country's biggest and most influential accounting firms, disclosed last week that some documents related to Houston-based Enron had been destroyed, but the company gave no additional details.
 On Sunday, after the memo became a subject on the television talk shows, Andersen released a statement acknowledging &quot;there were internal communications that raise questions&quot; in connection with the Enron documents.
 &quot;Andersen is committed to getting the facts and taking appropriate actions in the Enron matter,&quot; the statement said, adding that &quot;it would be inappropriate to comment further.&quot;
 Enron filed for bankruptcy Dec. 2. By then its stock had plummeted from about $83 a share a year earlier to less than $1 a share. In recent years many Enron executives sold their stock, though some continued to hold large amounts, worth about $1.1 billion. Other Enron employees were barred from selling stock in their 401(k) retirement fund as the company's problems became more serious.

TITLE: Rostov Industry Pitching New Plans To Attract Foreign Funds
TEXT: While the foreign-investment climate in Russia has shown positive signs over the last few years, most of the focus has been on money flowing into the two main cities, Moscow and St. Petersburg. In the first part of a four-part series on investment in the regions, staff writer </i><i><strong>Yevgenia Borisova </strong></i><i>investigates the state of affairs in the Rostov region.</i>
 ROSTOV-NA-DONU, Southern Russia - Four years ago, Sergei Kislov set out to build a sunflower-oil processing plant on what was just an empty field along the banks of the Don River.
 
Kislov's plant, which started up production last year, now claims to be the largest such plant in Europe, producing 14 percent of Russia's sunflower oil and exporting to Germany. It takes in 1,100 tons of sunflower seeds a day and pumps out 600 one-liter plastic bottles of Zo lo taya Semechka oil, while also feeding the pudgy pigeons that flock around it.
 The plant is part of Yug Rusi, a vertically integrated agricultural holding company headed by Kis lov that produces not only sunflower seeds and sunflower oil, but mayonnaise and mixed fodder. In 2001, Yug Rusi invested more than 800 million rubles ($26.6 million) in 14 farms in the Rostov and neighboring Kras no dar regions, providing fertilizers, fuel, machinery, consultancy services and loans.
 Among its 28 entities, the holding has three elevators, a river terminal next to the sunflower-oil plant, a bread-making factory, a distribution network, a mill and even a race track. Yug Rusi plans to build its own dairy-processing plant and recently bought a bankrupted poultry farm.
 &quot;Our profits for 2000 were 192 million rubles and revenues about 2 billion rubles,&quot; said Yug Rusi spokesperson Sergei Ivanenko. &quot;On July 1 of 2000, profits were already 341.5 million and revenues 3.7 billion rubles.&quot;
 In the first issue of a newspaper that his holding started in October, Kislov said: &quot;I am sure that, as time passes, our holding will become not only the biggest processor but also the major agricultural producer in the Southern Federal District.&quot;
 Kislov is among the entrepreneurs who made his pitch to hundreds of potential Russian and foreign investors at the South of Russia investment symposium that was held at the World Trade Center in Moscow in December.
 Kislov went to Moscow to woo petential investors, seeking $11.5 million to establish a new line for processing more highly refined sunflower oil, which can be used to make solid oils, soups and as an ingredient in perfume.
 The Rostov region - larger than Belgium, the Netherlands and Denmark combined - has had limited success so far in attracting investment, especially from foreign companies. In 2000, foreign investment was $91.1 million, of which $40.8 million was direct investment, according to government statistics. By comparison, Kras nodar received $959 million in foreign investment in 2000 and Volgograd $77 million.
 Russian investment is considerably higher and is growing. In the first nine months of 2001, $615 million was poured into the local economy, compared with $635 million for all of 2000.
 The largest share of foreign currency invested in Rostov in 2000, 59 percent, went to the food industry, the regional administration said. Trading companies got 22 percent, telecommunications 7 percent and transportation less than 4 percent.
 Foreign companies that are investing in Rostov have good things to say.
 &quot;We found out that there are a lot of highly qualified professionals in Rostov and, overall, the climate in the region is positive for investors,&quot; Yury Dombrovsky, CEO of the Luxemburg-based Millicom International Cellular S.A., said in a telephone interview from his Moscow office.
 Millicom, a telecommunications company that develops business in emerging markets, has invested about $10 million in Rostov Sotovaya Svyaz, a cellular-service provider in the region, since 1995.
 What Rostov wants most, though, is money to modernize its hundreds of industrial enterprises - Soviet-era monsters that do everything from smelting metal to building aircraft. Rostov makes the only long-distance electric locomotives and large boilers in the country. It produces more than 94 percent of the industrial sewing machines and half of the country's grain combines.
 The requests submitted to the Mos cow investment symposium ranged from the $8,300 that a tiny company in the village of Zavetnoye was looking for in order to repair the offices where it collects vegetables and berries from farmers, to the $437 million that Taganrogskaya Aviatsiya was asking for to establish mass production of Tu-334 passenger planes.
 Some of the projects were high-tech, such as the creation of a helicopter for extinguishing fires (Ros vertol was seeking $5 million in investment) and the completion of feasibility studies for the new Be-32K small plane and putting it into mass production (the Beriyev Factory in Taganrog needs $83 million).
 Other projects were less sophisticated: Rubin's state factory in Rostov was bidding for $220,000 to start production of enamel dishes, while the Rostov Prison Department was asking for $65,000 to produce barbed wire.
 But most of the projects are linked to the modernization of equipment or the establishment of new production lines.
 Rostselmash - the largest builder of agricultural machinery in Russia, which, according to Troika Dialog, holds 57 percent of the market - was looking for $30 million to establish mass production of the new Don-091 combine to replace its old Niva version. The plant, which is prepared to invest $30 million of its own money into the $60 million project, plans to make the first 100 combines in 2003 and start mass production in 2004. The new combine will collect 9.5 tons of grain an hour, while the Niva collected 7.2 tons, but it is expected to cost $36,000, compared with $25,000 for the Niva.
 &quot;We have big demand for the Niva, but it is outdated,&quot; said Vitaly Va si len ko, chief constructor at Rostselmash. &quot;This one is more comfortable for the driver and it has very useful electronic indicators of the working systems so that the combine driver can see where things go wrong, if they do. I am sure farms will prefer to buy this combine even though it is more expensive than the Niva. Anyway, it is a fraction of the cost of foreign machines and is better suited to our soil and climate.&quot;
 Whether or not Rostselmash is able to get investors interested in its project could say much about the future of other Soviet-era enterprises in the region. If this industrial giant, which is 20 percent owned and supported by the regional administration and now managed by a progressive team of investors, is unable to attract investors, then other projects have little hope.
 Rostselmash also is positioned to benefit from an expected increase in demand for combines if the Kremlin succeeds in pushing through legislation allowing the sale of agricultural land.
 But, as it is, the plant is only barely alive. Before perestroika, it made 370 combines a day, or about 80,000 a year, employed 50,000 people working in three shifts and formed 40 percent of the Rostov city budget. It made only 2,600 combines in 2000 and produced about 6,000 in 2001.
 The plant now operates only one shift. The workers who remain complain about their wages of about 3,000 rubles ($100) a month and the lack of young workers to replace them. Most appear to be at least 50 years old, and much of the work they do seems primitive, with hammers a common tool.
 A new team of Moscow investors, called Novoye Sodruzhestvo, purchased about 40 percent of the plant in 2000 and is trying to acquire enough shares to give it a majority stake and thus better control over the plant. About 30 percent of the company is held by the workers and other individuals, and 10 percent is controlled by portfolio investors.
 The task became more difficult when the government agreed in mid-November to restructure the plant's federal tax debt of 725.4 million rubles ($23.8 million) for the next eight years. The share price doubled almost immediately from about $10 to about $20, and local media have speculated that if a decision is made to restructure its 2.2 billion ruble ($72.6 million) tax debt to local budgets, the price per share could go up to $50.
 In ratings published by Expert magazine in October 2000, Rostov was 15th among the 89 regions in terms of the favorability of its foreign-investment climate.
 In a more recent report on foreign investment, issued in September by Troika Dialog, Rostov was not among the top 10 regions listed, but Troika senior analyst Tom Adshead said it was not far behind.
 &quot;Like Krasnodar, it does well because it is close to important transport corridors, although it lacks the oil and gas aspect of the local economy,&quot; Adshead said.
 &quot;The investment climate in any one region depends on the attitude of the local government to foreign investment. This is more important than location, climate or the size of the local market,&quot; he added. &quot;One of the points of our report was that the best regions attract most of the foreign investment because the bad regions are so hostile to foreign investment, creating too much bureaucracy and too unstable of a tax regime.&quot;
 The Rostov region has created favorable conditions for large investors. Under a regional law, tax breaks are available to companies that invest more than 5 million rubles ($164,000) in Rostov, Taganrog, Azov and Novo cher kassk; 500,000 rubles ($16,400) in six areas prone to drought; or 1 million rubles ($32,800) in all other districts.
 Approved in 2000, the law replaced a 1996 law that allowed tax breaks only for investments of $10 million.
 But less than 10 enterprises in Rostov were able to take advantage of the tax breaks this year, said Anatoly Bryukhovetsky, the Rostov deputy governor who heads the regional economics committee, in an interview last summer with the local newspaper Delovoi Rostov.
 The region also offers low-interest budget loans and guarantees for bank loans to selected projects.
 But Yury Yevchenko, executive director of Club Yug Rossii-2015, which unites most of the more progressive local businesspeople, said the administration needs to do more to improve the investment climate.
 &quot;The system of state support boils down to success in individual negotiations between the potential investor and the administration, and big investors are the most welcome,&quot; Yev chen ko said in a telephone interview.
 One of the region's major foreign investors, Famadar Cartona Ltd., praised the Rostov administration for its assistance. Natalina Yatsenko, the company's deputy director, just laughed when she was asked about corruption in the local administration, an insurmountable obstacle for many foreign investors in Russia.
 &quot;Once I brought a box of chocolates to our regional administration's economic department. I tell you, I thought they were going to bang me over the head with it,&quot; Yatsenko said in a telephone interview. &quot;I am 44, I have worked in various enterprises and in various Russian regions, but it's the first time such a thing has happened to me.&quot;
 Her company was founded - with 100 percent Cypriot and Greek investment - in 1999 in Taganrog to produce corrugated cardboard and packing, after it purchased 75 percent of the facilities at the local Pressmash works, which used to make machine tools.
 &quot;Of course everything can't be perfectly smooth in Russia. But there isn't any pressure from the regional or local administration, from any fiscal authorities, or even a negative attitude. We get tax breaks. They leave us alone - and we are happy about it.
 &quot;I think it is because they understand that investors are needed,&quot; Yatsenko said.
 Dombrovsky of Millicom said the company had some problems in the beginning, but they were all sorted out with the help of the Rostov administration and Governor Vladimir Chub.
 &quot;When we were obtaining our license back in 1995, the local telephone company refused to provide us with the connection and we had to apply to the Anti-Monopoly Committee,&quot; Dom brovsky said. &quot;Here a critical, positive role was played by the governor, who decisively took the side of the investor.&quot;
 Dombrovsky said Chub called a meeting of his officials and said he wanted competition to be established. After this, the license was immediately produced.
 &quot;We also used to have problems with the local mafia - our people were threatened and attacked - but now it is all sorted out, also with the help of the administration,&quot; Dombrovsky said.
 According to Prime-Tass, the region, where 80,000 companies are registered, has 736 ventures with a foreign stake. Out of a combined charter capital of 2.9 billion rubles ($95 million) in these enterprises, 69 percent was invested by foreign countries, including the United States, Britain, Italy, Germany, Turkey, Bulgaria and Poland.
 However, only 300 ventures with foreign capital are &quot;operational,&quot; said Bryukhovetsky, the deputy governor.
 Ivan Rodionov, executive director of AIG Brunswick Millennium Fund, said that there are several factors that make the Rostov region less attractive for investment.
 &quot;First, it is too close to the North Caucasus,&quot; Rodionov said in an interview. The lack of transparent accounting also makes regional industries and agriculture unattractive for the foreign investor, he said.
 Rodionov said it would take a few years until local investors - who have already started to put their money into such enterprises - have consolidated assets at these plants and put things &quot;in order.&quot; Then, he said, &quot;we will be able to introduce such an enterprise to the world market.
 &quot;Now I simply can't see investors could sell the enterprise they invested in here,&quot; Rodionov said.
 Andrei Balkin, credit expert with the Rostov branch of DeltaLeasing, agreed that direct investments in the real sector are highly risky due to weak federal legislation and law enforcement.
 &quot;I think the best option for investors at this point is indirect investment through Russia-based financial structures working in a stable manner that have a good reputation, including via leasing companies. It is desirable that a controlling or blocking stake in such companies belongs to a strategic investor.&quot;
 DeltaLeasing is a subsidiary of New York-based Delta Capital, a private equity manager. It was established to manage the U.S. Russia Investment Fund, which was created by the U.S. Congress and has invested close to $200 million in Russian companies, according to Delta Capital's Web site. Up to $3 million of that sum was invested in the Rostov region, Balkin said.
 Yatsenko of Famadar Kartona said investors could find good opportunities in the Taganrog and Rostov regions. &quot;But before they come here, they must find out all about our investment and taxation laws and of course talk to local businesses about their experiences here, as well as with the administrations.&quot;
 Dombrovsky agreed. &quot;Our experience shows that if investors are interested in the region, they should first talk to the local business societies about possible support, partnership and development of the business.&quot;

TITLE: Looking Back on Yet Another Wasted Year
AUTHOR: By Mikhail Delyagin
TEXT: SINCE 1994, Russia's reformers have been calling every year &quot;one more lost year for reforms.&quot; 2001, however, is particularly deserving of this title. This was the year in which hopes were crushed and Russia's economic boom - which provided GDP growth of 19.7 percent, industrial growth of 30.4 percent and a 33.5 percent increase in investments over the past three years - ran out of steam.
 
The slowdown started back in September. The cause, therefore, was not falling oil prices - the most common excuse given by the government for its blunders - but the unwillingness of the authorities to tackle key structural problems, such as the lack of property-rights protection, the arbitrary and unchecked behavior of monopolies, the degradation of depressed regions and the corrosion of the state administrative apparatus. Bureaucrats, in exchange for the superficial support of the president, have been granted carte blanche to do whatever they please.
 Something in the order of $20 billion per year flees the country as a result of the failure to resolve these problems
 At the Civic Debates Forum in Mos cow on Dec. 20, the ultra-liberal presidential economic adviser Andrei Illarionov effectively conceded the bank ruptcy of the liberal economic course, noting that policies had &quot;decayed with staggering rapidity - faster than was the case during the first term of President Bo ris Yeltsin.&quot; He pointed out that in 2000 Russia received an additional $25 billion and in 2001 an additional $32 billion purely as a result of favorable conditions on the world markets, and admitted that a continuation of the policies pursued by the government of Yevgeny Primakov in 2000 and 2001 would have resulted in GDP growth not of 8.3 percent and 4.9 percent, but of around 15 percent.
 Amazingly, when faced with the challenge of falling prices, the government did not even talk about the need for structural reforms and increasing the effectiveness of the bureaucracy. For the most part, the rhetoric boiled down to assurances that Russia still had sufficient funds to see it through to the end of 2002, even if action was not taken. This would seem to be an incredibly short-sighted approach, but maybe the Russian government has plans to move the country at the end of the year.
 Official claims that GDP growth in 2001 was between 5.5 percent and 5.8 percent and will be 4.3 percent in 2002 are quite absurd. Between January and September growth was 5 percent and then it ceased; thus for the whole of 2001, GDP growth will be below 5 percent.
 The estimate of 4.3 percent growth for 2002 is based on an oil price of $23 per barrel for Urals crude. The actual level is unlikely to exceed $20, and thus GDP growth should not exceed 3.5 percent. If one factors in structural problems, it should be no more than 3 percent. In the two years of Putin's reign, economic growth has slowed from 8.3 percent in 2000 to what will likely be less than 3 percent in 2002.
 Only the drop in inflation has remained insignificant, from 20.8 percent in 2000 to 18.7 percent in 2001 and will probably remain above 15 percent in 2002.
 The main factors affecting economic development in 2002 are the unresolved structural problems mentioned above, in particular burgeoning corruption. Falling world commodity prices and the erosion of reserves built up from 1999 to 2001 will further exacerbate the situation. 2002 will not be a crisis year, but a &quot;pre-crisis&quot; year with expectations being set accordingly.
 The money supply shrunk by 0.1 percent in November for almost the first time since August 1998. Between January and November 2001, the money supply grew by only 25.8 percent, while over the same period of 2000 it grew by 42.1 percent, and of 1999 by 39.4 percent.
 This is in keeping with the government's course, determined as it is to control inflation purely by fiscal tightening. This is useless, as inflation is caused not by excess money supply but by the unchecked abuses of monopolies. This is corroborated by the fact that inflation has been accelerating despite further belt-tightening measures. Inflation grew from 0.6 percent in September to 1.1 percent in October, and 1.7 percent to 1.9 percent in December.
 Further fiscal tightening in these conditions will only undermine the banking system, having a braking effect on the economy and provoke a new non-payments crisis.
 Falling exports and growth of imports are not so much brought about by falling oil prices as by domestic factors and, above all, by maintaining a fairly stable exchange rate in conditions of inflation. Growth of the real ruble exchange rate by 22.2 percent in 2000-2001 has boosted imports while undermining exports and the whole of the manufacturing sector.
 The government can try to halt the growth of the real ruble exchange rate not by containing inflation (which requires structural reforms and, primarily, a much more active anti-monopoly policy), but by devaluing the ruble in line with inflation. This is a palliative measure that will do severe damage to the key potential source of modernization - domestic demand - and will widen the gap between export-oriented sectors and the rest of the economy. Devaluing the ruble in line with inflation will also undermine efforts to de-dollarize the economy and lead to faster depletion of Central Bank reserves.
 This means that the government will almost certainly be unable to avert devaluation, with all the ensuing deleterious consequences, and may not be able to cope with the political fallout.
 The creation of a military-police state in such circumstances is highly likely. This would put Russia on a similar trajectory to relatively successful Third World countries such as Chile, South Korea and India.
 Under a military-police state, successful modernization is possible. However, in Russia such a regime would not work as the army and law enforcement agencies are among the most corrupt and ineffective structures in the country.
 Therefore, absolutism Russian-style would be neither enlightened, nor competent, and as a result short-lived. Such a regime would collapse within three or four years. This would clear the way for Russia to find a constructive economic alternative to ultra-liberalism, combining liberal values and national interests, and to undertake a new attempt at systemic modernization.
 
 <i>
Mikhail Delyagin is director of the Institute for Problems of Globalization and economic adviser to former Prime Minister Yevgeny Primakov. He contributed this commment to The St. Petersburg Times. </i>

TITLE: One Crisis And Two Different Reactions
TEXT: IT is said that the way you see in the New Year sets the tone for the rest of that year. Whether this is true or not, the events that have been unfolding in Argentina should serve as a serious warning to the world's governments and financial elite. After enraged crowds surged onto the streets of Buenos Aires, many recalled that three years ago Argentina was presented as a model for Russia to follow. The business press published gushing articles about the &quot;Argentine miracle&quot; and the man behind it, Domingo Cavallo. Fortunately - and surprisingly - the Russian authorities showed good sense: Rather than adopting tough fiscal measures like Argentina, Russia devalued the ruble and supported industry.As it turns out, Argentina's economic miracle was a catastrophe for the majority of the population. Once an artificially high peso exchange rate had been set, industrial output started to fall and continued on a downward trend for over four years, leaving most Argentinians penniless.
 
None of this stopped the international press and the Argentine elite from trumpeting it as a success story. 
 The collapse we are witnessing today is not the result of poor management or errors committed by the Argentine government, but rather a reflection of the fundamentally flawed philosophy on which economic decision-making rests.
 It is widely believed that a stable exchange rate and low inflation are a panacea for all ills, while the harsh reality has repeatedly provided evidence that the opposite is true, and that the stability of the financial system depends on the general state of the economy. Speaking in Buenos Aires in 1999, the English economist Alan Freeman was asked whether he thought that in order to boost production the peso would have to be devalued. He responded that he didn't understand the question and that if the economy was in deep recession the currency would have to be devalued whether this was desirable or not.
 What the political and business elite considers the only possible solution is absolutely unacceptable to the public. And what the population considers necessary is, in the opinion of the elite, impossible, senseless and absurd.
 It took five changes of president in three weeks for an Argentine leader to do the obvious, namely devalue the peso. Perhaps the financial crisis can be overcome, but it is too late to overcome a profound crisis of trust in government.
 The drama is scarily reminiscent of the events that took place in Russia three years ago, but with one major difference: In Argentina the people took to the streets, while in Russia they sat and watched television. Perhaps it can be explained by differences in temperament and culture. However, the more likely explanation is that in Russia in the 1990s - unlike in Argentina - people not only lost respect for the authorities, but also for themselves.
 
 <i>
Boris Kagarlitsky is a Moscow-based sociologist. </i>

TITLE: Part III of Civil Code Raises International Private Law Issues
AUTHOR: By Maxim Kalinin and Igor Gorchakov
TEXT: THE adoption of Part III of the Civil Code of the Russian Federation introduced several important changes in the sphere of international private law that will affect the business of those foreign companies that are doing business in Russia or trading with Russian partners.
 
According to Part III of the Civil Code, in a dispute involving business entities, the litigants may be charged by the court to present proof of the contents of the foreign law to be applied in the particular case. Thus, this regulation broadens the list of possible sources that may be used to establish and clarify the contents of foreign law applicable in a Russian court proceeding.
 Part III of the code states that if the contents of foreign law are not ascertained within a &quot;reasonable time&quot; then Russian law should be applied. However, there is no guidance provided as to what should be considered a &quot;reasonable time.&quot;
 A court may be tempted to decide that a &quot;reasonable time&quot; for the establishment of the contents of foreign law should not exceed the term during which the case is under consideration, which, for example, for federal arbitrage courts is two months from the date of the filing of the lawsuit with the court. On the other hand, the Russian Federation Arbitrage Procedural Code does not clearly allow a court to suspend the consideration of a case due to the need to establish the contents of the applicable foreign law (unless the court, using an analogy of the law, suspends the hearings for &quot;handling an expertise.&quot;)
 Another interesting development in Part III of the Civil Code deals with the application of imperative norms of federal laws. It is obvious that the imperative rules of federal public law, such as tax or currency-control laws, will in any case, apply to a contract between Russian and foreign parties governed by foreign law. However, Part III of the Civil Code also implies that certain imperative norms of Russian private law should also apply, if these norms are of &quot;special importance.&quot;
 The law is practically silent as to what should be considered to be an imperative norm of &quot;special importance.&quot; However, it suggests that such norms must have a special importance for the protection of the rights and interests of individuals and legal entities. In the absence of a detailed list of such imperative norms, the courts will most likely have discretion to decide in each particular case whether certain norms have such &quot;special importance.&quot;
 One of the most controversial elements of the new legislation is the regulation that, if the parties choose the applicable law after concluding contract, this law will have retroactive effect and will be applied to the parties' relations from the date of their concluding the contract. There may be two possible ways of interpreting and applying this regulation. First, when the parties have not determined any applicable law from the beginning and, second, when the parties decide to change the previously chosen applicable law. This regulation does not specify as to which of these situations it applies. However, we believe that it is designed to apply only to the situation where the parties did not chose the applicable law in the contract from the very beginning.
 There are many other changes which have been introduced by Part III of the Civil Code and there are many new precedents to come, which will most surely fill in some of the existing gaps.
 
 <i>
Maxim Kalinin is a partner and Igor Gor chakov an associate at Baker & McKenzie law firm's St. Petersburg Office. </i>

TITLE: The Failure of Brute Force
AUTHOR: By Robert Bruce Ware
TEXT: FOR both Russia and the United States, war followed terrorist attacks that claimed civilian lives and exacted heavy social costs. The attacks upon New York and Washington occurred exactly two years and one week after the first of four Russian apartment buildings exploded. The United States began its anti-terrorist campaign in Afghanistan exactly two years and one week after Russia began its current military campaign in Chechnya.
 
In their respective campaigns, both Russia and the United States found themselves fighting against forces composed of local militants and foreign fighters. These forces were joined on behalf of similar forms of Islamic extremism and were supported by the same individuals and organizations based in the Persian Gulf. The Taliban and Chechen militants have supported one another, and Osama bin Laden has supported both.
 But that's where the similarities stop. In a little more than two years, Russia has sunk steadily deeper into a Chechen quagmire. In a little more than two months, the United States has achieved most of its goals in Afghanistan. There is much that Moscow might learn from the U.S. campaign.
 The differences began immediately after the terrorist attacks occurred in each country. Russians quickly blamed Chechens for the apartment blasts, just as Americans accused al-Qaida. But Russian officials vilified Chechens as a people and the Russian media was quick to follow. This vilification added to long-standing anti-Caucasian prejudices in Russia that target people of dark complexion from the south, including dozens of other ethnicities as well as Chechens, for regular harassment and periodic assault. These prejudices undermine Russia's presence in the Caucasus morally and politically. How can Russia justify its retention of these people within its federation when it chronically treats them as second-class citizens? Every day in Russia new rebels rise up against the injustice of these prejudices.
 By contrast, U.S. leaders and the U.S. media joined forces to combat the vilification of Arabs. They opposed prejudicial treatment of Arab-Americans, prosecuted hate crimes, and declared that U.S. actions would not be anti-Islamic.
 After the attacks, the United States acted with careful deliberation. Initial efforts were dedicated to diplomatic finesse that addressed the fears of foreign leaders and consolidated international support. The following weeks saw similar public-relations efforts within Afgha ni stan. Millions of leaflets were dropped assuring Afghans of U.S. protection and offering them a clear choice if they abandoned their militant leaders. When the U.S. attack finally came, it was targeted to avoid civilian casualties and was accompanied by food drops.
 Moscow did none of this. The failure of Russian policies in Chechnya began before its troops re-entered the republic when it failed to explain the reasons for its military campaign to the international community and the people of Chechnya.
 In fact, Russia had a case. After Russia withdrew from Chechnya in 1996, Chechnya disintegrated into lawlessness. Thousands of people from the region were held hostage in Chechnya. Criminal raids across the Chechen border were daily events that terrorized the surrounding populations, and militant groups from Chechnya thrice invaded the neighboring republic of Dagestan. My survey research suggests that most of the Muslim people of Dagestan view Chechnya as a serious threat, support the Russian campaign in Chechnya and seek closer relations with Russia. Yet before Russian troops re-entered Chechnya, little effort was made to explain any of this in international forums.
 Nor did Russian leaders appeal to the people of Chechnya. Here again, Russia had a case. Many Chechens suffered from the chaos in their country and were fed up with the warlords and extremists who ran it. Especially in the early stages of the war, Russia had the support of some of these people, and it might have had the support of more had it made an effort to assure their protection.
 Instead, Russian attacks have been characteristically brutal and indiscriminate. Efforts to identify militants in &quot;pacified&quot; areas of Chechnya have resulted in the regular abuse of civilians. These tactics have inspired Chechen resistance and undermined any popular support that Moscow might otherwise have cultivated. So long as these tactics continue there can be no hope for peace in Chechnya.
 In Afghanistan, by contrast, the militants were found to be without popular support and folded surprisingly quickly. The U.S. presence has supported the restoration of human rights, and efforts to seek out militants in pacified areas have been relatively unobtrusive.
 Of course, comparison invites caveats. First, in southern Russia there are ancient animosities that the United States is spared in Afghanistan. Second, in Chechnya, Islamic extremists cannot be separated as easily from local nationalists as they were in Afghanistan. Third, the Russian military is a horribly blunt instrument for such delicate social surgery. Russians lack precision weapons and disciplined troops, while Chechen militants hide among civilians. Finally, the situation in Afg ha nistan is likely to deteriorate in the future, as power devolves to feuding warlords.
 Still, it remains a fact that Russia has rarely deviated from policies that are patently counterproductive. For more than two years, the West has bashed Russia's policies in Chechnya without producing constructive change. Now we have demonstrated a different approach. Perhaps we will do more to help the people of Chechnya if we appeal to Russians in terms of their own interests.
 
 <i>Robert Bruce Ware is an associate professor at Southern Illinois University who conducts field work in the Caucasus. He contributed this comment to The St. Petersburg Times. </i>

TITLE: Stop Playing With Our City's Future
TEXT: JUST five weeks after becoming the third-ranking politician in the country, Federation Council Speaker Sergei Mironov has unveiled his first gift to his native city - in the form of a draft law that would provide reimbursement from the federal budget for costs St. Petersburg incurs fulfilling its role as Russia's second capital.
 
Indubitably, this idea is one that is long overdue. The city administration has been lobbying for years for such a measure, pleas that have fallen on deaf ears in Moscow. We can only hope that Mironov - still enjoying a honeymoon after his recent elevation and no doubt very much in the president's good graces - can succeed where others have failed.
 Almost at the same time, however, another St. Petersburg native who has made the big time in Moscow presented the city with another gift that, while less welcome, may well be even more necessary and useful.
 Just as the country was revving up for the holidays, the State Duma's Audit Chamber - which monitors federal budgetary spending - came out with a report critical of the way that the city has spent the money that the government allocated for local projects in 2001. The Audit Chamber is headed by former Prime Minister Sergei Stepashin.
 Of course, the cynics have been quick to denounce both gestures as part of a politically motivated assault against Governor Vladimir Yakovlev, an assault that has much more to do with petty political ambitions than with the city's best interests.
 On the one hand, Stepashin is wielding the stick against the administration and, on the other, Mironov is offering up the carrot to the people in preparation for a bid to place a more obviously pro-Kremlin figure in Smolny.
 As is usually the case in Russia, the cynics are most likely right. Although with both initiatives St. Petersburg stands to gain - with Mironov's, it would be rightly reimbursed for federal expenses and, with Stepashin's, it might gain financial-oversight mechanisms that it so badly needs - it is unbearably frustrating to watch as time and again crucial local issues are played out so ... cynically.
 Other examples come readily to mind. The idea of combining St. Petersburg and the Leningrad Oblast into a single subject of the federation is one that will likely never get the thoughtful consideration it merits. And what about Moscow's insipid attitude toward easing the visa regime in order to boost international tourism to the city?
 Although it may be hopelessly naive to say so, the city deserves representation both in Smolny and in the Kremlin that puts local development interests ahead of personal political ambitions. After all these years, why is this still too much to ask?

TITLE: The Pasko Case: It Could Almost Seem Funny
TEXT: LAST week, Sergei Mi ro nov, the new speaker of the Federation Council, stated that he thinks the recent verdict against navy journalist Grigory Pasko was incorrect. A lot of people have come out against this verdict, including many pro testors in Vladivostok and around the country.
 
Pasko was convicted by a Vladivostok court last month on charges of espionage and sentenced to four years in prison. Pasko, who maintains his innocence, is appealing the verdict. Prosecutors, for their part, are appealing the sentence - they want at least a nine-year term.
 Mironov's statement stands in stark contrast to the views of Prosecutor General Vladimir Ustinov, who said recently that such matters should be decided in the courts and not at public demonstrations.
 On the surface, that makes sense. But reality seems to be a different matter, if you believe what Pasko's lawyers have to say. They claim that the military prosecutors have refused to hand over materials necessary for them to prepare their appeal.
 I, for one, believe it and I can imagine why the prosecutors are acting this way: They are ashamed of the way they collected their evidence. I'll bet that they don't want anyone to examine the signatures of the &quot;witnesses,&quot; signatures which Pas ko's lawyers claim can be shown to have been forged by Fe deral Security Service investigators.
 More, I'll bet that prosecutors aren't too proud of the indictment itself. As we now know, Pasko was convicted of having in his possession some allegedly &quot;secret&quot; information which &quot;might have been passed&quot; to alleged foreign intelligence operatives. Who are they? Journalists working for the Japanese television company NHK and for the newspaper Asakhi Simbun. 
 Pasko apparently also violated the law by speaking to journalists at all. Prosecutors tell us that a secret Defense Ministry regulation prohibits people like Pasko from having any contacts with foreigners. Frankly, I was shocked to discover that some Russian journalists - even military journalists - are bound by such Soviet-style restrictions.
 &quot;You are lucky to be so young,&quot; said local human-rights advocate Yury Vdovin, when he saw my surprise. &quot;I remember working at a defense plant in the early 1970s. I wasn't allowed to go to a jazz concert for fear that I might speak to a foreigner.&quot;
 On the other hand, I can understand why the FSB might act this way. After all, it is no secret that Soviet intelligence employed Soviet journalists abroad to gather intelligence on the enemies of socialism. Naturally, they suppose that other agencies are doing likewise.
 &quot;The grounds for conviction were notes that investigators found in Pasko's apartment,&quot; said Ivan Pavlov, Pasko's lawyer, at a press conference last week. &quot;They contained information written down by Pasko at a navy conference [at which officers] reported about recent maneuvers in the Pacific Ocean. All [Pasko] wanted to do was to use those notes to write an article for his own newspaper.&quot;
 Now, Pasko is locked in a cell. A journalist jailed for taking notes at a conference. Notes that &quot;might have been&quot; passed on to foreign agents. It almost sounds funny.

TITLE: Chris Floyd's Global Eye
TEXT: Tomb Raiders
 
It was the night after Christmas on Florida's eastern shore. A tepid rain was falling as a couple of county lawmen pushed up the garage door at a ranch house on Sugar Pine Drive, just outside Boca Raton. They stood back for a minute to let the fumes spill out, a few remaining shreds of the poison cloud that had done its work hours ago. The car was no longer running. Behind the wheel - just as they'd expected after getting the wife's frantic phone call half an hour before - was the body of Peter K. Hartmann, regional manager for Service Corporation International.
 
&quot;The funeral guy,&quot; said one of the deputies, then went to call for the meat wagon.
 SCI, based in Houston, is one of a handful of international corporations that have gobbled up the funeral industry in recent years, squeezing out independent operators in hardball takeovers. It's been a sweet deal for the Texas boys, better than oil, really: the only business in the world with a guaranteed, never-ending supply of &quot;customers.&quot;
 The company had been all over the local news recently: They'd just been hit with a big lawsuit, accusing them of &quot;recycling&quot; bodies in several Jewish cemeteries they owned in the Palm Beach area - cramming new cadavers into existing graves, or digging up the dead and tossing their bones and tattered burial shrouds into the woods nearby. A few outraged mourners had brought the initial suit, but there were hundreds more getting ready to join it.
 The funny thing was, Hartmann had not been directly implicated in the growing scandal. He was a local wheel for SCI, sure, but the cemeteries in question were not in his territory. In fact, he had been brought in to help clean up the mess, and had apparently gathered a good deal of background information on the gruesome goings-on. He was known as a straight arrow, a devout Catholic and devoted family man. &quot;He's about as upright a person as that company's ever had working for them,&quot; a former co-worker told the Miami Herald. &quot;He would certainly have always tried to do the right thing.''
 Hartmann's wife said he'd been upset by the grisly allegations; perhaps the company's response had rattled him as well. The mourners had videotapes of bones and shrouds scattered in the bushes, and they had sworn statements from cemetery workers who'd dug up bodies on SCI's orders. But the company said the remains were just animal bones - deer, alligators, wild boars. They blamed any &quot;overbooking&quot; of graves on the small, independent firm they'd squeezed out when they took over the cemeteries seven years before. They were going to stonewall it, fight it out. They could afford to: SCI had deep pockets - and the very highest political connections in the land.
 Just a few weeks before, SCI had settled a potentially explosive lawsuit that could have meant major trouble for the company and its co-defendant - a certain George W. Bush. That case began in 1998, with the Texas State Funeral Commission investigating some &quot;shortcuts&quot; used by the company to maximize their profits. Grieving families had reported noxious fluids leaking from their loved ones' crypts; word was that SCI was using unlicensed embalmers to churn out corpses on the cheap.
 But the company had the perfect <i>krysha. </i>SCI chairperson Bob Waltrip had long been a major cash conduit for the George Bushes, father and son. So he just called on his old friend, Lil' Dubya - then the governor of Texas. Bush commiserated with his financial patron: &quot;Bobby, are those people still messing with you?&quot; He turned the case over to his chief of staff, Joe Allbaugh.
 Over the next several weeks, Allbaugh and other senior Bush aides leaned on Funeral Commission chairperson Eliza May to end the probe. She persisted, and the commission eventually fined SCI $450,000 for its desecrations. The company refused to pay - and May was fired a few months later, after she began looking into SCI's campaign contributions to state officials.
 She filed a &quot;whistleblower&quot; suit against the company and its official protectors. Bush gave a sworn statement that he'd never discussed the case with Waltrip, despite eyewitness testimony that he had - from SCI's own lawyer. A long war of legal attrition ensued, with SCI and the state of Texas lining up against May.
 Finally, last November, in the looming shadow of Bush's bourgeoning imperial power, she accepted an out-of-court settlement for $210,000. The president paid nothing, of course. Texas taxpayers took the brunt of the costs, while SCI chipped in $55,000 - chump change for the self-proclaimed &quot;global leader in the death-care industry,&quot; filling its Houston coffers with $2.5 billion a year from funeral homes and crematoria on five continents.
 So that's SCI: hard-wired, with hard cash, into the Washington power grid. They certainly wouldn't let a few dead Jews and their misplaced bones derail the &quot;death care&quot; gravy train.
 The weekend before Christmas, Hartmann was summoned to a meeting with Houston honchos, who'd flown in for an emergency strategy session on the Florida case. We don't know what was said at that meeting, what facts were revealed, or left unspoken. We don't know what Hartmann was told to do, or not to do. We don't know what he agreed to do, or refused to do. We don't know if he indeed &quot;tried to do the right thing,&quot; whatever that might have been.
 We just know that three days later, on the night after Christmas, the deputies found him dead, in a company car, in the garage on Sugar Pine Drive.
 Just another &quot;customer&quot; now.

TITLE: WORLD WATCH
TEXT: Cabinet Steps Down
 

AMMAN, Jordan (AP) - In a surprise move, Jordan's prime minister and his entire cabinet resigned on Monday, the second such shuffle since late October, government officials said.
 Ali Abul-Ragheb tendered his resignation to King Abdullah II, and a new cabinet was expected to be formed later in the day, the officials said, speaking on condition of anonymity. Palace officials said only three or four cabinet positions would change.
 The reshuffle comes one day before the king is scheduled to leave on a state visit to China.
 It was not immediately clear what prompted the reshuffle, the third since Abul-Ragheb formed his cabinet on June 19, 2000. But it was unexpected since the 26-member cabinet endorsed a $3.4 billion budget on Sunday.
 The last cabinet reshuffle - on Oct. 27 - followed Abdullah's instruction to the government to pursue economic and political reforms with more vigor.
 
 
Presidential Mea Culpa
 

SEOUL (Reuters) - President Kim Dae-jung apologized to South Koreans Monday for a series of scandals and vowed to spend his last year in office nurturing the economy, improving North-South ties and ensuring the soccer World Cup is a success.
 Kim told a news conference he expected South Korea's economy to pick up in the second half of this year. He vowed to guarantee fair local and presidential elections in 2002, and also said he was considering a cabinet reshuffle but had not decided yet.
 On North Korea, Kim said the United States should help find a face-saving way for the North to restart talks between Washington and Pyongyang. North Korea has bluntly rejected offers so far.
 President Kim, a 76-year-old former dissident who won the Nobel Peace Prize in 2000, has not been accused of any personal wrongdoing in the latest spate of domestic influence-peddling scandals. But his popularity has been dented.
 
 
Farewell, Old Man
 

COJIMAR, Cuba, Jan 13 (Reuters) - Gregorio Fuentes, the weather-beaten captain of U.S. novelist Ernest Hemingway's boat in Cuba and inspiration for "The Old Man And The Sea," died on Sunday, aged 104, in the fishing village of Cojimar.
 "He was a symbol of Cuban fishing and of human brotherhood, thanks to all of his years of friendship with Hemingway," a friend, Jose Miguel Diaz Escrich, who runs Havana's Hemingway International Nautical Club, said.
 Born on July 11, 1897, Fuentes became captain of Hemingway's boat "Pilar" at the end of the 1930s. The American developed a strong bond of friendship with Fuentes, who as well as steering Hemingway's boat also prepared his favorite cocktails.
 In recent times, Fuentes had become something of a tourist magnet in Cojimar, just east of Cuba's coastal capital Havana, where he once used to embark on marlin-fishing trips with the adventure-loving Hemingway. Foreign journalists could usually get an interview in exchange for a bottle of rum.
 Fuentes died at his home on Sunday morning and was buried at a cemetery in the nearby village of Guanabacoa in the afternoon, friends said. Although still lucid, he was suffering various ailments associated with old age. 



TITLE: Favre Leads Packers to Divisional Playoffs
PUBLISHER: The Associated Press
TEXT: GREEN BAY, Wisconsin - The Lambeau mystique lives on.
 
Brett Favre threw two touchdown passes as the Green Bay Packers stayed perfect at home in the playoffs with a 25-15 victory over San Francisco on Sunday.
 The Packers (13-5), who advanced to face the St. Louis Rams next week, improved to 13-0 at home in playoff games. Favre improved to 31-0 in starts at Lambeau Field with the temperature one degree celsius or colder.
 It was minus one degree celsius at kickoff on Sunday, and Favre was 22-of-29 for 269 yards, two touchdowns and one interception.
 Favre guided Green Bay on a 93-yard touchdown drive after Tyrone Williams' interception of a deflection by Mike McKenzie with five minutes left and the Packers clinging to an 18-15 lead.
 Ahman Green capped the drive with a 9-yard run.
 Corey Bradford stripped Paul Smith of the ball and recovered on the ensuing kickoff, and the Packers ran out the clock for their first playoff victory since the 1997 NFC championship at San Francisco.
 The 49ers, who, like the <br> Packers, returned to the playoffs after a two-year hiatus, finished 12-5.
 For a time, the Niners made Packers coach Mike Sherman pay for his questionable decision to go for a 2-point conversion that failed with Green Bay ahead 15-7.
 
 <strong>
Ravens 20, Dolphins 3. </strong>Bruising defense, a grinding ground game and one pivotal pass put the Baltimore Ravens one victory closer to a possible return to the Super Bowl.
 
Baltimore scored on touchdown marches of 90 and 99 yards, and allowed only 151 yards to beat the Miami Dolphins 20-3 in the other wild-card playoff game Sunday.
 The Ravens, who needed a win last week over Minnesota to make the playoffs, advanced to a second-round game Sunday at AFC Central champion Pittsburgh. Baltimore won at Pittsburgh 13-10 on Nov. 4, but lost 26-21 at home to the Steelers on Dec. 16.
 It was a painfully familiar ending for the Dolphins (11-6). They're the only team to reach the playoffs each of the past five years, but they've made an early exit every time by a combined score of 164-16.
 The Ravens played the sort of smothering defense that took them to the NFL title last year. Miami's lone score came after Baltimore fumbled the opening kickoff, and the Dolphins managed just one first down in the opening 23 minutes.
 The defending champions also showed surprising punch on offense, rushing for 227 yards and converting 10 of 16 third downs. Terry Allen carried 25 times for 109 yards and a score, and Jason Brookins added 65 yards in 10 attempts.
 A bold call helped the Ravens put the game away in the third period. Nursing a 7-3 lead and facing a third-and-1 at the Baltimore 10-yard line, Elvis Grbac fooled Miami by throwing deep to Travis Taylor, who beat Patrick Surtain for a 45-yard gain.
 Eight plays later, again on third down, Taylor beat Surtain for a 4-yard touchdown catch. The two drives were the longest of the season for the Ravens.
 
 <strong>
Raiders 38, Jets 24. </strong>In the other AFC wild-card game, played on Saturday, Jerry Rice caught nine passes for 183 yards and a touchdown, and Charlie Garner rushed 80 yards for a score with 1:27 left as the Oakland Raiders pulled out of their late-season nosedive with a 38-24 victory over the New York Jets on Saturday night.
 
Six days after the Jets beat Oakland 24-22 in the teams' regular-season finale, the Raiders emphatically turned the tables with their best performance in two months. A roster of veterans assembled specifically for the postseason got it together just in time - and Rice led the way.
 It was Rice's 24th career postseason game, but his first with the Raiders after 16 record-setting seasons with the San Francisco 49ers. At 39, the NFL's most prolific receiver wrote a remarkable new chapter in his matchless career with several clutch receptions in the second half.
 Rice caught a 21-yard TD pass from Rich Gannon with 5:53 left, giving the Raiders a 31-17 lead. It was his 20th playoff TD, moving him one behind Thurman Thomas and Emmitt Smith for the NFL record.
 The Jets pulled within seven points on Vinny Testaverde's second TD pass to Wayne Chrebet, with 1:52 left. After the Raiders forced New York to use its final two timeouts, Garner sprinted down Oakland's sideline on third-and-10 for the clinching score.
 
 <strong>
Eagles 31, Buccaneers 9. </strong>Donovan McNabb threw for two touchdowns and 194 yards Saturday and ran for 57 more as the Philadelphia Eagles beat the Tampa Bay Buccaneers 31-9 Saturday in the first NFC wild-card game, the second straight season they've beaten the Bucs in the first round of the playoffs.
 
The Eagles' win was overshadowed by speculation that this would be head coach TonyDungy's last game after six seasons as the only winning coach in Bucs' history. He could be replaced by Bill Parcells, who led the New York Giants to two Super Bowl victories, took New England to the Super Bowl and the New York Jets to the AFC title game.
 The loss was typical of Tampa Bay's offensive failures. The Bucs have had three starting quarterbacks and three offensive coordinators in the last three seasons and just don't score enough touchdowns. This was the third straight playoff game they didn't score a TD, and Brad Johnson compounded the problems by throwing four interceptions.
 In the first half, the Bucs matched Philadelphia drive for drive, but went to the locker room trailing 17-9 because they managed just three field goals while the Eagles scored two TDs to go with David Akers' field goal.
 The Bucs' cold-weather jinx wasn't a factor-the team entered the game 0-20 in games begun in temperatures under five degrees celsius. It was a balmy eight degrees as the late-afternoon game began Saturday, but it made no difference.
 The Eagles (12-5) will face the Bears (13-3) in Chicago next Saturday.

TITLE: Withdrawals Steal the Show Down Under
AUTHOR: By John Pye
PUBLISHER: The Associated Press
TEXT: MELBOURNE, Australia - Gustavo Kuerten was upset in the first round Monday, a few hours after Andre Agassi and Serena Williams withdrew before their matches during a hectic opening day at the Australian Open.
 
Kuerten, the three-time French Open champion and former No. 1, lacked his usual zip and was treated for hip pain. He wasted a two-set lead to Julien Boutter of France and lost 3-6, 4-6, 7-5, 6-3, 6-3 to a player ranked No. 53.
 Kuerten left the Melbourne Park complex to get a medical opinion, but he returned not knowing exactly what is wrong or what to do.
 &quot;It's already been eight months that I've been feeling this,&quot; the second-seeded Brazilian said. &quot;I prepared well, but I was still not able to compete on hard courts.&quot;
 Kuerten has never advanced past the second round of the Australian Open.
 &quot;After the third set, I couldn't move,&quot; he said. &quot;I feel like I couldn't play my game. There's a lot of pain and it's no pleasure for me to play like that.&quot;
 After falling behind in the first two sets, Boutter took advantage of the Brazilian's sluggishness, sending 91 winners by Kuerten to compensate for 50 unforced errors.
 The tournament was jolted on the opening morning by the withdrawals of No. 3 Agassi and No. 5 Serena Williams - both injured during tuneup events - and delayed for more than an hour by rain.
 Williams injured her ankle in Sydney last week and withdrew just after first-round matches started on outside courts. That ensured there will be no repeat of the all-sister final at the U.S. Open in which Serena lost to Venus Williams.
 It also gave former No. 1 Martina Hingis one less hurdle in her path to a sixth consecutive Australian Open final.
 Venus, seeded second and the two-time U.S. Open and Wimbledon champion, beat qualifier Ansley Cargill of the United States 6-2, 6-2, and Hingis downed Virginie Razzano of France by the same score in the first night match.
 Hingis could have met Serena in the quarterfinals, Venus in the semifinals and defending champion Jennifer Capriati in the final.
 Hingis defeated Serena and Venus Williams last year before losing to Capriati in the championship match. But Venus Williams said she was not as prepared last year as she would have liked.
 &quot;Right now, I think I have a lot more experience on my side, and I have confidence,&quot; she said. &quot;So that's important going into a championship like this.&quot;
 Hingis is coming back from a three-month layoff for an ankle injury. She retained her title in Sydney last week, her first tournament victory in 11 months.
 Hingis said she could empathize with Serena Williams, having had ankle surgery herself. But she didn't want to dwell on how Serena's absence might help her.
 &quot;I love every time I walk out there,&quot; on center court, said Hingis, who won three Australian titles from 1997-99. &quot;First round is always tough. I'm not worried about the quarterfinals yet. I'll take it round by round.&quot;
 With the second-and third-seeded men already out midway through the first round, No. 1 Hewitt was set to open on Tuesday against Alberto Martin of Spain.
 Hewitt is the first homegrown player to be seeded first at this tournament since 1976. He is aiming to be the first Aussie to win at Melbourne since Mark Edmondson that same year.
 Pete Sampras, owner of 13 Grand Slam titles, faces Jarkko Nieminen of Finland in the first round.
 Agassi injured his right wrist in an exhibition loss Saturday to Sampras. After meeting with the tournament director and doctor, he advised organizers late Sunday he was pulling out.
 Mary Pierce, the 2000 French Open winner and 1995 Australian Open winner, didn't win a game before she quit while trailing Jill Craybas 4-0.
 Pierce, bothered by back injuries last year, said she strained abdominal muscles while serving in the first game.
 In other women's matches, No. 9 Sandrine Testud of France lost to compatriot Nathalie Dechy 7-5, 4-6, 6-3; No. 8 Monica Seles of the United States, a four-time Australian champion, beat Patty Schnyder of Switzerland 6-1, 6-2; and No. 15 Amanda Coetzer defeated Miriam Oremans 6-1, 6-1.
 Without Agassi or Kuerten, the men's draw appears wide open, with Hewitt and fourth-seeded Yevgeny Kafelnikov the favorites.
 Kafelnikov, the 1999 champion and 2000 runner-up, beat German qualifier Michael Kohlmann 6-3, 6-3, 6-2.
 Big servers Goran Ivanisevic and Mark Philippoussis opened with wins. Ivanisevic, the Wimbledon champion, didn't even qualify for the Australian Open last year. He is seeded 10th this time, and he opened by serving 30 aces in a 4-6, 7-5, 7-6 (4), 6-4 win over Martin Damm.
 Philippoussis, playing in his hometown, had 29 aces in a 6-3, 6-4, 7-5 win over Spain's Galo Blanco in Monday's last match.
 No. 5 Sebastien Grosjean, a semifinalist last year, advanced with a 6-2, 2-6, 7-6 (5), 7-6 (2) victory over Spain's Juan Balcells, and No. 6 Tim Henman had a 7-5, 6-2, 6-2 win over Australia's Todd Larkham. James Blake ousted No. 14 Alex Corretja of Spain 5-7, 7-6 (6), 6-3, 6-2.
 No. 12 Guillermo Canas was a 6-1, 6-1, 6-4 winner over Paradorn Srichaphan, and Dominik Hrbaty rallied to beat Lars Burgsmuller 3-6, 2-6, 6-3, 6-3, 7-5.
 Also advancing were No. 18 Albert Portas, No. 24 Thomas Enqvist, No. 28 Greg Rusedski, No. 21 Younes El Aynaoui, No. 22 Hicham Arazi, No. 32 Tommy Robredo and unseeded Jerome Golmard.

TITLE: SPORTS WATCH
TEXT: A Little Too Late
 

BOSTON, Massachussetts (Reuters) - The Boston Red Sox rejected a late, $740-million bid for the team Sunday and reconfirmed an earlier agreement to accept a $700-million offer from a group led by Florida finan cier John Henry.
 The team's owners said a new $740 million offer from Cablevision Systems Corp. Chairperson Charles Dolan, filed last Thursday, was "untimely" and raised the prospect that a deal could not be completed by the start of the new season.
 Henry's group had already paid a $66-million deposit and the offer was poised to win approval from Major League Baseball this week, said John Harrington, who runs the Jean R. Yawkey Trust, which owns 53.5 percent of the team.
 
 
Grand Opening
 

GALLE, Sri Lanka (Reuters) - Stuart Carlisle and Trevor Gripper shared a 153-run record first-wicket partnership as Zimbabwe avoided the follow-on in the third and final test on Monday against Sri Lanka.
 Replying to Sri Lanka's first innings of 418, Zimbabwe finished the third day at 230 for five with Grant Flower (19) and Heath Streak (29) at the crease.
 The match was poised for Sri Lankan off-spinner Muttiah Muralitharan, who had 395 wickets, to become the fastest and youngest bowler to take 400 test wickets.
 However Muralitharan, who bowled 47 overs on Monday and finished the day with figures of two for 66 off 53 overs, was thwarted by Carlisle (64) and Gripper's (83) stand.
 
 
Phone for Help
 

HONOLULU, Hawaii (Reuters) - Jerry Kelly claimed his first PGA Tour victory on Sunday, making two key par saves on the back nine and a short birdie putt at the 18th hole to hold off an unlucky John Cook by a stroke in the Hawaiian Open.
 The Wisconsin native Kelly never relinquished the lead he earned Saturday, shooting an even-par 70 as the chase group faltered and an errant phone call intervened in his favor.
 He briefly tied for the lead at 13-under with a birdie at the 18th but the damage had been done by a bogey at the par-three 17th, where his backswing was affected by a ringing cell phone.
 "I had a little miscue on 17 that I won't go into," said Cook, a 10-time winner on the PGA Tour who collected $432,000.
 
 
Shottenheimer Axed
 

WASHINGTON (AP) - Owner Dan Snyder felt that the Washington Redskins had given Marty Schottenheimer too much power, and last week asked for some of it back. Schottenheimer refused and was fired Sunday night, setting the stage for Snyder to hire his preferred choice all along: Steve Spurrier.
 Spurrier, who rejected Snyder's overtures before Schottenheimer was hired a year ago, has reached an "agreement in principle" with the owner for a five-year contract worth about $25 million, a source with knowledge of the Redskins' negotiations said on condition of anonymity.
 
 
Sacrifices, Sacrifices
 

MELBOURNE, Australia (Reuters) - Yevgeny Kafelnikov is so serious about trying to win this year's Australian Open that he has barred himself from playing golf.
 "Golf is one of my hobbies and it's one way that I can get away from the game and refresh my energy," he said.
 "Time is running away from me [to win tennis tournaments] but I'll have plenty of golf when I retire."
 Kafelnikov's dedication to his sport is already legendary. The 27-year-old from the Black Sea resort of Sochi is the ironman of men's tennis, playing more matches than anyone else on the circuit in seven of the past eight seasons.