SOURCE: The St. Petersburg Times
DATE: Issue #782 (48), Tuesday, July 2, 2002
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TITLE: Criminal Code Brought Into Force
AUTHOR: By Natalia Yefimova
PUBLISHER: Staff Writer
TEXT: MOSCOW - Most provisions of the new Criminal Procedural Code kicked into effect Monday - with supporters praising it for enhancing the rights of suspects, critics warning that practice will fall short of theory, and prosecutors and courts scrambling to deal with their enormous new workload.
 
The code was a cornerstone of the Kremlin-backed judicial reform package pushed through the State Duma last fall and purports to give greater power to the courts and to level the playing field for defense lawyers, who have often found themselves outdone by disproportionately powerful prosecutors.
 Under the new law, the courts - not prosecutors - must sanction searches, arrests and detention for longer than 48 hours. The code also puts an end to trials in absentia, such as the two rushed through last month against former intelligence officers Oleg Kalugin and Alexander Litvinenko.
 Justice Minister Yury Chaika predicted the new code would significantly reduce the number of arrests and alleviate overcrowding in the disease-ridden pretrial detention centers. Interfax cited Chaika as saying he expected the number of detainees - now between 200,000 and 250,000 - to drop by about 100,000 this year alone. One of the provisions intended to help ease overcrowding is the introduction of plea bargaining for offenses punishable by prison terms of less than five years.
 Among the unquestionable achievements of the new code is a ban on the practice of sending criminal cases back for "additional investigation" - a tactic often used by judges to let investigators patch up shoddy work or scrape around for new evidence. The code also forbids double jeopardy. Also meant to ensure a fair trial are new rules allowing a court to reject evidence obtained by the prosecution with procedural violations or other mistakes, and giving suspects the right to be questioned within 24 hours of detention and to have two hours with a lawyer before speaking with an investigator.
 Legal-rights advocates, though, were pessimistic, saying the code lacks mechanisms to prevent police torture to extract testimony and other rights abuses, and does too little to rectify the imbalance between the prosecution and defense.
 "It all looks very democratic if one doesn't know how it works from the inside," Mara Polyakova, head of the Council of Independent Legal Experts, said Friday.
 Polyakova pointed to the law giving investigators the right to appoint lawyers for defendants who cannot afford to hire their own and favoring the prosecution in the presentation of evidence and commissioning of evaluations by third-party experts. The defense can do so only with the permission of the investigator or the court. She also expressed concern about restrictions on sound recording in court and new limitations on nongovernmental organizations representing defendants' interests.
 While Chaika said he hoped the judicial system had undergone enough preparation to "avoid any serious problems," other officials worried that neither the courts nor prosecutors were ready to handle their expanded duties.
 Valery Grebennikov, a Duma deputy who worked on the law, estimated that an additional 3,000 judges would be needed immediately, with 11,000 more required by year's end. Otherwise, Grebennikov said, the country's 16,000 judges would need to "work around the clock to hand down quick decisions about conducting searches, arrests, phone-tapping and other activities."
 Deputy Prosecutor General Nikolai Makarov complained that the work of investigators would be "greatly complicated" and that no funding was available to hire the 8,000 additional staff his agency had requested.
 Makarov said law-enforcement officials are not experienced or educated enough to meet the new requirements. "Investigators are not yet ready to support the prosecution. Only 54 percent of the staff have a higher education and only 20 percent have degrees in law," he told the Vek newspaper Friday.
 One important provision of the new code - jury trials - will come into effect Jan. 1. But this applies only to cases involving grave crimes, and Polyakova said jury trials would be mandatory for only about 1 percent of criminal cases.

TITLE: Duma's Spring Session Fails To Win Plaudits
AUTHOR: By Gregory Feifer
PUBLISHER: Staff Writer
TEXT: MOSCOW - In contrast to the economic legislation passed in the State Duma's spring session, the political and social legislation gave deputies less reason to crow as they wrapped up their work for the summer Monday.
 
The most notable bills, all controversial, were those to fight political extremism, allow a limited alternative service to the military draft and make it more difficult to become a Russian citizen. 
 Praise for the spring's accomplishments was muted, even from Kremlin-connected analyst Sergei Markov. "A number of economic projects allowed us to take steps forward," he said. "But, on the other hand, there was a consolidation of bureaucratic tendencies."
 The initiative for only about half of the nearly 100 bills passed came from the Duma itself. The other bills were put forward by the government and the Kremlin, whose domination of the legislative branch has strengthened this year. 
 "If the president initiates a project himself or if he backs the government, the legislation is sure to pass the Duma," said Vladimir Pribylovsky of the Panorama think tank. "Deputies only speak up if they see the authorities unconsolidated on certain positions."
 Led by the pro-Kremlin United Russia Party, the Duma's centrists - who hold roughly 240 seats in the 450-seat house - largely controlled the proceedings. They further formalized their control by depriving the Communist Party - which holds the most seats in the Duma - of eight of its 10 committee chairpersonships. The Communists gave up the last two in protest.
 United Russia leaders were predictably happy with the spring session. "It was the first time in which three centrist groups worked together to represent one party," said Vyacheslav Reznik, a member of United Russia's general council, which coordinates the activities of the Unity, Fatherland-All Russia and People's Deputy factions. "Our close cooperation with the government allows us to follow the president's course."
 Deputies passed the bill on alternative service in the final reading only on Friday. Although it will finally bring the law in line with the 1993 Constitution, which guaranteed the right to alternative service, liberal lawmakers say the government-backed bill is too severe. If a man of conscript age succeeds in convincing a special committee that he is a pacifist, he must perform 3 1/2 years of alternative service, or 21 months if he has higher education. The maximum compulsory military service is two years.
 Grigory Yavlinsky, leader of the social-democratic Yabloko party, called it "alternative slavery" at a news conference Thursday.
 Markov said the bill allows the military to say it provides alternative service, while in reality changing little. "It's good for the military bureaucracy," he said.
 On Thursday, the deputies gave final approval to the bill on combating political extremism. The legislation was pushed through by the centrists over the objections of liberals and Communists, who say its vague provisions could lead to a clampdown on any group targeted by the authorities.
 Early this spring, in April, the Duma passed a presidential bill establishing new procedures for seeking Russian citizenship. Applicants for citizenship must prove they have lived in Russia for five years and pass a language exam.
 Opponents said the law would not only make an already bureaucratized process more difficult, but also disenfranchise millions of former Soviet citizens.
 Yavlinsky harshly criticized the citizenship and alternative service bills. "They're tied to what's happening in the whole country," he said. "A series of decisions are being made that are exclusively counterproductive for the country's future."
 In a meeting Monday with leaders of the Duma factions, Putin focused his praise on the economic legislation, although he listed the bills on extremism and citizenship among the most important of the session.
 Whether or not they approved of the Duma's work, deputies on the whole saw an entrenchment of parliament's new role under Putin's administration.
 Sergei Yushenkov, co-leader of the Liberal Russia party, said he was far from satisfied by the spring session. "Too much time was spent talking," he said. "But in no sphere was a single real reform carried out."
 Yushenkov particularly criticized the Duma's rejection of a Liberal Russia initiative to reduce the influence of the state in business. "Meanwhile, the building of a police state goes on," he said. "The Duma is an affiliate of the government. It's a far cry from the liberalism the president likes to talk about."
 While praising Putin's foreign policy, Yavlinsky came down on the Duma for failing to discuss foreign policy issues. "The Duma has become helpless," he said. "It's bereft of strategies."

TITLE: New Party Gets the Kremlin Kiss of Life
AUTHOR: By Claire Bigg and Natalia Yefimova
PUBLISHER: Staff Writer
TEXT: A cryptic new party with a vague grassroots platform and the blessing of the country's No. 3 politician was formed over the weekend, fueling speculation as to who was behind it and whose political tool it would be in the 2003-2004 election season.
 
Federation Council Speaker Sergei Mironov welcomed more than 200 delegates to the founding congress of the Party of Life held in Moscow on Saturday - with new members ranging from the Million Friends party, who describe their central focus as the love of animals, to representatives of Mironov's Will of Petersburg movement.
 The supporters of the new party said that the life of the country was its highest priority and that the Party of Life was solely aimed at improving the quality of life in Russia.
 "The Party of Life functions on another plane than all other political organizations," said Mironov at the constituent convention. "There are left, right and central parties, but not a single one of them approaches the individual and their life as the basis on which to build its ideology. This is why the Russian Party of Life seemed to me an appealing idea."
 Politicians and analysts were confident the Kremlin had approved - or even engineered - the creation of the new party.
 In a greeting read out by Mironov and quoted by Interfax, President Vladimir Putin said: "The creation of the Party of Life is a good omen for our country and a testament to the development of a civil society and the spiritual rebirth of the nation."
 Mironov, whose long-time friend and chilhood neighbor in St. Petresburg, Nikolai Levichev, is the party's main ideologue, did not join the party, citing a busy schedule, but said in a number of interviews that he would very much like to be a member. The Federation Council's regulations forbid party activity in the chamber.
 While a majority of analysts speculate that the party will run for the 2003 State Duma elections, which means the party must be founded no less than a year prior to the elections, several interpretations of the party's raison d'etre have been at the center of discussion.
 Andrei Ryabov of the Moscow Carnegie Center said Monday that he believed the party was created by the so-called St. Petersburg clan of intelligence and security officials close to Putin, indicating that they are set to battle for power against the dominant pro-Kremlin United Russia party in coming elections.
 "I think the party is gearing up towards the presidential elections, with the aim of becoming a political structure that would represent Putin," said Aleksei Musakov, the head of the St. Petersburg Center for Regional Development.
 The Kommersant newspaper wrote Monday that, despite the party's bottom-up platform, security at the congress was inordinately tight and journalists were forced to go through several security cordons, including searches by the Federal Security Service.
 In another report, the gazeta.ru Web site speculated that the rumors about the Petersburg clan could be a Kremlin &quot;decoy&quot; intended to discredit the <i>chekisty </i>if the party is a flop. The report also floated the idea that the Party of Life could be the presidential administration's way of keeping United Russia on its toes.
 Mironov's press secretary, Lyudmila Fomicheva, directed all questions to the new party, but calls to its offices went unanswered Monday afternoon.
 One St. Petersburg politician speculated that the party was part of a Kremlin attempt to secure the votes of people with low revenues or education level and pensioners. The politician, who spoke on condition of anonymity, said the presidential administration had become alarmed by some regional polls indicating that pensioners could cast a significant protest vote in parliamentary and presidential elections set for 2003 and 2004, respectively.
 Although the politician said that, together with environmental and Christian values, communist ideology occupied a significant place in the line of the new party, Ryabov said that the ideas espoused by the Party of Life and Mironov himself were too extravagant to attract the conservative, &quot;ideologized&quot; constituency of the Communists.

TITLE: A Year in Review: 2001 for AmCham St. Petersburg Members
TEXT: 2001 was a successful year for AmCham St. Petersburg member-companies operating in St. Petersburg and the Leningrad Oblast. Many companies, who invested millions of dollars into construction of factories and plants in Russia, have reached, and in some cases surpassed, their planned production capacity. New brands are constantly being added to the wide variety of products manufactured by our member companies
 AmCham St. Petersburg member-companies have lived successfully through the oil crisis, the IT crisis and hope to overcome the results of September 11 and the U.S. recession. It is perhaps, the dedication to the Russian market, a consumer-oriented approach and reliable local providers that allow our member-companies to operate successfully in both local and global markets, to be competitive and to adhere to the highest ethical standards known in the world. </i>

AUTOMOTIVE /<br> MACHINERY
 
In 2001, <strong>Caterpillar Tosno,</strong> Caterpillar's first factory in Russia, saw a 25-percent increase in production volume compared to 2000. The range of items manufactured at the plant almost doubled, and the number of employees increased from 520 to 590. Caterpillar Tosno produces parts and components for earthmoving and forestry equipment exported to Caterpillar plants in Western Europe. 
 2001 was extremely busy for the <strong>Ford Motor Company</strong> in Russia. Three new models were introduced to the Russian market: the Ford Excursion, the world's biggest and most powerful SUV, the new Ford Mondeo and the new Ford Maverick, which has already set new standards in the compact SUV class. The company's dealer network was expanded to include 48 dealerships and service centers across Russia and Belarus. Ford Motor Company also launched several customer-oriented programs in 2001, including the &quot;Ford on Credit&quot; program, an insurance program with Ingosstrakh, and a menu-pricing program. The Ford plant in Vsevolozhsk, Leningrad Oblast, will be officially launched in the 2002. The plant will produce the best-selling Ford Focus, the only model to receive the &quot;Car of the Year&quot; award in Europe and North America in both 1999 and 2000. Ford's total investment in this facility, which will have an annual capacity of 25,000 vehicles, totals $150 million. The plant employed 280 people by the end of 2001.
 <strong>OTIS Lift</strong> produced and shipped 583 elevators to its customers across Russia in 2001. The plant's quality-assurance system received ISO 9001 certification, making OTIS Lift the only ISO 9001-certified elevator-manufacturing facility in Russia and the CIS. Sales volumes have increased by 32 percent compared to 2000, reaching approximately $13 million, and the volume of orders from customers in Northwest Russia almost doubled. The company made significant investments in safety and environmental programs, and purchased new service equipment in order to ensure compliance with the highest standards of workplace safety and customer service. St. Petersburg Governor Vladimir Yakovlev presented Vladimir Marov, OTIS, general director, with the award for outstanding contribution to the city's economy and social sphere. 
 
CONSUMER <br> GOODS
 <strong>
British American Tobacco Russia</strong> managed to retain its leading position on the Russian market: over 47 billion cigarettes were sold during the year, 15 percent more than in 2000. Despite the success of existing brands, BAT Russia launched a new medium-price brand, called Alliance, in December 2001. On top of this, in 2001 the Yava family was enlarged by a new version - Yava Lights hinge lid. The majority of cigarettes sold locally are manufactured at BAT Russia's three factories in Moscow, St. Petersburg and Saratov. The remainder are imported from the United States and Britain. The St. Petersburg facility is working hard to continue to improve its labor efficiency, the proficiency of its staff, and the overall organization and utilization of machinery. BAT Russia's St. Petersburg factory complies with the highest international standards of quality, and environmental and production safety. 
 In November 2001, all bottling operations in the Russian Federation, previously owned by the <strong>Coca-Cola Company</strong> (including the plant in St. Petersburg) became part of Coca-Cola Hellenic Bottling Company (Coca-Cola HBC). Coca-Cola HBC is the largest European producer of non-alcoholic beverages, operating in 26 countries and serving over 1.2 billion cases of alcohol-free beverages to more than 500 million consumers a year. Coca-Cola can also be proud of the following achievements in 2001. The Coca-Cola brand was awarded the national Brand of the Year Award in the &quot;International Soft Drinks&quot; category by the National Trade Association of Russia. <strong>Coca-Cola St. Petersburg</strong> launched the production of Dr. Pepper, Fanta Exotic and new flavors of Fruktime, along with the distribution of Minute Maid juices. Completion of ISO 9001-2000 certification took place in 2001, which further guarantees that the company's quality-management system and all business processes meet the highest international requirements.
 Established in 1992, <strong>Ilim Pulp Enterprise</strong> is a leader in the Russian pulp-and-paper industry in terms of production, export, and sales, and is among the top 20 pulp-and-paper companies in Europe. The total sales figure in 2001 reached $657 million. Last year's production totaled 1.7 million tons.
 <strong>JT International</strong>, the world's third-largest tobacco company, has reaffirmed its status as the largest cigarette producer in Russia. Its flagship enterprise, the Petro factory in St. Petersburg, produced 55 billion cigarettes in 2001, 4 billion more than in the previous year, confirming the 10-percent production increase forecast by company representatives. Petro, with JTI's investment of $400 million, employs 2,000 workers. JTI's total investment in Russia constitutes $500 million. Peter I, the company's key local brand, remains the leader in the mid-price segment of the market. This is the first international-class filter cigarette ever to be produced in Russia. In 2001 Peter I took first prize at the Brand of the Year/Effie Awards. Also, Peter I Special Lights with charcoal filter were introduced in the market, in addition to the full flavor Peter I and Peter I Lights (the first light cigarettes in Russia). The tar and nicotine content of Petro-produced cigarettes is in full compliance with the new Russian standards.
 The 2001 performance of <strong>Kraft Foods</strong> in the Leningrad Oblast proves that Kraft's coffee-packaging plant in the Gorelovo industrial zone is a successful and promising investment. The factory reached its planned production capacity for 2001 faster than expected and, in fact, exceeded it by 20 percent. A new production-and-packaging line was installed for soluble coffee with cream and sugar products: &quot;Cappuccino&quot; and &quot;3 in 1&quot;. The investment constituted approximately $1 million. The Kraft Foods plant was recognized by the Leningrad Oblast government and the Lomonosov district administration as one of the most prominent tax payers, with more than $2.5 million paid in federal, regional and local taxes during the first year of operation alone. 
 In 2001, <strong>Pepsi-Cola</strong> increased its sales significantly, enjoying a 75 percent growth over the year before. The company also increased its share of the carbonated-beverages market. Several new names were added to the brand portfolio: Pepsi Wild Cherry, Mountain Dew, Seven Up Light, and Evervess Ginger Ale. Aqua Minerale was named the best brand in the &quot;Table/Mineral Water&quot; category, while the Pepsi and Seven Up brands received the &quot;Commodity of the Year&quot; diplomas, and Mountain Dew was a proud recipient of the Grand Prix in the &quot;New Name&quot; category of the Brand of the Year/Effie Awards 2001.
 The year 2001 was very successful for <strong>Philip Morris Izhora</strong>, Philip Morris International's state-of-the-art manufacturing facility in the Leningrad Oblast. New equipment was installed, and production volume was significantly increased, growing to almost 25 billion cigarettes, in comparison with 10.4 billion in 2000. The factory, now employing over 800 people, reached its planned capacity of over 30 billion cigarettes per year and launched new brands into production. With total amount of taxes paid to all budget levels about $95 million, Philip Morris Izhora became one of the biggest taxpayers of the Leningrad Region. The factory produces world-famous brands such as Marlboro, Parliament, Virginia Slims, L&amp;M, Chesterfield, and Bond Street.
 
INFORMATION <br> TECHNOLOGY AND TELECOMMUNICATIONS
 
St. Petersburg is traditionally known as one of Russia's centers for IT and telecommunications. AmCham members representing this sector are keen on utilizing the tremendous potential of local programmers and engineers. 
 Founded in 1991 as the first commercial operator in the St. Petersburg telecommunications market, <strong>Baltic Communications Limited (BCL)</strong> today is a value-added service provider, offering its corporate customers a full range of voice and data solutions over its own fiber-optic network, as well as integrated broadband IP solutions. BCL is the long-term telecom partner to many of the leading American businesses and institutions in St. Petersburg and the Leningrad Oblast, including Coca-Cola, Ford, International Paper, the U.S. Consulate General, and Dubravy. Since 2000, BCL has also been working with U.S.-based iBasis, the world's largest international Cisco-powered network for Internet telephony, and offers IP Calling Card services to individuals, including students and tourists, including international roaming access from Finland, Germany, and the UK. This sector is also served by BCL's network of 175 credit-card payphones, which are located at all of the main hotels, tourist sites and transportation centers, including railway stations, Pulkovo International Airport, and the main border crossings between Russia and Finland. 
 In 2001, the <strong>COMINCOM-COMBELLGA</strong> group started several investment projects, as part of a development program being carried out in cooperation with Telenor, the company's strategic partner. Today the transportation network of COMINCOM-COMBELLGA includes three automatic intercity exchanges - in Moscow, St. Petersburg and Samara - as well as a well-developed network of ground and satellite channels covering the entire territory of Russia. Among all COMINCOM investments, the network projects in St. Petersburg and Voronezh have the greatest importance, for their realization will significantly increase the company's customer base and market share in the regions. In addition to these developments, a number of corporate-network projects were realized for major customers with the use of satellite and ground-line channels. 
 <strong>Digital Design</strong> provides ISO 9001-certified software-development services to customers worldwide. The company first opened its development center in St. Petersburg in 1992. In 2001, in addition to a large portfolio of services, Digital Design established a systems-integration department, which will provide the following services to the company's clients in Russia: IT consulting, Microsoft-certified technical support, technical education, and computer-network design. Last year, the number of employees at Digital Design increased from 90 to 120. The company's turnover increased by 47 percent compared with 2000, reaching $2.8 million. Digital Design paid over $640,000 in taxes and duties. In 2001, Digital Design became Microsoft Gold Certified Partner in Technical Support Services, the only such center in Northwest Russia, and one of only four in the entire country. In collaboration with The Fort-Ross Consortia, Digital Design held the first Software Outsourcing Summit (www.soft-outsourcing.com), which has become a major meeting point for Russian IT service suppliers and their potential clients.
 Founded in 1999, <strong>eVelopers </strong>is an offshore development company located in St. Petersburg with headquarters in Silicon Valley, California. eVelopers designs and builds complex Web and wireless solutions for companies competing in the Internet economy. By applying top technical talent and delivering high-impact solutions in record time, eVelopers helps companies accelerate eBusiness opportunities and expand their competitiveness. In 2001 eVelopers delivered a number of Web-based projects to American customers, including several eBusiness applications for its main customer, Philips Semiconductors. During the past year, the company developed and improved its quality management system, and is currently undergoing ISO 9001 certification.
 <strong>EpicRus</strong> (Platinum Software before 2001) is a provider of the ERA business automation solution - based on products from the leaders Epicor Software Corporation (U.S.) and Infor Business Solutions (Germany) - to Russia, CIS and the Baltic States. The company employs over 150 specialists in its Moscow and St. Petersburg offices. EpicRus was twice named &quot;The Best Software Provider on the Russian Market,&quot; as a result of independent polls conducted at the Moscow International Accounting Forum (Kremlin, 2000 and 2001). 
 In 2001, <strong>Motorola's St. Petersburg Software Development Center (SPSD)</strong> enjoyed 50-percent growth in revenues compared to 2000, empolying 241 people, and paying almost $2 million in total taxes and duties. SPSD, which is part of Motorola's Global Software Group (GSG), specializes in embedded software (OS and applications), behavior models and simulation, Java technology for Motorola platforms, and embedded software for telecommunications. In September, SPSD was assessed at SEI CMM v.1.1 Level 5 (CAF compliant assessment), the highest possible level of software development, as defined by the Software Engineering Institute (SEI). With this assessment, SPSD becomes Motorola GSG's first SEI CMM Level 5 organization in the Europe-Middle East-Africa region. This is a truly significant achievement, not only for Motorola, but for the entire industry in Russia, as it demonstrates the potential of Russian software-development engineers and managers. 
 <strong>STAR SPB</strong> is a leading Russia-based software-outsourcing company specializing in the implementation and maintenance of information systems as well as database development and the migration of legacy systems to Web-based environments. Like all of their Russian colleagues in the profession, they felt the impact of the global recession in the IT industry in 2001. However, despite the rough times, STAR SPB takes pride in having stabilized its business by the middle of 2001. In the final two quarters, the company was already on the path to recovery. The U.S.-based Computer Sciences Corporation delegated several new and very promising assignments to STAR SPB, including the migration of a legacy system used by health-care providers throughout Scandinavia. STAR SPB's important new initiatives in 2001 included the launch of an Web information portal, www.outsourcing-russia.com, to showcase the Russian IT-service sector to American corporate consumers. 
 
 
FOOD <br> PROCESSING
 <strong>
Baltic Cranberry Corporation (BCC)</strong> completed its sixth season of berry collection in 2001. BCC is an ingredient supplier worldwide for producers of juices, yogurts, jams, purees, and frozen retail packages of berries. The company currently has 25 full-time employees and the rented factory coldstore operates on four shifts. Through its collection system, BCC involves over 10,500 rural workers annually in part-time employment. While most of the company's products are sold in the European Union, the United States, and Canada, BCC recently added sales to Israel and Australia.
 
BANKING
 
Among the largest banks in Russia, according to <i>Dengi </i>No. 11 of March 19, 2001, <strong>ZAO Citibank</strong> is now 13th largest in terms of capital, eighth largest by loans and credits to customers, and eleventh largest by assets. By the beginning of 2001, the share of Russian companies in the corporate-credit portfolio of the bank reached 45 percent. As one of the biggest custody-service providers worldwide and the largest foreign bank in Russia, the bank continues to provide custody services for three main products: MinFin bonds, GKO/OFZ and equities. The bank continues to issue VISA Electron payroll cards successfully. 
 A new player in the banking market in St. Petersburg, <strong>Raiffeisenbank </strong>has been present in Russia, since 1989, as a representative office and since 1996 as a fully operational bank. Over the past five years, four new branches were opened in Moscow and, in 2001, Raiffeisenbank established its presence in St. Petersburg. In both cities, the bank offers a full compliment of banking services to both corporate and private clients, and its leasing affiliate offers services to companies. Presently, Raiffeisenbank is rated No. 1 in terms of consolidated-payment volumes and private deposits among foreign affiliates. In recognition of its achievements, Raiffeisenbank was named &quot;Best Foreign Bank in Russia&quot; in 1999 and 2000 and &quot;Best Bank in Russia&quot; in 2001 by the British financial publication Euromoney.
 
 
TRAVEL
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British Airways</strong> operates 14 flights a week on the London-Moscow-London route and five flights a week on the London-St. Petersburg-London route. Notwithstanding the unfavorable market situation, British Airways managed to maintain the same frequency of flights to Russia as in the previous year. The company remains true to its history of being a full-service network carrier committed to customer-service excellence and world-class products.
 <strong>Delta Air Lines</strong> has been flying to Russia for over 10 years and provides daily passenger and cargo service between Moscow and New York. Being the only U.S. flag carrier to fly here, Delta Air Lines is an important part of the infrastructure that bridges the Russian and the American business communities. Delta is a founding member of Sky Alliance and has recently received antitrust immunity to allow for closer cooperation and schedule coordination with Air France, Alitalia, and Czech Airlines. Along with the other Sky Alliance members and partners, Delta offers over 8,000 flights to 475 destinations every day. Currently, Delta has nearly 50 employees working in Russia and serving the public through offices in both Moscow and St. Petersburg. 
 The first-class, upscale international <strong>Radisson SAS Royal Hotel</strong> opened on July 23, 2001, further strengthening Radisson SAS' presence in Russia. All 164 rooms and 17 suites are individually air-conditioned and have a classical decor. Facilities include a 72-seat restaurant, a cafe, two private dining rooms, five meeting rooms and a health club. The historical building is located in the heart of the city on Nevsky Prospect. The original building has been demolished and reconstructed, but its unique 200-year-old facade was preserved.
 The <strong>Hotel Astoria</strong> is nearing the completion of a comprehensive refurbishment program that was implemented in three stages, starting in 1999. The new Astoria will offer 227 rooms, including 47 suites, following the latest trends in design and equipment. As a result of huge investment by its management company, Rocco Forte Hotels, into staff training programs and renovation, in February 2001, the Astoria was accepted as a member of the Leading Hotels of the World. 
 In 2001, the 10th year since re-opening after massive renovations, <strong>the Grand Hotel Europe</strong> was the accommodation choice of Her Majesty Beatrix, the Queen of the Netherlands, Jacques Chirac, President of France, and Gerhard Schroeder, Chancellor of Germany. Notably, it was on the initiative of Elmar Greif, the hotel's general manager, that the &quot;White Days&quot; program was launched to trumpet the city's winter season cultural benefits and promote St. Petersburg as a major tourist destination in the off season. This is especially important in view of the city's approaching 300th anniversary. The Grand Hotel Europe's management company, Kempinski Hotels &amp; Resorts, is already actively promoting the package. 
 
 
REAL ESTATE 
 <strong>
Colliers International</strong> is a worldwide leader in the real estate market. The first office was opened in Russia in 1994, and the St. Petersburg office in 1997. Colliers International employs 20 specialists in St. Petersburg, with plans to expand to 25 in 2002. The company has been involved in leasing professional office space and elite residential apartments. In 2001, Colliers International focused on developing large shopping centers, a new product for St. Petersburg and a popular one throughout the world, for which there has been increasing demand in Moscow over the past three years. The new retail department that was opened in October 2001 is now extremely busy, with three new exclusive contracts signed for the design, development and, and subsequent leasing of over 67,500 square meters of shopping centers.
 <strong>Pulford Real Estate </strong>is a full-service real-estate agency with offices in both Moscow and St. Petersburg. Since 1993, Pulford has assisted clients ranging from multinational corporations to private individuals. Today, Pulford provides its clients with over eight years of experience in the Russian real-estate market and a distinctive, personal approach to service that sets Pulford apart from other real-estate agencies. Compared with 2000, the year 2001 brought increased market share and heightened awareness levels in both Moscow and St. Petersburg. 2001 also brought about a greater degree of visibility, strong customer satisfaction and client loyalty marking Pulford's continued growth and expansion. The result has been a 71-percent increase over the previous year in demand from Pulford clients for short-term and long-term apartments, as well as independent office space. During the same period, Pulford saw a 57-percent increase in the demand for Pulford serviced apartments. 
 
 
PUBLIC <br> RELATIONS
 
In 2001, the <strong>SPN Granat PR Agency</strong> carried out various public relations projects for a number of international companies, many of which are members of AmCham: Philip Morris, Gillette, Kraft Foods, Radisson SAS Royal Hotel, Bravo Holding Limited, Ford Motor Company, and many others. On June 29 and 30, 2001 SPN Granat, in cooperation with the European Public Relations Confederation (CERP), the Public Relations Association of Russia (RASO) and the Northwest Branch of the Russian Public Relations Association (NWRASO) organized the Baltic PR Weekend. The event included a conference titled, &quot;Main Trends and Prospects for the Development of PR in the Baltic Region Countries.&quot; On Dec. 7, 2001 SPN Granat supported NWRASO in organizing PRoba 2001, a professional PR contest for Northwest Russia. SPN Granat, in partnership with AmCham St. Petersburg, was the proud winner of the prestigious Silver Archer Award, the National Public Relations Award for the PR Project of the Year, for promoting Leningrad Oblast as an investment destination. 
 
HUMAN <br> RESOURCES
 <strong>
Boyden </strong>has strengthened its position as one of the market leaders in executive searches. Boyden International Recruiting (B-I-R), specializing in focused recruiting, is rapidly growing, providing middle-management recruiting for executive-search clients. Boyden Executive Search, together with Boyden International Recruiting, successfully finalized a number of projects providing human-resourcdes consulting services for the leading companies of St. Petersburg and Moscow. Successful cooperation with leading telecommunication companies allowed for the development of a number of consulting projects in the sphere of corporate structures and senior team building. Boyden has expanded its operations in the regions by delivering highly qualified candidates for the branches of the St. Petersburg clients. 
 The year 2001 was extremely successful for <strong>Kelly Services</strong>. Sales volume was increased by 13 percent over 2000. The fact that the demand for recruitment services from Russian companies constituted 22 percent of total sales is regarded by Kelly Services as one of the company's major achievements. On August 1, Kelly Services opened an office in Novgorod, where the company collaborates with a number of international manufacturers. In 2001, Kelly Services also implemented a number of successful assessment and development-center projects in large multinational companies. 
 
 
SAFETY <br> AND SECURITY
 
In 2001, <strong>Avanpost Risk Management Group</strong> was able to achieve 55 percent growth compared to the previous year, both in the volume of sales (exceeding $500,000) and in the number of employees (70 full-time staff). The company was the proud recipient of two diplomas from the City Department of Internal Affairs. The achievements of 2001 have prepared a base on which the company is now planning its expansion into the Moscow market in 2002. 
 <strong>Wackenhut Neva</strong>, a branch of Wackenhut International Incorporated, expanded its client base considerably during the last year. Along with such reputable firms as Philip Morris, Ford, Arthur Andersen, Procter &amp; Gamble, and International Paper, Wackenhut became a provider of security services to Petrovsky National Bank, Milarin, and the Israeli Embassy. Wackenhut International Incorporated has been operating in Russia since 1993 and has offices in Moscow, St. Petersburg, and Yuzhno-Sakhalinsk. American Chamber of Commerce in Russia
 St. Petersburg Chapter
 </strong><i>25 Nevsky Prospect, 191186, St. Petersburg, Russia 
 Tel: +7 (812) 326-2590, fax: +7 (812) 326-2591
 st.pete@amcham.ru
 www.amcham.ru

TITLE: Bar Owners Profit From Putin
AUTHOR: By Alexei Vladykin
PUBLISHER: The Associated Press
TEXT: CHELYABINSK, Ural Mountains - Yevgenia and Yelena didn't have to look far for a theme for their bar: Every day, televisions beam the image of the most captivating Russian politician into homes and businesses across the country. 
 
Like countless portrait painters and T-shirt vendors, the 21-year-old student entrepreneurs decided to cash in on the country's most popular brand name: Vladimir Putin. 
 Their bar is called simply &quot;Putin.&quot; 
 Students Yevgenia Borishpolskaya and Yelena Terekh have hung a judo kimono - Putin practices the sport - and a Russian flag at the entrance to the bar, on the edge of a park in the Urals industrial city of Chelyabinsk. 
 To accompany the Baltika beer on tap from Putin's hometown of St. Petersburg, the bar offers &quot;Stasi&quot; peanuts - a reference to the Soviet-era secret police in East Germany, where Putin served as a KGB agent. 
 The menu also offers &quot;Vertical Power&quot; kebabs, playing on the president's shorthand for his pledge to strengthen authority in Russia from the top down, and cookies stamped with the president's initials, VVP. 
 &quot;We're creating a myth, a legend, around Putin's image,&quot; said Borishpolskaya, a student of public relations and an unabashed presidential supporter. 
 She and her partner plan to do their part during Putin's re-election campaign in 2004, offering free mugs of beer to potential voters. 
 &quot;What's wrong with loving Putin? He's healthy, speaks well, and he's nice to look at,&quot; said Terekh, a law student. 
 Their only problem so far is low revenues, ranging from about $100 to $200 a day, which they blame on their location in the down-at-the-heels neighborhood that is home to the city's biggest metallurgical plant. 
 The average monthly wage for plant workers is $162.50, and few want to shell out a steep $6.50 to quaff a beer with crackers and a vegetable salad, which they could get elsewhere for less than a quarter of the price. 
 Local businesspeople have offered to move the bar to the center of Chelyabinsk, where daily restaurant turnover can reach $1,250. But, in that case, the two students would probably lose control over their enterprise. 
 Alexei Slepyshev, the federal inspector for the Chelyabinsk region, said his office considered the use of Putin's name without the president's consent unethical.
 &quot;We regard the opening of the cafe-bar ... named after the president as an ethical issue, not a legal one. And, in that sense, our reaction is negative,&quot; Slepyshev was quoted by Interfax as saying.
 Putin has become a favorite subject for children's books, paintings, films and Web sites in a wave of what one Russian reporter called the &quot;Putinization&quot; of the country. 
 It's not clear to what extent the Kremlin's image-makers are involved: Putin himself has said he objects to the adoration, but members of a pro-presidential youth group, Walking Together, have reported receiving official funding. 
 Their rallies are reminiscent of Soviet-era gatherings, where citizens sent from schools and workplaces sang the praises of Communist leaders.

TITLE: New Prosecutor Assigned To Budanov Murder Trial
AUTHOR: By Sergei Venyavsky
PUBLISHER: The Associated Press
TEXT: ROSTOV-NA-DONU, Southern Russia - A new prosecutor on Monday took over the trial of Colonel Yury Budanov, who is charged with murdering a Chechen woman. The change raises new questions about the prosecution of a case that is seen as a bellwether for the handling of military crimes in Chechnya. 
 
The new prosecutor, Colonel Vladimir Milovanov, appeared in court for the first time just a day before the verdict against Budanov was scheduled to be announced. His appointment followed unusual public criticism about the treatment of the case by Prosecutor General Vladimir Ustinov, who suggested that the defendant was being prosecuted too leniently. 
 The previous prosecutor in the case, Sergei Nazarov, had recommended that Budanov be sentenced to three years in prison, but be made eligible for immediate amnesty - provoking harsh criticism from human-rights advocates who accused the state of letting Budanov get away with murder. 
 Budanov, who admitted to strangling 18-year-old Heda Kungayeva two years ago, is the first Russian officer to face a public trial for alleged military crimes in Chechnya. 
 Judge Viktor Kostin said Monday that Nazarov had retired from the prosecutors' service on June 19. Milovanov, the new prosecutor, told the court that &quot;there have been some changes in the assessment of the actions of the defendant.&quot; 
 However, Milovanov refused comment to the media, saying the new assessment had been filed to the court in documents that have not been made public. 
 In a brief final statement Monday, Budanov expressed regret only about the length of the trial. &quot;I apologize before the court for the fact that my case took so much time to consider - a year and a half - and, for the efforts ... it took to accomplish,&quot; Budanov said, according to his attorney Anatoly Mukhin. 
 Budanov said he killed Kungayeva in a rage because he thought she was a rebel sniper. Kungayeva's family denies the accusation, and says that she was dragged from her home at night, raped and murdered during a drunken rampage by soldiers. 
 Budanov's lawyers have sought to use an insanity defense and Russia's leading psychiatric institute has supported Budanov's contention of temporary insanity. 
 However, Ustinov said last month that he didn't understand why an earlier exam showing that Budanov was sane hadn't formed a bigger part of the trial. Ustinov's office had also been critical of the earlier prosecutor dropping some charges or replacing them with milder ones. 
 Budanov had initially been charged with rape, but prosecutors later dropped the charge. Lawyers for Kungayeva's family say forensic experts who examined the victim's body found evidence of rape but that the military covered it up.

TITLE: Inquiry: Torpedo-Tube Blast Sank Kursk
PUBLISHER: Combined Reports
TEXT: MOSCOW - The final report into Russia's August 2000 Kursk submarine disaster said on Monday a torpedo fuel leak caused the massive explosion which sank the nuclear-powered vessel with the loss of all 118 crew.
 
Ilya Klebanov, the senior government minister who headed the commission that compiled the report, said investigators had made their findings after key elements from the torpedo bay were raised from the bottom of the Barents Sea last month.
 &quot;A thermal explosion of components of the class 298A PV torpedo caused the disaster,&quot; Klebanov told Interfax news agency. &quot;It happened as a result of a leak of hydrogen peroxide and the ignition of materials in the torpedo tube.&quot;
 Klebanov said the Kursk had been destroyed after a second explosion set off parts of the armaments stored in the first compartment of the Kursk, then Russia's most modern submarine.
 The torpedo fuel caused one explosion that killed all crew members in the submarine's first compartment and some in the next compartment, another commission member, Vice Admiral Valery Dorogin, told Interfax. 
 Then the fire and increase in pressure caused other ammunition on the submarine to detonate, resulting in a huge, second explosion, he said. 
 &quot;All members of the government commission agreed with these conclusions,&quot; said Klebanov, who is trade, science and technology minister.
 He added the conclusions would be handed to the prosecutor general, who is conducting a separate investigation.
 Last month Klebanov cleared NATO and other foreign vessels from any role in the sinking of the Kursk.
 Officially, his commission had been studying two other possible causes of the disaster, including a collision with an unidentified vessel. NATO countries had strenuously denied any role in the disaster. A third theory had the Kursk striking a World War Two-era mine.
 
 <i>(AP, Reuters) </i>

TITLE: New Code To Give Break to Drivers
AUTHOR: By Oksana Yablokova
PUBLISHER: Staff Writer
TEXT: MOSCOW -The new Administrative Violations Code, which spells out a wide range of noncriminal offenses and their penalties, came into force Monday. The code imposes or increases fines for offenses such as traffic violations, prostitution, bootlegging, swearing in public or failing to carry a passport.
 
The code, which replaces 1984 legislation, also maintains the presumption of innocence, making it more difficult for police to impose a punishment without clear evidence that an offense has been committed.
 Drivers have especially anticipated the code, because Chapter 12 on traffic violations drastically limits the powers of the traffic police and, at least in theory, makes it more difficult for them to extort bribes.
 As of Monday, the traffic police cannot seize a driver's license, tow away vehicles or accept fines for violations. Fines must be paid at a bank.
 Many drivers may still opt for bribes rather than deal with paperwork and the trip to the bank as envisioned in the code.
 The code levies a fine of up to 20 minimum wages (up to 2,000 rubles, or about $65) on traffic police officers who illegally confiscate a driver's license or seize a vehicle.

TITLE: IN BRIEF
TEXT: Senate Election Bill 
 

MOSCOW (SPT) - Yabloko has introduced a bill to the State Duma that would provide for direct elections of members to the Federation Council, the upper house of the Russian parliament.
 A spokesperson for the liberal party said on Monday that the bill allows for the gradual replacement of existing Federation Council members, who are currently appointed. The terms of each region's representatives expire at different times and, under the bill, the president would announce when the elections are to be held, she said.
 Yabloko Duma Deputy Igor Artemyev, one of the authors of the bill, consulted with the presidential administration before the bill was introduced. It is expected to have its first reading in the Duma's fall session, the spokesperson said.
 Federation Council Speaker Sergei Mironov has said he would support direct elections to the council.
 
 
Putin Meets Leaders
 

MOSCOW (AP) - President Vladimir Putin on Monday welcomed Russian-speaking Jewish leaders from around the globe who are gathering in Moscow to take part in the new World Congress of Russian Jewry. 
 "For the first time, an international organization is being created of Russian-speaking Jews, people who belong to two great cultures: Jewish and Russian," Putin said in a statement. 
 Delegates from Jewish communities in Russia and the former Soviet Union are taking part in the four-day congress, along with delegates from Israel, the United States, Canada, Europe and Australia. Their goal is to build cooperation between Jewish organizations, support Jewish culture, support the Israeli people and the global anti-terrorist coalition. 
 
 
Arafat Contacts
 

MOSCOW (AP) - Russia has no plans to cut off contacts with Palestinian leader Yasser Arafat, even as the United States presses its demand that he step down, Foreign Minister Igor Ivanov said Monday. 
 "To influence a settlement, naturally, it's necessary to maintain contacts and dialogue with both sides," Ivanov was quoted by Interfax as saying. "Therefore we are actively maintaining contacts with Israel and with the Palestinian leadership, including its leader, Yasser Arafat." 
 Ivanov also expressed concern about tensions in the region and urged international efforts to defuse them. 



TITLE: Busy Spring Session Ends at State Duma
AUTHOR: By Victoria Lavrentieva
PUBLISHER: Staff Writer
TEXT: MOSCOW - In a flurry of final readings, the State Duma on Monday wrapped up a spring session whose economic highlights included the approval of farmland sales, a new bankruptcy law and much-needed small business reform.
 
President Vladimir Putin met with leading lawmakers shortly after the Duma recessed at 2 p.m. for the summer and praised them for their &quot;colossal work.&quot; 
 Economic Development and Trade Minister German Gref said the bills approved in the session will fuel economic growth and attract new investment.
 In all, more than 30 economic bills were passed, many in the last few days. It has already become somewhat of a tradition for the Duma to extend its sessions for several working days, and this year was no exception. 
 But, with Russia gunning for a larger role on the world stage through the G-8 and the World Trade Organization, there never seems to be enough time to approve all the laws needed to push along reforms, lawmakers said.
 &quot;As a member of all the sessions of the modern-day Russian Duma, I can't remember one that could be compared to the latest in terms of the intensity of the work and the importance of the laws that were discussed,&quot; Oleg Morozov, head of the centrist Russia's Regions faction, told reporters on Friday.
 &quot;With so many bills and reforms being approved, we think that every session will be easier than the previous one. But in reality, it turns out to be quite the opposite,&quot; Morozov said.
 In its last day on Monday, the Duma approved in final readings the bill on bankruptcy and an initiative to simplify and cut the taxes of small and medium-sized businesses. 
 Following a government request, deputies abolished a one-percent turnover tax and did away with a one-percent road-fund tax, which applied to corporate revenues and is to be compensated for by new excise taxes on tobacco, alcohol, gasoline and luxury cars. 
 The bills will go to the Federation Council in the fall and, if approved, to Putin for his signature.
 Also Monday, the Duma tweaked the draft 2003 federal budget to allow the government to increase social spending on military service, regional salaries and the judicial system. As expected, the Duma also approved a government plan to buy the Central Bank's 99.5-percent stake in Vneshtorgbank for 42 billion rubles ($1.33 billion). 
 Lawmakers said the legislation passed this spring was crucial to the country's economic future.
 &quot;Not all of the legislation is for immediate action, but a lot of the bills will considerably change the lives of Russians in the longer term,&quot; Viktor Pleskachevsky, head of the Duma's property committee, said in a telephone interview on Monday.
 Putin said on Monday that the bill allowing the sale of farmland was the crowning achievement of the session, paving the way for the establishment of a land market in Russia for the first time since pre-revolutionary days.
 &quot;Of course there are still a lot of holes in this bill, and it won't be easy to build again the [land] culture that was lost so many years ago,&quot; Pleskachevsky said. &quot;But what is most important is that the bill finally sets the rules for the turnover of land.&quot; 
 The bill, which still needs to be approved by the Federation Council, is the logical next step to the Land Code, which was passed last fall and allows the sale of commercial, residential and dacha land. The bill regulates the use and sale of 406 million hectares of agriculture land throughout Russia. Foreigners are restricted to leases of up to 49 years. 
 Legislation that will help improve the investment climate and protect property rights included the tax breaks for small business, which were drawn up by the government and largely supported by the liberal Yabloko party, and the bankruptcy bill.
 &quot;The new bankruptcy law is one of the key macroeconomic acts that sets new mechanisms to protect the rights of private owners,&quot; Pleskachevsky said. 
 The former law was often used by creditors and competitors to initiate bankruptcy procedures and seize control of companies. 
 &quot;With the new law, which is expected to come into force in September, the rights of the owners, creditors and the government will be much better protected,&quot; Pleskachevsky said.
 The rights of minority shareholders received a boost with amendments that were passed to the law on joint-stock companies and the approval of a voluntary corporate-governance code.
 On the investment front, the Duma passed a production-sharing agreement for two oil and gas fields in the Caspian Sea in two readings. The PSA, which is being heavily lobbied for by the Union of Right Forces party, is to come up for a final reading in the fall.
 In March, the Duma passed a bill on compulsory auto insurance. Supporters of the measure hope it will bring the rule of law to the roads, but both insurers and car owners are waiting for the government to set insurance tariffs. The insurance law is to go into effect July 1, 2003.
 &quot;There were no evil intentions in some of the Duma delays,&quot; Pleskachevsky said. &quot;Quite the opposite - it was because of the huge importance of some bills that we needed more time to work on them,&quot; he said.
 Putin advised caution with regard to the pace of the Duma's work. &quot;Lawmakers working on these reforms have no room for any mistakes, because the price of a mistake is very high,&quot; Putin said, Interfax reported.
 He said top priorities for the fall session were the 2003 budget, the reform of the natural monopolies and pensions, further liberalization of the economy and cutting down on red tape. 
 The Duma reconvenes Sept. 11.

TITLE: New Data: More Small Businesses
AUTHOR: By Simon Ostrovsky
PUBLISHER: Staff Writer
TEXT: MOSCOW - The number of Russian small businesses is rising and could soon reach West European levels, according to a new report to be released Tuesday. 
 
Earlier data from the State Statistics Committee, indicating that small businesses were on the decline, is incorrect, said the report, authored by the European Commission, the Russian Anti-Monopoly Ministry and TACIS, the European Union's technical assistance program to the Commonwealth of Independent States.
 &quot;The [committee's] figures didn't include information on individual entrepreneurs, who make up the bulk of small business,&quot; said Igor Mikhalkin, director of the Russian Small and Medium-Sized Enterprise resource center. 
 &quot;The share of small enterprises is decreasing somewhat but, at the same time, 230,000 more individual entrepreneurs are being registered per year,&quot; he said, adding that previous reports also failed to take farming enterprises into account.
 &quot;You can see that there is a definite growth dynamic in this sector,&quot; Mikhalkin said.
 There were 843,000 small businesses, 262,000 farms and a staggering 4.5 million individual entrepreneurs at the beginning of 2001, the report said, or 37 small businesses per 1,000 people. There are 40 to 60 small businesses per 1,000 people in the European Union.
 Furthermore, a draft law on small businesses passed by the State Duma in its third reading Monday should boost the number of individual entrepreneurs, said Anatoly Melnichenko, head of the Tax Ministry's department for small business taxation.
 The law, which must pass through the Federation Council and be signed by the president, gives businesses with no more than 100 employees and a turnover of less than 15 million rubles ($477,000) per year a choice of paying 6 percent on revenues or 15 percent on profits.
 &quot;This will be much more convenient for [small businesses],&quot; Melnichenko said. &quot;The number of individual entrepreneurs will skyrocket.&quot;
 The report, however, warns that small business has not reached maturity and has yet to reach levels of efficiency comparable to European business. 
 Russian small business' contributions to gross domestic product and the federal and regional budgets are miniscule, the report says. 
 Small businesses account for only 8 percent to 10 percent of all the taxes paid in the country, Melnichenko said.
 &quot;But because of the appeal of the new taxes and the chance to get out of the shadows, we think the number of businesses paying taxes overall will increase and so will revenues,&quot; he said. 
 &quot;But we mainly want to make life easier for small businesses; and since their input into tax revenues is small anyway, we could afford to lower tax levels,&quot; Melnichenko said.
 The new report is the first of its kind in Russia and is meant to emulate the European Union research on small businesses.

TITLE: Euro Soars Against the Dollar
AUTHOR: By Victoria Lavrentieva
PUBLISHER: Staff Writer
TEXT: MOSCOW - With the euro surging to two-year highs against the U.S. dollar, the ruble and Central Bank reserves are sliding in value, and some panicky Russians are switching to the euro.
 
On the back of scandals swirling around U.S. giants WorldCom and Xerox Corp., the euro peaked at 0.999 to the dollar on Friday, its highest level against the U.S. currency since February 2000.
 A handful of banks, anticipating a further strengthening of the euro, started selling euros last week at rates equal to or higher than the dollar.
 &quot;The demand for euros has increased dramatically over the past several days,&quot; said a cashier at the EnergoSberBank currency exchange office, which has one of the highest rates for euros in Moscow, according to business-information service RosBusinessConsulting. EnergoSberBank was selling 1 euro for 31.9 rubles on Friday, while its dollar rate was set at 31.57 rubles.
 &quot;Demand is exceeding supply and Russian banks are having difficulties meeting it,&quot; the cashier said. &quot;As you might guess, people are making orders for quite significant amounts, as it is not a problem to change $100 for euros if you are going on vacation.&quot;
 At least six banks in Moscow - Bank Moskvy, Rossiisky Bank Razvitiya, Ogni Moskvy, Sovinkom, Sfinks Bank, Belekonombank, Fram and BFT - were buying euros at the same rate as the dollar Friday.
 The economy is traditionally linked to the dollar, as most of its exports are priced in dollars. The federal budget is based on the ruble-dollar rate, and most external debts are nominated in dollars. Eighty percent of the Central Bank's reserves are nominated in dollars, while euros account for 10 percent and the rest is in gold.
 At the same time, Europe has always been Russia's main trading partner, with food and clothes being among the major imports.
 &quot;In Russia's case, additional dollar weakness will mean, first of all, that the ruble will weaken against the euro while largely remaining unchanged against the dollar,&quot; said Philip Poole, head of emerging-markets research at ING Barings in London.
 &quot;In the longer term, this will make noncommodity exports from Russia more competitive in the EU market. At the same time, it will make imports sourced from the EU more expensive,&quot; he said. &quot;In this respect, over time we will probably see the shift in the Russian trade pattern from importing from the EU toward exporting to the EU.&quot;
 Additionally, a limited valuation effect will hurt the country's debt-GDP ratio. &quot;Russia does not have a lot of euro-denominated debt,&quot; Poole said.
 But while the macroeconomic effect of the dollar-euro battle for Russia will only be seen in the longer term, the Central Bank and ordinary people are already losing money.
 Presidential adviser Andrei Illarionov said recently that the value of the Central Bank's reserves has shrunk by about $2.5 billion because of the rise in the euro's value.
 According to some estimates, a 10-percent increase in the euro rate against the ruble means a $5 billion to $6 billion decline in Russia's trade balance. The euro has strengthened about 10 percent against the ruble since the beginning of the year.
 Alexander Kolochenko, head of consumer banking with Raiffeisenbank Austria, said that last week his bank was issuing an equal number of cards on euro accounts as on dollar accounts, while at the beginning of the year euro cards accounted for only 5 percent of the total.
 &quot;Also, many clients are coming and converting their dollar deposits into euros, even though they are losing on interest rates,&quot; he said.
 Roger Delous, head of the St. Petersburg branch of Raiffeisenbank, said that the same trends could also be observed in St. Petersburg. &quot;Personally, I think that we're witnessing a fall in the dollar, rather than a rise in euro. The dollar is also falling against other currencies, such as the yen and the Swiss franc, and this is more of a cyclical trend,&quot; he said.
 &quot;Russians are prone to panic,&quot; said Mikhail Matovnikov, deputy director general of the Interfax Rating Agency. &quot;But in the short term, the euro is still less attractive as a means of savings than the U.S. dollar and, although it sounds unbelievable, ruble deposits are the most attractive instrument of them all these days.&quot;
 But spreads on euro/ruble exchange rates remain very high at about 0.5 rubles, compared to 0.01 to 0.05 rubels for the dollar, as a result of high transaction costs, low liquidity and considerable currency risk, he said, adding that where the euro will end up is anybody's guess.
 &quot;Two months ago, no one would have expected the euro to reach parity with the dollar and, likewise, no one today can say what will happen in two months,&quot; Matovnikov said.

TITLE: Minority Shareholders Up Stakes at UES
AUTHOR: By Alla Startseva
PUBLISHER: Staff Writer
TEXT: KONAKOVO, Tver Region - Minority UES shareholders increased their number of board seats from one to two at the power monopoly's annual shareholders meeting Friday, a move that analysts said boded well for the company's looming reform.
 
The shareholders meeting also approved controversial changes to the company charter that have sent UES share prices tumbling in recent weeks. Unified Energy Systems CEO Anatoly Chubais said an extraordinary shareholders meeting may be called to reconsider the changes.
 Minority shareholders elected to the board Alexander Branis, the director of the Prosperity Capital Management investment company, and David Hern, the manager of the Brunswick Capital Management fund.
 Hern kept his seat on the 15-member board by a narrow vote of 2.56 percent, just above the minimum of 2.5 percent.
 Branis unexpectedly won a strong 8.23 percent, with only Chubais (9.32 percent), the head of the presidential administration Alexander Voloshin (8.89 percent), Economic Development and Trade Minister German Gref (8.46 percent) and Finance Minister Alexei Kudrin (8.36 percent) getting more votes.
 &quot;I carried out a rather large campaign among the foreign shareholders,&quot; Branis said after the results of the vote were announced. &quot;This is a vote of support to my stance, which has - it's no secret - often not been in line with the UES management's point of view.&quot;
 Analysts said having two representatives for minority shareholders was good news for the market, as it would boost their influence over the new board.
 &quot;This year's board of directors is the most balanced that UES has ever had,&quot; said Kaha Kiknavelidze of Troika Dialog. &quot;The voice of minority shareholders will be louder now.&quot;
 Approval of the modified charter had been another key issue at the shareholders meeting. Some minority shareholders and analysts said the changes could limit the board's authority and weaken its role disposing shares in subsidiaries and dependent companies.
 UES shares have dropped to their lowest in eight months in the past two weeks over investor jitters that the new charter would be approved. Minority investors wanted to make sure that the board has the power to rein in UES management as the company undergoes a restructuring to split UES into generating, transmitting and supplying companies.
 Chubais and Voloshin, who was re-elected UES board chairperson, said an extraordinary shareholders meeting may be called to discuss the charter. &quot;We could think up a set of amendments that would give the shareholders more control over management,&quot; Chubais said. &quot;I think it would be appropriate to deliberate on a package of amendments.&quot;
 Chubais said UES would by September prepare the 3+3 document explaining the details of its restructuring and future ownership.
 Branis, who obtained a draft of the document, said: &quot;It is horrible.&quot;
 He said the plan calls for the sale of six of UES's 10 wholesale-generation companies to foreign investors and the sell-off of the most dilapidated power plants. &quot;Minority shareholders will not get a thing from it,&quot; he said.

TITLE: Reforming Sberbank's 'Unnatural' Monopoly
AUTHOR: By Alexei Zabotkine
TEXT: THE restructuring of the natural monopolies, such as Gazprom, is without doubt one of the key items on the government's structural-reform agenda. While reform of the banking system is also widely recognized as a crucial task, any revision of the role of the state-controlled savings bank Sberbank - an &quot;unnatural monopoly&quot; in the banking sector - is often seen as being of secondary importance at best. But is this justified?
 
Only in part. From the point of view of both the state as the main shareholder and other shareholders there are huge advantages in maintaining the status quo. However, the current situation is both hampering the development of the banking sector and the maximization of Sberbank's market capitalization.
 The state controls Sberbank via the Central Bank, which holds almost two-thirds of voting shares in the bank.
 Leaving aside the obvious inadequacies of a situation in which Sberbank's main shareholder is also the banking system's regulator, I will focus on two questions: Why does the state need Sberbank in its present guise, and to what extent is its quasi-monopoly position in keeping with the medium-term economic-policy goals of the Russian authorities?
 The answer to the first question is pretty clear. First, it is the only bank with a national branch network. Sberbank's outlets - which number almost 20,000 - provide access to banking services for broad sections of the population.
 Second, the state guarantee on Sberbank deposits protects the savings of the neediest sections of the population. Moreover, the state provides hidden subsidies to certain sections of the population via a system of &quot;socially important&quot; Sberbank pension deposits, on which higher interest rates are paid than on other types of deposits.
 Third, Sberbank - due to its size and position in the banking system - is an important tool for the Central Bank in implementing monetary policy. Therefore, the state has solid reasons for wanting to maintain the status quo at Sberbank.
 However, Sberbank is itself an extremely serious obstacle to the development of private banks. The state-backed guarantee on Sberbank retail deposits forces private banks to offer higher interest rates in order to compete.
 If the government and the Central Bank really are committed to establishing a competitive banking system, they will have to decide what to do with Sberbank.
 In practice, things are somewhat less straightforward. Sberbank's key strengths, on which its market-leading position rests, are the state-backed deposit guarantee and its extensive branch network. These competitive advantages, however, come at a price - in particular, implicit social obligations such as maintaining unprofitable branches and outlets and providing special rates for &quot;socially important&quot; deposits. 
 Is this a fair price to pay? Sberbank's market capitalization is roughly equal to its equity capital. Compared to its East European peers, former state savings banks such as OTP (Hungary), and Komercni Banka (Czech Republic), their capitalization is between two and 2 1/2 times higher than their equity capital. The market prices Sberbank lower than its East European counterparts, suggesting that investors believe the minuses of state control are not compensated by the advantages the state provides.
 So, how to resolve the problem?
 The gradual strengthening of private banks, with the possible abolition of the state-backed deposit guarantee in 2005, and a gradual privatization of Sberbank between 2006 and 2010, - the &quot;working option&quot; adopted by the government and the Central Bank - is pretty much indefensible. This is a Russian-style strategy of hoping that things will just sort themselves out.
 However, in this case, it makes economic sense to spin the &quot;social obligations,&quot; the portfolio of government securities and that part of Sberbank's credit portfolio which is de facto directed by the state (natural monopolies, etc.) into a separate 100-percent state-owned institution guaranteed by the state.
 Without the state guarantee, Sberbank itself would have to compete with other banks on a level playing field. 
 Unfortunately, this option is unlikely to be considered seriously. An efficient banking sector remains too distant a goal compared to the very tangible financial might of Sberbank in its current guise.
 However, in a few years the absence of an efficient banking sector could pose a real obstacle to achieving economic growth rates of between 5 percent and 6 percent, about which there has been so much discussion of late.
 So, in reality, resolving the &quot;Sberbank problem&quot; cannot be put off for very much longer.
 
 <i>
Alexei Zabotkine is the chief economist of United Financial Group. This comment first appeared in Vedomosti. </i>

TITLE: Putting Brakes on the Private Sector
AUTHOR: By Kevin Phillips
TEXT: THE lurid 2002 portrait of the U.S. economy as a bunch of Enrons and Tycos, overpaid CEOs running corporations like casinos, electronic speculators, predatory hedge funds, fraudulent stock values, deceptive investment firms and collusive accountants didn't develop overnight. Unfortunately, while some of the excesses may shrink, they are not likely to fade away.
 
That's because much of the &quot;financialization&quot; that occurred in the 1980s and 1990s has been built into the system, save for the possible purgative of a market crash. The most visible evidence of this - the mushrooming of CEO compensation and the private sector's &quot;imperial corporate presidency&quot; - ironically parallels the dangerous growth and hubris of the governmental &quot;imperial presidency&quot; in the 1960s and early 1970s in the United States. 
 Over the past 20 years, the U.S. economy has been reoriented from making, growing, building and transporting things to moving, massaging and manipulating money and securities. So great has this transformation been that, by the mid-1990s, the finance, insurance and real estate (FIRE) sector had raced ahead of manufacturing in gross-domestic-product and national-income numbers. 
 During the 1920s, under the spell of a soaring stock market, the United States underwent some kindred changes. Market volume ballooned; mutual funds sprang into being; consumer loans caught on and debt surged. Americans were mesmerized by ticker tapes. However, during the three years after the bubble burst in 1929, stocks fell so low, so many banks failed and so much business and financial dirty laundry came into view that Americans soured on corporations, banks and stocks. 
 The shenanigans played by Enron, Arthur Andersen and a number of major banks and investment firms, with corporate names being added each week, resemble the financial and corporate dirty laundry exposed from 1930 to 1933. Toward the end of manic booms, frauds and swindles run rampant.
 Consider two barometers. Between 1919 and 1929, the volume of stocks traded increased eightfold, and the amount of money in mutual funds climbed from a few million to $8.5 billion. Between 1980 and 2000, by contrast, the volume of stocks traded on the major exchanges increased by roughly 50 times, and mutual-fund assets soared from $135 billion to $7.8 trillion. 
 As the financial sector, in short, became too important to fail, the Fed and the Treasury abandoned market economics to embrace socialization of credit risk. No other sector of the U.S. economy, save possibly defense, received such governmental assistance. 
 All this had a frenetic effect on corporate executives determined to share in the feast. In the 1980s and 1990s, top executives gave many U.S. corporations a financial tuneup. Some, like American Can and General Electric, became financial companies in whole or in part. Others recalibrated corporate success in financial terms - quarterly profits, stock options, creative accounting, currency arbitrage and derivatives trading, employee and benefits reduction - to raise the company's stock price and give senior management a seat at capitalism's high table.
 This corporate reorientation fed the stock market's rise, which, in turn, fed the buccaneering chief executives. Business Week magazine, which annually charts top-executive compensation in the U.S., found that between 1981 and 2000 the average package of the 10 highest-compensated U.S. executives had rocketed from $3.45 million to $155 million.
 What we have seen over the last two decades is the swelling arrogance, hubris and excess of the private sector, led by Wall Street's &quot;masters of the universe&quot; and the executive-suite monarchs of the imperial corporate presidency. But reform won't be easy, given that the overall finance (FIRE) sector is Washington's biggest spending lobby and No.1 writer of checks to politicians.
 It's possible that the NASDAQ crash, topped by Enron and the rest of the frauds and swindles, may become the private-sector equivalent of Watergate, especially if more market declines are ahead. Public demand for regulatory and legislative reform, although considerable, still falls short of the crisis level needed to overcome the Washington lobbies and big political donors.
 Nevertheless, a deeper market crisis could come if growing public suspicion of financial and regulatory integrity makes it impossible to sustain today's high price-earnings ratios. Despite the collapse of the NASDAQ, price-earning ratios, overall, remain at boom-period highs. 
 None of this is a given, and it's hard to know what odds to assign. Even so, the history of the leading world economic powers before the United States does underscore the danger. In their later stages, both Holland and Britain were rapidly financializing and losing commitment to their old &quot;real-economy&quot; livelihoods. For several decades, the financialization appeared to succeed, although the polarization between the rich and everyone else rapidly widened in the two countries. However, at a certain point, usually involving wartime stress, each nation's debt structure and global network of finance, communications and commercial services become vulnerable. Starting a war with Iraq - on top of anti-terrorist mobilization - could become a U.S. equivalent.
 But if these latter aspects are conjecture, the rapid onset of the financialization of the U.S. economy in the 1980s and 1990s is not. The Sept. 11 terrorists struck at finance - the World Trade Center - not at industry or agriculture. There is more that is new about the United States of the 21st century than many Americans realize.
 
 <i>
Keven Phillips is the author of the &quot;Wealth and Democracy: A Political History of the American Rich.'' He contributed this comment to the Los Angeles Times. </i>

TITLE: Executive Vertical Loses Out When 'Robin Hood' is Freed
TEXT: TWO weeks ago, Meshchansky district court handed down to Anatoly Bykov, the former head of Krasnoyarsk Aluminum Plant, or KrAZ, a 6 1/2-year suspended sentence for plotting the murder of his former business associate, Vilor Struganov.
 
Bykov's star started to rise in 1993 when Krasnoyarsk's organized crime bosses, with names like Lyapa, Tolmach and Siniy, started dropping like flies. (Subsequently, the Sayanovsk criminal authority Tatarenkov would accuse Bykov of having them bumped off.)
 Then Bykov appeared at KrAZ and started to work with TransWorld Group. However, not long after TWG tried to rip Bykov off by not paying for shares which had been purchased on the group's behalf, and in response, Bykov struck TWG off the KrAZ shareholder register.
 Bykov then became a hero in Krasnoyarsk. A Robin Hood figure, protecting the region from the omnipotent Moscow oligarchs. The locals worshiped Bykov and a couple of Moscow &quot;sheriffs&quot; ending up in body bags was never going to damage Bykov's reputation.
 Bykov reached the pinnacle of his success in 1997, becoming chairperson of KrAZ's board of directors. He controlled almost all the major enterprises in the region and was fighting with Anatoly Chubais for control of the Krasnoyarsk hydroelectric-power station. This was when Chubais started to talk openly of certain bandits who were trying to put the squeeze on Unified Energy Systems.
 Bykov got himself elected to the regional legislative assembly and then became the main sponsor of Alexander Lebed's gubernatorial campaign. However, after Lebed's election, it soon became apparent that there was not enough room in the region for both of them. Bykov declared war on Lebed.
 A parallel system of government emerged in the region. While KrAZ did not pay its taxes in full, Bykov became a major local benefactor, setting up orphanages and handing out stipends. The Lebed administration started to feel its own impotence, while the public surgeries established by Deputy Bykov resolved all citizens' problems, including wives' complaints about drunken husbands.
 Bykov could have got the upper hand in his tussle with the governor had it not been for a more formidable foe - Siberian Aluminum Group - entering the fray. In 1999, Oleg Deripaska, an old enemy of Bykov, unleashed a third aluminum war. The targets of the SibAl onslaught were three plants: KrAZ, Bratsk and Novokuznetsk. The main blows were delivered through arbitration courts and a raw-material blockade. Deripaska blocked the supply of aluminum to the plants and, with Chubais' help, started to bankrupt them for energy debts.
 While most of the owners were bought out, Mikhail Zhivilo and Bykov refused to compromise. Zhivilo ended up in exile in France, and Bykov ended up in Lefortovo prison.
 Bykov now considers Deripaska to be his main enemy, and now he is at large. It would seem that politics played a large role in the court's decision or, to be more precise, the ongoing battle between the &quot;old&quot; oligarchs and the St. Petersburg chekists. The former have money, while the latter control the courts. Deripaska, who is detested by the chekists, seized KrAz from Bykov. Up to now, Bykov's enemies have not gone bust or ended up behind bars; they have been dispatched straight to the morgue.
 Just one question though: The chekists are trying to take the oligarchs in hand in the context of strengthening the &quot;executive power vertical.&quot; But is not the release of Bykov really a rather strange way to go about strengthening the executive vertical?
 
 <i>
Yulia Latynina is a journalist with ORT and a columnist for Novaya Gazeta. </i>

TITLE: A Court Follows Orders
AUTHOR: By Boris Kagarlitsky
TEXT: A MILITARY court last week acquitted six officers accused of the murder of journalist Dmitry Kholodov. This fact in itself was exceptional, because Russian courts rarely acquit anyone at all.
 
Rare is the Russian who truly believes in the judicial system. The courts have too often been used as a tool by the state. The phrase &quot;independent judiciary&quot; carries no meaning whatsoever. 
 For this reason I want to emphasize that the Kholodov verdict was unjust. The court caved in to pressure from the top brass.
 All of the defendants, on the other hand, asserted that they had been pressured themselves. To a man they disavowed their official statements made during the investigation. And each maintained his innocence.
 We all know how our investigators operate. Forcing testimony from suspects is par for the course. The planting of evidence comes as no surprise. There's no good reason to trust the courts, and even less reason to trust the investigators.
 So, whom are we to believe? The independent press? In this case the press split from the very beginning into two camps - those who knew for certain that the accused were guilty, and those who called for their acquittal just as vigorously. No arguments or facts could sway either side.
 It was clear to the liberal-minded public that the officers were guilty because they were in uniform. The military is full of murderers and criminals by definition.
 The failure of the investigation was the result of maneuvering by the military lobby and intrigue by the enemies of democracy. In short, the officers should be sent up the river whether they killed Kholodov or not.
 Our dyed-in-the-wool patriots think the officers involved are fine and upstanding people simply because they wear caps emblazoned with the double-headed eagle and stars. Even if they happened to kill someone, it's not that big a deal. Any attempt to bring a military officer to justice is nothing less than a threat to Russia's military preparedness. And anyone who talks about such a thing is obviously a spy.
 Guilty or not, in other words, they had to walk.
 Dozens of journalists have died in the last few years. Their killers have not been found. Not that anyone ever really tried to hunt them down. But the Kholodov case was something different. 
 His death acquired political significance because he worked for a mass-market newspaper with a huge circulation. His death was not like other deaths. It was played out on the front page. The Moskovsky Komsomolets newspaper wanted blood. And as the scandal grew, so did sales of the paper. This was to be expected, of course. Professional instinct drove the paper to fuel the drama.
 Television went about its work with the same level of professionalism. Savik Shuster hosts a talk show on NTV television called &quot;Svoboda Slova,&quot; or Freedom of Speech, on which he gave air time to just about anyone - the acquitted colonel, Pavel Popovskikh, the lawyers, the prosecutors, the journalists. A specially selected focus group weighed in with its opinion on various issues.
 The prosecutor explained that the ranks of criminal investigators are filled with greenhorns who could never frighten a battle-hardened officer. Popovskikh declined to repeat what he had said to investigators during questioning. He wasn't afraid, just ashamed. Of what? That he got scared and incriminated himself while sitting behind bars? Or because he was lying now?
 Groups of supporters applauded or booed behind the speakers' backs. Passions ran high. The cost of advertising time during the show soared. And no one came across as credible.
 While the trial was in progress, the press was not allowed into the courtroom. The public had no information about the proceedings, and no way to form its own opinion. After the conclusion of the trial a wave of fact and conjecture, proof and obfuscation, crashed over us. None of this enhanced our understanding of what had happened, however. Instead, it muddied the waters forever.
 In essence the question is no longer who did the killing. That sort of question really only interests aficionados of the detective novel. The acquitted soldiers more than likely know whether or not they killed anyone, of course. But we have no way of knowing if they're telling the truth. The remaining players in this drama are concerned with other things entirely. 
 All of the parties involved are taking care of their own business, fighting their own foes and rivals, and mobilizing their own supporters. The dead journalist and the soldiers standing trial are actually of secondary importance. They're not the real issue.
 Guilt and innocence are turning into abstract notions that can be hurled at the other side. Objective investigation of the case has become not only impossible, but unthinkable. One could, of course, get to the bottom of it. But for that to happen there would have to be at least one person involved in the drama who wanted to get to the bottom of it. Not to convict or acquit, but to reveal the truth.
 You'll find no one like that here. This isn't that kind of play.
 RTR is wasting its time showing Agatha Christie's Hercule Poirot mysteries. He would find no role to play in our political theater. 
 If Popovskikh were a lucky man he would have joined the military elite by now, rather than ending up with a ruined career and a tarnished reputation. If Dmitry Kholodov had been a lucky man, he would still be alive today.
 But in our theater there are no happy endings.
 
 <i>Boris Kagarlitsky, a regular columnist for The St. Petersburg Times, is a Moscow-based sociologist. </i>

TITLE: A Long Way Left To Go From Here
TEXT: THE long-awaited coming into force on Monday of two documents - the new Criminal Procedure Code and the new Administrative Violations Code - is being touted by the Russian government as a major step toward turning the country into one governed by law, or, if you prefer, into President Putin's much-cited &quot;dictatorship of law.&quot;
 
While the written intent of the two codes - the attempt to establish more firmly concepts like the presumption of innocence and judicial independence, and to eliminate those such as double-jeopardy - is surely laudable, it is clear that the government's work is still in its early stages.
 The sad fact is that, in Russia, documents of this type are often of little value. One reason they are of little value is that those responsible for enforcing them have shown little interest in doing so. To make matters worse, because there is little faith on the part of the public that these rules will have effect, very little is done in the way of pressing the authorities to see that they do.
 One needs only look as far as constitutional guarantees of freedom of movement, or at Russian laws spelling out the concept of pedestrian right of way to get the point. The survival of registration requirements for anyone (Russian citizens and foreigners alike) in order to live in major population centers and the regular sight of frightened pedestrians scrambling, while crossing on a green light to get out of the way of speeding automobiles, are enough to call into question whether the government or the people here will take the new measures seriously enough for either of them to have any real effect.
 That Russian traffic cops will simply stop asking for bribes, in the absence of any serious attempts to root out and punish this behavior, seems to be as unlikely as drivers ceasing to offer them, unless the cops themselves decide to crack down on this. You can see the problem.
 The government now has to show that it is serious about making sure that these rules are observed - including coming forward with the money to make sure that they have a chance. At the same time, it must do what it can to send out the message to people that they should expect these rules to be enforced and to demand their protection.
 Effective laws aren't guaranteed by their existence on paper, but by the commitment in the minds of the people who are there to enforce and be governed by them.
 It's taken the government a few years to finally get these new measures passed.
 But their work has only just begun.

TITLE: Moscow Riots Should Be A Wake-Up Call
TEXT: &quot;Their relatives carried them back from a field the soldiers had occupied at the edge of the village: a man whose eye was gouged out; another whose fingers were cut off; a third whose back had been sliced in rows with the sharp edge of broken glass, then doused with alcohol and set afire.&quot; 
 </i>- The Washington Post, June 29, <br> reporting on the mid-May &quot;cleansing&quot; of a Chechen village by Russian soldiers.
 

 WE long ago passed the point where Vladimir Putin qualified as a war criminal. He'll certainly make the history books as one. Just consider that General Pinochet is reviled for having either &quot;disappeared&quot; or killed 3,000 people over a 17-year reign - while Putin's regime has already &quot;disappeared&quot; 2,000 people, in just under three years.
 
But now, as vandals and thugs rampage ever bolder through Moscow, we are approaching the point where the war in distant Chechnya comes home. Eight thousand lunatics have destroyed cars and stores in the heart of the capital, savagely beaten passers-by - beaten people to death. That was a pretty blunt message. Did anyone understand it?
 There is an ethnic-cleansing campaign under way in Russia. It's carried out by a mix of volunteers (contract soldiers) and miserable conscripts.
 Once &quot;in country,&quot; <i>kontraktniki </i>and conscripts together are, of course, killing enemy combatants and themselves taking casualties (10,000 Russian soldiers dead and 25,000 injured on Putin's watch, says the Committee of Soldiers' Mothers). But the soldiers are also running torture camps. There is no military or moral or legal justification for these camps - they are not helping to ferret out Chechen rebel secrets.
 They are not even intended to do that. They are about letting the sickest of minds in the Russian military run wild.
 A conscript's term is for two years. So, for an idea of who's on the streets of Moscow or St. Petersburg today, think about what was happening two years ago in the army. We know, from extensive testimony of victims, that, in 2000, civilians in Chechnya were being arbitrarily detained and taken to &quot;filtration camps&quot; - to &quot;filter out&quot; the rebels hiding among the innocents. At remand prisons in Stavropol and Pyatigorsk men and women were raped. Sodomized with sticks. Forced to strip naked and dance for the guards. Stacked on top of each other like kindling wood. Forced to crawl across rooms with guards on their backs, and beaten for crawling too slowly. Tear-gassed. Electro-shocked. Killed.
 It continues today. The Putin regime has done nothing to stop it, and everything to continue it.
 So what do you think happens when you rip tens of thousands of young boys from their homes; teach them to arbitrarily select frightened people from crowds; to put these frightened people into pits dug in the ground, or make them perform oral sex, or stomp on their testicles; and then demobilize them back home and abandon them?
 I suspect the World Cup riots are just the beginning of the whirlwind Russia is about to reap.
 
 <i>Matt Bivens, a former editor of The St. Petersburg Times, is a fellow with the Nation Institute [www.thenation.com]. </i>

TITLE: Global eye
TEXT: <b>Jungle Fever</b>
&quot;War.&quot; A potent, pliable word. Under the rubric of &quot;war&quot; - which implies dire emergency, imminent threat, the abandonment of normal life and the normal rule of law - there is no limit to the moral erosion that can occur. The previously unthinkable becomes routine practice: For example, a respectable democracy funding mercenary armies and terrorist forces in foreign countries, like the jihadists in Afghanistan, the Contras in Nicaragua - and now the Expeditionary Task Force, or ETF, in Bolivia.
 
There, the Bush regime is paying - lock, stock and barrel - for a band of local mercenaries taking part in Bolivia's campaign to eradicate coca production in the jungle region of Chapare, The Washington Post reported last week.
 The mercenaries are attached to regular army units, so they are not, officially, &quot;paramilitaries.&quot; But the many human-rights charges they've spawned - murders, beatings, rapes, torture, illegal detentions - sound like that old sweet song of yesteryear, when Reagan-Bush proxy armies prowled the Latin American night, killing tens of thousands of innocent people to keep Yankee investments and American-backed elites safe from riff-raff.
 The coca plant has been cultivated in Chapare since time immemorial, used as a healing medicine and pain reliever. In the second half of the 20th century, the sale and manufacture of its powerful derivative, cocaine (along with various opium derivatives), were taken up by organized crime and its allies in the Western security services as a high-yield money-maker. The mob used the profits to buy political influence and augment its already-considerable infiltration into the &quot;legitimate&quot; business world; elements in the security agencies used the money to fund various covert and terrorist operations.
 The highly addictive nature of the coca derivative guaranteed unimaginable profits when the full flood of the cocaine trade broke upon the lucrative American market. As in so many cases, a &quot;blowback&quot; then occurred. With so much money in play, previously acquiescent co-conspirators, like Panama's Manuel Noriega, got uppity and had to be crushed, while innumerable rogue operators muscled in on the action. Whole countries were upended by warring drug lords who passed in and out of official favor as the political winds shifted in Washington and other capitals.
 Having lost control of the profits from the drug trade - and having unleashed a social devastation on the American population that even the most cynical CIA player could not have foreseen - Washington then launched the &quot;war on drugs.&quot; This has proven every bit as profitable as the drug-running itself - perhaps even more so, as corrupt officials now can play both sides, drawing huge amounts of tax dollars for the &quot;war effort&quot; while also raking in bribes from favored crime bosses to keep the trade thriving.
 In short, the insane attempt to criminalize - rather than regulate - the perhaps regrettable but clearly ineradicable human desire to escape reality on occasion has led to a vast, pervasive corruption - of governments, societies, cultures, institutions - unprecedented in history. From Al Capone to al-Qaida, outlaw enterprises have entwined with state power to feed on this pool of illicit profit and blight the lives of millions.
 And now the &quot;war on drugs&quot; is merging with the &quot;war on terror,&quot; with a corresponding growth in scale and firepower, offering excellent potential for long-term profits for the &quot;defense&quot;-related industries that hold such a disproportionate sway in international politics. This merging also accelerates the moral corrosion that flourishes under the acidic metaphor of &quot;war&quot; - as we can see in Bolivia.
 When it was first foisted upon on a supine Bolivian government 18 months ago, the ETF kept a low profile. But, in the new dispensation after Sept. 11, they have, as one Bolivian officer puts it, &quot;gotten out of hand.&quot; The ETF is now under investigation for allegedly killing an unarmed union leader during a protest by local farmers in January. Bolivia's official human-rights ombudsman has logged charges of four other ETF murders and more than 50 instances of torture and theft since the Sept. 11 empowerment.
 To please their overlords in Washington, the Bolivian government has forbidden the farmers of Chapare to ply their ancient trade. When it banned coca cultivation, the government promised economic aid to help farmers switch to alternate crops and gain access to international markets for their new products. But little of this aid has been forthcoming, and now the 40,000 indigenous families of Chapare face ruin and starvation, the region's Roman Catholic officials say.
 So the farmers try to grow coca again - and they are burnt out by the ETF. They protest their lack of access to markets for legal crops - and they are shot dead by the ETF. Every bullet the mercenaries fire into the body of a farmer is paid for by the Bush administration. But the pious Pilates in Washington deny all responsibility.
 &quot;We don't believe them, the human rights allegations,&quot; a Bush spokesperson said, even after a videotape of the January murder was produced. And anyway, Washington has contracted with a private company to pass its blood money to the mercenaries: This Enron-like accounting trick means the U.S. has no &quot;official responsibility&quot; for any of the ETF's actions, the Bush regime claims.
 But some Bolivians disagree. &quot;These are soldiers with no clearly defined loyalties, and a foreign power is funding them to run around our country with guns,&quot; said Juan Quintana, an official with the Bolivian Defense Ministry. &quot;The existence of this force is a violation of the Bolivian constitution.&quot;
 Ah, Juan, you just don't understand - this is &quot;war.&quot; Anything is possible.


TITLE: Koreas Trade Deadly Fire Over Yellow Sea
PUBLISHER: Combined Reports
TEXT: SEOUL - South Korea and the United States agreed on Monday to increase military surveillance of North Korea and strengthen rules of engagement after Saturday's bloody naval clash between the two Koreas, the South's defense ministry said.
 
The shootout in the Yellow Sea on Saturday reflects North Korea's irritation with a border set by the United Nations almost half a century ago that prevents the North's ships from entering valuable fishing waters. 
 In the latest altercation, four South Koreans died when, according to South Korea, two North Korean patrol boats crossed over the disputed border, ignored signals to turn back, and fired on South Korean boats that were protecting fishing vessels. 
 On Monday, South Korea estimated that North Korea had suffered about 30 casualties.
 Thousands of fishermen from both countries count on the waters for their livelihoods and, in the case of North Korea, for helping to feed a populace that desperately needs food.
 The North contends that the line is arbitrary and invalid. Indeed, according to a spokesperson for the United Nations Command, the North said it would not discuss Saturday's shootout until it could first talk about abolishing the line in the sea.
 South Korean Defense Minister Kim Dong-shin met the commander-in-chief of U.S. forces, General Leon LaPorte, on Monday afternoon and asked for his cooperation in revising military rules to minimize casualties and damage sustained in any fighting with North Korea, a defense ministry spokesperson said.
 LaPorte is also chief of combined South Korean-U.S. forces.
 &quot;They discussed ways to streamline the process of firing at the enemy, when we're threatened seriously,'' the spokesperson said.
 Under existing rules, the South Korean navy has to go through a five-phase process to fire at an enemy, and is not supposed to begin firing unless attacked, the spokesperson said.
 U.S. forces will step up monitoring of North Korea, LaPorte told Kim. They are likely to send more patrol planes near the Demilitarized Zone (DMZ) bisecting the Korean peninsular, to catch North Korea's moves in advance, the spokesperson said.
 The United States has 37,000 troops stationed in South Korea to help deter North Korea from repeating the 1950 invasion that started the three-year Korean War.
 Separately, U.S. military officials are liaising with South and North Korean officials to set up a special general-level meeting on the incident at Panmunjom truce village in the DMZ.
 It is not yet clear when or if that meeting will be held.
 The United States has condemned the naval clash as a provocation by the North, and a senior U.S. official said Washington might delay sending a proposed delegation to North Korea for talks.
 The meeting between key officials of the two allies took place as South Korean President Kim Dae-jung met Japanese Prime Minister Junichiro Koizumi in Japan to discuss the incident. 
 President Kim, who won a Nobel Peace Prize for his efforts to reconcile with North Korea, told Koizumi he would press ahead with his &quot;Sunshine Policy&quot; of engaging the Communist North, despite the deadly naval clash, Japanese officials said.
 &quot;We will maintain our engagement policy,'' a Japanese official quoted Kim as saying. Koizumi voiced full support for Kim's engagement policy toward the North, the official said.
 President Kim, was expected to return to Seoul on Tuesday and address his people by television about the incident.
 After heart-rending military funerals for the victims of the clash were held in South Korea on Monday, Seoul's Unification Minister also said the South would continue to pursue dialogue with the North and inter-Korean economic exchanges.
 &quot;The inter-Korean relations are likely to be strained after the incident, but I don't think that will last long,'' a ministry spokesperson quoted minister Jeong Se-hyun as saying at a meeting with ruling party officials.
 The sea battle was a reminder that the peninsula remains a potential flashpoint half a century after the Korean War of 1950 to 1953 ended in a truce, and not with a peace treaty.
 Japan, whose own efforts to normalize strained ties with communist Pyongyang have stalled of late, has beefed up its air-defense patrols and called for peace on the peninsula.
 
 <i>(Reuters, NYT) </i>

TITLE: New Bolivia Congress To Choose President
PUBLISHER: The Associated Press
TEXT: LA PAZ, Bolivia - Impatient with an economic crisis and social woes, many Bolivian voters turned away from traditional candidates in elections for president and congress, picking a fragmented group that some analysts said could leave the country more unstable.
 
Election officials were expected to announce partial official results Monday from the vote the day before, but exit polls and a media count showed two presidential candidates within 1 percentage point of each other - meaning the new congress will have to decide the victor.
 In order to be picked by congress, either candidate - whether multimillionaire Gonzalo Sanchez de Lozada or longtime Cochabamba Mayor Manfred Reyes Villa - will have to negotiate with supporters of other candidates, among them radical newcomers proposing overturning the country's free-market economy and ejecting those responsible for its continued existence.
 Such newcomers captured the attention of Bolivians fed up with the status quo and will now be working alongside traditional politicians in congress.
 How the new government deals with that challenge will determine the future state of democracy in Bolivia, said Elizabeth Spehar, chief of the Organization of American States' mission overseeing the elections.
 &quot;Bolivia is certainly at a very important crossroads,'' she said. &quot;We're going to see some new forces, and what kind of interplay they have in congress will decide how well they will be able to govern the country.''
 Media projections, based on unofficial results from 93 percent of the votes, gave Sanchez de Lozada the lead with 21.7 percent of the vote and Reyes Villa 20.2 percent.
 But because Bolivia's constitution requires a majority support for an outright victory, the president will be chosen by the new Congress. While partial official results were expected on Monday, legally officials have three weeks to tally all the votes.
 The big surprise of the day was the third-place candidate, Evo Morales. After surging from 4 percent to 12 percent in pre-election polls, Morales, an Aymara Indian who is the controversial leader of Bolivia's coca farmers, received 17.9 percent of the vote, according to the unofficial numbers.
 &quot;These results show that the people really wanted a change,'' said political analyst Jose Luis Scotto.
 Morales has already stated that members of his party, Movement Toward Socialism, will not form coalitions with either Sanchez de Lozada or Reyes Villa, already paving the road for conflicts in Congress.
 Morales has reached out to voters who are disillusioned with traditional politicians and fed up with 20 years of democracy that they feel has given them little. At least six of every 10 Bolivians live in poverty-in rural areas the figure is nine out of 10. Violent crime, including bank robberies, kidnappings and bombings, are on the rise in a country once known for its tranquility.
 Morales, who was expelled from congress last year on accusations of inciting violence, has also gathered support on his left-wing promises to overturn the country's free-market economy and eject what he terms &quot;imperialist Yankees.''
 Sanchez de Lozada, known by his nickname &quot;Goni,'' was seen by many voters as the safest choice in this election. In his campaign he promised to create more jobs, fight corruption, and improve upon the current free-market system in Bolivia. President from 1993 to 1997, Goni is responsible for much of Bolivia's capitalization.
 &quot;We aren't big winners, but we're the winners,'' said Goni, after the media declared him the victor.
 Almost every other candidate besides Goni called for either dismantling or revamping the neoliberal economic model.

TITLE: U.S. Demands Immunity as War-Crimes Tribunal Opens
PUBLISHER: The Associated Press
TEXT: UNITED NATIONS - The world's first permanent war-crimes tribunal officially came into existence Monday, hailed by supporters as a milestone in international justice that will prevent future Hitlers, Pol Pots and Saddam Husseins - but vehemently opposed by the United States.
 
On the eve of the birth of the International Criminal Court, the United States made the depth of its opposition crystal clear: It dramatically vetoed a UN Security Council resolution to extend UN peacekeeping in Bosnia, because it didn't exempt American peacekeepers from prosecution by the court - and then agreed to a three-day extension to try to find a solution.
 But U.S. Ambassador John Negroponte warned that &quot;peacekeeping in general'' was at stake if a solution isn't found. He indicated that the U.S. might try to end the 14 other UN peacekeeping missions from East Timor and Cyprus to Congo and the Iraq-Kuwait border if its demand for immunity isn't met.
 Secretary-General Kofi Annan questioned how the United States could join the Security Council in supporting war- crimes tribunals for former Yugoslavia, Rwanda and Sierra Leone - yet now oppose a permanent tribunal and threaten the future of UN peacekeeping.
 &quot;It would be unfortunate if the peacekeeping tool which has served the world so well, and we are going to need in the future, was to be hampered,'' he said. &quot;I think the council's credibility and the organization's is on the line. And not only that, how do we explain these contradictory attitudes?''
 The U.S. brinkmanship was clearly aimed at underscoring the decision of the administration of U.S. President George W. Bush to have nothing to do with the court, but it also underlined American willingness to stand alone against almost all other council members, including its closest allies.
 The United States is demanding immunity because it fears that American troops and citizens could be targets of prosecutions.
 The U.S. willingness to put its demand for immunity for its soldiers above the UN mission to train Bosnia's police force, and possibly the NATO-led peacekeeping force in the country - which Washington helped create - angered many council members.
 &quot;By pitting international peacekeeping against international justice, the United States government has sunk to a new low in terms of its moral and political leadership at the United Nations,'' said William Pace, head of the International Coalition for a Criminal Court, a coalition of over 1,000 organizations supporting the tribunal.
 Nonetheless, Pace said, &quot;international justice has actually won and the U.S. government lost,'' because the Rome treaty establishing the court came into force on Monday, ratified by 74 countries and signed by 139. The new court will prosecute those responsible for genocide, crimes against humanity, and war crimes committed on or after July 1.
 Pace said the main targets are &quot;[those] who use nerve gas against ethnic groups, the military monsters who hack off children's arms to terrorize civilian populations.''

TITLE: Ronaldo Double Secures Fifth Title for Brazil
AUTHOR: By Barry Wilner
PUBLISHER: The Associated Press
TEXT: YOKOHAMA, Japan - Brazil was weak. Ronaldo was through. The World Cup title was beyond their reach. The Brazilians shut up the critics in a most convincing way Sunday night, winning an unprecedented fifth soccer championship with a 2-0 victory against Germany.
 
Even better, they did it with traditional Brazilian flair, restoring order to a World Cup of upsets and upstarts.
 &quot;Everything changes,&quot; Ronaldo said through tears. &quot;People said Brazilian soccer was decadent and in crisis. But this will prove that Brazil's soccer is alive.&quot;
 Ronaldo scored both goals, capping a superb tournament that helped erase bad memories of his knee injuries and the team's 1998 World Cup final. He embraced Pele on the victory stand, and the man who led the country to its first three titles kissed Ronaldo's forehead.
 The Brazilians won with a style and artistry reminiscent of their past champions, and overcame the cool efficiency of the Germans, who were undone by a blunder from the world's best goalkeeper, Oliver Kahn.
 Brazil, just months ago considered one of the weakest teams ever from the country, went 7-0 in the world's most popular sporting event, playing in the final for the third-straight time.
 Pele handed over the golden World Cup trophy to captain Cafu as fireworks and streamers flew from a stage on the field and teammates bounced up and down in a sea of silver confetti.
 Thousands of flashbulbs went off as the first World Cup in Asia - and the first with co-hosts - ended in a much more satisfying way for Brazil and Ronaldo than in 1998. He fell ill before that game and played poorly in a 3-0 loss to host France.
 At the final whistle, every Brazilian player ran onto the field carrying a flag or draped in one. Goalkeeper Marcos, who outplayed Kahn, kneeled in the net, his body covered with his country's green, blue and gold flag, as coach Luiz Felipe Scolari ran to hug him.
 With a sign in Portuguese saying, &quot;People of Brazil, thank you for the affection,&quot; players paraded before an ecstatic crowd that chanted &quot;Penatcampeao&quot; - five-time champion - while it did the samba in the stands.
 Each member of the Brazilian contingent held hands and gathered in a circle in the middle of the field just before Cafu accepted the trophy.
 &quot;We did not have a debt, but we are free now of the weight on our consciences,&quot; Ronaldo said.
 That weight now might fall on Kahn, the best goalkeeper of the tournament until he made an egregious error in the 67th minute. The Germans actually were controlling play, looking as adventurous as Brazil, until Ronaldo struck.
 He stole the ball from Dietmar Hamann and fed his attacking partner, Rivaldo. His hard left-footed shot was stopped by Kahn, who was impenetrable for nearly the entire month, allowing just one previous goal.
 But the ball ricocheted off Kahn's arms directly to Ronaldo, who touched it home with his right foot.
 Ronaldo got another goal 12 minutes after his first, one featuring that special Brazilian magic. Rivaldo cleverly allowed Kleberson's pass to roll through his legs directly to Ronaldo just inside the penalty area. He right-footed a low shot just inside the post that a sprawling Kahn could not reach.
 &quot;Today God reserved this for me and the Brazilian team,&quot; Ronaldo said. &quot;I'm very happy and proud. I dedicate these goals to my family and to Dr. Gerard Saillant.&quot;
 Saillant is the French doctor who performed surgery on his right knee, saving the career of the 25-year-old striker who missed almost two years with injuries.
 During a tournament highlighted by upsets from the very beginning, when Senegal beat defending champion France in the opener, the Brazilians never faltered.
 &quot;They are worthy world champions. They showed it today and in other games as well,&quot; said German coach Rudi Voller.
 They showed it with flair, particularly from the &quot;Three Rs,&quot; with midfielder Ronaldinho returning from suspension to spice the attack that Ronaldo finished off.
 They did it with defense, particularly from Edmilson, who made a brilliant block of Jens Jeremies' header early in the second half.
 They did it with Marcos, who had four shutouts and was unbeatable. His best work Sunday came on Oliver Neuville's blistering free kick he barely tipped off the goalpost and out of play.
 And they did it for Brazil.
 &quot;The secret is enthusiasm, friendship, union and sacrifice,&quot; Scolari said. &quot;We had to revive the image of a victorious Brazil.&quot;

TITLE: SPORTS WATCH
TEXT: Foreigners Come Here!
 

MOSCOW (Reuters) - Nearly 80 percent of Russians want a foreign coach to run the national soccer team after the country's poor showing at the World Cup.
 In a national poll conducted by the Sport-Express newspaper on the weekend, 79.6 percent of the 14,000 Russians asked said they were in favour of a foreigner replacing Oleg Romantsev after their team was eliminated in the first round.
 In the poll, former Italy goalkeeper Dino Zoff, who led his country to World Cup triumph in 1982, received 29.2 percent of the votes. He was followed by former Lazio and AC Milan coach Alberto Zaccheroni and Denmark's Richard Moller-Nielsen, who quit as coach of the Israeli national team earlier this year.
 Last month, two Russian oil executives, ashamed of their team's World Cup showing, offered to pay up to $1 million per year out of their own pockets to hire a foreign coach.
 However, Vyacheslav Koloskov, president of the Russian Football Union (RFU), played down the chances of an overseas coach being appointed, saying a foreigner would face an uphill battle against Russia's conservative football establishment. "I'm not too sure that we need a foreign coach," Koloskov was quoted as saying by Sport-Express.
 "We have many Russian coaches who have won various honours in their own right, and in my view, without their support it will be very difficult for anyone to succeed here," he said.
 
 
Joseph on the Move?
 

TORONTO (AP) - Goalie Curtis Joseph will become an unrestricted free agent after failing to reach a deal Sunday with the Toronto Maple Leafs, who then traded his rights to Calgary for a 2004 eighth-round draft pick.
 Joseph isn't expected to sign with the Flames, meaning Calgary will get compensatory draft picks when he signs with another team - possibly even Toronto.
 "It was clear that we were unable to make a deal with Curtis and his representatives before the July 1 deadline," Toronto GM Pat Quinn said. "So, we proceeded to do what was best for the organization."
 Discussions between Quinn and Joseph's agent, Don Meehan, didn't materialize into a new deal for the 35-year-old goalie, who was to return from vacation on Monday - when teams could negotiate with unrestricted free agents.
 Joseph, who broke his hand during the season, went 29-17-5 with a career-best 2.23 goals-against average and a.906 save percentage in 51 games. He had a 2.30 goals-against average and a .914 save percentage in 20 playoff games.
 Joseph, who has also played with St. Louis and Edmonton, is 346-260-81 during his 13-year NHL career.
 
 
Mattiace Rallies To Win
 

MEMPHIS, Tennessee (AP) - Len Mattiace won for the second time this year as he rallied from a seven-stroke deficit by shooting a 7-under 64 to win the St. Jude Classic by a stroke. He pulled off the largest come-from-behind victory since Davis Love III rallied from seven down in 2001 to win at Pebble Beach.
 Mattiace had a mistake-free day in a round where Glen Hnatiuk, looking for his first victory, blew a four-stroke lead. Mattiace turned in a bogey-free seven-birdie round that included five on the back nine and three consecutive on Nos. 15-17 for an 18-under 266 total and the $684,000 winner's check.
 With the victory, Mattiace, who won the Nissan Open in February, joined Tiger Woods (three) and Phil Mickelson (two) as the only multiple winners on the tour this year.