SOURCE: The St. Petersburg Times
DATE: Issue #934 (2), Tuesday, January 13, 2004
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TITLE: Kasyanov Defends Yukos On Tax Bills
AUTHOR: By Valeria Korchagina
PUBLISHER: Staff Writer
TEXT: Prime Minister Mikhail Kasyanov has come out in defense of Yukos, criticizing claims by tax authorities that the embattled oil company owes more than $3 billion in taxes for 2000.
"If legal activities to optimize tax payments are declared illegal retroactively, then I see this as negative," Kasyanov told Vedomosti in an interview published Monday.
"If actions were allowed by the law, we should today be guided by the letter of that law and not by ideas of fairness."
The message, however, could also be interpreted as a reassurance to big business that the state will use Yukos as a scapegoat but stop short of across-the-board scrutiny of other major companies, analysts said.
The day the interview was published, President Vladimir Putin appointed Kasyanov the head of a new Kremlin Anti-Corruption Council and said concrete measures should be taken to fight corruption. (See story, page 5.)
The allegation that Yukos and its affiliates failed to pay 98 billion rubles in taxes in 2000 was presented to the oil major on Dec. 29, after the Tax Ministry ran a hasty two-week audit of company books.
It is only the latest in a string of legal problems the company's current and former management - including jailed former CEO Mikhail Khodorkovsky - are facing in a month-long struggle with the authorities that started last summer.
The new tax bill shows that the state is ready to continue pressuring Khodorkovsky.
"This basically means: 'We will keep squeezing you until you realize that rules of the game have changed,'" said Roland Nash, chief strategist at Renaissance Capital investment bank.
Nash said the unearthed back taxes are unlikely to pose an immediate danger to Yukos in terms of undermining its financial stability, providing they are not beefed up by other charges.
"Paying $3 billion is not going to do much for Yukos' income statement, but it is not going to destroy the company either," he said.
Yukos is already under financial pressure in its quest to recover $3 billion that it paid last year under a merger agreement with Sibneft. Sibneft has since withdrawn from the deal.
Picking out a single year for a tax crackdown indicates more charges could be brought up should authorities choose to look into other years, Nash said.
The choice of 2000 is not completely random, said Yukos chief financial officer Bruce Misamore, as it was the earliest year officials could investigate because of a three-year statute of limitations on tax liability.
Misamore stressed that Yukos will fight the claims in courts if its answers to the Tax Ministry audit, which are currently being drafted, are not accepted.
"We feel that we have a very strong case here," Misamore said in a telephone interview.
Misamore refrained from forecasting any timeframe for the potential legal battle and refused to say how damaging the bill would be, if paid, for company finances.
The Tax Ministry charged at the end of December that Yukos committed massive tax evasion in 2000 by using schemes involving domestic offshore zones - a loophole in the tax law exploited by practically all big Russian companies.
Kasyanov told Vedomosti that it is the government - including himself personally - that should be held responsible for not closing such loopholes.
The prime minister also said that running checks on a large number of businesses would be impossible.
"There is nobody who could set a goal of reminding everyone of their past sins," he said.
Nash suggested that the government has no need to go after everyone. By going after the biggest, the state sends a "very loud warning" to toe the government line, he said.
From a legal point of view, Yukos is unlikely to have to cough up the cash any time soon.
"It is impossible to tell how long would it all take. But by law Yukos doesn't have to pay anything until all stages of defending itself in court are over," said Kakha Kiknavelidze, oil and gas analyst with Troika Dialog investment bank.
TITLE: Lawmakers Mull City Faction of Homeland
AUTHOR: By Vladimir Kovalev
PUBLISHER: Staff Writer
TEXT: The creation of a new faction that will represent the Rodina, or Homeland, bloc's views in the Legislative Assembly is being discussed by city lawmakers.
Deputies said last week that the faction will be in nominal opposition to City Hall.
The faction is expected to be formed from at least five lawmakers who are currently members of the United Russia or Sports Russia factions and the Communists-People's Patriotic Union faction, which represents those with the strongest left-wing views among the 50 deputies in the city parliament.
According to sources in the Legislative Assembly, the faction will be based on the nationalistic Rodina, or Homeland, bloc that during its campaign for the State Duma called for the revision of the privatizations of the 1990s, the jailing of Anatoly Chubais, who oversaw the privatizations, and heavy taxes, or "natural resource rents," on oil companies.
Analysts say the bloc was created by Kremlin spin doctors for the Duma elections as a tool to split the Communist vote. It got 10 percent of votes nationally and 13.7 percent in St. Petersburg.
Under the proposal being mulled for the Legislative Assembly the Communist bloc would not be split, but it would work within the Rodina faction, even though they are strange bedfellows.
Just what consituency the deputies can claim to represent is unclear: Rodina was formed in 2003, long after the December 2002 elections for the Legislative Assemby, but party-hopping after elections is a common feature of Russian political life.
"The influence of the new faction, as we know, will depend directly on how many members it has," said Vladimir Yeryomenko, a lawmaker in the Mariinskaya faction and one of the deputies known to oppose City Hall. "I think they will be in opposition to City Hall, at least outwardly, and to Vadim Tyulpanov, [the Legislative Assembly speaker]."
"There is a base in society for such a faction because Rodina got 13 percent of votes in the city and as far as I know the People's Patriotic Union supported the bloc during the State Duma elections in the city," he said Friday in a telephone interview.
One reason to form the new faction is because Yury Savelyev, a former member of the five-member Communists-People's Patriotic Union faction left the Legislative Assembly after being elected to the State Duma in December, leaving the faction with less than the minimum amount of members to exist, according to the city parliament regulations, Yeryomenko added.
Oleg Koryakin, a deputy in the People's Patriotic Union faction and head of the St. Petersburg branch of the Communist Party, said the new faction will be formed by Feb. 2. It is an initiative backed by Konstantin Serov, Andrei Lovyagin and Sergei Andreyev of the United Russia faction, and Konstantin Sukhenko, an independent lawmaker who was expeled from United Russia in September as a punishment for his decision to run for governor last year.
"[These deputies] are not comfortable in the factions where they are working," ABNews agency quoted Koryakin as saying last week. "Besides, despite Yury Savelyev having left for the State Duma, left-wing forces will insist that Vadim Tyulpanov fulfill the promise he made last year to introduce the post of second vice speaker of the Legislative Assembly."
The new faction may take up the name Rodina, with one of its goals to promote the bloc and create a branch of the party in the city, he added.
But Sukhenko, one of the deputies said to be about to join the new faction, is already getting cold feet.
"My position was based on discussions held 1 1/2 months ago, when it seemed it was possible to do something useful within the Rodina bloc," Sukhenko said Friday in a telephone interview. "The situation has changed. Too many people say they are going to join the bloc and the promises I was given 1 1/2 months ago seem not to have been fulfilled."
"It is impossible to do anything productive at the Legislative Assembly, which has turned into an executive tool for City Hall to just approve its initiatives and nothing more," he added. "The only thing left for me to do is work in my district, but I came to the [city] parliament to do something interesting and productive. And there are other deputies that feel the same way I do."
Leonid Kesselman, a political analyst at the sociology department of the Academy of Sciences, said the authorities could be behind the initiative, which might have the goal of creating something that looks like an opposition, but is not.
"That might well be the goal. As political analyst Andrei Piontkovsky has pointed out, the president's power vertical, which was supposed to look like a pyramid has turn out to be like a pole," Kesselman said Friday in a telephone interview. "And it looks rather like a striptease pole, with everybody dancing around. It seems to be standing up rather well and is not about to fall."
"We should have expected that this would happen," he added. "Revisiting the privatizations has proved to be popular and the oligarchs have not behaved well. Where there is demand there will always be a supply," he said.
TITLE: Two Jailed for 1999 Apartment Bombings
AUTHOR: By Anatoly Medetsky
PUBLISHER: Staff Writer
TEXT: MOSCOW - A Moscow court sentenced two men to life in prison Monday after finding them guilty of building and accompanying shipments of explosives used in 1999 bombings in Moscow and Volgodonsk that killed 246 people.
The Moscow City Court also determined that Yusuf Krymshamkhalov, 41, and Adam Dekkushev, 42, fled from Russia to Georgia as members of an illegal armed formation, said a lawyer representing bombing victims, Igor Trunov.
A film presented during the closed trial and shot by the armed group shows Dekkushev helping kill wounded Russian soldiers, he said.
Krymshamkhalov and Dekkushev were captured in Georgia's unruly Pankisi Gorge, bordering Chechnya, and deported to Moscow in 2002.
The court found the two defendants guilty of committing terrorist acts, committing exceptionally cruel murders, participating in illegal armed groups, illegally producing, storing and transporting explosives and illegally crossing the border, Trunov said.
During the trial, Krymshamkhalov denied most of the charges but acknowledged that he had illegally crossed the border. He also said he thought he had been mixing paint, not building an explosive device.
"Many of the conclusions are based on lies," he told reporters after the verdict, Interfax reported.
His lawyer, Shamil Arifulov, filed an appeal to the Supreme Court on Monday. He said prosecutors had fabricated evidence, including the testimonies of witnesses and the statements of experts, RIA-Novosti reported.
Dekkushev maintained his innocence, saying his actions were the result of rebels turning him into a "religious zombie." He has 10 days to appeal.
Both men apologized to those affected by the bombings, Trunov said by telephone.
The three apartment bombings - and a fourth apartment bombing in Rostov-on-Don unrelated to this trial - followed days of heavy fighting between federal troops and Chechen guerillas in Dagestan. Authorities blamed the blasts on Chechen rebels and launched the second military campaign in Chechnya weeks later.
Then-Prime Minister Vladimir Putin adopted a tough stance against the rebels that propelled his popularity to sky-high levels, eventually helping him win the presidential election in 2000.
Rebels have denied involvement in the attacks, and some critics of the Kremlin have speculated that the Federal Security Service staged the bombings to justify the Chechen campaign.
Many of those who have challenged the official line have been prosecuted on charges that they call fabricated. Among them are businessman Boris Berezovsky, who was charged with fraud and was granted asylum in Britain last year, and Mikhail Trepashkin, a lawyer for bombing victims who was jailed on weapons charges last fall.
The Moscow court ruled Monday that Krymshamkhalov and Dekkushev will serve their sentences in a maximum-security prison. It also ordered them to pay victims and their families 4 million rubles ($143,000) in damages.
It wasn't immediately clear which of those injured in the attacks and their families would receive compensation.
Prosecutor Sergei Verbin expressed doubt that the defendants would be able to pay. "As far as I know they don't have this kind of money," he told Interfax.
Trunov agreed, saying that the defendants had worked sporadically in their village near Kislovodsk in the Karachayevo-Cherkesskaya republic.
He said the Finance Ministry should be required to compensate the families under a federal terrorism law - an argument he has unsuccessfully used in lawsuits against the Moscow city government over the Dubrovka theater tragedy.
According to prosecutors, the apartment bombings in Moscow and Volgodonsk were ordered by rebel warlords Khattab and Abu Umar, who have since died.
TITLE: Iraqi Fighters Learned Tactics from Chechens, Officer Says
AUTHOR: By Jim Krane
PUBLISHER: The Associated Press
TEXT: CAMP ANACONDA, Iraq - Iraqi guerrillas blasting U.S. military convoys with improvised bombs hidden at roadsides may have learned tactics by talking to Chechen rebels and Taliban and al-Qaida fighters in Afghanistan, a U.S. Army intelligence officer said.
Iraqi rebels have been communicating with such outsiders through e-mail, telephone and personal visits, said Major Thomas Sirois, chief intelligence officer of the U.S. Army's 3rd Corps Support Command, which occupies this sprawling base north of Baghdad. He declined to identify the types of communication intercepted.
"I think they share information," Sirois said. "Individuals here who are fighting against us I'm sure are reaching out to see what has been successful in other locations, and probably trying to adapt those procedures here."
Some ambush techniques seen in Chechnya against the Russians and in Afghanistan against U.S. forces by al-Qaida and Taliban militants "we've seen employed here" in Iraq, Sirois said.
Like Iraq, recent conflicts in Chechnya and Afghanistan saw Islamic guerrillas hiding at roadsides to ambush military convoys with booby-trapped bombs and rocket-propelled grenades.
One Middle East military analyst said information being shared from Afghan and Chechen sources is probably technical assistance with fuses, remote-control detonators - like cellphones - and assembling the complex daisy-chained bombs that began appearing in Iraq in late summer.
Since the beginning of military operations in Iraq, with the March invasion, 494 American troops have died, according to the Defense Department. Most of those died as a result of hostile action.
The British military has reported 52 deaths; Italy, 17; Spain, eight; Bulgaria, five; Thailand, two; Denmark, Ukraine and Poland have reported one each.
Suicide bombings blamed on Chechen separatists have killed more than 275 people in and around Chechnya and in Moscow in the past year.
"There will be people out there with the expertise who will be very happy to share it, because they want to see the U.S. project in Iraq fail," said Jeremy Binnie, with Jane's Sentinel Security Assessments in London. "With the technical things, there is some level of cooperation because they can get quite sophisticated."
TITLE: Nabokov Museum Rent Arrears
AUTHOR: By Vladimir Kovalev
PUBLISHER: Staff Writer
TEXT: The hearing was adjourned until March 1.
City Hall says the museum owes the city budget about $23,000, according to an agreement signed by the museum's management in 1998. The agreement determined the rental at $500 per month for the 345-square meter area occupied by the museum on the ground floor of a building at 57 Bolshaya Morskaya, where Nabokov spent the first 18 years of his life. But no rent has been paid.
"According to a new law, the building will soon get the status of an architectural monument of federal significance," property committee spokeswoman Tatyana Prosvirina said Monday in a telephone interview. "When that happens, we may allow the museum to use the space at no charge."
The museum has not been able to raise enough funds to pay the rent because its only income is from ticket sales and private donations, Tatyana Ponomoryova, the museum's director said Monday in an interview. This income is just enough to keep the museum running and pay the salaries of its three employees.
"Honestly speaking, we can not [pay the debt back]," Ponomaryova said. "People tell us that the debt is not all that big, but sponsors and art patrons invest only in popular events that draw large crowds. If only I knew a person of that kind ... "
"The museum was bound to have such problems organized the way it was," she said.
Ponomoryova took over the museum in 2002.
Dmitry Nabokov, the writer's son who lives in Switzerland, has taken the stance that the house belonged to the family and was taken from them illegally by the Soviets, so the government itself should care about such questions as financing for the museum.
His father fled Russia after the Bolshevik Revolution and lived in Europe for many years before taking up a teaching position in the United States. He died in 1977 in Montreux, Switzerland.
Dmitry Nabokov has agreed to transfer to the museum money he receives as payments for publishing rights, but Russian publishers treat Nabokov's works as not subject to copyright law because they were written before 1973, she said.
In November, the estate filed a court case in Moscow over unpaid royalties.
Even if royalties were paid, they would not be large amounts, Ponomoryova said.
In August, City Hall told the museum to pay the debt within a month, but Ponomaryova said this was not enough time to collect the money.
"I wrote letters to City Hall, but because it was summer, many officials were on holidays and because of the [gubernatorial election campaign], many of them went unanswered," she said. "We started this work again in November."
City Hall's cultural committee is considering putting the museum under municipal jurisdiction, but it would take some time until all the technical details of the plan are clarified, she added.
"If they signed off the debt we would have handed over the museum to the city," she said.
Before 1917, Nabokov's family occupied all three floors of the building. A dining room, hall and library were located on the ground floor, a living area for parents was on the first floor and children's rooms were on the third floor. While the young writer lived there the house was frequently visited by famous figures, including singer Fyodor Chaliapin and Sergei Kusevitsky, a conductor and pianist who gave the future writer music lessons. In 1914, Nabokov's family was visited by British writer H.G. Wells, a British writer who was admired by the family.
The first and second floors are currently occupied by Nevskoye Vremya newspaper, while the ground floor is frequently visited by foreign tourists and scholstd from around the world who study Russian emigre literature.
Ponomoryova said the building could have been a perfect place to organize not only an exhibition on Nabokov, but also to organize exhibits on different topics of Russian emigre literature, since there is no such place in Russia that covers the subject, except the library of Russian emigre literature Library, organized by Alexander Solzhenitsyn in Moscow.
The cultural committee could not be reached for comment Monday.
TITLE: Probe Into Building Collapse Terminated
PUBLISHER: The St. Petersburg Times
TEXT: The Kirov district prosecutor's office has ended the criminal case over the collapse of the nine-story dormitory building at 8/3 Ulitsa Dvinskaya on June 3, 2002.
Three people died after a large crack appeared in about a third of the building that collapsed half an hour later in the middle of the day. Firefighters and rescue workers managed to evacuate 55 people.
About 190 residents lost their homes and all their belongings.
Prosecutors opened a criminal case in June 2002 under a clause that suggested the collapse was due to "violation of safety norms during construction work."
Initially, however, the investigation also took into account that repairs were being made to the building's water supply line just before the collapse. It appeared that an excavator, which dug a trench near the building, had caused soil to subside and weakened the building's foundation.
Later the investigators concluded that the collapse was not a result of the repairs, but due to violations committed when the building was under construction in 1971.
As a statute of limitations of 10 years applies to the clause under which the criminal case was opened, the prosecutor's office closed the case.
The damaged building was a family dormitory where every apartment consisted of eight rooms that were shared by several families.
TITLE: Queries Sent On Dubrovka
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW - Five relatives of victims of the 1999 apartment bombings and the Dubrovka hostage crisis have appealed to the 10 candidates running for president to make an investigation into the attacks part of their campaign platforms, Ekho Moskvy radio reported Monday.
The letter says a discussion of the attacks is needed to revive a public discussion of what really happened and to pressure the government to be more forthcoming with information.
The letter contains 10 questions, including: Why were all the Dubrovka terrorists killed rather than questioned? Why was Mikhail Trepashkin, a lawyer investigating the apartment bombings, arrested? And why did authorities close an investigation into the Ryazan bomb scare?
"We want to hear how each of you will act if elected," the letter says. "Will there be a real independent and unbiased investigation, or will the conspiracy of silence around the deaths of our loved ones continue?"
TITLE: IN BRIEF
TEXT: ST. PETERSBURG (SPT) - Seven people have declared that they will run for the State Duma in St. Petersburg's electoral district No. 207, Interfax quoted the district election commission as saying Friday.
The district has no representative after more people voted "against all" than for any candidate in the Dec. 7 Duma elections.
Among those seeking the seat are Anna Markova, a former city vice governor and candidate for governor last year, former Duma deputy Grigory Tomchin, a member of the Russian Communist Workers' Party, Gennady Turetsky, a member of the nationalist LDPR party, and independents Nikolai Kozlov, Elvira Sharova and Andrei Yelganinov, the report said.
The closing date for filing to run is Jan. 20 and candidates must provide the documents for registration by Jan. 29. The election will be held on March 14 at the same time as the presidential elections.
Prosecutor Satisfied
ST. PETERSBURG (SPT) - City prosecutor Nikolai Vinnichenko is satisfied with his office's performance in 2003, Interfax reported Monday.
"The success rate ion solving murders last year was 70 percent," he was quoted as saying. "This means we have a high rate of uncovering what happened in the most serious crime, the killing of a person." The number of murders in the area he is responsible for fell 17 percent last year, he added.
Among the main investigations carried out by the office was the murder of Duma deputy Galina Starovoitova, which has already gone to trial, and several cases of racketeering, he added.
Icon to Return in June
MOSCOW (SPT) - The Tikhvin Virgin icon, which has been in the United States since World War II, will return to Russia in June, Interfax reported Monday.
The news agency said the date of return was agreed after a meeting in Moscow on Monday between Alexey II, Patriarch of the Russian Orthodox Church, and Sergei and Alexander Garklavs, who are the guardians of the icon. Their father, who died in 1982, had said the icon, one of the most revered by Orthodox believers, should return to Russia only if the Tikhvin monastery reopened.
In October, Sergei Garklavs visited the Tikhvin monastery, located in the Leningrad Oblast, and was satisfied that it was suitable for the icon.
District Head Named
ST. PETERSBURG (SPT) - Alexei Sergeyev has been named the head of the city's Kalinin district, Interfax quoted the governor's press service as saying Monday.
Sergeyev was general director of the firm Sampo from 1992. His predecessor Leonid Mogalchuk has been appointed deputy head of the administration's archive committee, the report said.
Liberation Medals
ST. PETERSBURG (SPT) - The first medals marking 60 years of the liberation of Novgorod from the German siege during World War II were handed out on Friday, Interfax quoted the mayoral press service as saying.
Mayor Nikolai Grazhdankin awarded the medals to 60 veterans who took direct part in the liberation and restoration of the city in 1944 immediately after the military action, the report said.
The press service was quoted as saying that for 2 1/2 years Novgorod oblast acted as a shield that prevented the Germans from widening their front against Moscow and St. Petersburg.
Longer Power Discount
MOSCOW (SPT) - UES will extend the 20 percent discount on electricity for five regions, Interfax reported Monday.
The move by Sverdlovenergo, Lenenergo, Permenergo an Nizhnovenergo means that electricity rates will not rise in these regions and St. Petersburg even after a nationwide rate increase.
The discount was announced in November 2003 and, according to the UES press office, was based on cost-cutting measures of the regional power companies. Baltic Pipeline Up 9%
ST. PETERSBURG (SPT) - Transneft's Baltic pipeline increased the amount of oil pumped 9 percent to reach 75.195 million tons in 2003, Interfax reported Friday.
Specifically, the amount of oil handled by the Yaroslavl-Primorsk section of the pipeline grew 44 percent, while oil handled through the Surgut-Polotsk section dropped 4.8 percent.
The Baltic pipeline has 18 oil transfer stations and 23 reservoirs with a total capacity of 450,000 cubic meters.
Pulkovo Passengers Up
ST. PETERSBURG (SPT) - Pulkovo airlines increased passenger carriage on its own fleet of jets by 16.1 percent to 2,403,449 passengers in 2003, Interfax reported Friday.
Domestic carriage was up 15 percent while international carriage increased 17.4 percent.
Freight and postal carriage was also up 17.6 percent over 2002.
Pulkovo is the largest airline in the Northwest region and combines an airline with the airport of the same name.
Governor: Pipeline On
ST. PETERSBURG (SPT) - Murmansk Governor Yury Yevdokimov says the arrest of former Yukos chief Mikhail Khodorkovsky will not compromise the company's participation in building a pipeline joining the Kola Peninsula with western Siberia, Interfax reported Monday.
"Since the objections of law enforcement agencies against Khodorkovsky are not connected with the Murmansk pipeline project, Yukos has no reason to stop participating in its implementation," Yevdokimov said in an interview.
The governor said the Yukos affair should not hinder strategic investment in the oil industry. "If [western investors] have every opportunity to understand the essence and foundation of the claims of law enforcement agencies against the managers of Yukos, then I don't think they will change their views of economic benefit from working in the Russian oil business," Yevdokimov said.
The cost of the Murmansk pipeline has been calculated at between $3.4 billion and $4.5 billion, depending on the route chosen. The pipeline is intended to handle up to 120 million tons of oil per year.
Land Tax Overpaid
ST. PETERSBURG (SPT) - Businesses in St. Petersburg stand to receive money from overpaid taxes after the city's Charter Court ruled that certain tax rates contradict the city charter.
The St. Petersburg City Charter Court ruled Dec. 29 that the land tax rates established for 2003 were contradictory, opening the door for taxpayers to file for the return of their overpaid taxes.
"This ruling deals with the abolishment of the land tax increasing by an index of 8.64 for 2003 and can be used as legal grounds to apply for reimbursement of the land tax overpayment for 2003 and probably for the previous years," Maria Klinova of Ernst and Young said. "This however, will depend on some circumstances in each particular case."
"There is a possibility for companies to return this sum that was made illegal," said Natalia Diatlova, an attorney for Ernst and Young. There is a "100 percent possibility to go to court and win these sums."
"These sums" vary, according to Diatlova, depending on the size of the land being taxed. One of her clients will be receiving about $200,000 of overpaid taxes from 1994 until the present, Diatlova estimated. She added that most businesses will be dealing with overpaid taxes from 1999-2001.
However, businesses seeking to recover money in overpaid taxes must be proactive and file with court.
Average Incomes Rise
MOSCOW - Russians' real disposable incomes have continued to rise, climbing 15.1 percent on the year in October, Prime-Tass reported the State Statistics Committee as saying last week.
Overall, real incomes rose 13.8 percent from January to November 2003 year on year, the committee reported.
The hike in real disposable income, which is defined as income adjusted to inflation according to the consumer price index and also includes deductions for mandatory payments, comes as pensions and wages climbed.
The nominal monthly wage in November was up 2 percent on the month and 27.9 percent on the year at 5,982 rubles. Real monthly wages, meanwhile, rose 1 percent on the previous month and 13.7 percent on the year. Capital Flight Declines
MOSCOW (AP) - Capital flight from the private sector declined by almost one-third last year to $2.9 billion, the Central Bank said this week, according to Interfax news agency.
That was down from $8.1 billion in 2002, and $14.8 billion in 2001.
Government officials have said that the growing economy, new tax laws and greater political stability have boosted confidence, encouraging Russians to keep their money at home.
Interfax also reported that the government is already preparing to transfer about 107.6 billion rubles ($3.9 billion) into the new stabilization fund, created as a safety net in case the economy stumbles.
Cell Phones Double
MOSCOW (Reuters) - Cell phone operators more than doubled their clientele in 2003 to 36.15 million - 24.9 percent of the population - as over 18 million Russians signed up for cellular services, AC&M telecom consulting firm said Thursday.
"December showed record growth in customer net additions - over 2.6 million new subscribers - bringing national penetration to 24.9 percent," AC&M analyst Anton Pogrebinsky said.
Ukraine's Inflation Up
KIEV (Reuters) - Ukraine's annual inflation accelerated to 8.2 percent in 2003, above the government target of 7.2 percent, the State Statistics Committee said this week.
In 2002, consumer prices dropped by 0.6 percent.
Consumer prices have been rising faster than expected following the worst grain harvest in 50 years in Ukraine. Food prices account for about 60 percent of the consumer price index.
Ingush Camps to Close
MOSCOW (AP) - Chechen authorities said Monday that the republic was safe enough for refugees to return and proposed closing by next month the tent camps in neighboring Ingushetia housing thousands who have fled the conflict.
"Not a single [refugee] tent should remain on the Ingush territory after March 1," Said Dabiyev, spokesman for the Chechen State Council, was quoted by the Interfax as saying Monday.
Dabiyev said that all people living in refugee camps in Ingushetia will be given money to compensate for their lost shelter and property so that they can either return to Chechnya or find better shelter in Ingushetia.
Dabiyev stressed that nobody would be forcibly returned to Chechnya.
"There are no reasons for people to remain in tent camps, where living conditions are unbearable," acting Chechen Prime Minister Eli Isayev said.
Khakamada Gets Help
MOSCOW (SPT) - The Union of Right Forces, or SPS, will help co-leader Irina Khakamada gather the 2 million signatures needed to run for the presidency, SPS co-leader Boris Nemstov said Monday.
"I've given instructions to help Irina after conferring with party co-chairmen," Nemtsov told Interfax. "It's just that we cannot turn down our friend in a difficult moment."
He added that while SPS's regional divisions would mobilize to help gather signatures, it will be up to a party congress on Jan. 24 to decide whether SPS will formally support her candidacy.
Khakamada said she decided to run as an independent after SPS and rival liberal party Yabloko failed to agree on a joint candidate.
"A presidential election is above all a tribune from which to begin a conversation with citizens," she told Nezavisimaya Gazeta in an interview published Monday.
Car Deaths Grow
MOSCOW (AP) - The death toll from car accidents last year exceeded 35,000 people, which is 7 percent higher than in 2002, officials said Monday.
Some 35,500 people died and 244,000 were injured in 204,000 car accidents last year, a traffic police spokesman said.
This amounted to 7 percent more deaths and 13 percent more injuries than in 2002. The overall number of accidents rose by 10 percent.
Solidarity in Smolensk
MOSCOW (SPT) - Belarussian weekly Solidarity has begun publishing just across the border in Smolensk after being turned down by two printers in Belarus, its editor Alexander Sarikevich said.
The newspaper, which belongs to an independent labor union, could not get printed in Belarus after it published material by reporters from the Belarus Business Newspaper, an outspoken critic of President Alexander Lukashenko, Sarikevich told the Rosbalt news agency. The Belarus Business Newspaper is currently also being printed in Smolensk.
Solidarity has a circulation of 5,000.
TITLE: New Oil Tanker Breaks Ice
AUTHOR: By Angelina Davydova
PUBLISHER: Special to The St. Petersburg Times
TEXT: HELSINKI - Russia is a promising market for Finland's Kvaerner Masa-Yards, especially considering increasing oil shipping in the Baltic Sea, said the company's vice president for marketing and sales Mikko Niini at a press conference in Helsinki on Thursday.
Kvaerner Masa-Yards, one of the world's leading shipbuilders, has developed a new type of oil tanker that can cope with thick ice cover without the help of ice breakers. The tanker navigates icy waters using its own stern and Azipod propellers. Two such tankers are currently under construction at a Japanese shipyard.
Kvaerner Masa-Yards, which is a part of Norway-based AKER Kvaerner group - the world's fourth or fifth largest shipbuilder and the largest shipbuilder in Europe - specializes in designing and building cruise ships for Europe and the Americas), passenger-car ferries and other vessels. During the last 10 years over 25 percent of the world's cruise ships have come from the company's shipyards.
Along with cruise and passenger ships the company specializes in ice-breakers, liquefied gas carriers, special oil tankers and cable ship construction. According to Niini, during the last 80 years Kvaerner Masa-Yards has supplied more than 1,200 vessels to Russia.
The new oil tankers are equipped with a so-called compromise bow, or a hybrid ice breaker-tanker bow. The vessels are powered by the Azipod propulsion system developed by ABB. Kvaerner Masa-Yards says the system enables the vessels to turn around without moving forward. During testing of the new equipment it also became clear that the vessels move through ice most effectively stern first. Stern-mounted propellers pull the vessel as it backs up and push it more effectively into the ice cover. "The mating of Azipod propulsion with an ice-breaking bow produced a double-acting tanker, a vessel with a regular bow but an ice-breaking stern," said Niini.
As a double-acting tanker reaches the edge of ice cover, it turns around, reverses the rotation of its propellers, and starts to break the ice using its stern. "It does not need any help from an ice-breaker, and it travels through warmer water with the same ease as a regular oil tanker," Niini said.
The vessel can cut through a 70-cm-thick layer of ice and ice ridges 13 meters thick.
The company says the first new tankers were ordered in 2003 by Finnish energy giant Fortum. These ships operated completely independently during their first winter in the eastern Gulf of Finland, running between Primorsk and western ports.
Russia has placed an order for such oil tankers for the Sakhalin-1 project on the Sea of Okhotsk for 2005.
"Double-acting tankers open up new opportunities in Russia's Far North for exploring the resources of areas such as the Timan-Pechora region, the Yamal peninsula and Sakhalin. Similar potential exists in Alaska and northern Canada," Niini said.
TITLE: Foreign Capital Sinks To New Low in 2003
AUTHOR: By Alex Nicholson
PUBLISHER: Staff Writer
TEXT: MOSCOW - Foreign direct investment hit a record low in 2003, dropping $3.5 billion year on year, according to Central Bank estimates.
Analysts agreed that the aggressive investigations into oil major Yukos, as well as a strong showing of parties hostile to big business in recent State Duma elections, certainly played a role in the drop.
But some observers suggested that the real issue is not the fall in foreign direct investment, but the fact that the volume of FDI in Russia remains miniscule, especially given President Vladimir Putin's ambitious goal to double gross domestic product in 10 years.
The most important event that investors are waiting out, they said, are the presidential elections in March.
Data on Russia's balance of payments on the Central Bank's web site showed that despite initial rosy government predictions, the Central Bank now expects investors to divest some $2.4 billion in the fourth quarter of 2003, meaning $100 million of FDI left the country last year.
"In a year when the government was saying we'd have a $6 billion to $6.5 billion FDI inflow... we're winding up the year with minus $100 million," said Peter Westin, chief economist at the Aton brokerage. "This is the lowest level ever in Russia."
Official records of Russia's balance of payments started in 1994. Over three years FDI fell from $3.3 billion in 1999 to $2.7 billion in 2001, though it bounced back up to $3.4 billion in 2002, according to Central Bank statistics.
The Central Bank's estimate puts Russia at the bottom of FDI rankings for 27 Eastern and Central European countries, according to Aton.
Based on a comparison of FDI data from 1994 to 2002, Russia has accumulated net FDI of $52 per capita, with only Uzbekistan and Tajikistan receiving less.
Assuming little change to other countries' FDI, and based on the new Central Bank data, Russia would come at the bottom of this table, with just $22 accumulative net FDI per capita, according to Westin.
"I was surprised by the sheer size of those numbers ... Russia is not getting any new direct foreign investment. They are now at the lowest accumulated level of all transition countries. This doesn't reflect the overall economic situation we have here," said Westin.
Yet not everyone expressed surprise at the Central Bank estimates.
Sergei Gavrilenkov, chief economist at Troika Dialog investment bank, was quick to point out that figures were likely to change.
"The figures could be very different when the Central Bank finally prints its final payments balance in three months' time," he said. "If at the start of the year the hopes for the first half were positive, in the second - when there were all sorts of uncertainties - this flow stopped. The final figure will most likely be the same as the year before."
Whatever the final figure, Gavrilenkov said, one thing was clear: Little had happened to suggest that the investment climate had improved, despite rallying calls from the president and the government.
"The well-known events around big business are one of the reasons," Gavrilenkov said, alluding to the Yukos affair.
Other analysts challenged the importance of FDI at its current levels as a useful indicator per se, suggesting that the drop could be attributed to the growing ease of borrowing capital at home.
The lion's share of Russia's FDI comprises companies' foreign borrowings, and part of the reason for the fall is that domestic companies have borrowed considerably less overseas in 2003 than the year before, said Chris Weafer, chief strategist at Alfa Bank.
Companies have been able to generate more cash within Russia to cover their expansion, he said.
Furthermore the Central Bank calculations are based on funds flowing into Russia from abroad and not linked to foreign ownership. Therefore BP's multi-billion dollar acquisition of half of TNK in 2003 did not appear on the FDI radar screen, as the company paid a Cyprus entity for the shares.
Weafer agreed that investors were holding back in the aftermath of the Yukos investigations and said that as a statistic FDI would only take on real relevance in the wake of the presidential elections.
TITLE: Criminal Charges Loom In Audit Chamber Probe
PUBLISHER: Combined Reports
TEXT: MOSCOW - A probe by the Audit Chamber into the often chaotic 1990s privatization program may well result in a large number of criminal charges being brought, Interfax quoted a senior investigator as saying Monday.
Vladislav Ignatov, heading the probe, said Audit Chamber investigators would aim to end speculation over shadowy deals that gave a few oligarchs control over much of Russian industry and have fueled increasing public resentment.
"Clearly the public is disturbed by this [question]," he was quoted as saying. "Privatization here was accompanied by a huge number of murders and disappearances both of people and documentation."
President Vladimir Putin, speaking Monday to the first meeting of the Kremlin's Anti-Corruption Council, said concrete steps should be taken against corruption.
"Empty negotiations, lots of noise and 'campaigning' in this sphere are absolutely useless to us. We need exact and realistic measures both against corruption and, more importantly, in preventing it," he said in remarks carried by Interfax.
Putin appointed Prime Minister Mikhail Kasyanov head of the advisory council, created in November, whose members include speakers of both houses of the parliament and the heads of the Supreme, Constitutional and Higher Arbitration courts.
Last month's parliamentary elections saw a boost for parties calling for many privatization deals to be canceled, and a series of actions taken against key shareholders in the oil firm Yukos has bolstered Putin's popularity.
The Yukos case caused worries among investors that the investigation was meant to reverse privatization deals, but Putin said last month there was no intention of revoking privatization deals, only to punish five or seven businessmen who he alleged had broken the law during the privatizations.
Ignatov said the number of firms where privatization files may be handed to the police would be not a great deal more than "five or seven."
"There are oligarchs [who operate] in the open, and there are oligarchs in the shadows," he said. "There were a lot of crimes, though in many cases the offenses are beyond the statute of limitations."
Ignatov was quoted as saying it would be up to the Prosecutor General's Office to decide how to deal with firms that have since been passed on to legitimate third-party buyers.
He pointed to a precedent where new owners compensate the state for the value of the company at privatization and in return receive legal recognition of their ownership.
(Reuters, SPT)
TITLE: Aeroflot Finally Says Yes to Ilyushin
AUTHOR: By Lyuba Pronina
PUBLISHER: Staff Writer
TEXT: MOSCOW - Aeroflot has agreed to lease six long-haul Ilyushin planes in a move that could stimulate the domestic aircraft industry and eventually help promote the plane on foreign markets, analysts said.
Ending four years of tough negotiations, state-controlled Aeroflot signed a contract with the Ilyushin Finance Company to lease six Il-96-300s.
The deal, sealed on Dec. 31, came after months of haggling and legal proceedings between the two companies.
"A compromise has been reached, we will be getting the aircraft at acceptable terms. Now it remains to be seen whether they will be delivered on time," Lev Koshlyakov, Aeroflot's deputy general director, said by phone Thursday.
The first aircraft is due in mid-2005 with the remaining five to be delivered in one-month intervals by that year's end.
The Il-96-300 will have an improved business class and an economy cabin, seating 252 passengers in total. Business class will have "cocoon" seats that fold out into a bed, yet will not offer Internet access as promised before.
The aircraft will serve destinations in Southeast Asia and the Far East, as well as some lucrative European routes.
Koshlyakov refused to describe financial details of the deal saying only that monthly lease payments will be between $250,000 and $300,000, way down from the $500,000 IFC originally demanded.
"This is also the first time we have managed to oblige a domestic producer to give us financial guarantees, just as we do with Western aircraft manufacturers," Koshlyakov said.
Should the aircraft fail to deliver 5,000 flying hours per year, IFC would be financially accountable. Koshlyakov said IFC strongly resisted this condition at first.
Neither IFC nor the National Reserve Bank, a shareholder in both IFC and Aeroflot, were available for comment at the time of going to press.
The six Il-96-300s that Aeroflot already operates each clock up less than 4,000 flying hours a year. The plane's western peer, the Boeing 767, performs about 5,000 flying hours for Aeroflot.
Aeroflot could not agree with IFC on pricing terms in the course of 2003. IFC's major shareholder, National Reserve Bank, last spring acquired a 28 percent share in Aeroflot - a bid, analysts believed at the time, to pressure the carrier into buying Ilyushin jets.
Aeroflot CEO Valery Okulov has said repeatedly that the lack of readily available domestic aircraft is stunting the growth of Russian carriers, and Aeroflot in particular.
TITLE: Central Bank Unable To Control Dollar Fall
AUTHOR: By Alex Nicholson
PUBLISHER: Staff Writer
TEXT: MOSCOW - As its plunge continued on international currency markets, the dollar reached a new low of 28.87 rubles in domestic trading Monday, with analysts predicting the fall would continue at least until mid-year.
After ending 2002 at 31.8 rubles to the dollar, the continuing fall means that the U.S. currency has lost almost 10 percent of its value in a year, according to Troika Dialog calculations.
Last Friday the dollar dropped below the psychologically important 29 ruble barrier.
Expectations that U.S. interest rates will remain at 45-year lows have contributed to the ruble's appreciation. Other factors are a burgeoning oil price and resulting high export revenues, meaning high demand for rubles as exporters repatriate their earnings.
"I think the economy will come under the pressure of the exchange rate this year," said Roland Nash of Renaissance Capital. "It's going to become increasingly more difficult for manufacturing companies to remain competitive."
Chris Weafer, chief strategist at Alfa Bank said that the Central Bank's policy had become one of containment as the dollar dropped against the ruble over 2003 - though today it is in no position to control the dollar's fall.
Now all the Central Bank can do is "go to bed praying for a lower oil price," Weafer said.
"This is completely inconsistent with the government's declared economic objectives, which are to push growth into the domestic sectors, the manufacturing sectors, the ones that specifically get hurt with the strong currency," he said. "Now it looks as if the [ruble] is going to rise even more over the coming months."
Weafer predicted a greenback low of 27 rubles to the dollar by mid-year. An easing in oil prices at that stage would allow the Central Bank to intervene, bringing the rate back to 28 to 29 rubles to the dollar by the end of this year.
But if oil prices stay high at between $27 and $32 per barrel, the ruble could appreciate to as much as 26 rubles to the dollar, Nash said.
Other observers highlighted the advantages of a stronger ruble.
"It makes ruble denominated bonds look particularly attractive," wrote Peter Westin in a research note for Aton brokerage Monday. Westin predicted that second tier issues could offer a total dollar return for the year of upwards of 20 percent.
Furthermore, an appreciating ruble would boost the dollar value of companies with primarily ruble-denominated revenues and costs, such as fixed-line telecoms, power utilities and food and beverage producers.
TITLE: Travel Agent Masters Tough Reality
AUTHOR: By Ali Nassor
TEXT: Born 29 years ago of a Russian mother and an African father and abandoned in a Leningrad Oblast village orphanage, Yulia Stepanova had to either survive by braving the cruelty of the village where anyone non-Russian was treated as an outcast, or die to avoid the equally hostile world ahead of her. She chose the former.
Stepanova led a single-handed struggle for survival and won battles that intimidated others. She shattered the notion of a humiliated black orphan girl having no place in ethnic-minority hostile Russia. She finally rose to the world of abundance through business.
"The first 10 years of my life were the worst nightmare, although what followed later was almost like going back to the frying pan," says a relaxed Stepanova from behind her St. Petersburg office desk. Stepanova now commands a 20-plus team of her own employees in the office and its city affiliate arranging tours for about 300 tourists across the globe each month.
Stepanova founded the Golden Pelican Travel Agency on her own using a borrowed computer and space rented with loan money four years ago. The agency has now grown into a giant tour operator, and Russia's first to forge a joint venture with the famous London City Sightseeing Co. to bring London's bus tour operators to St. Petersburg. With one London-city trademark red double-decker bus, Golden Pelican is the first to organize simultaneous multilingual sightseeing tours of St. Petersburg during the peak tourist season that runs from May to October. Tour languages include Japanese, Finnish, Italian, French and German, in addition to the traditional English and Russian.
Stepanova plans to increase the fleet to four buses and spread her firm's network across Russia.
She also boasts of having managed to strike rare deals with leading British airlines Ryanair and EasyJet to provide her clientele with fares as low as 70 euros for multiple St. Petersburg-London flights.
"What looks like a fairy tale in Russia makes no news elsewhere," says Stepanova of the stony path she has trodden to achieve success.
She had to bear the burden of being abandoned by parents she never knew and endure the pain inflicted by a public whose hostile attitudes towards an orphaned "negress" were stereo-typed to portray her mother as a "whore" who transcended communist social taboos because she dated a negro, Stepanova said.
"Not knowing the implication of names they used to call me, I was brought up to believe that being black was unnatural, hence inferior," says Stepanova referring to her early childhood. She added that "the only company I could feel myself welcome in was a group of three to five girls in the orphanage."
Stepanova, who has developed some skills to face brutal realities on her own, found relief when she was transferred to an orphanage for older children on reaching the age of 10.
Realizing the meaning of the dubious phrases and ill-treatment she had suffered, she would simply respond with indifference when called "obezyana" (monkey) or "Mowgli" in reference to Rudyard Kipling's jungle boy. But she would return a smile when called "Rabina Isaura," a positively portrayed 19th-century mixed-blood slave girl featured in a Brazilian soap opera popular in early-1990s Russia, says Stepanova with a sense of humor she claims is necessary in her line of work.
Devoid of parental guidance, the harsh school of life in the iron-curtained communist world had little to offer Stepanova in the moral criterion of right and wrong. She was driven to make mistakes she considers serious when, at the age of 18, she left the orphanage for a taste of independent life for which she was poorly equipped.
"As could be expected of someone with no one to turn to for advice, it often took me too long to realize I was taken for granted, sometimes sexually, especially when looking for a job," Stepanova said regretfully. "Male employers looked at me as an exotic sex object," she added.
Stepanova attended four schools in seven years starting in 1991 but graduated from only one, the St. Petersburg High School of Models, where she earned a two-year degree in modeling. She resorted to fashion designing and being an art sales consultant while pursuing courses for a degree at the St. Petersburg University of Movies and Television in 1997. But finding it hard to earn a living, she dropped out two years later.
It was a six-month course in international tourism management that finally inspired Stepanova to launch her own business in May 1999.
Meanwhile, Stepanova has few complaints. Having survived setbacks to the worldwide tourist industry caused in the past two years by war and terrorism, Stepanova complains of unpredictable and vaguely defined Russian tourism business licensing laws.
She says the laws are too loose to protect operators and their clientele. For example, it is enough to have $300 in a savings account to open a travel agency, of which there are 850 in St. Petersburg, according to Stepanova. "The amount is so ridiculous that the city has seen a rise in bogus tour operators that disappear overnight, leaving their clients in limbo," Stepanova said. "It is a legal discrepancy that leaves Russian tourists and tour operators unprotected in case of travel mishaps abroad since no one bears responsibility."
But rest assured: thanks to Stepanova, the Golden Pelican is here to stay.
TITLE: Liberal Currency Law Kind to Individuals, Companies
AUTHOR: By Ruslan Vasutin and Georgy Pchelintsev
TEXT: The new Law on Currency Regulation and Currency Control was signed by President Vladimir Putin on Dec. 10, 2003. There were many disputes and discussions about this law; it was subjected to numerous amendments and additions, which took the bill about 9 months since approval in the first reading by the State Duma to be signed into law by the president.
The new law was intended to liberalize existing currency regulation policy in Russia. For these purposes the new law actually introduces a number of novelties, which indeed make it look more liberal as compared to the 1992 Law on Currency Regulation and Currency Control.
The basic rule for the old law was the principle that "everything not directly allowed was prohibited." The new law challenges this very principle since it expressly provides that "in the absence of a set procedure for carrying out a currency operation or procedure for opening a bank account such operations shall not be subject to limitation." Such a provision is truly revolutionary in the administrative legislation of Russia, which was traditionally based on the opposite approach.
Practitioners would say that one of the biggest problems of existing currency control practice is the excessive number of normative acts, sub-laws, official and non-official interpretations. These acts and regulations often contradicted each other. The new law attempts to solve this problem and sets a clear hierarchical system of currency control legislation. It limits the right of the government and Central Bank to issue normative acts in the sphere of currency regulation to those cases where the law directly prescribes it. Furthermore, the law takes over a liberal rule from the Tax Code: it states that all irresolvable doubts, contradictions and ambiguities of the currency legislation and acts of currency control agencies are to be interpreted in favor of individuals and companies.
Another fundamental novelty of the law is a legal approach that all operations of residents and nonresidents shall be subject to no restrictions, except for the exhaustive list of cases contained in the law. Moreover, the law allows for restrictions only in order to protect the Russian economy from certain negative factors. Such restrictions must be lifted when conditions turn for the better.
The lists of transactions that now fall under currency regulations resemble the list contained in the old law. However, according to the new law, so-called current transactions are no longer distinguished, while capital flow transactions are generally separated into those regulated by the government (generally, commercial credits granted by residents to nonresidents) and transactions to be regulated by the Central Bank (loans, cash transfers and purchase of securities). In this regard, the new law gets rid of the infamous requirement of obtaining Central Bank permissions for certain capital flow operations and, furthermore, it prohibits the need to obtain such permits in the future. Instead, the law introduces brand new tools of currency regulation in the form of reservation of funds, usage of special accounts, and pre-registration of accounts. Importantly, outbound investments by Russian residents through purchase of participation rights in charter capital of non-residents will be allowed. The government should introduce a specific procedure and agree upon it with the Central Bank, in which case the authorities may establish no limitations other than use of special accounts and reservation of no more than 100 percent of investment value for up to 60 days.
The reservation system is briefly described in the law and is also subject to further clarification by the Central Bank and the government. Basically, residents and nonresidents may be obliged to transfer from 20 percent to 100 percent of funds involved in a currency transaction to an interest-free bank deposit for a set period of time. The sum is recovered after a lapse of the term or as obligations under a foreign-trade agreement are performed by a nonresident. The deposit requirement may have a negative effect since it requires an outlay of cash for Russian companies. Nevertheless, it is clear that the reservation system provides much more certainty for businesses as compared with former Russian currency control rules under which the state could arbitrarily decide whether or not to grant permission for specific transactions.
Starting June 2005 residents will enjoy unlimited rights to open accounts in foreign banks in countries which are party to the Organization for Economic Cooperation and Development (OECD) and the Financial Action Task Force on Money Laundering (FATF), the only requirement being that they notify the Russian tax authorities that they are opening such a bank account. In regard to other countries it will be necessary to institute a procedure of pre-registration of an account with the tax authorities, but the procedure should be of a purely informative nature, rather than of a licensing nature. In accordance with this new procedure, Russian companies will be allowed to freely transfer money to their foreign accounts and use these funds as they see fit, except for concluding transactions with the same residents. The flipside of the coin is that the law says that a reservation requirement may be established for the transferred sums and that Russian companies are obliged to present to the tax authorities regular cash-flow reports on such accounts.
It should be mentioned that the law reinforces the right of Russian individuals to purchase foreign securities denominated in hard currency and transfer of cash for these purposes subject to certain restrictions. The law also retains the requirement of drawing up a transaction passport for transactions between legal entities, repatriation and mandatory selling of 30 percent of currency gains by residents.
One of the serious practical problems accompanying the law is the fact that the absolute majority of subordinate pre-2004 legislation will cease to be effective and a large number of new normative acts will need to be adopted pursuant to the new law. These acts will require thorough analysis, interpretation, formation of new court practice and a search for effective methods of their practical implementation. It is already clear that the new law will not stop capital flight from Russia, but that is not its main goal. The law has a different objective, namely to liberalize currency control legislation. This may be achieved by newly proposed legal instruments helping to integrate the Russian economy with foreign countries. In the absence of specific acts referred to in the law it is hard to estimate how these new instruments will work in practice. We look forward to June 2004 when the law will come into force, as we believe that most subordinate legislation should be adopted by that time and the situation will become clearer.
Ruslan Vasutin is a senior manager, and Georgy Pchelintsev is a lawyer at EY Law, St. Petersburg.
TITLE: Stocks Boosted After Break
AUTHOR: By Angelina Davydova
PUBLISHER: Special to The St. Petersburg Times
TEXT: The first trading week after the New Year was eventful with most Russian stocks rising rapidly. The RTS index surpassed 597.3, which is where it had stood when Mikhail Khodorkovsky was arrested in October 2003. At the same time, the U.S. dollar continued to fall, dropping below 29 rubles on Monday.
Market activity after the holidays surprised many analysts with both the number of transactions and the reported volumes closing at higher levels every day. By the end of last week the volumes had already exceeded last year's figures. On Friday RTS volume amounted to $67 million, whereas MICEX stock volume reached $390 million.
Sberbank shares led the way, soaring up to 15 percent. They were followed by UES shares, which grew 8 percent.
The situation changed slightly on Monday with most shares going down. "It is unlikely that the change will last and we can expect that on Tuesday the growth trend will reinstate itself," said Mikhail Zak, Web-Invest Bank analyst.
"The most promising shares for the first half of 2003 will be UES, LUKoil, Rostelecom, Gazprom and Sberbank shares," he added.
In the near future the Russian stock market will remain at levels attained last week, Alexey Trunyayev, an expert with Aton Capital, said.
At the same time, according to Troika Dialog, by Monday during overnight trading in New York most Russian ADRs were well bid. There was selling pressure in Yukos, but "nothing serious."
Troika Dialog also highlighted concerns surrounding Gazprom on Monday morning, following a Bloomberg article claiming that the gas monopoly plans to cut production in January by 24 percent year on year. "We think this highly unlikely, as December-January is the time of a seasonal peak in the company's production. Nor have Prime Minister Mikhail Kasyanov's statements that there is no need to reform Gazprom changed our fundamental view of the company. All this means is that the reform will not be given any attention until after the presidential elections," Troika Dialog analyst Denis Gorvat said.
On the federal front, the start of 2004 demonstrated the growth of demand for federal bonds with yield of long-term issues falling 0.2-0.3 percent, resulting in the bonds rising by 1-1.2 percent. On Wednesday volume in the sector amounted to 336.5 million rubles, and on Thursday it almost reached 1 billion rubles.
Analysts say that this is the most significant growth of federal bonds over the last half year. Reasons for this, according to Web-Invest Bank experts, include expanded limits of investment in bonds of some market operators, the appearance of positive statistical data on the market (2003 inflation within the government's forecast level of 12 percent, capital flight down, a 2003 budget proficit of 1.7 percent of GDP, and Central Bank gold reserves up), and, finally, the vast amount of free money on the market. Correspondent account balances remain at a historically high level of around 300 billion rubles.
On the corporate front, bonds went up while volumes slid. On Tuesday the volume was 390 million rubles against 232 million rubles on Friday. Analysts say the yield correlation between federal bonds and corporate bonds reappeared. However, the main buyers in both sectors are non-residents.
On the oil front, according to Troika Dialog, Transneft reported a 12.4 percent rise in non-CIS oil exports last year to an average 2.99 million barrels per day. This substantial improvement is attributed to strong export growth in December, aided largely by recent expansion in the throughput capacity of the Baltic Pipeline System. Among individual companies, the highest increases in export volumes were posted by LUKoil and Tatneft.
YUKOS and Sibneft were Russia's leaders in terms of full-year export growth rates. These companies boosted their non-CIS exports via the Transneft system by 10.1 percent and 7.9 percent respectively, while LUKoil showed a disappointing rise of just 0.8 percent.
"Russia's oil companies were encouraged by higher priced, ramped up exports of crude to CIS countries. We expect exports to continue to grow in 2004. According to the Energy Ministry, total exports of Russian crude, including those bypassing Transneft, will hit 4.64 million barrels per day," Troika Dialog analysts said.
TITLE: Illarionov Fear of Kyoto Protocol Overrated?
AUTHOR: By Michael Grubb
TEXT: The public pronouncements by President Vladimir Putin's economic adviser Andrei Illarionov about the Kyoto Protocol on climate change at last bring to the topic the level of attention and debate that it deserves. But it is a pity that he has jumped to conclusions before looking more carefully at the evidence.
Illarionov's most basic assertion is that Kyoto's emission limits for 2008-12 could constrain Putin's goal to double Russia's gross domestic product. He justifies this with reference to countries in which "each percent of GDP growth is accompanied by a 2 percent growth in CO2 emissions." This is extremely misleading and must rely on a bizarre selection of countries.
The most directly relevant international comparisons would be with other countries that, like Russia, have undergone transition from former central planning. In these countries, resurgent economic growth has not generally been accompanied by rising emissions, and indeed in most developed countries there is no longer a clear and simple link between GDP and CO2 emissions.
The relevant measures are per capita economic and emissions growth (no one disputes that an increase in population can add to both GDP and emissions - this is part of what Illarionov's statistics measure - but the president's goal is to double Russia's economy, not its population). Since the mid-1990s, Poland and Hungary have averaged 4 percent a year per capita economic growth without any increase in their per capita emissions; Slovakia exceeded 3 percent a year economic growth with declining emissions. Economic growth has resumed in Ukraine and the Czech Republic but their emissions have continued to decline by more than 2 percent a year on average since 1995.
The reasons for this are simple. Central planning resulted in a huge energy infrastructure which, while it served well the need for basic industrialization in the post-World War II era, was grossly inefficient compared to the needs of modern economies. The economic burden of wasting so much energy is an impediment to further economic development, not a corollary.
The special features of transition economies emphasize the divergence of GDP and emissions as economies mature, but the underlying fact is more fundamental. Even U.S. emissions since 1990 have only grown at the same rate as its population. And Britain's economic resurgence since 1990, with per capita economic growth significantly exceeding even that in the United States, has been accompanied by a 9 percent absolute reduction in CO2 emissions. About half the gains came by replacing Britain's antiquated coal power stations by natural gas; the other half came through economic restructuring and radical improvements in industrial energy efficiency.
Per unit of GDP, Russia currently emits about twice as much CO2 as China and the United States, and about four times as much as West European countries (as measured on a purchasing power parity basis to minimize exchange rate distortions; measured on real exchange rates, the disparity is even larger). Russia could double its GDP and yet not emit any more just by achieving the efficiency levels of the United States. If it moved toward West European or Japanese efficiencies, doubled GDP could be accompanied by further emission reductions.
Yet Russia's emissions cap under Kyoto allows Russia more than 50 percent CO2 emissions growth from recent levels, over this decade. Efforts to increase Russia's energy consumption by as much as this would imply wasting energy on a colossal scale that would surely undermine rather than aid the president's economic goals. If Russia wants to double its economy in a decade, it needs to be efficient about it.
That is why Russia's own national energy strategy, and the ministries that contributed to it, stress the importance of improving Russia's energy efficiency and project that Russia will continue to have a large surplus of emission allowances under its Kyoto cap, and that its emissions will not surpass their 1990 levels until well after 2020. Illarionov's arguments simply do not stand up.
Russia will not lack emission allowances, but it may lack sufficient investment capital and modern technology to secure the president's economic goal, and Kyoto offers one contribution to address this. Its surplus allowances will be available for sale to other countries in the Kyoto system: the European Union, Japan and Canada - all of which now acknowledge that they will need to acquire emission units by investing abroad under Kyoto's international mechanisms. Russia would be the biggest potential partner and that is why most of Russian business is lining up in favor of Kyoto.
Illarionov expresses fears about the longer term, but these are not well founded. As indicated, the longer-term trend of emissions in advanced economies is not a force of nature, it is in our hands. Technology studies show huge potential for continued increase in efficient and low-carbon emitting technological and economic systems; Britain has now made the pursuit of such an efficient low carbon economy the centerpiece of its energy policy and expects long-term economic benefits to flow from this. Nor is such action a threat to Russia profiting from its oil and gas resources. Gas is a relatively low-carbon fuel and benefits from the switch from coal, while oil remains the fuel of choice for transport. No actions under Kyoto will stop the global rise of oil and gas consumption.
All major countries, including the United States, now accept the scientific reality of the climate change problem and the need to tackle long term emissions. But limits post-2012 under Kyoto are not predetermined, they are all to be negotiated. No country need or should agree to limits that might seriously hurt its economy. Illarionov's fear that future emission limits would do so betrays a surprising lack of faith in the skill or power of Russian negotiators. They secured a very good deal in Kyoto's first-round commitments; there is no reason why they should agree to an unfair deal in future rounds.
A final consideration - the most silent element in the Russian debate - concerns wider issues of international relations. Russia faces big questions about the shape of the new "world order." The final Kyoto Treaty, with the implementation rules as agreed in 2001, was the culmination of 10 years of diplomatic effort. Does Russia want to ratify the legitimate product of a decade's global effort to protect the planet, in a treaty that was finalized in ways that fully accommodated the concerns raised by Russia? Or will it ratify the authority of the Bush administration in declaring that its rejection renders the treaty dead for all other countries on the planet?
Illarionov is right that Kyoto deserves serious, strategic scrutiny - for seen in that light, it embodies one of the most fundamental choices that faces Putin and the new State Duma. All the more important, then, to ensure that the economic analysis is well founded.
Michael Grubb is visiting professor of climate change and energy policy at Imperial College in London; senior research associate at the department of applied economics, Cambridge University; and associated director of policy at the U.K. Carbon Trust. He contributed this comment to The St. Petersburg Times.
NB All data are drawn from the U.S. Energy Information
Administration's World Energy Outlook, except for purchasing power efficiency comparisons (for which GDP comparisons on EIA data suggest even greater differentials than indicated here).
TITLE: 'Skunks' Downplay Disaster from Kyoto Signing Delay
AUTHOR: By Hans Mario Fruehauf
TEXT: For years the enduring debate about the regulation of greenhouse gas emissions has brought about many arguments about the correlation between economic growth and harmful CO2 emissions. The Kyoto Protocol is the result of international agreement on this topic. It is a treaty aimed at reducing worldwide CO2 emissions to the levels of the early 1990s, a goal that many environmentalists consider to be asking for too little too late.
The basis of this agreement is the scientifically supported theory that the steady warming of our world's climate with all its negative side effects is most likely being caused by the rapid increase of industrial and urban greenhouse gas emissions (a fact that as such will be taken as a given here). It is therefore of the utmost importance that every country on Earth should contribute to the general attempt at reducing emissions. Special responsibility, however, lies in the hands of the world's greatest CO2 producers, namely the United States, Russia and the European Union. Considering the above, the contrast between the European and the U.S.-Russian approach to emission policy and control is remarkable - Europe supports and ratification of the Kyoto Protocol, while the U.S. and Russia vehemently refuse to do so.
One might very well ask oneself: why? When looking at the slow economic growth within the European Union - especially in Germany and France, its two largest members - such a position must seem bewildering. Even more so since many critics and politicians point out that policies for environmental and climate protection will have a negative effect on the economy and therefore consider it the most important flaw of the treaty.
Upon taking a second look, though, things appear in a different light. The politicians of the world's strongest economic market - which is, after all, the European Union - are smart enough not to hurt their own cause by attempting to take the leading role in climate protection. Quite on the contrary, they have foresight enough to understand that the solution to this problem lies in the development of a completely new kind of economy, compatible with environmental protection standards. And so the alleged discrepancy between economic growth and climate protection in itself harbors the answer to the riddle.
Understanding and sharing the belief that our current economic standards cannot coexist with maintaining equal living conditions for all of humanity easily explains the European nations' position in this debate. The knowledge of our planet's destruction due to excessive waste of natural resources - with fatal consequences for all future generations - must be established at all levels of society. Only then can there be hope for a new, more responsible approach to the subject, say in the likes of "worldwide economic growth - yes, but within reason" (e.g., a car is undoubtedly a necessity, but why does a capital city businessman need a 15-liter 4WD?).
Imagine that Russia, China and India develop economies similar to those in the U.S. and Western Europe. Imagine further that - as a most likely consequence - this development will be proportionally linked to an increase in CO2 emissions. And now ask yourself: will our planet support these ever increasing emissions and pollution? The answer can only be no. The Western kind of economy won't do for export, and it won't do for the West much longer, either. The result is a new ethical approach to the term "developing countries," since not only the southern, but also the northern hemisphere will need to develop new economies in accordance with environmental protection standards. Only the protection of nature, and most important, the climate, will render future economic growth possible.
Taking all this into account, your editorial's finishing line "What good is clean air if people have nothing to eat?" (The St. Petersburg Times Dec. 19) seems quite out of place to me. We are not talking merely "bad air" here, but catastrophes directly connected to the greenhouse effect - draughts, floods, famine, and so on. Your words not only heat up the topic emotionally, but also draw the wrong conclusions: those who will (and already do) suffer most from these effects are exactly the same people who have nothing to eat today. The same criticism applies to the headline of the editorial "Don't trade economy for Kyoto." True enough, somewhere along the way the positive intentions of the treaty are mentioned and some of the arguments outlined in this contribution are touched upon. But every objective conclusion is dwarfed by these opening and finishing lines, oversimplifying a complex issue and manipulating readers to inadvertently reject an idea that should be of basic interest to them. A rhetorical technique, by the way, that is widely used by the likes of George W. Bush and now, unfortunately, also Russia's presidential economic adviser Andrei Illarionov, representing the spreading "Axis of Skunks" encircling our planet.
Hans Mario Fruehauf is a student of resource management and international politics in Bad Homburg, Germany.
TITLE: Setting Sights Higher on Religious Freedom
AUTHOR: By Lawrence A. Uzzell
TEXT: Washington is bureaucratizing the cause of
human rights -- for both good and ill, as one can see in the U.S.
State Department's latest annual report on worldwide religious
freedom, released in the latter half of December. Bureaucracies can be
superb at collecting information, and simply by publishing catalogues
of specific abuses they deter abusers and encourage victims. But
government reports, produced by compromises between bureaucratic
factions, are less adept at creative analysis. They tend to fall back
on standard formulas, repeating them every year rather than providing
new insights into the changing dynamics of repression. They often
flinch from telling hard truths.
For example, the new report's section
on Russia states that "there was no change in the overall
status of respect for religious freedom" during the period it
covers -- the year 2002. Contradicting that conclusion are facts
that the report itself acknowledges. It provides a commendable
wealth of detail on expulsions of foreign clergy and missionaries,
but fails to state explicitly that such expulsions have sharply
increased in recent years.
The year 2002 was dramatically worse
for Roman Catholic clergy than any previous year since the collapse
of the Soviet Union, with the expulsion of one bishop and four
priests. In essence, 2002 was the year when the Roman Catholics
abruptly caught up with the Protestants as targets of religious
repression -- but the State Department report fails to make this
clear, or to make any serious attempt to analyze the reasons why.
The report cites the groundbreaking
research of Geraldine Fagan, now Moscow correspondent of the Forum
18 News Service, but fails to share her finding that the number of
known cases of expulsions of foreign Protestant missionaries in 2002
alone was about the same as the total for the previous four years
combined.
Combining Fagan's data and other
sources, Mark Elliott of Samford University recently estimated
"a current total of 84 known expulsions of foreign religious
workers (1997-2003), including 54 Protestants, 15 Muslims, seven
Catholics, three Buddhists, three Mormons, and two Jehovah's
Witnesses." He stressed that "these totals undoubtedly are
incomplete because of the desire of many to avoid publicity."
Nor do they include missionaries who have suffered lesser forms of
harassment such as finding that they are stuck in Moscow, barred
from returning to the provinces where they had been serving.
In carefully neutral language, the
State Department's report notes that Russian officials often cited
"state security" as the justification for expulsions. It
fails to make clear, however, that they consistently failed to
provide any evidence for that vague allegation. When bureaucrats
make a habit of patently false, sensational charges against
vulnerable minorities, outside observers -- even diplomats -- should
explicitly state that those charges are false.
On the other hand, the report
provides a useful summary of the draft report by a Russian
government task force on "religious extremism," leaked to
the press in December 2002.
It correctly observes that this draft
"appeared to reflect the types of concerns that prompted
government actions in a number of visa and registration cases"
-- such as the view that Roman Catholics are a prime security
threat. Unfortunately, the State Department fails to mention an
essential piece of context: a policy document on national security
issued by Vladimir Putin himself in January 2000, warning against
"foreign religious organizations and missionaries" as
tools for "the cultural-religious expansion of neighboring
states into Russian territory."
Indeed, one of the report's striking
features is that every specific reference to Putin is either neutral
or positive -- mostly the latter. It is as if U.S. officials have
accepted the old Russian view of the tsar himself as being above
criticism, no matter how oppressive his ministers.
The report deserves credit for
focusing on repression of Muslims, an issue sometimes neglected in
the past. It rightly highlights the demagogic use of the term
"Wahhabi" to smear a broad range of Muslim groups no
matter what their actual beliefs. It lists specific government
actions such as Sochi's refusal to let that city's Muslims build a
new mosque, and also positive steps such as a court decision
allowing Muslim women to wear head-scarves in their passport photos.
But on some other indigenous
minorities, especially those without vocal co-religionists in
America, the State Department continues to be unsatisfactory. As in
past reports, the Old Believers and the unregistered initsiativniki
Baptists are barely mentioned. The latter especially have suffered
more in recent years than mainstream Protestant groups -- but since
they are not partners of well-connected groups such as the Southern
Baptist Convention, America's evangelical Protestant lobbyists are
not interested. Human rights advocates should defend the weakest of
the oppressed, not just those with the best legal and
public-relations machines.
Another flaw is the report's
excessive emphasis on "tolerance" and "interfaith
dialogue." These may be good things, but they are not identical
to religious freedom and can even undermine it. When the state
promotes feel-good ecumenical meetings in which groups with
radically different belief systems are coached to avoid offending
each other, it marginalizes those who oppose ecumenism out of strong
conviction and who just want to be left alone. Unlike America's
culture, Russia's takes ultimate metaphysical questions seriously;
the challenge for Russians is to find ways to disagree about such
questions without enslaving each other, not to smother disagreements
under U.S.-style political correctness.
Finally, the State Department report
fails to use the word "corruption" even once. Admittedly
this is a difficult topic to investigate -- but in church-state
relations, as elsewhere in Russian life, it is crucial. For example,
the Salvation Army's refusal to pay a bribe in 2001 was one of the
major reasons for its subsequent difficulties with Moscow
officialdom.
Russia is not a militant persecutor
like China. It does not penalize individuals simply for praying at
home or attending worship services, though it denies some groups the
right to disseminate their beliefs in public.
Nor is it a theocracy: There is
almost no correlation between a religious minority's disagreement
with Orthodox Christian teachings and its likelihood of suffering
repression. Overall, Moscow's current agenda is not so much
ideological as bureaucratic: It does not chain religious leaders but
leashes them, keeping them dependent on the state and intimidated
from speaking out on issues such as Chechnya.
To understand that agenda we need
deeper, more nuanced analysis. The State Department needs to raise
its sights.
Lawrence A. Uzzell, president of
International Religious Freedom Watch, contributed this comment to
The Moscow Times.
TITLE: Search Is On for Pushkinian Ghostwriter
AUTHOR: By Matt Bivens
TEXT: In late September and early October, America's
first lady, Laura Bush, took a whirlwind tour through Europe. It was
time to mend fences with critics of the war in Iraq. So Mrs. Bush
stopped in Paris -- Jacques Chirac kissed her hand and said it was
time to let bygones be bygones. And she joined Lyudmila Putina in
Moscow to inaugurate a new Russian book festival -- one inspired by
Mrs. Bush's own American book festivals.
A day later, back in Washington, Mrs.
Bush opened her own National Book Festival with a charming anecdote
about her husband.
"President Bush is a great
leader and husband -- but I bet you didn't know, he is also quite
the poet," she said. "Upon returning home last night from
my long trip [to Russia], I found a lovely poem waiting for me.
Normally, I wouldn't share something so personal, but since we're
celebrating great writers, I can't resist:
Roses are red
violets are blue
oh my lump in the bed
how I've missed you.
Roses are redder
bluer am I
seeing you kissed
by that charming French guy.
The dogs and the cat
they miss you too,
Barney's still mad you
dropped him,
he ate your shoe.
The distance my dear
has been such a barrier,
next time you want an
adventure,
just land on a carrier."
Pushkin it ain't. In fact, it's awful
-- so awful it actually rings true, and therefore kinda treacly
sweet.
Now it turns out that this was a
bizarre falsehood. A lie. Interviewed on television between
Christmas and New Year's, Laura Bush was shown the video clip of her
remarks. Interviewer Tim Russert teasingly started to ask her about
the poem when Mrs. Bush said: "Well, of course, he [the
president] didn't really write the poem. But a lot of people really
believed that he did. That evening at the dinner, what [sic] some
woman from across the table said: 'You just don't know how great it
is to have a husband who would write a poem for you.'"
Hmm. Perhaps some people really
believed that George Bush wrote that silly poem because Laura Bush
said: Hey, my husband wrote me this silly poem, and normally I
wouldn't share it because it's so personal, but I can't resist.
So if George Bush didn't write that
poem, who did?
Did the White House's crack political
team then assign some poor junior staffer the miserable job of
ghostwriting it? Did that poor junior staffer have to start by
interviewing Mrs. Bush about intimate details, for verisimilitude?
(She told Russert that her husband has indeed called her his
"lump in the bed.")
What's it like to be ordered to write
a love note for your boss's wife?
Now that you know Bush didn't write
it, look at the poem again. Imagine some corpulent, crapulous
political operative in a rumpled suit, croaking instructions:
"Make sure you get their damned dog Barney into it. But if
there's gonna be a dog -- you gotta mention the cat! Everybody knows
that, kid!
"Put in some vague bedroom
imagery. Nothing too explicit! And, uh, get in a slap at the French.
Something about how they're so prissy, kissin' hands and all
..."
So who wrote George Bush's love poem
to Laura Bush?
Matt Bivens, a former editor of
The Moscow Times, writes The Daily Outrage at www.TheNation.com.
TITLE: Chris Floyd's Global Eye
AUTHOR: By Chris Floyd
TEXT: Dark Skies
Entertain conjecture of a national leader, in the midst of a ferocious war, plotting to drop tens of thousands of anthrax "superbombs" on the civilian population of his enemy. At his order, his generals draw up a detailed plan for a chemical attack on six major cities: they estimate that millions will die immediately "by inhalation," with millions more succumbing later through skin absorption of the poisons.
In the end, the leader is thwarted by objections from his aides and allies. To assuage his frustration, he launches another pet idea: "Operation Thunderclap," a massive conventional bombing raid on the enemy's capital, also aimed at civilians, designed to "castrate" the enemy population. In a single night, allied forces kill 25,000 people, almost all of them from the city's working class and poorest districts.
Emboldened, he presses for yet another feast of fire and death. He gets it: a bombing raid on a non-military target, a cultural center, a city glutted with refugees, slave laborers and prisoners-of-war - his own soldiers and those of his allies. The raid kills 35,000 people or more; no one knows for sure, because the city is completely pulverized - and is bombed again immediately afterward, with special high explosives, in an attempt to kill any survivors hiding in the ruins.
A portrait of Saddam Hussein, at the height of the murderous Iran-Iraq war? No, it's Winston Churchill, whose shadow looms so large over the carnage being conducted by his historically ignorant successors in the Anglo-American "coalition." Churchill has long been anointed a secular saint by the chewed cud of received wisdom, especially in America, although those who knew him best seemed to like him least - he was booted out of office by his own people not once but twice: the first time before the end of World War II (which we are now told he won almost single-handedly).
As journalist Mike Davis reports in his book, "Dead Cities," Churchill's plan to blanket Germany with 40,000 anthrax bombs was narrowly averted by Franklin Roosevelt. But Winston was allowed to wield his more conventional "thunderclaps" on the civilians of Berlin and then Dresden. Finally, the once-reluctant Americans succumbed to his policy of "terror bombing" and launched "Operation Meetinghouse," the firebombing of Tokyo that killed more than 100,000 civilians in a single night. Although American warplanners called the raid "nothing short of wonderful," it was, in some respects, a disappointment: they had originally planned a six-city extravaganza with the carefully calibrated target of 584,000 civilian fatalities.
Oddly enough, these attacks were launched over the strenuous objections of some of America's most battle-hardened military brass, Davis notes. Air Force General George McDonald railed against "indiscriminate homicide and destruction," which "repudiates our past purposes and practices." War Secretary Henry Stimson warned, "We don't want the United States to get the reputation of outdoing Hitler in atrocities." Major General Laurence Kuter declared "it is contrary to our national ideals to wage war against civilians."
These honorable stances cut no ice with Churchill (or Roosevelt, in the end). Of course, the pendulously-jowled PM was a mass-destruction fan from way back. In 1919, Churchill called for airborne chemical assaults on "uncooperative Arabs" (actually Kurds and Afghans, but your great men need not make such petty distinctions). "I do not understand the squeamishness about the use of gas," he declared. "I am strongly in favor of using poison gas against uncivilized tribes." Some years later, a certain A. Hitler would apply this gaseous philosophy to another troublesome "tribe."
The two Teutonically-derived statesmen also shared a loathing for the lesser breeds. As Churchill put it with customary eloquence in 1937: "I do not agree that the dog in a manger has the final right to the manger even though he may have lain there for a very long time. I do not admit that right. I do not admit that a great wrong has been done to the Red Indians of America or the black people of Australia. I do not admit that a wrong has been done to these people by the fact that a stronger race, a higher-grade race, a more worldly wise race, has come in and taken their place." Hear hear! cried Hitler, as he sent his "higher-grade" hordes swarming eastward into the vast Slavic manger.
Churchill's understandable thirst for revenge against the Nazis who had bombed English cities took a curious turn, however. The mass British counter-raids aimed at "breaking the enemy's morale" were targeted almost exclusively against the "lower orders," who died by the hundreds of thousands in the "area bombing" that neither broke civilian morale nor substantially hampered German war production (although it did waste the lives of thousands of allied airmen). Yet the sumptuous, undefended villas of Nazi leaders (the very men who had ordered the blitz on English cities) and major Nazi industrialists (who, along with their American partners like Prescott Bush, had built Hitler's war machine) were specifically excluded from the attacks. What stirring chivalry among the warrior elite!
Today, Churchill's bust adorns the office of George W. Bush - a gift from his loyal tributary, Tony Blair. Churchill is their lodestar, their magic totem, the mythic foundation of their "moral authority" as war leaders. But as history shows, there is no "moral authority" in war, even in a "good war": there is only "indiscriminate homicide and destruction," the unleashing of the beast within all of us - even the "great ones," made drunk with power and terror.
For annotational references, see the Opinion section at www.sptimesrussia.com
TITLE: Last-Minute Heroics Define NFL Playoffs
AUTHOR: By Barry Wilner
PUBLISHER: The Associated Press
TEXT: The Philadelphia Eagles and Carolina Panthers worked overtime for their spots in the NFC championship game.
Philadelphia edged Green Bay 20-17 in overtime Sunday on David Akers' 31-yard field goal, putting the Eagles in the NFC final for the third consecutive year. The Eagles had to convert a fourth-and-26 pass from Donovan McNabb to Freddie Mitchell to get in position for the tying kick in regulation.
"This was such a test for us. What we did was, even though we were down, we showed heart and came back," McNabb said.
Carolina went even longer in St. Louis before winning 29-23 Saturday on Steve Smith's 69-yard reception to start the second OT.
The AFC championship features a classic matchup of what has been an unstoppable offense and a stingy, complex defense. NFL co-MVP Peyton Manning, as hot as a quarterback can be in the postseason, will guide the Indianapolis Colts against the host New England Patriots.
Indianapolis secured that matchup by winning at Kansas City 38-31 Sunday, with Manning throwing for 304 yards and three touchdowns. New England beat Tennessee 17-14 on Saturday night.
NFC Championship
Carolina (13-5) at Philadelphia (13-4)
Green Bay seemed in control at Philadelphia until some conservative Packers coaching late in the game helped the Eagles come back. Now, the Eagles must face an opportunistic Carolina team riding an emotional wave after dramatically snapping the Rams' 14-game home winning streak.
Being at home didn't seem to make much difference for Philadelphia against the Packers, and the Eagles have lost three times at Lincoln Financial Field. The fact Green Bay came so close to advancing should buoy the Panthers.
"We'll get a chance to get one back," Panthers running back DeShaun Foster said, recalling a 25-16 home loss to the Eagles on Nov. 30.
But the Panthers will need to stay calm, just as the Eagles did Sunday. Carolina blew an 11-point lead in the final moments, then survived a wild first extra period before winning on Smith's long touchdown reception.
The health of Panthers' star running back Stephen Davis (groin strain) might not be so critical if Foster can be as effective next week as he was in St. Louis. Philadelphia is vulnerable against the run.
What can't be measured is the lift the Eagles will get from such a gutsy comeback after trailing 14-0 against Green Bay.
AFC Championship
Colts (14-4) at Patriots (15-2)
The Colts' offense will present streaking New England with a huge challenge, but the Patriots, who beat Tennessee in frigid conditions, are the biggest obstacle Indianapolis could face.
Not only must Manning and his potent offense deal with likely arctic conditions, but they will play for a third straight week. New England's bye after winning the AFC East with the conference's best record, could be especially significant next Sunday.
Besides, the Colts must be tired from running into the end zone so much in their two postseason wins.
"It's not trickery, just running the same plays we've run all season," Manning said. "Hopefully we can keep it up next week. New England will be the toughest challenge of the season, by far."
Because, by far, the Patriots have the best and most opportunistic defense the Colts have seen since, well, they lost 38-34 at home to the Patriots - also on Nov. 30. Obviously, New England's defense didn't play particularly well in that game.
But at home, the Patriots are a different animal. The two touchdowns scored by the Titans were one more than New England allowed at home in the previous six games combined.
Manning will see a mixture of coverages that have baffled just about everyone so far. He loves to study film, and he'll be looking at it late into the night this week.
"I think this game will be tougher, bigger and obviously there is more riding on it than even the last game," Patriots coach Bill Belichick said. "At this time of year, every time you win, then the next game gets bigger."
Belichick certainly knows that. This season's coach of the year guided the Patriots to the Super Bowl title two years ago.
The Colts haven't been this far since 1995.
TITLE: Boucher Goalless Streak Ends
PUBLISHER: The Associated Press
TEXT: GLENDALE, United States - Brian Boucher knew a goal was coming eventually, and everyone predicted it wouldn't come in the prettiest of fashions.
Everyone was right.
After five-plus games of record shutout hockey, a puck finally got past Boucher on Sunday night - ending the longest personal streak in modern NHL history.
That was the only Atlanta goal as Boucher and the Phoenix Coyotes bore down to earn a 1-1 tie at home with the Thrashers.
Boucher went 332 minutes, 1 second of consecutive play without allowing a goal. That mark and his five straight shutouts were the longest since Montreal's Bill Durnan posted four in a row and kept pucks out of the net for 309:21 in 1949.
"I'm happy that it's over," Boucher said. "It was a nice run, something that I'll never forget.
"But we're talking about one goal. I think it's good for the team that we don't have to answer questions about it anymore."
In other NHL games, it was Ottawa 2, Carolina 2; Tampa Bay 2, the New York Rangers 1 in overtime; Washington 1, Edmonton 0; Colorado 5, Chicago 4 in overtime; Columbus 2, Anaheim 2; and Florida 2, Vancouver 2.
When the Thrashers broke through, it was with a deflected shot that Boucher had no chance of stopping. Figuring out which Atlanta player to give credit to for the goal was nearly as difficult.
At first, it was awarded to Ronald Petrovicky on a deflection of Randy Robitaille's hard wrist shot. But before the third period began, the ruling was changed and Robitaille was given the goal.
"A flukey goal," Boucher said. "That's how easily a goal can go in. The fact that it didn't happen for five-plus games is pretty amazing."
Robitaille's shot glanced off the chest of Phoenix defenseman David Tanabe and got past Boucher.
"I don't think it would have hit the net if it didn't hit me," Tanabe said. "If it wasn't for that bounce, he could have had another shutout."
And that would've given the Coyotes the modern NHL record for shutout minutes by a team, a mark that Phoenix fell 3:22 short of matching. A sixth straight shutout for Boucher would've tied the overall league record.
Instead, he'll gladly settle for the marks he broke in Minnesota on Friday. Boucher stopped 146 consecutive shots and finished with 20 saves on Sunday.
He was equal on that night to Atlanta counterpart Byron Dafoe, who made 40 saves. But Boucher's previous feat was all the more astounding to Dafoe - who only allowed a goal to Daymond Langkow in the third period.
"I'm sure there are 60 goalies around the league tipping their hat to him because it's very impressive," Dafoe said. "I don't think that's going to be broken definitely in my lifetime."