SOURCE: The St. Petersburg Times
DATE: Issue #790 (55), Tuesday, July 30, 2002
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TITLE: Pulkovo Jet Crash Leaves 14 Dead
AUTHOR: By Claire Bigg and Valeria Korchagina
PUBLISHER: Staff Writer
TEXT: A Pulkovo Airlines Il-86 passenger jet slammed into woods shortly after taking off from Sheremetyevo Airport on its way to St. Petersburg on Sunday, killing 14 of the 16 people on board, all from St. Petersburg and the Leningrad Oblast. 
 
The wide-body aircraft, which can seat up to 350 passengers, is generally considered Russia's safest, having never suffered a fatal crash in its 22-year history.
 Citing experts investigating the accident, Reuters on Monday reported that a faulty tail stabilizer, a small wing on the tail of the aircraft that helps control the angle of the plane's nose during flight, may have caused the crash.
 "Our main version is a spontaneous move by the stabilizer into an extreme position that caused the plane to make a steep climb at high speed," Valery Chernyayev, chairperson of the commission investigating the crash, told NTV television. "The stabilizer jammed two seconds after take-off."
 The stabilizer was found among the wreckage of the plane, and Chernyayev said that the stabilizers on all Il-86 jets would be checked.
 The Il-86, with two pilots and 14 other crew members, took off at 3:18 p.m. and reached a height of about 200 meters before plummeting to the ground and bursting into flames, airport officials and eyewitness said.
 A plume of thin smoke was drifting up from the charred wreckage several hours after the crash. Only the tail section of the plane remained relatively intact. The two survivors had been seated in the rear section.
 "The three of us were sitting together in the tail, when the plane started shaking," flight attendant Tatyana Moiseyeva told daily newspaper Izvestia. "We understood that something had gone wrong."
 Interfax reported on Monday that a source from within the investigation commission said that the voice recorder, one of the three "black boxes" that record the systems of the aircraft during flight, all of which were recovered, had not logged the crew's conversation.
 Earlier on Monday Russian media reported that the plane had skipped a routine mechanical check up during its stop-over in Moscow, but Pulkovo representatives denied that this was the case.
 "This was done in line with the rules," Tarasevich said in an interview with Reuters. "these engineers have a right to perform technical examinations during stopovers."
 The two survivors, Moiseyeva and fellow flight attendant Arina Vinogradova were both injured in the crash and remained hospitalized on Monday. Moiseyeva suffered a concussion and other head injuries, broken bones in her shoulder and forearm, an abdominal injury and burns to her ankles. She remained in serious condition on Monday, although doctors expected her to survive, the Associated Press reported.
 Miraculously, Vinogradova suffered only a broken wrist and various cuts and bruises, said Dmitry Fedorovsky at the Botkin Hospital in Moscow.
 "I told her that she should start writing her memoirs because it is unique to survive such a catastrophe," he said in televised remarks.
 The plane was returning without passengers to St. Petersburg from the Black Sea resort of Sochi after completing a charter flight, said Vadim Sanzharov, the Sheremetyevo director who was in charge of operations Sunday.
 Eyewitnesses described what could have been a stall - when an aircraft falls or goes out of control after attempting to climb with insufficient airspeed.
 "The plane was heading upward, and everything seemed normal," said Andrei Korotayev, 15. "Then suddenly it looked as if the plane had stopped. After that it started falling down flat."
 He said the plane then banked slightly to the left and struck the ground, exploding in a ball of fire.
 "We heard screams for help," said his friend, Sergei Durygin, also 15.
 Paul Duffy, a Moscow-based independent aviation specialist, said Monday that the eyewitnesses' testimonies were so varied that they did not enable experts to make even preliminary suggestions as to what caused the crash.
 Konstantin Tarasevich, a Pulkovo spokesperson, said in a telephone interview on Monday that both the pilot and copilot of the aircraft were highly qualified fliers.
 "Konstantin Ivanov was an experienced pilot," Tarasevich said. "He had 13, 298 flying hours behind him. Vladimir Voronov had 11, 386 hours in the air."
 Tarasevich said that Pulkovo Airlines did not as yet possess any information concerning the families of the victims. He only said that flight commander Ivanov, copilot Voronov, navigator Valery Shcherbin, flight engineer Boris Kushnerov, Moiseyeva and Vinogradova were all from St. Petersburg. The other flight attendants were either from St. Petersburg or the Leningrad Oblast.
 "As far as we know, the relatives are still in St. Petersburg, apart from two who flew to Moscow on Sunday evening. We are not planning to arrange a flight to Moscow, unless the relatives request this," he added.
 The 14 bodies of those killed Sunday were recovered within a few hours of the crash, but their identification could take some time as the bodies were badly burned, Interfax reported on Monday.
 Before the crash, Pulkovo Airlines operated a fleet of nine Il-86s, all built in the 1980s. The airline's last fatal accident was in 1991, when a Tu-154 jet broke in half during a hard landing in St. Petersburg. Twelve people died in the accident
 "Pulkovo airlines have a very competent operational and technical base," Duffy said. "If you consider its size and the number of flights it operates, Pulkovo airlines hold a very good record."
 The Il-86 has enjoyed a near-perfect safety record, suffering only three accidents since it started regular passenger flights in December 1980, Duffy added.
 "In the first accident, an Indian plane landed on the Il-86, which was parked in proximity of the runway. The Indian airline was training pilots. So the Il-86 was not to blame in this incident," he said. 
 The second accident involving an Il-86 happened in September last year, when an Aeroflot Il-86 made an emergency landing in Dubai after an engine caught fire. All 307 passengers and 14 crew members escaped uninjured.
 "The Il-86 is a very strong and very reliable aircraft. It is, together with the Boeing 777, the only plane that has never killed a passenger. And the Boeing 777 has only been in service six or seven years, whereas Il-86 has been flying for 22 years," Duffy said.
 Ilyushin has built 103 of the aircraft.
 The large size and safety record of the plane has made it a favorite in Russia. President Vladimir Putin flies in an Il-86, and three modified Il-86s, known as the Il-80, serve as mobile command posts for the military in case of war.
 Tarasovich said that Pulkovo Airlines would continue to fly Il-86 aircraft.

TITLE: Analysts Warn of Possible Economic Crisis
AUTHOR: By Victoria Lavrentieva
PUBLISHER: Staff Writer
TEXT: MOSCOW - Is there an economic crisis brewing - perhaps even one like the one that brought the country to a halt in August 1998?
 
There is growing concern among economists that the answer to that question is more likely yes than no.
 They say that, against the backdrop of a depressed world economy, Russia's basic macroeconomic indicators may look healthy but ,beneath the gloss, several trends have emerged recently that give cause for alarm and suggest that the positive effects of the 1998 ruble devaluation have been exhausted: Growth is slowing; investment is falling; corporate profits have halved; public-sector wage arrears are on the rise; the ruble is rising in real terms against the dollar, making domestic producers less competitive; and barter appears to be making a comeback.
 "The number of warning lights that have started flashing in the last several months is concerning despite the apparent health of the basic ratios," said Roland Nash, head of research at Renaissance Capital. "First, and most widely recognized, is slowing growth," he said.
 After posting record gross-domestic-product growth of 9 percent in 2000, the pace slowed to 5 percent last year and the government now expects 3.8-percent growth this year. The official forecast for the year was originally 3.6 percent, which led President Vladimir Putin to chastise his government publicly for not being ambitious enough. Last week, the Economic Development and Trade Ministry announced a rosier outlook, saying that the new number was based on higher-than-expected growth of 3.8 percent in the first half of the year, up from 3.2 percent in the first quarter.
 "[This] allows us to say that the economy has broken the negative trend of the first quarter," the ministry said in a statement, claiming, without elaboration, that real sector companies now "feel more secure" than earlier in the year, despite external pressures such as a stronger ruble, rising labor costs and higher tariffs.
 Even so, assuming Russia can maintain 3.5-percent annual growth, it will take 100 years to achieve the average per-capita income level enjoyed by the European Union, if the EU grows at an average of 2 percent a year, according to a recent Economist Intelligence Unit study.
 However, even 3.5 percent may not be sustainable, economists say, without further structural reforms and a radical overhaul of the banking system.
 If Russia continues to evolve the way it is now, "a new crisis will be inevitable," said Yevgeny Gavrilenkov, chief economist with investment bank Troika Dialog. Gavrilenkov characterized that evolution as one along the lines of the ill-fated South Korean chaebols - huge, vertically integrated conglomerates that emerged in the absence of a strong financial sector. He said Russia is now developing an "Asian economic model and an administratively driven system."
 Another worrying sign is industrial production, which is slowing faster than overall economic growth. After growing 5.1 percent in the first six months of 2001, industrial-production growth slowed to 3.1 percent in the first half of 2002.
 Marcin Wiszniewski, an economist who tracks Russia for Morgan Stanley in London, said the current slowdown did not come as a surprise, because the pace of industrial production and GDP growth were expected to slow after the initial boost from ruble devaluation and high oil prices was exhausted and spare capacity in the economy was largely utilized.
 "But, even if we devalue the ruble now, it won't help to support growth because, production capacities are full," Gavrilenkov said. "So, in the end, economic growth is driven by consumption demand and investments."
 Part of the slowdown can be attributed to shrinking levels of investment - both foreign and domestic. While the level of domestic investment grew 18 percent in 2000 and 15 percent last year, it grew by only 2 percent in the first six months of 2002. Furthermore, foreign direct investment actually shrank, reaching $1.4 billion in the first half of 2002, down $500 million from the same period last year.
 More worrying still is that corporate profits are down nearly 50 percent year on year, from 501 billion rubles ($16.7 billion) in the first half of 2001 to 316 billion rubles in the same period this year.
 "A combination of real ruble appreciation of around 8 percent per annum, real wage growth of nearly 20 percent per annum and rising utility tariffs are rapidly increasing firm costs," Nash said.
 These negative factors, combined with tax changes and increased expenditure obligations, have left regional budgets struggling to make ends meet.
 "In May, the federal budget was forced to bail out regional budgets, a transfer that pushed the federation into its first cash deficit since 2000," Nash said.
 This, in turn, has led to an increase in arrears for the first time since the 1998 crisis.
 Tax arrears to the federal budget increased by 11.9 percent during the first half of 2002 to 530.8 billion rubles ($17 billion), a Tax Ministry official told Prime Tass on Friday, without elaborating. And Putin last week criticized the cabinet for not paying state wages on time and failing to meet budget targets in the social sphere.
 "People are going on vacation and they are not paid money to spend," Interfax quoted Putin as saying. Putin stressed that, despite pledges by the government to cut wage arrears by the summer, they "have grown, and considerably so."
 On Friday, Deputy Prime Minister Valentina Matviyenko said that wage arrears increased by 1 billion rubles in June to about 3 billion rubles. Especially hard-hit are the country's poorly paid teachers, who have yet to receive their yearly summer bonuses. Finance Minister Alexei Kudrin said Monday that the government would do so by Sept. 1.
 Similar problems are facing the largest state-controlled companies. Natural monopolies Unified Energy Systems and Gazprom are both having problems getting customers to pay - suggesting that the old days of barter payments may be making a comeback.
 UES said Friday that its level of cash collections has fallen from 100 percent to 98 percent in the first quarter of 2002. "Two percent is a very huge number for us, taking into account the payment volumes," UES spokesperson Yury Melikhov said.
 And gas giant Gazprom said the debts of its customers in the same period rose by 1.6 billion rubles ($50.8 million) to 45.1 billion rubles, equal to roughly a third of its investment budget this year.
 "For the first time since the devaluation, there are the first signs that nonpayments and barter may again be on the rise," said Nash. 
 So what does the future hold?
 Nash said Russia is going through the transition that all emerging markets go through at one stage or another - the redistribution of resources from those firms that cannot survive to those that can.
 "We all know that Russia has only started down the path of genuine structural transformation after macroeconomic stability was established," Wiszniewski said. "As always in transition economies, problems are deep and everything boils down to political commitment and the government's political ability to tackle those problems." 
 But even here the government is not doing as much as it can, according to the Economist Intelligence Unit.
 "The state's ability to implement its legislative program will remain constrained by institutional weakness, including corruption, crime, excessive bureaucracy and weak rule of law," the EIU wrote. It also concluded that economic reform has been hampered because it "has not been accompanied by efforts to build up democratic institutions."
 Gavrilenkov said Russia's future lies not in the further exploration of its natural resources, but in developing new export-oriented sectors.
 Russia is again at a fork in the road where one option is to reduce the entry barriers for business and develop the private financial sector, Gavrilenkov said. "This could bring about a resumption of high, sustainable growth rates," he said.
 "The other is the road to a further strengthening of the 'chaebols' as substitute intermediaries between savings and investments," Gavrilenkov said. "This would be building the foundation for a new crisis."

TITLE: No Baltic Buildup, Says Ivanov
PUBLISHER: Combined Reports
TEXT: MOSCOW - Defense Minister Sergei Ivanov said Monday that Moscow would not build up its forces in Kaliningrad as the Baltic states prepare to join NATO but insisted that keeping existing forces combat ready is a top priority. 
 
Ivanov warned earlier this month that Moscow would "react" if NATO builds bases in Lithuania, Latvia or Estonia. He said Russia could not rule out military measures in response. 
 But, in Kaliningrad on Monday, he said, "We are not going to respond to this by building up our forces in the Kaliningrad region and saber-rattling," news agencies reported. "However, the state of our forces in the region and their rearming are a priority," Ivanov said.
 Meanwhile, French Foreign Minister Dominique de Villepin said Monday that France's support for Moscow in the visa dispute did not mean Paris had broken with its European partners. He told the daily Le Monde that President Jacques Chirac's backing for Moscow's position indicated his concern to find a solution.
 
 <i>- AP, Reuters </i>

TITLE: The seventh running of the &quot;Knight's Castle&quot; festival wrapped up at Vyborg Castle on Saturday.
TEXT: Participants in the festival came from historical clubs across Russia. The participants had all themselves made the weapons and armor that was used, following historical techniques.
 The main event of the festival was a series of mock battles, staged according to strict rules, in which groups would attempt to capture Vyborg Castle from each other. The castle was built in 1293, when the Swedes first captured Karelia from Novgorod.
 The St. Petersburg Times' photographer </i><i><strong>Alexander Belenky</strong></i><i> rode forth intrepidly on Saturday to capture on film some of the day's deeds of chivalry, revelry and knight life.

TITLE: Kursk Enquiry Ends, No Charges Made
PUBLISHER: Combined Reports
TEXT: MOSCOW - Prosecutor General Vladimir Ustinov closed a criminal investigation into the Kursk nuclear-submarine sinking Friday, saying nobody would be charged because the disaster was caused by a technical malfunction - leaky torpedo propellant.
 
Ustinov also defended the Kremlin's handling of the botched rescue efforts, saying that all 118 sailors aboard died within eight hours after the Kursk sank in the Barents Sea on Aug. 12, 2000, long before any help could arrive.
 &quot;The disaster occurred at 11:28 and 26.5 seconds, Moscow time, because of the explosion of a practice torpedo inside the fourth torpedo tube,&quot; Ustinov said at a news conference. Within two minutes and 18 seconds after the first blast, other combat weapons detonated in a powerful explosions that threw the submarine to the seabed and killed most of its crew.
 When the navy located the submarine on the seabed some 30 hours after the catastrophe, &quot;there was already no chance to save anyone,&quot; he said, speaking after reporting his verdict to President Vladimir Putin.
 He insisted that no one was to blame for the torpedo's malfunction. A government commission had previously pointed at a leaky torpedo as the only possible cause. 
 &quot;The investigators have decided to close the criminal case since no evidence of a crime has been found,&quot; Ustinov said. &quot;Those who designed the torpedo couldn't foresee the possibility of its explosion.&quot;
 He dismissed allegations that the navy could have triggered the disaster by damaging the torpedo while loading it onto the Kursk. &quot;There is no evidence and no testimony that the torpedo was dropped,&quot; Ustinov said.
 He said the torpedo exploded suddenly as the Kursk was moving under periscope close to the surface, preparing for a practice torpedo attack. He said the recovered shiplog and crew conversation recorders contained no sign of anything awry.
 Stanislav Proshkin, the head of the Gidropribor research institute that designed the torpedo, challenged the verdict in remarks carried by the Interfax-Military News Agency. He said the weapon could only have exploded after an internal impact, most likely a fire in the bow.
 Ustinov said the Northern Fleet chief and several other top naval officials fired last fall were ousted for flaws in organizing the exercise the Kursk had been taking part in that &quot;weren't directly linked&quot; to the disaster.
 But relatives of those who died on the Kursk voiced anger Monday that prosecutors decided not to press charges in the sinking and demanded a clearer explanation about the cause of the tragedy.
 Retired navy Captain Vladimir Mityayev, who lost a son on the Kursk and represents 39 Kursk sailors' families, said Ustinov's conclusions were unsatisfactory.
 &quot;We had expected that those at fault for the death of our children would be named,&quot; he said in a telephone interview. &quot;To me, this is a clear case of negligence.&quot;
 He said he and the families he represents have asked to meet with investigators for answers to what exactly happened on the Kursk.
 He has also asked a Moscow-based lawyer to examine the investigation results.
 Nadezhda Nekrasova, the mother of a Kursk sailor, told Ekho Moskvy radio on Saturday that she was willing to go to court in Russia or abroad to find out who was responsible for the sinking.
 Chief military prosecutor Alexander Savenkov said Monday that investigators will do their best to answer relatives' questions.
 Ustinov, in presenting the results of the investigation, defended the government's failure to save any of the crew. Twenty-three people survived the explosions in the bow and gathered in the less-damaged stern, but Ustinov said they died within eight hours, succumbing to carbon monoxide poisoning from fires and the rising pressure caused by icy water flooding the deck.
 The government had been criticized for missing a chance to save the Kursk crew because of its slow and botched response to the disaster. Putin came under fire for his failure to quickly end his Black Sea vacation when the Kursk sank.
 Putin on Friday ordered Defense Minister Sergei Ivanov to closely study the prosecutors' findings to prevent similar catastrophes.
 The navy has already pulled from service all torpedoes of the type that exploded. The torpedoes had a higher speed and range than conventional torpedoes powered by conventional electric engines making them highly attractive for the military.
 The ruined hulk of the submarine was salvaged and lifted off the seabed last fall.
 
 <i>- AP, SPT </i>

TITLE: Former FSB Agent Faces Questions About Associate
AUTHOR: By Oksana Yablokova
PUBLISHER: Staff Writer
TEXT: MOSCOW - Former FSB officer Mikhail Trepashkin, who helps an independent commission created by a group of liberal lawmakers to investigate the 1999 apartment bombings, was summoned for questioning by the Chief Military Prosecutor's Office on Friday.
 
Trepashkin said the questioning was unexpected and lasted for 10 hours. He was summoned the day after he attended a commission meeting at which his former colleague, Alexander Litvinenko, presented a statement from Achemez Gochiyayev, the main suspect in the bombings who is sought by the Federal Security Service (FSB).
 Trepashkin, fired from the FSB in 1997, said he was questioned in connection with an investigation that was opened into his activities in January, after FSB detectives searched his apartment looking for information on the exact whereabouts of Litvinenko, who fled to Britain in 2000 and has since been granted political asylum.
 Trepashkin said the detectives found documents related to cases he had investigated some 10 to 15 years ago while still with the FSB's predecessor, the KGB, which he was not supposed to have at home, and have been deciding since then whether to charge him with disclosing state secrets.
 &quot;There was no mention of Litvinenko or the commission meeting during the questioning, but the urgent and unexpected way I was summoned makes me wonder whether there is a link,&quot; Trepashkin said in a telephone interview Friday.
 A spokesperson for the Chief Military Prosecutor's Office denied any link between the commission meeting and the questioning. &quot;The questioning is a routine affair that had been scheduled for two weeks,&quot; spokesperson Mikhail Yanenko said.
 He said Trepashkin was summoned in connection with allegations that he had disclosed state secrets and was in illegal possession of ammunition, but he refused to elaborate.
 Trepashkin was one of a group of FSB officers who appeared with Litvinenko on television in 1998 when he accused his FSB superiors of ordering him to kill Boris Berezovsky. Litvinenko has since been closely associated with Berezovsky.
 On Thursday, via a video link from London, Litvinenko presented a statement he said was from Gochiyayev, in which he claimed to have had nothing to do with the 1999 explosions and to have been set up by a childhood friend whom he now suspects was an FSB agent.
 Litvinenko said the statement supports his claim that the Federal FSB, and not the Chechen rebels, as the official version goes, engineered the series of blasts in order to create a pretext for sending troops back into Chechnya in 1999.
 Sergei Kovalyov, a lawmaker and respected human rights activist who heads the commission, raised questions about the statement Friday.
 Kovalyov questioned why Gochiyayev did not name the old friend on whose behalf he said he had rented space in the two Moscow buildings where the explosions took place. 
 &quot;They are accusing the authorities of a terrible crime,&quot; Kovalyov told Interfax, saying that Gochiyayev's claims must be verified.

TITLE: IN BRIEF
TEXT: <b>Historic Bombshell
 </b>

ST. PETERSBURG (SPT) - A bomb dating back to World War II has been discovered at a gas station situated in the Luzhsky neighborhood of the Leningrad Oblast, Interfax reported on Monday.
 The bomb, weighing 50 kilograms, was found during work being carried out on the territory of the station, the press service of Emergency Situations Ministry's Northwestern regional center told Interfax.
 A bomb-disposal team was clearing the unexploded bomb that appears to have been dropped by plane during the war, and it was expected to be removed on Tuesday.
 
 
<style text><b>Raising the Haul
 </b>

ST. PETERSBURG (SPT) - The Northwestern Customs Authority said that weapons and drug smuggling rose in the first six months of this year, Intefax reported Monday.
 "Over 470 weapons, 17 kilograms of hard narcotics and over five kilograms of other drugs were confiscated during the first half of the year," Vladimir Vyunov, the head of the Northwestern Customs Authority told Interfax, summing up the results of this year's work so far.
 He pointed out that the authority had succeeded in collecting sufficient customs fees to meet its targets for the period. Approximately 50 billion rubles ($1.56 billion) were paid in to the federal budget income, a 35-percent rise over the figure for the same period last year.
 Vyunov also reported that 18 criminal cases have been opened against customs officials as a result of internal investigations. 
 
 
<style text><b>That Time Again
 </b>

ST. PETERSBURG (SPT) - Over 3,000 members of the militia will be on hand to provide security at the soccer match between Moscow's Spartak and St. Petersburg's Zenit on Tuesday.
 The press service of the Northwest Department of the Interior Ministry informed Interfax that it was expecting 3,000 Spartak fans to travel to St. Petersburg for the game, with 300 already having arrived.
 The majority will be traveling on overnight trains, according to the department, and the transport militia detachments at all the Oktyarbrskaya railway stations and on the trains will be reinforced as a precaution, Interfax reported
 For the first time, a separate train will be provided for the Spartak fans for their return journey to Moscow on Tuesday night.
 The train will make no stops on the way to the capital and law-enforcement officers will be on hand to ensure their safety.
 
 
<style text><b>Borodai Denial
 </b>

MOSCOW (SPT) - Alexander Borodai, a former deputy editor at the hard-line nationalist newspaper Zavtra, denied a report published Monday that he has been appointed deputy director of the Federal Security Service, or FSB.
 Reached by telephone, Borodai said the report, carried by the Pravda.ru web site and attributed to the sensationalist Political News Agency, was a hoax arranged as a gag gift for his recent 30th birthday.
 "It should simply be dismissed as totally untrue," Borodai said Monday. He explained that he had quit Zavtra some time ago, finding it too difficult to combine the job with his work as head of a small political public relations agency.
 The FSB press service also said Monday that it was not aware that Borodai had been appointed to any post with organization.

TITLE: Alekperov Makes it Into Billionaires Club
AUTHOR: By Anna Raff
PUBLISHER: Staff Writer
TEXT: MOSCOW - LUKoil has partly lifted the veil on the identities of its true owners, but, with markets diving worldwide, this overture might not be enough to get investors to buy into the upcoming privatization of a 6-percent stake in the oil giant.
 
Vagit Alekperov, LUKoil's president, owns 10.38 percent of the company, a stake currently valued at $1.26 billion, according to a share-sale prospectus. Nikolai Tsvetikov, CEO of affiliated company NIKoil, holds 5.26 percent, worth some $638 million. The other major shareholder is vice president Leonid Fedun, with 4.62 percent.
 LUKoil First Vice President Ravil Maganov, LUKoil-Reserve-Invest Fund General Director Igor Sherkunov, LUKoil-Garant Pension Fund General Director Mikhail Berezhnoi and Valery Graifer, general director of oil services company Ritek, each own less than half of one percent.
 As recently as a month ago, Alekperov claimed that he only owned 3 percent of the company.
 The prospectus was circulated among potential investors ahead of a placement on the London Stock Exchange, scheduled for Wednesday. The government has been trying to sell 6 percent of the company since 2001, when it was touted as the biggest privatization of the year.
 The government's plans were foiled by the delayed publication of financial accounts and a spat with a U.S. politician. The problem now lies with international financial markets, which have plunged to five-year lows over the past two weeks.
 Since the company and the State Property Fund, which officially owns the stake, began their roadshow last week, government officials have been sending out mixed signals as to whether the issue would go ahead.
 First Deputy Property Minister Alexander Braverman attempted Friday to put speculation to rest, saying a final decision will be made Wednesday, when, he said, investor interest in the stock should be clear.
 Braverman admitted that the situation on world markets was not the best, but added that, so far, investors have been impressed with LUKoil's balance sheet and earnings.
 &quot;The decision will be made in the best interests of the government and LUKoil,&quot; Interfax reported him as saying.
 LUKoil is undervalued by between 36 percent and 38 percent, because Russian companies carry more risk than their Western counterparts, Braverman said.
 Russian companies' ownership structures - which often include a maze of shell companies created to avoid taxes and conceal identities - are part of this risk. LUKoil is the fourth major holding to reveal its major shareholders this year, a move applauded by analysts.
 &quot;The official disclosure on individual ownership stakes is clearly another sign of increased transparency,&quot; Aton Capital said in a research note.
 Some moves toward transparency brought unpleasant surprises: Before its February initial public offering on the New York Stock Exchange, Wimm-Bill-Dann disclosed that its largest shareholder was a convicted felon.
 Others were more predictable. Group Menatep, an industrial giant before the 1998 financial crisis, announced last month that it owned 61 percent of Yukos, giving Yukos CEO Mikhail Khodorkovsky 36 percent of the oil company. As of Friday's market close, Khodorkovsky's stake was worth $6.86 billion, substantially more than Alekperov's, despite LUKoil's larger production volumes. Earlier this month, Sistema, whose top asset is Mobile TeleSystems, opened its books in an effort to attract foreign investment. In a filing to the Federal Securities Commission after completing a revamp, the company's consolidated assets were put at $1.7 billion as of Oct. 1, which would make Sistema founder and chief Vladimir Yevtushenkov's 75.96-percent stake worth about $1.5 billion.
 The London Stock Exchange requires that listed companies say how much each member of the directors and management board owns, said Patrick Humphris, a spokesperson with Britain's Financial Services Authority. But companies are not required to disclose other major shareholders.
 According to the prospectus, Alekperov's annual salary is $1.5 million, and if LUKoil meets production and sales goals, his compensation shoots up by another $2.225 million. He also received 500,000 &quot;phantom shares&quot; in 2001. Although they do not exist, Alekperov is paid dividends on the stock as well as the amount they go up during a three-year period.
 The stock's recent volatility has caused some concern among government officials. Some analysts, however, believe the state will not delay the placement because it has struck a behind-the-scenes deal with LUKoil in which the oil company promised to support the stock price by purchasing via companies backed by LUKoil management.
 In 1999, Reforma Investment, an obscure Cypriot-based company, won an auction for 9 percent of LUKoil with a bid that was only $5,000 above the asking price of $200 million. It is widely believed that LUKoil managers or people close to them were behind Reforma. Alekperov has repeatedly denied these accusations, and Reforma remains a mystery.
 A source close to the current privatization said rumors about purchases by &quot;friendly&quot; companies were &quot;ridiculous,&quot; adding that there are many reasons to go ahead now rather than postponing the issue.
 &quot;There will be a lot of blame to go around if the government decides to put off the issue for another six months and then discovers the markets have gone even lower,&quot; the source said.
 Government officials have said they expect $660 million to $800 million in proceeds from this month's sale.
 The government will probably go ahead and sell despite difficult market conditions as long as the price stays above $13, the level originally envisioned, said Steven Dashevsky, an oil analyst with Aton Capital.
 LUKoil shares crept up 0.7 percent Friday to close at $14.35 on the Russian Trading System. At this price, the state would reap about $700 million from the sale.

TITLE: Lenoblast May Break Contract
AUTHOR: By Angelina Davydova
PUBLISHER: Special to The St. Petersburg Times
TEXT: The Leningrad Oblast administration may not meet its liabilities under an investment contract with Philip Morris, Governor Valery Serdyukov said at a press-conference last week, while, at another press conference on Monday, he described the difficulties of collecting excise payments for the federal budget as &quot;daylight robbery.&quot; He added that &quot;The excise taxes have been taken away from us, even though we only built the factory because of those taxes.&quot;
 
According to Serdyukov, under the agreement with Philip Morris, the administration must give the company between $43 million and $50 million in exemptions on tobacco excise. Until now, these excise taxes have been collected by the Leningrad Oblast administration and paid directly into its budget. However, according to a new federal law, from Jan. 1 onward, excise payments on tobacco and alcohol will be paid into the federal budget. In addition, the new excise rate will rise by 70 percent.
 &quot;We will receive $33 million in excise payments from Philip Morris in 2002, according to the old rates. If we lose 100 percent of the tobacco excise and the federal budget doesn't offset that, we'll be forced to break our investment contract,&quot; Serdyukov said. He added that, since the factory opened in February 2000, it has generated a total of $150 million in taxes for the local and federal budgets.
 Serdyukov said that the Leningrad Oblast administration has sent a letter to Deputy Prime Minister and Finance Minister Alexei Kudrin, proposing that the excise-tax rates remain unchanged, and that all revenues be left with the Leningrad Oblast. 
 A spokesperson for Philip Morris Izhora, Marina Balabanova, said in a telephone interview on Monday that the factory had not been informed of the problem, having only learned about the information from reports in the press. &quot;We have not yet received any official warning, so we think it's too early to comment,&quot; she added.
 Philip Morris International owns three factories in Russia - Philip Morris Kuban in Krasnodar, Philip Morris Neva in St. Petersburg and Philip Morris Izhora in the Leningrad Oblast. Production at Philip Morris Neva has been halted, with production equipment being disassembled and transferred to Philip Morris Izhora. The staff at the St. Petersburg plant will also be transferred to Philip Morris Izhora. Company officials have maintained that they have always considered the Philip Morris Neva factory to be a short-term project.
 The Philip Morris Izhora factory provides a complete production cycle, including tobacco processing and cigarette production. Philip Morris has invested $330 million in the facility. 
 In 2001, the factory produced 25 billion cigarettes, with a maximum capacity of 30 billion. Philip Morris Izhora also exports cigarettes to Belarus, Ukraine, Moldova and Armenia. Brands being produced and sold in Russia include Marlboro, Parliament, Virginia Slims, L&amp;M and Soyuz Apollon and Optima.

TITLE: U.S. Welcomes Pricing Reforms for Energy
AUTHOR: By Steve Gutterman
PUBLISHER: The Associated Press
TEXT: MOSCOW - A top U.S. trade official said Friday he is &quot;encouraged&quot; by Russia's plans to reform its domestic energy-pricing system, which the United States says gives Russian producers an unfair advantage by providing them power at prices far below what their foreign competitors pay.
 
But the official, Assistant Commerce Secretary Faryar Shirzad, said it remains to be seen how effectively the ambitious reforms - part of President Vladimir Putin's efforts to bring Russia's economy in line with the West - will be implemented.
 &quot;Clearly the direction the Russian government wants to go is a very positive one, but it's a matter of seeing what the details are and ... how fully they are able to implement those details,&quot; said Shirzad, who is in charge of the U.S. import administration.
 As Russia pushes to join the World Trade Organization, the United States and Europe have been pressuring Putin's government to reform the domestic energy pricing system. Russia will begin drafting reforms of its natural gas industry this year, Prime Minister Mikhail Kasyanov said Thursday.
 The current pricing system, left over from the centrally controlled economy of the Soviet era, gives Russian producers access to energy at rates that are &quot;far below market prices,&quot; Shirzad said.
 He said the issue has come up in discussions and disputes between the United States and Russia over trade in fertilizer and steel, two of Russia's major exports.
 Russia does not agree with the U.S. and European view that its low domestic energy prices distort trade with other countries, he said.
 However, he added, &quot;I think there's agreement from both sides that market reforms are needed in this sector, and the Russian government by all accounts is planning a very ambitious set of reforms designed to bring more market discipline on energy prices.&quot;
 Shirzad spoke before leaving Russia after four days of talks whose purpose was to follow up matters discussed by Commerce Secretary Donald Evans, who came to Russia with U.S. President George W. Bush for a summit in May.
 Relations between Washington and Moscow have improved dramatically since Putin offered support for the U.S. anti-terror campaign after the Sept. 11 attacks, and the Bush administration has said it wants to sharply increase trade with Russia.
 &quot;Clearly there is a commitment that our two presidents have made to strengthen and deepen the relationship between our two countries, particularly with regard to economic issues,&quot; Shirzad said.
 A handful of trade disputes have clouded improving relations, including clashes over Russian imports of American poultry and new U.S. steel tariffs.
 Shirzad said he had hoped his trip would bring agreement on a deal to raise the limits on Russian exports of steel slab, but that no deal was signed because the Russian side was still discussing the proposal. He said he hoped the agreement would be sealed early next month.

TITLE: American Brings Pizza, Panties to Siberia
AUTHOR: By Victoria Lavrentieva
PUBLISHER: Staff Writer
TEXT: NOVOSIBIRSK, Western Siberia - When Eric Shogren was working hard to get a small business off the ground in Minneapolis in 1992, he could hardly have imagined that a decade later he would have made it big in Siberia.
 
But a chance introduction to a Russian entrepreneur changed all that. Shogren has since built up a multimillion-dollar empire in Novosibirsk that includes a chain of pizza restaurants, a bakery, a furniture workshop and the only Russian outlet of top U.S. lingerie chain Victoria's Secret.
 On top of all this, Shogren, 36, has a Russian passport, a Russian wife, Olga, who also acts as his personal assistant, four children and a 700-square-meter house in the woods outside the city. He also sits on the board of Novosibirsk University, sponsors educational programs and employs more than 400 people.
 But Shogren has no plans to stop there.
 &quot;I have bet on this country and bet on this city,&quot; he said in an interview.
 Although Shogren has some Russian blood in him - his relatives on his mother's side emigrated from Russia at the beginning of the 20th century - he had little idea early on of how big an influence the country would have on his life. After finishing secondary school, Shogren decided to set up a business in his hometown, Minneapolis.
 &quot;I was involved in a small video-production business and was selling sports art,&quot; he said. &quot;Nothing serious - just the usual type of small American business.&quot;
 But in 1992, Shogren's brother, Brad - then studying Russian at Novosibirsk University, introduced him to a Siberian entrepreneur during a visit to Minnesota on a cultural exchange. The man said he was looking to do some business in the United States. &quot;He told me: 'Whatever you can buy and send to Novosibirsk, I can sell,'&quot; Shogren recalled. &quot; For me it sounded like nonsense, because I could buy everything in America.&quot;
 After some thought, however, the pair decided to set up a business shipping American cars to Novosibirsk - Ford Explorers, Lincoln town cars and Crown Victorias, which were popular with New Russians in the early 1990s. His partner would send Shogren cash in dollars, and all Shogren had to do was arrange for the cars to be shipped as far as St. Petersburg.
 &quot;It was very easy for me, although sending money and documents was always a headache for us because there was no FedEx at the time,&quot; Shogren said. &quot;Also, it was very hard for my Russian partner to wait for a month until he got the cars.&quot;
 Despite these hitches, the business was very successful. Even now, Shogren and the local administration use the cars that were shipped over at the time.
 Shogren soon became bored of exporting cars, however, and decided he wanted to sink his teeth into a new project. In 1993, he approached his partner with the idea of opening a supermarket in Novosibirsk. Although it seemed unrealistic at first, the idea was well timed because it was so difficult to buy foreign goods in Russia, Shogren said.
 The two partners opened their supermarket in 1993, and, sure enough, it was revolutionary for Novosibirsk.
 &quot;People treated the shop like a museum,&quot; Shogren said.
 The supermarket fell apart a year later, however, because of Novosibirsk's remote location and problems with delivering goods, which lost quality during their transportation on the Trans-Siberian Railroad.
 At about the same time, Shogren's partner decided to emigrate to the United States. &quot;My partner said that he was fed up with Russia and wanted to live a normal life,&quot; Shogren said. &quot;So he left for the U.S. and I had to move to Novosibirsk to oversee the business, which I was already fond of.&quot;
 After Shogren moved to Russia full-time, he expanded his business in several directions. One of his first ventures was a chain of pizza restaurants called New York Pizza, which he founded in 1996. There are now five of the 100 to 150-seat restaurants in Novosibirsk, and New York Pizza's general director, Denis Ivanov, a former student at Novosibirsk University, said the company is planning to open two more in the coming months.
 &quot;My first New York Pizza restaurant cost me $100,000,&quot; Shogren said.
 The chain now makes several million dollars a year.
 As well as the pizza restaurants, Shogren runs an upmarket 36-seat restaurant called Klassika, the New York Times jazz nightclub and a chain of coffee shops.
 After the 1998 financial crisis, Shogren decided he needed to diversify, and so later that year he set up his furniture business and the Bavarsky Khleb bakery. The bakery now produces and bakes a ton of dough a day, and Shogren has plans to increase production further.
 &quot;We are planning to expand the bread-and-cake business, and our goal is to produce 10 tons a day compared with one ton today,&quot; he said.
 &quot;We have German equipment and produce the highest-quality bread in town,&quot; he said, adding that, although the bread is more expensive than other brands, it is filling a niche in the market.
 Six months ago, Shogren also made himself popular with the women of Novosibirsk by opening the Diva lingerie shop, which sells goods from U.S. chain Victoria's Secret.
 Shogren said he runs the store as much for pleasure as business. &quot;I just want to make lingerie more accessible to Russian women,&quot; he said. His store is less expensive than the Russian Dikaya Orkhideya chain, he said.
 Unlike many modern-day Russian entrepreneurs, Shogren said he does not think only of money when he embarks on a new venture. &quot;True, I have made a lot of money here and have a very successful business,&quot; he said. &quot;But what is most important is that this money is made in Novosibirsk, and this is the only place where I want to invest it.&quot;

TITLE: Svyazinvest Tops List of Sell-Offs for 2003
PUBLISHER: Combined Reports
TEXT: MOSCOW - The government hopes to raise 51 billion rubles ($1.62 billion) in 2003 through the sale of state-owned assets, the bulk of it from a minority stake in state telecoms holding Svyazinvest, the government said Friday.
 
The government said in a statement that it planned to sell 25 percent minus two shares in the company, a stake expected to generate some 70 percent of planned privatization receipts next year. That puts Svyazinvest's stake at around 35 billion rubles.
 International financier George Soros led a coalition that bought 25 percent plus one share in the holding in a 1997 auction with a bid of $1.875 billion. Soros later called it the worst investment he had ever made.
 Svyazinvest owns a controlling stake in Rostelecom, the national fixed-line carrier.
 Russia is in the process of consolidating dozens of regional fixed-line carriers, and authorities hope that a sweeping restructure will raise the price of Svyazinvest's stake, which has been slated for privatization for years.
 &quot;Companies that have strong potential for competition must be privatized,&quot; Prime Minister Mikhail Kasyanov said in remarks shown on television after the Cabinet discussed the 2003 privatization program at an extraordinary meeting.
 But Kasyanov said that while individual enterprises should be transferred to private owners, &quot;the country's infrastructure should not be privatized.&quot;
 The plan also calls for a sale of 17 percent in top-three steel maker Magnitogorsk and 5.27 percent in oil company Slavneft.
 Russia holds a 75-percent stake in Slavneft and intends to sell 19.68 percent of it this year. Belarus owns 11 percent of the company, with the rest in private investors' hands
 The government said the privatization revenues would be used to reduce the country's long-term liabilities. Russia has to repay foreign debt worth some $17 billion in 2003.
 Privatization remains one of the most controversial issues in Russia.
 There are still 9,810 state-owned enterprises in Russia, and the government owns a stake in another 4,354, according to a report by First Deputy Property Minister Alexander Braverman, Itar-Tass said. These include oil companies, communications businesses and airlines.
 In total, the government hopes to privatize 450 state-owned companies, and sell its stakes in 600 more next year, Itar-Tass reported.
 Kasyanov also said that the government was considering foreign loans to energy firms in China, India, Vietnam and Yugoslavia. The loans, Kasyanov was quoted as saying by Interfax, are &quot;a mechanism of export support.&quot;
 
 <i>- AP, Reuters </i>

TITLE: New Hurdles Arise in Poultry Dispute
AUTHOR: By Mara D. Bellaby
PUBLISHER: The Associated Press
TEXT: MOSCOW - The Agriculture Ministry will keep accepting U.S. poultry imports for another six weeks, but a Russian official warned that new U.S. demands threaten to derail a permanent solution to the dispute that has run for months.
 
U.S. and Russian officials had hoped to end the dispute last week after exchanging documents on Wednesday about new veterinary certificates.
 But Sergei Kuznetsov, a spokesperson for the Agriculture Ministry, said that the documents from J.B. Penn, U.S. undersecretary for farm and foreign agricultural services, &quot;made a number of suggestions that in some cases contradicted previously reached agreements.&quot;
 &quot;Negotiations continue,&quot; Kuznetzov said.
 The Russian government imposed a ban on U.S. poultry imports in March, citing concerns about sanitary conditions at U.S. plants and cases of salmonella in imported chicken.
 The ban was lifted a month later, after the United States promised to tighten export controls, but new bureaucratic hurdles immediately arose.
 Russia demanded a new veterinary certificate accompanying poultry imports and warned the United States that it would ban all U.S. poultry imports as of Aug. 1 without the new certificates. Russia had recently backed off that deadline, and Kuznetsov said Friday that the United States would have an additional six weeks to use the old certificates.
 &quot;We have a six-week extension, so we have time to work out any remaining issues,&quot; said a U.S. Embassy spokesperson, speaking on condition of anonymity.

TITLE: Israeli Economy Feels the Pain
AUTHOR: By Jo-Ann Mort
TEXT: JERUSALEM - When the peace process grinds to a halt, this city feels the stoppage through all of its pores. The fear of more suicidal violence has nearly brought downtown to a standstill. Many stores on Jaffa Road, the main street along the spine of downtown in West Jerusalem, don't even bother to open at night, knowing they won't have customers. And with the Israeli government's policy of closure, it is nearly impossible for Palestinians to travel from Ramallah to East Jerusalem to work.
 
The economic situation here is grave. My hotel has so few guests that the room where breakfast is usually served is not used, replaced by one much smaller. It is the same everywhere in town. Tel Aviv hotels are even emptier. In the Palestinian territories, things are worse, with widespread starvation suddenly seeming like a real possibility.
 So where are all the American Jews who march and rally by the thousands to support Israel and the current Israeli government? A few staunch leaders still make pilgrimages - as have conservative Christian activists such as Gary Bauer, whom I saw in the lobby of my hotel deep in conversation with former Israeli Prime Minister Benjamin Netanyahu. But the rank-and-file Jews and conservative Christians who shout their support for Ariel Sharon while safe on U.S. soil are unwilling to risk a visit.
 The &quot;situation,&quot; as Israelis call this new intifada, has cost the Israeli economy two million tourists a year. Economic growth is expected to be less than 1 percent next year, while unemployment is projected to hit nearly 14 percent.
 The combined weight of security costs, lack of tourism and general gloom has slowed the economy dramatically. According to the Likud finance minister, Silvan Shalom, foreign investment has almost completely dried up, and Israeli investment is also slowing. The situation has prompted Shalom to call for steep cuts in the defense budget.
 The only Israelis holding their own - at the expense of the rest of the country - are settlers in the West Bank and Gaza, because their schools, housing and transportation are heavily subsidized as part of this government's desire to keep them in place, rather than offering them incentives to leave.
 The only growth industry currently in Israel is security services, as every business requires a guard. Young soldiers patrol the Jerusalem streets intermittently in their green army jeeps. With Palestinians in the territories on virtual lockdown, suicide bombings were certainly slowed, but as Israelis learned last week, they have not been eliminated. And the human suffering among Palestinians is becoming intolerable.
 It's understandable that people feel nervous about venturing to Israel, but if that is the case, one must ask how to resolve this stalemate, because as the empty streets attest, Israel is in a dire state. Just last year, Jews in Argentina considered Israel a possible refuge from that country's economic collapse. Now, one hears comparisons between the Israeli and the Argentine economies.
 For those who have dreamed of a strong Zionist state that could take in the world's Jews in need, blanket support for the Sharon government is simply not good enough.
 
 <i>
Jo-Ann Mort is co-author of &quot;Our Hearts Invented a Dream: Can Kibbutzim Survive the New Israel?&quot; and national secretary of Americans for Peace Now. </i>

TITLE: Fishy Business Turns To Sports and North Korea
AUTHOR: By Yulia Latynina
TEXT: Russia might not be a liberal country, but it's about to become much more &quot;sporting.&quot; The Justice Ministry, which refused to register Boris Berezovsky's Liberal Russia party, seems likely to take a more favorable view of Vyacheslav Fetisov's proposed Sporting Russia party. In a way this makes sense. The kinetic energy displayed by the mob on Manezh Square back on June 16 needs to be converted into political energy.
 
The Kremlin's destruction of the Communist Party has vacated a niche that will inevitably be filled, either by aggressive fascists or by a manageable sporting movement.
 While the Kremlin goes about the business of producing well-groomed athletes, today's athletes go about their business as usual.
 In Vladivostok, a former<i> sambo</i> or unarmed combat champion, Viktor Alexeyenkov, better known by his nickname, Alexei, was attacked and nearly killed. The attempted murder came hard on the heels of an attempt on the life of another athlete, Vladimir Nikolayev, better known as Vinni-Pukh, or Winnie the Pooh. Word is that Vinni-Pukh and Alexei just couldn't agree on how to carve up the fish - the main thing they divide up in the Primorye Region. Even Primorye Governor Sergei Darkin and former Governor Yevgeny Nazdratenko, now head of the State Fisheries Committee, couldn't reach a working agreement when it came down to fish.
 Darkin was the head of a company called Roliz. When he became governor, Darkin soon handed over the entire regional pollock quota to a trio of friendly firms - Roliz, Intraros and Ogni Vostoka. When Nazdratenko found out about this, he immediately overrode Darkin's orders and assigned the pollock harvest to companies loyal to the State Fisheries Committee.
 They say that relations between the two men soured to such an extent that Nazdratenko talked about ousting Darkin from the governor's office.
 Who is Darkin? Just a run-of-the-mill entrepreneur who used to work for Primorye's &quot;sportsmen.&quot; After the death of a local crime boss called Baul, poor old Darkin was caught in the middle between two criminal organizations. They even unloaded a machine gun right under his nose. The winner, they say, was none other than Vinni-Pukh.
 As governor, Nazdratenko was never under the athletes' thumb. Quite the opposite. Local legend in Vladivostok has it that Baul, an accomplished swimmer, drowned shortly after his relationship with Nazdratenko took a turn for the worse. Something about missing campaign funds.
 It would be nice if Darkin and Nazdratenko could settle their differences like Vinni-Pukh and Alexeyenkov, rather than running to Prime Minister Mikhail Kasyanov and the presidential envoy to the Far East, Konstantin Pulikovsky, who both have better things to do with their time.
 Pulikovsky recently found time to write his memoirs - a book called &quot;24 Hours With Kim Jong Il,&quot; about how he rode across Russia on the North Korean dictator's armored train. The book could be distributed as a supplement to the magazine North Korea. Pulikovsky writes that Kim Jong Il &quot;has an exceptional ability to manage people. I learned that he had mastered ancient treatises on management used to train the kings of Korea.&quot; Pulikovsky writes, with implied criticism of Primorye: &quot;Kim Jong Il said that the power structure prevents weaker cadres from rising to responsible posts.&quot;
 What can you say? Nazdratenko is no great leader, but the leader of a country where three million people have died of starvation is in no position to lecture him.
 One can only hope that Kim Jong Il, the diligent reader of ancient treatises on statecraft, will do his kingly duty and thank Pulikovsky by handing over all of the ships from Primorye that have fled to North Korea. Nearly a third of the Primorye fishing fleet is now in North Korea, riding out the endless battles between the governor, the State Fisheries Committee chief and the gangsters.
 
 <i>
Yulia Latynina is a journalist with ORT. </i>

TITLE: Looking on the Bright Side of White-Collar Criminality
AUTHOR: By Bill Keller
PUBLISHER: New York Times Service
TEXT: What I'm about to propose reminds me slightly of the final scene in &quot;The Life of Brian,&quot; in which the faux messiah and his followers, hanging crucified on a row of crosses, burst into happy song: &quot;Always look on the bright side of life!&quot; But you don't really have to be in a Monty Python mood to think that the cascade of grim tidings from Wall Street is, in many ways, good for the United States.
 
I know the accounting scandals, bankruptcies and vaporized stock values have caused real pain. With deep sympathy for the victims, though, it seems to me this is one of those inevitable, chastening moments from which we may benefit.
 To begin with, the crisis has deflated an artificially inflated market, and forced us to face up to the fact that we were living an economic lie. All those grinches who warned against stock values built on vague promises of future profits were right, and - c'mon, be honest - even as we sucked the nitrous oxide we kind of knew it. Any recovery begins with an honest reckoning.
 The truth may empty your pockets, but it will also set you free. Over the past decade we have been absurdly captivated by the stock market. The Dow became our national mood ring. Investing went from being a form of savings to being a kind of lottery. We became a country lined up on its elliptical trainers, pedaling to nowhere while staring blankly at the market ticker on CNBC. We didn't want to be like Mike. We wanted to be like Phil Jackson, clicking trades on his laptop. The fact that Americans are losing faith now is no bad thing; we've been worshiping in a casino.
 My father was a CEO who retired in 1989 with both his company and his reputation in robust health. He and his business friends watch the scandals now with amazement and horror, not so much at the venality as at the madness of corporate life. How did share price become the sole measure of success? How did corporate executives start feeling they had to spend half their time doing lap dances for market analysts? How did even industries whose accomplishments take years - bringing an oilfield on line, developing a new automobile - start jerking to the tempo of quarterly reports?
 When everyone was feasting together, moreover, it was easy to overlook that the system had grown blatant conflicts of interest. The consultant who taught you how to evade your taxes was partners with the auditor who testified that your accounts were on the up and up. The investment banker who underwrote your expansion was joined at the hip to the stock analyst who rated your stock. The directors of the company were too often well-stroked pets of the chief executive they were supposed to oversee.
 These corrupting arrangements are now being challenged, a little by legislation, a little by regulation, and in large part by angry shareholders, corporate executives and boards trying to save their companies' skins. The excesses of stock options are likely to be reined in. The conflicts of interest are being sundered. There will be fuller disclosure and tighter accountability, at least until the inventive minds of American capitalism open new loopholes. Integrity has regained some standing as a marketable corporate value. Witness the move by companies to occupy the moral high ground - Coca Cola by leading a move toward treating options as an expense, Charles Schwab by aggressively advertising the fact that its advisers do not get commissions for pitching you bad investments.
 &quot;American capitalism goes through this all the time,&quot; said Irwin M. Stelzer, director of regulatory studies at the Hudson Institute. &quot;The question this time was, does it still have its self-corrective powers? I think the evidence is that it does. It's amazing the speed with which the corrective antitoxins were injected into the system.&quot;
 Here's another cheering prospect. This shift in the zeitgeist may stimulate a healthy resistance to the overweening influence of corporate lobbies. I'm betting we won't be privatizing Social Security anytime soon, despite the president's continued devotion to the scheme. Legislation to stop companies from dodging taxes by setting up phony headquarters in Bermuda is at least up for discussion. President George W. Bush's tax cut - mother of all deficits - still seems nearly invulnerable, but who knows? 
 Democracy, like capitalism, also has antitoxins. They are called elections, and the next ones promise to be a lot more interesting. It was hard to stir much resentment of politicians who served the fat cats when we were all hoping to be fat cats. Now that our aspirations have been downsized, one can hope we will get some serious discussion about our national priorities.
 There is no reason voters' wrath should be reserved for Republicans. Democrats like Tom Daschle, Chris Dodd and Charles Schumer have helped smother important corporate reforms, and there are plenty of Congressional Democrats who act like wholly owned subsidiaries of special interests.
 But the Democrats enjoy the distinct advantage of running against a party and a president that put the lazy in laissez-faire, the party of the post-Enron shrug, the party of Harken and Halliburton, the party of the Enron-tainted Army Secretary Thomas White. The Democrats get to run against Harvey Pitt, who, whatever his skills as SEC chairperson, must be the most politically tone-deaf man to serve in Washington since Earl Butz, who memorably justified junk-food school lunch programs by declaring that ketchup is a vegetable. 
 And what of Bush's future? A lot can happen in two years, of course, and he seems to lead a charmed life. (For a while this summer it even looked as if Martha Stewart was going to take a bullet for him. The TV and tabloid fascination with her stock dealings briefly obscured the president's complacency.) But at the rate he's going, Bush will be lucky to steal a second term.
 
 <i>
Bill Keller is a columnist for The New Times to which he contributed this comment. </i>

TITLE: Russia as the Trump Card
AUTHOR: By Jim Hoagland
TEXT: AMERICA'S war on terrorism and Russia's pursuit of economic engagement with the West reinforce each other and now dominate world politics. Only a decade after the end of the Cold War, American and Russian leaders are moving toward an era of global entente that will reduce the strategic influence of Europe, China and Japan on Washington and Moscow.
 
This chilling thought has begun to take form in Europe's major capitals, where it is seen as a deeper and even more unwieldy phenomenon than American unilateralism. Concern also surfaces in statements from Tokyo and Beijing. A world long fearful of the consequences of superpower nuclear war now frets about the effect of deepening cooperation between the White House and the Kremlin.
 If global entente replaces the Cold War, one metaphor will survive the transition. It is still useful to see the Americans playing poker while the Russians play chess.
 President Vladimir Putin has become U.S. President George W. Bush's hole card with the Europeans. Bush is Putin's queen on the chessboard, to be moved into a position of rescue or of domination at decisive moments. They play different games, but intersecting goals and interests put them on the same side of the table.
 Case in point: Once-vocal opposition from Berlin, Paris and elsewhere to U.S. national missile defense - and particularly to Bush's proposal to scrap the Anti-Ballistic Missile Treaty - evaporated last fall when Putin quietly accepted Washington's withdrawal from the 1972 accord.
 &quot;It is a mistake,&quot; he grumbled, sacrificing the treaty as a lost pawn in his longer-term game.
 Without Putin and the Russians expressing righteous indignation, European leaders could no longer defend the arms control treaty as the cornerstone of strategic stability. And without the Europeans predicting doom, Bush's U.S. critics were deprived of critical ammunition.
 This pattern could come into play again in the diplomatic run-up to a rumored U.S. military strike against Iraqi dictator Saddam Hussein this winter. Diplomats recently in Moscow detect signs that Putin has already reached an informal, private understanding with Bush that Russia will not be an obstacle to U.S. use of force - once Bush has clearly and effectively made his case against Iraq to the world.
 The Foreign Ministry continues to argue otherwise as it frantically tries to rally Europeans and the Chinese to a common effort to save Moscow's ex-client in Baghdad. But Putin's pragmatism is almost certain to trump lingering Cold War loyalties once again.
 In an unusual public keynote address at the Foreign Ministry on July 12, Putin challenged Russia's most senior diplomats to take up his view of U.S. cooperation as the key to Russian economic and political revival. Putin told his ambassadors that Russia's diplomacy is unequipped to respond to free markets, modern media or the threat of global terrorism - and must be overhauled.
 Open Russian acquiescence on Iraq will change the international environment, particularly in the UN Security Council. Putin's tentative commitment to Bush moves Russia close to current French and British positions.
 French President Jacques Chirac and British Prime Minister Tony Blair have separately told Bush that they will support U.S. action after Washington has launched and completed a fresh, thorough effort to get Saddam to accept effective UN inspections for weapons of mass destruction, officials report. The assumption in London and Paris is that Saddam will risk war rather than accept intrusive inspections.
 Russia's defection would isolate China as the only permanent member of the Security Council opposing any form of military action against Iraq. Beijing is unlikely to push its opposition very strongly in these circumstances. And Europeans unhappy with U.S. policies see their room to maneuver diminishing.
 &quot;Since Sept. 11, Bush has treated Russia as a more reliable partner than his European allies,&quot; says one senior European official. &quot;Russia is more eager, and more pliable, on security matters. For Washington, the Europeans are too strong to be treated like Russia, as a junior partner, but too weak to oppose American designs. We are bothersome in-betweens.&quot;
 That view is speculative at this point. Russia's strategic leapfrogging of the Europeans is contingent on two developments. Putin's Foreign Ministry speech was an implicit admission that his policies do not yet have the support of his own national security elite or public. He must eventually secure that support. And its puny economy must expand rapidly if Russia is to have true weight in world affairs.
 But the trend lines do bring together the instinctual Bush and the intellectual Putin. The American must avoid letting the short-term demands of each hand that he plays block what he will need to do in the future (letting Putin off the hook on Chechnya or ignoring Russia's arms sales to China). And Putin cannot rely on the elegant inevitability of chess, as his communist predecessors did while their empire collapsed beneath them.
 
 <i>Jim Hoagland is a columnist for The Washington Post, where this comment first appeared. </i>

TITLE: Just Like the Good Old Sports Days
TEXT: IT is hard not to be at least a little bit skeptical about the real motives behind the creation of the Kremlin-backed sports organization Sportivnaya Rossiya, or Sporting Russia, which had its founding congress in Luzhniki Stadium on Friday - attended by the great and the good.
 
Chairperson of the State Sports Committe and former star ice-hockey player Vyacheslav Fetisov was unanimously elected leader of the organization although there wasn't much competition - in fact, there was no other candidate for the post. 
 In 1994, President Boris Yeltsin's friend and tennis coach Shamil Tarpischev (later minister of sport) set up something called the National Sports Fund. However, the fund, which enjoyed incredibly lucrative exemptions from paying customs and excise duties on imported alcohol and cigarettes, rapidly became an all-purpose slush fund for the Yeltsin administration. The operation ran until 1996, when Tarpishchev's high-level protectors in the Kremlin fell out of favor with the president and, finally, Tarpishchev himself was booted out in disgrace.
 But lo and behold: Among those on the 31-member Sportivnaya Rossiya council is none other than Shamil Tarpishchev. 
 Post-Soviet Russia has had an unhappy history of entanglement between the sporting world and the criminal underworld, starting with Otar Kvantrishvili, the former famous wrestler and reputed mafia godfather, who created and headed the short-lived Party of Sportsmen in 1993, before meeting with an untimely end the following year.
 Of course, Sportivnaya Rossiya is a far cry from all this. It has the official backing of President Vladimir Putin and its council is stacked with heavyweights from the sporting world, government, the parliament and big business such as: Alexander Karelin, olympic wrestler and Unity party member; Education Minister Vladimir Filippov; Russian Olympic Committee president Leonid Tyagachyov; Norilsk Nickel CEO Mikhail Prokhorov; Gazprom Deputy Chairperson Boris Yurlov; and several Duma deputies.
 Although it is strenuously denied, it is clear SR has the potential to mutate into a political organization, possibly offering its services to the party of power as the State Duma elections approach in less than 18 months.
 Also, with all its high-level connections, the organization clearly has great potential as a lobbying outfit, whether it be for sports-related projects or projects totally unrelated.
 However, a great deal remains unclear: Not least, why exactly Fetisov quit a very well-paid job as a hockey coach in the United States to become sports committee head with an estimated salary of $200 per month.

TITLE: We Should Keep the Army At Arms Length
AUTHOR: By Alexei Pankin
TEXT: SINCE noon Saturday, we have been overwhelmed by terrible television images: an SU-27 fighter jet skidding along the military airfield at Sknyliv near Lviv, a fireball, bodies scattered on the airfield, the injured covered in blood, shocked bystanders. And the growing body count of children and adults at the military airshow in the Ukraine.
 
On Sunday morning, Russian television viewers were witness to another show with the participation of military and civilians. ORT aired a 30-minute program about a visit made by the top managers and journalists of ORT to a military base in the Moscow region.
 Journalists merrily rode around in armed personnel carriers, shot at targets with pistols, submachine guns and machine guns and chatted about their shooting prowess with officers. Then they presented soldiers with expensive presents from various sponsors as a reward for excelling during military training. Such grandeur!
 President Vladimir Putin, out of respect for those that were killed in Lviv, canceled Navy Day celebrations in Sevastopol. A parachutist had been killed in celebrations to mark the same event that had taken place earlier in Vladivostok. The relatives of the crew members that perished on the Kursk submarine are disputing the conclusions of the official report on causes of the tragedy. All this comes from the news of just the past few days.
 If one looks more generally at news connected with the armed forces, one finds: Every week in Chechnya, dozens of Russian soldiers are killed; the case of Colonel Yury Budanov, who is charged with the rape and murder of a Chechen girl, continues; soldiers deserting their bases and going on murderous rampages has become a widespread phenomenon; officers and their families drag out a miserable existence.
 At one level, one could read into ORT's report an attempt by the country's main television channel to satisfy the populace's very real appetite for positive news and information.
 In practice, however, you get the modern equivalent of Potemkin villages and an indecent feast at a time of plague. It isn't just the unfortunate coincidence of these shows of happiness and tragedy, but also the fact that fundamental norms of journalistic ethics were forgotten or ignored: The ORT stars' trip to the army base took place over a week ago - journalists from leading publications were invited to gawk at the goings-on. A photograph of ORT general director Konstantin Ernst aiming into the distance with a submachine gun appeared on the pages of more than one newspaper.
 Similar photographs of Russian journalists posing with weapons in their hands can be found on the web site of the human rights organization Center for Extreme Journalism (www.cjes.ru). Only they are in a special section titled &quot;Don't Do This.&quot;
 It reminds us of one of the widely recognized ethical rules of our profession - when in a professional capacity, a journalist should not take up arms. Behind this, there is a much more fundamental issue: It is not the business of the journalist to be excessively familiar with, and get close, to his or her protagonists, if he or she wants to retain independent and objective judgment.
 And it is extremely unbecoming and inappropriate for the heads of media companies to do joint propaganda events with those who tomorrow could well be the subject of in-depth investigative reports.

TITLE: Global Eye
TEXT: <b>Strange Fruit
 </b>
&quot;By their fruits ye shall know them.&quot; And by their nuts as well.
 
The acorns of any presidential administration never fall very far from the tree - thus, the remarks made last week by one of George W. Bush's appointees to the U.S. Civil Rights Commission give us a pretty fair indication of what the future will look like if the Regime's seeds of tyranny ever come to full flower.
 Bush emissary Peter Kirsanow told a Detroit crowd last week that America could &quot;forget about civil rights&quot; if there is another terrorist attack on the United States by &quot;the same ethnic group that attacked the World Trade Center,&quot; the Detroit Free Press reports.
 What's more, such heathen devilry would cause the righteous folk in the Homeland to rise up and demand that the Regime chuck every last Arab-American into a concentration camp, Commissioner Kirsanow proclaimed.
 Kirsanow - one of Bush's many prank appointments, a &quot;Civil Rights&quot; commissioner who's spent his career opposing civil rights programs - said that he wasn't <i>advocating </i>an Auschwitz for Arabs, you understand. He was just saying that the public outcry for one would be almost impossible for the Bush Administration to withstand. (And you know they'd try <i>really, really </i>hard, too.)
 &quot;Nobody will be crying in their beer if there are more stops, more detentions, more profiling,&quot; Kirsanow told the crowd - which was made up largely of Arab-Americans, who came to protest the ongoing, un-Constitutional detention of Arabs without formal charges being carried out by Bush's biggest joke appointment: Attorney General John Jesus Jehovah Ashcroft.
 In fact, not only will there be a dearth of salt in the old hops, there will also be &quot;a groundswell of public opinion to <i>banish </i>civil rights&quot; altogether if al-Qaida comes a-callin' again, Kirsanow said.
 Therefore, citizens should just accept the Regime's police-state measures and stop bellyaching about the &quot;perceived erosion of civil rights,&quot; the commissar huffed. Otherwise, it'll be camps, curfews and kangaroo courts for the whole damn country.
 Let's connect the dots - or gather up the nuts - shall we? As Harper's reports, Bush's vice president, Dick Cheney, tells us that &quot;the prospects of a future attack are almost certain; not if, but when.&quot; Bush's FBI director, Robert Mueller, tells us: &quot;There <i>will </i>be another terrorist attack. We will not be able to stop it.&quot; Bush's warlord, Donald Rumsfeld, tells us: &quot;It is only a matter of time.&quot; And now Bush's point man on constitutional protection tells us - openly - that we can &quot;forget about civil rights&quot; when this unstoppable and absolutely certain new terrorist attack finally occurs.
 So where does that leave the future of liberty in the &quot;land of the free&quot;? Dangling on a noose from a tall Texas tree, that's where.
 
 
<b>Magna Force
 </b>
But Bush is just an amateur when it comes to gutting age-old civil rights. Sure, he's busy stripping away Constitutional safeguards that have stood for more than 225 years, but over in Tony Blair's own benighted isle of Blighty, they're putting the axe to the Magna Carta itself - <i>800 years </i>of legal protections against the power of the state, flushed down the loo in a trice!
 
Last week, Blair's &quot;New Labour&quot; (i.e., Old Tory in Nicer Shirts) government announced a sweeping &quot;reform&quot; of the UK criminal justice system, with draconian measures far beyond the dreams of Maggie the Merciless - or even murderous King John himself.
 The proposed &quot;overhaul&quot; abolishes protections against &quot;double jeopardy&quot; - being tried for the same crime more than once - and does away with the right to trial by jury in some cases, The Independent reports. These were rights wrested from King John and set down in the Magna Carta in 1215. They are, as the paper notes, part of the cornerstone of Western jurisprudence, which has for centuries been guided by this ideal: that justice should be prejudiced in favor of the rights of the individual against the vast, untrammeled power of the state.
 Now the Nicer Shirts will allow defendants to be relentlessly persecuted by the state, tried over and over again until the desired verdict is reached. You can never again be &quot;proven innocent&quot; of a crime, however malicious or sloppy the charges. They can always come back for another go at you.
 The &quot;reform&quot; will also allow judges to try &quot;complex cases&quot; of criminal fraud and &quot;risky&quot; cases against mobsters without bothering with those pesky juries - a plan provoking much glee in corporate boardrooms and Mafia hangouts (often one and the same place these days, of course). The wiseguys know it's much easier to corrupt one judge than 12 jurors.
 What's more, judges will now be allowed to reveal any past convictions of a defendant on trial in a new case - a heavy thumb tilting the scales toward conviction, especially in the many cases based on circumstantial evidence.
 British justice once seemed an enlightened counterweight to more primitive concepts of law, which vested all rights and power in the state and left individuals to the mercies - tender or otherwise - of arbitrary rulers. It sought to hedge in the corrupting nature of power with safeguards that stood between the accused and the great engines of coercion embodied in the state.
 But it takes courage and wisdom to uphold such an ideal, to transcend our monkey-brain urges toward herd and hierarchy. And the leaders of the West are plainly losing their nerve - and their senses - in the headlong flight from individual liberty now infecting the &quot;civilized&quot; world.
 Nice shirts, though.
 
 <i>For annotational references, please see Global Eye in the &quot;Opinion&quot; section at www.sptimesrussia.com </i>

TITLE: Jet Kills 83 in Crash at Ukrainian Air Show
AUTHOR: By Tim Vickery
PUBLISHER: The Associated Press
TEXT: LVIV, Ukraine - The bright sun lighting their grim faces, hundreds of family members and survivors gathered Monday for a memorial ceremony on the charred Ukrainian airstrip where a military jet plowed into air show spectators, killing at least 83.
 
As investigators sought to determine who was to blame, Ukraine's air force commander and a top officer had been detained, the Su-27's two pilots were under investigation and the country's defense minister had submitted his resignation. Two main causes were being considered - pilot carelessness or the mechanical failure of the 15-year-old plane.
 All of Ukraine held a day of mourning Monday for the victims of Saturday's crash, the world's deadliest air show accident.
 Officials at the mayor's office in the western city of Lviv said a total of 83 people had been killed, including 23 children, and 199 people were injured. Forensic experts were still identifying remains on Monday. The first funerals were scheduled for Tuesday.
 Relatives of the dead and spectators who survived the disaster, clutching carnations and handkerchiefs, streamed Monday into the Sknyliv air base for a brief memorial ceremony, led by Ukrainian Orthodox clerics singing and reading prayers. One woman held a candle.
 Flowers were strewn around the singed turf where the fighter jet exploded in a huge ball of fire. The site was cordoned off by security officials.
 The jet had been performing a risky maneuver at low altitude when it nicked the ground, sliced off the nose of a plane on the ground and roared through a crowd of hundreds of spectators. The pilots catapulted and survived.
 &quot;The plane started killing people as it was coming in,&quot; said Ivan Kravchenko, who saw the crash from about 50 meters away. &quot;I thought, 'It's flying too low over people. This is not a good stunt.&quot;'
 He said his grandson, 4-year-old Vitaly, asked him later, &quot;Grandpa, is that what's supposed to happen?&quot;
 Raisa Volodymyrova was standing next to the Il-76MD that was clipped by the Su-27.
 &quot;There were piles and piles of people around me. There was a body of a child lying on me,&quot; she recalled tearfully at Monday's ceremony.
 The accident was the latest blow for Ukraine's cash-starved military.
 Defense Minister Vladimir Shkidchenko tendered his resignation Sunday, which was being considered by President Leonid Kuchma. Shkidchenko's predecessor was fired after a Ukrainian missile accidentally downed a Russian passenger jet over the Black Sea.
 Air Force Commander General Colonel Vladimir Strelnikov and Lieutenant Colonel Stepan Opyshchak were fired by Kuchma and detained on suspicion of &quot;negligent attitude to military service that led to grave consequences,&quot; the Prosecutor General's Office said. Kuchma also fired the chief of the general staff.
 A court will decide whether to arrest the two pilots after they recover from their injuries, prosecutors said.
 Russian officials and media said pilot error was likely to blame, and criticized Ukraine for failing to maintain its Soviet-era aircraft and properly train pilots - criticisms that also have been leveled at Russia's post-Soviet military.
 &quot;In Ukraine, as in Russia, flights are conducted irregularly, the equipment gets stale and often the human factor can bring about a tragedy,&quot; Russian test pilot Anatoly Kvochur was quoted by Kommersant newspaper as saying.

TITLE: Rescuers Win Race With Water To Save Pennsylvania Miners
PUBLISHER: The Associated Press
TEXT: SOMERSET, Pennsylvania - Three of the nine coal miners rescued from a flooding pit in Pennslvania on Sunday were still in hospital Monday morning.
 
One of the miners was briefly in a decompression chamber after experiencing early symptoms of the bends, an excruciating condition caused by sudden changes in pressure, said Dr. Russell Dumire, a trauma surgeon at Conemaugh Memorial Medical Center, where six of the miners were taken.
 One miner told family members that he will &quot;never go underground again,&quot; according to his daughter.
 Though they were covered in coal dust and their heavy-duty clothes were soaked through, the miners surprised medical personnel, who had prepared to treat them for symptoms of hypothermia or the bends. Decompression chambers, ambulances and helicopters were at the scene, 88 kilometers southeast of Pittsburgh.
 Trapped 80 meters underground in a flooded mine for three days, one thought kept creeping back into Harry Mayhugh's mind: He didn't kiss his wife goodbye before he left for work.
 As more than 150 rescue workers and neighbors above ground struggled to reach them, he and eight other coal miners fought to keep their heads above the cold water, huddled together for warmth, and hoped.
 &quot;It was the only day in my life I never kissed my wife before I went to work. It had to be the day,&quot; he said Sunday, breaking down into sobs as he stood with his arms around his wife, Leslie.
 In a rescue that transfixed the country, all nine miners were pulled safely from the Quecreek Mine in rural western Pennsylvania, after water from an abandoned mine flooded the shaft where they were working.
 A desperate rescue operation with tons of heavy equipment and 18 medical helicopters finally paid off when rescuers reached the miners Sunday morning and pulled them up a narrow shaft, one by one, in a yellow cylindrical capsule.
 As each was slowly raised, one by one, through the narrow hole in a two-meter-tall yellow cage, at least two gave a thumbs up. Their coal-covered faces managed smiles. Rescuers greeted them with applause and shouted out nicknames.
 But underground, Mayhugh described a nightmarish scene: The men tied themselves together so they would &quot;live or die as a group.&quot; On Thursday, when the water in the shaft was rising, he asked his boss for a pen.
 &quot;I said, 'I want to write my wife and kids to tell them I love them,'&quot; said Mayhugh, choking back tears.
 &quot;Everybody had strong moments,&quot; he said. &quot;At any certain time maybe one guy got down, and then the rest pulled together and then that guy would get back up and maybe somebody else would feel a little weaker. But it was a team effort. That's the only way it could've been.&quot;
 The miners became trapped about 9 p.m. Wednesday, when they inadvertently broke into an abandoned, water-filled mine that maps showed to be 100 meters away.
 Mayhugh said a one-meter-high wall of water - as many as 60 million gallons - came crashing through the breached wall.
 &quot;We tried to outrun it, but it was too fast,&quot; he said.
 But they were able to warn a second crew, which escaped.
 &quot;They are the heroes. If not for them, there'd be dead bodies,&quot; said mine worker Doug Custer, among the group who escaped.
 The trapped miners spent roughly five hours in the water, at one point attempting to break through another wall to try to bring the water level down. Instead, the level rose, forcing them to swim in their heavy clothes, Mayhugh said.
 The miners also huddled around a pipe funneling down warm air.
 Drilling a rescue shaft to the men began more than 20 hours after the accident when a drill rig arrived from West Virginia. Drilling was halted early Friday morning because a 1,500-pound drill bit broke after hitting hard rock about 100 feet down, delaying the effort by 18 hours.