SOURCE: The St. Petersburg Times
DATE: Issue #884 (52), Tuesday, July 15, 2003
**************************************************************************
TITLE: Second Woman Looking For Vote
AUTHOR: By Vladimir Kovalev
PUBLISHER: Staff Writer
TEXT: Over a month after she announced in a speech before the Legislative Assembly that she would run in the Sept. 21 election for St. Petersburg governor, Anna Markova on Monday finally made it official by filing her candidacy application with the City Election Commission (CEC).
Markova's comments during her June 5 speach were a veiled swipe at Valentina Matviyenko, who is generally considered to be the front-runner in the campaign so far, saying that the presidential representative in the Northwest Region had already been running an unofficial campaign for the post and that she had a responsibility to run against Matviyenko to "preserve democracy."
Once the campaign opened, however, after former Governor Vladimir Yakovlev's resignation on June to take a Kremlin post as deputy prime minister responsible for housing and communal-services reform, Markova tempered here announcement, saying on July 1 that she had to consider all of her options.
Her comments after filing the papers for her candidacy on Monday were more subdued than those of a month earlier and avoided direct attacks on Matviyenko.
"I won't judge the attributes of other candidates until I have read their election platforms. If someone doesn't think that they can win, then it's better that they just not get involved in the campaign," the Rosbalt news agency quoted Markova as saying on Monday morning. "[As governor], I will act in the city's interests. The main thing for me is a support of the city's residents."
But she didn't seem to be able to resist taking a subtle dig at Matviyenko, who clearly has the endorsement and backing of the Kremlin in the race.
"A candidate for the governorship should be able to solve all of their problems using their own resources ..." she added.
Beside Markova, Legislative Assembly deputy Mikhail Amosov. a member of the Yabloko faction in the chamber, and a candidate backed by the Conceptual Unification Party, Viktor Yefimov, who is the director of the First Pasta Factory, also filed their applications on Monday, bringing the field of potential candidates to 20.
But Markova, who is presently the vice governor and head of the City Emergency Commission, was the candidate whose announcement had been most anticipated.
In her original announcement in June, Markova said that she had received veiled threats from certain people that she could face physical danger should she choose to run. She refused to name any of the people making the comments at the time and took the question in stride in her answers on Monday
"Everything that happens is just part of the political battle," she said.
Markova, like the other 18 candidates, appears to be facing an uphill battle in trying to defeat Matviyenko for the governor's post. As the presidential representative in the Northwest Region, Matviyenko has maintained a high profile and has received extensive media coverage leading up to and following the official opening of the election campaign. While federal election laws require her to take a leave from her duties once she has been certified as a candidate, the CEC has yet to rule on her candidacy, so she remains active in office.
Matviyenko's popularity ratings appear to be relatively high. In a survey of 1,002 city residents aged 18 years and older taken on Sunday by the Agency of Social Information, Matviyenko polled the support of 36.7 percent of all respondents, with Markova finishing second at 6.9 percent. the agency says that the poll has a margin of error of plus or minus two percent and muddies the picture by including as choices individuals who have not announced that they will run. One such example is Communist State Duma Deputy Sergei Glazyev, who finished third in the poll, with 6.3 percent.
"Markova's rating has grown by about two percentage points over the last week," Roman Mogilevsky, the head of the Agency of Social Information, said in a telephone interview on Monday. "It could be linked to the fact that the list of candidates has more or less stabilized ... ."
Vladimir Yeryomenko, a Legislative Assembly deputy who is a former member of the pro-Smolny United City bloc, says that it is too early to start putting too much weight in the numbers.
"The situation is still very unclear at the moment and all of the polls appearing right now don't mean much," he said. "It usually only becomes clear who has a real chance about two or three weeks before the election."
Before being named vice governor in March 2002, Markova served for three years as the head of the Frunzensky district administration. That appointment came after serving for 20 years in the city's police force.
THE LIST
Candidate Present Post/Occupation (affiliations in brackets)
. Tatyana Amelina
No occupation stipulated
. Mikhail Amosov
Legislative Assembly deputy (Yabloko)
. Sergei Belyayev
Former head of Sheremetyevo International Airport
. Alexander Gabitov
Municipal Council member,
District 62
. Yevgeny Gilbo
Newspaper columnist,
New Petersburg
. Vasily Goryachev
Journalist with the "Russian Land" newpaper
. Rashid Dzhabarov
Businessperson
. Gennady Kuptsov
Former governor of the Lipetskaya Oblast
. Nikolai Kuznetsov
Director of AIRLEN airline
. Anna Markova
St. Peterburg vice governor
. Valentina Matviyenko
Presidential representative in the Northwest Region
. Sergei Pryanishnikov
Erotic movie producer
. Mikhail Schelkonogov
Head of the Way of the Sun, a National Public Organization to develop the middle class
. Vasily Terentyev
Self-proclaimed "Acting tsar of Great Russia"
. Vladislav Teryokhin
Unemployed
. Alexei Timofeyev
Legislative Assembly deputy (Sport Russia)
. Oleg Titov
Flight attendant, Pulkovo Airlines
. Gennady Vasilenko
Head of Petrolakt company (National Party to Develop Small Business)
. Viktor Yefimov
Head of the First Pasta Factory (Conceptual Unification party)
TITLE: Putin Still Dodging Situation At Yukos
AUTHOR: By Catherine Belton
PUBLISHER: Staff Writer
TEXT: MOSCOW - President Vladimir Putin tippy toed around the snowballing investigations against the owners of Yukos at a Kremlin meeting on Friday, leaving the market and the country none the wiser on how the politically charged case will play out.
But, in a sign he would not back down in an attack that many see as punishment for Yukos owner Mikhail Khodorkovsky's attempts to put loyal deputies in the State Duma, he slammed big business for attempting to block the passage of reforms by lobbying the Duma.
"I am, of course, opposed to arm-twisting and jail cells. In general, I don't think this is the method to deal with economic crimes," he said in televised remarks from the meeting, which was attended by the heads of Duma factions, governors, Cabinet ministers, Kremlin aides and Arkady Volsky, the head of the Russian Union of Industrialists and Entrepreneurs, or the RSPP.
During the meeting, Volsky handed Putin a letter from the RSPP asking him to take steps to defuse the attack on Yukos, which the RSPP fears could set a precedent for undoing the results of past privatizations.
But Putin qualified his remarks against throwing people in jail by adding, "but at the same time we need to punish economic violations."
Friday's meeting had been much awaited as a chance for Putin to finally break more than a week of silence and clarify his position.
But Putin remained unscrutable even as prosecutors raided Yukos offices on Friday. The case, which began with the arrest July 2 of Yukos pointman Platon Lebedev on charges that he stole state property in a 1994 privatization, has prompted mounting concern the onslaught against the powerful oil major could spiral out of control and undermine the stability that has been the crowning achievement of Putin's term in office so far.
Lebedev, meanwhile, despite Putin's comments, remains locked in Lefortovo prison.
In a speech that did not once mention Yukos by name but that nevertheless appeared to be laced with a carefully worded message to the business elite, Putin called on society to consolidate for a push to double GDP, bring an end to poverty and modernize the armed forces.
"A society split into small groups with their own narrow interests cannot concentrate on implementing major national projects," he said.
"It's not likely that we will be completely in agreement on all questions. But we will have to agree on all the main ways and work on a common position if we want to develop our country."
Yukos has come under fire as Mikhail Khodorkovsky, the company's main shareholder, has been seen to threaten those plans for consolidation.
Putin had agreed not to touch the corrupt gains made by the oligarchs in the skewed privatizations of the 1990s on the condition they stayed out of politics. But analysts say Khodorkovsky's financing of opposition parties in parliament threatened plans to form a Kremlin supermajority in the Duma next year and push through new reform bills, some of which, such as plans to increase taxation on the oil companies, Khodorkovsky-financed factions could oppose.
In remarks from the meeting shown on Rossia television Sunday evening, Putin spoke out against attempts by big business to lobby their interests in the Duma. He said he could not rule out that business groups could attempt to block legislation to levy greater royalty taxes for the use of natural resources.
"Even softer reforms are not getting passed by the Duma at the moment because those who are not interested in them getting passed are blocking them," he said, Interfax reported.
Putin said that he had recently met with Duma Speaker Gennady Seleznyov, who had told him of all the problems big business was creating in the Duma. He quotes Seleznyov as telling him, "I am already getting sick of this, I can't keep quiet any longer. It's hard enough trying to take care of day-to-day goings on, but the things that business is up to in the hall just step over all boundaries."
What was broadcast of Putin's comments Friday did little to signal that the standoff could be over soon and, as such, did little to ease market jitters. The stock market plunged a further 3 percent on Friday. "This was not what the market was looking for," said Stephen O'Sullivan, head of research at United Financial Group. The investigations "might have been intended as a shot across the bow for Khodorkovsky to remind him who is boss, but it may have got out of hand."
The trouble is, it is not clear which way Putin wants to go. Analysts say that he has spent most of his presidency balancing two opposing factions: the oligarchs who made their fortunes during the Yeltsin era and his allies from the KGB and St. Petersburg. Now, with what analysts say appears to be an all-out attack launched against the old oligarchic elite by the St. Petersburg group, the stakes have been raised in Putin's balancing game, and he may have to take sides.
One insider, Konstantin Remchukov, a lawmaker with the Union of Right Forces and the former head of the advisory board of Base Element, the holding company owned by metals tycoon Oleg Deripaska, fears that Putin has already made his move.
"Such events do not happen without the say-so of Putin," he said "Within the Kremlin, his team was looking for a subject they could make a common enemy out of. The choice fell on the oligarchs. Without this common enemy, it's not clear why anyone would vote for [pro-Kremlin] United Russia."
RSPP executive secretary Igor Yurgens said on Saturday that a campaign had started against the oligarchs when a report was issued in mid-June by the Council of National Strategy warning that Russia was "on the verge of a creeping oligarchic coup" that could seek to remove Putin from power.
"This campaign is very dangerous for the country," Interfax quoted him as saying on NTV's "Lichny Vklad" discussion program Saturday. "The idea is that the Communists are already not much of a threat, and you can't use this as the bugbear in this election campaign.
"So where's the threat? There it is - the oligarchy, big business," Yurgens said.
During the meeting Grigory Yavlinsky, the leader of the Yabloko party, which is financed by Khodorkovsky, took a more conciliatory stance. In remarks to Putin that were later published on the Yabloko Web site, he said that the main aim for the country was to dismantle the "oligarchic economic system," which is still a "colossal brake" on economic growth and which is "always accompanied by poverty and corruption."
But he called on Putin to be careful in dismantling the system. "The first thing - and this is a principal matter on which we insist - is that it should be impossible to cancel the results of privatization and redistribute property using repressive means."
Boris Nemtsov, the leader of the Union of Right Forces, which has also received funding from Khodorkovsky, said in an interview on Ekho Moskvy radio Friday that he was worried by Putin's silence on privatization during the meeting.
"A reexamination [of privatization results] is the way toward confrontation, toward pumping money out of one business structure into the pocket of another. It means capital flight, the loss of millions of work places and plunging the country into poverty," he said, Interfax reported.
TITLE: Khodorkovsky Gets Some Big-Money Support
AUTHOR: By Catherine Belton
PUBLISHER: Staff Writer
TEXT: MOSCOW - Oligarch-under-fire Mikhail Khodorkovsky on Monday got words of support from Lord Jacob Rothschild, a key member of the powerful family whose banking empire spans centuries and continents and who has joined up with the Russian oil baron for philanthropic projects that promote ties between Russia and the West.
"Khodorkovsky is a progressive businessman who is devoted to Russia," Rothschild's office said on Monday, as Khodorkovsky himself courted members of the U.S. elite in Washington.
Rothschild's office, however, was unable to comment on a Kommersant report Monday that cited high-ranking anonymous sources in Yukos as saying that Rothschild could take over the reins of Group Menatep, the holding company that manages the assets of core Yukos shareholders, if its leading shareholders were incapacitated in any way.
The man who is next in line to take over Khodorkovsky's business empire should anything occur, Platon Lebedev, is in jail on charges that he stole a state-owned stake in a fertilizer producer Apatit in 1994. The next in command after Lebedev is Yukos board member Yury Golubev, and should anything happen to him, Kommersant said, the chain stretches down into other hands, eventually ending with Rothschild.
The Rothschilds have been seen as the power behind the throne of many a regime since the family first arrived in Britain in the late 1700s. From small beginnings lending to Europe's royal families, the empire is said to have spread into new riches in the United States and is thought to have ties to the powerful American Rockefeller dynasty.
Khodorkovsky first became acquainted three years ago with Lord Rothschild, who then introduced him as a debutante into the world of leading financiers.
At that time, Khodorkovsky was embarking on a big pro-Western PR drive aimed at showing that he had turned his back on the howling corporate governance violations he had committed in the past. Yukos rapidly became the darling of Western investors as it cleaned up its financial accounting, hired top Western managers and said that it was consolidating all profits centers onto the company's books. Shares in Yukos skyrocketed.
His partnership with Rothschild was sealed with the creation in December 2001 of the Open Russia Foundation in London. The foundation, which awards grants to academic institutions and other not-for-profit organizations while promoting Russian art in the West, quickly expanded to the United States, where its glitzy launch in September last year was held in the heart of the U.S. establishment, the Library of Congress. The foundation board includes Rothschild, U.S. foreign policy guru Henry Kissinger and former U.S. ambassador to the Soviet Union Arthur Hartman.
Khodorkovsky's recent efforts to promote energy ties with the West and help boost U.S. energy security - pushing for the construction of a pipeline to the Arctic port of Murmansk for crude shipments to the United States and sending a pioneering tanker of Yukos crude last year - have earned him points with the White House.
As the politically charged case that some fear could prompt a new asset carve-up escalates against Yukos, a senior U.S. diplomat last week said he has asked Russian officials for clarification on what was happening. The diplomat said he was "concerned about what political agenda may be behind these steps" which, he said, could have a "certain dampening effect on the energy relationship" that the United States and Russia are building.
"Khodorkovsky was one of the initiators of the new very strong energy partnership between Russia and the U.S.," said Lilia Shevtsova, a senior associate for the Carnegie Endowment for International Peace. "It is very important for the West what happens to him."
Yukos spokesperson Hugo Erikssen said that Khodorkovsky was meeting Monday with business leaders in Washington, after departing from a two-day conference in Sun Valley, Idaho, that was attended by bigwigs such as Warren Buffet, Microsoft Corp.'s Bill Gates and New York Mayor Michael Bloomberg. Erikssen would not say who exactly Khodorkovsky was seeing.
A spokesperson for Menatep, Yury Kotler, confirmed that the group has established an emergency chain of command that leads from Lebedev to Golubev, but he could not say whether it stretched down to Rothschild.
"Group Menatep has a lot of very powerful foreign partners. But as to whether they would take over the operative leadership of the company, I honestly don't know," he said.
He could not say whether the Rothschild family has any direct stake in Khodorkovsky's companies.
Rothschild's office, however, said, "Lord Rothschild has no business relationship with Menatep."
TITLE: Homeless Six Talk Soccer Glory
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: Despite finishing 13th out of 18 teams in the first Homeless World Cup soccer tournament held last week in Graz, Austria, Russia's representatives in the competition, a team of six men from St. Petersburg, returned to the city proud of their accomplishment and boasting the tournament's most valuable player.
Team Russia ended up winning six of its ten matches, including opening-day victories over both Denmark and Ireland and, in a noticeable departure from their compatriots in the big-time World Cup last year, had nothing but positive comments to make about their experiences in the tournament.
"We were very happy to be there," said the Russian team's manager, Arkady Tyurin, who is editor of Put Domoi, a twice-monthly magazine that is sold by the city's homeless, who receive 50 percent of the sales, said at a press conference on Monday. "We are happy with our performance and we believe that all of the participants have won in the end."
Maxim Mastitsky, the team's player-coach, earned the tournament's most-valuable-player title. Mastitsky said that the team prefers to play a "more aggressive" game and that their game against Ireland on the opening day of the tournament had been their favorite.
Vitaly Shishkin, the Russian side's goalkeeper, agrees.
"[The Irish] were the most competitive," Shishkin said at the press conference on Monday. "Their fiery temperament helped to create a sort of thunder-and-storm atmosphere, which we all enjoyed very much."
While none of the players mentioned it, the fact that Russia won the game 10-2 may also have added to the fondness of the memory.
The driving force behind the The World Cup is the Independent Network of Street Papers, which links 50 papers from 27 countries, including The Big Issue in London, Manchester, Glasgow and Melbourne, Diagonal in Buenos Aires, Hecho en Chile in Santiago and Put Domoi in St. Petersburg.
Beside Russia, Austria, Brazil, England, Ireland, South Africa, Denmark, Germany, Italy, Netherlands, Poland, Slovakia, Scotland, Spain, Sweden, Switzerland, USA and Wales sent teams to the tournament.
Host team Austria defeated England 2-1 in a tension-packed final
The purpose of the tournament is to use the positive power of soccer to raise awareness of the issue of homelessness and poverty worldwide. Social-integration programs centered around sports have been practised successfully by organizations like the English soccer street league for a number of years.
According to the organizers of the Russian squad, the term "homeless" is interpreted relatively broadly during the selection process, and only one of the team's players lives on the streets or in homeless shelters.
Others have either found temporary refuge in rehabilitation centers or live with relatives and friends.
Team captain Yuri Kuzmin said that the team started out with a bigger roster.
"With regard to playing, there were two competitions - one to make the team and another to survive the intensive training regime," Kuzmin said on Monday. "Several people who were very enthusiastic in the beginning had to drop out after a while."
The Russian players pointed out that they had only a little more than two months to prepare for the tournament, whereas some other teams have been training together for as much as three years and had some high-powered help.
"The British team was coached by Manchester United, while the one from Brazil got help from Real Brazil," Tyurin said. "Nobody really thought about these inequalities. The goal wasn't the victory. The goal was the process and just being there on field."
Shishkin said that the team is going to continue training together and is even planning to expand. All six players on the Russian squad found out about the project through Russian newspapers and the team is hoping to publish more advertisements.
Links: http://www.streetsoccer.org
TITLE: Tsarist Debt Leads To Grab For Hermitage Art Treasures
AUTHOR: By Galina Stolyarova
PUBLISHER: Staff Writer
TEXT: A collection of paintings from the State Hermitage Museum is under threat of being seized to pay off the old debts of the Russian government - 86-year-old debts, to be exact.
The Paris-based French Association of Russian Bond Holders (l'Association Francais des Porteurs d'Emprunts Russes), or AFPER, says that it will file a suit with France's Supreme Court asking that an exhibition of works from the Hermitage currently on display in the Cathedral des Invalides in Paris be seized as collateral against debts that the organization says have been improperly written off by both the governments of France and Russia.
In 1996, the two governments signed a bilateral agreement on tsarist debt, which stipulated that Russia would pay France a fixed sum of $400 million.
AFPER, which unites over 15,000 descendants of holders of Tsarist-Russian state bonds, says that the agreed sum is inadequate and estimates that Russia owes its members as much as $ 7.2 billion. The organization hopes that a court order to seize the collection, which is entitled "When Russians Spoke French: 1800-1830" and which runs through the end of August, will draw attention to their complaints.
"Russia hasn't yet fulfilled its obligations to the French holders, and we have to remind the world about it," Pierre de Pontbriand, the president and founder of AFPER, told reporters on Friday, shortly after the exhibit opened. "Some of the loans - taken by the city of St. Petersburg, the capital of Imperial Russia at the time - were guaranteed by St. Petersburg state property. So, if the country is not going to pay us, we are going to claim some of its property."
Mikhail Piotrovsky, the director of the State Hermitage Museum, doesn't appear to be concerned with the threat posed by AFPER.
"I am sure that the incident won't result in the seizure of the collection. The French government passed a law that guarantees protection for all works of art while they are touring the country," Piotrovsky said in an interview on Friday ."We shouldn't be worried by the claims. They come not from the French government but from an organization that is simply launching an improper initiative."
"With regard to the scandal, it will only bring additional publicity for the exhibition."
The exhibition comprises 300 items of Russian and French art from early 19th century, with two thirds of the items coming from the Hermitage collection. The rest are from Pavlovsk Palace Museum, the Kremlin, and the Army Museum in Moscow.
Vadim Uskov, the head of "Uskov and Partners" law firm, said that the incident must be viewed in its political context.
"I would understand if it was a claim against Soviet-era debt, because Russia has claimed official responsibility in this sphere. But St. Petersburg hasn't claimed responsibility for the debts of the former Imperial capital. What is happening is not an accident but a clear trend," Uskov said said in a telephone interview on Monday. "Russia already refused to send its brand new Sukhoi aircraft to the prestigious annual aviation event in Le Bourget in June because of reservations that last year's scandal would be repeated."
"Russia is perceived as country which owes something to France, not as a welcome guest," he added. "I was looking for a Russian-language audio guide in the Louvre and couldn't find one, although there were plenty in such languages as Italian, Chinese and Arabic."
But Uskov, who visited the exhibition last week while on a business trip to said that the French government is keeping at a safe distance from the conflict.
"There is a giant poster inside the cathedral, which explains that the project focused on cultural ties between the two countries and is dedicated to the 300th anniversary of St. Petersburg," Uskov said.
Regardless of the French government's stance, Piotrovsky is outright dismissive of the claims made in the suit.
"The suit is certain to be thrown out," he said on Friday. "Any other scenario is simply unrealistic, so I'm not even going to discuss it."
TITLE: Russian Students Have Troubled Road to U.S.
AUTHOR: By Robin Munro
PUBLISHER: Staff Writer
TEXT: MOSCOW - Despite expectations for significant growth, the number of university students going to the United States to work for the summer or sightsee is shaping up to be hundreds fewer this year due to late and improperly filled out visa applications, the U.S. Embassy said.
A record 8,000 students visited the United States last summer, and then-U.S. Consul General James Warlick said in May that he expected 10,000 to go this year. But it looks like the actual number will end up being closer to 7,000, the embassy said.
Kim Marie Gendin, second secretary at the embassy, said Friday that student-exchange programs were asked to file their applications no later than April 1 so that the embassy would have enough time to process them under the slower and more stringent system it introduced after Sept. 11, 2001. But no applications were received by that deadline from the 24 exchange-program agencies accredited with the embassy, she said.
An extension was granted until June 17, and the embassy promised to process the 9,000 applications that it received by that deadline by July 15, next Tuesday. Embassy staff have been working overtime and on weekends to honor the promise, Gendin said.
"All the paperwork is being done in the order in which we received them," she said.
At least 25 percent of all applications will probably be rejected, a rate that is relatively constant with all applications for U.S. visas, she said.
This year, however, the rejection rate could be higher because staff have noted an increase in the number of forged documents, incomplete and rushed material and ineligible applicants - applicants who are not students.
"People have heard this [posing as students] is a way to get into the United States," Gendin said.
Scores of other students may still miss out because they got their visas so late that the positions they had hoped to fill were given to others, said some exchange program agencies.
"I'm just wondering why the new system screwed up the hopes of all these people," said Valery Kostin, general director of Artek-Tour, which works with the youth affairs department of the Education Ministry.
Kostin, who in his first year in the program in 1990 sent 23 students to the United States, has managed to secure visas for 1,260 this year, down from 1,500 in 2002.
"We increase this program to 1,500 but decided not to accept more this year because I had a feeling something dreadful was going to happen," he said Friday.
Intex defended the agencies over missing the April 1 deadline.
"You cannot say the delays are the fault of the agencies working in this program," said Intex general director Dmitry Almukhametov. "It's almost impossible to make all these applications in time."
Almukhametov said the process of making an application is complex and involves finding sponsors and employers as well as cross-checking and providing documents.
"U.S. employers start to hire summer students only after the New Year, and it's hard to get everything done before February or January and that's why we have such delays," he said.
TITLE: Diplomat Still Fighting Spying Conviction
AUTHOR: By Sarah Karush
PUBLISHER: The Associated Press
TEXT: MOSCOW - Valentin Moiseyev was a successful career diplomat when security agents showed up at his door five years ago and turned his quiet life upside down.
More than six months after completing a prison term for spying for South Korea, Moiseyev is fighting to clear his name and says the government he once served never gave him a shot at justice.
Moiseyev and his supporters say the case was a product of an unreformed KGB-style security service, a judicial system skewed in favor of the state, and officials' paranoid belief that Russia is surrounded by enemies. Human-rights organizations say that the trial was riddled with holes and crude legal violations.
Since the end of the Soviet Union, with its show trials and political prisoners, Russia has struggled to build a legal system based on principles such as the presumption of innocence and the right to a fair hearing. Rights groups point to cases like Moiseyev's as evidence that such reforms - considered key to the success of Russia's democratic transition - have yet fully to take root.
Gray-haired and gaunt from prison, Moiseyev, 57, has turned to the European Court of Human Rights and is suing authorities for violating his rights after his release.
"To go through the entire judicial system, you have to be a turtle, to live 300 years," Moiseyev said during a recent interview, his deep voice breaking into a bitter laugh.
In 1999, Moiseyev was convicted of systematically gathering information on Russian-North Korean relations and transferring them to the South Korean intelligence agency over the course of 4 1/2 years.
Moiseyev's is among 13 espionage cases in post-Soviet Russia that human-rights groups say are blatantly unfounded. Some ended in prison terms, some were dropped, and others are awaiting trial.
Moiseyev became a suspect simply because his work involved contacts with foreigners, said Lyudmila Alexeyeva, the head of the Moscow Helsinki Group, a human-rights organization.
Unless such cases are stopped, "our country will again become a closed society," she said.
Moiseyev was the deputy director of a Foreign Ministry Asia desk and had lived in North and South Korea for 15 years. His nightmare began July 3, 1998, after a visit to his home by South Korean diplomat Cho Sung-woo.
Cho was then detained and expelled as a spy, with South Korea strongly protesting.
Hours after Cho's visit, Federal Security Service agents came for Moiseyev.
Investigators told him that he would not need a lawyer, Moiseyev recalled, and he believed them. He did not get one until two weeks into his interrogation.
"I was so stunned, I couldn't understand what was happening," Moiseyev said. "I told them, 'I never spied and never had any intention to do so.' On the contrary, my whole life was devoted to defending the state's interests."
Moiseyev was sentenced to 12 years in prison in December 1999, but the Supreme Court granted him a retrial. The second verdict, in August 2001, differed little, but the sentence was cut to 4 1/2 years, in part for health reasons.
Before the first conviction, Vladimir Putin - not yet president, but the head of the Federal Security Service - told the daily Komsomolskaya Pravda that Moiseyev's guilt was beyond doubt. Moiseyev says that the government thereby denied him the presumption of innocence.
Both trials were held behind closed doors, but the verdicts, published on a Russian human-rights Web site, provide a glimpse into the thinking of the prosecutors and judges.
In both trials, an unsigned Korean-language document of unspecified origin was accepted as evidence of Moiseyev's spying. It allegedly describes a Russian informer, but does not explicitly name Moiseyev. Moiseyev's supporters insist it is a fabrication.
Another key piece of evidence supposedly proving espionage is the text of a lecture Moiseyev had delivered at an open, international conference, which he gave to Cho on the evening of his detention.
Moiseyev says that the authorities have continued to violate his rights after his Dec. 31 release. Police demanded letters from his wife and daughter saying that they had no objection to his living with them in the apartment he owns. They also required him to register as a potential repeat offender and inform them any time he left Moscow.
Moiseyev has a Ph.D. in economics, but the state employment agency has offered him only two jobs - cloakroom attendant or factory worker. None of the 50 private recruiting firms to which he sent his resume has responded. Moiseyev believes his conviction has prevented his 24-year-old daughter Nadezhda, also a Korea specialist, from finding work in her field.
TITLE: Chechnya Elections Draw First Candidate
PUBLISHER: The Associated Press
TEXT: MOSCOW - A little-known businessperson has became the first person to notify the local elections committee of his intention to run for president of Chechnya, officials said on Monday, in a vote the Kremlin hopes will help end the nearly four-year-old conflict there.
Said-Khamzat Gairbekov informed Chechnya's election commission that he intends to run, said Bulaisari Arsakhanov, the commission's deputy chairperson, according to Interfax. He must collect signatures from 20,000 people - 2 percent of Chechnya's voters - to get his name on the ballot.
Gairbekov, 60, has lived for several decades in Russia's southern Astrakhan region, where he is the deputy director of a construction company, Interfax said.
Chechnya's Kremlin-appointed acting leader, Akhmad Kadyrov, announced his candidacy in June, but he has yet to notify the elections committee. Kadyrov said on Monday that he will do so within a week, Lenta.ru reported.
The Kremlin is pushing the election as part of a plan it drew up to bring stability to the republic.
The first step was a March referendum in which voters approved a new constitution, cementing the region's status as part of Russia. Then, last month, the State Duma passed an amnesty for rebels not accused of serious crimes.
U.S. Ambassador Alexander Vershbow praised the efforts toward peace in an interview published Monday.
"The more the political process succeeds, the more the terrorists will be marginalized," he was quoted by Interfax as saying.
However, Vershbow said that "considerable additional effort" would be needed to endure successful elections, adding that the electoral process must be open and all candidates must have media access.
Vershbow said that the amnesty should be applied as widely as possible to allow those who have not committed serious crimes to join the political process.
Ella Pamfilova, the head of President Vladimir Putin's human-rights commission, said on Monday that rebel leader Aslan Maskhadov should be allowed to run for president.
Other Kremlin officials have called Maskhadov a terrorist, though the former Chechen president denies involvement in attacks against civilians.
"If Maskhadov says that he opposes terror and is able to prove it, this means he is also eligible for amnesty and could well run for president," Pamfilova was quoted by Interfax as saying. "The more people in the elections who are somebody, the more likely it is that ... the people will have a real choice."
However, the Kremlin's spokesperson on Chechnya, Sergei Yastrzhembsky, said that Maskhadov is ineligble for the amnesty, Interfax reported.
Independent human-rights groups have criticized the Kremlin's peace efforts, saying that the only way to end the war is through negotiations. They fear that the election is simply an attempt to legitimize Kadyrov's control and say no free vote can take place in conditions of war.
Even if he were allowed to, it is unlikely that Maskhadov would run in Kremlin-organized elections.
Meanwhile, rebels continued their hit-and-run attacks in Chechnya, killing 10 service personnel over the past 24 hours, an official in Kadyrov's administration said on condition of anonymity.
Three pro-Moscow Chechen police officers were killed when their car hit a land mine.
TITLE: Police Beleive Witness May Link Moscow Bomb Attacks
AUTHOR: By Simon Saradzhyan
PUBLISHER: Staff Writer
TEXT: MOSCOW - Police suspect that a middle-aged woman in sunglasses helped organize the double-suicide bombings at a rock concert July 5 and the botched attack on a downtown restaurant last Wednesday, Kommersant reported Monday.
Zarema Muzhikhoyeva, the Chechen woman arrested after the failed bombing on 1st Tverskaya-Yamskaya Ulitsa, has told investigators that a witness being sought in connection with the rock concert attack prepared her for her attack, the newspaper said.
She recognized the woman after being shown a police composite sketch of the witness.
In a further sign that authorities believe the attacks are linked, the Prosecutor General's Office on Monday took over the probe into Wednesday's attack from Moscow city prosecutors and said that it would chase down leads "in parallel" with its investigation into the July 5 attack, Interfax reported.
A Prosecutor General's Office spokesperson declined to comment on Monday.
But a Moscow police spokesperson confirmed that investigators believe the same person or persons organized both attacks. He stressed, however, that the woman in the composite sketch is only being sought at a witness, not a suspect.
Kommersant said Muzhikhoyeva told investigators that the woman met her upon her arrival in Moscow from the Ingush capital, Nazran, on July 3, and introduced herself as Lyuba. Lyuba put Muzhikhoyeva up at her dacha outside Moscow and took her around the city center last Tuesday to select targets.
Muzhikhoyeva said that Lyuba kept insisting that she drink orange juice, and that the drink gave her headaches and made her feel dizzy, according to the Kommersant report, which cited unidentified police sources.
Investigators suspect that the drink contained powerful opiates.
According to Kommersant's account of what happened Wednesday night, Muzhikhoyeva walked into the Mon Cafe on Tverskaya at 10:00 p.m. and tried about 20 times to detonate explosives hidden in a black bag. She then became upset, screamed that she would blow up the entire cafe, and ran out.
Muzhikhoyeva walked down the street to the upscale Imbir restaurant and tried to enter, but private security guards stopped her and alerted the police.
One of the Federal Security Service's best sappers, Major Georgy Trofimov, tried to defuse the bomb early Thursday morning but died when it exploded. The 29-year-old officer, who is survived by a wife and 3-year-old daughter, was buried Monday at the Preobrazhenskoye Cemetery.
TITLE: IN BRIEF
TEXT: Nose Found
ST. PETERSBURG (Reuters) - A giant statue of a nose, inspired by Nikolai Gogol's story of a man's pursuit for his runaway nose, was tracked down by St. Petersburg police Friday, 10 months after it vanished.
The marble sculpture, erected eight years ago to honor the tale, disappeared last September from the house where the story's hero is supposed to have lived.
The head of St. Petersburg's sculpture museum, Vladimir Timofeyev, said that the 100-kilogram proboscis was found in a city apartment block.
Sniffer Cat Dead
MOSCOW (Reuters) - A police cat who proved adept at sniffing out fish smugglers in southern Russia could be honored with a memorial plaque after dying in the line of duty, one of his former owners said Monday.
Rusik was employed to catch illegal shipments of fish from the Caspian Sea.
But his career ended tragically when, after ensuring that a bus was free of illegally harvested seafood, he jumped lightly to the ground - only to be hit by a car.
Russian media muttered darkly that the incorruptible feline hero had been the target of a "contract murder" in revenge for busting a smuggling ring. But the police officer denied foul play.
"He just jumped down from the bus and was hit by a car," he said. "It was a sad accident."
Embassy in Iraq
MOSCOW (AP) - The United States should guarantee the safety of Russian diplomats in Iraq and give the Russian mission there full diplomatic recognition, the Foreign Ministry said on Saturday.
The ministry statement came after U.S. Ambassador Alexander Vershbow said that Washington does not consider the Russian Embassy in Iraq a diplomatic mission and cannot accept responsibility for the staff's safety.
Vershbow also was quoted by Interfax as saying that the United States considers it unwise for other countries to set up missions in Iraq because there is no Iraqi government at this stage.
Arsenal Blasts Injure 13
VLADIVOSTOK, Far East (AP) - Explosions at a naval arsenal in the Far East on Sunday sent artillery shells flying and shattered windows in nearby homes, injuring at least 13 people, a naval spokesman said.
The explosions at the artillery arsenal, 70 kilometers north of the Pacific port of Vladivostok, started early Sunday morning, apparently caused by a firecracker that flew into the arsenal through a ventilation opening, said Alexander Kosolapov, the navy's spokesperson in Vladivostok.
Residents were celebrating the national Fishermen's Day over the weekend.
TITLE: Are the Oligarchs Cashing Out?
AUTHOR: By Catherine Belton
PUBLISHER: Staff Writer
TEXT: MOSCOW - As prosecutors continue their assault on the Yukos empire of Russia's richest man, speculation is mounting that its second-richest, Sibneft owner Roman Abramovich, may be preparing to pull out of the country altogether.
Two leading Moscow dailies, Kommersant and Gazeta, both reported Friday, citing anonymous sources, that the Siberian oil tycoon turned Chelsea soccer sugar daddy is in talks to sell his half of RusAl, the world's second-largest aluminum producer.
One interested buyer, according to the papers, is Oleg Deripaska, who runs RusAl and owns the other half. Gazeta also mentioned Viktor Vekselberg, who controls RusAl rival SUAL and a large chunk of Tyumen Oil Co., for which he is set to receive part of the $6 billion that oil supermajor BP has agreed to pay to merge its Russian operations with TNK.
Neither Millhouse Capital, the holding company that manages the assets of Abramovich and other core Sibneft shareholders, nor RusAl would comment on what they called market rumors.
Deripaska's holding company, Base Element, was unavailable for comment, but a source close to the company said that Abramovich and Deripaska, when they created RusAl in 2001, agreed to freeze any asset sales for three years, a time limit that has just expired.
In addition, the source said, law enforcement's increasingly hostile and public attacks on "the oligarchic elite" - specifically main players behind Yukos (who have been accused of embezzlement and murder) and Sibneft (who have reportedly been questioned by prosecutors over tax evasion) suggest that the time may be right for Abramovich and Yukos owner Mikhail Khodorkovsky to cash out while they can.
"There's an interesting pattern here, and it may not be a coincidence," said Stephen O'Sullivan, head of research at United Financial Group.
Yukos and Sibneft are trying to finalize a merger that would create Russia's first top-tier global oil company, but the Kremlin is reportedly not in favor of having such a huge and influential company uncontrolled by the state.
If Friday's reports are true, the sale of Abramovich's RusAl stake would be the latest in a string of sell-offs, adding substance to speculation that the Chukotka governor and protege of exiled tycoon and Sibneft founder Boris Berezovsky is pulling out of Russia.
In March, he sold his 26-percent stake in national airline Aeroflot for an estimated $130 million. A month later, the Yukos-Sibneft merger was announced, which will result in Abramovich getting the lion's share of the $3 billion in cash that Yukos will pay to take over its smaller rival plus, 26 percent of the new, $40-billion company. Abramovich is also reportedly seeking to sell his 37.5-percent stake in Deripaska's Ruspromavto holding, which includes Russia's No. 2 automaker GAZ.
For Khodorkovsky's part, Yukos, as part of its acquisition of Sibneft, will pay its shareholders - of whom Khodorkovsky is by far the largest - more than $5 billion in cash.
"Alert lights should be going off when this much cash is being taken out of companies," said James Fenkner, head of research at Troika Dialog.
"Abramovich and Khodorkovsky are two of the cleverest guys in Russia. They are always ahead of the curve. These guys got their assets for next to nothing, and now they are cashing out," Fenkner said.
Abramovich's liquidation rush comes amid concern that the slew of probes into Yukos that began two weeks ago with the arrest of Khodorkovsky's right-hand man Platon Lebedev, for allegedly stealing state property, mark the beginning of a massive redistribution of property.
Most political observers see Kremlin insiders who worked with President Vladimir Putin in both the KGB and in the St. Petersburg government as forming a new elite group that is hungry for its own slice of Russia's resource pie.
"The people close to Putin refuse to understand that they came too late for the carve-up of assets," said Union of Right Forces State Duma Deputy Konstantin Remchukov, a former head of the advisory board at Deripaska's Base Element. "They see themselves as having another four years in power, and they see no reason why they shouldn't have their share of the economy, too."
"We are still in the very early stages of having private property in Russia. There may well be two privatization stages in Russia - the Yeltsin era and the Putin era."
Nearly all of the country's super-rich, including Abramovich and Khodorkovsky, seized their wealth in the smash-and-grab privatizations of the 1990s, most of which were as clearly rigged as the laws governing them were flawed - leaving them open to challenge.
Upon coming to power, however, Putin vowed not to launch a full-scale review of their ownership rights, as long as they paid taxes and stayed out of politics. But Khodorkovsky, for one, has set himself on a collision course with powerful state-owned energy companies over future pipeline routes, and has moved to publicly support opposition parties in the Duma.
Meanwhile, Abramovich's recent $230-million playboy-style splurge on London soccer club Chelsea could make him the next target, analysts say.
In what one British tabloid said could be "the biggest cash splash in football history," Abramovich has launched a blitzkrieg tour of Europe's leading clubs in an effort to sign top players, including Inter Milan's Christian Vieri, AC Milan's Andrei Shevchenko and Juventus' Edgar Davids.
This audacious coming-out party for a man rarely seen in his home country has already ruffled some influential feathers back home.
Audit Chamber chief Sergei Stepashin, for example, last accused Sibneft of dodging $300 million in taxes, which, he suggested, was used to buy Chelsea.
"Abramovich's purchase of Chelsea was a very stupid move," said Andrei Ryabov, senior political analyst at the Carnegie Moscow Center. "Now any person can question whether he could have done more for Chukotka."
Indeed, media reports have said that Sibneft is the target of a new tax probe, and that Sibneft CEO and new Chelsea board member Eugene Shvidler and other Sibneft officials were questioned by prosecutors Friday, although the company denied the reports.
In a sign that the writing may have already been on the wall for the oligarchs, Khodorkovsky seemed nervous about a looming shake-up even as far back as March. "If today I am told there is a more interesting sector, or I am told that the oil industry will be state owned, then I will do something else," he said in an interview at the time.
Could this happen?
"Not under Putin. Putin keeps his word. But anything is possible. Nothing is forever," Khodorkovsky said. "If the oil business stops being [profitable], then we don't need to turn Yukos into another company. We will give the money to shareholders."
With the Yukos-Sibneft merger, Khodorkovsky is seeking to do just that.
Analysts say that there are two likely reasons for all of the activity surrounding Yukos and Sibneft now. One is that it is part of a larger effort to target controversial tycoons as a rallying cry ahead of December's parliamentary elections, which are followed by the vote for president in March. The oligarchs, who have never enjoyed grass-roots support without paying for it, are seen as an easy target, replacing the Communist threat.
The other reason could be that Putin plans to use his electoral mandate to hike taxes on the oil barons in his second term, which may explain why Khodorkovsky is so keen to fund opposition parties that could prevent a pro-Kremlin majority faction in the next Duma. It may also explain why Khodorkovsky and Abramovich seem to be in such a hurry to get what they can now.
TITLE: Fixing Probe at Brunswick Extended
PUBLISHER: Vedomosti
TEXT: MOSCOW - Federal authorities have extended their initial two-month investigation on price manipulation at Brunswick UBS until Sept. 6, the investment bank's president said.
Marlen Manasov said that the investigation was launched upon the request of an anonymous client.
"It's not credible," he said, questioning why such a person would have waited two years to come forward.
The Federal Securities Commission has been tight-lipped, with spokesperson Ilya Razbash saying only that one of Brunswick's clients asked the government to investigate "information pertaining to instances of price manipulation."
Manasov, who has openly criticized FSC policy and decisions, denies any price manipulation took place, and the company questions whether the investigation may be politically motivated.
Price manipulation does not have a legal definition under Russian legislation, making the commission's battle with it "illogical," Manasov said.
TITLE: Ruble Union Plagued By Further Setbacks
AUTHOR: By Igor Semenenko
PUBLISHER: Staff Writer
TEXT: MOSCOW - Officially, Belarussian President Alexander Lukashenko's last-minute decision earlier this month to delay the introduction of the Russian ruble in business-to-business transactions was due to "technical difficulties."
But observers say that the much-touted currency union between the two former Soviet states will likely be scuttled altogether because it would require the Belarussian strongman to relinquish some of his power.
Belarus, Russia's neighbor to the West, was scheduled to partially introduce the ruble July 1, but analysts now say that the project may likely be shelved altogether as Lukashenko uses the issue to bargain for Kremlin support to violate the Belarussian Constitution and serve a third term as president.
"The [delay] is an entirely domestic issue," said Sergei Dubkov, an assistant to the board chairperson of the Belarussian Central Bank.
In addition to its bilateral agreements with Russia on adopting the ruble, Minsk not only committed to using the currency in business-to-business payments as of July, but also to begin pegging its currency to Russia's as of January next year.
Officials in Minsk now say that the July deadline was not part of the bilateral package. But whatever the divergence of view is over implementation, Belarus has committed itself to introduce the ruble on all monetary transactions from 2005 and fully switch to a joint currency in 2008.
However, observers agree almost unanimously that Lukashenko will try to use the currency union as leverage in his talks with President Vladimir Putin.
"Should Lukashenko introduce the Russian ruble, he will have to give away some of his powers," said a Belarussian analyst who asked not to be identified, given his involvement in a government-sponsored project. "The only criteria for policymaking in Belarus is Lukashenko's personal gain or loss. For that reason, the ruble project was abandoned."
"This is a clear signal that Putin will not score easy victories in the former Soviet Union," said Leonid Zaika, head of the Strategy think tank in Minsk.
The key issue for Lukashenko now is Russia's agreement to his third presidential term.
In pursuit of this goal, analysts said, Lukashenko may start throwing dirt on Putin's foreign policies on the eve of the presidential election in Russia, scheduled for March 2004.
According to Zaika's estimates, Putin may lose as much as 10 percent or 15 percent of the domestic vote if he can be linked to failed policies in the former Soviet Union.
Already, a small public outcry has followed the recent gas deal Putin struck with Turkmen President Saparmurat Niyazov that resulted in Russians in the Central Asian state being ordered to leave the country if they chose to hold onto their Russian passports.
Economically, Belarussian companies could save on transaction costs if the ruble is introduced without strings attached.
Belarus last year exported 50.1 percent of its output to Russia and bought 65.1 percent of its imports from Russia, posting a deficit of $1.8 billion.
Local companies have to sell 30 percent of their export proceeds to the Central Bank and submit import contracts to justify the purchase of foreign currency, including the ruble.
About 70 percent of foreign-trade contracts in Belarus are written in U.S. dollars, 21 percent are fixed in Russian rubles, while the remaining 9 percent are euro-denominated, according to estimates made by Priorbank, a subsidiary of Austria's Raiffeisenbank.
Earlier this year, MAZ truck-maker managers said that the company, which exports 80 percent of its $4000-million annual output to Russia, lost between $500,000 and $600,000 to convert those rubles into the local currency.
If the currency union moves ahead as planned, those costs to companies would disappear.
But the economic cost of a ruble peg or joint currency could be substantial since Belarus would no longer be able to prop up its exports with a weak currency.
Inflation amounted to 15.1 percent in Russia in 2002 versus 34.8 percent in Belarus. In 2001, prices in Russia grew 18.6 percent compared to 61.1 percent in Belarus.
"If the ruble is introduced, Belarus will follow the trail blazed by Russia's regions too heavily dependent on manufacturing," said Leonid Zlotnikov, head of the NISEPI think tank in Minsk. "The Dutch disease will take its toll on local businesses."
The first symptom of the Dutch disease is an overvalued exchange rate, which makes a country's manufacturing exports uncompetitive, reinforcing its reliance on commodities exports.
Major manufacturing industries in Russia collapsed in the early 1990s after facing tight competition from imported goods. This destroyed the economies of entire regions, the most notable being the Ivanovo region with its heavy concentration of textile-industry firms.
Belarus will face several restrictions should it finally opt for a joint currency with Russia.
First, it will have the right to print only 4 percent of the amount of shared currency notes that Russia prints, as Moscow seeks to rein in Minsk's appetite for minting money and stem the inflation it inevitably causes.
TITLE: Stocks Rise on New Confidence
AUTHOR: By Hope Yen
PUBLISHER: The Associated Press
TEXT: NEW YORK - Better-than-expected profits from Citigroup and Bank of America powered Wall Street higher Monday, as investors grew increasingly confident of a strong economic rebound. A brokerage upgrade of Intel also boosted stocks.
"Citigroup and Bank of America tend to be a pretty good litmus test for the financial services sector as a whole. If they feel good, that's a good sign for the rest of economy," said Doug Sandler, chief equity strategist at Wachovia Securities.
"We continue to believe the potential for upside [earnings] surprises outweigh the downside surprises," he added. "Investors' risk tolerance is going up, and they're not penalizing equities as much as they're used to."
By midafternoon, the Dow Jones industrial average was up 141.60, or 1.6 percent, at 9,261.19, having gained 0.5 percent last week.
The broader market was also sharply higher. The NASDAQ composite index gained 37.36, or 2.2 percent, to 1,771.29, following a weekly advance of 4.2 percent. The Standard & Poor's 500 index rose 15.55, or 1.6 percent, to 1,013.69, having gained 1.3 percent.
Dow component Citigroup advanced $1.43 to $47.58 after the country's largest financial institution reported second-quarter earnings that beat estimates by 3 cents per share. The bank also raised its quarterly dividend to $0.35 from $0.20.
Bank of America rose $1.47 to $84.35 after it posted quarterly profits that also topped expectations.
Intel, another Dow component, climbed $1.03 to $24.37 after Merrill Lynch raised the technology company's stock rating to "buy" from "neutral." The company releases its quarterly earnings report on Tuesday.
While stocks have surged in recent months, investors have been watching the second-quarter earnings season for evidence the economic recovery is firmly under way. Analysts say that companies will largely meet, if not beat, expectations, creating more opportunities for stock gains.
"We're getting some indications that the rally was actually based on something fundamental" rather than investors' expectations, said Ed Peters, chief investment officer at PanAgora Asset Management Inc. in Boston. "With all this news coming together, it's mostly good."
He added, "there's still a little upside to the current rally. But I'm not sure the [earnings] news is going to be so good that the market can start another leg up."
Two merger announcements Monday also gave the market a boost.
Overture Services climbed $2.55 to $24.06 after Yahoo! agreed to buy the Web-search advertising company in a deal worth about $1.63 billion. Yahoo rose $0.08 to $32.27.
OfficeMax surged $1.50 to $8.68 after Boise Cascade agreed to buy the office-supplies retailer for nearly $1.2 billion in cash and stock; the deal will double the size of its office-products distribution business. Boise Cascade declined $0.87 to $22.56.
Decliners included Cigna, which fell $2.61 to $41.88 after the health insurer lowered its 2003 earnings estimates, citing a $100-million restructuring that had not gone well as planned. Cigna HealthCare President Patrick Welch is also leaving the company.
Advancing issues outnumbered decliners 9 to 4 on the New York Stock Exchange. Volume came to 896.43 million shares, compared with 779.28 million traded at the same point Friday.
The Russell 2000 index, a barometer of smaller company stocks, rose 6.37, or 1.3 percent, to 480.14.
TITLE: Slower Now, Stronger Later
AUTHOR: By Yevgeny Yasin
TEXT: At the Higher School of Economics, we recently completed work on a report on the "nonmarket" sector of the Russian economy. The study focuses on the crucial trade-off between structural reforms and economic growth.
As has been widely reported, President Vladimir Putin, in his state of the nation address to the Federal Assembly earlier in the year, set the objective of doubling GDP in 10 years and also stated that we do not need reform for reform's sake. I fully agree with the latter point. However, our report, which brings together the results of three years of research, leads to the conclusion that structural reforms are urgently needed, and that during their implementation there may be a temporary drop in economic-growth rates.
When we talk about structural reforms, we are talking about reform of natural monopolies, primarily Unified Energy Systems and Gazprom, as well as housing reform and related measures in the area of social security.
Prices for gas, electricity and housing services in this country are low and regulated by the state. I would like to emphasize that domestic gas prices are not low because they are subsidized by high export prices, as is often held to be the case in the West. Even with low domestic prices, the gas industry is still profitable for the most part: Losses are no more than 1 percent of turnover on the domestic market.
However, low domestic prices - and they are about four to five times lower than export prices - lead to the irrational use of extremely valuable resources; each year up to $30 billion in natural-resource income is lost. But cheap gas makes it possible to maintain low rates for electricity - gas makes up 62 percent of fuel used in Russian power stations - and together they make it possible to keep prices for housing services low. This in turn is justified by reference to the low income levels of the majority of the population.
In fact, low incomes themselves are a product of the fact that we have preserved the Soviet tradition of maintaining services at an artificially cheap level and handing out all kinds of benefits. The population now pays only 50 percent of the cost of the housing services it receives. The rest comes from the budget, cross subsidization and running down infrastructure and capital stock. In 2001, all this combined amounted to approximately 90 billion rubles.
Together, these branches comprise the heart of the nonmarket sector of the economy. They employ about 5 million people. This enclave of the Soviet economy, not dismantled to this day, in our opinion, is a major obstacle to the healthy development of the country.
Low gas and energy prices, together with low salaries, are not conducive to the development of manufacturing industries either, as they destroy incentives to save energy and raise productivity - although, initially, of course, the increased price of inputs would lead to higher costs and lower profits.
And there's the rub: To raise costs and freeze growth for two to three years but to get rid of the nonmarket sector, expand competition, and to create conditions for the inflow of capital into those sectors. Or, for the sake of growth today, as fast as possible, to go slow on structural reforms and listen to all those industrialists incapable of functioning in a competitive environment and calling for electricity prices be reduced even further.
Our conclusion is that structural reforms are the only way forward. We propose gradually increasing electricity rates over a three-year period (2004-2007) to $0.03 to $0.04 per kilowatt hour; on gas, to $40 to $50 per thousand cubic meters. Rent on gas between $20 and $25 per thousand cubic meters should be earmarked for raising salaries for state employees and pensions so that the population would be able to afford the higher prices for housing and communal services. Calculations based on 2001 conditions show that it would be sufficient to raise state employees' wages by 600 rubles ($19.90) per month and pensions by 300 rubles per month, preserve housing subsidies and slightly increase child benefits, in order to compensate 80 percent of the increase in household expenses. Moreover, less well-off families would receive full compensation.
As far as industry is concerned, costs would grow by approximately 13 percent including salaries, but predominantly in those sectors which have considerable export revenues (gas, ferrous and non-ferrous metals, chemicals and petrochemicals) and capable of mobilizing their resources to reduce costs in other areas, inter alia by investing in new technology.
Under this scenario, we calculate that between 2005 and 2007 growth rates would slow to 2 percent to 3 percent per year. However, from 2008 to 2010, we expect growth rates to rise to 5 percent to 6 percent, and possibly even more depending on how well structural reforms are implemented.
This approach differs from more generally accepted approaches. However, at least it forces us to look at our problems from a new perspective and to look for non-standard solutions, when run-of-the-mill measures are very unlikely to result in success.
Yevgeny Yasin, former Economics Minister, is rector of the Higher School of Economics in Moscow. He contributed this comment to The St. Petersburg Times.
TITLE: Presidential Ambiguity Undermines
TEXT: President Vladimir Putin's remarks to the country's political elite on Friday about methods of dealing with economic crime - the president's first indirect pronouncement on the judicial attack against Yukos - were delivered with trademark ambiguity.
While perhaps seeking to dampen the zeal of the Prosecutor General's Office, Putin did not send a clear signal to desist (and this was reinforced by the prosecutors' search of Yukos offices that also took place on Friday). This is very much in keeping with his cautious style of keeping above the fray and fence-sitting for as long as possible.
But, just as it is almost unthinkable that a move against an oligarch of this magnitude could have been made without the president's sanction (or at least tacit nod), it is exceedingly unlikely that the whole thing will just blow over without a public intervention by him.
If the Kremlin's plan was to deliver a "surgical strike" against Khodorkovsky for overstepping the mark politically and to flash a warning to the rest of the business elite in the run-up to the elections, without destabilizing the situation overall, things seem to have gone somewhat awry.
There is clearly concern in some quarters that what is essentially an intra-elite conflict could spill over and infect the body politic as we move into the election season, with unpredictable consequences. Coverage of the Yukos affair on state-controlled television would hardly have been so low-profile (or non-existent) if it had been the Kremlin's intention to engage in oligarch-bashing for primarily populist ends.
And the business elite has been at the forefront in raising the specter of renationalization, presumably in order to raise the stakes and put pressure on Putin to take a firm stance.
One of the problems is that the prosecutor's office is rather a blunt instrument, and once the mechanism has been set in motion it requires an equally blunt and public signal to bring it to a halt.
With political stability under threat and the markets reacting badly to the events of the last 10 days, Putin cannot just bury his head in the sand - and the longer he keeps quiet, the more havoc it will cause.
But there is another consideration as well. Putin doesn't want to be seen to cave into to pressure from the business elite or to be siding too closely with one of the factions in his entourage.
Nonetheless, the longer the power struggle continues, the worse it will be for Putin, as he will increasingly be seen as weak and unable to control the situation.
Putin's silence, in this situation, is not golden.
TITLE: Big Television's Message Is Mixed at Best
TEXT: The most interesting thing about the coverage of the "Yukos affair" on state television these past few weeks is just how limited and incomprehensible that coverage has been. Compared with the extensive coverage of the other big criminal/political scandals of late, Yukos has been a non-story. Never mind that Platon Lebedev's arrest, the questioning of Mikhail Khodorkovsky and Leonid Nevzlin and the search of Group Menatep's offices have been splashed all over the front page of Russian newspapers and the foreign press for two weeks. And yet I can't think of a single significant report on state-controlled Channel One. Coverage the last two weeks on the state-owned Rossia channel's weekly news and comment show, Vesti Nedeli, reminded me of Eduard Shevardnadze's speech at the White House on the last night of the 1991 putsch.
On that decisive night, Shevardnadze gave his friend Mikhail Gorbachev his due, demanding the release of the lawful president of the Soviet Union. In the next breath, however, he gave Boris Yeltsin his due, declaring that if Gorbachev had organized the putsch he was a criminal and ought to be punished. The entire speech consisted of such mutually exclusive statements, each calculated to please a specific audience, from Western leaders to the coup leaders themselves.
This came as no surprise from a veteran courtier like Shevardnadze. In conditions of extreme uncertainty, he had to maintain his image as a democrat while hedging his bets in case the putsch were to succeed.
Conditions of extreme uncertainty also seem to be dictating editorial policy at Russia's state television stations of late. News executives are waiting for a clear directive from above, but no directive has been forthcoming. They can't just pretend that nothing is happening, but it's too risky to say anything definite. Last week's Vesti Nedeli show was a masterpiece of equivocation. The Yukos story was already big news around the world, but Vesti Nedeli buried its report toward the end of the program after a piece on the search for a ship called the Varyag, which sank a century ago.
State television has almost unlimited access to Russia's ruling elite. Viewers, therefore, expect these stations to inform them clearly and concisely where their leaders stand on the major issues of the day. Instead, they're given wishy-washy reporting of which even Shevardnadze would be proud.
So why won't the Kremlin clarify its position on the Yukos affair? You may recall how flustered Putin was on a trip abroad when he learned that Vladimir Gusinsky had been arrested back in Moscow. Did Putin want to get rid of Gusinsky? You bet he did. Did he need a scandal at that particular moment? Not exactly.
But law enforcement and the security services have their own ideas about how to suck up. The Gusinsky case still tarnishes the Kremlin's reputation, mostly abroad. An obliging fool, as they say, is more dangerous than any enemy.
So what's the connection? Who's to say? Thanks to the total lack of reliable information and the enthusiastic obeisance of state television, all we can do is guess.
Alexei Pankin is the editor of Sreda, a magazine for media professionals. [www.sreda-mag.ru]
TITLE: New Faces for Same Old System
AUTHOR: By Boris Kagarlitsky
TEXT: In the 1990s, it became something of a tradition for dramatic events of one kind or another to take place in the month of August. The coup attempt in 1991, then default and devaluation in 1998, the sinking of the Kursk submarine in 2000 - all occurred in August. July, on the contrary, has always been seen as a quiet period, when journalists could confidently head off for their vacations.
I don't know what this August will bring us, but July so far has certainly not been a "slow news" month. The terrorist act at the Krylya rock festival in Tushino, which took at least 13 lives, has given rise to a whole new wave of political debate.
However, the main issue troubling the elite right now is not terrorism but the latest round of factional infighting in the upper echelons of power. That is how the arrest of Group Menatep head and major Yukos shareholder Platon Lebedev is being interpreted. Not only was Lebedev arrested, but Yukos CEO Mikhail Khodorkovsky and his right hand, Leonid Nevzlin, were called into the Prosecutor General's Office for questioning.
Over the weekend, Khodorkovsky commented on these events as follows: "This concerns neither the company's management nor its business activities. This concerns individual company shareholders."
He hit the nail on the head. It is the interests of "individual people" that lie at the heart of the Russian political system - and the names of most of these individuals are no big secret.
Nonetheless, the conflict between different clans has been deepening. On the one hand, there are the so-called St. Petersburg chekists, who swept to power on President Vladimir Putin's coattails, although certainly not all of them are members of the state security establishment. Then, there is the oligarch old guard - those who climbed the greasy pole under Boris Yeltsin and acquired the Family moniker - although far from all of them are intimately related to the former president's family.
The standoff between these groups is all too real. And there is plenty to fight over: At stake is power and control of the country's assets.
Over the weekend, court experts explained to the masses that Putin had finally decided to take on the oligarchs. The vast majority of the population, who suffered impoverishment during the course of the 1990s, should be well-disposed toward such moves. In the oligarchs, they see, if not those who are to blame for their woes, then at least those who got very rich off the situation.
Alas, skirmishing with the oligarchs does not mean the demise of the oligarchy is imminent, and the current clash between members of the president's entourage and the captains of big business does not mark a major change of course. On the contrary, it only confirms how little things have changed.
No structural reforms to restrict the economic power of the oligarchy have been proposed by the Kremlin, even out of populist considerations. Nationalization is not on the agenda; and not even more moderate options - such as a windfall tax or the introduction of a natural-resource tax, along the lines proposed by left-wing economist Sergei Glazyev - are being considered. Measures of this kind would be proof positive of a real attempt to cut the oligarchy down to size, but as Khodorkovsky rightly pointed out, it is not the system that is at issue, but specific individuals.
The St. Petersburg chekists, in moving against the Family, are not remotely interested in changing the system. On the contrary, they simply want to be the dominant actors in the existing system. The chekists are seeking to use their political power to seize the "commanding heights" of the economy.
In the early 1990s, this was called "converting power into property." The dream of the St. Petersburg chekists, who missed the party the first time around, is to preside over a new carve-up.
In turn, the oligarch old guard is no stranger to politics. Khodorkovsky and other Yukos shareholders finance political parties spanning the political spectrum. A party's ideology and program is of little real importance.
Both the chekists and the Family know that the main threat they face is from each other - and are taking out insurance accordingly.
For the man on the street, this battle of the Titans is likely to be confined to their TV screens.
That is, as long as the warring sides don't go too far and end up destroying the very system, in whose preservation they both have a vital interest.
Boris Kagarlitsky is director of the Institute of Globalization Studies.
TITLE: Chekist 'Chelseafication' Of the Leading Oligarchs
AUTHOR: By Yulia Latynina
TEXT: Yukos is the most transparent company in Russia. Last year it paid $4.5 billion in taxes. And Yukos CEO Mikhail Khodorkovsky is Russia's richest man, according to EuroBusiness magazine.
In Russia, the drive for transparency can all too easily be interpreted as a drive for independence. Maybe that's why Yukos now finds itself at the center of a battle between the oligarchs and the siloviki - bigwigs in the armed forces, law-enforcement and the intelligence services. This is also a battle between the Kremlin clan led by presidential chief of staff Alexander Voloshin and another clan led by Viktor Ivanov and Igor Sechin. Rumor has it that the Ivanov clan has got the green light to create the People's Party on the basis of pro-Kremlin single-mandate deputies in the State Duma.
The first harbinger of the conflict between Yukos and the siloviki came in the form of reports that Yukos was financing the Communists.
The allegation that Khodorkovsky is systematically bankrolling the Communists holds about as much water as allegations that the Jews bankrolled Hitler. When disinformation like this turns up on the Internet, it is intended to mislead the public. But when it lands on the president's desk, it is hard to see it as anything but an attempt to mislead the president.
Yukos returned fire during a meeting between Putin and the oligarchs when Khodorkovsky effectively accused state-owned Rosneft of acquiring Severnaya Neft in February for an inflated price.
You may recall that Rosneft president Sergei Bogdanchikov is thought to be closely allied with the siloviki in the presidential administration.
Khodorkovsky's decision to return fire seems to have been a tactical error. His attack on the siloviki breathed new life into persistent rumors of his political ambitions. The rumor campaign reached its height when the Council for National Strategy published a report by two unknown political scientists, Iosif Diskin and Stanislav Belkovsky, which all but accused Yukos of planning a coup d'etat.
Foes of Yukos in the presidential administration didn't accuse Khodorkovsky of corruption or criminal activity. Instead, they made him out to be a vain oligarch bent on scaling the heights of power, up to and including the presidency.
The primary purpose of the law enforcement and the intelligence services is to do battle with enemies of the state. But when there are no enemies to battle, new ones must be created. Enter Khodorkovsky, who has been systematically turned into an "enemy."
Whatever you may think of the oligarchs, they do know how to run a business. The siloviki do not, as they have amply demonstrated in recent years. But they do know how to create enemies and destroy them.
In that case, there is no point in bankrolling election campaigns. You're better off buying the Chelsea soccer club and hopping on the next plane West.
Yulia Latynina is a columnist for Yezhenedelny Zhurnal.