SOURCE: The St. Petersburg Times
DATE: Issue #872 (40), Tuesday, June 3, 2003
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TITLE: Putin Shows Off Hometown to World
AUTHOR: By Simon Saradzhyan and Natalia Yefimova
PUBLISHER: Staff Writer
TEXT: With dancers painted in gold from head to toe, floating fountains and choreographed laser beams dancing across the nocturnal skies, more than 40 visiting heads of state and their spouses had every chance Saturday to heed the advice of President Vladimir Putin and forget about politics for a while.
Cordoned off from residents and sightseers by police officers, secret service agents and navy divers, world leaders sailed, rode and walked with Putin from one landmark to the next in an exclusive tour of St. Petersburg during the 300th-anniversary celebrations.
Putin arrived in his hometown Thursday and immediately joined in the festivities by attending a rock concert. The president and his wife, Lyudmila, braved the Thursday evening chill to chat with teenagers before warming up near a roaring bonfire, according to media reports. Lyudmila Putina even danced with one young man to the thumping music of local rock band Leningrad, known for its obscenity-packed lyrics.
On Friday, Putin took Japanese Prime Minister Junichiro Koizumi to a martial-arts school to watch students practice one of his favorite sports, judo.
Later in the day, Putin led foreign dignitaries and their spouses to St. Isaac's Cathedral to hear religious leaders and soft choral music. An evening concert at the sumptuous Mariinsky Theater rounded out the day.
Saturday morning dawned with a mini-concert by Italian tenor Luciano Pavarotti, heavy-metal band the Scorpions and other stars, who sang St. Petersburg's anthem for the world leaders outside their guesthouses at the Konstantinovsky Palace.
Inside the recently renovated palace, Putin showed his guests a short film called "Resurrection of the Masterpiece" devoted to the restoration of the Konstantinovsky Palace. Putin called the former imperial residence "an outstanding work of Russian and European architecture" that had fallen into such decline in the Soviet era that it had become "a real dump", with virtually no walls or roof.
Instead of the promised 1 1/2 minutes, the film lasted at least five. There was no commentary on the history of the palace, which was badly damaged in World War II and restored in just over a year at a cost of nearly $300 million. There was dramatic music to go with scenes of wartime bombardment, switching to a more upbeat, fast-paced tune as footage of busy construction workers flashed on the screen. Putin's guests watched politely, while waiting for him to begin the EU summit.
Perhaps impressed by the outcome of those talks - or the Russian cuisine - European Commission President Romano Prodi compared the relationship between Russia and EU to vodka and caviar.
"Not everyone understood what he meant, but everyone smiled," Rossia television said in its account of the three-hour EU-Russia summit.
The next stop was the Catherine Palace in Pushkin, where Putin and German Chancellor Gerhard Schroeder were on hand for the official presentation of the recreated Amber Room. The original disappeared after German soldiers dismantled it and took it back to Germany 60 years ago.
Schroeder was clearly impressed with the extravagance of the room, which was recently reconstructed by Russian artists with the help of German funding. He stopped to put on his glasses and closely examine some of the more than half a million pieces of amber.
French President Jacques Chirac got so carried away by the room that he was late for a luncheon address by Putin in a nearby hall, according to television reports.
"Today we have visited the legendary Amber Room, which was brought back to life through the mutual effort of Russian craftsmen and the support of German partners," Putin said in the address. "This masterpiece has become a symbol of the new relations in the united family of our greater Europe."
But this was not the last banquet or toast for Putin on Saturday.
After marvelling at the Catherine Palace, the guests were whisked to the grandest of St. Petersburg's palaces - the Winter Palace, the former seat of the tsars and current home of the State Hermitage Museum. The guests got a chance to look at an exhibit about Peter the Great but didn't have time to sign the guest book before being rushed to the nearby bank of the Neva River to watch a water show.
Donning shawls and overcoats to protect themselves from the bitter Baltic wind, they watched a procession of imperial seagoing vessels, floating fountains and 45 rowboats, each carrying the national flag of the visiting dignitaries' home countries. The ships plowed through the choppy waters to the strains of Tchaikovsky and other Russian composers.
The leaders then went for a boat ride of their own - on three hydrofoils - to the Grand Palace in Peterhof. Before they boarded, however, they had to wait for navy divers to give a security clearance from underwater.
U.S. President George W. Bush joined the leaders at the palace for an outdoor banquet with the Gold Ballet troupe. Ballet dancers - some painted gold to match the sculptures in the majestic palace garden - performed against the backdrop of the garden, fountains and man-made waterfalls.
Bush, making good on a promise not to let his feelings about those who opposed the war in Iraq get in the way of the party, shook hands with Schroeder and asked him, "How are you?" But he missed Chirac, who returned home early, ostensibly to get ready for the G-8 summit that started Sunday in Evian, France.
Bush briefly shook Chirac's hand on Sunday in Evian.
The Putins and the Bushes strolled together along the palace's halls, and the Russian leader took advantage of the moment to demonstrate his English, which he is currently studying, to the Americans.
It was in Russian, however, that Putin later raised a glass of champagne in a toast, urging his guests to put politics behind them for the night.
"This evening you can forget about everything and relax. It is not often you have a chance to be with your spouses," Putin said.
He offered them coffee at a nearby pavilion and then took them back outside for a laser and fireworks extravaganza at 10 p.m.
TITLE: Russia and U.S. Put Quarrels In the Past
AUTHOR: By Natalia Yefimova
PUBLISHER: Staff Writer
TEXT: With hugs and handshakes, President Vladimir Putin and U.S. President George W. Bush publicly buried the hatchet in their disagreement over Iraq on Sunday and looked instead jointly to thwart the spread of weapons of mass destruction, especially in Iran and North Korea.
"Friends can disagree, go beyond that disagreement and work in a constructive way to ... maintain peace," Bush told reporters after a 45-minute meeting at the Konstantinovsky Palace in the St. Petersburg suburb of Strelnya.
Both leaders said that weathering the Iraq crisis - when the two countries had taken opposite positions on U.S. military intervention to oust former Iraqi President Saddam Hussein - had only made them closer, even on the issue of Iran's alleged pursuit of nuclear weapons, which Moscow had heretofore denied.
"Russia and the United States have mutual concerns about the advanced Iranian nuclear program. We understand the consequences of Iran having a nuclear weapon and, therefore, we want to work together ... to insist that they do not have a nuclear weapon," Bush said. "I appreciate Vladimir Putin's understanding of the issue and his willingness to work with me and others to solve this."
Putin said that the positions of Russia and the United States on Iran are closer than people thought. Both countries are urging Teheran to sign additional protocols of the International Atomic and Energy Association, which would open up nuclear facilities to more thorough inspections.
Putin dropped a small fly in the ointment, however, saying that Russia was wary that "the pretext of an Iranian nuclear-weapons program [could be used] as an instrument of unfair competition" against Russian companies.
Washington has urged Russia to slow down work on the atomic power station it is building near the Iranian port of Bushehr, pending iron-clad guarantees that Iran would return any nuclear fuel it receives for the plant, said a senior U.S. diplomat familiar with the meeting.
The diplomat said that Putin's comment may have referred to uranium-enrichment technology that was recently discovered in Iraq and traced to a European company. He added that the U.S. administration suspects that the technology may have gotten into Iranian hands illegally, not from the company itself.
Notwithstanding the friction on this front, Sunday's meeting was full of good will, with both leaders stressing the personal element of their sturdy relations.
"We have lots of coinciding points of view," Putin said. "This is what allows me to call President Bush my friend and him to call me his friend, not just the fact that I like him personally ... and his family."
Bush, on his third trip to Putin's native city, called the Russian leader "my good friend" and invited him to visit Camp David this September, around the time of a U.S.-Russian forum on energy cooperation. Foreign Minister Igor Ivanov said that Putin had accepted.
Bush also called for the two countries to boost high-level contacts. It was not clear whether the plan to do so was directly linked to misunderstandings over Iraq, but the senior U.S. diplomat said that channels of communication between the two countries needed to be broadened "to make sure the thinking of both sides would be reflected in our policy."
The diplomat added that the closer ties would build in part on existing links between Bush's national-security adviser, Condoleeza Rice, and Putin's chief of staff, Alexander Voloshin, who jetted to Washington earlier this year for talks before the Iraq war.
During their meeting, the presidents discussed the next phase of rebuilding postwar Iraq, in which Russia has been eager to participate. First UN sanctions and then this year's war have put a freeze on billions of dollars in Russian oil contracts and credits to Baghdad.
Citing Russian companies' extensive experience in Iraq, Putin offered "everything at our disposal, our experience and resources" to help rebuild the country.
"We are not ruling out the possibility that our companies will work there," Putin said. "This will depend on the situation that is developing in Iraq, including the oil-for-food program."
Bush thanked Putin for supporting UN Resolution 1483 on lifting sanctions against Iraq and acknowledged Russia's history of involvement in the region, but said that "the Iraqi people will make the decision which is in their best interest."
The presidents also signed off on papers marking the ratification of the nuclear-arms reduction agreement known as the Moscow Treaty. The U.S. Senate ratified the document earlier this year, while the Russian parliament finally passed it about a week before the two leaders met.
TITLE: VOX POPULI
TEXT: The preparations for St. Petersburg's 300th-anniversary celebrations brought positive predictions from federal and local leaders, feverish last-minute construction and restoration works and complaints about security, traffic and other inconveniences from residents. Now the frantic jubilee period has ended, Staff Writer Irina Titova asked some city residents about their impressions of the festivities.
Yelena Vasilenko, 39, lawyer
The jubilee was terrible from the point of view of the city's residents. It was impossible to get anywhere, many of the streets were closed. Simply put, it was a celebration for guests and not for the city residents.
My friends and I, for instance, had to watch the fireworks from a point very far away, as there was no opportunity to get closer because of the size of the crowd. We also wanted to see the parade of marching bands but, again, it was impossible to push through the crowd.
I'd say it was badly organized.
I'm happy that we've survived all of these crazy days, but most of the people I know just went to their dachas during this period.
Anna Lisitsyna, 20, secretary
I have to admit that I expected much more from the celebrations.
For example, I didn't like the laser show, which had been so well advertised They also promised to seed the clouds but this obviously didn't work, considering how bad the weather was.
Nadezhda Fyodorova, 50, engineer
I think that the celebrations were good. It was very pretty all around. It's been a long time since the city saw a celebration this big and this good.
I went to the city carnival and, although the crowds were large, it really looked impressive. I watched the rest of the events on television, and I liked what I saw.
I think that the jubilee had positive effect on the city, because many historical places were restored for the event, along with a number of new facilities that were built.
I also think that the EU-Russia and the CIS summits that were held here over the period will probably bring more investment to the city.
Oleg Mineyev, 38, computer programmer
My wife spent four hours on a commuter train on her way to the dacha, because the train had to stop to let some of the official delegations pass. As you can imagine, she wasn't very happy.
Personally, I was trying to see the laser show during the evening on City Day. They announced that there were about 1.5 million people who came to see the show but, about 10 minutes after the start, a lot of people began to leave. I don't think that they were impressed.
Irina Vasilyeva, 49, interpreter
I think the celebrations were a success. Most of all, I liked the general festival atmosphere and holiday flavor.
In fact, I spent most of the celebration period out of the country but, when I returned and went down to the Neva River at night, I really enjoyed the view of the city.
With regard to the organization, the big political events were set up well, but this was less the case at lower levels
Jerzy Vavruk, engineer from Poland
I liked the celebration and would like to buy a videotape of it to be able to see the whole picture because it was impossible to see some of the events. It was my first time in St. Petersburg and I was impressed by the number of beautiful monuments.
TITLE: Putin Gets His Minor Diplomatic Victories
AUTHOR: By Natalia Yefimova
PUBLISHER: Staff Writer
TEXT: President Vladimir Putin hosted a Russia-EU summit on Saturday that may have been short on results but allowed him to score all the minor diplomatic victories he hoped for: greater cooperation with the European Union, virtually no criticism about Chechnya and a promise of further talks on visa-free travel.
Visibly pleased to be playing host in his native city, a smiling Putin warmly greeted world leaders and their delegations Saturday at the newly restored 18th-century Konstantinovsky Palace in Strelna. The president shook hands with each new arrival, chatting without an interpreter in German and English.
Putin used the summit, one of three high-level meetings held during the tricentennial celebrations, to emphasize his country's European heritage, saying that the venue for the meeting - known as Russia's "window to Europe" - carried "a special symbolism."
"The city on the Neva personifies Russia's choice made long ago in favor of deep and many-faceted cooperation with Europe, based on the commonality of cultural values and roots," Putin said as he opened the summit, attended by the heads of 14 EU countries and another 10, mostly former Soviet satellites, due to accede next year.
In pressing his idea about Russia's place in Europe, Putin warned against creating "a new Schengen wall" and repeated earlier calls for visa-free travel for Russians throughout the continent.
"We understand that such a system won't be established tomorrow," Putin said. "But the citizens of greater Europe should know when, how and at what price freedom of movement, one of the most significant rights of every person, will be achieved."
European Commission President Romano Prodi said that eliminating dividing lines and aiming for a common European space where Russians can participate in everything except institutions was an important long-term objective. But he also rattled off a list of EU concerns that would need to be addressed before this could happen, including organized crime, poor border control and low-tech, easy-to-forge travel documents.
The pervading mood, however, was one of bonhomie. Putin surprised guests and observers by dispensing with protocol and asking his European counterparts for their consent to open the entire summit to the press. No one objected.
"We have a very strong partnership," Prodi told reporters after the talks, likening the interdependence of Russia and the EU to "vodka and caviar."
In order to further cooperation, the European and Russian leaders decided to increase the frequency and intensity of political dialogue by transforming the existing, somewhat flimsy Russia-EU cooperation council into a Permanent Partnership Council.
"This body will meet not once a year [as now], but more often, and not only at the level of foreign ministries, but with the participation of federal ministries and agencies from other fields," Foreign Minister Igor Ivanov said Sunday, welcoming the move.
The toughest obstacle diplomats had forecast for the summit had been disagreement over the simmering violence in Chechnya. While European politicians have repeatedly criticized rights violations by Russian troops, Moscow has cast the fighting as part of a war on international terrorism, especially after the terrorist attacks in the United States on Sept. 11, 2001.
Ultimately, Russia came out on top, receiving acknowledgement of the terrorist threat emanating from Chechnya and praise for the recent Moscow-organized referendum, which confirmed the republic's status as part of Russia.
While some leaders made explicit references to human rights in Chechnya, the summit's final joint statement included very general wording on protecting human rights there and condemned "any kind of violence, in particular terrorist acts."
TITLE: 10 Years on, CIS Has Yet To Create An Identity
AUTHOR: By Natalia Yefimova
PUBLISHER: Staff Writer
TEXT: Ten years ago, as leaders of the Commonwealth of Independent States got set to meet for one of their first summits, in Minsk, Belarus, a prominent local businessperson said skeptically: "We have not felt the CIS. It is a paper organization."
As CIS leaders wrapped up an informal summit on Friday, it became ever more clear that Konstantin Ustymchuk, then the director of the Minsk Motorcycle and Bicycle Factory, was something of a fortune teller: The loose group of 12 former Soviet republics has yet to become a viable mechanism for economic cooperation.
Ukrainian President Leonid Kuchma summed up the summit, stunning reporters by showing up alone at the scheduled news conference. Flanked by empty chairs that had been set up for the other CIS leaders, Kuchma said in his brief address that the two-hour meeting had been "intense" and "brought results."
The top result on Kuchma's list was an agreement to firm up CIS plans for creating a free trade zone ahead of the group's September summit in Yalta - hardly a breakthrough considering that the original plan to create such a zone was signed in 1994. Since then, disagreement over issues such as export duties, tax payments and gas supplies has stalled progress on the project. Speaking to reporters on Sunday, Foreign Minister Igor Ivanov said that the most problematic issues at the summit had been the form and pace of economic integration.
The 11 CIS leaders present at Friday's meeting, not attended by ailing Azeri President Heidar Aliyev, decided to prolong for another 10 years an agreement on the rights of deportees and minorities and to send observers to upcoming elections in Azerbaijan and Georgia. They failed, however, to agree on what to do with peacekeepers in breakaway Abkhazia and set a two-week deadline to settle the issue.
The summit took place aboard a high-security, five-star cruise ship, the Silver Whisper.
"Many of those gathered in this hall have a great many connections to Petersburg," Putin said in opening remarks before the meeting. "Some of you studied here. Some of you have friends here. ... This is a unifying element. We tried to do everything necessary for you to feel at home, among friends."
After the talks, the CIS leaders were plied with traditional Russian fare, like mushroom pies, pelmeni and blini with caviar, Itar-Tass reported. But their sometimes-strained relations were highlighted by the last-minute change at the post-summit news conference.
In contrast to the openness demonstrated at Saturday's Russia-EU summit - which, at Putin's suggestion, was broadcast live in its entirety - the CIS heads of state voted unanimously to have Kuchma speak to journalists by himself. Questions were officially forbidden.
No explanation was given for the change, but it sent the rumor mill whirling. Some observers speculated that summit organizers did not want any public reminders of the presence of Saparmurat Niyazov, the autocratic Turkmen president who has had a good deal of friction with Moscow lately.
Others suggested that Kuchma's one-man appearance was meant to shield Georgian leader Eduard Shevardnadze from unpleasant questions about a recent Russian press report that Washington would use bases in Georgia and Azerbaijan to launch an attack against Iran. Georgia has denied the allegation.
TITLE: Some of Putin's Guests Low on Party Spirit
AUTHOR: By Natalia Yefimova
PUBLISHER: Staff Writer
TEXT: The weekend's Russia-European Union summit was full of backslapping and compliments. But it was clear that some guests didn't feel as welcome as others.
While President Vladimir Putin used the meetings and festivities to cement good relations with Western leaders, the mood between Russia and its closest neighbors - eight former Soviet satellites due to join the EU next May - were markedly cooler.
A residue of ill will still tarnishes ties between Moscow, the former imperial master, and its erstwhile dependents. And Saturday's summit was no exception.
Speaking toward the end of the meeting, Polish Prime Minister Leshek Miller riffed on the recurring theme of Putin's native St. Petersburg as Russia's window to the West.
Unfortunately, it was closed many times in history," said Miller, referring to the Soviet government's repressive policies.
The seating arrangement also gave a hint about who is who. While Putin and the EU leaders sat at a giant circle of desks in the center of the regal hall, the heads of the candidate countries were relegated to the back of the room, perched at two tables in the corners.
Czech leader Vaclav Klaus did not conceal his resentment, saying it was tough to say something "sufficiently optimistic" when sitting in second class.
"We are in the second circle," he said, playing on the title of dissident writer Alexander Solzhenitsyn's novel "The First Circle" about a slave-labor camp where scientists toil for the benefit of the Soviet state.
Russian officials have repeatedly raised concerns about the problems that could accompany the EU's eastward expansion.
Next year's accession of the Czech Republic, Estonia, Hungary, Poland, Slovenia, Latvia, Lithuania and Slovakia, as well as Cyprus and Malta, will require changes to about 100 bilateral agreements, deputy presidential chief of staff and foreign policy adviser Sergei Prikhodko told Interfax last week.
TITLE: Regions Unsure About Jubilee
AUTHOR: By Vladimir Kovalev
PUBLISHER: Staff Writer
TEXT: KOTLAS, Far North - While a survey conducted in all of Russia's regions by the presidential administration in May reported that over 90 percent of respondents viewed St. Petersburg's 300th anniversary as a positive event, the citizens of Kotlas seem to be split more evenly on the question.
Located 1,025 kilometers to the northeast of St. Petersburg, in the Murmansk region, Kotlas is a city of 80,000 that resembles many other provincial towns in Russia. Grass sprouts through the numerous cracks in the asphalt sidewalks and the four-story yellow buildings built in the Stalin era appear not to have seen a fresh coat of paint since.
In a city far-removed in character from St. Petersburg, some of the residents were awed by the celebrations held in the city on the Neva River over the last week, but others complain about billions of rubles being spent on an anniversary party while the majority of the country lives in poverty.
"This is Russia's second-most important city and it has earned the right to celebrate its anniversary this way. The question is not about the money, as this is an advertisement in Europe for all of Russia and for the city in particular," said Dmitry Ivantsov, a 26-year-old engineer, who moved to the Kotlas region from the Southern city of Bryansk a few years ago. "It's not like it's something that happens once every 10 years ... so I don't think that this is a big price to pay."
Nikolai Mokrestov, 65, was not as optimistic, saying that, although he respected people from St. Petersburg and thinks of the city as "the capital of the Northwest [Region]," he questioned the government's decision to spend so much money on the events when the economic situation is so difficult.
"I can't see how this celebration is good for all of Russia. What kind of celebration can it be when we have nothing on our tables to celebrate with? The government has completely forgotten about the people," Mokretsov said. "My wife and I have a combined monthly income of 3,300 rubles [about $110], so I have no choice but to dig here. ... What kind of culture can a hungry person talk about?"
Lukyan Shashkov, a priest who heads the Russian Orthodox Old Believers Spiritual Mission for the Vologda, Archangelsk, Murmansk regions and the Karelian Republic, was not happy with the money being spent, and even more scathing when talking about St. Petersburg and what it stood for.
"This celebration is just putrid. [St. Petersburg] is just not a city and it will fall through the ground as was predicted," Shashkov said. "Tens of millions of people died while it was being built by Peter the Great, so what else would you expect? He wanted to change Russian people by forcing them to put on European coats and shave off their beards. This was just a way mock the Russian people."
Part of Peter the Great's program of Westernization involved adopting European dress and social habits, some of which, including shaving off beards, drew fierce opposition from the Old Believers, a sect that split from the Russian Orthodox Church in the 17th century.
But the debate over the city's history meant little to Natalya Strekalovskaya, 26, a waitress at Kotlas' XXL nightclub. She said that she had never been to St. Petersburg, but enjoyed what she had seen of the celebrations on television.
"It's is a question of money - it's too far away," she said. "But I would like to go to see a museum. Plus there's another interesting thing to see, the things they open at night ... the bridges."
TITLE: EU Backs Russia Stance on Chechnya
PUBLISHER: Combined Reports
TEXT: The European Union on Saturday welcomed Russian moves to find a political solution to the war in Chechnya and condemned violence in the republic, but did not specifically address allegations of brutality by Russian soldiers against Chechen civilians.
In a joint declaration, the EU and Russia said that they hope "that the recently started political process as well as the economic and social reconstruction will lead to the restoration of the rule of law, thus promoting the protection of human rights and a genuine reconciliation in Chechnya."
Greek Prime Minister Costas Simitis, the EU's current chairperson, said that the 15-member bloc did not want to see progress toward political settlement "undermined" by "terrorist attacks" in Chechnya over recent days.
"Russia is absolutely right in trying to solve [the problem] through political dialogue," British Prime Minister Tony Blair said.
But Russia has refused to negotiate with rebel leaders in seeking an end to the 3 1/2-year war. Instead, the Kremlin has pushed for stabilization by calling a March referendum in which a Chechen constitution was approved.
Despite those moves, new carnage wracks Chechnya almost daily. An explosion at a bus station killed at least three people Friday in Grozny.
The Chechen Emergency Situations Ministry said a radio-controlled landmine exploded close to a passenger bus and several other vehicles, killing three people and wounding at least two.
The bus driver, Uvad Dzhamalayev, said that the explosion killed passengers in other vehicles and no one was killed on the bus.
Earlier in May, two separate suicide attacks in Chechnya killed at least 78 people.
Although Simitis and Spanish Foreign Minister Ana Palacio condemned terrorist attacks in Chechnya, the European leaders did not mention widespread accusations that soldiers have killed, raped and robbed Chechen civilians and brutalized them during so-called mopping-up operations aimed at flushing out rebels.
"Yesterday, terrorists struck all of us once again; all of us because the target of each act of terrorism is aimed at destroying our common values, the values of an open society of freedom and democracy," Palacio said.
Jan Peter Balkenende, the prime minister of the Netherlands, which currently chairs the OSCE, a leading human rights and security organization, also welcomed the recently started political process and said that it "supports the path chosen by the Russian Federation as the right and only one."
Putin thanked the Organization for Security and Cooperation in Europe for its support and said that Russia would give Chechnya the widest autonomy within the framework of the Russian Constitution and the constitution recently approved in a referendum in Chechnya."
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Pro-Moscow Chechen administration head Akhmad Kadyrov said Sunday that a reward was being offered for information about the whereabouts of rebel leader Aslan Maskhadov, whom he accused of masterminding recent terror attacks in Chechnya, Interfax reported.
Kadyrov did not give details about the reward, saying only that local officials throughout Chechnya were notifying the public about it. On Saturday, Kadyrov signed a decree creating a Chechen State Council that will act as an interim legislative assembly until local elections are held in December, Interfax said.
The council will include the mayors of Grozny, Gudermes and Argun, the heads of Chechnya's 15 district administrations and an elected representative of each district. It was not clear when the representatives would be elected.
The State Council will hold its first session June 12, Interfax reported.
(AP, SPT)
TITLE: IN BRIEF
TEXT:
MOSCOW (AFP) - Russia's failure to reform its military is standing in the way of full cooperation with NATO, a high-ranking NATO official said Monday.
"The Russian military structure does not want reform, although it is necessary that this be done," said Chris Donnelly, special adviser to NATO Secretary General George Robertson.
"This is why there remain problems in finding general points of cooperation," said Donnelly, in remarks quoted in Russian by Interfax.
Baltics Guarantee
MOSCOW (AFP) - Russia wants guarantees from NATO that it will not set up foreign bases in Estonia, Latvia and Lithuania after they join the Western alliance next year, the Foreign Ministry said.
"We intend to put the question firmly of the formulation of precise and unequivocal guarantees that arms and military forces of third countries will not be deployed on the territory of the Baltic countries," ministry spokesperson Alexander Yakovenko said Sunday.
Gordeyev Demoted
MOSCOW (SPT) - The Agrarian Party stripped Deputy Prime Minister Alexei Gordeyev and Nikolai Kharitonov, the head of the agro-industrial faction in the State Duma, of their senior party posts Satuday, Interfax reported.
The party's plenum said that Gordeyev, who is also the agriculture minister, and Kharitonov have not been representing the Agrarian' interests in their work in the government.
Gordeyev and Kharitonov had belonged to the Agrarian Party's central council.
Although they remain members of the party, Kharitonov might be expelled at the party's next congress, possibly in August, the plenum said Saturday.
Cosmonaut Dies
MOSCOW (AP) - Soviet cosmonaut Oleg Makarov, who survived a harrowing launch accident when the booster rocket carrying his capsule exploded after lift-off, died of a heart attack at his home, Itar-Tass reported. He was 70.
After joining the cosmonaut team in the 1960, Makarov underwent training for a Soviet manned mission to the Moon that never materialized. He made his first space flight in 1973 in a Soyuz capsule.
During his next mission in 1975, a booster rocket that carried him and crewmate Vasily Lazarev to space, exploded shortly after lift-off from the Baikonur Cosmodrome. The Soyuz capsule automatically jettisoned from the rocket just seconds before the explosion.
After suffering severe gravitational overloads, the pair landed in the deserted, forested mountains in southern Siberia and crawled out of their charred capsule as they waited for rescue teams.
Budanov Trial
ROSTOV-NA-DONU, Southern Russia (AP) - A Chechen witness in the trial of Colonel Yury Budanov, who is accused of murdering a Chechen woman, told a military court Friday that he had never met the defendant, despite photographic evidence to the contrary.
Budanov has admitted killing 18-year-old Heda Kungayeva in the early hours of March 27, 2000, but says he suspected her of being a rebel sniper and acted in a fit of rage.
Ramazan Sambiev, a resident of the village where the woman lived, allegedly pointed out the woman's home to Budanov, informing him that she and her mother were snipers.
Despite a photograph showing him and Budanov together, taken by a journalist the day prior to the killing, the witness denied ever having met Budanov and said that he wasn't in the area on the day of the killing.
Primorye Eyes China
VLADIVOSTOK, Far East (AFP) - The Primorye region in the Far East has resumed visa-free tourist flow with the northern Chinese province of Heilongjiang despite countrywide concerns about SARS, officials said Friday.
The Primorye administration is desperate to minimize the losses to the region's economy sustained in the wake of the SARS scare, which has left many travel agencies and some hotels, restaurants and casinos facing bankruptcy.
Primorye Deputy Governor Viktor Gorchakov said the region is satisfied that Heilongjiang has taken the necessary precautions against the disease. The loss of some 400,000 Russian cross-border traders and tourists cost Heilongjiang up to $3 million per day, he said.
TITLE: India, China Boosting Links With Russia
PUBLISHER: Combined Reports
TEXT: Russia and India on Friday vowed to increase bilateral cooperation, including joint military exercises and space programs, while Russia and China agreed to strengthen their cooperation on defense.
After a dinner banquet for the foreign guests marking the 300th anniversary of St. Petersburg, President Vladimir Putin's hometown, Putin met Indian Prime Minister Atal Bihari Vajpayee late Friday.
As the meeting began on the Silver Whisper cruise ship, Putin noted that Russia had helped India launch a rocket into space earlier this month and that the two countries were holding their first joint naval exercises in the Indian Ocean.
"We are working together in the most sensitive areas. I am not speaking only of economic cooperation ... but also of developing military-technical cooperation, cooperation in space," Putin said.
Russia will deliver 72 Kopyo aircraft radars to India by the end of next year, the radar system's producer Sokol said Friday.
The radars, part of a $300-million contract signed by the two countries in 1996, are due to be installed aboard MiG-21 fighters of India's air force. The radars would allow the fighter pilots to track eight planes at the same time, launching two guided missiles simultaneously.
Russia is also helping India construct two nuclear reactors for the Kudankulam plant in the southern state of Tamil Nadu. The first reactor is due to be completed by 2007.
Moscow's relations with New Delhi slackened after the 1991 Soviet collapse, but warmed later in the 1990s, as India again became a top customer for Russia's weapons industries, purchasing fighter jets, tanks and other military hardware worth billions of dollars.
Vajpayee said Friday that the two countries have a "very good partnership."
"Our cooperation in various spheres is going very well. Russia is our trusted friend, and we are very good friends and we have high hopes in Russia," Vajpayee said before the meeting.
Chinese defense minister General Cao Gangchuan met with his Russian counterpart Friday to discuss arms trade and ties between the two countries' militaries and global conflicts.
Cao accompanied Chinese President Hu Jintao, making his first trip abroad since becoming leader in March. Cao told reporters after meeting with Defense Minister Sergei Ivanov that last week's Russian-Chinese summit was a "complete success"
"We agreed that our defense ministries would take joint efforts to implement the agreements reached by our presidents and strengthen our cooperation," Cao said.
China has become the No. 1 customer for Russia's arms industry, purchasing billions of dollars worth of jets, missiles, submarines and other military hardware
(AP, AFP)
TITLE: Mobile Firms Take Away Encryption
PUBLISHER: Vedomosti
TEXT: The Federal Security Service, or FSB, this weekend ordered mobile-phone operators in St. Petersburg to switch off the GSM-standard encryption function used to protect callers' privacy.
At a time when the country's northern capital was hosting leaders of the world's most powerful countries, this effectively gave the FSB the ability to listen in on calls.
While some feared this would mean a free-for-all for eavesdroppers, a source from the FSB gave assurances that "the only people who can identify who is calling are the people on Liteny," referring to the FSB's headquarters in St. Petersburg.
Representatives of both Mobile TeleSystems and Megafon, which operate in St. Petersburg, said that the encryption was turned off at the request of the security services - and that it was not the first time.
"Just as we did during the Dubrovka [hostage crisis last October], our encryption is being turned off at the request of the authorities," MTS spokesperson Yeva Prokofyeva said.
When GSM operators switch off encryption, subscribers normally see an icon appear on their handset indicating that encryption is not available - either an opened lock or an exclamation mark, depending on the model.
But a loss of encryption does not mean just anyone can eavesdrop, information security firms said. "You need some serious equipment worth $100,000 ... to be able to tap into an unprotected call and identify the subscriber," a SmerSh Technics spokesperson said.
TITLE: Tycoons Gain Three Seats on UES Board
AUTHOR: By Alla Startseva
PUBLISHER: Staff Writer
TEXT: ZELENOGRAD, Moscow Region - It was a raucous and protracted affair, but when the dust finally settled late Friday, tycoons Andrei Melnichenko and Oleg Deripaska had what they wanted - seats on the UES board ahead of the liquidation phase of the company's reform.
After quietly buying up an estimated $1-billion worth of shares in Unified Energy Systems between them over the last several months, Melnichenko's MDM Group and Deripaska's Base Element came away from the company's annual shareholders meeting with three of 15 board seats, two and one, respectively.
Portfolio investors saw their influence over company policy wane as a result, as the number of directors representing minority shareholders dropped from two to one.
In a surprise development, the most outspoken critic of UES management, Alexander Branis of Prosperity Capital, failed to get re-elected, leaving newcomer Seppo Remes, the executive director of investment fund Vostok Energo and founder of the European Business Club, as the lone defender of small investors in the world's largest utility.
A half-empty community center in this small town northwest of Moscow was the venue for a meeting that was supposed to begin at 11 a.m. but was inexplicably delayed for hours.
By noon, as dozens of protesters from the liberal Yabloko party quietly demonstrated outside, the mood inside turned ugly, with scores of irritated shareholders demanding UES Chairperson Alexander Voloshin, who is also the Kremlin's chief of staff, and CEO Anatoly Chubais "take the stage."
Soon thereafter Voloshin - flanked by Chubais and his deputy Leonid Melamed, as well as Deputy Property Minister Sergei Kosarev and three other directors: Branis, David Hern of Halycon Advisors and Rolf Birkhoff of Euroelectric, who has rarely been heard or seen in a year - appeared and attempted to calm the crowd.
"Keep the order," said Voloshin, who, after scanning the rows of empty seats, added: "We have fewer and fewer shareholders."
"Not even an apology for making us wait!" screamed one shareholder, but Voloshin calmly started reading the company's annual report, and many in the audience soon fell asleep.
After speeches from several other company executives and directors, it was finally Chubais' turn to answer questions from shareholders, one of whom rushed the stage, shouting, "The real value of my property is falling close to zero" and Chubais and Voloshin are "robbing the people."
Only then did Chubais apologize for the delay in starting the meeting, and with that the voting began.
The results took eight hours to tabulate, which Chubais said was due to a new Federal Energy Commission regulation that no longer requires shareholders to vote at once.
While UES executives knocked back whiskey, strategic shareholders worked their mobile phones.
"There is vote buying going on right here, right now!" Branis said. He said that he did not know what the going rate was to get elected, but another candidate, Alexander Lebedev of National Reserve Bank, told the daily Gazeta on Thursday that he figured it was about $2 million.
Lebedev, a current board member who controls about 4 percent of UES, failed to make it.
In all, 28 men from several countries vied for a seat.
Base Element's David Giovanis got the most votes, with 9 percent, followed by Voloshin with 6 percent.
"Giovanis worked very well on the votes. We did not do this," said MDM Bank Deputy Chairperson Alexei Panfyorov. "We were told that a larger number of votes would be needed, but it didn't turn out that way."
Giovanis refused to comment.
The rest of the winners, including MDM Group Chairperson Melnichenko and MDM Bank chief Sergei Popov, all got around 5.5 percent.
The government retained 10 seats on the board: Voloshin, Chubais, Economic Development and Trade Minister German Gref, Deputy Property Minister Sergei Kosarev, FSC first deputy chairperson Yury Sakharnov, Deputy Prime Minister Viktor Khristenko, Anti-Monopoly Minister Ilya Yuzhanov, Energy Minister Igor Yusufov and two senators from the Federation Council - Valentin Zavadnikov and Alexander Kazakov.
Zavadnikov was once Chubais' deputy CEO, and Kazakov worked with Chubais in the Property Ministry. Chubais' current first deputy CEO, Melamed, was also elected.
"The structure of the board reflects the structure of UES ownership," Chubais said when it was all over. "You don't choose your shareholders, just like you don't choose your parents."
Remes of the $250-million Vostok Energo fund, which has positions in several UES subsidiaries, said that the new strategic shareholders, while professional, do not have the electricity industry as their main interest.
"I understand my responsibility to portfolio investors. I do not pretend to be a teacher in a kindergarten." Remes said. "Institutional investors voted for me, all of them, almost without exceptions."
He said that he would call for faster consolidation of the generating assets once split and for a fair asset valuation.
TITLE: Putin Sounds Warning Over Budget Debate
AUTHOR: By Valeria Korchagina
PUBLISHER: Staff Writer
TEXT: MOSCOW - Debate on the 2004 federal budget officially kicked into high gear Friday, with President Vladimir Putin calling on lawmakers and officials not to get carried away ahead of parliamentary elections and the Finance Ministry submitting the basic outlines of the bill to the government.
"The main task of budgetary policy remains the improvement of the population's well-being and ensuring the country's steady economic growth," Putin said in his annual written request to the cabinet to begin the budget process, which was posted on his official web site, www.president.kremlin.ru. "The 2004 federal budget must not become a hostage to electoral ambitions, lobbying by sectors and promises that are impossible to fulfill."
Putin stressed that a stabilization fund to guard against external and internal economic turmoil should be created, and called for more tax cuts and greater efficiency
Shortly after Putin's letter was delivered to the cabinet, Finance Minister Alexei Kudrin submitted to the government basic parameters for the 2004 budget, which includes a $3-billion surplus, or 0.6 percent of gross domestic product.
"If one were to generally assess President Vladimir Putin's budget address, one can note that it is aimed at creating a more stable financial system in Russia," Kudrin was quoted by Interfax as saying. "This stability will be secured by the tax system, budgets at all levels, their balance and immunity to various risks and external influences."
Putin's chief economic adviser, Andrei Illarionov, said that what Putin was calling for amounted to nothing less than a "revolution" in budget policy.
"The volume of funds redistributed through the state budget must be reduced. [Putin] has set out this kind of task for the first time. This is why fulfillment of the goals set in the budget address will mean ... a budget revolution," Illarionov told reporters in St. Petersburg, Interfax reported.
The draft budget submitted Friday sets spending at 2.59 trillion rubles ($84.39 billion), up 11 percent from this year's budget, and is based on an estimated annual exchange rate for the year of 31.9 rubles to the dollar.
Spending will come to 17.1 percent of GDP, which is expected to grow 5 percent to 15.2 trillion rubles, or about $490 billion.
The Finance Ministry expects the average price of Russia's benchmark Urals blend of crude oil to be $22 for the year, and total revenues of 2.69 trillion rubles, according to Reuters.
The 2003 budget was drafted based on the estimation that Urals would hover around $21.5 per barrel.
The draft also takes into account the new tax code, which would reduce a number of taxes.
TITLE: Hard Cash Still King Despite Card Boom
AUTHOR: By Lucie Godeau
PUBLISHER: Agence France Presse
TEXT: MOSCOW - Bank-card use in Russia has skyrocketed in the past year, but analysts say that is not necessarily a sign that Russians have been able to wean themselves from the security offered by hard cash.
State-owned Sberbank, Russia's largest bank in which two-thirds of the country's population keep private accounts, issued 57 percent more bank cards over the past 12 months, reaching some 5 million people.
There are some 15 million cards currently circulating in Russia and half of them are international Visa or Mastercards, according to Andrew Keeley, an analyst at Renaissance Capital investment bank.
"Banks issued Visa cards with a frantic speed" over the past year, said Brian Huckett, deputy head of Visa International's development department.
The number of Visa cards issued in Russia in 2002 doubled on the year before, reaching 5.1 million cards.
But, for a country with a population of 145 million, "this is still just a drop in the ocean," noted Maxim Bylov, a specialist on the issue for the Kommersant business daily.
While credit card use shot up to $6.8 billion dollars last year, that is still nothing compared to Poland, where twice the number of people hold Visa cards and used them to spend $989 billion last year, Visa International's Huckett said.
And while international groups Mastercard and Visa hold half of the Russian market, the other half belongs firmly to domestic Russian cards, mainly used for cash withdrawals.
But even that was a rarity in Russia just a couple of years ago, with Russians still reeling from the 1998 financial meltdown and accustomed to keeping their savings tucked away at home in cash.
Russians are thought to be stashing an estimated $75 billion and most continue to pay for property and large purchases in cash, while banks hold just $30 billion in private accounts.
Russian businesses, such as metals and mining giant Norilsk Nickel, often give their employees ATM cards to retrieve their salaries, aiming to simplify accounting practices and save money by making redundant workers who manned cash registers handing out pay.
Baltiisky bank official Alexander Kazansky says that this system is the main reason why card use in Russia has increased.
The government is also pushing citizens toward using cards, paying state workers directly and handing over student grants through bank accounts.
Yet the number of bank accounts remains low, representing just 10 percent of gross domestic product, while in Western Europe it represents 78 percent, Renassaince Capital's Keeley said.
The low number of ATM machines accounts, in part, for the failure of bank accounts to catch on in Russia, where 40 machines exist for every 1 million people.
In Western Europe, an average of 550 ATM machines exist for every million people, while that number in the United States is more than 1,200, according to Renaissance Capital estimates.
Furthermore, most Russian cards are bank-specific and can be used only in the issuer's ATM machines.
TITLE: Moscow Giants Head to Northern Capital
AUTHOR: By Angelina Davydova
PUBLISHER: Special to The St. Petersburg Times
TEXT: The number of Moscow banks operating in St. Petersburg has grown significantly over the last few years, and yet more of the capital's banks are expected to arrive on the local market soon. Although St. Petersburg banks appear to focus on large corporate clients and Moscow banks seem to be more active in the retail sector, competition between the two groups is likely to increase in the near future.
There are 120 banks currently operating in St. Petersburg, but only 42 of them are St. Petersburg-based. "Nevertheless, according to the main financial indicators, with the exception of Sberbank, all those leading the way are local banks", said Vladimir Dzhikovich, the President of the Association of Northwest Banks.
"At the same time, the presence of Moscow banks is being increasingly felt, mainly in high-technology sectors, such as Internet banking. It's expected that Moscow banks will gain a major St. Petersburg market share as time goes on," he said.
Alfa Bank, Uralsib Bank, MDM Bank, Nomos Bank, Avtobank NIKoil and First OVK Bank are regarded as being the largest branches of Moscow banks in St. Petersburg.
With the corporate banking sector dominated by local banks, largely supported both by the city administration and St. Petersburg enterprises, branches of Moscow banks have, until now, tended to focus on developing personal banking, especially in the providing of credit services, having already developed experience in providing such services in Moscow.
Sergei Shubayev, Director of Avtobank NIKoil's St. Petersburg branch, believes that the Moscow banks, with the powerful financial resources of their central offices, are more capable of financing large, long-term projects than St. Petersburg banks.
At present, the volume of money loaned by the majority of Moscow bank branches exceeds the volume of deposits made there, with St. Petersburg banks finding it difficult to compete with the large financial resources that Moscow's banks can bring to the local arena.
Another example of Moscow banks moving into the St. Petersburg market can be seen in the provision of express store loans for the purchase of domestic appliances, furniture and computers, which are provided in large St. Petersburg stores, for the most part by three Moscow-based banks - First OVK, Russian Standard and Uralsib, all of which began operating in the city last year. Representatives of St. Petersburg banks say that they are not able to compete in this sector, as they do not yet have the necessary technology, which the Moscow banks began investing in several years ago.
Eduard Ilyasov, Head of the Department of Client Operations at the St. Petersburg branch of First OVK, said that the bank is currently working with some 100 stores in the city, with the total market capacity in the city estimated to be worth several hundred million dollars.
According to Shubayev, however, the local infrastructure of St. Petersburg banks allows them to make quick decisions, resulting in faster credit services, a key factor in the marketplace.
In the meantime, some St. Petersburg banks have also started expanding into other regions of Russia, including Moscow.
Industrial-Construction Bank and Menatep St. Petersburg, have so far been the most active St. Petersburg banks in launching on the Russia-wide market.
Menatep St. Petersburg, which has recently launched a large personal banking project, is planning to develop retail services all over Russia, with Moscow, Novosibirsk, Nizhny Novgorod and Yekaterinburg first in line.
Over time, the differences between St. Petersburg and Moscow banks are likely to get smaller, according to Shubayev. "St. Petersburg banks will get stronger, which will enable them to operate with larger volumes of resources, while central offices of Moscow banks are likely to give regional branches more independence," he said.
Some bankers already believe, however, that the differences between Moscow and St. Petersburg banks are no longer important. "The St. Petersburg banking sector has been developing as a stable, planned and systematic market over the last few years, and success is defined more by the size of branches and quality of service, than by their place of origin," said Svetlana Sergeyeva, spokesperson for Northwest Sberbank.
TITLE: One-Stop Shopping For Services
AUTHOR: By Angelina Davydova
PUBLISHER: Special to The St. Petersburg Times
TEXT: Although local banks are becoming increasingly active in developing the financial-supermarket sector, with a large number of such outlets having opened in recent months, potential clients appear to be slow in warming to the idea. While analysts maintain that financial supermarkets are the best way to attract personal banking customers en masse, they admit that creating sufficient levels of demand could take some time.
While Sberbank holds a leading position in terms of volume of personal banking, savings and current accounts, other commercial banks, after years of concentrating on developing large corporate clients, have also caught on to the advantages of attracting personal customers. These banks are eager to persuade a skeptical public that putting their savings in the banking sector has advantages over keeping an estimated $60 billion "under the mattress."
For now, however, analysts say that private individuals are a long way from using the full range of financial services offered by banks. According to local research company COMCON's survey of St. Petersburg citizens over the age of 16 on their usage of banking services, 50.9 percent use banks to pay for utilities, 16.6 percent use them as currency exchanges, 12.3 percent deposit and withdraw money from accounts, 7 percent use banking cards, and 6.8 percent use other banking services, while 21.1 percent do not use banks at all.
Beginning in the fall of last year, a significant number of banks declared that financial supermarkets are the way for the personal banking sector to develop in the future, with Alfa Bank, Avtobank NIKoil, Menatep St. Petersburg, Technochimbank and several others revealing their plans for retail business development.
"The creation of financial supermarkets - that is, the providing of several kinds of financial services within one banking unit - is a result of the dynamic growth of the local banking market. In our financial supermarket, we've united a range of banking, investment, insurance and consulting services," said Sergei Shubayev, branch director of Avtobank NIKoil St. Petersburg said.
Shubayev also said that Avtobank NIKoil had acquired Industrial-Construction Insurance company, one of the major Russian insurance companies, in order to be able to provide insurance services to private customers.
Alexander Rotstein, the deputy director of Ego-Holding, which opened a financial supermarket in February 2003, believes that the trend is a result of growth in competition, along with a drop in the profitability of operating in a single segment of the financial sector. "It forces banks to search for new ways to approach customers," he said.
"Rather than separate products, clients are being offered an integrated scheme, allowing them both to allocate money in different ways and to find an optimal system of finance and property management," Rotstein said.
"In addition, when participating companies unite their services, it allows them to lower their costs and make all those participating more competitive. On top of that, some specific and, as yet, not very well known services, such as mutual-fund shares, are unlikely to attract customers unless they are working together with more widespread banking services," he said.
"The universalization of banking activities is a natural development, both at Russian and foreign banks," said Svetlana Sergeyeva, spokesperson for Northwest Sberbank. "We've also started to develop our network of branches, mainly as universal branches, or financial supermarkets. However, we still believe that certain banking services are best provided by specialized offices."
Although banks have been making efforts to promote retail services heavily in recent times, demand still appears to be lagging.
"Although financial supermarkets have good prospects, genuine impact is unlikely to be seen any time soon," said Vladimir Kirillov, general director of the Creative Investment Technologies asset-management company.
"The main reason for this is that banks are not ready to provide financial services of a sufficiently high quality which enables them to compete with specialized banks and companies. The other reason is that, due to the narrowness of the Russian financial market, there is a rivalry between different services and products within each financial supermarket. Moreover, the demands made on staff at financial supermarkets are very high, and not all the employees meet them," he said.
"Another factor is that private individuals are not yet ready to accept this set of banking services and to entrust their savings to the financial-supermarket investment schemes, which means that the whole idea of retail-financial services needs to be promoted," Kirillov said.
TITLE: Banking Services To Continue Growth
TEXT: With the local banking sector continuing to develop at a frenzied pace, Angelina Davydova spoke to three industry experts about the latest trends and prospects for the future.
Sergei Shubayev, director of the St. Petersburg branch of Avtobank NIKoil
Q: How is the market for banking services development? Which new services have appeared recently?
A: The personal banking sector is set to become the fastest growing sector in banking services this year, with two types of services leading the way.
Firstly, an overall rise in living standards has created a vast demand for all types of credit: car credit, mortgages, consumer credit, overdraft credit. The creation of an infrastructure enabling banks to provide prompt credit services on favorable terms will define the leading banks in the Northwest region.
The other group of services with great potential in the market place is the use of bank cards for regular payments, for instance for telecommunications services or for utilities, for instance. When banks launch such services, they will be able to not only increase the number of debit cards which are issued, but also to begin the issue of credit cards on a broader scale. The credit products and bankcard services being developed will interact and supplement each other.
I would also mention another aspect of financial services which is likely to define the development of the banking sector in the near future - insurance services, both for companies and for private individuals. Primarily, I mean car insurance, third-party car insurance and insurance for housing-construction risks. It is obvious that, as these tendencies continue to develop, the market will demand that single corporations and supermarkets offer all these services.
Dmitry Pankin, chairperson of St. Petersburg Bank of Reconstruction and Development (SPBRD)
Q: How is the market for banking services development? Which new services have appeared recently?
A: There's been a stable tendency for the last year and a half in the city towards growth in demand among private customers, and that's been seen in a rise in an increase in the volumes of savings being held at banks and the issuing of plastic cards.
At the end of May, SPBRD began offering new service aimed at attracting a large number of middle class St. Petersburgers - mortgage schemes, with credit being given for periods of up to ten years. For the bank it's an important step, but not the only one that's being taken to broaden the range of services being offered, and in doing so to strengthen St. Petersburg's role as a financial center for Russia.
At the same time, there's a demand for loans of, say, 2 thousand rubles, but the cost of making such a loan is high in comparison with the amount. Making such loans at the moment is an attempt to capture market share.
The aim is to enter the market and occupy a very promising niche. But, for the time being, it's very doubtful that this is profitable, and that banks are already seeing returns on such loans. The issue of giving loans for the purchase of cars and real estate is normal - that sector is developing at the moment, although only within a narrow sector of the population. But as far as providing credit for the purchase of kettles is concerned, you just have to count up the expenses involved to see that it's not yet profitable.
Alexei Dmitriyev, head of retail and marketing at the St. Petersburg branch of Uralsib Bank
Q: How is the market for banking services development? Which new services have appeared recently?
A: At present, retail is actively developing, particularly in the various forms of loans that are being offered to private customers. The banks are developing their branch networks and introducing various new types of service. Card products have genuinely become products that are available to the mass market. For the time being, the owners of cards are simply taking cash out at ATMs, but, in the future, people are going to be using them more frequently to pay for goods and services. The most in-demand services last year were consumer credit, express loans, payments, money transfers, investments and currency-exchange operations. Of the new services, loans for cars, credit cards and mortgages are worth noting.
The demand for almost all services for private customers is going to go up. Huge demand for mortgages and consumer credit is predicted. The latter is already developing at a very fast pace, and that will just continue, particularly in express loans.
Factors holding the sector back include the fact that the technology for servicing private customers remains undeveloped, as well as the fact that people can't provide the proof of income which a lot of banks are demanding.
TITLE: City's Bankers on Reform Pace
AUTHOR: By Angelina Davydova
PUBLISHER: Special to The St. Petersburg Times
TEXT: Though many working in the local banking sector claim that St. Petersburg's banks have yet to experience the full effects of the national banking reforms currently being carried out, many expressed a hope that such reforms would soon make an impact on their work.
Similarly, analysts working in the local market said that the most pressing need for reform is to be found in the accounting system, banking taxation and a general reduction of the role of the state in the banking system.
"I haven't seen any results from the reforms [that have been carried out so far], and I don't know what the point of it all is," said Vladimir Dzhikovich, president of the Association of Northwest Banks which unites 46 of the region's banks.
"I believe that the pace of development in banking is higher than for industrial enterprises," he said. "In the last year, the volume of banking assets has grown by 44 percent; the capital of banks by 25 percent; private deposits by 54 percent; the volume of loans to industrial enterprises by 45 percent; and profitability is up by 40 percent," said Dzhikovich.
"That's why I don't understand the need for reform. In fact, the banking sector has only one problem, and that's insufficient capital, but I don't know how it can be increased in the short term," he said.
Svetlana Sergeyeva, spokesperson for Northwest Sberbank, believes that, though needed, reform in the banking sector should be cautious and well thought out.
"Russian banks are now working in far more difficult conditions than those experienced by foreign banks," Sergeyeva said.
"For instance, the cost of financial resources in Russia is about three to four times higher than in most EU countries.
Sergeyeva also stressed that reform within the sector should be aimed at providing banks with uniform conditions within which to operate. "In order to create fair competition between the banks, it is necessary to provide a level playing field for them," Sergeyeva said.
Dmitry Pankin, chairperson of the St. Petersburg Bank for Reconstruction and Development, on the other hand, believes that competition within the local banking sector is already relatively intense. "It is probably one of most competitive market sectors in Russia overall," Pankin said.
Although local bankers remain largely underwhelmed by the impact of the reform process within the sector, some believe that the reforms have already brought change. "Very important changes are taking place within the controlling functions of the Central Bank," said Gennady Mesheryakov, vice president and financial director of the International Bank of St. Petersburg (IBSP). "The Central Bank's policy, which tends to be very conservative much of the time, is now becoming more liberal."
"Our bank has also felt the effects of the new system for rules on financial documentation, according to which all banks will have to switch to International Accounting Standards [IAS/GAAP], instead of using local standards," Mesheryakov said.
"The introduction of the new accounting standards will not make the banking system better, but it will make the whole economic system more transparent, providing open and objective information and allowing all market participants to take effective decisions," Pankin said.
TITLE: S&P Report: Lending by Banks in Russia too Risky
AUTHOR: By Victoria Lavrentieva
PUBLISHER: Staff Writer
TEXT: MOSCOW - Up to 75 percent, or $43 billion, of all corporate loans made by Russian banks are high-risk, according to a new report by Standard & Poor's.
The international ratings agency estimates that 50 percent to 75 percent of banks' total corporate lending portfolios are "problematic."
Standard & Poor's also warned of instability in a sector that it says has changed little since it was decimated by the 1998 crisis.
Nearly five years after the default and devaluation, most banks are still in business, though many have changed their names, owners and even business profiles - but old habits die hard, and the sector remains largely unreformed, said Yekaterina Trofimova, the Paris-based author of the report.
"Though the sector has rebounded and distanced itself from the crisis, much remains to be done before it is aligned with the best practices in the global banking sector, or even in neighboring Central and Eastern Europe," she said.
The government, which controls more than half of all banking assets, holds sway over the industry, with state savings bank Sberbank dominating both corporate lending and retail deposits.
The 15 or so largest private banks each control just 1 percent to 5 percent of these markets. And while there are more than 1,300 banks in the country, nearly 90 percent operate with less than $10 million in capital.
Aside from the government's dominance, the biggest weaknesses in the sector are the "significant concentration of business with single clients; the high-risk practice of lending to affiliated members of financial-industrial groups, or FIGs; weak implementation of regulatory policy; and lack of transparency with respect to bank owners," Trofimova said.
Most of the strongest private banks in the sector have emerged from so-called pocket banks of FIGs such as Gazprom's Gazprombank, LUKoil's Bank Petrocommerce and Yukos' Trust and Investment Bank.
Alfa Bank, part of Alfa Group, has grown through regional-network expansion and is pursuing a universal banking strategy.
MDM Bank, part of MDM Group, has expanded by acquiring regional banks.
Trofimova said that several of the top banks have adjusted their development strategies since the crisis, but it remains an open question which of the banks will emerge as market leaders in the future.
The battle for future market share is being aggressively fought now, as increasing competition is forcing more and more banks to play by new rules in order to survive. This in turn forces them to become more transparent and look for new niches that may be more complicated but are also potentially more profitable, such as consumer lending, leasing and trade finance.
For example, Alfa Bank, the top private bank in the country and No. 4 overall by assets, recently launched a new retail project focused on providing various retail services through mini-outlets with low overheads. A similar program has also been launched by Rosbank, the country's No. 8 bank and a part of the Interros industrial group. Another retail newcomer is the NIKoil investment bank, which recently acquired Avtobank and its strong retail base.
Analysts say that a void in the market makes these expansion plans into retail reasonable, but for many banks the move may prove too ambitious.
"Almost every bank in the top 20 has the same goals," said Mikhail Matovnikov, deputy director general of Interfax Rating Agency. "But I doubt that all of them will succeed," Matovnikov said.
Trofimova was even more skeptical about the objectives being set by leading banks. "So far, these are only declarations," she said.
Lowering profit margins in the banking sector are encouraging bank owners to turn their attention to industrial projects, said Richard Hainsworth, head of RusRating and banking analyst for Renaissance Capital, singling out Alfa, MDM and Trust and Investment.
"FIG owners technically don't have enough time to control both directions of their business," Hainsworth said.
"As a result, they need to trust their management to make the banking business more transparent so that it is easier for them to understand what is going on at the bank," Hainsworth said.
The general trend toward greater transparency is a conscious choice that many banks have made, but analysts credit the new team at the Central Bank for enforcing better standards in the industry.
One of the Central Bank's most important initiatives is a new requirement on banking capital that is intended to put an end to the so-called gray schemes that many banks use to increase their capital and consequently their lending limit.
Other initiatives that the Central Bank has proposed, and which are currently before the State Duma, include requiring banks to disclose the "real owners" of more than 10 percent of their equity capital.
The Central Bank has also submitted a plan to introduce a deposit insurance scheme, which should help break Sberbank's monopoly as the only bank with government-guaranteed deposits. The cabinet has yet to sign off on that plan, however.
TITLE: After the Fireworks, What Really Got Done?
AUTHOR: By Vladimir Frolov
TEXT: Now that the celebrations in St. Petersburg are finally over, it is time to take stock of the results that the frantic summitry there has produced.
It is safe to say that both the Russia-EU summit and the meeting between Presidents Vladimir Putin and George W. Bush will be remembered more for their positive atmosphere than for any substantive progress on major issues under discussion.
The Russia-EU summit looks particularly disappointing. On the two issues of most importance to Russia - reform of Russia-EU cooperation structures and the "road map" for visa-free travel - progress was, to put it mildly, extremely modest. On the issues most important to the EU - Russian ratification of the Kyoto Protocol and accession of future member states to the Russia-EU Partnership and Cooperation Agreement, or PCA - headway was imperceptible. And on Russian entry to the WTO, no forward movement was registered.
The decision to transform the PCA Cooperation Council into a Permanent Partnership Council - a high-level consultative body that would meet more frequently and engage not only the foreign ministers but also the heads of other government agencies - is obviously a welcome step in the right direction and an improvement on the existing arrangements. But it falls far short of Russia's more imaginative proposals for a wide-ranging, permanent consultative structure, spanning different levels of EU decisionmaking, including Russian participation in some meetings of the Committee of Permanent Representatives, or COREPER, in Brussels. This would have made it possible for Moscow to be consulted at the earliest stage possible on EU decisions affecting Russia - thus enhancing the two sides' abilities to find mutually acceptable solutions in a timely manner.
Regarding the prospect for mutual visa-free travel, the summit failed to reach an agreement on establishing a special working group that would produce a "road map" of specific steps to reach this objective within a reasonable timeframe. The noncommittal phrase included in the joint statement was actually borrowed from a similar document prepared for, but not released at, the November 2002 summit in Brussels.
Even modest French and German proposals to create simplified visa-regimes for some categories of citizens - for example, students - have failed to garner support: The statement refers only to finding flexibilities within the Schengen rules. The fierce opposition by some EU member states, particularly our Nordic neighbors, to any practical moves toward a visa-free regime with Russia is incomprehensible and in the long-term counterproductive.
The all-smiles Putin-Bush meeting is more important not for the publicly released joint statements, which are mostly bland and inconsequential, but for the content of the private discussion between the two presidents. Here we have two novel developments.
One is an agreement to expand and strengthen the high-level channels of communication between our governments, particularly between the presidential administration in Moscow and the National Security Council in Washington. This is a very important and welcome step that would allow both presidents to communicate more effectively, bypassing, if necessary, their foreign-policy bureaucracies. The Iraq crisis clearly demonstrated the need for our leaders to be on the same wavelength when underlying policy assumptions and overall objectives are not well understood and open to question.
But the new channels of communication, while useful, will not by default solve the problem of diverging worldviews if neither side demonstrates good will and effort to take the other's point of view seriously. If the Bush administration uses the new channel in the familiar "my way or the highway" manner and if Moscow regards every U.S. move with traditional suspicion, nothing good will come out of it. It would also be important for the Bush administration to overcome the growing credibility gap created by its somewhat careless treatment of the facts vis-a-vis Iraq's weapons of mass destruction as a legal basis for war.
The second important development was the likely discussion of a new counterproliferation initiative by the Bush administration. In his address in Krakow, Bush announced the Proliferation Security Initiative - a multinational effort to develop legal tools and specific military capabilities to interdict cargo ships and planes believed to be carrying WMD, their components, means of delivery and production machinery. The idea is to stop WMD proliferation in its final stage, before the delivery of the deadly cargo is taken by the rogue regime or a terrorist group, and when traditional nonproliferation tools have failed. It is a novel approach, obviously not without risks, that offers a means to actually do something about the WMD threat before it's too late. Although Washington offered participation in the new effort to some of its closest allies (Britain, Spain and Poland), it is obviously interested in getting Russia on board too. It seems to be in Russia's national interest to take a very serious look at what the Bush administration has to offer here. This could give some very specific content to U.S.-Russian cooperation in a high-priority area, as well as strengthening Russia's ties with key U.S. allies in Europe.
There's also a lot of truth in what Putin said about the gradual convergence of U.S. and Russian views on Iranian and North Korean nuclear programs. On Iran, the milestone development will be the upcoming meeting of the IAEA board of governors and the agency's report on the Iranian nuclear program, including its recent discovery of clandestine components. The IAEA findings will be an important legal basis for Russia to review its nuclear power projects in Iran.
Vladimir Frolov, deputy staff director of the State Duma's foreign affairs committee, contributed this comment to The St. Petersburg Times. The views expressed are the author's own and do not reflect the position of the committee or any of its members.
TITLE: Russia's Rosy Present Hides Uncertain Future
TEXT: The Russian economy depends entirely on the export of oil and gas. The state of world financial and commodity markets therefore determines the country's political future to a significant extent.
After the war in Iraq, many feared that the United States would punish the Kremlin for its pro-German stance by dumping huge quantities of oil on the market, driving prices down to a level at which the Russian economy would simply go belly up. This scenario was always unlikely, however. Not because the current White House is known for its willingness to forgive and forget, but because dumping would hurt U.S. oil companies even more than their Russian counterparts. Burning the house down to drive out the cockroaches might be a viable option for Russian leaders, but not for the pragmatic Americans, even with George W. Bush in charge.
Rather than flood the world market with cheap oil, the U.S. leadership elected to pursue a much more effective and comprehensive strategy. As Iraqi oil starts to flow again, oil prices will drop gradually, but the dollar will fall at the same time. This gives the U.S. economy a number of advantages. The U.S. domestic market will remain more or less stable. The cost of raw materials will decline, but not enough to ruin the companies that supply them. U.S. exports will become more competitive and its trade balance will improve. Most importantly, the U.S. foreign debt will shrink as the value of the dollar falls. America's competitors may be pleased by the strength of the euro, but Europe's current depression will only deepen as a result.
This policy does not guarantee an upswing in the U.S. economy, of course. America currently faces long-term, structural problems. Manipulating the exchange rate and the price of oil may not be enough to ensure stable growth at home. On the other hand, this strategy does guarantee a prolonged depression for the rest of the world.
Russia is paid for oil in dollars, but services its debts and pays for a large percentage of imported goods in euros. Where the U.S. foreign debt shrinks as the dollar falls, ours increases in inverse proportion. What's more, the Russian Central Bank's currency reserves, whose growth has been such a source of pride to our leaders over the past few years, are held in dollars. Presidential economic adviser Andrei Illarionov calculates that, in the past two years, Russia has lost $15 billion to $17 billion to changes in the exchange rate. The dollar has lost 30 percent of its value. This means that the purchasing power of the Central Bank's $50 billion reserve is equivalent to $34 billion at the early spring 2001 exchange rate. Our exporters are also losing money because of dropping oil prices, even though that drop has not been as sharp as many expected. The strengthening ruble could potentially impact Russia's trade balance.
In short, the years of plenty are over. The majority of Russians probably didn't notice that the country has enjoyed four years of economic growth, but they will definitely feel the pinch in the hard times to come. The people are left out of the decision making, of course - that's the prerogative of the oligarchs and bureaucrats. Yet even these groups are in for a rough ride. As the money dries up, competition for scarce resources will increase and political stability will decrease. President Vladimir Putin knows this better than anyone.
According to poll results reported in the media, support for Putin has plummeted to just 48 percent. This doesn't mean that Russians have turned on their leader overnight, however. The media used to report Putin's reiting doveria, a measure of the public's confidence in his abilities. Now they refer to his elektoralny reiting, the percentage of the electorate prepared to back him at the polls.
The pollsters now explain that, even in the salad days of 2000, no more than 45 percent of voters actually backed Putin. For some reason, we never heard about voter support back then. These days you almost never hear about the president's job-approval numbers.
Chechnya is front-page news once more. Until recently, we heard very little of the bombings, attacks on federal convoys and dead soldiers. Now, not a day goes by without fresh reports of the fighting in Chechnya. Where, once, the media tried to make us forget about the war, now they have decided to remind us.
In Russia, sociology and war are inseparable from propaganda. Putin's share price will fall in any case, and our media magnates and oligarchs, being seasoned businesspeople, have begun to speculate on devaluation. Previously, they insisted happily that there was no alternative to Putin. Now, they are anxiously asking: "Who will be the next president?" The spectrum of possible candidates is broad, from Boris Gryzlov to Sergei Glazyev. But one thing is for sure. The fight to succeed Putin has begun.
Boris Kagarlitsky is director of the Institute of Globalization Studies in Moscow.
TITLE: Chris Floyd's Global Eye
TEXT: Copycat Killers
"This is a blessing of Sept. 11!" exclaimed the president's top adviser, as tanks rolled across the border and paratroopers blackened the sky above the enemy's land - an outlaw state seething with "terrorists" and run by "international criminals." With embedded media breathlessly narrating the action, the president launched the greatest display of military might the country had seen in more than a generation, an earth-shaking blitzkrieg that the generals like to call "Shock and Awe."
That was the scene in Indonesia last week, as the military force responsible for two of the most horrendous campaigns of genocide in the last 50 years stormed into the rebel province of Aceh, vowing to crush a 27-year-old independence movement in just six months. The Indonesian militarists - who killed more than 500,000 people (a conservative estimate) in a CIA-assisted coup in 1965, then slaughtered more than 250,000 East Timorese in an American-backed invasion in 1975 (not to mention the mere thousands they and their paramilitary fronts killed in East Timor in the 1990s) - were back in the saddle and loaded for bear.
They were ordered in by President Megawati Sukarnoputri, a rather feckless leader who was elevated to power on the strength of her famous father's name but struggled in office - until she failed to prevent a bloody attack by al-Qaida on her homeland and was paradoxically rewarded with new powers and popularity. But as her close ally George W. Bush could tell her, a terrorist hit - like any illicit high - doesn't last long. You always need another fix. Especially when your economy is sinking beneath the weight of rampant cronyism, corruption, poverty and inequality.
So with the boost from last year's Bali attack failing, Megawati - or rather, the clique of aggressive hardliners who have come to dominate her inner circle - opted for the patented Bush method of conflict resolution: Bomb the bloody bejesus out of 'em! In conscious emulation of the Anglo-American aggression in Iraq - indeed, citing that shining example at every turn - the old Jakarta genocidists unleashed disproportionate firepower (50,000 troops, heavy armor, heavy guns, undisputed air cover) against an economically ravaged civilian population and a lightly-armed force of some 5,000 rebels. In keeping with the Iraqi motif, they also gussied up their campaign with glitzy visuals, "on-message" media massaging - and incessant praise of Bush's "war on terrorism."
It was the latter theme that led senior Megawati advisor Rizal Mallarangeng to echo Bush's American sycophants in declaring the mass murder of Sept. 11 "a blessing," The New York Times reports. We're blessed, it seems, because the honorable Mr. Bush has now shown us how to deal with anyone we care to label a "terrorist" - with blood and thunder, collateral damage be damned. So Megawati broke a tenuous ceasefire by heaping purposely unacceptable demands on the rebels, then brought down the Bush-style iron fist.
For despite the slick media makeover, the assault on Aceh is very much in keeping with Indonesia's proud military traditions. The army has already begun summary executions, including boys as young as 12, The Independent reports. Dozens of innocent civilians - including students and Red Cross personnel - have been massacred in indiscriminate "sweeps," The Guardian reports. Most ominously, Jakarta announced last week that it will herd up to 200,000 Acehnese civilians into concentration camps, The Times reports. Presumably this is "merely" to deny local support for the rebels, and hold their families hostage - although given the Indonesian military's recent history, the sky's the limit. Or perhaps we should say, the grave?
The blitzkrieg is being carried out with hardware and expertise supplied by the Christian Coalition of Bush and Blair. Bush renewed military ties with the genocidist army last year, as a reward for help in - what else? - the "war on terrorism." Meanwhile, Indonesia's British-made warplanes - supplied under Tony Blair's self-proclaimed "ethical foreign policy" - keep minatory watch in God's blue heaven.
It's not all bad news, of course. You'll be happy to know that Aceh's biggest corporation is still raking in big bucks despite the carnage, Reuters reports. That would be the Bush Regime's favorite oil and gas giant, ExxonMobil. For, like Iraq, Aceh possesses an abundance of energy resources; yet also like Iraq - and most other similarly blessed lands as well - Aceh's energy-exploiters are rich but the people themselves are unaccountably poor.
In fact, there has been an interesting confluence between the Bushists, ExxonMobil and war-ravaged Aceh. Last year, Bush intervened in the U.S. courts to quash a lawsuit filed by Aceh natives against the American oil company, which uses Indonesian troops as hired muscle to protect its operations against the local riff-raff. The Acehnese accused ExxonMobil of colluding with its hired hands in the murder, rape and torture of civilians. But Bush said that the lawsuit would "harm American foreign policy interests." This certainly seems a bit of a stretch - unless, of course, "American foreign policy interests" involve murder, rape and torture by corporate mercenaries. Surely Mr. Bush is not saying that - is he?
By mid-week, the rape of Aceh - massacres, executions, concentration camps and all - had virtually disappeared from the media screen, much like that other recipient of the "blessing of Sept. 11," the ruined and abandoned land of Afghanistan. The restless addict Bush, craving a fresh hit, patently ignored his Indonesian imitators and instead turned his fevered eyes to Iran, where he hopes to bestow a fresh "blessing" soon. Aceh is irrelevant. The dogs bark, the caravan moves on.
Only the corpses remain behind.
For annotational references, see the "Opinion" section at www.sptimesrussia.com
TITLE: Israel Lifts Closure of Travel in West Bank
AUTHOR: By Mark Lavie
PUBLISHER: The Associated Press
TEXT: JERUSALEM - Israel eased some travel restrictions and Palestinians predicted a cease-fire soon, as both sides prepared for a crucial peace summit this week with U.S. President W. Bush.
The summit, set for Wednesday in the Jordanian resort of Aqaba, marks the official launch of the "road map" peace plan, the latest blueprint for ending 32 months of bloody Mideast violence and nudging the two warring sides into peace talks.
Israelis and Palestinians were considering Sunday how far they could go in the first stage of the three-phase, three-year plan, sponsored by the "Quartet" of mediators - the United States, European Union, United Nations and Russia.
The United States was assuming the role of initiator, inviting the Palestinian and Israeli premiers to meet Bush and talk peace.
Palestinian, Israeli and U.S. officials have met in recent days to discuss the wording of possible declarations in which the two sides would recognize the other's right to statehood and security. The declarations, to be issued at the end of the Jordan summit, are required by the road map.
Israeli Prime Minister Ariel Sharon told his Cabinet on Sunday that he would be likely to make a declaration committing Israel to dismantling settlement outposts set up in violation of Israeli law, according to an official at the Cabinet meeting. Stopping settlement construction is a key element of the peace plan.
However, Sharon's adviser, Zalman Shoval, said on Monday that Israel did not consider all those outposts illegal and would only dismantle those not deemed necessary for Israeli security.
Palestinians see the dozens of outposts on West Bank hilltops as efforts to further expand Jewish settlement in the West Bank and Gaza Strip and create new obstacles to a Palestinian state. Hardline Israelis defend settlement building with religious and security arguments.
On the Palestinian side, Palestinian Prime Minister Mahmoud Abbas' government continued to work toward a declaration of a cease-fire on attacks against Israelis by militant groups like Hamas. While Israel demands a crackdown, including the arrest of Hamas militants, Abbas prefers to negotiate a truce.
Israeli officials bent in Abbas' direction by saying that such a truce could be the first step of a concerted move against the violent groups. Meanwhile, Palestinian leader Yasser Arafat told the London-based Arabic language Al-Hayat newspaper that a cease-fire could be completed in the coming days.
In Gaza Sunday, Israeli soldiers shot and killed a Palestinian who they say opened fire on them near the Kissufim crossing point. In another part of Gaza, soldiers critically wounded a 17-year-old Palestinian. The Israeli military had no comment on that incident.
After Abbas and Ariel Sharon met on Thursday, Israel announced it would cancel a closure that has kept all Palestinians, including laborers, out of Israel for more than two weeks. On Sunday, it eased the restrictions slightly.
About 3,500 Palestinians holding valid work permits passed on foot into Israel through the Erez crossing in Gaza on Sunday morning, according to Palestinian officials. Another 3,000 to 5,000 workers are said to have entered Israel from the West Bank.
TITLE: Zimbabwean Opposition Leader Arrested by Authorities
AUTHOR: By Angus Shaw
PUBLISHER: The Associated Press
TEXT: HARARE, Zimbabwe - Authorities arrested Zimbabwe's opposition leader Monday, vowing to crush the launch of anti-government demonstrations the opposition hopes will mark the most significant challenge yet to President Robert Mugabe's long rule.
Morgan Tsvangirai, leader of the opposition Movement for Democratic Change, was arrested at his home Monday for planning an illegal demonstration, said William Bango, an opposition official.
Tsvangirai, a former trade union leader, became increasingly defiant in his calls for people to rise up against Mugabe and his policies, which the opposition blames for sinking the country into economic and political disarray. This week was dedicated to anti-government strikes and protests.
It was not clear whether Tsvangirai would appear for his scheduled court date later Monday. He is standing trial for treason. The state alleges that he was part of a plot to assassinate Mugabe, charges he and his fellow accused - two senior opposition officials - deny.
Moving to block protests, police-manned roadblocks were set up Monday along all the main roads leading into the capital, Harare, and military helicopters swooped over the western city of Bulawayo. Both cities are considered opposition strongholds.
In Harare it appeared that the strike was taking hold, with most shops, banks and factories closed. Traffic was light and only a few commuter buses were running. Opposition officials said that they were planning for street demonstrations later in the day.
In Bulawayo, two lawmakers were arrested and accused of planning an illegal demonstration, opposition officials said.
The opposition says that it wants Mugabe to negotiate on Zimbabwe's deepening political and economic crisis and to agree to step down so new presidential elections can be held.
Zimbabwe is facing its worst economic crisis since independence with annual inflation of 269 percent and acute shortages of currency, gasoline, medicines and other essential imports. Only international food aid has averted mass starvation.
Over the weekend, the High Court declared the demonstrations illegal but the opposition planned on filing an appeal against the ruling at the Supreme Court on Monday.
State television, in its nightly news Sunday, said that planned demonstrations and strikes this week called by the main opposition will be "met with the full wrath of the law."
It said that ruling party youths loyal to the government would break up opposition street demonstrations and quoted Defense Minister Sidney Sekeramayi as saying "enough measures" were being taken to stop anti-government unrest.
"Our soil is very sacrosanct. We shall not allow it to be recolonized," Sekeramayi told the Zimbabwe Broadcasting Corp.
The government has repeatedly accused Britain, the former colonial ruler, of funding the Movement for Democratic Change and opposition-backed labor unions to mount a campaign to oust Mugabe.
Government vehicles sped through Harare late Sunday throwing out printed fliers urging Zimbabweans to ignore opposition calls for the protests, saying: "No to mass action. No to British puppets. Let the workers go to work, let the children go to school and let the banks and businesses remain open. Remain strong."
It was the first time the government distributed political fliers that littered the streets, with few being picked up by passers-by.
Armored vehicles and troops carriers headed into Harare on Sunday from their base, 25 miles northwest of Harare.
TITLE: IN BRIEF
TEXT: Praying for Rain
HYDERABAD, India (Reuters) - Hundreds of thousands of Hindus and Muslims prayed Sunday in a southern city in India for respite from a heat wave that has claimed 884 lives.
Some 100,000 Muslims offered special prayers for rain in Hyderabad, the capital of Andhra Pradesh state, following a tradition set by Mohammed, who is believed to have led similar prayers for rain more than 14 centuries ago.
In another part of the city, more than 5,000 Hindus gathered on the bed of a dried out lake, chanting sacred hymns and prayers from ancient Hindu texts for a reprieve from the blazing heat.
At least 884 people have died in the past three weeks because of the heat wave, D.C. Roshaiah, the state's chief relief official, said Sunday.
Temperatures rose as high as 47 degrees Celsius on Sunday and the weather was not expected to change in the next few days, Roshaiah said.
Myanmar Crackdown
YANGON, Myanmar (AP) - Myanmar authorities turned away students from universities on Monday, the first day of a new semester, suspending classes just days after they detained pro-democracy leader Aung San Suu Kyi and closed her party's offices.
The crackdown on Suu Kyi and her National League for Democracy party follows a violent clash Friday between her supporters and thousands of pro-government protesters, which officials said left four people dead and 50 injured in northern Myanmar.
University sources said on condition of anonymity Sunday that authorities had decided to suspend classes at all universities and colleges under the Ministry of Education.
No reason was given for the suspension, and there was no immediate official announcement.
School Rampage
BERLIN (Reuters) - Two German teenagers have laid waste to a school, wrecking 25 classrooms with hammers and killing the janitor's fish with a fire extinguisher.
The boys, 14 and 17, caused 1 million euros ($1.2 million) of damage by smashing up furniture and ripping out water pipes to flood the school in the Bavarian town of Fuerth, police said Friday.
They also set fire to the adjacent kindergarten. Amid the chaos, the pair emptied a fire extinguisher's contents into the tank of the luckless fish.
The boys said that they embarked on the 3 1/2-hour orgy of violence because it was fun, police said. The younger boy said he also hoped that by wrecking the school, he would get out of having to attend. Both of them now face a spell in a young offenders' institution instead.
A Ping Too Far
TOKYO (Reuters) - A senior Japanese local-government official resigned Friday after admitting to playing pinball instead of helping to deal with a powerful earthquake in the area, Kyodo news agency said.
Takashi Chiba, the deputy governor of Akita Prefecture in northern Japan, was enjoying a game of "pachinko," a popular pinball-like game, when a strong earthquake struck at about 6:30 p.m. local time Monday, the agency said.
The quake injured about 100 people, damaged buildings, roads and railways and could be felt as far away as Tokyo, about 450 kilometers to the south.
A chauffeur-driven car was waiting outside the pachinko parlor but, rather than return to his office to deal with the emergency, Chiba kept on playing for another 45 minutes, Kyodo said.
"I am extremely tired both mentally and physically and have lost confidence in my ability to do my job," the article quoted Chiba as saying.
TITLE: Russians Down Americans for Upset Wins
PUBLISHER: The Associated Press
TEXT: PARIS - Russians Vera Zvonaryova and Nadia Petrova used to play each other as kids for fun.
Now it's serious business as the pair head for a quarterfinal showdown after victories Sunday over Grand Slam champions.
Zvonaryova, a fresh-faced 18-year-old with steely blue eyes that suggest an unwavering concentration, was first through - beating third-seeded Venus Williams 2-6, 6-2, 6-4 on center court.
Petrova soon followed suit, defeating seventh-seeded Jennifer Capriati - a winner of three major titles - 6-3, 4-6, 6-3.
They meet Tuesday in a rivalry that began a decade ago when Petrova, then a 10-year-old, beat 8-year-old Zvonaryova 6-0, 6-0.
"I knew her since [I was] 6 or 7," the 22nd-seeded Zvonaryova said, recalling a time when hundreds of Russian boys and girls competed furiously to "be the best."
"Maybe it's why now there's a lot of [Russian] girls on the tour," she added.
Zvonaryova and Petrova share more than just a Moscow upbringing. They both project powerful mental strength and masses of self-confidence.
"I was really concentrated, and I didn't lose it," Zvonaryova said, referring to her win over four-time Grand Slam champion Williams. "I think it was maybe the best part of my game."
Zvonaryova's persistence had a lot to do with the upset. She skidded into both corners to retrieve shots, extending rallies until Williams made a mistake.
And often that's what happened. Williams committed 75 unforced errors and hit 12 double-faults, accounting for 87 of the 100 points Zvonaryova won.
Some of those errors made the center-court crowd groan - such as the easy slam Williams sailed 5 meters long five games from the finish.
"I was really off," she said. "I just had a tough time keeping balls in."
Petrova, 20, withstood Capriati's rally in the second set - admitting after that she had to dig deep to counter her opponent.
"I was feeling like there is no way to win because she looks like she was much fitter," Petrova said. "But then I just told myself, 'Go and get every point you can.' The game turned around."
The winner of the Petrova-Zvonaryova match could face second-seeded Kim Clijsters in the semifinals - provided that the Belgian beats Spain's Conchita Martinez. Martinez, 31, had a lead of 6-4, 2-0 when her opponent, Lindsay Davenport, was forced to quit.
That left only two American women in the quarterfinals - Serena Williams and eighth-seeded Chanda Rubin.
Defending champion Serena Williams trailed in the first set but rallied to beat Ai Sugiyama 7-5, 6-3. Her opponent Tuesday will be France's Amelie Mauresmo, who upset Williams in the Rome semifinal May 17.
"You've really got to try and get your head clear of all the media hype around the Williamses," Mauresmo said, "and realize that these are not players from outer space."
Rubin beat Petra Mandula 4-6, 6-2, 7-5 and next plays No. 4 Justine Henin-Hardenne, who celebrated her 21st birthday by eliminating No. 19 Patty Schnyder 6-3, 2-6, 6-2.
On the men's side, 1999 champion Andre Agassi reached the quarterfinals for the fourth time in five years by beating Flavio Saretta 6-2, 6-1, 7-5.
"I knew the first week was going to be crucial for me," Agassi said. "So now it's like basically a new life. I've sort of found my comfort zone out there, striking the ball well, moving, and feeling pretty comfortable."
Agassi, the 1999 champion, will next play the winner of a match suspended because of darkness Sunday, with No. 7-seeded Guillermo Coria leading Mariano Zabaleta 6-4, 7-6 (6-4), 5-7.
Elsewhere, No. 4 Carlos Moya, the 1998 champion, defeated No. 13 Jiri Novak 7-5, 6-3, 6-2. He'll next face Dutchman Martin Verkerk, who upset No. 11 Rainer Schuettler 6-3, 6-3, 7-5.
"I'm ready to beat some good players," Verkerk said. "But it's too far for me to say that I can win this Grand Slam."
Agassi's victory left him three wins from his 59th career championship, and it left him in a mood to reminisce. He played a Brazilian on Sunday. As it happens, he won his first title 15 years ago in Itaparica, Brazil.
"Martin Jaite in the semis, Luis Mattar in the final, 7-6, 6-2," Agassi said. "A $90,000 paycheck. Lots of women in bathing suits going around. I remember a lot. It was a very special week for me down there, my first win."
Agassi has 765 wins - sixth on the men's career list - and estimated that he remembers 75 percent of them. He most likely remembers all of his 233 defeats.
His near-total recall goes beyond matches on the ATP Tour. He remembers playing Michael Chang when he was 12. He remembers a satellite tournament in Florida where he earned his first prize money - $1,100.
"You don't necessarily remember specific scores," he said. "You remember, 'Easy first set, couple breaks, second set I lost my serve late, one break.' That sort of thing."
"You can test me any time. I'd love to know myself how much I remember."
Even among the many highlights in Agassi's career, this week could rank near the top. At 33 he's the oldest player in the draw, and he's three wins from his ninth major title. He already has won the Australian Open this year and is 11-0 in Grand Slam matches since losing to Pete Sampras in the 2002 U.S. Open final.
Saretta entered their match bothered by a sore buttock, and he twice required treatment during changeovers. The injury left him with little chance against the second-seeded Agassi, who was so sharp that in one game he landed winners not just in both corners, but on them.
The rout left Saretta searching for ways to give fans their money's worth. Forced far out of position during one rally, he offered his racket to a spectator even before Agassi finished off the point. During the ensuing changeover, Saretta kept the ball in the air, bouncing it off the top of his feet.
TITLE: Ducks Resurrect Challenge With Game 3 Victory in OT
AUTHOR: By Alan Robinson
PUBLISHER: The Associated Press
TEXT: ANAHEIM, California - The goal that gave Anaheim hope came on a shot Martin Brodeur never lets in. The goal that got them back into the Stanley Cup finals came on a shot Ruslan Salei never puts in.
Salei scored off Adam Oates' faceoff win at 6:59 into overtime and the Mighty Ducks, taking advantage of one of the biggest misplays of Brodeur's career, beat the New Jersey Devils 3-2 in Game 3 on Saturday night.
Oates fed the puck off the faceoff to Salei at the top of the slot, and Brodeur barely reacted to his one-timer as the Mighty Ducks stayed perfect - 6-0 - in playoff overtimes. The Devils are 2-3.
It was essentially a must-win game for the Ducks, who played with the desperation expected of a team that trailed 2-0 in the series and almost certainly would have had no chance to raise the cup had it lost.
Ducks coach Mike Babcock joked that Salei is one of his hardest shooters, if not the most accurate. The goal was only Salei's second of the playoffs.
"He can really shoot the puck. We always tell him shoot the puck on net once in a while," Babcock said. "He bangs the puck off the glass with the best of them."
Salei said that the faceoff win was so clean, "You've got to shoot. So far, it's the biggest goal I've ever scored. We had to win this game. We had to get some momentum going. Now maybe it will go seven games, or six."
Game 4 is Monday night, when the Devils can either take a commanding 3-1 lead or the Mighty Ducks will tie a series they seemed out of following two dominating Devils wins in New Jersey.
Overtime playoff wins have largely been responsible for Anaheim's remarkable playoff run, which began with three consecutive series-opening overtime victories.
That success traces to goalie Jean-Sebastien Giguere, who has been unbeatable in overtime, with an NHL-record overtime scoreless streak of 167 minutes, 48 seconds. He broke Patrick Roy's record of 162:56 early in the overtime.
Giguere turned aside 29 of 31 shots in by far his best game of the finals.
"We were excited to play [overtime], because we know we can be successful," said Giguere, who challenged his teammates to play with the emotion and intensity they lacked in the two losses.
But the Devils might have won it if Brodeur hadn't lost his stick and couldn't defend Sandis Ozolinsh's seemingly harmless shot as it trickled in from center ice, putting the Ducks up 2-1 at 14:47 of the second.
Only 45 seconds before, the Devils had tied it at 1 on Patrik Elias' goal.
"I was just trying to stop it, the stick slipped out of my hands and the puck hit it and went in the goal," Brodeur said. "It was just one of those once-in-a-lifetime things."
Devils coach Pat Burns said, "You don't think Patrick Roy ever made a play like that? It's not the end of the world. You're going to fault the goaltender for that? I'm not."
On the other bench, though, Anaheim felt it had "the break we needed," Babcock said.
Brodeur, positioned at the left of the crease, began to scramble over to play the puck, only to drop his stick. With Brodeur unable to defend, the puck trickled off the stick and into the side of the net as the goalie dropped to his knees, raising his hand to his head in disbelief.
It was a perfectly awful play by the goalie who was near perfect for the first seven periods of the series.
Still, the Devils bounced back to tie it at 2 when Scott Gomez deflected Grant Marshall's wrister from above the right circle past Giguere at 9:11 of the third. Gomez has two goals in the finals after scoring only once in 16 games.
"Obviously, they got breaks and that's what it's all about. They got them and we didn't get them," Burns said. "We had a great chance tonight [to go up 3-0]. But it came down to errors and mistakes, like every hockey game does."
The maddening misplay at 14:47 of the second came slightly more than 11 minutes after Ozolinsh set up Anaheim's first goal of the series, by the infrequently used Marc Chouinard. That goal at 3:39 of the second ended Brodeur's scoreless streak of 143:39, the second-longest to start the finals.
Ozolinsh shot the puck toward the net from along the boards, and it deflected off Chouinard's stick and past Brodeur to the glove side. The Devils scored the first goal in each of the first two games on their home ice, and the Ducks never challenged after that in either game.
Chouinard was scratched for the Ducks' last five games before the finals and had only three goals all season.
The first period was scoreless for the third straight game, but the tempo was much different from the first two games. The Mighty Ducks, challenged Friday by Giguere to be more emotional and physical, were both - sometimes to their disadvantage.
"Everybody was real emotional," Giguere said. "Everybody played a great game."
TITLE: Clemens Still Looking for 300
AUTHOR: By Mike Fitzpatrick
PUBLISHER: The Associated Press
TEXT: NEW YORK - Roger Clemens had a big lead against the worst team in baseball. Surely, this was it. Just the formality of a few more easy innings for win No. 300 - so it seemed.
The Detroit Tigers suddenly began a scrappy comeback, keeping Clemens stuck at 299 and taking the visiting New York Yankees to 17 innings before losing 10-9 Sunday.
"You've got a 7-1 lead and Roger on the hill, that's icing on the cake," teammate David Wells said. "It's just a shame because we thought it was in the bag."
Clemens and the Yankees' defense unraveled in the fifth inning, allowing the Tigers to score five runs. He came out after six and watched helplessly as Detroit tied it at 8 in the seventh.
The Rocket, who lost to Boston on May 26 in his first crack at No. 300, finished with a no-decision before a disappointed Comerica Park-record crowd of 44,095.
"We're glad that Roger is going to have to do it somewhere else," Tigers manager Alan Trammell said.
Clemens' chase will continue next weekend in Chicago. The six-time Cy Young winner is scheduled to start Saturday at Wrigley Field against Cubs ace Kerry Wood, who struck out 20 batters in 1998 to tie the nine-inning record set twice by Clemens.
The Yankees haven't played at Wrigley since the 1938 World Series, and Clemens has never pitched in a game inside the ballpark's ivy-covered walls. That means his friends and family will be trying to secure some tough tickets.
"The family doesn't get together too often on the road, so this is nice for me," said Clemens, who had 60 family members and friends on hand in Detroit. "And they're getting to see some different ballparks."
Alfonso Soriano and Jorge Posada homered off Steve Sparks (0-2) in the 17th inning for New York. Wells (7-2) pitched 5 2-3 innings in his first relief appearance in nearly 10 years, and Juan Acevedo got his sixth save.
Derek Jeter and Todd Zeile also homered for the Yankees, who made three of their season-high four errors in the fifth.
Still, the 40-year-old Clemens said he wasn't disappointed after failing in his latest bid to become the 21st pitcher to win his 300th game - and first since Nolan Ryan in 1990.
"There are some guys disappointed inside [the clubhouse]," Clemens said. "Some of the relievers are a little upset. It will be great to get it overwith and move on to something else."
Arizona 10, San Diego 4. A busy day for the Arizona Diamondbacks also became a winning one. Shea Hillenbrand took over at third base and Matt Williams was cut. Closer Matt Mantei was placed on the disabled list and center fielder David Dellucci was carted off after a collision.
Arizona wound up beating the San Diego Padres 10-4 on Sunday, helped by two guys named Gonzalez.
Edgar Gonzalez, the youngest player in the majors at 20, won in his major league debut. Luis Gonzalez homered and drove in four runs for the second straight game.
"I was impressed with Edgar," Arizona manager Bob Brenly said. "His stuff is really good. He's sneaky quick with his fastball. His fastball seems to jump on the hitters."
Hillenbrand, acquired Thursday in a trade with the Boston Red Sox for pitcher Byung-Hyun Kim, was 0-for-3 with two walks.
"It felt all right," Hillenbrand said. "I felt a little tired, but the team made it easy to come in and play. I wasn't nervous, I just wasn't in my comfort zone."
Williams, a five-time All-Star, was designated for assignment.
"He took it like a professional," Brenly said. "He didn't make any excuses. He didn't lay any blame anywhere. He said he understands the business of the game on what was obviously a very tough day for him, for me, for a lot of people in this room."
Williams, a four-time Gold Glove winner, was hitting .246 with four home runs and 16 RBIs in 44 games this season.
Cubs manager Dusty Baker, who managed Williams in San Francisco, plans to call his former third baseman. Chicago has been unsettled at the spot, and perhaps the 37-year-old Williams could help.
"Matt is one of my favorite guys. It's a matter of how he can play and how much he has left," Baker said.
The Diamondbacks put Mantei (right shoulder sprain) and reliever Mike Koplove (right shoulder tendinitis) on the 15-day disabled list.
Arizona later saw Dellucci sustain a concussion when he collided with shortstop Alex Cintron while chasing Miguel Ojeda's fly ball in the third inning.
Cintron caught the ball, but his left knee appeared to hit Dellucci in the face. Dellucci was prone on his stomach for four minutes and was driven off the field.
TITLE: Sorenstam Returns Triumphant to WPGA
PUBLISHER: The Associated Press
TEXT: AURORA, Illinois - Playing in her first LPGA Tour event since her historic rounds at the Colonial, Annika Sorenstam breezed to a three-stroke victory in the Kellogg-Keebler Classic on Sunday.
Though she bogeyed her final two holes, she'd built up such a big lead it hardly mattered. She finished with a 1-under 71, giving her a 17-under 199 for the 54-hole tournament.
"Obviously I'm very, very pleased," she said. "It's been a great week, and to come back and perform the way I did is pretty much incredible."
Mhairi McKay had four birdies on the back nine, but a triple bogey on the front had all but ended her chances. McKay shot even par, finishing three strokes back at 14-under 202.
It was Sorenstam's second victory of the year on the LPGA Tour - her 44th overall. Sorenstam earned $180,000 with the win, putting her back in first place on the money list with $734,501.
Though Sorenstam missed the cut at the Colonial, her grace under unbelievable pressure won her millions of fans worldwide. And many were out in force Sunday. More than 22,000 people came out for the final round - most just to see Sorenstam. They wore the now-familiar "Go Annika!" buttons, and followed her from hole to hole as if she was the Pied Piper.
As she walked up the fairway on the fourth hole, a group of kids on the balcony of one of the huge homes lining the course screamed, "We love you, Annika!" Sorenstam grinned and waved at them as the crowd laughed.
Even tournament volunteers got in on the lovefest. They followed her up the 18th fairway, a sea of red the backdrop for her victory. When she made her final putt, she skipped backward with a big grin on her face and tossed her ball into the crowd.
In Dublin, Ohio, Kenny Perry gained his second successive victory with a two-shot win in the Memorial Tournament on Sunday, despite making bogey on five of the last six holes.
Perry's even-par 72 left him on 13-under-par 275 and was worth $700,000.
Twice U.S. Open champion Lee Janzen also shot 72 and was second, while Masters champion Mike Weir of Canada fired a seven-under 65 for third.
Playing his first PGA event since the Masters in April, world number one Tiger Woods also had a 65 and tied for fourth with Fiji's Vijay Singh (71).
The 42-year-old Perry is on the best run of his professional career after following up last week's easy win at the Colonial with another comfortable victory despite the late lapse.
Starting with a two-shot lead over Janzen, Perry increased his margin to five strokes by the turn with four birdies and a four-under-par 32 that effectively sealed the win.
Five bogeys and a lone birdie on the back nine, however, made the ending interesting.
"That front nine was probably the best nine I played in a long time," Perry said. "I shot some good rounds last week, but to shoot 32 on that nine through those winds and that conditions really set up this victory for me."
TITLE: Jason the Kidd Finally Has His Chance To Shine With Spurs
AUTHOR: By Tom Canavan
PUBLISHER: The Associated Press
TEXT: EAST RUTHERFORD, New Jersey - Jason Kidd has long been rumored to be headed to San Antonio to play with Tim Duncan.
It's true. But Kidd is bringing along the New Jersey Nets to face Duncan and the Spurs in the NBA Finals.
It's a best-of-seven series that might be Kidd's last in a New Jersey uniform. He is going to opt out of his contract at the end of the season and become a free agent.
However, that won't happen until July. The finals are first and that's all Kidd will talk about.
It's Kidd, the All Star point guard who has turned the Nets into a two-time conference champion in two seasons, against Duncan, the two-time defending MVP, beginning Wednesday night.
"That's what it's all about," Kidd said. "We've put our teams in a position to try to win a championship. In October you are never guaranteed that. For us to have both our teams in the finals, now it's just who's team is going to play better. That's what it's all about right now."
San Antonio won the Western Conference title Thursday night with a 90-78 victory over Dallas in Game 6. New Jersey won the Eastern Conference on May 23 when it swept Detroit.
The Nets and Spurs split two games in the regular season with both winning at home. San Antonio will have home-court advantage.
"They're a great team," Spurs center David Robinson said. "In Jason Kidd, wow, what can you say about that guy."
New Jersey might be playing better basketball than the Spurs, who posted the best regular-season record in the league. New Jersey has won its last 10 games in posting a 12-2 postseason mark.
San Antonio might be more battle tested, having knocked off Phoenix, Los Angeles and now Dallas.
"We were going to have to face somebody, now it's San Antonio," Kidd said. "We have to go down there and play two games to see if we can win one. We don't worry about the talk of me going to San Antonio."
Kidd said the Nets know what to expect from Duncan, who averaged 21 points and 14.5 rebounds against them.
"They were the best team in the NBA so everybody talks about Tim and they should," Kidd said. "But [point guard] Tony Parker is the key. When he plays well, they play well. They are similar to us, you never know who can go big on their team."
Manu Ginobili, Stephen Jackson, Malik Rose and former Net Stephen Jackson are the Spurs other main contributors.
Kidd's supporting cast is led by power forward Kenyon Martin, small forward Richard Jefferson and guard Kerry Kittles. Forwards Aaron Martin and Rodney Rogers and guards Lucious Harris and Anthony Johnson are the leading contributors off the bench.
New Jersey was swept in the final last year by the Lakers.
"We have been blessed to get to the finals two straight seasons," coach Byron Scott said. "When you get that opportunity you want to take advantage of it. All our guys understand that now. We want to go out here and give it our best. We feel we have a shot at winning the championship."
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Paul Silas will be the new coach of the Cleveland Cavaliers after reaching agreement with the team on a long-term contract, The Associated Press learned Sunday.
The deal was being finalized Sunday, according to two sources with knowledge of the talks who spoke on condition of anonymity.
Silas beat out former Knicks coach Jeff Van Gundy, who had several discussions with Cavaliers owner Gordon Gund and general manager Jim Paxson about the possibility of becoming LeBron James' first pro coach.
The Cavaliers have the No. 1 pick in the upcoming draft and have said they will select James, the 18-year-old high school phenom from Akron.
"They decided, and they got a great guy. I'm fine with it," Van Gundy said.
Silas was let go by the New Orleans Hornets at the conclusion of the regular season following his fifth season with the team. He was a candidate for several other coaching vacancies around the league.
Silas could not immediately be reached for comment. Cavaliers spokesperson Tad Carper said the team would hold a news conference Monday at Gund Arena for "a major announcement."
Silas had an overall mark of 208-155 with the Hornets, taking them to the playoffs each of the past four seasons - although they've never advanced beyond the second round.
Before joining the Hornets, Silas was the top assistant with the Phoenix Suns from 1995-97. Silas also worked for the New Jersey Nets for four seasons and was the head coach of the San Diego Clippers for three seasons from 1980 to 1983.
Former Philadelphia 76ers coach Larry Brown agreed to a five-year, $25 million deal to be the next coach of the Detroit Pistons, a source within the league said Sunday.
Pistons spokesperson Matt Dobek said the team would introduce its new head coach Monday at a news conference at The Palace of Auburn Hills. Dobek would not confirm that Brown is the coach.
Brown, 62, had also coached Denver (five years), Indiana (four years), San Antonio (3 1/2 years), New Jersey (two years), Carolina of the ABA (two years) and the Los Angeles Clippers (18 months).
He has an 879-685 record in the NBA, and is 1,285-853 overall, including ABA and college. Brown won an NCAA championship with Kansas in 1988, and became the first coach to take six NBA teams to the playoffs when the Sixers made it in 1999.