SOURCE: The St. Petersburg Times DATE: Issue #742 (8), Tuesday, February 5, 2002 ************************************************************************** TITLE: Heineken Seals $400M Bravo Deal AUTHOR: By Andrey Musatov PUBLISHER: Staff Writer TEXT: Europe's biggest brewer, Dutch-based Heineken, announced on Friday that it had signed an agreement to acquire St. Petersburg's Bravo Holding for $400 million. The purchase, which officials at Heineken said would help them move into a Russian market that still has room for growth, not only brings the European holding the popular local Bochkarev brand, but will also allow more market penetration for its own flagship label. "With this acquisition, Heineken gains a foothold in the expanding beer market in Russia," a statement released by the firm said. "The transaction is valued at a maximum amount of $400 million, provided that volume and price targets are met in the next 12 months." According to Manel Vrijenhoek, press officer at Heineken, the price is a reasonable one to pay for Bravo's facilities, brands and expertise. "We think that it's a good price for a company that has shown such strong growth," she said in telephone interview on Monday. "The next few years will bring at least 6-percent annual growth, especially considering that there is room for growth on the beer market." "And, as we already have such a strong position in Europe, the company's management decided to focus on markets in Russia, Asia and Latin America," she added. She also said that Heineken planned to launch a line producing its own beer here. "Because Russia has very high import duties, the Heineken brand will have a competitive advantage in the Russian premium market when it is brewed inside the country itself," she said. "Basically, we are not planning to change Bravo's structure and strategy because we see no point in reorganizing a system that is working well. We will fill some positions in management, while the present team will likely stay." Bravo International was set up in 1993 by two Icelandic businessmen, Thor Bjorgolfsson and Magnus Thorsteinsson. The local brewing facility, which began production in 1999, is the sixth-largest single-site brewery in Europe. Although the brewery has only been in production for three years, Bravo has already acquired a 17-percent share of the St. Petersburg market and a 7-percent market share in Moscow, according to a Heineken statement. The company's highest-profile brands are Okhota and Bochkarev. The brewery also produces the Lowenbrau brand under license. In 2001, Bravo sold 230 million liters of beer and 40 million liters of mixed alcoholic beverages. Projected sales for 2002 are 400 million liters. Heineken is the world's second -largest brewer behind U.S.-based Anheuser Busch, which produces the Budweiser brand. Heineken has 110 breweries worldwide and has over 80 brands available in more than 170 countries. According to the Heineken press service, the size of the Russian beer market has doubled over the last three years, reaching a total sales volume of over 6 billion liters in 2001. Further market growth is expected to rank Russia among the world's top five beer markets in the next few years. Vrijenhoek said that Heineken will continue to develop Bravo's mixed-drinks lines in a separate company and will finance the entire acquisition with its own capital. Final closure of the deal is expected in the first quarter of 2002. According to Stephen Ogden, the chief financial officer of Bravo International, "this is one of the most significant consumer-goods deals in the history of Russia." "Bochkarev is a good national brand and, although we believe they will produce Heineken beer, the priority will stay for rapid growth of Botchkarev brand," he said Monday. "This purchase represents strategic investment and, above the $400 million Heineken is going to pay, the company will likely invest money for marketing aims." Ogden declined comment on the total amount Bravo had invested in the plant up to the present. Some analysts expressed surprise that it had taken Heineken so long to make the move. According to Kim Iskyan, an equity strategy analyst with Renaissance Capital Research, Bravo brewery was "made out of nothing and selling it on had always been a part of the big picture." The big question, he said, is why in a market so full of foreign investment did the purchase come so late? "Heineken has been looking for a way to get into the Russian market for years," Iskyan said. "Now they are getting in late, so they're having to pay the price. It's not ideal from their perspective - ideally they would have done it five years ago. Now they're playing catch-up." According to Vladislav Mamontov, the head of the Russian Brewers' Union executive secretariat, industry experts generally believe that the Russian beer market has already been carved up by the existing players. "A lot of analysts think that Heineken is getting here too late," he said. "On the other hand, the willingness of such a major player to move into the Russian market at this time suggests that the market is only in the early stages of it's development." He also said that the price paid by Heineken is consistent with the amount necessary for the construction of a brewery and the promotion of brands. "Meanwhile, Bravo is already listed among top 10 beer producers, so [Heineken] made a reasonable decision," he added. The top four positions in the Russian market are occupied by Swedish-controlled Baltika, with more than 20 percent of the market; Belgian Sun-Interbrew with about 15 percent; Ochakovo and Krasny Vostok. With regard to beer consumption, Russia has a long way to go to catch up with the world leaders. Per capita, Russians drink just 37 liters of beer a year, while Germans, the biggest beer drinkers, consume 131 liters, the Financial Times reported, citing industry estimates. Last year, 6.27 billion liters of beer were produced in Russia, up 14.5 percent from 2000, according to the Russian Brewers' Union. Growth of 10 percent is expected for 2002. It was not immediately clear how much beer Heineken imported to Russia last year. However, imported beer accounts for a mere 1.5 percent of the market, according to the Russian Brewers' Union. TITLE: Where Dreams of Olympic Gold Come True AUTHOR: By Irina Titova PUBLISHER: Staff Writer TEXT: Last year, Lyubov Nikulina, a speed-skating coach at the Olympic Reserve College for winter sports, spent 42 days on the train. Each round-trip ticket represented days away from her two sons, as she accompanied her students to competitions all over the country. "I'm used to this kind of life," Nikulina said. "It's my work." The St. Petersburg Olympic Reserve College, or ORC, is one of 34 similar schools throughout Russia, all dedicated to preparing the country's future athletic elite. This year, 11 graduates including figure skaters Anton Sikharulidze, Yelena Berezhnaya, Maria Petrova and Tatiana Totmyanina; speed skaters Svetlana Zhurova and Dmitry Shepel; and others - are on the Russian team in Salt Lake City, Utah. Nonetheless, such schools are struggling to maintain their previous prestige as participation in sports has fallen nationally from about 30 percent to less than 10 percent over the last decade. The gray brick building of the school stands almost hidden among the trees on the outskirts of the city. Nearly empty because its students are training at various winter resorts, the school betrays no hint of the fact that future sports legends are being molded here. Inside, as well, the school is spartan. The equipment in the gyms is old and rather the worse for wear. However, as more and more sports-oriented schools shut their doors and fewer families can afford to support their children's athletic dreams, such schools are increasingly becoming the last refuge for the country's talented youth. "The ORC finances travel to competitions, provides room and board, as well as coaching," said ORC director Igor Komarov. "We do have to buy our own equipment," said 21-year-old Alexander Korchyonkin, a second-year ORC student and short-track speed skater. "I know talented athletes who had to give up their sports because they couldn't afford it. But the school provides at least initial support." Marina Drozdova, who teaches at the school, says that many parents breathe a sigh of relief when the school accepts a student and takes on at least part of the expenses of his or her training and schooling. Yelena Tikhanina, a 24-year-old short-track speed skater who represented Russia at the 1994 and 1998 Olympics, praises the ORC for allowing athletes to combine their passion for sports with their studies. "It is no secret that if an athlete is committed to really serious results, then it is impossible to combine ordinary schooling with constant training," Tikhanina said. No ordinary school would tolerate students who must miss up to half of each academic year to pursue their sports. "We understand that sports takes the leading position among our students' goals," said Yelena Tushkova, who teaches psychology at the ORC. "However, athletes are normally highly organized and purposeful people with regard to all of their activities, including study." Tushkova says that the school's students generally study independently while spending their time at competitions. They then return to the school to pass their examinations. "Our students understand that when they become too old for their sports, they will need a profession," Drozdova said. Many ORC graduates go on to become coaches themselves at sports schools or winter resorts. The ORC provides a complete high school education for its students, grades 9 through 11. It also has a three-year secondary-education program to prepare students to work as coaches or sports administrators. Graduates from this program are eligible to enter the second year of the Lesgaft Sports University. Each year, the school - which opened in 1987 - enrolls 200 new students on the recommendation of teachers and coaches from throughout northwestern Russia. According to Komarov, the school accepts about two out of every three students that are recommended. About 10 percent of the students leave the school each year if they fail to meet the school's academic or athletic standards. The ORC provides coaching in cross-country and alpine skiing, the biathlon, speed skating, short-track speed skating, figure skating, hockey, ski-jumping and snowboarding. The school's staff includes 27 coaches. The ORC is financed from the city budget. And, although Komarov says the staff and students are grateful for the support, the amount of financing available is far less than the school requires. Local athletes do not receive any stipend, like their counterparts in Moscow do. According to Yury Pavlovsky, who trains the ORC short-track speed-skating team along with his wife, Lyudmila Pavlovskaya, the school has serious difficulties finding adequate skating rinks for its students' training. He notes that the SKA Sports Palace allows students to train for free three times a week for one hour, waiving the ordinary $66 per hour fee. "However, this amount of time for training is not enough," Pavlovsky said. "Our colleagues in Moscow train six days a week, twice a day," Korchyonkin said. "Who do you think gets better results?" Long-distance speed skaters are in an even worse situation. Nikulina says that St. Petersburg does not have a single professional speed-skating facility. Athletes must train in other cities, in addition to participating in competitions from October to March. Despite this, though, three of the nine long-distance speed-skaters representing Russia in Salt Lake City this year come from St. Petersburg. Cross-country and alpine skiers and ski-jumpers practice in Toksovo, a ski resort in Leningrad Oblast, about 30 kilometers from the city. Figure skaters practice at a special sports school at the Yubileiny Sports Palace, while remaining enrolled at the ORC. Despite the difficulties, though, the ORC remains the place where dreams of glory are born and nurtured. Denis Brandis is 15. A native of Tallinn, Estonia, Brandis has been playing ice hockey since the age four. Since coming to the ORC, he has been training twice a day. "My goal is to qualify for the national hockey team and to win the World Championships or the Olympics," he said. TITLE: Bush To Meet Putin in Petersburg in May AUTHOR: By Barry Schweid PUBLISHER: The Associated Press TEXT: WASHINGTON - U.S. President George W. Bush will hold his next round of talks with President Vladimir Putin on May 23 in Moscow and the next two days in St. Petersburg, Russian officials said last week. U.S. Secretary of State Colin Powell held a planning session at the Russian Embassy in Washington with Prime Minister Mikhail Kasyanov. Powell said they had discussed what the two sides hoped to achieve in Moscow and St. Petersburg. Russian officials later provided the precise dates and said they would be announced later by the White House. Smiling, Kasyanov said "relations are good," and that the two sides would cooperate in several fields. But there is at least one potential trouble-spot - Russia's insistence on a formal accord to reduce nuclear-weapons arsenals. The Bush administration prefers an informal approach. The two sides swapped drafts of proposed agreements on Wednesday that are designed to set relations on a new and friendlier course. The goal is for Bush and Putin to announce the agreements in May. At talks Tuesday at the State Department, the Russian delegation was led by Deputy Foreign Minister Georgy Mamedov, while Undersecretary of State John Bolton headed the U.S. team. Powell met briefly with Mamedov and separately with Sergei Kiriyenko, head of the State Commission for Chemical Disarmament and the presidential envoy to the Volga Federal District. The U.S. and Russian delegations are due to meet again in Moscow on Feb. 19. The main elements of one proposed agreement are that "it's going to be a legally binding document providing for radical, real and verifiable cuts in strategic weapons," and that a new ceiling be set for no more than 1,700 to 2,200 warheads on each side within 10 years, the Russian delegation said in a statement. In Moscow, Putin reiterated Russia's wish for a binding arms deal. His remarks, made during a meeting with Defense Minister Sergei Ivanov, appeared to be aimed at reinforcing his position ahead of high-level meetings that Ivanov and Kasyanov will hold with top Western officials over the next few days. Putin elaborated on his views on international security during a meeting in the Kremlin to receive credentials from 10 new ambassadors posted to Russia. He said that the world must learn from the failures of the past century and create a system where every country's interests are respected. A mutual legal-assistance treaty between Russia and the United States took effect Thursday when they exchanged instruments of ratification at the Russian Embassy in Washington. The treaty, which was signed in 1999, sets procedures for the exchange of legal information in criminal cases. The embassy said it would be useful against organized crime, drug trafficking and terrorism. TITLE: Security Tight as Bykov Murder Trial Finally Gets Started AUTHOR: By Nabi Abdullaev PUBLISHER: Staff Writer TEXT: MOSCOW - After a yearlong investigation and three months of delays, a Moscow court on Monday opened the trial of Krasnoyarsk metals magnate Anatoly Bykov, who is charged with plotting the murder of former business associate Vilor Struganov. The high-profile hearings opened under tight security at the Meshansky district court. Dozens of armed police officers and court guards swarmed the court premises, and a sniffer dog was brought in to check the building for explosives. Bykov, who has been awaiting trial in the Lefortovo prison since October 2000, stood in the steel-barred defendant's cage. Clad in a sleeveless jacket and tight jeans, he flashed his trademark, toothy smiles and oozed self-confidence. "What a bureaucracy," Bykov said, sighing loudly, as judge Vladimir Nikitin questioned prosecutors, defense lawyers, Struganov and Bykov himself in opening-day formalities. "That's why courts are overloaded with cases." Struganov - who was flown in for the trial from Krasnoyarsk, where he was recently arrested on charges of plotting two explosions - rarely lifted his gaze from the floor. Struganov, his eyes rapidly blinking with the nervous tic that earned him the nickname Tsvetomusyka, or Strobelight, sat jammed between two guards in civilian clothes. He could not recall his address when asked by the court. "Somewhere on Varshavskoye Shosse. I don't remember the numbers," he said, his eyes on his velvet boots. Most of the day was consumed by reading Bykov's indictment - a confusing tale of real and fake murders, business rivalries and invisible ink. According to investigators, Bykov, then the head of the Krasnoyarsk Aluminum Plant, and Struganov parted ways after Struganov joined forces in 1999 with the Chyorny brothers, Bykov's main rivals in the aluminum business. A conflict between the two businesspeople began when Bykov was detained later that year in Hungary at the request of Russian law enforcement. Russia had issued a warrant for Bykov's arrest on suspicion that he was involved in money laundering, gun-running and contract murders. Struganov visited Bykov in a Hungarian prison in December and asked him to sell some or all of his 28-percent stake in Krasnoyarsk Aluminum, according to the indictment. The request made Bykov furious. Bykov was extradited to Krasnoyarsk in April and released from a jail there on Aug. 24, 2000, under orders not to leave town. However, while still in jail in March, Bykov, "experiencing enmity to Struganov, based on distrust," had ordered his driver and bodyguard Alexander Vasilenko to kill him, said prosecutor Svetlana Yemelyanova, reading the indictment. The Federal Security Service helped stage Struganov's murder in Sept. 29 of that year in a sting operation to catch Bykov. Four days later, Vasilenko, wearing a hidden microphone, went to Bykov's apartment and told him about the order had been fulfilled. As proof he had killed Struganov, Vasilenko brought Struganov's gold Rolex watch and several business documents smeared with invisible ink by FSB officers. Bykov was arrested Oct. 4, and the watch and documents were found in his apartment. Although he denied any involvement in the attempted murder, the recording of his conversation with Vasilenko and the ink residue on his hands suggest otherwise, investigators said. Bykov's five defense lawyers said they will argue that the case is a frame-up, relying heavily on the fact that Vasilenko has retracted the testimony he gave investigators. The start of the trial was delayed three times as lead defense lawyer Genrikh Padva attempted to get permission to submit as evidence written and videotape recordings of Vasilenko declaring Struganov had forced him to testify against Bykov at gunpoint. He made the statements in Cyprus in December and is now hiding in France, Nikitin said, citing an FSB report released at a previous hearing in January. "It is in Struganov's interest to have these documents in the case, because he is the only party who hasn't seen them," Padva told the court. Struganov reacted indifferently. "I don't care," he said, giving what was his standard answer to most questions at Monday's hearing. The court allowed the videos and documents into evidence after watching three of the tapes. Padva also asked for permission to summon additional witnesses, including four State Duma lawmakers and a high-ranking police officer from Krasnoyarsk. Two of the Duma deputies were Yegor Salomatin and Vladislav Demin of the LDPR faction who had brought Vasilenko's statements from Cyprus. Padva said the witnesses would give more details about the relationship between Bykov and Struganov. Struganov's only objection at the hearing was to permitting private television stations film in the courtroom, an allowance favored by Bykov and his lawyers. "These stations can be easily bribed and will influence the court and the witnesses," said Struganov, adding that he has nothing against state-controlled ORT and RTR television. The judge forbade video and audio recordings in the courtroom, and only permitted reporters from the print media to stay. Bykov refused to testify after the reading of indictment. "I don't admit any guilt," he said. "Let the prosecution prove what I am being charged with." The court then recessed until Tuesday. If convicted, Bykov faces up to seven years behind bars. The trial is expected to take at least several weeks. TITLE: TV6 Boss Settles In Landrover Dispute AUTHOR: By Robin Munro PUBLISHER: Staff Writer TEXT: MOSCOW - TV6 General Director Yevgeny Kiselyov on Monday paid a 5,000 ruble fine and received his Landrover back from police, who seized it from him late Friday night. Reports initially suggested that Kiselyov's car was impounded because of a court order declaring him a debtor in connection with the Jan. 11 bankruptcy ruling against TV6. But Moscow deputy chief court bailiff Svetlana Kukushkina said Monday that the fine would go to former Kaliningrad Governor Leonid Gorbenko, who won a defamation suit against Kiselyov's former channel, NTV, in a Kaliningrad regional court last year. The court ruled that an NTV broadcast on Dec. 25, 2000, which accused Gorbenko of corruption, had harmed the governor's honor and dignity. Kukushkina said in a telephone interview that Kiselyov had not responded to a request to pay the fine last year and, in September, the traffic police had been asked to seize his car. Kiselyov was stopped by police using sirens and flashing lights near the Kremlin around 10:30 p.m. on Friday. "It seems as if they were trying to frighten me and affect my morale," Kiselyov said on Ekho Moskvy radio Sunday night. Kukushkina said the car's seizure was not connected to the liquidation of TV6 and that the timing of the seizure was the decision of police, not the bailiffs' office. The Kaliningrad court also fined NTV 50,000 rubles, and reporter Eduard Petrov, who now works for RTR's "Vesti" program, 1,000 rubles as a result of the broadcast on Dec. 25, 2000. No comment was available from NTV or Petrov whether they had paid the fines or had property seized until the fines were paid. Kiselyov said that he might have forgotten to pay the fine. No comment was available from the traffic police. TV6 spokesperson Tatyana Blinova said in a telephone interview that the payment did not mean Kiselyov accepted the ruling. His lawyers are considering an appeal, she said. Blinova said that the seizure of the car was inappropriate considering the small size of the fine and that police could easily have contacted Kiselyov to get the money. Kukushkina said the action was "perfectly normal." She was not able to say how many cars had been seized in similar cases over the past year. A spokesperson for Musa Motors, which sold the car to Kiselyov at the end of 1999, said the value of the car was between $62,000 and $70,000. All customs and other duties were paid before the sale, she added. TITLE: Russia To Continue Engagement With Kabul AUTHOR: By Jim Heintz PUBLISHER: The Associated Press TEXT: KABUL, Afghanistan - Foreign Minister Igor Ivanov came to Afghanistan on Monday promising that Russia aims to help rebuild the country from 23 years of war that began with a Soviet invasion. Ivanov, who met with interim Prime Minister Hamid Karzai, represents a Kremlin whose policies are stunningly different than those in force at the time of the 1979 invasion. With its military in slow-motion collapse and its economy staggering back from catastrophe, Russia now makes only pro-forma pretensions of being a world power and has become increasingly cooperative with the West. Ivanov's boss, President Vladimir Putin, surprised many observers by his quick support of the U.S.-led anti-terrorism campaign that has focused on Afghanistan. Just three years ago, the Kremlin bitterly denounced the U.S.-led attacks on Yugoslavia. Putin further astonished the West by not objecting to former Soviet central Asian republics making their military facilities available to Western troops, putting them in what Russia once regarded as its back yard. When the Taliban fled from Kabul in November, Russia was quick to seize the opportunity to show its best face. The Ministry of Emergency Situations, widely admired as an unusually efficient and capable operation, sent in workers to set up a field hospital and a center for coordinating humanitarian aid. The presence of Russians at first disconcerted Kabulis who suspected them of scouting for new opportunities to exert power, but Russia appears to have limited its interests to these benign operations, and the ministry's uniformed personnel keep a lower profile than soldiers of the international peacekeeping force. Russia also led the work to reopen the Salang Tunnel, built to assist the Soviet invasion, but which now facilitates the delivery of humanitarian aid between Kabul and the north. Ivanov on Sunday promised that the humanitarian focus will continue. "We intend to cooperate in the political and economic rehabilitation of Afghanistan," he said in New Delhi, India, according to the Russian news agency Interfax. Russia's new approach to Afghanistan is hardly selfless. The Kremlin has intense interest in boosting Afghan security as a way of guarding its own flanks. Afghanistan-trained fighters of the Islamic Movement of Uzbekistan have threatened to destabilize Uzbekistan, Tajikistan and Kyrgyzstan for years and such an uprising could spread into Russia proper. Moreover, Russia fears links between the al-Qaida terrorist network and the rebels in breakaway Chechnya who have fought Russian forces for more than two years in a costly and demoralizing war in which no end is in sight. Russian Defense Minister Sergei Ivanov said Sunday that a videotape had recently surfaced showing al-Qaida leader Osama bin Laden together with Chechen warlord Khattab, Russian news reports said. Russia likely also has larger interests rooted in its Afghanistan policy. In his statement in India on Afghan rehabilitation, the "we" referred to Russia and India, and India has been a focus of Ivanov's aims of developing a "multi-polar world" in which Russia and other countries cooperate to balance what the Kremlin sees as U.S. domination of world affairs. Iran, with which Russia has extensive relations, is another keystone of that strategy - a potentially awkward issue for Ivanov given growing reports that Iran is working to destabilize Karzai's interim administration. TITLE: Kasyanov Urges Bush To Focus on 'Real Dangers' AUTHOR: By Sally Buzbee PUBLISHER: The Associated Press TEXT: WASHINGTON - Prime Minister Mikhail Kasyanov said Monday after meeting with U.S. President George W. Bush that the United States and Russia must work together to "identify dangers, real dangers rather than imaginary," that threaten the world's stability. Kasyanov refused to say whether he and Bush had specifically discussed Bush's labeling of Iraq, Iran and North Korea last week as "an axis of evil." But his comments made clear that Russia will not necessarily accept U.S. claims that Iraq, Iran and North Korea are on the verge of creating weapons of mass destruction and support terrorism. "We discussed all those issues which are on the Russian-U.S. agenda ... strategic stability and dealing with different conflicts in the world," Kasyanov told reporters after the White House meeting. "Of course we should identify dangers, real dangers rather than imaginary," Kasyanov said. "That's why we continue to work closely. Our defense people, our intelligence people exchange information and deal with those issues, so that we will be sure we correctly identify all problems." Bush, leaving the White House, did not comment on the Russian meeting. Russia has supported the U.S. war in Afghanistan but could find itself in a difficult position if Washington decides to expand its anti-terror campaign. Moscow has strong ties to all three countries that Bush called an "axis of evil." Bush's national security adviser, Condoleezza Rice, said last week that the United States will use its "new and budding relationship with Russia" to try to block Iraq's access to weapons technology. But over the past week, senior Russian officials and lawmakers have said any unilateral U.S. moves to extend the anti-terror campaign beyond Afghanistan could jeopardize Russia's support. But both Russia and the United States want smooth relations when Bush travels to Moscow in May for a meeting with Russian President Vladimir Putin. Key issues will be on the agenda then, including a possible final agreement on major nuclear-arms cuts. Putin also wants Russian membership in the World Trade Organization, a bid that would require strong support from Washington. TITLE: IN BRIEF TEXT: High-Level Meeting ST. PETERSBURG (SPT) - Sergei Yastrzhembsky, assistant to President Vladimir Putin and his primary spokesperson on Chechnya, met with Governor Vladimir Yakovlev on Monday at Smolny, Interfax reported. According to Yakovlev's spokesperson, Alexander Afanasiev, the two men discussed the upcoming 300th anniversary celebration and how it should be covered by the mass media. Natalia Batozhok, chairperson of the 300th-anniversary organizing committee, and acting Vice Governor Irina Potkhina, who chairs the City Hall Mass Media committee, also participated in the meeting, according to Interfax. Afanasiev said that a meeting of the federal commission on the anniversary will be held in Moscow on Wednesday, according to Interfax. Korneyev Injured ST. PETERSBURG (SPT) - The former director of the Leningrad Zoo, Ivan Korneyev, was injured in an automobile accident on Sunday in a city suburb, Interfax reported. His 28-year-old wife, Anna, was killed in the accident. Korneyev suffered a broken leg and bruises. His eldest son, Vitaly, was also injured in the accident. Both were treated for their injuries and have been released from the hospital, Interfax reported. According to Korneyev's brother, Andrei, who witnessed the accident from the following car, the incident happened Sunday evening at about 8:40 p.m. when an oncoming automobile unexpectedly crossed the center line and crashed head on into the car Korneyev was driving, Interfax reported. Citing police sources, Interfax reported that the driver of the other vehicle was drunk at the time. Among the four passengers in that car, a 20-year-old male died at the scene and all the others, including a four-year-old child, were hospitalized, Interfax reported. Mirilashvili To Appeal ST. PETERSBURG (SPT) - Lawyers for businessperson Mikhail Mirilashvili intend to appeal a decision by prosecutors to extend the period for investigating his case until March 23, Interfax reported. Mirilashvili's lawyer, Yury Novolodsky, made the announcement on Sunday. "In the end, Mikhail [Mirilashvili] will be fully vindicated on all three of the counts with which he is currently being charged," Novolodsky said. Novolodsky declined to say how long this would take. "Whether this will last half a year or a year and a half or two years, I don't know. I'm not a fortune-teller," he said, according to Interfax. Mirilashvili was arrested on Jan. 23, 2001, on two kidnapping charges. Later, he was also charged with organizing the murders of the two alleged kidnapping victims. Back From the Ice ST. PETERSBURG (SPT) - The rescue service of the Northwest Region branch of the Emergency Situations Ministry rescued 223 fishermen from an ice flow in the Gulf of Finland near the Le nin grad Oblast town of Krasnaya Gorka on Saturday afternoon, Interfax reported. According to the news agency, 149 fishermen were rescued by the icebreaker Semyon Dezhnev at approximately 5:30 p.m. After they were safely returned to shore, the vessel returned and rescued another 71 men. Three more men were subsequently rescued by helicopter, according to Interfax. All of the rescued fishermen were in good health. The Emergency Situations Ministry warns that, due to a sharp increase in temperatures and high winds, fishing on the ice in the Gulf of Finland and on Lake Ladoga is extremely dangerous. Consul's Car Robbed ST. PETERSBURG (SPT) - A car used by the consul general of Japan was broken into on Friday, Interfax reported. According to the news agency, unidentified thieves broke into the Nissan Maxima as it stood near Consul General Sadaki Sadakaru's residence on Cheboksarsky Pereulok. The thieves stole the car's stereo, some cassette tapes, some compact discs, a battery and some tools, Interfax reported. The police are now investigating the incident. TITLE: DLT Shut Down by New Round of Struggle AUTHOR: By Vladimir Kovalyev PUBLISHER: Staff Writer TEXT: The doors of DLT, one of the city's biggest department stores, were closed to customers on Monday, due to the latest battle in a three-year war between two management teams for control of the location. The latest incident was sparked off when Alexander Kondratyev, the person chosen by the City Hall Property Committee (KUGI) and elected at an emergency shareholders meeting on Sept. 20 to take over management, snuck into the company's offices on Friday, accompanied by security guards and city court officials, and occupied the general director's office at Dom Leningradskoy Torgovly (DLT). The business daily Vedomosti reported that Kondratyev and his accomplices had to saw through a metal gate that separated the store's retail space from the director's office. But Lyudmila Andreyeva, who had been - and insists she still is - the store's general director, maintains that the Sept. 20 vote to replace her was unlawful. Representatives of the previous DLT management refuse to recognize the new management team or KUGI's controlling stake in the company, and boycotted the September vote. Andreyeva said that, as a result, the vote represented only 0.33 percent of DLT shares. Kondratyev, however, maintains that he is fulfilling an order from the Nevsky District Court, which ruled on Jan. 31 that Kondratyev was legitimately entitled to take over management of the store. In reaction, Andreyeva ordered the store closed on Monday and told the Union-M security company, which provides security for the building, to bar anyone, including Kondratyev, from entering the offices. "I can't tell you anything about it, unfortunately, because I can't get in touch with anyone who knows exactly what's going on," said Tatiana Prosvirina, the City Hall Property Committee spokesperson, in a telephone interview Monday. "But the security company Union-M, which is under contract with [Andreyeva's] management team, isn't allowing [Kondratyev] to enter," she added. "This is in flagrant violation of the court's decision and, as a result, there are now grounds to revoke the security company's operating license." According to Vedomosti, Andreyeva said the department store had been closed due to problems with the building's electricity. Another employee said that there was a difficulty with the building's sewage system. But local utilities denied that any problems had occured at the store. "When the store was open, we were inside, but now that it's closed we're out here... It wasn't open today at all, but it will be open tomorrow," said a guard who refused to identify himself as would-be shoppers approached the building, only to leave after reading the signs saying "Closed due to technical difficulties." The three-year battle for control between the managers put forth by the Property Committee and Andreyeva's group has seen the the filing of 11 court cases, but the difficulties at DLT actually began in 1993, when the store's minority shareholders decided to drop KUGI from the list of shareholders. The decision was made at a shareholders meeting at which representatives of KUGI, which owned 74.37 percent of the company's stock, were not present. KUGI had acquired the stake in DLT as a result of the privatization of the company in 1991. Another 15.63 percent of the shares was given to DLT's employees, while the remaining approximately 10 percent of the stock was divided up between Baltiisky Zavod, Svetlana Union and the Vologodskoye Garment Factories Union in exchange for investment in the company. The 1993 decision was compounded at a subsequent shareholders meeting in 1996, when a new set of corporate regulations was passed for the company, including a new charter, which did not list KUGI as a shareholder. A decision was also adopted at the meeting to increase the company's charter capital through the emission of more shares. But it wasn't until October 1998 that KUGI finally filed its first court action against the other shareholders. According to Daniil Petrov, the deputy head of KUGI's legal department, the five-year delay between the 1993 decision to freeze KUGI out of the shareholders list and the filing of the first suit was the result of the fact that officials at the City Property Committee knew nothing about the decisions. "The situation just seems very strange to me," said Lev Savulkin, senior analyst at the Leontief Center forSocio-Economic Research. "City Hall went to court against the store's owners and won, which is like establishing a precedent for reviewing the results of the privatizations of many companies that were in the past partially owned by the state." "There are a lot of companies that fit this description." "I just don't understand why City Hall needs DLT that badly," Savulkin said. DLT, which is located at 21-23 Bolshaya Konyushennaya Ulitsa, was opened in 1909. The department store itself contains 9,000 square meters of shopping space, while the company also operates a chain of 22 Detsky Mir stores in the city. The children's stores total another 19,500 meters in retail. In 2000, the firm's revenues totaled more than 900 million rubles (about $31.5 million by the exchange rate at the end of the year). According to the report in Vedomosti, both sides have already confirmed that they will will continue to refer their cases back to the courts to be decided. TITLE: Governor's Shift Lifting Prospects in Krasnodar TEXT: While a couple of investors can tell horror stories about their experience investing in the Krasnodar Region, the local administration says it has turned over a new leaf. In the third part of a four-part series on regional investment, Yevgenia Borisova explores what the local administration is trying to do to change its image. KRASNODAR, Southern Russia - Ten years ago, a small wooden barn in a town near Krasnodar was pretty much all there was of a 60-year-old dairy employing a handful of people. But in 1991, when most Russian enterprises started to go downhill, this one started to grow - and the reason was Natalya Boyeva. "She just worked and worked, and so did we," said Galina Filobok, one of about 700 employees who now work at the Kaloria dairy in Staroderevyankovskaya, which processes up to 220 tons of milk a day to make 180 different products. "She was completely devoted to the business." Kaloria, which in November won a regional contest for the quality of its products, now holds 10 percent of the regional dairy market, second among more than 30 local producers only to Moscow giant Wimm-Bill-Dann. After purchasing the biggest dairy in the region, Wimm-Bill-Dann holds 18 percent of the 4.5 billion ruble ($148 million)-a-year regional dairy market, according to the Krasnodar regional administration. Boyeva, 50, the director of Kaloria, is one of more than 100 applicants from the Krasnodar region seeking investment under a new federal program. Kaloria is seeking $724,000 to buy equipment to expand production. The dairy, which is owned by the workers, has so far funded its expansion solely through its profits, but the sum it is now seeking is too large, and Boyeva says a commercial loan is not feasible because local banks charge high interest. "We could form a joint venture - whatever the investor, a Russian or a foreign one, would like," she said. In recent years, Krasnodar has been attracting foreign investment for the first time and has hopes of attracting much more. The region, which is roughly the size of the Czech Republic, has some of Russia's best agricultural land. It now produces about 80 percent of the country's rice, 60 percent of its grapes, 20 percent of its sunflower seeds and 10 percent of its grain. Krasnodar also has a relatively well-developed infrastructure, which should facilitate foreign trade. Its eight ports account for 40 percent of Russia's port capacity. It has five airports, including three with international flights, and is crisscrossed by highways and railroads. Foreign investment in Krasnodar, only $15.3 million in 199, reached $980 million in 2000, including $959 million in foreign direct investment, according to the State Statistics Committee. Troika Dialog estimates last year's total investment at about $1.2 billion. Foreign investors seem encouraged by the election a year ago of a new governor, Alexander Tkachyov, who says promoting investment is one of his priorities. About 700 enterprises with foreign investment operate in the region, and the largest direct investors are firms and banks from Turkey, Cyprus, Germany and the United States. Most foreign investment, however, is linked to two large projects - the $2.9 billion Blue Stream project led by the Dutch-registered consortium of Gazprom and Italian ENI and the $2.6 billion oil pipeline from Kazakhstan to Novorossiisk, opened at the end of November by the Caspian Pipeline Consortium. Russian investment is much smaller. In 2000 it dropped by 14 percent to only 1.87 billion rubles ($66 million), of which 27 percent came from the local enterprises themselves, according to the Krasnodar territory's statistics committee. While numbers are not available yet for 2001, regional officials say that the figures are a bit better than 2001, and that they have nowhere to go but up. "We have hit bottom and are now recovering," Vladimir Lybanev, deputy mayor of the city of Krasnodar, said in an interview. "It is just impossible with our resources to stay as low as we were during the many years that the whole Russian economy went awry. We are at the starting point now, but I believe that in a year's time we will have so much investment that we will not know what to do with it." Lybanev may be being overly optimistic. Any investor considering coming to the region will likely first talk with those who are already there, and two big foreign investors - Cargill and Kuban-Knauf - have unpleasant stories to tell. Kuban-Knauf is a subsidiary of Knauf, a German manufacturer of building materials that has now invested more than $200 million in three operations in Russia: in St. Petersburg, Krasnogorsk in the Moscow region, and Krasnodar. In 1995, Kuban-Knauf had just assembled its equipment at a plant in the Krasnodar town of Psebai, in which it had purchased a controlling stake, when the local administration decided to take over the plant. Knauf was literally thrown off the premises and branded "German occupiers." Later, when the company restored its operations in 1997, it became known that those who had participated in the protest action against Knauf had been paid by those who took over the plant. "It was a huge scandal," said Mikhail Velegotsky, leader of the local Yabloko movement, in an interview with Moskovsky Komsomolets in 1999. "The German president sent a telegram to [President Boris] Yeltsin, he talked to [Prime Minister Viktor] Chernomyrdin, but everything depended on [Governor Nikolai] Kondratenko's position. Only after several rounds of major negotiations did Kondratenko soften his stance. The enterprise was then called 'an example of mutual cooperation,' but it cost the Germans a lot of blood." Cargill, a U.S. grain trader, also puts much of the blame for its troubles on Kondratenko, who was known for his nationalist and anti-Semitic statements. Cargill purchased a controlling stake in a grain elevator in Bryukhovetsk from private shareholders in 1998, but is still battling in court over its investment. Dominique Le Doeuil, of Cargill Enterprises in Moscow, said in an interview that with the new regional administration, "We are a little bit more positive about the fairness of the court, but it is still not perfect." Le Doeuil said the initial investment of about $500,000 was a "testing ground" for his company, which had planned a more significant agricultural project but would not go forward with it until the case was resolved. "We still find it difficult to do transparent business here, but I hope that with the new administration, which is much more business-focused, we are looking at a different outlook in the future," he said. Tkachyov, the Krasnodar governor, said at a Nov. 22 meeting in Moscow organized by the European Chamber of Commerce that providing good conditions for investors was one of his priorities. "Such incidents as took place with Knauf are not possible anymore," he said. Tkachyov told Le Doeuil that he is prepared to give Cargill any assistance it needs. The governor is already helping Knauf. Knauf spokesperson Leonid Los said that, soon after his inauguration, Tkachyov visited the factory and "seemed very interested." "He promised to help us with our major problem - a lack of freight cars to transport our products - and he is doing it," Los said in a telephone interview from his Krasnogorsk office. "Things in the region seem to be getting better for investors." Although Tkachyov and foreign companies working in his region are upbeat about the prospects for investment, Krasnodar is part of the Red Belt - one of about 40 regions where the Communist Party is strong - and the governor himself represents the party. It remains to be seen how prepared Tkachyov is to go forward with market reforms, but just last November he spoke out aggressively against President Vladimir Putin's plans to allow the sale of agricultural land. "Land must not be sold in Kuban," he told a party conference in November. "Otherwise, as I told the president, if a land market is introduced in Kuban, the people of Kuban will take pitchforks and I will be with the people. More than that, I will lead this process." Cargill's Le Doeuil said the right to buy and sell agricultural land was key. "We would expect a region that is as important as Krasnodar to Russian agriculture to be, in fact, a leader in the program for making land available for people to buy and sell. I understand that there are other interests at stake, but for us this is the only way that one day we would have a completely transparent agricultural sector - that is when land will be freely tradable. "I don't think we will be a company that would be acquiring huge parcels of land, but we would see it as a very important change in the way people look at an agriculture project." For those investors who are prepared to lease land instead of buying it, the regional administration offers technical support and tax breaks. In 1999, the regional legislative assembly passed a law on promoting investment that allows it to exempt investment projects from all taxes to the regional budget for up to three years. A commission formed by the regional administration reviews major investment projects and passes its recommendations on to the legislative assembly. Eleven projects have already been approved, and six more are in the process of receiving approval, according to the administration. Under the law, investors may also be awarded concessions for the use of land and other natural resources and given preferential terms for the purchase or lease of real estate belonging to the region. Among those to take advantage of the law was the Moscow-based Ochakovo beer and beverage firm, which invested about $200 million into production lines in Krasnodar and recently started to make beer here, in addition to kvas and other beverages. Ochakovo said it intends to capture 30 percent of the regional beer market. "We had lots of proposals to invest from different regions," said Alexei Kochetov, general director of Ochakovo. "But we decided to invest in Krasnodar after the regional law on state promotion of investment was passed." The regional administration believes that Krasnodar's investment potential is much larger than what it is digesting now. "It could take in about $7 billion worth of investments," said Igor Vdovin, co-chair of the nongovernmental National Agency of Direct Investments, which organized a symposium on regional investment in Moscow in December. Among the projects presented was one by the Development Yug construction corporation, which builds houses and cottages in Krasnodar and recently won a tender to build a $1.8-billion dispatcher office for Gazprom's Blue Stream project. Development Yug is looking for 500 million rubles ($15.9 million) to build a factory to produce its own high-quality bricks. The local Compressor Manufacturing Plant, which builds compressors for oil-and-gas exploration and for repairing wells and holds more than 90 percent of the market in Russia, was seeking 1.5 million rubles ($500,000) to make a new compressor that would be four times more powerful than its latest version. "It is safe to invest in our project," said the plant's general director, Anatoly Kryukov. "Even if oil prices go down, oil-extraction volumes will still be at about the same level, while Russian companies - and foreign, too - will start to prefer our cheaper machines because their profits will be going down, too." Other projects presented to potential investors included the construction of three power plants, a plant for producing lubricants, a salt factory the and reconstruction of a brick factory. Agriculture projects include the reconstruction and equipping of a pig farm, expansion of a poultry farm, completing construction of a meat processing plant and expansion of a sparkling-wine production facility. Some of those projects could well be picked up by the Vostok-Zapad group, which recently announced that it is prepared to put $100 million into agriculture projects in Krasnodar. The recent Interros creation Agros, which announced that it will invest $200 million in agriculture, is also looking into opportunities in Krasnodar. A number of Russian firms, especially those with processing facilities in the region, are already busy buying up the best farms or establishing long-term cooperation with the most profitable farms. Vdovin said that he expects that up to 50 projects from Krasnodar will ultimately find investors. But, he said, there is a problem that needs to be addressed if the region is to attract medium and small investors. Krasnodar's legislation offers tax breaks and other privileges only to large investors, but even they are subject to much bureaucracy. Kochetov of Ochakovo said, "An official is always an official. Wherever we go with our investments, our first request to the administration is to protect us from the bureaucrats. Bureaucracy rules in any region, including this one - it is a reality of our time and I must say that I am very grateful to the Krasnodar [city] and regional administrations that they are helping us and not standing in our way. "They just pounded the table with their fist and told their bureaucrats to get out of our way. I think any investor should go first to the administration - whether it is a small, medium or large investor. He must first discuss his business with the administrations of the city and the region - and there is nothing wrong in that," Kochetov said. Johnny Stroemvoll, general manager for the CIS for Norway's Hydro Agri - one of the world's largest producers of plant nutrients - said in an interview that investors need "attention and coordination" from the Krasnodar administration. "What we would like from the administration is coordination - that they collect all of those working in this market and find out who is doing what," Stroemvoll said. Vdovin said his agency, in cooperation with the Krasnodar administration and the regional chamber of commerce, is working on creating a mechanism to help firms of all sizes find out where and how to invest in the region. The chamber of commerce is preparing a database of investment projects in the region, and Vdovin's agency is assisting it in providing expertise and preparing Western-style business plans. Boyeva of Kaloria, however, said she does not need any assistance from the regional administration. "I just come to see them sometimes if I want to cry a bit on their shoulder about the federal taxes that are too high," she said. TITLE: Energy Cuts Spark Probe PUBLISHER: The Associated Press TEXT: MOSCOW - Prosecutors on the Far Eastern Kamchatka Peninsula have opened a criminal investigation into an electric utility that cut power to military space facilities because of debts, while blackouts continued at other Russian military sites Monday. The probe was opened by Kamchatka's chief prosecutor Alexander Voitovich, who has questioned the legality of the cutoffs by Kamchatskenergo, Interfax reported Monday. The blackouts in Kamchatka reached national attention last month after the power grid cut off power to a tracking station of the Russian Space Forces, which claimed the action could have led to the loss of spacecraft. National grid Unified Energy Systems insisted that the power was only cut to supply buildings and never jeopardized satellites. The military has since paid off 40 million rubles ($1.3 million) of its 200-million-ruble debt to Kamchatskenergo, the utility's deputy manager Viktor Nigmatulin said Monday, according to Itar-Tass. TITLE: Food Co. Opens Up - Way Up AUTHOR: By Victoria Lavrentieva and Torrey Clark PUBLISHER: Staff Writer TEXT: MOSCOW - Caveat emptor, but don't let the buyer say he wasn't warned. Food giant Wimm-Bill-Dann, preparing for a planned initial public offering (IPO) Friday on the New York Stock Exchange, has opened itself up for scrutiny as required by the exchange's strict disclosure requirements. And the prospectus the company filed makes for strong reading. Revealed for the first time is Wimm-Bill-Dann's largest shareholder, Gavril Yushvayev, who holds 26.09 percent of the company and "was convicted of a violent crime in 1980 and served nine years in a labor camp," according to the prospectus, a copy of which was obtained by The St. Petersburg Times. It also confirms that Wimm-Bill-Dann shareholders and directors are involved with the Trinity group, which has interests in "automobile distribution, financial services, security services, casinos, construction, advertising and engineering," and acknowledges that the group has been linked by the Russian media to organized crime. Wimm-Bill-Dann, the maker of J7 fruit juices and Chudo yogurt, refused comment Monday. But a source close to the company said its honesty should be an encouraging sign for investors. "By this move, the company wants to show that it has nothing to hide," the source said, on condition of anonymity. "That's why we have chosen the New York Stock Exchange, despite its strict requirements." Market watchers said Wimm-Bill-Dann's decision to throw off its long-held shroud of secrecy supports a growing belief that the truth, the whole truth, and nothing but the truth - no matter how much it hurts - is the new credo of Russian companies looking to the West for cash. "A Level 3ADR is a very positive moment because it forces companies to disclose an enormous amount of information and to take responsibility for the information," said Dmitry Vasilyev, head of the Institute of Corporate Law and Governance and a former head of the Federal Securities Commission. "Therefore, the companies in Russia with level three ADRs differ quantitatively in terms of their corporate governance." According to the prospectus, Yushvayev will have only 20 percent after the listing, is not a member of the board, does not have voting rights for many issues and is not participating in the management process. Yushvayev, now 37, was 15 at the time of the unspecified crime. Market analysts said the crime and Wimm-Bill-Dann are hardly connected since the company was formed 12 years later, in 1992. Yet they said his conviction and other risks such as Trinity's reputation could have a negative affect on the company's image. The prospectus, while conceding Trinity "has been the subject of speculation in the Russian press, including with respect to possible links to organized crime," is quick to point out that "no charges have been brought by governmental authorities against any of our shareholders or directors and, to the best of our knowledge, none have been threatened." It also states that Wimm-Bill-Dann chairperson David Iakobachvili is the head of Trinity Negus, a company that provided security for Wimm-Bill-Dann until 2001. Iakobachvili, who refused to discuss the pending IPO at the ongoing World Economic Forum in New York, will have 6.65 percent of Wimm-Bill-Dann's shares after the listing. Wimm-Bill-Dann plans to offer a 29.5-percent stake - or 10,620,001 shares - through American Depositary Receipts on Friday at a price of $18.50 to $21.50 each. One ADR is equal to one share. The company hopes to attract up to $230 million of fresh money for highly ambitious $137.2-million expansion-and-development plans. The company has budgeted an additional $36.2 million beyond the IPO proceeds. Kim Iskyan, an analyst at Renaissance Capital, said the history dredged up in the prospectus is unlikely to have any immediate impact on Wimm-Bill-Dann. However, he added, "Wimm-Bill-Dann, like any other Russian company, may find that speculation about wrong-doings or corporate-governance violations can hit its share price as hard as any concrete proof would." "There is a lot of enthusiasm among investors toward Russia now, but most still consider Russian market to be a risky place," said Alexander Branis, head of Prosperity Capital Management, which currently manages six funds and private portfolios in Russia worth $250 million, "so when they see additional evidence of their fear, some of them may take their decision not in favor of Russia," he said. According to industry sources, this may have made Schroder SalomonSmithBarney and Brunswick UBS Warburg shy away from the deal. They were first approached by Wimm-Bill-Dann last fall to lead the IPO, which is now being managed by ING Baring, with Troika Dialog and Alfa Bank as co-managers. Both Salomon and Brunswick declined to comment on the issue. A source familiar with the situation said Brunswick UBS Warburg recently got clearance from its compliance department and attempted to come back to the deal. "Unfortunately, the time of Wimm-Bill-Dann's IPO coincided with the bankruptcy of Swissair, and UBS was very reluctant to get involved in something risky," he said. Only three Russian companies have listed with the NYSE - Vimpelcom and Rostelecom in 1994 and Mobile TeleSytems in 2000. LUKoil announced plans to place ADRs on the NYSE, but later chose the London Stock Exchange with its less tough requirements. Yukos is planning level one ADRs, which do not involve the same detailed disclosure as Wimm-Bill-Dann's level three ADRs. "If you look back on 1996-97, no one really cared about the corporate governance of Russian companies. Investors could not tell one company from another, and were buying everything under the massive euphoria towards Russia," Branis said. "But now we don't see anything like that," he said. "Investors understand the difference, and this makes Russian companies pay more attention to their image." TITLE: Russians Weigh In With Views on Foreign Banks AUTHOR: By Victoria Lavrentieva PUBLISHER: Staff Writer TEXT: MOSCOW - Lingering memories of pyramid schemes and the 1998 financial crisis have made most people exclude banks as places to put their money, preferring instead to keep it under their mattresses. But, as the economy continues to grow, bringing wages along with it, there may not be enough mattress space to keep the public's growing cache of dollars. So where should Russians keep their savings? In any developed country, the answer is obvious: a bank. But for Russians, it's not so simple. "After the collapse of SBS-Agro, MOST-Bank and Inkombank, which had huge retail networks ... we don't recommend Russian consumers put their money in local banks," said Dmitry Yanin, executive vice president of the independent consumer-rights group Konfop, which recently completed a ranking of foreign banks offering retail services in Moscow. Konfop, which operates in six CIS states and is a member of Consumers International, a federation of consumer-advocacy groups, sent a representative to nine fully foreign-owned banks to open a savings account. The depositor did not know the nationality or the specialization of the banks and was unaware of their position on the market, Konfop said. The banks were rated according to three main criteria: economic attractiveness, including interest rates and minimal deposit requirements; transparency and helpfulness of staff; and other factors like availability of information and its presence on the Internet. At first glance, the results were surprising. But experts and executives said the research is unique and based on information open to the public. The highest score was given to KMB-Bank, which since 1998 has been the European Bank for Reconstruction and Development's main channel for lending to small- and medium-sized enterprises. Turkey's GarantiBank and Finansbank took second and third place respectively, while Austria's Raiffeisenbank placed fourth. "We were not surprised that our bank is No. 1 for depositing in terms of economic attractiveness," said a KMB-Bank representative. "At the same time, it was a pleasant surprise for us to find out that we also had a high score for retail service because we do not consider that a priority." KMB began working with retail customers only recently, but is looking to increase its activity. The bank has attracted roughly 1,000 new depositors in the last few months, KMB said, bringing its total number of retail customers to more than 8,000. GarantiBank, too, was surprised by its rating. "As we have only one branch, we can't claim to be active in the retail sector," said Maria Mishakova, head of the financial institutions department at the bank's Moscow office. "Yet we don't have anything against Russians who want to put money in our bank." As of Jan. 1, GarantiBank had roughly $4 million in 180 retail deposits, with the average account around $22,000. The major advantages of KMB and GarantiBank, Konfop said, were their low minimum-deposit requirements: KMB-Bank requires a minimum deposit of $100 or 100 euros, while GarantiBank's is $1,000. The lack of a minimum-balance requirement and high interest rates were contributing factors, Konfop said. Konfop cited high minimum deposits ($5,000 or the euro equivalent), strict requirements for opening a deposit (filing a tax declaration) and low interest rates as drawbacks for Raiffeisenbank, a leader in retailer services among foreign banks, with more than $153 million in deposits at five branches in Moscow and one in St. Petersburg. Raiffeisenbank sets its interest rates in accordance with the London Interbank Offer rate, or LIBOR, said the bank's board chairperson Michel Perhirin. LIBOR, or the rate most creditworthy banks charge each other, is currently around 3 percent annually. The bank pays 3 percent on dollar deposits ranging from $5,000 to $49,000 or 2 percent for the same amounts in euros - some of the lowest rates on the entire retail market. KMB-Bank, on the other hand, is offering 5 percent in interest for dollar deposits of the same size, and 4.5 percent for euros, while GarantiBank is offering 4 percent and 3.25 percent, respectively. TITLE: Bush Budget Focuses on Anti-Terror War AUTHOR: By Alan Fram PUBLISHER: The Associated Press TEXT: WASHINGTON - U.S. President George W. Bush proposed a $2.13-trillion budget on Monday that pumps billions into the war on terrorism but challenges the U.S. Congress by reining in deficits through cuts to job training, highways and scores of other programs. Foreshadowing tactics sure to echo until November's elections for control of Congress, the Democrats embraced Bush's national-security plans. But they also blamed him and the ample tax cut he won last year for bringing back deficits and shortchanging domestic programs. They complained that the budget would divert $1.5 trillion in Social Security and Medicare surpluses over the next decade to pay for other programs. In flusher times, lawmakers from both parties promised to use that money for debt reduction. "The budget should promote long-term economic growth through fiscal responsibility, investments in people and technology and honoring our commitments to Social Security and Medicare," said House Minority Leader Dick Gephardt. "The administration's budget fails on all three counts." The Democrats' criticism is just one reason Bush's blueprint will hit election-year trouble in Congress. Conservative Republicans oppose letting deficits return on the GOP's watch. Party moderates may resist the president's proposed spending cuts in toxic-waste cleanups, economic and urban-development grants, and other programs. Bush's spending plan for the budget year that begins Oct. 1 renews his call for tax cuts to bolster the economy, help lower-income Americans afford health insurance and reward corporate research. It seeks more money for biomedical research, schools in poor districts and park land maintenance. Right from its cover depicting a rippling Stars and Stripes, the spending plan makes clear its chief priorities of protecting Americans at home and pursuing enemies abroad. "The budget I submit recognizes the vital role the military will play and recognizes we have only one alternative, and that is victory," Bush told cheering military personnel at Florida's Eglin Air Force Base. Battling bioterrorists and other domestic security initiatives would double to nearly $38 billion. The Pentagon would get a $48-billion boost to $379 billion, including money for long-term contracts that will take years to spend. The figures include an overlapping $10 billion for Defense Department anti-terrorism activities. Bush would use that defense increase - the biggest since President Ronald Reagan's buildup two decades ago - to raise military pay by 4.1 percent while buying more pilotless surveillance planes, stealth fighters and other weapons. Last year's vision of uninterrupted annual surpluses has evaporated, thanks to the recession, the costs of fighting terrorism and the $1.35-trillion tax cut Congress shipped Bush in the spring. Gone, too, are the president's year-old plans to retire $2 trillion in national debt by 2011. Bush forecasts a $106-billion deficit this year and $80 billion in 2003; not until 2005 is black ink projected. Also, last year's projected $5.6 trillion in accumulated 10-year surplus has shrunk to $1 trillion, assuming the president's tax and spending plans are enacted. Democrats said even that dwindled surplus was inflated because of its reliance on Social Security and Medicare funds. "It's fictional. That's exactly what got Enron in trouble," said Senate Budget Committee Chairperson Kent Conrad, referring to the bankrupt energy company's accounting tricks. But House Speaker Dennis Hastert said the eroded surpluses justified "limiting growth in spending for those programs that are not as essential during these trying times." Overall spending in 2003 would grow by $76 billion, or 3.7 percent, over this year's total. Projected revenue would increase by $102 billion, or 5.2 percent, to $2.05 trillion. Bush sets aside $190 billion over the decade to set up Medicare prescription-drug benefits and overhaul the program. That is an amount lawmakers consider too low. More telling, however, is the one-third of the budget that Congress must approve each year, and that excludes automatically paid benefits such as Social Security. Overall, that category would grow by nearly 8 percent to $773 billion. But aside from the robust increases proposed for defense and domestic security, everything else - from the space program to agriculture - would get a cumulative 2-percent boost, less than the inflation rate. Winners include the National Institutes of Health, whose $27 billion would culminate a bipartisan, five-year drive to double its budget. One of Bush's highest-profile reductions is the $9-billion cut - to $23 billion - for highway building. Many lawmakers predict the money will be restored. Twenty of the government's 48 job-training programs would be erased, including one to help migrant farm workers find jobs outside agriculture. Advanced-technology grants to companies, one of former President Bill Clinton's favorites, would be cut, as would funds for the National Oceanic and Atmospheric Administration and the U.S. Geological Survey. Public housing, the space station, heating aid for the poor and the Forest Service also would be pared. Among the proposals likeliest to be ignored are those to eliminate more than 1,000 education, science and health projects that lawmakers have won for their home districts. A similar Bush idea last year went nowhere. TITLE: Enron Boss Lay To Face Senate Panel Subpoena AUTHOR: By Pete Yost PUBLISHER: The Associated Press TEXT: WASHINGTON - A U.S. Senate panel prepared to subpoena former Enron Chairperson Kenneth Lay after he refused to appear Monday, and an investigator into Enron's collapse said virtually everyone from top management down knew that Enron was hiding financial losses. The Senate Commerce Committee plans to vote on a subpoena Tuesday morning, 24 hours after Lay had been scheduled to testify before two congressional committees on the largest bankruptcy in the country's history. A house subcommittee set the stage for its own subpoena to demand Lay's appearance if necessary. Lay abruptly canceled his scheduled appearances before the panel on the eve of the hearing. In testimony prepared for the House panel, William Powers, the dean of the University of Texas Law School, said his investigation into Enron's activities found "a systematic and pervasive attempt by Enron's management to misrepresent the company's financial condition." Powers summarized his report, released over the weekend, and told lawmakers, "There's no question that virtually everyone from the board of directors down" understood that Enron's use of its partnerships was to "offset its investment losses with its own stock." There was a "default of leadership and management" that began at the top, including Lay and former Enron Chief Operating Officer Jeff Skilling, while Enron's board of directors "failed ... to provide leadership and oversight." The subcommittee voted unanimously to authorize, if necessary, a subpoena directing Lay to testify, but for the time being held off further action. In the Senate, Representative Byron Dorgan said at a news conference, "We decided that we really had no choice but to issue a subpoena." Lay "should not have expected it would ever be a walk in the park" to testify at a congressional hearing, he said. Dorgan acknowledged Lay's Fifth Amendment right to refuse to answer questions when he does appear. The committee chairperson, Senator Ernest Hollings, focused blame on the Bush administration, declaring, "We've got an Enron government." Hollings ticked off names of top Bush administration officials, some incorrectly, with ties to the Houston-based company and listed benefits he said Enron received such as loosened energy regulation. Hollings said a special prosecutor was needed because the Bush Justice Department could not be relied on to investigate objectively. Meanwhile, Representative Richard Baker, chairperson of the House Financial Services Subcommittee, opened his hearing on Enron by saying the company's "misrepresentations, obfuscation and acts of secrecy" have created a crisis of confidence in corporate America. Lay canceled his Senate testimony after several senators and House members suggested on Sunday news shows that he and other company executives engaged in criminal acts. Lay "cannot be expected to participate in a proceeding in which conclusions have been reached before Mr. Lay has been given an opportunity to be heard," his attorney, Earl Silbert, said in letters to the congressional panels that were to hear from him. TITLE: WORLD WATCH TEXT: Duhalde Strikes Back BUENOS AIRES, Argentina (AP) - President Eduardo Duhalde took the unprecedented step Monday of suspending all court challenges to an unpopular banking freeze for 180 days, taking a drastic step to shore up the teetering financial system. The move, outlined in an executive decree, follows a surprise Supreme Court ruling Friday declaring the banking restrictions unconstitutional and sets up a likely showdown between the three branches of government. The restrictions, which severely limit access to Argentines' savings deposits and triggered mass protests, were imposed Dec. 1 by Duhalde's predecessor to stop a run on the banks that saw $2 billion flee deposits in one day alone. Turkey Loan Grows WASHINGTON (Reuters) - The International Monetary Fund on Monday approved a $12-billion increase in its lending to Turkey, bloating the lender's Turkish loan program to $31 billion and making Ankara the IMF's largest-ever beneficiary.