SOURCE: The St. Petersburg Times
DATE: Issue #878 (46), Tuesday, June 24, 2003
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TITLE: Kremlin Switches Off TVS
AUTHOR: By Anna Dolgov
PUBLISHER: Special to The St. Petersburg Times
TEXT: MOSCOW - TVS journalists cast around for new jobs Monday, while the Press Ministry struggled to find a legal justification for its decision to yank the channel off the air a day earlier.
The Press Ministry cited TVS's long-standing financial and management troubles as the reason it replaced TVS with the new state-controlled Sport channel on Sunday. However, it continued to keep mum Monday about its apparent violation of the law, which says a television channel may only be shut down by court order.
"It was a rather unusual situation that required an unusual solution," a senior Press Ministry official said on condition of anonymity.
He also said that by failing to broadcast in Moscow for more than a week, TVS has breached its licensing agreement.
TVS broadcasts in Moscow virtually stopped in mid-June when city authorities pulled it off the capital's cable network, claiming the channel had failed to pay $8 million for cable services. TVS representatives insist the bill is overblown, and Vasily Perfiryev, deputy chief of Media-Sotsium, which holds TVS's broadcasting license, ridiculed the ministry's explanation.
"This is absolute stupidity," he said in a telephone interview. "There is no requirement for mandatory broadcasts" in all the cities listed in TVS's license.
He said the ministry order to close the channel was illegal. "This is exactly the reason why they cannot explain anything," he said.
Attempts to explain the TVS closure by financial troubles also seem to hold little water. State-controlled Channel One television has run up debts of more than $100 million, but remains on the air, local media has reported.
Critics brushed off the explanation as hypocritical and said the closure was illegal. Under the law, a television channel can be shut down only by a court decision, not a Press Ministry order, said Oleg Panfilov, head of the Center for Journalism in Extreme Situations.
"The authorities have achieved what they have wanted - to destroy [TVS Chief Editor Yevgeny] Kiselyov's team," Panfilov said. "They have been working at it for 3 1/2 years in a very consistent manner."
Media-Sotsium said in a statement Monday evening that it will seek an out-of-court settlement from the Press Ministry for having been taken off the air.
TVS was the last private national channel, and its closure gives the Kremlin a monopoly on the TV airwaves ahead of December's parliamentary elections and the March presidential vote.
"I have a feeling that somebody really needs what is happening," Kiselyov said by telephone. "I have a persistent feeling that the events are guided by somebody's evil will."
TVS's demise follows the 2001 takeover of NTV television by government-connected parties and last year's closure of Boris Berezovsky's TV6. Following the NTV takeover, most of its prominent journalists, led by Kiselyov, fled to TV6, and after it was shut down, they formed TVS.
TVS journalists appear to have thrown in the towel and are looking at moving on to other jobs. Kiselyov has been offered the post of an adviser to NTV General Director Nikolai Senkevich, NTV officials said. But many journalists have become unemployed and appear to expect big salary cuts.
"We even have a joke now that TVS is holding a summer sale of staff," TVS anchor Marianna Maximovskaya was quoted by Kommersant on Monday as saying. "Since it's a sale, those who take our people count on huge discounts."
Due to money shortages that have left TVS journalists and technical staff without pay for three months, the channel was to stop broadcasting Monday. But the Press Ministry pulled the plug early Sunday without waiting to give TVS staff a chance to say good-bye to their viewers.
A colored cross-hatch pattern - the kind used to tune television sets - has appeared on TVS's Web site, in a sign of mourning for the channel's demise.
The closure of the last private national channel is prompting concerns that the government is moving to stifle independent media before December's parliamentary elections and the presidential vote next March.
The authorities have moved to strengthen their grip on the media and to end the occasionally one-sided reporting that tarnished previous campaigns. Last week, the State Duma approved a bill that would allow the government to suspend broadcast or print media for coverage deemed biased. A first violation would result in a fine and the second in a suspension until the end of the election campaign.
The bill still needs to be approved by the Federation Council and signed by President Vladimir Putin to become law.
TVS has been in dire straits for months, plagued not only by financial troubles but also management disputes and a legal dispute with TV6's former owner, MNVK, over its broadcasting license.
The channel is funded by a consortium of businesspeople, including Unified Energy Systems chief Anatoly Chubais and aluminum magnate Oleg Deripaska. But the group has been torn apart by internal disputes, while TVS finances continued to decline.
A loan of $50 million from state-owned Vneshekonombank has been nearly used up, and TVS journalists and technical staff have been unpaid for three months. TVS deputy chief Galina Segodina was appointed acting general director Friday and assigned the task of sorting out wage arrears, TVS spokesperson Tatyana Blinova said.
TVS went off the air at midnight and was replaced with sports broadcasting Sunday morning. Sport television was created a few weeks ago by the government in response to a call by President Vladimir Putin for a national sports channel that would encourage Russians to get more physically fit.
Picking Sport to replace TVS was illegal, said Alexei Samokhvalov, who helped draft federal regulations on broadcasting licenses and heads the National Research Center of Television and Radio.
"Why does this particular channel suddenly get the opportunity to broadcast?" Samokhvalov said. "It participated in no tenders [for the broadcasting license]. Maybe there also are others who want to broadcast on this frequency."
The license is technically held by MNVK, while TVS has been broadcasting under a temporary permit in a Press Ministry arrangement that conforms to no Russian law, he said.
MNVK board member Igor Shabdurasulov said Sunday that Berezovsky might soon give up his 75 percent stake in the company, Interfax reported.
Speaking on Ekho Moskvy radio, Berezovsky refused to confirm whether he would sell his MNVK stake and referred all questions to Shabdurasulov.
He said talk about a possible new buyer was secondary to the fact that "the last television channel that is independent of the state has been destroyed."
TITLE: TRK Sees Changes, Suspects Kremlin
AUTHOR: By Vladimir Kovalev
PUBLISHER: Staff Writer
TEXT: The general director of local television channel Petersburg Television resigned on Friday during a tumultuous few days of events that insiders and analysts said were orchestrated by the Kremlin to strengthen the federal government's grip on one of St. Petersburg's most influential media outlets.
Irina Tyorkina, general director of the station, which is also known as Channel 5 and TRK Peterburg, signed a letter of resignation live on the channel's Inform-TV news program on Friday afternoon, a day after she met with Press Minister Mikhail Lesin.
"It is my own decision to resign," Tyorkina said on the program. "I have worked for the company for 10 years, but the situation has become too much. Logic dictates that I do this."
Tyorkina's successor is Igor Ignatyev, former deputy head of the St. Petersburg branch of the state-owned Rossiya television channel, whom company management unanimously voted into the job with immediate effect at a meeting Saturday afternoon. Ignatyev was swift to dismiss allegations of political shenanigans behind Tyorkina's resignation.
"There's only one political goal, which is that the channel should be a local [media outlet]," Interfax quoted him as saying on Saturday.
Press Ministry representatives said they had no reason to doubt that Tyorkina's resignation was her own decision, made without interference from federal authorities.
"I don't know what [Tyorkina and Lesin] spoke about, because I wasn't there," Press Ministry spokesperson Alexander Shaburkin said by telephone on Monday. "We, the Press Ministry, are for openness and democracy, and we maintain [a principle] of no interference in editorial policy if there's talk of replacing hosts or programs. ... That's an internal, editorial decision."
Petersburg Television spokesperson Irina Karpushina, who on Saturday signed a letter of resignation to be effective June 25, said that, at Saturday's meeting, Ignatyev told the channel's team "to avoid confrontations between the branches of power in St. Petersburg."
"Personally, it's a shame for me that this happened," Karpushina said by telephone on Monday. "In the years that Tyorkina was director, we managed to assemble a creative team of journalists and increase our viewing figures from 4 percent [of local viewers] last year to 14 percent by now."
Experts estimate that Petersburg Television, which also broadcasts to some areas of the Leningrad Oblast, has a potential audience of roughly 4 million.
Also among the victims of the weekend's events were two of Petersburg Television's political-analysis programs, "Postfactum" and "Vecher Trudnogo Dnya" ("A Hard Day's Night").
Daniil Kotsubinsky, the creator of Postfactum, which he also wrote, presented and produced, said he was called to Ignatyev's office on Monday afternoon and told that his program was being taken off the air "because it's ratings are too low and ratings mean money," an allegation he denied.
"We'd tied up advertising agreements for the program, so there are no grounds for talking about possible [financial] losses for the channel," Kotsubinsky said by telephone on Monday.
Kotsubinsky added that he is going on vacation in a month, so the channel could just as easily have waited to pull the program.
"It's clear that this is being done to cut St. Petesburg residents off from information that would allow them to make objective judgements," he said. "It's being done to make life easier for one candidate - [Presidential Representative to the Northwest Region Valentina] Matviyenko."
Matviyenko is widely seen as the Kremlin's choice to be the next governor of St. Petersburg, following the appointment of the previous incumbent, Vladimir Yakovlev, as deputy prime minister in charge of communal-services reform. She has yet to announce that she will run for the office.
Kotsubinsky's fellow journalist Pyotr Godlevsky was also told by Ignatyev that Petersburg Television no longer requires his services.
"I was told that I stir up political tensions in the city," Godlevsky said by telephone on Monday.
"To some extent, the situation is reminiscent of 2001, when the federal government established control over [previously independent television station] NTV," he said. "If [the authorities] manage to bring all the journalists into line, free speech will cease to exist in the city."
Leonid Kesselman, a political analyst at the Sociology Department of the Russian Academy of Sciences, said it was clear that Kostubinsky and Godlevsky got in trouble for their critcism on Sunday night's "Vecher Trudnogo Dnya" of the federal government, which they said was trying to trample all over the media ahead of the local gubernatorial elections, likely to be scheduled for Sept. 21.
"The times of unlimited satire are over," Kesselman said by telephone on Monday, saying he could think of two possible explanations for the changes at the channel.
"These are either the actions of a certain person who doesn't like things being said against him, or it could be advice from image makers who say it is dangerous to play with the fire of freedom of speech in the run up to [Duma and presidential] elections," Kesselman said, referring to President Vladimir Putin.
"However, this is dangerous," Kesselman said. "It's possible to keep your hand on a spring for a while but, sooner or later, it will explode, and it will be very painful."
Petersburg Television was a Yakovlev stronghold during his almost seven years as governor, broadcasting programs descrediting anti-governor and pro-Kremlin Legislative Assembly deputies, and promoting City Hall policies during the gubernatorial election campaign of 1996.
Currently, the City Administration owns 68.2 percent of the channel's shares, with 23.3 percent belonging to the Leningrad Oblast Administration. Smaller stakes are owned by local firms.
"The former management of Petersburg Television was closely tied to [former] Governor Vladimir Yakovlev, so ... it's not surprising that the power changes at city hall have been followed by changes at Petersburg Television," State Duma Deputy Igor Artemyev, of the Yabloko party, was quoted by his press services as saying on Monday.
"I am sympathetic to Igor Ignatyev, and hope he will put all his efforts into building an independent channel at which freedom of speech will not suffer," Artemyev was quoted as saying.
The weekend's shake up at Petersburg Television did not come completely without warning.
At the end of May, Andrei Radin, news editor and presenter at NTV's St. Petersburg branch was taken off the air for two weeks "for showing Valentina Matviyenko less often than [Vice Governor] Anna Markova, who was on the air too often," the Kommersant daily reported this month.
Markova declared her candidacy for the post of governor on June 12.
NTV management denied the allegations, and Radin was later reappointed - but only as a presenter.
On Friday, the City Prosecutor's Office launched an investigation into Petersburg Television's finances as part of a criminal case against Alexander Garusov, former head of the City Election Commission.
According the City Prosecutor's Office, Garusov transferred 10 million rubles (about $322,500) of city budget money to the channel as an illegal payment to buy airtime for three vice governors during last year's Legislative Assembly campaign.
"Postfactum"'s Kotsubinsky said he now plans to concentrate on print journalism and writing books. Kommersant reported on Monday that Tyorkina had allegedly been offered a job as a program host on a federal television channel, without giving any details.
According to the Kandidat.ru Web site, shortly after Tyorkina resigned, Petersburg Television management embarked on a sale of its properties, including a building located outside the city and two BMW cars, and was negotiating to sell three mobile broadcasting stations.
Channel spokesperson Karpushina laughed off the allegations, however.
"Nothing of the sort ever happened," she said. "We didn't launch anyone into space either."
TITLE: Assembly Lets Boffins Relax a Little
AUTHOR: By Irina Titova
PUBLISHER: Staff Writer
TEXT: They may be best known for scientific discoveries that could potentially change the course of history, but Nobel Prize winners have their human side, too.
The 20 Nobel Prize winners who assembled in St. Petersburg last week for the first meeting of its kind in Russia said that gatherings like last week's are valuable not just from a scientific point of view, but are also a great way for them to get to know each other personally.
"I thought I knew a lot about many of my colleagues' scientific research, but I never knew, for example, that Charles Towns, who won the Nobel Prize for physics in 1964, is such a great dancer," said Zhores Alfyorov, who won the physics prize in 2000 and was the initiator of last week's meeting in his hometown.
Alfyorov said that Towns, 87, danced energetically with his wife non-stop for 20 minutes during one of the laureates' parties last week. Alfyorov himself joined in with singing at the party.
On the more serious side of the proceedings, Alfyorov said that the assembled laureates had the chance to exchange information on their work and to learn from each other during the lectures and round tables held here between Monday and Saturday.
He said another aim of the meeting was to raise the prestige of science in Russia.
"Since 1992, the financial support from the government for the country's leading scientific institutions has shrunk by 95 percent, which has resulted in a scientific brain drain," Alfyorov said. "Our scientific research is also not valued as highly as it should be [in Russia]."
Towns said that Russia, which has "very outstanding science," should provide more financial support for one of its academic strong points.
"Scientific disciplines do not immediately pay off; its pay off takes longer," Towns said. "American scientists proved that science's pay off can, ultimately, be colossal, but people often don't have enough patience for it."
Meanwhile, scientists and their wives were offered a broad cultural program, and taken to see the famed city suburbs, with a party being held on board a ship. Many of the scientists present at the meeting said that at such gatherings they do not only discuss science, but also get to talk with each other about various other topics.
Towns, who has four children and six grandchildren, said that he and other Nobel laureates, whom he has known for years, discuss their families.
"We all commiserate with each other about our grandchildren living far away from us, and about missing them greatly," he said. He said that, beside science, he is fond of natural history, hiking, ornithology, and singing, adding that hobbies were also a frequent topic for discussion last week.
Georg Bednorz, a German scientist who received the Nobel Prize for physics in 1987 at the age of 36, agreed, saying that, when Nobel laureates meet, their conversations are not entirely restricted to science, but include hobbies, families and private activities.
Bednorz said that he likes to cook all kinds of cuisine, including Russian, where he is good at cooking borshch. He said that he is also fond of sculpting in bronze or stone.
Most of Nobel laureates arrived at the St. Petersburg meeting with their wives, who were given a separate cultural program.
"For scientists, who have dedicated lots of time to their research, it is very important to have a good and understanding wife," said Yang Li, winner of the Nobel Prize for chemistry in 1986.
TITLE: Truck-Bomb Attempt Kills 2 Bombers
AUTHOR: By Sergei Venyavsky
PUBLISHER: The Associated Press
TEXT: ROSTOV-ON-DON, Southern Russia - A powerful truck bomb exploded near a government compound in Grozny on Friday, killing two bombers and wounding 36 people in a foiled attempt to inflict bigger casualties, officials said.
Akhmed Dzheirkhanov, the deputy chief of the Chechen Emergency Situations Ministry, said the truck bombing occurred about 70 meters from a building housing the Chechen police's unit for fighting organized crime.
A man and a woman were riding in the truck as it sped toward the police building and were killed in the explosion, Alexander Khityanik, a top Grozny police official, said on NTV television.
Of the 36 wounded, four people, including one child, were hospitalized, Dzheirkhanov said.
A Justice Ministry official, speaking on condition of anonymity, said Saturday that six people were killed in the blast, but that figure could not be independently verified.
Interior Minister Boris Gryzlov said casualties were minimal because the truck was prevented from reaching its destination.
"It was obvious that the truck did not plan to stop and its driver had criminal intentions," Gryzlov said in Rostov-on-Don,
Interfax reported. "The vehicle was destroyed."
The explosion carved out a crater three meters wide and four meters deep, Dzheirkhanov said. It caused moderate damage to buildings housing the police's organized crime unit and the region's electricity utility, Grozenergo.
Another Chechen emergency ministry official, Ruslan Khadzhiyev, said the truck had carried the equivalent of 1.5 metric tons of TNT.
TVS television showed footage of a man cradling an injured arm and running for help on a street strewn with metal fragments. Police and military troops came streaming into the street, moving quickly toward the smoke-covered scene of the blast.
The explosion came a day before the region's temporary legislature met for its first session in a Grozny building that was hastily built to replace the government headquarters destroyed in a December car bombing. That attack killed at least 70 people.
The prime minister of Chechnya's pro-Moscow administration, Anatoly Popov, said the council meeting went ahead despite Friday's attack.
"No actions of terrorists can frustrate it," he said.
At its first session, the State Council - formed as an interim legislature after the adoption of a Chechen constitution in March - appointed Hussein Isasyev as its new chairman, Itar-Tass reported.
Kadyrov said the council will mainly focus on the payment of compensation to the Chechen people whose houses were destroyed by the war.
Earlier this month, a female bomber blew up a bus carrying workers from an air base near Chechnya, killing herself and at least 14 people. Two other suicide bombings in a three-day period inside Chechnya last month killed at least 78 people.
The rebel attacks have undercut the Kremlin's efforts to portray the situation in the region as stabilizing. The State Duma last month approved a partial amnesty in hopes of encouraging rebels to abandon their fight.
On Thursday, Chechnya's Moscow-appointed leader, Akhmad Kadyrov, said the region would hold presidential elections in October and elect a parliament by the end of the year. On Friday, Kadyrov reiterated his intention to run for president and said that no matter what attacks rebels stage, they would not stand in the way of the election, Interfax reported.
TITLE: Local Beaches Get a Poor Bill of Health
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Over one third of the beaches in and around St. Petersburg may be contaminated and unfit for use, according to figures released this month by the St. Petersburg Center for Epidemic Control.
Eight of the 23 beaches checked by the center had sand or water - or both - that registered dangerous levels of contaminants or toxins, the study, released June 8, found. The blacklisted included the beach at the Peter and Paul Fortress, two beaches at Primorsky Park Pobedy, the Bezymyannoye Lake beach in the Krasnoselsky District, two beaches on the Izhora River in the Kolpino District, the beaches at Lisy Nos and the Belaya Gora beach at Sestroetsk.
"We take sand samples from all the city's beaches once a month," Nikolai Borovkov, of the center's Enivironmental Hygiene Department, said by telephone on Monday. "We also take water samples once a month for chemical contaminants such as heavy metals, and once a week for dangerous bacteria."
Borovkov said that local water is tested for bacteria, including bacteria that cause dysentry, salmonella and cholera, although experts believe the latter is unlikely to be found in the Neva River.
"If people swim in the polluted waters, the very least they can expect is a severe stomach infection," Borovokov said.
According to Borovkov, the major problem with sand is that it typically shows traces of animal waste, which contains pathogenic germs.
Although district administrations are responsible for cleaning beaches, they often leave it until the last possible moment, or ignore it completely. Technically, Borovkov said, the sand on the beaches should be cleaned regularly and replaced every year, but many local authorities find the process too expensive, and are forced to clean the beaches when local hygiene authorities clamp down.
The water pollution is also caused by the pumping of untreated industrial waste as well as human waste into the Neva River, the water in which is always far from clean.
According to Mikhail Probirsky, deputy head of local water-and-sewage monopoly Vodokanal, 25 percent of sewage and industrial waste released into the Neva River is untreated due to the shortage of water-treatment facilities in the city.
"It may sound like a lot but, before 1978, the city had no water-treatment facilities at all," Probirsky said in an interview last week.
"With the completion of the new Southwest Water-Treatment Plant in 2004 or 2005, we will be able to filter out 85 percent of the waste," he said. "However, much more money is needed to solve the problem completely."
Dmitry Artamonov, head of the local Greenpeace office, questioned Probirsky's figures, suggesting that the amount of untreated waste exceeds 30 percent, and also said that many city residents are either careless or unaware of the state of the water.
"I often see people fishing just meters from where things are pumped into the river," Artamonov said by telephone on Monday. "These illegal pumpings may contain anything from dyes and oils to all kinds of chemicals."
Artamanov also warned that polluted water may often appear clean, as much of the illegal waste disposal takes place at night.
"The Neva is fast, so if you throw something into it at night it will be far away by morning," he said. "Even if the water looks clean, with no obvious oily patches, don't trust your eyes - they just don't give you the whole picture."
If St. Petersburg had enough facilities to treat all the waste it produces, Artamanov said, then one solution would be to introduce stringent penalties for illegal or excessive dumping. However, he said, in the current circumstances, building new sewage-processing plants should be the city's main priority.
The full list of results from the study by the Center for Epidemic Control can be found at www.medport.ru
TITLE: Presidential PR Spun in English
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW - The Kremlin opened the English-language version of the presidential Web site on Friday.
"As an integral member of the global community, Russia considers Internet to be an indispensable tool in the modern times for fast and easy access to information," Putin says in a greeting to visitors on the site at Kremlin.ru/eng.
"I hope you find this web site useful and interesting as the first-hand source of daily updated news about Russia in general, its government, political and economical priorities."
The English-language text of President Vladimir Putin's news conference Friday in the Kremlin was posted on the site shortly after the event ended.
In addition to news, the site includes a tour of the Kremlin and a presidential photo album with pictures of Putin and his family.
Putin called for the creation of the English-language site after Kremlin.ru underwent a top-to-bottom overhaul in June last year.
TITLE: Putin Gives Feeding Frenzy to the Media
AUTHOR: By Simon Saradzhyan
PUBLISHER: Staff Writer
TEXT: MOSCOW - In a broad sweep across domestic and foreign policy challenges, President Vladimir Putin answered journalists' questions Friday on topics ranging from his re-election and government reshuffles to Russian intelligence estimates of the war in Iraq and Iran's readiness for random inspections of its nuclear program.
The annual press conference, which lasted two hours and 40 minutes, also produced inquiries on less burning issues such as "bio-terrorism" in the Volga River delta and potato farming.
The Kremlin gathering got under way with a question from a Tomsk newspaper editor who first half-jokingly announced that Putin's wish to a newlywed couple in the region to conceive a baby has already been fulfilled before inquiring whether there is a conspiracy on the part of the oligarchs to turn Russia into a parliamentary republic.
Putin did not miss a beat, however, and spun the news of the pregnancy in this Siberian city to assert that Russia is part of Europe by saying that demographic problems are as serious in Russia as "elsewhere in Europe."
He went on to say that any transformation of Russia into a parliamentary republic would be "dangerous" and that Russians should be able to directly elect their head of state.
He also seemingly backtracked on the vague promise he made in his state of the nation address last month to form the next government on the basis of the parliamentary majority. Putin made clear he has no firm plans for the government to reflect the balance in the State Duma and said it is sufficient that the Constitution requires the president to win the Duma's approval of his candidate for the post of prime minister.
Putin left open the possibility that he may shuffle the government after the December elections, and said the future of Mikhail Kasyanov's cabinet will depend on whether it is able to maintain growth rates of more than 7 percent.
While easily spitting out macroeconomic numbers, Putin also showed a rather deep knowledge of the farming he said 20 million Russians do part-time on small plots of land.
He not only revealed that the lion's share of domestically produced potatoes is grown on these plots, but also confided to more than 700 journalists how his parents had forced him to "grind" on their plot of land back during his Soviet youth.
While speaking animatedly and at length on long-term objectives, such as doubling GDP and cutting the term of compulsory military service from 24 to 12 months in 2008, Russia's most popular politician nevertheless ducked repeated questions on whether he plans to seek another four-year term.
Putin said he would not push for merging some of Russia's 89 regions, even though some are not "economically self-sufficient." Putin said he has no intention to turn the seven federal districts into "quasi-states," and noted that under the Russian Constitution only the regions themselves can decide whether to merge.
A question from a reporter from the Chechen newspaper Gums contained praise for the pro-Kremlin United Russia party, and Putin started his answer by saying that he was "pleased that you have remembered United Russia" and the role it played in organizing the constitutional referendum in Chechnya.
In the past, Putin has praised Chechnya's pro-Moscow leader Akhmad Kadyrov for the success of the referendum, which sealed the republic's status within Russia, but this time he avoided directly supporting Kadyrov ahead of the presidential elections in Chechnya in October.
On foreign policy, the president said little new, reiterating that Russia wants a nuclear-free Korean peninsular but will continue nuclear cooperation with Iran as long as it makes its nuclear program "transparent" to inspectors from the International Atomic Energy Agency. Putin said he "has information" that the Iranian leadership is ready to fully cooperate with IAEA inspectors on all of its nuclear programs.
The president insisted that Russia's stance on Iraq was consistent and said he was never misled into thinking that the U.S.-led military campaign could become protracted or stalled. He said the possible scenarios that Russian intelligence services had prepared for him ahead of the war coincided with actual developments "almost by the day."
When addressing foreign policy issues, Putin got the most animated when evaluating Moscow's relations with Tbilisi, which have been strained over incursions of Chechen rebels from Georgia's Pankisi Gorge into Chechnya. In his description of Moscow's arsenal of sticks and carrots for negotiating with Tbilisi, Putin went beyond previous proposals to deploy Russian commandos in the gorge and offered financial aid to Georgia.
Of the 710 journalists present, 140 represented Russian national media, 230 represented foreign media and 340 represented regional media.
The predominance of regional journalists was reflected in the questions, with 38 of the 48 questions focused on domestic or local issues.
Television companies from Nizhny Novgorod were especially active. They repeatedly prodded the president on whether the city should become the official capital of the Volga Federal District, even after Putin clearly spoke against such an idea at the very beginning of the press conference.
While disapproving of the emergence of any quasi-states with their own capitals within Russia, Putin said that some federal agencies could be relocated from Moscow to other cities.
Journalists from the Volga regions showed extra zeal in quizzing Putin, with one Astrakhan writer leaving the rest of the crowd wondering what he meant when he praised Putin for the fact that local "terrorists are acting not as obnoxiously and are hiding in the reeds."
Sensing the bemusement, Putin clarified that the journalist was referring to agents of "bio-terrorism" who are poaching sturgeon in the Caspian Sea. He then admitted to having eaten surgeon caviar sold on the black market himself.
The president also did not blink when an Egyptian journalist, speaking Russian, congratulated him on the "third anniversary of Leningrad" rather than the 300th anniversary of St. Petersburg and then quizzed him on "weapons of mass expression."
Putin also raised laughs with his reply to a question from an Interfax journalist, who asked why the president seems to make a practise of appointing people who have failed in regional jobs to higher, federal positions - such as former St. Petersburg Governor Vladimir Yakovlev, recently appointed deputy prime minister in charge of communal services, and disgraced former Primorye Governor Yevgeny Nazdratenko, who was appointed to head Russia's fisheries and, subsequently, the countries security council.
"You've put me in a difficult position," Putin said. "I don't know any examples that would confirm your thesis."
"We had one example, but I don't want to talk about it," he said. "In this case, a person who worked in one place was transferred to another, unrelated position in which he also faced problems."
Staff Writer Vladimir Kovalev contributed to this report.
TITLE: Putin Says Poverty Is Still the Enemy
AUTHOR: By Alex Nicholson
PUBLISHER: Staff Writer
TEXT: MOSCOW - What makes Vladimir Putin ashamed? The poverty of his people. The antidote? A stronger economy.
His answers may not have been revelatory, but in the course of a marathon press conference Friday, the president displayed a detailed understanding of a staggering array of economic issues, from oligarchs and capital flight to the sales tax and sturgeon.
"I don't like the word oligarch," said Putin, when asked if the nation's business colossi had heeded his call to show patriotism and repatriate more of their earnings.
"An oligarch, in our general understanding, is a person who has stolen his money and who continues to steal by taking advantage of his access to power. I am doing everything to make sure that this situation doesn't repeat itself. I don't see these kinds of people. But maybe someone is trying."
As to reports of an impending "oligarchic revolution," Putin said he was satisfied with the relationship between tycoons and the state. "Over recent years the much-discussed equidistance from the organs of power has finally been achieved," he said, contrary to popular perceptions. "Today, those who disagree with this position are - as they say - long gone," he said, referring to exiled tycoons Boris Berezovsky and Vladimir Gusinsky.
And those that remain appear to be heeding the president's plea. Legitimate capital flight has fallen drastically, from $24.8 billion in 2001 to $11.2 billion last year, the president said. "This is a good sign. It shows that Russia is gradually creating conditions for investment here."
Another "good sign," he said, was Thursday's decision by the body leading the global fight against money laundering, the Financial Action Task Force, to make Russia a full member - less than a year after it was on its blacklist.
A question on Putin's recent bold challenge to the government to double the size of the economy within 10 years wasn't long in coming.
"Ask for more and they'll give you what you need," Putin joked. "But seriously, this task is realistic and it can be achieved. Though for Russia it is a tough one. ... If this result is not achieved, then this means there are problems. And it is premature to be happy with all the government's activities."
Putin later gave grudging praise to one man whom some observers had predicted could soon be looking for work.
"The government is headed by the prime minister, and he's not working badly. He could do better, but it should be said that his work is satisfactory."
As the State Duma voted through amendments to the Tax Code, Putin called lowering the tax burden "one of the main tasks of the government this year," and emphasized its importance for the floundering manufacturing sector.
Asked to justify the removal of the controversial 5 percent sales tax, which is expected to hit some regions hard, Putin said the decision would make Russia's economy more effective overall. "We had to do this. ... There is no country in the world with two taxes - VAT and sales tax - that function in parallel. ... The budget will provide resources to cover falling revenues for the regions."
Deputy Finance Minister Sergei Shatalov said earlier Friday that the shortfall would be compensated for by redirecting other revenues, such as taxes on small and medium-sized businesses, excise duties on alcohol and up to 1 percent of the federal income tax.
Other questions highlighted regional business issues.
When asked by a journalist from Vladivostok about possible routes for a new oil pipeline to the east to tap Asian markets, Putin said he was leaning toward the route from Angarsk to the Far East port of Nakhodka over a rival route backed by Yukos that would go directly to northern China.
"Nakhodka looks more attractive from the point of view that it will give us access to markets in the broader sense," he said, adding, however, that the route will ultimately be determined by ongoing feasibility studies.
A question from Astrakhan spotlighted rampant poaching in the area and the expediency of creating a state sturgeon-fishing monopoly.
"In general monopolies are dangerous, especially state ones," Putin said. "But bearing in mind the unique nature of the situation, it could make sense." He even confessed that he was acquainted with the problem first hand. "There's a lot of poached produce around," he said. "I've eaten it myself. I'm guilty."
And from a reporter from the Krasnodar region came the observation that "Russia has two problems - a good harvest and a bad harvest, because either way prices on flour and bread rise."
When asked what can be done to make state aid to the agriculture sector more efficient, Putin said that to start with he had ordered the government to prepare a decree that will clear the balance sheets of farmers. Putin said the collective, 330-billion-ruble ($11-billion) debt owed to the government by agricultural enterprises should be written off. "I've given the order," he said.
But in the end, his greatest concern, he said, is the "poverty and the low standard of living" that affects about a quarter of the population. "Every Russian has the right to, and must, live better."
TITLE: IN BRIEF
TEXT: Starovoitova Probe
ST. PETERSBURG (SPT) - The investigation into the 1998 murder of Duma Deputy Galina Starovoitova has been extended until December 20.
"The decision for another half year extension was called for in the interests of the investigation," Interfax quoted the press service of the FSB's St. Petersburg and Leningrad Oblast branch as saying.
Starovoitova's former assistant, Ruslan Linkov, told Interfax that the investigation was making use of information obtained from one of the primary figures involved in the affair.
"The earlier arrest of those who committed the crime point to a former Duma deputy who was involved in the selection of the personnel for this crime, their recruitment, and decided questions of payment for the act," Interfax quoted Linkov as saying.
Starovoitova was shot to death in the doorway of her home on Nov. 20, 1998, on the eve of the elections for the St. Petersburg Legislative Assembly. Linkov was also wounded in the attack.
Water Pollution
ST. PETERSBURG (SPT) - The Swedish Commission for the Protection of Water Environment has warned that the Baltic Sea is in an extremely serious state and that many species in the Baltic's ecosystem may face extinction because of pollution from St. Petersburg, the BBC reported Saturday, according to Interfax
The number of sightings of fish that inhabit the Baltic Sea has halved, and the fish population is now at a below-critical survival level due to a shortage of oxygen.
Pregnant women in Sweden are now recommended not to eat herring, as it can affect the amount of dioxin in their bodies.
"We have discovered huge problems in the growth of seaweed and plankton [in the Baltic] as a result of a shortage of oxygen," said the head of the commission. Sweden is particularly concerned about the environmental state of the Baltic Sea because an important part of the country's economy consists of fishing industries.
TITLE: Plant Carves Into Meat Market
AUTHOR: By Angelina Davydova
PUBLISHER: Special to The St. Petersburg Times
TEXT: A new $10-million EkoNord meat-packing plant was opened by Holland-based company Carpenter Investment B.V. and US-based company Crown Investment in Vsevolozhsk, Leningrad Oblast, on Tuesday.
According to the executive director, Mattias Frank, the new plant's production capacity will be 100 tons of vacuum-packed cold meat per day.
"EkoNord can now meet the St. Petersburg and Leningrad Oblast demand for packed meat, and soon fresh local produce will replace foreign meat products," he said.
Crown Investment, one of the two companies financing the EkoNord plant, is also co-owner of one of Russia's largest meat-importing companies, Meatland. In 2002, Meatland imported 40,000 tons of meat to Russia. Analysts believe that, with the new meat-import quotas introduced by the government in April this year, the profitability of the meat-importing sector has been reduced. For this reason, many companies in the sector are eager to diversify their business.
At the new production facility, cold packed meat will be manufactured under the Fileya trademark and EkoNord is planning to invest another $500,000 in its promotion over 2003. Dmitry Gordeyev, the director of Crown Investment in Russia, said that the company plans to capture 30 percent of the local meat market, and distribution contracts have already been signed with several major retail chains,such as Pyatyorochka, Lenta, O'Kei and Metro.
The second phase of the construction, costing $1.8 million, will raise production levels at the plant by 30 tons and should be completed by the end of 2003. The range of products manufactured will include hamburgers, minced meat and marinated, ready-to-cook foodstuffs.
Further plans for the project include the construction of a modern abattoir and a meat-storage facility in Leningrad Oblast.
Gordeyev added that Crown Investment intends to create a chain of EkoNord meat-packing plants throughout Russia, with the Moscow Oblast as the next potential location.
TITLE: Deputies Approve VAT Cut, Creates New Mineral Charge
PUBLISHER: Combined Reports
TEXT: MOSCOW - The State Duma, heading for re-election later this year, on Saturday approved a government-backed plan to trim value added tax and eliminate the controversial 5-percent sales tax from next year to spur economic growth.
Deputies voted overwhelmingly to approve amendments to the Tax Code, including cutting VAT to 18 percent from the current 20 percent. They retained a 10-percent VAT-rate incentive for some basic necessities.
The 10-percent cut in the VAT rate is enshrined in the 2004 federal draft budget, currently planned with a surplus of 95 billion rubles or 0.6 percent of gross domestic product.
VAT is a key revenue source for the government, which has said that the cut would erase 96.4 billion rubles from the books next year.
The deputies initially insisted on more radical cuts, but the government managed to ward them off as a threat to plans to keep the budget in the black next year.
The sales tax is a key source for the regions, and the government promised to compensate them for the loss by earmarking part of income taxes and alcohol taxes for regional budgets.
President Vladimir Putin praised the moves at a news conference Saturday.
"In normal economies there is either VAT or a sales tax. The only exception is Canada, but even there the sales tax is, in substance, a modified VAT ... We are making our economy more civilized," he said.
To offset some of the loss, the Duma introduced a mineral-extraction tax of 107 rubles ($3.52) per 1,000 cubic meters for all gas producers, despite opposition from independent firms, which say that the tax would make their work unprofitable.
Independent oil firms, unlike state-controlled gas behemoth Gazprom, are not allowed to export gas and this way compensate for losses at home, where the government caps prices at a much lower level than can be fetched abroad.
The legislation also increases tax on oil production to 357 rubles per ton ($11.77) from the current 340 rubles ($11.21).
(Reuters, SPT)
TITLE: Tourism Industry Counts Costs of Throwing a Party
AUTHOR: By Angelina Davydova
PUBLISHER: Special to The St. Petersburg Times
TEXT: Although the City Administration has yet to release any official statistics on the number of tourists who visited St. Petersburg during the 300th anniversary celebrations, travel companies and hotels have already begun to collate their results.
Travel businesses appear to have weathered the difficulties presented by jubilee well, and are now have high hopes for the future, believing that the celebrations will continue to boost in-coming tourism in the coming months.
Most travel companies working in the incoming-tourism sector faced difficulties both with hotels and with accommodation in general during the jubilee period. "We turned away 1,500 tourists from St. Petersburg between May 15 and May 27, due to problems with accommodation, although, on the actual anniversary dates, we found out that there were spare rooms at hotels," said Valery Friedman, the general director of Mir travel company, which serviced 1,172 tourists between May 25 and June 5.
"From May 17, hotels were asking us to pass tourists on to them, but we're not the fire service, and we're not able to fill in all the necessary documents that quickly," he said.
Natalia Belik, the spokesperson for the Corinthia Nevskij Palace Hotel, said that the hotel was only 56.3-percent full this May, while it was 75-percent full during the same month last year.
Galina Kurnikova, the director of the Neptune Hotel, said that the hotel was 50 percent full during the celebration - the normal figure for December. "Now the occupancy is increasing and will soon reach 90 percent."
Kurnikova believes that, as a result of the anniversary celebration, the number of tourists coming to St. Petersburg will grow by 5 percent to 8 percent in the near future.
During the anniversary period, another local travel company, Fremad Russia, accepted only a fraction of the amount of tourists that it usually services. "We've had only 20 percent of the number of tourists that we had in the same period last year. Our company was only accepting tourists if our partners insisted on it, although we had explained to them that there would be difficulties and we wouldn't be able to provide a full service," said Gennady Gostyev, the company deputy general director.
Fridman said that one of the major problems facing many travel companies during the jubilee, concerned a need to extend visas for one day. "When we provided visa support to our clients, we didn't know about the decision to close the airport, and were arranging visas which expired on June 1. But, as Pulkovo was closed for flights, we had to extend the visas urgently."
Another problem, according to travel experts, was created by the difficulties in moving around the city with so many roads closed for official delegations.
"I was driving round the city in my car, looking for open roads, and then calling bus drivers to give them instructions where to go," Fridman said.
The State Hermitage Museum, an "obligatory" sightseeing destination for every travel group, also noticed a fall in the number of foreign visitors during the jubilee. A spokesperson for the museum said that for all of May, and particularly the last week of the month, there was a drastic decline in the number of foreign visitors - the drop was so huge that it could only be compared with the fall following the September 11 attacks. The only exception was on the anniversary night, when the museum worked 24 hours and entrance was free.
Experts in the tourist industry believe that this fall in numbers was caused by the lack of spare hotel beds. However, they are expecting a boom in the number of visitors in the period immediately after the celebrations. While 25,800 foreign tourists who had pre-booked with travel companies visited the Hermitage in May, advance bookings for foreign visitors in June topped 63,300.
Sergei Korneyev, director of the Northwest branch of the Russian Union of the Travel Industry, said that the anniversary will have a positive influence on the local travel market. "Firstly, the jubilee will dispel the misconception that St. Petersburg is a city full of dull monuments, where nothing ever happens and there's nothing to do, making people think twice about coming to the city. Numerous television programs showed the city as a modern, vibrant and constantly changing place," Korneyev said.
"Secondly, the presence of political leaders from all over the world demonstrated to potential tourists that St. Petersburg is a safe city."
The influence of the anniversary celebrations will not only be restricted to perceptions, however. Korneyev said that the major events timed to coincide with the celebrations would also lead to concrete results. "The main problem for St. Petersburg tourism is its seasonal character, and that can be solved through the development of conference tourism, through the organization of congresses, conferences and seminars. The Russia-EU summit was a good example of that," Korneyev said.
Korneyev stressed that, as well as pros, the jubilee celebrations had brought some cons. "I hope that the unjustifiable rise in hotel prices won't last long after the celebrations, and that St. Petersburg will be able to provide travel accommodation at competitive prices," he said. "If increases in hotel prices aren't matched by improvements in service, the world travel market may well forget about the promotional effect of the 300th anniversary, because there will be other big events going on, such as the Olympic Games in Athens. That's why I believe a 10-percent to 15-percent increase in the volume of tourists will be a sufficiently positive outcome of the jubilee.
TITLE: Solving Russia's Image Problem Key To Attracting U.S. Finance
AUTHOR: By Caroline McGregor
PUBLISHER: Staff Writer
TEXT: MOSCOW - When it comes to luring direct investment from the locomotive of the global economy, Russia has a PR problem.
While much of the world has been mired in an economic downturn, Russia has posted four consecutive years of stellar growth, and the administration of President Vladimir Putin has laid the groundwork to keep the ball rolling with progressive changes to the tax, customs, land and legal codes.
But back in the United States, the number of companies bullish on Russia are fewer and farther between. For many, Russia simply remains too foreign.
As a result, the total stock of U.S. investment here is only about $6 billion, by U.S. Embassy calculations - roughly comparable to the amount sunk into Costa Rica, whose economy is about 40 times smaller.
"It's a question of perception," says John McCaslin, a U.S. Commerce Department official on staff at the embassy in Moscow.
"We hear from U.S. companies here that when they go back to their boards and compete for their companies' resources against China, Malaysia or South America, it still seems to be a hard sell for a lot of companies," he said.
The perception that organized crime is omnipresent and property rights are flexible is mistaken, says James Balaschak, head of Deloitte & Touche's management consulting practice and a decade-long veteran of Russia's business scene.
As a result, he says, "U.S. companies are missing opportunities being snapped up by Western European and Asian counterparts, who are moving more aggressively, and strategically, to invest and produce in Russia."
Some companies didn't hesitate and are doing a brisk business here. Those that account for the bulk of U.S. investment in Russia are household names, clustered around three of the market's most alluring features: natural resources, skilled labor and growing consumerism.
ExxonMobil has invested $1.4 billion of a planned $12 billion at Sakhalin Island in the Far East, and aerospace giant Boeing says that it has put in some $1.3 billion so far, which means, if the embassy's $6 billion number is right, these two companies alone account for 40 percent of total U.S. investment to date.
According to the American Chamber of Commerce in Moscow, however, the U.S. Embassy calculations are off.
"Six billion is too low," says AmCham president Andrew Somers, who estimates that the figure is closer to $10 billion.
Peter Pettibone, managing partner of the law firm Hogan & Hartson in Moscow and a member of the U.S.-Russia Business Council board of directors, agreed, saying that if the real figure isn't already $10 billion it will be shortly.
DOING THE MATH
A quick run through the math seems to support that consensus.
Connecticut-based United Technologies Corp. has invested $400 million in two dozen joint ventures making everything from Carrier air conditioners and Pratt & Whitney motors to Otis elevators, the first of which was installed in St. Petersburg's Winter Palace in 1993.
U.S. firms have invested some $2.5 billion in the Northwest. Chicago-based Wrigley's and Boston's Gillette each have $50-million production facilities in the Leningrad Oblast. Cigarette maker Philip Morris, now called Altria, recently announced that it would spend $240 million upgrading its massive Izhora plant outside St. Petersburg, its largest facility outside the United States.
Mars, another consumer-goods giant, recently opened a $25-million pet food plant in Novosibirsk, bringing its total outlays in Russia to half a billion dollars, while Procter & Gamble, headquartered in Cincinnati, has put $150 million into a soap factory outside Tula and Frito-Lay opened a $60 million potato-chip plant in Kashira, southeast of Moscow, last fall.
And you get another $500 million with the launches, last fall, of new production lines by Ford, outside St. Petersburg, and General Motors, in Tolyatti, in central Russia.
Pepsi, meanwhile, has been here since the 1960s, when then-CEO David Kendall brokered a deal to swap bottling plants and soda-pop concentrate for the rights to sell Stolichnaya vodka in the United States. Pepsi says that it has poured some $1 billion into Russia; rival Coca-Cola is not far behind with $750 million.
And that's before you scratch the lower-tier firms.
WAITING ON WAL-MART
Beyond oil and gas, engineering and consumer goods, U.S. companies have found Russia somewhat less compelling.
Some sectors, like aluminum, are notoriously hard to break into, because oligarchs have a choke hold on that part of the economy, says James Mandel, a lawyer at Salans. Oil firms have trouble competing for projects on domestic oil majors' home turf, unless it's a place where the latter are incapable of extracting themselves - like offshore at Sakhalin.
Other sectors simply have been neglected.
Of the top 10 U.S. companies on the Financial Times' rankings of the world's top 500 firms, only Wal-Mart has no presence in Russia, despite a dizzying domestic-retail boom that started for real early last year and shows no signs of slowing.
The world's largest retailer has reportedly been sniffing around, sending exploratory teams here in recent months, but when reached by telephone in Arkansas last week, a company spokesperson demurred, saying only that the company is "always looking for growth opportunities in markets where customers want to see us."
Not to worry, says AmCham's Somers - Wal-Mart is coming: "Based on what I know, and the discussions I've had, they'll be here, probably next year. They're so big, they feel like they can take their time and let the market mature."
The surge in the fast-moving consumer-goods sector has pretty much run its course, however, Balaschak says. In the future, the development will be concentrated in heavier industries, like power production and related industries, as the monopolies that control them are unbundled.
Also, with the breakup of Russia's rail and power-grid monopolies, General Electric is hoping for a piece of the action. The No. 2 conglomerate in the world after Microsoft is at an advanced stage of negotiating to build locomotives for the Railways Ministry at a $75-million plant outside St. Petersburg.
And as Unified Energy Systems is privatized, the new leaner, meaner electricity providers will be looking to update their power generation machinery.
GE could not be reached for comment, but Somers says: "Discussions are going on, and GE could well play a role."
WTO OPENS THE DOOR
As World Trade Organization accession negotiations push sectors like telecoms and financial services toward liberalization, officials at the U.S. Embassy see opportunities for companies to create more of a footprint here.
"American companies dominate these sectors around the world, but we don't really have much of a presence here," says McCaslin of the embassy's foreign commercial service.
U.S. investment banks like Goldman Sachs and Merrill Lynch left Russia when the financial bubble burst in 1998 and they may be tempted back when the banking sector regains a critical mass, but, until then, they are content to handle energy deals out of London.
Part of the hesitation, many argue, is that Russia's image problem is well earned and still applicable. If Russia gets a bad rap in boardrooms, the argument goes, it's because there's a history of U.S. investors getting burned.
Sawyer Research Products, the No. 1 U.S. crystal-quartz producer, lost the $8.2 million it invested in a plant in the Vladimir region in July 2001 when Sawyer's partner took over the company with the backing of the local administration and the courts, which ruled the price it paid for its lease was too low.
And back before Yukos was toasted as the darling of the investment community for its good corporate governance, it fought a number of high-profile battles with Kenneth Dart, a U.S. minority shareholder who accused the oil major of diluting his stake in Yukos subsidiaries, leaving him with an empty shell. The two eventually reached an undisclosed settlement, though a similar tussle with oil major TNK was mired in the court system in 1999 and 2000.
The legal playing field may be getting more level for foreign companies, but it's not there yet, Pettibone says. "Some decisions may have a paternalistic, protective aspect, but I think we'll see that judges will become more professional with reforms, more training and decent salaries."
FINDING A PARTNER
When it comes to structure, a number of people, looking back on cautionary tales like the Sawyer and Dart experiences, advise companies to go it alone, without a partner, known as "going greenfield."
This school of thought argues that it's simpler to have two rather than three negotiating parties: your company and the local government administration of the district where you plan to launch.
The other school argues in favor of investing through a joint venture with a Russian partner who can run interference with the bureaucracy on your behalf.
Which one is best is, in many, ways dependent on the U.S. investors' corporate culture.
Ford Motors went greenfield with its plant outside St. Petersburg, while General Motors, its competitor across town in Detroit, opted to enter the market here in conjunction with No. 1 auto manufacturer AvtoVAZ, and with the support of the European Bank for Reconstruction and Development.
Both think that they went the right way, says Somers, and both probably made a choice that was right for them.
GM Russia executive Heidi McCormack spoke highly of her company's joint-venture experience. "Like all working relationships, there are challenges, just like in a marriage," she says.
Bringing the GM-AvtoVAZ Tolyatti factory to life took more than two years of negotiations and approvals, and the groundwork was laid even before the 1998 crisis.
"That the deal survived is pretty outstanding," McCormack said. But despite the companies' differences, there's a fundamental agreement on principles, she says: "Both of us want the same thing out of the partnership."
UTC and Boeing, meanwhile, have tapped Russia's skilled labor force.
"We have found terrific Russian partners," UTC Senior Vice President Ruth Harkin said by telephone from Washington. "There's a technical excellence here that in some cases surpasses our own."
"Working with [our partners] has been good for us and good for our business," says Thomas Pickering, a former U.S. ambassador to Russia and now Boeing's senior vice president for international relations. "There's a strong sense of mutual win."
The classic joint-venture model involves the American partner bringing to the table technological know-how or its globally recognized brand name, while the Russian partner brings the ability to drive through the implementation of plans to build a production facility.
It pays to be especially scrupulous in selecting a Russian partner, lawyers like Pettibone and Mandel point out, because greasing the wheels often means a few well-placed bribes. Publicly held companies are bound by U.S. securities legislation, through which they can be held liable for a partner's disreputable behavior under the Foreign Corrupt Practices Act, which forbids companies from paying bribes to obtain contracts.
Some payments are O.K. - for example, it is acceptable to give a gift in order to expedite the routine tasks officials are supposed to do. But giving gifts to win preferential treatment from bureaucrats is not.
Privately held companies, like Mars or agro-giant Cargill, which is planning a sunflower-oil plant in Krasnodar, enjoy greater flexibility, since they aren't under the gun on quarterly financial reporting.
Nor do European rivals face such stringent scrutiny.
BUREAUCRACY
If U.S. reporting requirements are tough, Russian bureaucratic work is considered exponentially more burdensome. What U.S. companies need, but don't always have, is an awareness of all the ways in which officialdom can interfere.
"Form over substance is important - sort of the opposite of the way it is in the United States," Pettibone says, explaining that he has seen firms get in trouble for something so seemingly innocuous as filing documents on the wrong color paper. "Even if you are an upright citizen and have the best of intentions, you can get in a lot of trouble if you don't keep strictly to the required forms, and that bothers a lot of people."
U.S. Ambassador Alexander Vershbow has said that the difference between the two countries' bureaucracies amounts to "a quantum leap." A recent Russian government study, for example, found that of 5,000 state bureaucratic functions, 4,750 must be preserved in the course of administrative reforms. That mentality is hard for U.S. firms to understand, Vershbow argues, because American businesspeople are used to operating entirely independently from the state.
ExxonMobil's experience is a good illustration.
As its Sakhalin-1 project moves from exploration to development, Exxon says that it has filed 37,000 pages of documentation to get the necessary approvals from over 50 agencies at the federal, regional and local levels involved in the regulatory process.
"The project ... will require thousands of approvals, concurrences, licenses and permits before we can begin operations," David Simerka, Moscow general manager for Exxon in the CIS, wrote in an e-mail interview.
Russia is a bureaucratic heaven, as Pettibone puts it, and large companies are at a distinct advantage because they can better afford to pad their staffs with employees whose express purpose is to ensure that the firm is complying with the state's myriad document demands.
In short, size matters.
'THERE'S NO TEXTBOOK'
A large company can afford to operate at a loss for a year or two while it establishes itself on the market, while the smaller entrepreneurial-type firms that rushed in the early days of capitalism had less staying power. In the mid-1990s, an estimated 700 U.S. firms dotted the Russian business landscape.
Many pulled out before the crisis, or were swept away by it, and there are fewer adventurers these days.
Those that managed to put down roots, however, and weather the devaluation, are now seeing the returns. "They didn't lose the advantage of their trade names," Somers says, and now most have long since passed their 1997 financial high watermarks.
Boeing's Pickering said that firms need to have "multibillions in revenues" if they want to make a go of the Russian market.
But David Jones, head of Delta Capital, which manages the U.S. government financed U.S.-Russia Investment Fund, argues that size is not a decisive factor.
"Anybody can lose money in Russia. The question is more whether you've done your homework and put the right people on the ground," Jones says.
"Part of being successful here is in absorbing the battle scars, establishing contacts and developing a sense for the rules of the game," says Mandel of Salans. "There's no textbook."
A number of these companies are outperforming their sister companies elsewhere in the world.
"Whereas a Russian general manager used to fly off to conferences to learn about how to do business in an emerging economy, now the conferences are being held here, or it's the Russian general manager giving the lecture," Somers says.
In addition, legal risk is diminishing as the judicial system is reformed, moving it in the right direction. Political risk is seen as very low right now. Commercial risk, too, is quite low, as the country enjoys budget-boosting high commodity prices.
The consensus seems to be that the rewards of being on the Russian market outweigh the risks.
Buoyed by GM's positive experience, McCormack says that the balance tilts strongly toward rewards. "It's certainly not a 50-50 proposition."
The more skeptical, like Harvard economist Marshall Goldman whose most recent book is "The Piratization of Russia," see Russia perched in the middle, with any promise that the market holds balanced out by the peril. "You have to work with someone who knows the ropes," Goldman cautions. "Nothing can be taken at face value."
GLOBALIZATION
Although remarkably immune from the global downturn, Russia has been a victim too. As companies turn inward to ride out the storm, they don't invest as much abroad.
"If companies are hesitant to take any risk at all, the mentality is, why take it in Russia?" says Jones of DeltaCapital.
Balaschak, at Deloitte, says that U.S. companies have been internally focused on their bottom lines due to the economic turndown, but as the outlook brightens, they'll once again turn outward, and toward Russia.
"At very senior levels, American executives are saying we think we should be in the market, we're going to come to the market. We want to know how to come in smart," Somers says.
Chip maker Intel is an example of such deliberate, long-term strategic thinking. It announced last month that its venture-capital arm would be putting $10 million into RuNet holdings, a smaller, yet significant investment.
"We're here to get our feet wet, get some experience and figure out how to invest effectively," says Steve Chase, president of Intel for Russia.
Chase says that he's heard other American businesspeople say that they like what they see here, they just don't know whom to talk to. There's no development agency able to attract investment, like national bureaus set up to encourage tourism.
On the positive side, the quality of local-hire managers, which was always considered a weak link, Jones said, has markedly improved.
At the U.S. Embassy, Mary Warlick, head of the economics section, was encouraged by the recent appointment of Yury Isayev, the 30-year-old former president of Impexbank, as deputy economic development and trade minister for investment policy. "He's dynamic and certainly understands the need to streamline the process."
GM's McCormack says that there's a big disparity of appetite and impressions between Russian-based managers and those back at headquarters. "[Changing that] has more to do with getting them over here to see Russia for themselves than anything else."
"There should be a lot more U.S. direct investment and that's something we're trying to encourage in a challenging environment," says McCaslin at the U.S. Embassy.
"It's wise to be cautious," says Boeing's Pickering. "But it's not wise not to come."
TITLE: Fund Investors Feeling Bullish
AUTHOR: By Amy Baldwin
PUBLISHER: The Associated Press
TEXT: NEW YORK - With Wall Street rallying for more than three months, stock fund investors are feeling more bullish. Funds with positive returns far outnumber those with negative returns, and riskier funds, including those that focus on growth or technology stocks, are outpacing bearish havens like gold funds.
"I think caution should still be the word of the day," said Ralph Scearce, a financial planner in Lexington, Kentucky.
Scearce is concerned that the stock market is overvalued, with the Standard & Poor's 500 index, the broadest of Wall Street's major indexes, having risen about 30 percent since mid-March to reach levels of a year ago. Stocks in the S&P are trading at more than 30 times earnings, which planners like Scearce say is too high, given the fact that bull markets, historically, have started with stocks trading at 12 times earnings.
"I believe we had the greatest [market] bubble in the history of mankind between 1995 and 1999, and I don't think we are going to get through that bubble in three years," Scearce said.
Still, there's plenty contributing to investors' upbeat mood. Each of the 25 largest stock funds have positive returns so far this year, 20 of them in the double digits, according to Lipper Inc. The three biggest gainers of this group are: the NASDAQ-100 Trust, with a year-to-date return of 24.9 percent; American Funds Growth Fund of America, A shares, with a return of 16.4 percent; and Vanguard Windsor II, with a return of 16.1 percent.
Another encouraging sign can be found in the 41 categories of equity funds that Lipper tracks. Of those categories, all but two have positive returns so far this year. And the two that don't are the type that fare best in bear markets - gold funds, with a negative year-to-date return of 0.5 percent, and specialty equity-diversified funds, with a negative return of 5.8 percent, according to Lipper.
Fund investors' old favorites, the tech and growth funds that ruled the 1990s bull market, are back on top. Health/biotechnology funds have a year-to-date return of 23.6 percent, while small-capitalization growth funds have a return of 18.3 percent, according to Lipper.
Yet, financial planners and other experts recommend that fund investors continue with caution. After all, if they are looking to chase the market's recent stellar returns, chances are that they're too late, said Eric Tyson, author of "Mutual Funds for Dummies."
"The screaming bargains that were out there are no longer there. The easy money has been made," Tyson said. "I am still bullish about the long term, but people can't expect to buy now and see the market go straight up."
Tyson recommends that investors make more moderate moves rather than turning their fund portfolios over to riskier, high-growth sectors.
Tyson said that investors should look to diversify their holdings, making sure that they have money in both stocks and bonds, and companies of varying size as well as companies based in the United States and abroad.
"Keep a diversified portfolio. Those investors who did [during the three-year bear market] fared better than most," Tyson said. "Those who had a 50-50 split between stocks and bonds probably didn't lose money."
Scearce, the planner in Kentucky, recommends that investors focus on value-oriented funds, which concentrate on safer blue-chip companies that often pay dividends and typically hold up better when the economy is wobbly.
Another reason that value-oriented funds deserve attention is because of the recent dividend tax cuts. As part of the 10-year, $350-billion package of cuts, signed into law by U.S. President George W. Bush last month, stock dividends will be taxed at a maximum rate of 15 percent from 2003 through 2008. Previously, dividends were taxed as ordinary income at rates as high as 38.6 percent.
In 2009, dividend taxes return to the rates paid on ordinary income with the high rate being 35 percent, but some market analysts believe Congress will decide to extend the cuts.
Paul Merriman, president of Merriman Capital Management in Seattle and publisher of FundAdvice.com, recommended that investors, before making big fund purchases, identify their goals and determine the rate of return necessary to reach them.
"It amazes me how few people understand the implications of exposing themselves to more investments," Merriman said.
TITLE: A Decade of Strengthening Ties
AUTHOR: By Larisa Naumenko
PUBLISHER: Staff Writer
TEXT: MOSCOW - Back in 1993, U.S. Ambassador to Russia Robert Strauss had just left that post and Eugene Lawson was stepping down as vice chairperson of the U.S. Commerce Department's Eximbank.
A decade later, they are celebrating the 10th anniversary of the U.S.-Russia Business Council, the organization they founded in response to arguments from executives of leading U.S. corporations that something needed to be done to educate U.S. firms about business opportunities in the new, post-Soviet Russia.
"At the time, there was a tremendous sense of urgency," Strauss said in a telephone interview from Washington. "Everyone said there would be a market that would open up quickly and our hopes were higher than was justified."
Since those early days, the USRBC has grown from an organization with a couple of dozen members to a leading trade association representing the interests of almost 300 members.
Based in Washington DC, the council advocates ways to expand and enhance bilateral relations, not between the two governments, but among the private sectors.
The USRBC says that its aim is to promote an economic environment in which business can succeed in what is a challenging Russian market.
To achieve this mission, the council has stepped in in a number of ways.
When a member company has found itself in a commercial dispute, the council has, in the past, sought to resolve the problem through its contacts with relevant government officials, through letters to members of congress and policymakers, and public information campaigns.
The council has also organized several committees and working groups to facilitate the exchange of ideas on policy issues related to aerospace and aviation, agribusiness, energy, IT and e-commerce, legal issues and World Trade Organization accession.
"The USRBC is a valuable way to be part of a broader group of people and companies, acting together," said Esther Dyson, chairperson at EDventure Holdings, an investment company active in the IT sector.
She had high praise for the council's IT forums, saying that they "are helping to foster the more effective use of IT, the growth of the sector itself, and more enlightened government policies about it."
Some criticize the organization, though, for being too much of a cheerleader for Russia, giving rosy pep talks at the expense of a more objective, balanced take on the risks that U.S. firms face when launching ventures in Russia.
The USRBC additionally conducts Russian and U.S. government policy research, publishes a quarterly magazine called Russia Business Watch, and organizes regular briefings and networking events.
Boeing's vice president for international relations, Thomas Pickering - a former ambassador to Russia, like Strauss - said that when he traveled to Washington from the embassy, he would often stop by the USRBC because it was a valuable forum for people from the Washington policymaking community to meet visiting senior Russian government officials.
The council originally oriented itself toward U.S. companies, but it has since opened itself up to Russian businesses, too. Flagship airline Aeroflot in 1999 became the first Russian company to join the USRBC, doing so as part of its initiative to enhance its name recognition and improve its image in the United States.
Since then, the council's Russian members have grown to 40 in number, and the council has expanded its scope to lobby on behalf of those firms as well.
"The USRBC has increased the West's loyalty to Russian enterprises and the country's economy in general," said Artyom Minayev, spokesperson at Vimpelcom, Russia's No. 2 cellular operator. "Without this help, it would have been difficult for us to convince the West to invest money in Russia and, in particular, in Vimpelcom."
The USRBC has also played a key role in the Russian-American Business Dialogue, or RABD, a private-sector initiative launched by U.S. President George W. Bush and President Vladimir Putin at their July 2001 summit in Genoa, Italy. The dialogue is designed to strengthen the economic and commercial ties between the two countries.
The dialogue is a joint project run by the USRBC along with the American Chamber of Commerce in Moscow and on the Russian side, the Union of Industrialists and Entrepreneurs and the Russian-American Business Council headed by former Ambassador to the United States Yuly Vorontsov.
Moscow-based AmCham and Washington-based USRBC "work hand in hand across long distances to improve investment participation and investment relations," Boeing's Pickering said.
The dialogue covers several important aspects of bilateral relations, including visa and customs issues, access to markets, investment policies, high-tech support, the growth of small and medium-sized enterprises and judicial reform.
The USRBC has pushed for an end to the U.S. Jackson-Vanik amendment, which links Soviet-era emigration policies with trade status, but has been used by the U.S. Congress to leverage Russian concessions during a simmering poultry-trade dispute. The USRBC hopes that permanent normal trading relations will soon be extended to Russia.
The council has also supported Russia's early succession to WTO membership and has advocated the reforms needed to improve the country's investment climate.
Last May, during a Bush-Putin summit in Moscow, the council and the three other groups within the Russian-American Business Dialogue presented the dialogue's initial report to the two presidents in a meeting at the Kremlin.
As the council is celebrating its 10-year anniversary, USRBC President Gene Lawson reflected on the council's achievements. "The council's greatest achievement over the past decade is of a more macro nature - helping to foster a climate in which normal business can operate predictably," he said.
"I think we have had a direct and tangible impact on the way foreign investment is perceived in Russia. That perception has evolved from at least a hesitant, maybe a fearful approach to an atmosphere where foreign investment is welcomed and its economic and social contributions are recognized," he said.
"Helping to integrate Russia into the global economy is a central part of our mission, and we firmly believe that trade and investment is a two-way street," said Blake Marshall, executive vice president at the USRBC.
"We were proud to have played a role in giving our economic partnership a significant boost last year when Russia was formally designated a market economy under U.S. trade law," Marshall said. "Going forward, our campaign in this area will tackle the challenge of terminating the application of the Jackson-Vanik amendment to Russia, thus granting permanent normal trading relations on the road to WTO accession."
Alexis Sukharev, president of Auriga, a Russian IT company, said that he especially valued the USRBC's efforts to promote economic and other reforms in Russia, lobbying for Russia's market-economy status under U.S. trade laws and for WTO accession.
"In good and in not so good times in U.S.-Russia relations, the USRBC has always been a strong champion of strengthening the relations and actively worked towards achieving practical results," Sukharev said.
Staff Writer Caroline McGregor contributed to this report.
TITLE: Business Provides Ballast For Rocky Political Patch
AUTHOR: By Caroline McGregor
PUBLISHER: Staff Writer
TEXT: MOSCOW - Three weeks after the U.S. and Russian presidents met in St. Petersburg and three months before they meet again in Camp David, the U.S. government's top foreign-trade official described business ties between the two countries as the ballast that will carry bilateral relations through rough political waters.
Speaking to a conference hall full of Russian and American businesspeople, U.S. Undersecretary of Commerce for international trade Grant Aldonas on Thursday argued that the countries need to see a common economic future. "Right now we share the same perspective on a lot of political issues, but commercial ties are the ballast in the relationship," he said.
Later in the afternoon, Aldonas met with Economic Development and Trade Minister German Gref, as part of the groundwork being laid for the trade mission to be led by U.S. Commerce Secretary Don Evans in the second half of September, in connection with the Second Commercial Energy Summit in St. Petersburg.
Evans is also due to hold meetings with small-business entrepreneurs in Moscow and visit an as-yet-undetermined site in western Siberia, home to the bulk of Russia's oil and gas. Later in September, President Vladimir Putin plans to travel to Camp David, Maryland, for a summit with U.S. President George W. Bush.
Both sides are looking to give deeper roots to political ties after they were buffeted by a chilly divergence of views over the United States' actions in Iraq. The political fallout over Iraq between the United States and France this spring was arguably worse, but the relationship was not fundamentally shaken because shared economic interests anchor them together.
Economic ties, Aldonas said, are the ties that bind.
John Beyrle, the deputy chief of mission at the U.S. Embassy in Moscow, echoed those remarks, though he noted that despite commendable improvements to the investment climate here over the last three years, much remains to be done to attract U.S. companies.
"It's still too hard to do business in Russia," Beyrle said twice, for
emphasis.
Recent restrictions by the Sakhalin governor barring foreigners from traveling outside the capital, Yuzhno-Sakhalinsk, is one vivid example of an obstacle to be overcome, he said.
As ExxonMobil and Conoco develop their projects there, the island could be home to 15,000 expats in the coming years, but this suggests a worrying "mini-resurgence of a climate of suspicion," he said, and it counteracts gains made elsewhere.
The common goal of integrating Russia into the world economy has been established, Beyrle said. "Now the question is how to get there."
Aldonas said that he hoped to see more tangible success stories. "We need to show the American business community that investment can work in Russia in the short and long terms," he said.
"As Secretary Evans likes to say, capital is a coward," Aldonas said. "It needs to know there's a strong foundation for investment in Russia. We need to make Moscow as familiar as Los Angeles for an investor sitting in Washington, D.C."
An attendee, Barry Morris, a former banker who now runs PCG, an investment-advisory firm, said that investors have been encouraged by increasingly balanced, frank talk about the difficulties of the Russian market, not just its opportunities. "It's easier to appreciate the upside when the downside is identified."
When Putin and Bush met in St. Petersburg during the city's 300th anniversary festivities, the economic agenda was "the center of gravity," Beyrle said. Besides some fence mending on Iraq, in the space of their one-hour conversation, the two covered energy-sector cooperation and graduating Russia from Jackson-Vanik, an embedded trade-related thorn in Russia's side, as well as potential new General Electric and Boeing investment projects and the Murmansk pipeline.
The distance from the deepwater port of Murmansk to New Jersey is relatively very short, Beyrle noted, so if the pipeline is ultimately built, the project could pay "tremendous dividends" in the coming years. If that flow of oil gets up and running, it will reduce the United States' dependence on the Middle East, one of Washington's strategic priorities. "Russia is a tremendous partner in that."
Another item on the bilateral agenda is the hurdles to Russia's WTO accession.
Beyrle said that the growing sense among Russians that the U.S. government does not fully support Russia's bid is "absolutely wrong."
"We're four-square behind accession and have been from the earliest possible moment," Aldonas concurred. "The time is now," he said, before the feet-dragging deprives Russia of the chance to take part in the Doha round of revisions to the international trade framework. The first talks have been held and are due to wrap up in 2005.
Eximbank, the U.S. government's export credit agency, has long been one part of the constellation of government agencies working to link the two countries economically.
Paul Tumminia, the bank's director for Russia and the NIS, said that the Russia portfolio has fallen to around $200 million in the past few years, but he expected an upturn this year.
"The number of transactions is up, but their size is falling - and that's a good thing," he said. No longer do sovereign loans, or those backed by the government, drown out lending to private-sector firms, as they did in the 1990s.
Eugene Lawson, the president of the U.S.-Russia Business Council, said that his 300 members "are the most optimistic they've ever been about doing business in Russia.
"The pace and magnitude of change here has been simply extraordinary," he added.
Blake Marshall, the council's deputy director, said that he expected a wave of American firms to join the market in sectors like financial services, advertising, IT and telecoms. An A.T. Kearney study last fall said that one in 10 firms with a global presence would expand into Russia within the next three years. "Based on the knocking on our door, I think that's borne out," he said.
Parallel to that, Russian companies' interest in boosting trade and investment in the United States is growing, he said. These firms are in metals and mining, like Norilsk Nickel, which concluded its acquisition of Montana palladium producer Stillwater Mining this week, as well as IT firms in Novosibirsk and Tomsk, which ship software to technology firms outside Washington, along what is known as the Dulles tech corridor.
The kinds of firms eyeing Russia are becoming more diverse, but it's still energy-sector heavyweights that grab the headlines for foreign direct investment.
"The energy sector is the thin end of the wedge of Russia entering the international business community," Aldonas said. "There's still some distance to go, but there's an awful lot of good activity."
TITLE: Pitiful Performance at Gazprom is a Giant Disgrace
AUTHOR: By Boris Fyodorov
TEXT: Foreign and domestic shareholders alike remain disgruntled with Gazprom's performance, and are becoming increasingly vocal. The short-lived flurry of optimism at the time of Rem Vyakhirev's dismissal as Gazprom CEO in May 2001 has given way to entrenched frustration at the lack of tangible results.
The most accurate yardstick for private investors to judge management is a company's share price and market capitalization - and Gazprom has failed to measure up. It has the same capitalization as Yukos, although estimates suggest that its capitalization should be at least 10 times larger.
The Gazprom share price consistently underperforms the market: It is lower now than this time last year. Shareholders perceive the share price as a reflection of the quality and performance of the company's management - and they cannot help but wonder when the share price dips 10 percent in the context of an overall market rise of 50 percent.
Gazprom management appears to be indifferent to the issue of higher capitalization, although the advantages of such an increase directly benefit the company and, of course, its largest shareholder - the government. The government's apparent indifference is baffling. How can it be indifferent to the value of its single largest asset?
As regards Gazprom's dividend policy, there is scant evidence of positive change. The much-heralded dividend-policy announcement 18 months ago has proved a hollow promise.
Paying out something to shareholders seems to be permanently mired at the bottom of the agenda of Gazprom's managers and government representatives. This is detrimental to the company's interests. Shareholders are not requesting exponential increases, but they should be entitled to decent increases in real terms.
For a number of years, shareholders have anticipated a move to scrap the pernicious policy of artificially dividing the company's share structure into domestic and international segments. But, despite numerous promises of action, the problem inexplicably remains. Shareholders are at a loss as to who can be supporting the separation, which is universally acknowledged as detrimental to Gazprom.
Government and management seem unable to implement even the purely technical measure of introducing trading on MICEX, which would improve the liquidity of the market for Gazprom's shares. Despite the efforts of a presidential commission on liberalizing the share structure - which completed its work in 2001 - it is totally unclear what, if anything, is going to be done in this area.
This inertia damages the share price and the standing of Gazprom in international financial markets. Managers talk about investment, but no action is taken to encourage it. A decision on this issue and a commitment to concrete dates, figures and formulas is of paramount urgency.
For over a year, the market labored under the mistaken impression that liberalization was linked to the state increasing its direct share in the company to 51 percent. It has become abundantly clear that this was just a pretext for stalling on the ring-fence issue. Gazprom CEO Alexei Miller is a de facto presidential appointee, and government and company officials control approximately 60 percent of the stock. Real control already exists - there is no need to increase the share.
The core problem is that the government representatives on the board suffer from split loyalties. As state officials, they are inherently unable to act as proper board members and execute their fiduciary responsibilities to the company and its shareholders. Just to give a few examples, they are not keen on gas-tariff increases, the creation of a free wholesale-gas market or demanding tax minimization from management.
Herein lies the rub for Gazprom. No company in the history of the free market has ever succeeded when run by a team of government officials who are not even allowed to be compensated for their services as directors. Gazprom would benefit greatly from an increase in the number of board members to 15 and having more nongovernment directors.
In addition, shareholders are increasingly concerned by management's obsession with physical production volumes, rather than financial results. Sustaining high production levels without domestic tariff reform is the road to ruin.
Of equal concern is the unwillingness to consider the inevitable wave of broader industry changes. The monopoly is already breaking up - oil companies and independents are beginning to demand access to pipelines and exports. It is clear that, ultimately, pipelines will be separated from Gazprom.
Gazprom should protect its interests, but also prepare for reform. This debate needs to begin now, so that, in two years, an effective plan will be in place, thus avoiding a repeat of the unfortunate UES scenario. Despite the inherent logic in this strategy, proposed by the Economic Development and Trade Ministry, Gazprom has so far turned a deaf ear.
Shareholders enthusiastically lauded the change in Gazprom's management in 2001, anticipating with relish an end to graft and the inauguration of a new period of enhanced efficiency. Although new managers lacked experience, they were given generous grace periods in which to produce results.
Two years on, the honeymoon is most definitely over, and all excuses have been exhausted. Investors fail to understand certain ill-advised appointments and the rate of new management turnover. The murky actions of some managers have directly led to distrust and the impression that these new managers have quickly "gone native."
Investors have a basic right to expect management to be efficient in cutting costs and waste in a company. Gazprom has a program of cost cutting, but it falls short of what is really needed.
There is no evidence that measures have been taken to cut personnel to more manageable proportions.
The advertisement and sponsorship budget of the company beggars belief. There is no rationale for sponsoring visiting foreign singers and musical extravaganzas. As an experiment, I once tried to submit a genuine application for a modest donation to a domestic cultural organization in need of support, and it was refused.
There remains the nagging problem of NTV. Why does management continue to subsidize the channel with pointless advertisements? Indeed, does Gazprom - a monopoly - really need to advertise at all?
These points can be elaborated on ad infinitum. But I return to the first and most basic issue - the share price. If the share price underperforms, then management has clearly underperformed.
The brave new world of 2001 is now in tatters, and this should be a matter of utmost concern, not only for shareholders and investors. Gazprom is a prime test case for the stock market, the international financial community and, indeed, for the whole of Russia. A lack of respect for shareholders on the part of Gazprom sends a bad message to everybody.
Boris Fyodorov, a former finance minister and member of the board of directors of Gazprom, contributed this comment to The St. Petersburg Times.
TITLE: Bachelor Lukashenko's Dirty Dowry
AUTHOR: By Yulia Latynina
TEXT: Russia's relations with neighboring Belarus have been rocked by one more in a long line of scandals. In 2001 and 2002, the Russian Central Bank issued credits to Belarus totaling 4.5 billion Russian rubles ($150 million) to help prop up the Belarussian ruble, commonly known as the zaichik, or "little hare." The loans carry a 5-percent annual-interest rate. Last week, repayment of the latest tranche was postponed for another year.
Vedomosti reported that most of the rubles loaned to Belarus to stabilize the zaichik never made it to their destination. They were salted away in Russian banks instead. A deposit of 635 million rubles was made into a NOMOS Bank account yielding 10 percent annual interest. Another 700 million was deposited in the Bank of Moscow at 14 percent. Rosbank was the big winner, receiving deposits of 293 million and 794 million rubles and paying out zero and 5 percent annually, respectively.
In addition, in 2002, 159 million rubles were deposited in an account at Lanta Bank at 12 percent per annum. Another 500 million earned 15 percent interest at MDM Bank, while deposits of 635 million and 53 million rubles in accounts at Alfa Bank earned 3 and 1 percent per annum, respectively.
In all, 3.7 billion of the 4.5 billion rubles loaned to Belarus to prop up its national currency were deposited in Russian banks to generate income. Using a low-interest loan this way is like asking for money to pay for your mother's cancer treatment and then it transpiring later that you blew it all on your girlfriend.
According to the author of the Vedomosti article, the respected financial reporter Alexander Bekker, in one year Minsk cleared no less than 225 million rubles just by arbitraging on the difference in interest rates.
The deposits in accounts yielding less than 5-percent interest are rather more suspicious. It's true that you're not a thief until you get caught stealing. But in the old days, when a red director deposited his factory's money in a zero-percent account, it usually meant that he was collecting a little interest income for himself on the side - in cash. This used to be a favored method for transferring a company's money to the director's pocket.
If the Financial Action Task Force, or FATF, doesn't raise an eyebrow when money from a stabilization loan is deposited in an account at zero percent interest, this suggests that FATF may be doing a little laundering itself. In this case, however, the process seems to be moving in reverse: Clean money (a stabilization loan) is converted into dirty interest payments. Money is not being laundered, it is being flushed into the sewer. There's no reason to suspect the banks involved of operating as washing machines - but as toilets, that's a different matter.
President Alexander Lukashenko of Belarus is quite similar to Queen Elizabeth I of England. She died a virgin, as we know, but the prospect of her hand in marriage was a powerful instrument of British foreign policy. Lukashenko's Belarus is unlikely ever to unite with Russia for the same reason that Haiti never managed to unite with the United States during the 29-year Duvalier family dictatorship. Countries where political opponents vanish without a trace never unite with other countries, much less with those where political opponents haven't yet begun to disappear.
And yet, as bridegroom Lukashenko is allowed to live on the interest from his dowry without tying the knot. Russia's Central Bank floats loans to Lukashenko at a loss. Gazprom sells him natural gas at the domestic rate of $24 per 1,000 cubic meters, knowing full well that Lukashenko's Beltransgaz resells it for twice as much. Russia's railways ship Belarussian freight for the domestic fee. The customs agreement with Belarus amounts to renting out a stretch of the Russian border to Lukashenko so that his buddies in the shipping business can make a mint delivering goods to the Russian market.
The union of Belarus and Russia is like having a tapeworm in your gut. For you, this is nothing short of unification. But for the worm, it's full autonomy.
Yulia Latynina is host of "Yest Mneniye" ("Some Might Say") on TVS.
TITLE: Traveling a 450-Year Long and Winding Road
AUTHOR: By Sir Roderic Lyne
TEXT: I was one of the thousands packed into Red Square last month to hear Paul McCartney. Those of my generation - the generation that grew up with the Beatles - had, I am sure, a single thought in our minds: This was one of those events that, 20 or 30 years ago, we would never have expected to see. The burial place of Lenin and Stalin, Brezhnev and Suslov, pulsating to "Back in the U.S.S.R." and "All You Need is Love."
Four hundred and fifty years before McCartney, another enterprising British visitor came to Russia and, like McCartney, was received by Russia's ruler in the Kremlin. Richard Chancellor was trying to find a Northern route to Cathay (China) in his ship, the "Edward Bonaventure," when he dropped anchor in the White Sea, near what is now Severodvinsk in Russia's Far North, and opened relations with Russia instead.
"Our men learned that this country was called Russia, or Moscovie", wrote his chronicler, Richard Eden, "and that Ivan Vasiliwich [i.e., Ivan the Terrible] ruled and governed farre and wide in these places. And the Russes asked likewise of our men whence they were, and what they came for: where unto answere was made, that they were Englishmen sent into these coastes, from the most excellent King Edward the Sixt, having from him in commandement certaine things to deliver to that King, and seeking nothing else but his amitie and friendship, and traffique with his people, whereby they doubted not, but that great commoditie and profit would grow to the subjects of both Kingdomes." Chancellor made the arduous 1,000-kilometer trek by sled to Moscow ("I take the whole towne to bee greater than London with the suburbes: but it is very rude, and standeth without all order") and duly delivered his letter from Edward to Ivan the Terrible. Within two years, Britain and Russia had signed their first trade treaty.
This week another page will be turned in the history of this relationship when, at the invitation of Queen Elizabeth II, President Vladimir Putin becomes the first Russian president to pay a state visit to the United Kingdom. He will be repaying the state visit that the queen paid to Russia in 1994. (A state visit is the highest card in the pack of diplomatic protocol; the British sovereign normally issues only two such invitations each year). What we seek in this event is essentially the same as Richard Chancellor's aims, 450 years ago: "amitie and friendship, and traffique with his people."
The "amitie, friendship and traffique" have ebbed and flowed over the course of four and a half centuries. The last state visits by Russian leaders to Britain were those of Nicholas I in 1844 and Alexander II in 1874. Between these two friendly events lay the distinctly unfriendly episode of the Crimean War. In the twentieth century, although Britain established diplomatic relations with the Bolshevik state at an early stage, formal links at the highest level saw a long interruption. But now we are in a different era, as this week's visit will underline.
This does not mean that we are always going to agree. However, our recent disagreement over Iraq was an interesting demonstration of the changed nature of the relationship. In the past, even as recently as the Kosovo crisis, such disagreements tended to spill over into unrelated areas and often led to a prolonged chill. Iraq, by contrast, was an issue between us only in a narrow context and a short time frame. We did not disagree over the principle that Saddam Hussein's brutal regime was in material and repeated breach of a long series of UN Security Council resolutions and posed a threat to international peace. We had, as Foreign Minister Igor Ivanov has written, a tactical difference on how to resolve the problem. That is now firmly behind us. The action taken by the coalition has had a salutary effect and will bring lasting benefits to Iraq, the Middle East and the wider international community. As Ivanov wrote in The Times of London after the passage a month ago of Security Council Resolution No. 1483, "the way is now open for a better future for Iraq and for an end to the quarrels between the big powers in the wider field of international relations."
The international context within which we operate and the problems we face have changed as well, and we all need to update our thinking to match. This makes the vogue for demanding a "multipolar" world rather puzzling.
On one level, "multipolarity" is simply stating the obvious. Power, wealth, and military might do not repose solely in one country. They never have, and never will. The United States' share of world GDP, for example, is vastly less than it was 50 years ago. But it is a delusion to think that power will ever be spread evenly around the globe. Our world is irrevocably, but also irregularly, multipolar. So calling for a multipolar world is like calling for an Earth that is round. We have it already (plus motherhood and apple pie to boot).
On another level, digging below the rhetoric, the doctrine of multipolarity looks rather old fashioned. It seems to hark back nostalgically to the world of 1945 to 1985, divided into blocs and "zones of influence"; the world of the Yalta and Potsdam agreements, and of doctrines of containment and deterrence. Multipolarists argue that the European Union should develop as a "counterweight" to the U.S. They do not want Russia to seek to integrate more closely with its European neighbours, but urge it to act, instead, as a separate "pole" (by implication embracing other states within a "sphere of influence" ). Similar arguments are advanced for China, Latin America and other areas.
This doctrine suffers from one fatal flaw: It won't work. It doesn't answer the questions we face in 2003.
From the 16th to the 19th centuries, the dominant issue was rivalry and conflict between nation-states and empires. In the second half of the 20th century, it was confrontation between blocs, conducted in part through proxy conflicts in different regions. These are not the issues now, as everyone can see. Regional conflicts and tensions have, alas, not disappeared; but the line-up of rival blocs on opposing sides has. There is no fundamental divergence between, say, the permanent members of the Security Council in their attitudes to any of the world's sources of tension. The Arab/Israeli dispute is a prime example: the specter of rival superpowers manipulating client states has been replaced by a "Quartet" of the U.S., the UN, Russia and the EU, trying in harness to promote a settlement. North Korea looks like another case in point, with Russia declaring its readiness to join China, the United States, and other interested parties in working for a diplomatic solution.
The most acute and worrying problems we face now are those that transcend national boundaries - international terrorism, the proliferation of weapons of mass destruction, organized crime and the massive trade in narcotics, global warming and transboundary air and water pollution, poverty, demographic pressures, disease (from malaria to HIV/AIDS or viruses such as SARS). Self-evidently, we are not going to make progress on issues like these by dividing our forces into poles, blocs and counterweights. The only way forward (as Ivanov argues in the article I have quoted) is through joint efforts to counter global threats.
As a concept, multipolarity is the antithesis of partnership. We're not going to slow global warming if we sit cosily in our multiple poles around camp fires of fossil fuels. And we won't produce a safer world if the responsible powers revert to competing with each other rather than combine to defeat proliferators and terrorists.
Sitting in laagers is easy. Building partnerships is much harder work. It means taking another person's point of view into account and tuning in to their wavelength. But, in practice, that is the path we are taking. Huge efforts have been made since the end of the Cold War to generate cohesive international partnerships in the face of the new global threats. Russia has made a major contribution, with its drive to integrate more closely with European, G8 and other partners. This was epitomized by the unprecedented summit meetings held back to back in St. Petersburg and Evian, France three weeks ago. And partnership, I am sure, will be a strong theme of Putin's state visit to Britain. Not as a diplomatic cliche, but as work in progress.
The partnership between Russia and the U.K. is not just a political relationship between two states, each belonging to the G-8 and the UN Security Council, each also a member of separate and wider groupings, each having involuntarily shed an empire in the fairly recent past.
To return to Richard Chancellor, a striking feature of the partnership is the surge in "traffique" between the two peoples, and the way that "commoditie and profit" are now growing to the subjects of both countries. As well as our bilateral 450th anniversary, the state visit, the long-awaited first performance in Russia by a Beatle and the return to Moscow last week, after 16 years, of the Royal Ballet from Covent Garden, 2003 is also a year that has seen massive new British investments and commercial partnerships in Russia. Businesses don't join up for reasons of diplomatic nicety or political convenience. Anyone engaged in the task of forging joint businesses out of the different cultures, traditions, and mentalities of Russia and a country like my own will testify that this is not a picnic in Gorky Park - but that the results can be very rewarding.
At the end of the long and winding road, here comes the sun?
Sir Roderic Lyne, British ambassador to Russia, contributed this comment to The St. Petersburg Times.
TITLE: TVS Debacle Channels a Sobering Message
TEXT: From early Sunday morning, TVS' usual programming was interrupted by wall-to-wall sports. I am not going to speculate about exactly what spurred Press Minister Mikhail Lesin to pull TVS off the air so abruptly, although one thing is clear: He cut short the agony of its death throes.
In April last year, the authorities, concerned by international condemnation of their attempts to prise the oligarch "blackmailers" Vladimir Gusinsky and Boris Berezovsky away from their media holdings, decided to allow the journalistic team led by Yevgeny Kiselyov back onto the airwaves. Back then, it was clear that no good would come of it - indeed, several time-bombs were built into the TVS edifice right from the word go.
The management structure was just one of them. What you had was a strong editorial team, investors in the form of a group of oligarchs with different and sometimes conflicting interests and the holders of the channel's broadcasting license (Media-Sotsium, headed by Yevgeny Primakov and Arkady Volsky) - all far from working together in harmony.
Furthermore, the broadcasting license was issued for a frequency that, from a legal perspective, was not completely free. The legal dispute surrounding MNVK, the holder of the TV6 license and the company that had broadcast on channel six, was far from completed.
Despite all this, throughout its existence TVS made consistently high-quality television. It even seemed to me that finding themselves in a situation over which they had little control, Kiselyov and Co. returned to their roots, remembering what had motivated them to set up NTV back in 1993.
It is worth recalling that the founders - Igor Malashenko, Oleg Dobrodeyev and Yevgeny Kiselyov - created the private channel under the slogan: "It is indecent to work for state television." NTV at that time was much more akin to public service television than the state-owned channels.
This all came to an end when in 1996 NTV started working for Yeltsin and in return was showered with state largesse to the tune of hundreds of millions of dollars. From that moment on, its journalism turned into politicking: first in the struggle to maximize state-provided benefits, and then - when the political winds changed - in the fight not to repay the various debts it had run up.
And so, after NTV and TV6, Kiselyov's team went back to making something similar to public service television on TVS.
In Russia, after all, the structure of the television industry is extremely strange. We have state-controlled TV, whose hallmark is that the first three items on any news broadcast are always devoted to coverage of President Vladimir Putin. Apart from that, as the heads of the state channels like to boast, they don't receive a single kopek from state coffers and therefore live by the laws of commercial television. Then, there is the private national television company NTV, whose hallmark is that the first three news items are always devoted to coverage of accidents and disasters.
TVS, in terms of its programming, produced classic public service television, as we know it in Western Europe. In other words, the same mixture of news, analytical and entertainment programs as on normal commercial channels, but with more of a focus on the "thinking man" rather than the viewer as consumer.
In this respect, TVS was extremely successful. Its ratings may not have been high enough for it to rank among the top commercial channels, but were more than respectable for a channel with the kind of programming that it had.
I think that the oligarch investors who have destroyed TVS through a combination of struggling for influence over the channel and demands that they get returns on their investment, have made a big mistake. After all, it has become fashionable of late to get involved in charitable activities. They should have agreed on a sensible budget with the creative team and all have chipped in to a common pot - no strings attached.
The outpouring of public gratitude resulting from giving people a channel of the caliber that Kiselyov's team is capable (with stable financing and when not playing politics), would far outweigh all feasible benefits to be had from using the channel as a political tool or a means of making money.
Alexei Pankin is the editor of Sreda, a magazine for media professionals. [www.sreda-mag.ru]
TITLE: Chris Floyd's Global Eye
TEXT: Cry Freedom
They were digging mass graves in Iraq last week.
No, not the mass graves that George W. Bush now reflexively invokes to justify his murder of up to 10,000 innocent Iraqi civilians and the needless deaths of more than 200 United States soldiers in the aggressive war that he launched on the basis of proven lies and outright fabrications. Those mass graves, containing victims of Saddam Hussein's dictatorship, were dug years ago, back when powerful U.S. officials like Dick Cheney, Colin Powell and Paul Wolfowitz were pursuing "closer ties" to the Hussein regime at the signed, insistent order of another president named George Bush.
They were also being dug all over Iraq when Donald Rumsfeld was eagerly pressing Husseinite flesh as Ronald Reagan's special envoy, restoring diplomatic ties with the CIA-supported killer. Oh, to have been a fly on that wall as Rumsfeld squinted tenderly into Hussein's beady eyes and pledged to lavish him with U.S. money to build his war machine, U.S. technology to fuel his internal repression, and U.S. military intelligence for his poison gassing of Iranian troops and missile attacks on Iranian civilians. How many thousands of lives were sacrificed in that moment of explosive power-guy passion! It must have been a real bodice ripper.
We're now told that those mass graves are bad mass graves, although they were perfectly acceptable at the time. (Then again, fashions change, don't they? Remember when presidential deceit was an impeachable offense? When military aggression was a war crime? Ah, those silly fads of yesteryear.) But the new mass graves being dug in Iraq today - for the innocent collaterals killed during the American military sweeps last week - are good mass graves, you see, because the aged farmers, retarded teenagers, young fathers and fleeing women now being shoveled into fetid desert pits were killed by the bombs and bullets of liberation!
Yes, we know that Bush's viceroy in Iraq, the preppy-monikered L. Paul Bremer III, has forbidden the liberated Iraqi people from using their liberty to verbally oppose the occupation of their land by a foreign power. Stifling dissent by force of arms might seem a counterintuitive expression of freedom, but it chimes perfectly with the Bush Regime's masterful use of Zen paradox in statecraft. After all, this is the same crew that introduced the American people to such mind-bending concepts as loser-take-all democracy, charity for the rich, and prosperity through bankruptcy. Do the noble Iraqis deserve any less?
And yes, it's true that Bushist Party bosses in Baghdad have announced plans to start "privatizing" the county's assets - which, as you doubtless recall, are being "held in trust for the Iraqi people" - before said Iraqi people can form a government and make their own decisions about it, Agence France Presse reports. But is that so wrong? Indeed, hath not the Leader himself proclaimed, in the official National Security Policy of the United States, that unbridled crony capitalism is "the single sustainable model of national success?" Since there is no real choice, why bother to let the locals decide? [Memo to the leader: possible strategy for 2004?]
And so the villagers of Al Hir, where an entire family was raked to death by machine-gun fire while they cowered in their wheatfield - a "mistake," the Pentagon said - joined hundreds of other survivors in burying their collateral dead last week, The New York Times reports. Some of the corpses were bullet-chewed beyond recognition; others were charred "like burned meat," Knight-Ridder reports. How many civilians were killed - sorry, liberated from this mortal coil - during the full-bore assault? A Pentagon spokesperson put it in the proper perspective: Such trifles, he said, are "just not significant information."
Equally insignificant, apparently, are the U.S. soldiers who keep dying, week after week, in a war whose triumphant "end" was announced nearly two months ago by the Dear Leader during his million-dollar photo-op on an aircraft carrier. This week, stung by mounting evidence - including pre-war reports from the Pentagon's own intelligence service - that there were no weapons of mass destruction in Iraq before the war and thus no casus belli, Bush struck back. The president, whose family fortune was built in part on profits from the Auschwitz death camp, denounced his critics as "historical revisionists," Reuters reports. Wisely ignoring the WMD issue altogether, Bush offered up his last remaining line of defense: "This is for certain: Saddam Hussein is no longer a threat to the United States."
Oh, really? Who then is killing Americans by the dozens in Iraq? The Dear Leader's own spokespeople tell us it is "Baathist die-hards," who are likely being paid if not directly supervised by the still-alive, still-free dictator himself. Hussein, it seems, enjoys considerably more liberty than the liberated Iraqi people. And he is a much greater threat to Americans now - as a free agent, with nothing to lose, operating in secret - than he ever was as the struggling head of a crippled country crawling with UN inspectors, Kurdish armies and Allied warplanes controlling his skies. From 1991 to 2003, not a single U.S. death can be tied to Saddam Hussein; but in the seven weeks since Bush declared "mission accomplished," his partisans have killed more than 40 Americans.
But for Bush, the loss of a little cannon fodder here and there obviously represents "no threat" to real Americans: you know, the pious hypocrites who profit from lies and murder, the well-guarded cowards who gorge themselves on the "burned meat" in Iraq's mass graves - past, present and future.
For annotational references, see the "Opinion" section at www.sptimesrussia.com
TITLE: U.S. Makes Security in Iraq 'A First Priority'
AUTHOR: By Jim Krane
PUBLISHER: The Associated Press
TEXT: RAMADI, Iraq - Insurgents fired rocket-propelled grenades at U.S. Army patrols in two western Iraqi towns - the latest in an escalating series of attacks that included an ambush involving a 12-year-old girl, the military said Monday.
No one was injured in the grenade attacks in Khaldiyah and Habaniyah, according to the overnight intelligence report distributed to Army commanders.
Military officials said that they had no information about reports that an airstrike on a three-vehicle convoy fleeing Iraq near the Syrian border last Wednesday killed top officials in the government of former president Saddam Hussein, perhaps including Hussein or his sons.
The Washington Post quoted defense officials as saying that DNA tests were being conducted on the victims, and the Pentagon was closely following the results of the strike by a Special Operations forces AC-130 gunship.
But they added that so far there was no evidence that either Hussein or one of his sons, Uday and Qusay, was hit. They are the top three on the U.S. list of most-wanted officials in Iraq, and coalition officials say that the lack of evidence about their fate is fueling resistance to the occupation within Iraq.
On Sunday, Iraq made its first foray back into the international oil market since the war, with the loading of 1 million barrels of crude onto a Turkish tanker at the Mediterranean port of Ceyhan.
But sabotage and looting of the 960-kilometer pipeline from the northern Iraqi town of Kirkuk to Ceyhan delayed the flow of freshly pumped oil - the key to reconstructing an economy devastated by sanctions and war. Pumping was supposed to have begun Sunday.
Information Radio, operated by the U.S.-led coalition, broadcast an appeal Monday for Iraqis to help police the pipeline and report the location of looted equipment. It said that Iraq was losing $50 million a week needed for the nation's reconstruction due to delays caused by sabotage and theft.
In Ramadi, a patrol of two tanks and four Humvees came under small-arms fire on Sunday, and the patrol saw a young girl running away with an AK-47 assault rifle, said Captain Burris Wollsieffer, of the 3rd Armored Cavalry Regiment. The bullets landed harmlessly in the dirt around the vehicles, he said on Monday.
The troops followed the girl home and found the rifle wrapped in a red dress propped in a corner. Three men in the household were taken for interrogation, but the troops allowed the girl to remain at home when they learned her age. They also seized $1,500 in cash and $1,000 worth of Iraqi dinars, the officer said.
None of the troops saw who fired the weapon, although they found no other suspects in the area other than the young girl.
"It's just weird. It's totally unconventional," said Wollsieffer when asked about the rising number of ambushes on his forces in Ramadi, a town where resistance to the occupation has been high. "It's guerrilla warfare."
Two senior army officers met Monday with a prominent Islamic cleric, Abdullah al-Annay, who preaches in two Ramadi mosques, to ask him to tone down his anti-American sermons, said the captain.
"If he keeps this kind of speech going, they are just going to attack us more and more," said Wollsieffer, whose regiment has lost 10 men - more than half of the 18 men reported killed from hostile action - since May 1 when major combat was declared over.
The 3rd Armored Cavalry Regiment held a moving memorial service Sunday for Staff Sergeant William T. Latham, who died four days earlier in a Washington hospital from shrapnel wounds suffered during a May 19 raid at a suspected arms market.
In an interview published Monday in The Washington Post, Grand Ayatollah Ali Hussein al-Sistani, a senior figure in Iraq's Shiite clerical hierarchy, demanded that the U.S. occupation forces allow Iraqis to rule themselves.
"We feel great unease over their goals, and we see that it is necessary that they should make room for Iraqis to rule themselves by themselves without foreign intervention," al-Sistani said in written responses to questions from The Washington Post.
The U.S. chief administrator of Iraq, L. Paul Bremer, acknowledged Sunday to industrialists and political leaders at the World Economic Forum in Jordan that security is a prerequisite for putting Iraq on the road to recovery.
Bremer insisted that security was his "first priority," blaming continuing political violence and acts of sabotage on "a very small minority still trying to fight us" that is loyal to Hussein.
He also suggested that Iraqi oil revenues could be distributed directly to the country's citizens, as Alaska does with its residents, or placed in a national trust fund to pay for pensions or other social programs.
"Every individual Iraqi would come to understand that his or her stake in the country's economic success was there to see," Bremer said.
Sunday's oil shipment marked a key first step. Iraq has the second largest oil reserves in the world, and all proceeds from sales are to go into a U.S.-controlled fund to help in rebuilding its battered infrastructure.
TITLE: 160 Still Missing In Tunisian Sea Disaster
PUBLISHER: The Associated Press
TEXT: TUNIS, Tunisia - Rescuers have recovered 41 bodies in the search for survivors from a decrepit, leaky boat that sank with nearly 250 Africans aboard, Tunisian authorities said on Sunday.
However hopes of finding the estimated 160 people still missing have faded.
The boat was en route to Italy with people trying to slip into Europe illegally when it sank at dawn Friday about 110 kilometers southeast of the Tunisian city of Sfax, according to the national news agency, TAP.
The Tunisian coast guard said that four patrol boats searched for survivors on Sunday, but that their work was hindered by strong winds and stormy seas.
The boat left from Libya and carried people from several African countries hoping to slip into Europe. The 41 survivors included nationals of Morocco, Egypt, Mali, Liberia, Somalia and Ghana - all of whom had hoped to find a new life in Europe.
The cause of the accident was still unclear. It was the latest in a series of deadly accidents involving boats of Africans trying to enter Europe illegally.
Thousands of people risk their lives every year in the crossing. Often, they set off overnight in makeshift crafts or inflatable boats.
According to survivors, the vessel that sank Friday was overcrowded and decrepit and began leaking through its hull.
TITLE: Students Protest Holding of Classmates by Iranian Police
AUTHOR: By Ali Akbar Dareini
PUBLISHER: The Associated Press
TEXT: TEHRAN, Iran - Student leaders held sit-ins Sunday to protest the detention of classmates following last week's fierce clashes between pro-clergy militants and anti-government demonstrators, in which police said 520 people were arrested.
The clashes broke out when university marches that began June 10 expanded into protests against the hard-line Islamic clerics who rule Iran. Militants attacked protesters to put down the marches, at one point breaking into dormitories during the night and pulling students from their beds.
Police General Mahmoud Japalaqi was quoted as saying on Sunday that 520 people, including 18 women, were arrested. "Only 10 of them are students and the rest of the rioters are ruffians," Japalaqi told the government-run daily Iran.
But student leaders holding sit-ins in front of the parliament and at Tehran University said most of the detainees were classmates.
"We believe more than half of those detained are students. I know about three dozen who were either arrested or disappeared," student leader Hasan Shoaei said outside parliament, where he and about 30 other student leaders and families of detainees gathered.
Inside Tehran University, about 50 people held a similar sit-in demanding information on the detainees.
"As a mother, at least I want to know where my son is being held and what for. Police and judiciary have simply refused to answer my questions," said Somayeh Ahmadi, whose son, 21-year-old Tehran University student Naser Mohammadi was arrested by plainclothes security agents early last week.
Inside the reformist-dominated parliament, 166 lawmakers signed a statement denouncing the "savage and ruthless attacks" by the hard-line militants against the students, and expressing support for the sit-ins.
TITLE: Pope Asks Bosnians to Pardon Past Atrocities
AUTHOR: By William J. Kole
PUBLISHER: The Associated Press
TEXT: BANJA LUKA, Bosnia-Herzegovina - Embracing a country struggling to forgive, Pope John Paul II asked Bosnians to pardon Roman Catholics and others for atrocities committed over a half-century of war and ethnic strife.
On a brief but draining day trip Sunday to the Bosnian Serb heartland, the frail 83-year-old pope issued a moving plea for forgiveness for his church's role in a World War II-era massacre of 2,300 Serb villagers.
"From this city, marked in the course of history by so much suffering and bloodshed, I ask Almighty God to have mercy on the sins committed against humanity, human dignity and freedom also by children of the Catholic Church," John Paul said during a Mass for 50,000 pilgrims.
Weakened by Parkinson's disease and crippling knee and hip ailments, the pope's hand trembled considerably and he looked drawn and uncomfortable on his second visit to Bosnia, the 101st foreign pilgrimage of his nearly 25-year papacy. The pontiff visited Sarajevo in 1997.
A Vatican official, speaking on condition of anonymity, suggested a hoped-for trip next month to predominantly Buddhist Mongolia - home to just 170 Catholics - would be postponed.
"The time is not yet ripe. A bishop has to be named and the church must still be built up," the official said.
John Paul, who made a grueling five-day trip to Croatia just two weeks ago, still intends to press ahead with a visit to Slovakia in mid-September.
Eight years after the war, which killed 250,000 people and made refugees of 1.8 million others, Bosnia remains under international administration as it struggles to overcome ethnic divisions and catch up with the rest of Europe. The Dayton peace accords that ended the war carved the country into a Bosnian Serb republic and a Muslim-Croat federation.
Under heavy security in Banja Luka, the administrative center of the Bosnian Serb mini-state, the pope urged Bosnians to find the will to forgive one another by searching their hearts, which he said contained "the root of every good - and sadly, every evil."
"I know the long ordeal which you have endured, the burden of suffering that is a daily part of your lives," John Paul said. "Do not give up. Certainly, starting afresh is not easy. It requires sacrifice and steadfastness if society is to take on a truly human face and everyone is to look to the future with confidence."
The pope beatified Ivan Merz, a Catholic theologian who devoted his life to the Church in the 1900s.
TITLE: Two Killed by Grenade in Kashmir
AUTHOR: By Mujtaba Ali Ahmad
PUBLISHER: The Associated Press
TEXT: SRINAGAR, India - Suspected Islamic guerrillas hurled a grenade into a crowded bus station in India's portion of Kashmir on Monday, killing two civilians and wounding 38 others, police said.
At least six of the injured were in a serious condition after the attack, which targeted civilians, said local police chief Amarjeet Singh.
"There was no security patrol there that could have been a possible target," Singh said.
The attack took place in Shopiyan, a town about 55 kilometers south of Srinagar, the summer capital of India's Jammu-Kashmir state.
More than a dozen Islamic militant groups have been fighting security forces in the region since 1989, seeking independence for Indian-held Kashmir or its merger with Pakistan.
India accuses Pakistan of training and funding the militants. Pakistan denies the charge, saying it only offers them diplomatic support.
India and Pakistan have fought two wars over control of Kashmir since they won independence from Britain in 1947. More than 63,000 people, mostly civilians, have been killed in the conflict.
TITLE: Russians Pull Out of NBA Draft
AUTHOR: By Carl Schreck
PUBLISHER: Staff Writer
TEXT: MOSCOW - Two of Russia's most promising young basketball players unexpectedly pulled out of the 2003 NBA Draft late last week even though both were probable first-round selections.
Pavel Podkolzin, the 7-foot-5 (226-centimeter) 18-year-old who in the last six months went from a bench warmer in the Italian first division to a projected NBA lottery pick, and CSKA Moscow and Russian national team player Viktor Khryapa both withdrew their names from the draft list shortly before the 5 p.m. deadline last Thursday.
The 2003 NBA Draft will be held on Thursday in New York.
According to Podkolzin, his U.S. agent, Justin Zanick, failed to get a guarantee from any of the NBA lottery teams that he would be selected in the top 10.
"I sat down with my agent and my manager and discussed it all evening and the entire next morning," Podkolzin said in a telephone interview from Varese, Italy, where he played last season for the Italian first-division team Metis Varese.
"I decided that if it wasn't 100 percent, I wasn't going to risk it."
Podkolzin was adamant about who was behind the withdrawal.
"It was my decision," he said. "I'm the player, and, in the end, I make the decisions."
Depending on where he is eventually drafted, Podkolzin's decision could have major financial implications.
The most lucrative guaranteed contract - almost $13 million over three years - according to the NBA rookie salary scale goes to the No. 1 pick in the draft.
By foregoing this year's draft, some experts believe Podkolzin could be chosen with the No. 1 pick in the 2004 NBA Draft, and thus receive a contract worth several millions of dollars more than the one he might have received this year.
"I think I have an excellent chance to improve my draft position," Podkolzin said.
"I think it's good for me to have another year in Europe to develop."
He noted, however, that though he has a meeting with the Metis Varese management next week to discuss his future, he is still not sure where he will be playing next year.
Podkolzin said he is not disappointed that his NBA dreams have been postponed for a year.
"I'm only 18 years old," he said. "If I were 25 years old, maybe I would have been disappointed that no one promised to draft me. I would have probably stayed in the draft. But I have a lot of time right now."
The 20-year-old Khryapa, a lanky 6-foot-9 (205-centimeter) forward who has been compared to fellow Russian Andrei Kirilenko of the Utah Jazz because of his defense, rebounding and slashing offensive style, was expected to be selected toward the end of the first round.
In a telephone interview from Italy, Reed Salwen, European representative of U.S. agent Marc Fleisher, who represents Khryapa, said he withdrew in order to ensure an ideal draft
situation.
"There were about five or six of the best teams in the NBA who wanted to draft Viktor," Salwen said, without naming any specific teams. "But there were also some other possibilities that Viktor wasn't so excited about."
"Deciding where Viktor is going to live and play for his first four years in the NBA is a serious decision, and we wanted to make sure that this will be 100 percent right."
The 2003 NBA Draft was to be a breakthrough for Russians. Only four Russians have ever been drafted into the world's strongest basketball league. Of those, only one - Kirilenko - was drafted in the first round. Podkolzin and Khryapa appeared set to become the second and third Russian first-round picks ever.
Kirilenko, the 24th pick in the 1999 draft, remains the only Russian ever to play in the NBA.
"It's lonely being the only Russian," Kirilenko said earlier this month while on his summer break in Moscow.
He will likely have to wait at least one more year for some company.
TITLE: Lewis Gets Dubious Win Over Klitschko
AUTHOR: By Tim Dahlberg
PUBLISHER: The Associated Press
TEXT: LOS ANGELES - Vitali Klitschko was bloodied but still willing. He had given Lennox Lewis all he wanted and more, yet after six rounds he sat bleeding on his stool as a ring doctor ended his chance of becoming heavyweight champion.
Klitschko hurt Lewis during six brawling and sometimes brutal rounds, exposing the 37-year-old champion as an aging fighter, who just a year ago had looked devastating when he stopped Mike Tyson in the eighth round.
An entertaining fight ended when the ring doctor ordered it stopped after the sixth round because of a bad cut over the challenger's left eye. Klitschko was winning the bout on all three scorecards. All three ringside judges had the Ukrainian winning 58-56 when the fight was stopped, but The Associated Press had it 58-56 for Lewis.
Klitschko, bleeding badly from a cut over his left eye, jumped off his stool in disbelief, yelling "No, no, no" and going across the ring toward Lewis as if he wanted the fight to continue.
"I can see very well," Klitschko complained. "I don't know why the doctor stopped the fight."
Lewis was tired, but more than willing.
"If the fight went on, I would have knocked him out," said Lewis, who became only the third heavyweight champion his age or older to successfully defend a title. "There is no way he could have finished the fight. He was just deteriorated anyway."
The crowd at Staples Center booed wildly, and Klitschko held his arms up in victory.
"Right now I feel like the people's champion," Klitschko said. "I did not want them to stop the fight. My strategy was to take it into the seventh or eighth round and my strategy was working perfectly.
Even Lewis said: "He's a legitimate No. 1 contender."
Lewis, who earned a reported $10 million, improved to 41-2-1, 32 knockouts. Klitschko is 32-2 with 31 knockouts.
Klitschko went into the fight - with just two weeks notice - a 4-1 underdog and wasn't even supposed to be the best fighter in his family. That honor belonged to his brother, Wladimir, who worked his corner against Lewis.
But the 6-foot-7 (200-centimeter) Ukrainian came out and traded punches from the opening bell, rocking Lewis in the second and third rounds and hitting him with almost every left jab he threw. Lewis looked tired and old, but did enough to come back and land uppercuts and right hands.
"We are big guys and any punch is going to hurt," Lewis said. "I do give him credit. I gave him a chance to fight. He has an unusual European style. I was just getting my second wind."
One big right hand appeared to open a cut in the third round that proved to be the undoing of Klitschko. Because the cut was caused by a punch and not a head butt, it didn't matter that Klitschko was leading on the scorecards when the fight was stopped.
Ring doctor Paul Wallace said he stopped the fight not because of the blood, but because Klitschko's eyelid was covering his eye and he had to move his head to see.
"When he raised his head up, his upper lid covered his field of vision," Wallace said. "At that point I had no other option but to stop the fight. If he had to move his head to see me, there was no way he could defend his way against a punch."
The normally mild-mannered Klitschko, who speaks four languages and holds an advanced college degree, was visibly angry and had to be restrained by his brother at one point.
"He is a great fighter. I won this fight in points," Klitschko said. "I want a rematch. I showed everybody that I can fight Lennox Lewis."
He's not likely to get a rematch, assuming Lewis continues to fight.
Lewis is eyeing a possible bout with Roy Jones Jr. later this year that could mean huge money for both fighters.
Klitschko was trying to become the tallest heavyweight champion ever, and the two fighters combined for a record 504 pounds (229 kilograms) between them.
Lewis weighed 256 pounds (116 kilograms), the heaviest of his career, and he appeared soft in the middle. For one of the few times in the 6-foot-5 (195-centimeter) champion's career, he was punching up at an opponent.
"I knew his condition was not good, he's very heavy. He couldn't fight hard," Klitschko said. "I know I was hurting him with my punches."
Klitschko landed a big right hand with 1:45 gone in the second round that shook Lewis, whose chin had been questioned after being knocked out by Oliver McCall and Hasim Rahman in other title fights.
"He woke me up," Lewis admitted.
Lewis had a vast edge in experience, coming into the fight with 15 wins in 17 title fights.
He had taken a year off, but seemed to be in his prime at a time when most fighters tend to be in decline.
Klitschko was fighting for a major title for the first time and fighting in the United States for only the second time.
Klitschko has spent much of his career fighting on cards in Germany with his brother, and his record was littered with a string of unheralded opponents.
TITLE: Wimbledon Facing Life Without a Legend
AUTHOR: By Steven Wine
PUBLISHER: The Associated Press
TEXT: WIMBLEDON, England - For years, a visit to Centre Court was part of Pete Sampras' ritual leading up to Wimbledon.
He would stand in the shadows, soak up the silence and anticipate the applause to come. The cheering followed each of the seven titles he won at the All England Club from 1993 to 2000, a span during which he lost just one match.
But there was no Centre Court pilgrimage last week by Sampras, and there will be no cheers for him this week. With the tournament beginning Monday, the king of grass is absent for the first time in 15 years.
Sampras hasn't played a match since winning his 14th Grand Slam title last September by beating Andre Agassi in the final of the U.S. Open. At 31, Sampras has stopped short of announcing his retirement but is 95 percent certain he won't play again.
He'll be missed - especially at Wimbledon.
"You don't win a tournament again and again without there being some meat to the bone," Agassi said. "It's not like it's smoke and mirrors. You have to go out there and earn it."
"If you've done that a few times, there's a heck of a chance that the environment itself really lends to your game in a certain way that makes you pretty darn tough to beat. Pete at Wimbledon is a great example."
Before winning the U.S. Open last summer, Sampras went more than two years without a Grand Slam title. The slump included upset losses at Wimbledon to two Swiss players, Roger Federer in the fourth round in 2001 and George Bastl in the second round in 2002.
Because of the less-than-regal sendoff last year for Sampras - a defeat against a player ranked 145th on tiny Court 2 - it was widely anticipated that he would make another try at Wimbledon. But for now, at least, Sampras says he lacks the motivation to train as necessary to play another major.
"Like I said when he was going through his slump," Agassi said, "this guy has earned the right and deserves the respect of playing the game on his terms. If he wants to get out there and continue losing and losing and losing, that's his choice. Then he goes and wins the Open."
"Now he's choosing not to play, and I sort of have the same feeling about it. He has earned the right and deserves the respect not to play this game on his terms."
Change at Wimbledon is regarded with the same disdain as rain, but the transition to the post-Sampras era should be entertaining. In his absence, the list of title candidates is longer than usual and includes Agassi and Tim Henman, two perennial contenders who never beat Sampras at Wimbledon.
Agassi won the first of his eight major championships at the All England Club in 1992 but has reached only one final since, losing in 1999 to Sampras. Henman, seeking to become the first British man to win Wimbledon since 1936, has reached the semifinals four of the past five years but lost every time, twice to Sampras.
Other contenders include top-seeded defending champion Lleyton Hewitt, the erratic Federer and American Andy Roddick, who hired Brad Gilbert as his coach after the French Open and then won his first career grass-court title at Queen's Club.
A first-time champion is a possibility, especially given the recent unpredictability of the men's game. Grand Slam finalists since the beginning of last year have included Thomas Johansson, Rainer Schuettler, David Nalbandian and Martin Verkerk.
A surprise is less likely on the women's side, where the Williams sisters remain the players to beat, even though both were beaten at the French Open. Venus won Wimbledon in 2000 and 2001, and Serena won in 2002.
The most likely candidates to prevent an all-Williams final are Justine Henin-Hardenne and Kim Clijsters, who staged an all-Belgian final at Paris two weeks ago. Henin-Hardenne ended Serena Williams' one-year domination of major events by beating her in the French Open semifinals, then defeated Clijsters in the final for her first Grand Slam title.
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THE ASSOCIATED PRESS
ROSMALEN, Netherlands - Kim Clijsters won the Ordina Open on Saturday when Justine Henin-Hardenne quit after hurting her left hand during the second set of an all-Belgian final.
This rematch of the French Open final earlier in the month ended with a 6-7 (7-4), 3-0 victory for Clijsters in a grass-court Wimbledon tuneup.
Henin-Hardenne, the French Open champion, stumbled at the end of the second game of the second set. She rose, wincing, and her trainer taped her left wrist. After losing the following game, she forfeited. She expects to play Wimbledon on Monday.
Sjeng Schalken won the men's final on Sunday, defeating Arnaud Clement 6-3, 6-4 in the final for the second straight year.
In Nottingham, U.K., Greg Rusedski won his first title since last August, defeating Mardy Fish 6-3, 6-2 on Saturday in the Samsung Open final.
TITLE: NHL-Draft Picks Favor Youth Over Experience
AUTHOR: By Teresa M. Walker
PUBLISHER: The Associated Press
TEXT: NASHVILLE, Tennessee - Agents and players expecting big money when the NHL's free-agency period begins July 1 should pay heed to the lack of blockbuster deals at the league's draft.
Plenty of teams talked during the two-day draft, which ended Sunday, about trading players to cut salary. But they found no takers, not even the free-spending New York Rangers, with the NHL facing a possible lockout in September 2004.
The biggest trade of the weekend came before the first pick, which was dealt from Florida to Pittsburgh on Saturday. The biggest name rumored to be on the move was Washington forward Jaromir Jagr, but he stayed put - for now.
The Capitals star was just one high-priced player mentioned as teams look to cut salaries going into the final year of the league's current labor agreement. In the new deal, the NHL wants to limit disparities between large and small market teams and improve competitiveness.
The draft concluded Sunday with center Marty Murray, the most-established player swapped, going from Philadelphia to Carolina for a 2004 draft pick.
The relative lack of trades meant the final six rounds wrapped up Sunday in about three hours, only taking that long because so many teams took turns thanking Nashville for its Southern hospitality and an event that attracted approximately 13,000 fans on Saturday.
Quinn predicted teams may get busy when free agency opens after reevaluating their needs and the players who hit the market.
The list of those expected to be available includes Teemu Selanne, Felix Potvin, Slava Kozlov, Sergei Fedorov, Derian Hatcher, Darren McCarty and Joe Nieuwendyk.
Many teams may follow the path Pittsburgh is taking.
The Penguins made the first and biggest trade of the weekend by moving up two spots to draft goaltender Marc-Andre Fleury, the franchise's first No. 1 pick overall since 1984, when it chose now-owner Mario Lemieux.
"We decided that the best place to start building is in the goal," Penguins General Manager Craig Patrick said.
Fleury, from Cape Breton of the Quebec Major Junior Hockey League, is a 6-foot-1 (185-centimeter), 172-pounder (78-kilogram) whom Lemieux called a franchise goalie. The Penguins hope Fleury will mix with other young players for a strong team in three years.
Florida GM Rick Dudley came into the weekend holding the top pick, and he traded away that choice for the third time in five years.
He did it in 1999 with Tampa Bay and last year with Florida. Again, Dudley found the player he wanted all along, this time grabbing center Nathan Horton. He acquired right wing Mikael Samuelsson in the deal with the Penguins.
Samuelsson played 80 games last season with the Rangers and Pittsburgh and had 10 goals and 14 assists.
A record eight Americans were selected in the first round, with defenseman Ryan Suter the first - going to Nashville at No. 7. He is the son of Bob Suter, a member of the 1980 U.S. Olympic hockey team, and nephew of 17-year NHL veteran Gary Suter.