SOURCE: The St. Petersburg Times
DATE: Issue #983 (51), Tuesday, July 6, 2004
**************************************************************************
TITLE: Yukos In $1Bln Default
AUTHOR: By Catherine Belton
PUBLISHER: Staff Writer
TEXT: MOSCOW - Yukos is on the brink of insolvency after a group of its foreign creditors said it was in default on a $1 billion loan, the company said Monday as tension mounted over expected asset seizures this week to collect a crippling $3.4 billion tax bill.
"The actions of representatives of the Russian government have led Russia's best and most creditworthy company to the brink of an unintended and artificial situation of insolvency and bankruptcy, creating an unthinkable default situation with its bank lenders, all at a time when the company is experiencing the best results in its history," Yukos chief financial officer Bruce Misamore said in a statement Monday.
Misamore said the consortium of banks, headed by Societe Generale, was not demanding immediate repayment of the $1 billion yet, but could do so now at any time following the company's formal notification by the banks Friday it was in default.
He said he would meet with representatives of the banks Tuesday. "The biggest risk to the company is not the banks, it is the government," he said by telephone.
Later Monday. Misamore told CNN television that it seemed the government had barred the way for any peaceful settlement. A behind-the-scenes dialogue had been going on to find ways to save the company, he said, but early last week all channels were suddenly shut off.
A spokeswoman for Societe Generale said the banks' decision on whether to call for immediate payment, a move that would push the company toward bankruptcy, would all depend on what steps the government took next.
"We have not asked for immediate repayment of the loans at this point," said Laetitia Maurel, the bank's spokeswoman. "[Whether this happens or not] depends on how the situation evolves."
But in rare comments from a top government official on the affair Monday, Oleg Vyugin, head of the government's Federal Service for Financial Markets and a former Central Bank deputy chairman, said that it looked like things were moving toward bankruptcy.
"The president has said that the company should not be bankrupted, but, on the other hand, all the actions taken by legal institutions show that all this is leading to bankruptcy," Vyugin said, Interfax reported.
The legal onslaught against the company snowballed last week when court marshals froze the accounts of the NK Yukos holding company and gave it five days to pay up voluntarily on a $3.4 billion back tax bill for 2000. It then ratcheted up the pressure another notch by handing Yukos a second $3.4 billion back tax claim for 2001.
Yukos has said it does not have the cash to pay the first bill. It received the second claim Monday, the company said.
The rapid increase in pressure could make events spin out of control, analysts said.
"Its like a run on a bank," said Ron Smith, oil analyst at Renaissance Capital. "At some point it becomes self-fulfiling."
Yukos stock dipped nearly 4 percent Monday on the Russian Trading System as investors held their breath in anticipation of the Wednesday close-of-business deadline for the company to pay the 2000 bill.
"Right now, we're in the eye of a storm and we won't get a clear indication of how this is going to turn out until Wednesday evening," said Chris Weafer, chief strategist at Alfa Bank. "At some point on Wednesday evening or Thursday morning investors are going to know. If they go in with lorries and start loading them with assets, that's it," he said. "But if assets are taken in an orderly fashion and are valued using market mechanisms, that would be another matter."
There was some confusion as to whether the five-day deadline for repayment could run out Monday evening, making asset seizures possible as soon as Tuesday. But Yukos spokesman Alexander Shadrin cited company lawyers as saying the court marshals gave them five working days, not five calendar days.
In a sign the government could be eyeing some of Yukos' core production assets, marshals turned up at Yukos' Tomskneft production unit in eastern Siberia on Monday, Interfax reported. Tomskneft officials could not be reached for comment.
The market would sigh with relief if the court took Yukos' stake in Sibneft, analysts said.
Yukos last week offered its 35 percent stake in Sibneft gained as part of its now-aborted merger with the company as collateral for the $3.4 billion tax bill. But the court marshals ignored the offer, the company said.
"One of the big questions will be what happens with Sibneft," said Paul Collison, oil and gas analyst at Brunswick UBS. "It would be a big positive if the government were to take this as payment on Wednesday. It would stave off technical bankruptcy at this point."
As speculation ahead of Wednesday's crucial deadline mounted, Yukos appears to have also been raising the rhetoric in a bid to force the government to back off.
Last week, it said the move to freeze Yukos NK's Russian bank accounts could force it to halt production because it would not be able to make the payments required to continue operations. Then, on Monday, Yukos officials told Reuters it might have to soon starting cutting back sea and rail exports because of a cash crunch.
The rhetoric surrounding a possible production halt looks more like brinkmanship than a real threat, analysts said.
Yukos CFO Misamore conceded Monday that only $20 million had been frozen under the move to arrest Yukos NK's accounts. "We do not keep a lot of cash at the level of the holding company," he said by telephone. "There was probably about $20 million on those accounts."
Experts say the government could relax its tax case against the company, which is threatening it with bankruptcy, if Group Menatep shareholders, the core group that owns a majority of Yukos shares, agree to give up their stakes. The legal onslaught has been seen as an attempt to force Yukos founder and its largest shareholder Mikhail Khodorkovsky out of business because he was beginning to encroach on President Vladimir Putin's power base. Khodorkovsky has been held in jail for the last eight months on separate fraud and tax evasion charges.
Khodorkovsky has not given any indication as to whether he is ready to do so. Menatep spokesman Yury Kotler said the group was aiming to avoid bankruptcy at all costs and would not announce default on Yukos' other major syndicated loan, worth $1.6 billion, which is backed by Menatep.
TITLE: Tikhonov Tapped for City Post
AUTHOR: By Vladimir Kovalev
PUBLISHER: Staff Writer
TEXT: A former KGB officer in President Vladimir Putin's inner circle has been named the St. Petersburg's vice governor in charge of security.
Governor Valentina Matviyenko on Friday named Valery Tikhonov, a former deputy head of the Federal Guard Service, to fill the vacant position.
One of Tikhonov's main goals will be to oversee a redivision of business interests in the city, lawmakers and political analysts said.
"This place had been reserved for certain people, so this is not a big surprise that ... [Tikhonov was] appointed to this position," Alexei Kovalyov, a Legislative Assembly lawmaker in the Union of Right Forces, or SPS, faction, said Monday in a telephone interview. Tikhonov is a member of Putin's team of former KGB officers that he brought to the Kremlin from St. Petersburg after he became president.
Born in 1951, Tikhonov graduated from the Leningrad Financial University and the Northwest Academy for the State Service. From 1984 till 1992 he worked in the Leningrad Oblast KGB and then in the St. Petersburg Federal Guard Service, or FSO, until 2001, when he was promoted to deputy head of the service. In 2003, he was sent to St. Petersburg to oversee security during celebrations of the city's 300th anniversary.
"Although he is originally from St. Petersburg, what he has done in his career is not that important. But the political side is," Vladimir Yeryomenko, a Mariinskaya faction lawmaker, said Monday in a telephone interview.
"It looks as if he was sent from the Kremlin to control Governor Matviyenko's steps in the light of recent actions linked to the redivision of business interests in the city. It looks as if the Kremlin has some questions about the governor," he said.
Matviyenko did not comment the new appointment, promising to explain the decision this week, her press service said. The position became vacant last month after the previous incumbent Andrei Chernenko was appointed to head the federal migration service.
"This could be linked to such steps as [favors] given to Lukoil on the St. Petersburg fuel market and to questions in the construction business," Yeryomenko said.
"Some companies spread their wings too widely, while other businesses are not happy about it. It is likely that rumors about such a situation have reached the Kremlin."
Tikhonov met city lawmakers Monday to answer questions before the vote on his candidacy on Wednesday. His appointment will be the last major topic lawmakers discuss before their summer holidays.
Although deputies are unsure who was behind the decision to send Tikhonov to St. Petersburg, most of them say City Hall is going to be under tight scrutiny.
"It is unlikely that within the next month or two that Tikhonov's activities will be noticeable," said Sergei Gulyayev, an SPS faction lawmaker, said Wednesday in a telephone interview after meeting with Tikhonov.
"He needs time to get to know what he is going to work on, but within this year we will definitely see some steps to enforce order in the city in relation to corruption issues and so on.
"He will definitely be useful for the city government with his experience of working in the federal structures," Gulyayev said.
Sergei Mikhailov, an independent lawmaker, on Monday filed a draft decree for the Legislative Assembly to approve Tikhonov.
Leonid Kesselman, a political analyst in the sociological department at the Academy of Science.
He said Tikhonov's appointment is in line with a drive by the ex-KGB team in the Kremlin to restructure the way the regions are run.
"This is the so-called team of [Putin's] youth," Kesselman said in a telephone interview from Germany. "I have a feeling that after they completed forming the team, they started arranging themselves in a hierarchy across the country."
"Their main goal is to redivide what was divided in the past - in the wrong way from their point of view. But they have a real problem here because they don't have any sort of thoughts about future development," Kesselman said.
"It is not only Mikhail [Khodorkovsky] who they are dealing with in Moscow.
They want to take charge of every single kiosk in every region. We all pay taxes in this team's favor."
"People have understood that to live, they have to keep paying these people wearing epaulettes," Kesselman said.
"But the day may come when the people will say, 'Enough!'"
TITLE: Pushkin Manuscript Was Diary Dedication
AUTHOR: By Yuriy Humber
PUBLISHER: Special to The St. Petersburg Times
TEXT: The precious original manuscript of Alexander Pushkin's famous poem "On the hills of Georgia" has been returned to Russia through the generous and unsolicited efforts of state-owned bank Vneshtorgbank.
The sheet of paper, a page from Countess Caroline Sobanskaya's diary on which Russia's national poet wrote the poem, was purchased for $300,000, avoiding a scheduled appearance at Paris auction house Douot.
The success of private negotiations between Vneshtorgbank's president Alexander Kostin and the French collectors, brothers Andrei and Vladimir Goffman, enabled President Vladimir Putin to personally present the manuscript to Pushkin House in St. Petersburg on June 26.
The house, located on the Strelka of Vasilyevsky Island, is the repository of about 98 percent of Pushkin's original works and the national center for their study.
In English, the poem reads:
"The hills of Georgia are covered by the night;
Ahead Aragva runs through stone,
My feeling's sad and light; my sorrow is bright;
My sorrow is full of you alone,
Of you, of only you ... My everlasting gloom
Meets neither troubles nor resistance.
Again inflames and loves my poor heart, for whom
Without love, 'tis no existence."
Pushkin penned it for Sobanskaya, a Polish countess, a few years after they met in Kiev in 1829. It was the start of a highly charged affair with the educated beauty who was known for her sardonic wit, mocking irony, and liking of literary men.
"Their meeting was all about passion and yearning," said Tatyana Krasnoborodko, the academic curator of Pushkin manuscripts.
"She was certainly a woman able to attract men and occupy the center of society," she added. "She had many an admirer and no fewer husbands. In between Pushkin and her marriage to French writer and poet Paul de la Croix in 1851, she was also married to a dragoon commander."
Pushkin often visited the countess' home. At her request,he wrote two poems in her diary. One, "What does my name mean to you?", she records as entered on January 5, 1830.
That page has been in the keeping of Pushkin House since 1948. On the other page was "On the Hills of Georgia", with the countess' text in French added alongside: "improvisation of Alexander Pushkin, 1829." Pushkin House, did not know until 15 years ago that the original still existed.
After receiving the poem, Krasnoborodko measured it against the other diary page: "I came back to the museum and put the two pages together. They fitted together perfectly."
"For us, it is not just an object of pride, a memorial that will not be touched," she said. "Here, the manuscript will be studied, it will be compared to others Pushkin papers, and written about in our academic research publications."
Pushkin House learned of the existence of the 19 centimeter by 26 centimeter, water-marked, gold-edged diary leaf in November 1989.
"At that time, I was brought an auction catalogue from Paris where there was an entry and a photo of a Pushkin manuscript," Krasnoborodko said.
"At first, I thought of flying to Paris and bidding in the auction, but bad luck prevented me from going: I broke my leg. The manuscript was sold, but the name of the new owner was not disclosed, nor was the price. All that remained with us was the photo in the catalogue."
In around 1994, the Goffman brothers appeared in Krasnoborodko's office and announced that they had recently acquired the manuscript.
"I immediately felt great joy. After four years, it had resurfaced.
"The Goffmans were interested in having the page from the diary assessed, and gave us the opportunity not only for an evalutation but for an academic assessment.
"They were very helpful providing all the material and information in response to our queries about the manuscript, which, incidently, never left France, firmly remaining in their possession."
The Goffman brothers, an architect and a sculptor, had more than a normal collector's interest in Pushkin. Their grandfather, Modest Ludovich Goffman, was one of the most famous Pushkin scholars of the 1910s-20s. He was in frequent contact with the founders of Pushkin House, and collected material from archives on their behalf.
In 1920 he was appointed curator at Pushkin House. It was Modest, who in 1922 made a trip to sign an agreement with Alexander Otto-Onegin, a Russian Pushkin fanatic who changed his surname to that of Pushkin's hero Yevgeny Onegin. Otto-Onegin emigrated to Paris after the Bolshevik Revolution, but Goffman persuaded him to bequeath his Pushkin collection of manuscripts and private items to the house.
Modest was dismissed by the museum in 1924, but he would continue to describe his years working there as "some of the happiest of my life."
The Goffmans, though active private collectors, were influenced by their grandfather's memories and were sympathetic to the museum's work. However, "private ownership is not a constant to rely on. Property could be sold on at any moment," Krasnborodko said.
From 1999, Pushkin House looked for funds to buy "On the hills of Georgia" from the brothers.
"We asked the Soros Fund, the Culture Ministry. We were always told, 'These are serious sums which are simply not available to us.'"
Help arrived later, quite suddenly and from an unsought source. "I have never talked to the bank about the manuscript, never had any relations with them," Krasnoborodko said.
The manuscript is not the last one held abroad.
"There are others," Krasnoborodko said. "There was one for sale a few years ago in Berlin. Then, I don't know exactly, but from sources I have recourse to I have heard of a man in France who has an undisclosed Pushkin manuscript. Yet, we have no information about it."
Would Vneshtorgbank assist Pushkin House should it become available?
Krasnobordko laughs. "We can't say. No other manuscripts are up for sale and may not be for a long time. But, we met with the bank. We are acquainted with them now and we hope that they remember us."
Andrei Piontkovsky, political analyst at the Center of Strategic Studies, said Pushkin House has a good chance of finding someone to buy more manuscripts, should any more come on the market.
"It is not only fashionable now, a continuation of the [Faberge] eggs purchase, but it is a functional move for an oligarch," he said in a telephone interview from Moscow.
"They are all in a hurry to please the president, and they will continue buying. We have lots of oligarchs. And they have little imagination. If Kostin buys a Pushkin manuscript, someone else will go and buy another, or something similar."
Even a cynical political analyst agrees that "it is good, no question about it. That they are getting some interest in culture and buying these former national treasures back is certainly a positive result."
TITLE: Photopage - The Watery Beauty of Peterhof
TEXT:
TITLE: Suspect at Starovoita
Trial Gives Evidence
AUTHOR: By Vladimir Kovalev
PUBLISHER: Staff Writer
TEXT: One of the six suspects being tried for involvement in the assassination of State Duma Deputy Galina Starovoitova in 1998 unexpectedly gave evidence on his role on Thursday.
Anatoly Voronin told the St. Petersburg city court that in October 1998 he was assigned by another accused, Yury Kolchin, to install eavesdropping devices, which Voronin installed in a telephone box located on the staircase at 91 Kanal Griboyedova, the apartment building where Starovoitova lived.
Together with another suspect Igor Lelyavin, Voronin tried to organize video surveillance of Starovoitova, he said, denying that he knew the steps were in preparation for an assassination.
"Shortly before this Kolchin asked us to come over, showed us a photo of Starovoitova in a newspaper and ordered us to monitor all the trains from Moscow and to Moscow," Vorinin said, local media reported. "A watch was also kept on the airport." On the day of the assassination, Nov. 20, Voronin said he was at an apartment the suspects rented in the Admiralteisky District and saw Oleg Fedosov, Igor Bogdanov and Vitaly Akishin enter the apartment in the evening, carrying heavy bags.
"While I was cooking dinner I had time to see Fedosov take a mirror and start applying women's makeup to his face, and try on a chestnut-colored wig. At the same time, Akishin was trying on a fake beard and mustache," Vorinin told the court.
Fedosov and Bogdanov are wanted on federal warrants for their role in the case. Starovoitova's assistant, Ruslan Linkov, who was with her when she was gunned down on the stairway leading to her apartment told the court on Wednesday that he recognized Akishin as the one who shot Starovoitova.
"I recognized him right away at the plenary hearing on Dec. 29 when I entered the courtroom," Linkov said Friday in a telephone interview. "I looked him in the eyes, he looked at mine and it was clear he understood that I had recognized him. He started visibly shaking when I looked him in the eye."
"When I gave my testimony Akishin was smiling," he said. Linkov said he could not reveal his evidence before it had been presented in court.
Voronin said that shortly before the assassination he had gone to the apartment building where Starovoitova lived and removed the eavesdropping device. He went back to the apartment where the suspects had been living, threw away old clothing that he had worn into the Griboyedov Canal and fell asleep without turning off the television.
"When I woke up there was breaking news about Starovoitova's assassination on the television," he said in court. "They were showing the yard and the staircase where I had just removed the eavesdropping device. I was in shock. 'What have I got myself into?' I thought."
The six suspects on trial were all born in the city of Dyadkovo in the Bryansk region.
Vyacheslav Lelyavin, the seventh suspect charged with plotting the assassination was detained recently, according to FSB quoted by Interfax on Monday.
Lelyavin was a witness, but was arrested during interrogation after new information was found, FSB press service said.
TITLE: Hero's Welcome for Sir Edmund Hillary
AUTHOR: By Robin Munro
PUBLISHER: Staff Writer
TEXT: The first man to climb to the highest point on Earth came to the country that sent the first man into space on Sunday and was treated like a hero.
New Zealander Sir Edmund Hillary and Sherpa Tenzing Norgay, of Nepal, were the first to climb Mount Everest in 1953, when it was not known if the human body could survive the altitude.
Hillary went on to drive modified farm tractors to the South Pole and serve as New Zealand High Commissioner to India in the 1980s. Books about his feats were available in Russia in Communist times.
Asked if he had been impressed when Yury Gagarin became the first man in space in 1961, Hillary said he was.
"It was a very exciting moment all around the world," he said. "I had certainly no desire or ambition to do the same but I greatly admire the astronauts who succeeded in doing it."
"If I had been given the opportunity to go into space I would certainly have accepted it but I realize I didn't have the technical knowledge for that project so I stuck to the things that I did reasonably well - where there was snow and ice and rivers, all those things we have in New Zealand."
Arriving with his wife June on a cruise for two days in St. Petersburg on Sunday, just a fortnight before his 85th birthday, Hillary was met by Russian mountaineers, travelers, polar scientists and the New Zealand Ambassador Stuart Prior.
Artur Chilingarov, a polar adventurer and deputy speaker of the State Duma, welcomed Hillary and presented him with a certificate making him a member of the Russian Polar Society.
"We have great respect for you," Chilingarov said.
Hillary looked at the certificate and questioned whether it was really his name on it.
"Yes, it's in Russian," Chilingarov said. "Here you are 'Khillary.'"
Alexander Odintsov, who had just led an expedition that had climbed the North Face of Jannu in the Himalayas, said he was so delighted to meet Hillary that he did not want to wash his hand after shaking Hillary's.
Hillary said there are many things he would still like to do in life, but his old age prevents him from realizing all of them.
His main activities are fundraising for the Himalayan people. His efforts have helped to fund the construction of 27 schools, two hospitals, two mountain airfields and bridges across wild rivers, he said.
"This work gives me great satisfaction."
Told of the adventures and plans of local mountaineers and polar expedition members, Hillary said he envied them.
"It's fantastic what the young people are doing nowadays," he said. "There's better equipment and better techniques and I admire them greatly."
"But I still got to the top first," he added.
In May 1982, Vladimir Balyberdin, of Leningrad, as St. Petersburg was then known, and a Muscovite Eduard Myslovsky were the first two Russians to climb Everest (8,848 meters) along the most difficult, southwestern route.
TITLE: IN BRIEF
TEXT: Scientists Study Sound
ST. PETERSBURG (SPT) - An international congress dedicated to the influence of sound on a human life opened in St. Petersburg on Monday.
More than 500 scientists from all over the world take part in the congress, Interfax said.
"The problem of the influence of sounds on human life is especially important for residents of big cities," the congress's organizing committee said. "Thus, every second resident of St. Petersburg is exposed to a heightened level of noise from automobiles."
Alexy II to Bless Church
ST. PETERSBURG (SPT) - Orthodox Patriarch Alexy II will bless the restored church at the city's Mining Institute, Interfax said Monday.
The church of Makari Yegipetsky was built in 1805. In 1918 the church was closed under a Soviet decree on separation of the church and state. In the 1920s, the Soviets removed the church's bells and the cross, and used the building as a cinema and later a gym.
Payroll Heist
ST. PETERSBURG (SPT) - Two unidentified people attacked and injured a security officer delivering money to the suburb of Pushkin on Friday, city police said.
The collector was shot in the leg. The criminals stole the wages and stipend of the employees and students of the Agricultural University. They stole about 4 million rubles ($140,000), Interfax said.
The incident took place in the middle of the day right outside the university.
Family Killed
ST. PETERSBURG (SPT) - Unknown people killed a family of four people, Interfax said Monday.
The family lived in an apartment buildings on Prospekt Veteranov.
According to preliminary data, the murdered people belonged to one family. Among them was a teenage girl. According to early reporrts from the investigation the victims died of multiple knife wounds.
TITLE: Duma Stages a 'Social Coup' Over Benefits
AUTHOR: By Oksana Yablokova
PUBLISHER: Staff Writer
TEXT: MOSCOW - As dozens of protesters clashed with police outside the State Duma, deputies staged a sweeping "social coup" Friday to discard Soviet-era state guarantees for nonindexed cash payments on services like health and transportation.
Deputies debated the Kremlin-backed bill for five hours before passing it in a first reading by a vote of 296-116, with four abstentions.
Opponents believe that the unpopular plan will only impoverish retirees, war veterans, the disabled and other socially vulnerable groups. They also say the proposed cash payments will soon be eaten up by inflation and not cover the cost of the benefits that recipients now enjoy.
Presenting the 600-page bill to the Duma, Finance Minister Alexei Kudrin said that will benefits taken out, cash payments will grow by 16 times for war veterans and by nine times for the disabled.
"The goal of this bill is to move from pure populism to implementing [the government's] obligations," Kudrin said.
Kudrin also said cash payments are more fair because many people who are entitled to benefits under federal and regional laws cannot take full advantage of them. As an example he pointed to people in rural areas who do not have telephones and rarely use buses but are still entitled to free phone service and an unlimited number of rides.
The bill approved Friday effectively annuls 41 laws and amends 155 others.
Kudrin promised that the federal government would look out for those who need "the most expensive" care. As such, cash payments to the country's 14 million war veterans, disabled people, Chernobyl cleanup workers and survivors of the Nazi blockade of Leningrad will be paid directly from the federal budget, he said. Payments will amount to 800 rubles to 3,500 rubles per month.
Regions will be responsible for the country's 19 million retired workers - including those who worked on supply lines in World War II - and those who suffered Soviet political repression, Kudrin said.
Under the Duma bill, regional governments will be given the option of keeping the existing benefits system of switching to cash payments.
Critics fear that those eligible for benefits in the regions might not see any payments at all. Regional governments are often late in paying salaries to their employees.
Outside the Duma, some 2,000 protesters rallied against the bill, shouting at and jostling with police officers, who cordoned off the building during a vote for the first time in at least a decade. Several were detained and dragged away when they tried to break through the cordon to get closer to the building.
Two members of the radical National Bolshevik Party managed to get into the Duma but were detained by security guards before they could throw anti-Kremlin leaflets off a balcony into the main hall where the deputies were seated.
Deputies of the pro-Kremlin United Russia party, which controls two-thirds of parliament, found themselves Friday in the uncomfortable position of being obliged to support the government's plan at the risk of alienating voters.
United Russia deputy head Oleg Morozov offered muted criticism of the bill, saying it was a good proposal that the government had failed to properly explain to the public.
"Cabinet members seemed carried away with a purely accounting approach and almost ruined the entire project, " he added.
A total of 283 United Russia members voted for the bill, 10 voted against, two abstained and 10 were not present to vote. United Russia Deputy Oleg Kovalyov, head of the Duma's Ethics and Self-Regulations Committee, offered support for the bill, saying most of the country's regional legislative assemblies and governors have examined it and approved it.
Vologda Governor Nikolai Maksyuta called the bill half-baked at a meeting of the advisory State Council in the Kremlin on Friday.
"I think that a moratorium should be put on the bill until 2006, because all the pros and cons should be calculated more thoroughly," she said.
In the Duma, outraged Communists could do little to change the outcome of Friday's vote.
"The government has picked the pocket of 103 million of its citizens," Communist leader Gennady Zyuganov said.
Communist Deputy Sergei Reshulsky proposed an open vote so the electorate would know "who had voted against their rights."
Other opponents called the bill "a social coup."
"This is effectively a liquidation of social sphere. The country has never seen a blow like this before," said Deputy Oleg Shein, a prominent expert on labor and social policy with the nationalist Rodina bloc.
One of the most out-spoken critics of the bill, Shein had submitted 14 amendments, including one that would have allowed the disabled to keep a number of benefits. The Duma voted against them all.
At the same time, deputies agreed to consider amendments proposed by United Russia Deputy Andrei Isayev, who heads the Duma's Labor and Social Issues Committee, before the bill comes up for a second reading early in August. Under his amendments, payments for child welfare and victims of Soviet repression would come from the federal budget.
Shein promised to draw up more amendments before the second reading.
Liberal Democratic Party leader and Deputy Duma Speaker Vladimir Zhirinovsky called for a pilot program, saying benefits in some regions should gradually be replaced with cash payments to see how the system works.
"Today we are bidding farewell to socialism and the entire Soviet system of social guarantees," Zhirinovsky said.
He said President Vladimir Putin is pushing the plan through the Duma at the start of his second term in office because those who will be deprived of their benefits will either die or learn to accept their loss by the next presidential election in 2008.
TITLE: Basayev Says He Won't Strike Abroad
PUBLISHER: Combined Reports
TEXT: DUBAI - Chechen warlord Shamil Basayev, in a rare television statement broadcast Friday, said his separatist rebels would not target Russian officials abroad and insisted their battle was solely against the Moscow government.
Al-Jazeera Arabic television aired a tape it said it had obtained showing the bearded Basayev speaking to a camera. He has not appeared on television for at least two years.
Basayev's statement was broadcast two days after a Qatari court sentenced two Russian intelligence agents to life imprisonment for killing former Chechen leader Zelimkhan Yandarbiyev and accused Moscow of supervising the operation.
"Our Chechen people will continue their struggle inside Russia and we are not planning any attacks outside Russia even though we have the capabilities to do so," he said in comments Al-Jazeera dubbed into Arabic.
"We will not even target Russian officials who committed massacres against the Chechen people if they are in foreign countries," Basayev added.
He criticized the assassination in February of Yandarbiyev, who was living in exile in Qatar.
"This incident proves who is the terrorist and who is not," Basayev said, adding that Moscow was besmirching the rebels' "honorable struggle" by propagating rumors.
"I reaffirm again that we are not planning any operations in foreign countries ... unlike the Russians who assassinated our former leader in Qatar."
Last month, rebels killed almost 100 people in an attack in Ingushetia, on Chechnya's western border. Many Ingush fighters took part, underscoring how the conflict is spreading.
Basayev periodically issues statements threatening targets throughout Russia and has claimed responsibility for various attacks. Most recently, he said his fighters had carried out the assassination of Chechnya's pro-Moscow president Akhmad Kadyrov in a bomb attack in May.
Last month, Russian media reported that Basayev, who had a foot amputated after entering a minefield during a Russian attack on Grozny, may have left Chechnya for medical treatment and be living abroad. Authorities, however, say the hunt for the country's most wanted fugitive is continuing in Chechnya.
Major General Ilya Shabalkin, spokesman for Russian forces in Chechnya, told Interfax that Basayev's videotape was aimed at drawing attention to the rebel fighters in a bid to raise more money.
"He is trying to replenish the exhausted financial flows coming to support terrorist guerrilla activities in Chechnya," Shabalkin said, Interfax reported.
In Moscow, Russian media reported on Friday that one of the main organizers of last week's raids in Ingushetia had been killed in a large-scale operation in the region.
Interfax identified the man as Abu Kuteiba and described him as an Arab mercenary, formerly a close associate of rebel commander Khattab - a key figure among Chechen separatists killed two years ago.
Television showed several bloodied bodies on the ground after the operation and said 16 rebels had been detained.
(Reuters, AP)
TITLE: Zyuganov Is Re-Elected as Party Divides
AUTHOR: By Francesca Mereu
PUBLISHER: Staff Writer
TEXT: MOSCOW - Amid a mysterious power outage, a Communist Party congress on Saturday unanimously re-elected embattled leader Gennady Zyuganov - while across town in a closed-door meeting, a breakaway faction was ditching Zyuganov in favor of its own alternative leader.
The lack of electrical power, as Zyuganov's opening speech was plunged into darkness, appeared to reflect the parlous state of the party's fortunes: badly beaten in two elections and now facing an open revolt by a group claiming the legal right to the Communist brand name.
The breakaway congress, reportedly held in private on a boat on the Moscow River, drew support from Zyuganov rival Gennady Semigin, a State Duma deputy and former businessman who was expelled from the party in May after being accused of cooperating with the Kremlin to undermine the party.
Organizers of the breakaway congress said it had picked a new leader and Central Committee, and was claiming to be the legitimate party congress.
Delegates to the main Communist congress saw the alternative congress as a Kremlin-sponsored plan to further split the party, which has already endured several months of vicious infighting.
A pro-Zyuganov party official, speaking on the sidelines of the main congress at the Soviet-era Izmailovo hotel in northeastern Moscow, said he feared the breakaway congress would be able to quickly register with the Justice Ministry, and with Kremlin help lay claim to the party name.
"The Justice Ministry will get two documents from two party congresses, each asking for legitimacy," said the official, who asked not to be named. "The situation is awful. With two quarreling factions claiming the same name, I don't know what the party's future will be."
The official said that the registration would be decided on the basis of which application was correctly filled out. "And we made a lot of mistakes in our documents," he added.
The alternative congress might be able to register with the Justice Ministry soon, the official said, adding that the pro-Zyuganov congress would "likely file the papers only in a week's time," because of party bureaucracy.
At a downtown news conference Saturday, the organizers of the breakaway congress appeared to confirm the fears of the Zyuganov faction, saying they were seeking to officially register as a party.
"We seriously hope that ultimately we will be considered the only [officially registered] Communist organization," said Valentin Knysh, one of the organizers of the alternative congress and a former Duma deputy, Interfax reported.
The organizers of the breakaway congress said that, in line with party rules, they had been able to muster a quorum of 150 officially elected delegates. But Ivan Melnikov, who was elected Zyuganov's deputy Saturday, said that 249 out of 317 registered delegates had showed up at the main congress. Twenty-four people could not come because they were sick, Melnikov said.
"I suppose that roughly 50 delegates went to the alternative congress," he said.
The breakaway congress picked Vladimir Tikhonov, the Communist governor for Ivanovo and a former State Duma deputy from 1995 to 2001 for its leader. Organizers said that representatives from the Justice Ministry and the Central Elections Commission were present at the congress to validate its decisions.
The main congress expelled Tikhonov from the party, while Zyuganov and his supporters denounced the breakaway faction.
"The Kremlin has an hand in this," Zyuganov said after being re-elected leader.
TITLE: Yavlinsky Says Open to Left
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW - Yabloko re-elected Grigory Yavlinsky as party chairman at a weekend congress and pledged to take part in the next State Duma elections in a new democratic coalition that could include left-leaning politicians.
"Yabloko is ready to cooperate with those who affiliate themselves with the left wing of the political spectrum," Yavlinksy told the congress Saturday in the village of Moskovsky, south of Moscow.
"But, there is a boundary there - we will never accede to any kind of alliance with those who approve and propagate the methods employed by Stalin, Beria or Lenin," Yavlinsky said, RIA-Novosti reported.
The new democratic coalition should include "genuine democrats," he said.
Yabloko's first deputy chairman, Sergei Ivanenko, who took the floor after Yavlinsky, said Yabloko should be the core of the coalition. He said the liberal party is holding talks with "renowned public figures," RIA-Novosti reported.
Ivanenko said Yabloko will work with democratic forces that have not sullied their reputations by being involved in the reforms of the 1990s.
TITLE: Tourists Shunned On Nuclear Icebreakers
AUTHOR: By Simon Ostrovsky
PUBLISHER: Staff Writer
TEXT: MOSCOW - If you're thinking about hopping aboard a nuclear-powered icebreaker and heading to the North Pole, environmentalists are urging you to reconsider, as is the Russian government, albeit for different reasons.
With demand waning for its traditional service - clearing Arctic shipping lanes - the Murmansk Shipping Company, which operates the world's only fleet of atomic icebreakers, has started offering tourists a chance to chill out at the top of the world for $20,000 per head.
The business has outraged environmental groups such as Friends of the Earth Norway, which is urging would-be ticket buyers to consider the damage a nuclear accident can do to the pristine region's fragile ecosystem.
Operating the ships also adds to the already massive stockpiles of nuclear waste encased in the rusting shells of decommissioned navy submarines, the group says.
"We want the icebreakers decommissioned," said Dag Arne Høystad, who heads Friends of the Earth Norway's Russia project. "But since we've gotten no reaction from the Russian government we've targeted Western tourists who make the market," Høystad said by telephone from Oslo.
The green group has found an unexpected ally in the Russian Audit Chamber. Parliament's budgetary watchdog, after investigating partially state-owned Murmansk Shipping's finances earlier this year, urged the government to revoke the company's license to operate the fully state-owned icebreakers because it had "improperly used $79 million worth of state property and cheated the state out of $7.3 million in revenues," auditor Yury Tsvetkov said June 29.
Based on the chamber's report, prosecutors in Murmansk earlier this month began probing company officials for allegedly exceeding their authority and for infringing ownership rights, according to Olga Vasilchenko, a spokeswoman for the Murmansk prosecutor's office.
"A list of names of suspected bureaucrats is still being put together," Vasilchenko said by telephone.
In his report, Tsvetkov said Murmansk Shipping rented some of its six nuclear-powered ships to foreign companies for months at a time without the government's permission.
These actions "created a real risk to Russia's national security in the Arctic and increases the likelihood of a radioactive terrorist attack," Tsvetkov wrote.
"These people are walking around nuclear-powered ships taking pictures, a whole group of terrorists posing as tourists could take it over. This is not what these ships were made for," Tsvetkov said.
Murmansk Shipping declined to comment last week.
Last week, Izvestia quoted a Murmansk Shipping official as saying the charges were unfounded and that the ships were safe from terrorist attack because the Federal Security Service had approved the tourist trips, and sensitive areas on board were well protected.
Last month, the company's workers' union published a statement alleging the Audit Chamber orchestrated its investigation at the behest of major corporations that are interested in acquiring the nuclear fleet.
"The interests of heavyweight oligarchs representing LUKoil, Norilsk Nickel, Gazprom and Rosneft have crossed with those of Sevmorput-Kapital, core shareholder of the Murmansk Shipping Company ... we sailors do not want to be hostages of a battle between oligarchs," the workers' union said.
Arctic tourism is apparently a lucrative field.
According to Tsvetkov, Murmansk Shipping netted $1 million per month renting the ships to foreign companies, who then netted $3 million per month selling cruise packages at $20,000 per head.
One such company, Quark Expedition, bills itself on its web site as being the only company in the world to operate "powerful, polar icebreakers for expedition cruises."
"This voyage to the top of the world is the ultimate journey of adventure and discovery," Quark says on its web site, touting Murmansk Shipping's Yamal ship as its own.
TITLE: Intelligentsia Get a Statue
PUBLISHER: The St. Petersburg Times
TEXT: MOSCOW - A new statue of a winged horse dedicated "to the Russian intelligentsia" has attracted puzzled reactions, with one of its sculptors saying the statue depicts intellectuals as "spongers."
Alfa Bank and the Union of Right Forces sponsored the erection of the monument, a copper Pegasus flying over bent iron and wounded by arrows, which was unveiled June 29 outside the Andrei Sakharov Museum and Social Center.
In comments on NTV television, one of the statue's sculptors, Galina Shilina, said the Pegasus figure represented "people who eat well but do not work hard - spongers," and said the arrows were made out of rusty iron, "a very nice material."
Museum director Yury Samodurov said he did not like the idea of the statue.
Samudurov is one of three human rights advocates connected with the Sakharov Center who went on trial last month, facing charges of inciting religious hatred over a controversial art exhibition, "Caution, Religion," at the museum.
The statue was originally intended to be inscribed "in honor" of the intelligentsia. Later the inscription was changed to "in memory" of the intelligentsia, then simply "to the Russian intelligentsia," NTV reported.
TITLE: Tajiks Worry About The Afghan Border
AUTHOR: By Burt Herman
PUBLISHER: The Associated Press
TEXT: HAMADONI REGION, Tajikistan - Lieutenant Colonel Mahmudjon Mahmudov repelled raiders while the Soviet-Afghan war raged next door in the 1980s. He protected the rugged frontier with Afghanistan in the '90s during the tumultuous five years of his country's own civil war and internal fighting between Afghans across the border.
Now Mahmudov is facing what could be the biggest challenge yet in his 17 years as a Tajik border guard: Tajikistan's underpaid, underequipped and undermanned force is supposed to take control of most of the Afghan frontier from a Russian force by next summer and complete the handover in mid-2006.
The change has raised concerns of everyone from foreign diplomats to local residents. Tajikistan is already a major trafficking route for illegal drugs from Afghanistan, the world's largest opium producer, and militant groups have in the past operated across the border.
"We risk a very major vacuum, which could become very problematic," Antonio Maria Costa, head of the UN Office on Drugs and Crime, said during a recent tour of Central Asia.
Even Tajik officers themselves point to problems. They complain they need more radios and do not have proper lights or night-vision equipment like the Russians.
Still, Mahmudov, chief of staff for a regional border guard command, insisted his men can effectively control the frontier. "Soldiers never live easily," he said.
Russian-led guards have patrolled almost the entire 1,200-kilometer Tajik-Afghan border under a 10-year agreement signed in 1993. Most of the guards are Tajiks working as contract soldiers under the command of Russian officers.
Negotiations began last year on extending the deal, and most observers expected the Russians to stay. But the Tajik government this year asked them to leave - apparently more assured of itself and of international support after 13 years of independence.
"The Tajiks do have a certain degree of feelings of sovereignty about their own border," said U.S. Ambassador Richard Hoagland. "They would like to assume full control as any normal country would assume full control of its own borders."
Previously, the national border force controlled just about 70 kilometers of the frontier. This summer, it will take over patrols of the mountainous Gorno-Badakhshan province, said Major General Abdurakhmon Azimov, commander of the Tajik border forces.
The Russians will pull out of all areas except the key Pyanj region, site of a major crossing, by mid-2005, and leave there the next year, Azimov said.
The United States has pledged $8 million to the Tajik border force, of which $2.8 million has already been spent for training, uniforms, vehicles and radio equipment.
Tajik President Emomali Rakhmonov has pledged to bolster border defenses with forces from other government agencies. Some international observers, however, expect a spike in drug trafficking - both from diminished defenses and because border economies will suffer when the Russians' higher salaries disappear.
For example, Mahmudov earns the equivalent of just over $30 a month as a lieutenant colonel. His wife, who works as a medic for the Russians and is only a master sergeant, makes more than $270.
But the biggest worry for people living in frontier areas is simply money.
At Cafe Pogranichnik - Cafe Border Guard - just across from a Russian base, chief cook Jurabek Gaipov said every family here gets income from the Russians. "If they go, many people will be unemployed," he said.
Kurban Karomatov, who stocks meat and cheese priced far out of reach of ordinary Tajiks at his bazaar stall, fears people will turn to crime or terrorism once the Russians leave.
"I don't want them to go. We have relations with them like brothers and sisters," Karomatov said.
At Tajik border guard outposts in the Hamadoni region, troops who now serve as a second line of defense behind the Russian-led force admit they have never fired their guns in conflict.
But the force has seen combat. A memorial plaque at one barracks honors six guards who died in a June 1998 clash with Afghan drug smugglers in which 10 assailants also were killed.
"We'll get used to it," Major Zokir Sharipov said of the coming changes, looking solemnly at the names of his fallen comrades. "Now we're just learning."
TITLE: Rot Front, Baturina Donated to Putin Bid
AUTHOR: By Francesca Mereu and Oksana Yablokova
PUBLISHER: Staff Writer
TEXT: MOSCOW - President Vladimir Putin accepted contributions from 26 corporate sponsors in his re-election campaign, including Moscow Mayor Yury Luzhkov's wife, Yelena Baturina, and the Rot Front chocolate factory. But he did not use any money from Sodbiznesbank and CreditTrust, two private banks that recently lost their licenses, according to a campaign finance report from the Central Elections Commission.
This is the first time that the elections commission has provided a breakdown of contributors and how much they gave in a presidential campaign.
The release of the report late last month appears to be in line with an amendment to the law on presidential elections that was passed in January 2003 and requires the public disclosure of information about campaign contributors.
It also comes after Sodbiznesbank's license was revoked in a money-laundering investigation in May, at which time the Central Elections Commission said the bank had donated 1 million rubles ($34,500) to Putin but made no mention of it not being used.
The report says Sodbiznesbank and CreditTrust, which are believed to have the same owners, each wired 1 million rubles to Putin's campaign account and that the president had returned the money.
The Kremlin had some warning that things were amiss at Sodbiznesbank as early as October, when then-Interior Minister Boris Gryzlov publicly accused the bank of laundering 500 million rubles and said four of its employees had been arrested.
According to the report, Putin's biggest contributors were Rot Front and an obscure company called Belyant, which each gave 4 million rubles. Baturina donated 1 million rubles.
With 49,565,238 votes, Putin effectively ran the least-expensive campaign, with each vote costing 75 kopeks from his campaign budget of 37 million rubles.
Federation Council Speaker Sergei Mironov, who finished last in the March 14 election, accepted 2 million rubles from Sodbiznesbank and CreditTrust, the report said.
His biggest contributor was a little-known company called OFAR, which donated 8.5 million rubles, while pharmaceutical holding Biotek was second, with 6 million rubles.
Despite finishing in sixth place, Mironov ran the most expensive campaign, gathering more than 47 million rubles and spending most of it. Each of the 524, 324 votes he received cost about 90 rubles.
Another big spender was independent liberal candidate Irina Khakamada, who spent 36 rubles for each of her 2.6 million votes from a budget of 96 million rubles. Her sole corporate contributor was Latira, a Moscow-based construction company, which donated more than 12 million rubles.
Communist Nikolai Kharitonov, who stepped into the race after party chief Gennady Zyuganov decided not to run, had a modest budget of 6 million rubles and garnered more than 9 million votes. Six companies donated to his campaign, including alcohol retailer Gross Market and shoe retailer City Market, which each gave about 1.5 million rubles.
Liberal Democratic Party candidate Oleg Malyshkin and independent candidate Sergei Glazyev did not receive any corporate funds, according to the report. Malyshkin had 20.6 million rubles and garnered 1.4 million votes, while Glazyev had 11 million rubles and got 2.8 million votes.
Dmitry Orlov, a political analyst at the Agency for Political and Economic Communications, said the report does not paint a complete picture of how the campaigns were financed, pointing out that Putin, for example, received blanket coverage on state-run television stations while other candidates were all but ignored.
He also said Kharitonov faired well because he was able to bank on the Communists' name recognition.
TITLE: Tax Police Raise the Curtain on Film Studio's Dubious Money Schemes
AUTHOR: By Simon Ostrovsky
PUBLISHER: Staff Writer
TEXT: MOSCOW - Olga Darfi was fresh out of film school when she got what she thought was her big break - an offer from a famous producer to direct a new action movie.
Shortly after she graduated from Russia's premier film school, VGIK, in 2001, a friend introduced her to Maxim Fedoseyev, a producer at the Novy Vek studio who said he was looking for a young and talented director to shoot a movie about bowling. It was called "Sfera," or sphere.
"Fedoseyev told me I would direct the film because they needed a young, dynamic director who could get a good script written. He said there would be plenty of money, a budget of $1 million," Darfi said. "This was huge for me. I turned down other offers to work on 'Sfera.'"
What Fedoseyev did not tell Darfi is that she had just become a small cog in a multimillion-dollar tax-evasion scheme.
After hammering out a number of scripts with screenplay writers over the next two months, Darfi said Fedoseyev suddenly stopped calling.
"When I called him, he said the deal was off because the investors had offered him too small a sum to produce the picture, and that I shouldn't worry about it because they hadn't planned to pay me much either," she said. "I was shocked, it was very emotional for me."
Darfi had all but forgotten about the episode until a year later, when she received an early morning phone call from the Tax Police asking her to come down to their offices for questioning.
Asking if they were sure they had the right person, Darfi told the Tax Police that she would only answer questions after she received an official request in writing. "Most people don't like getting official written requests from the Tax Police when they haven't paid taxes on $10 million," came the reply, as Darfi remembers it. "I had no idea what they were talking about. But after they said that, I decided to go in for questioning," she said.
During the meeting, Darfi discovered that, at least on paper, the film had been shot with a budget of $10 million and that she herself had been "paid" $1 million. "I didn't even get any money for the two months I worked on the film," she said. "It felt horrible to be a victim."
Convinced Darfi had not profited from the scheme, the Tax Police let her go. Novy Vek, however, has not been so lucky. On Tuesday, the Interior Ministry announced it had opened a probe into tax-evasion activities by executives at the now-defunct studio. The ministry claims that the film company received 342 million rubles ($11.2 million) from investors to produce "Sfera."
"During the investigation, it was discovered that Novy Vek had not actually shot 'Sfera,' and that the funds were transferred to one-day firms using fictitious documents," the ministry's tax and economic crimes department said in a statement. In its financial statement for 2001, then state-owned oil giant Slavneft, which has since been sold to TNK-BP and Sibneft, claimed to have spent 722 million rubles ($25 million) to produce "Sfera" and two other films - an extraordinary sum considering Russia's most expensive film to date, Nikita Mikhalkov's "Barber of Siberia," cost $45 million.
Prior to changes in tax legislation in 2002, the Interior Ministry said Slavneft and many other companies took advantage of a legal loophole that freed companies from paying taxes on profits that were invested into Russian films.
Companies that invested in "Sfera" evaded paying 103 million rubles of profit taxes, the Interior Ministry said in its statement. It did not name the companies, but media reports have said they include Slavneft and Megasfera, Moscow's first bowling alley.
"Some of the largest companies in the natural resources sector financed national film productions with their profits. These sums were exempt from the profit tax," the ministry said. "A number of film studios laundered the money through nonexistent firms or sent it abroad through intermediaries to be spent on various materials... not related to filmmaking," it said.
Some companies claimed to have invested as much as 2 billion rubles ($68 million) into making a movie, the ministry said without elaborating.
Film industry experts polled last week said the sums being put into movies while the loophole existed were huge.
"In order to use the tax scheme, films had to be officially deemed 'national,' by the Culture Ministry, which means you had to show the movie would be made by Russians," said Daniil Dondurei, editor of film magazine Iskusstvo Kino.
"Between 1999 and 2000, the Culture Ministry issued 700 such approvals, but only 180 films were actually made," Dondurei said.
"This is exemplified by Slavneft, which spent some $17 million on two documentary films, even though making documentaries in Russia costs nowhere near that much," he said.
Slavneft itself blamed any shady dealings on the company's state-appointed former managers.
Darfi said she was told by the Tax Police that Novy Vek has been closed down and that its former managers, including Fedoseyev, have opened a new studio, Artes Productions.
Fedoseyev and Artes Productions could not be reached for comment.
"I don't talk to Fedoseyev anymore," Darfi said. "The last time I saw him I asked him what the [expletive] he thought he was doing, but he didn't seem to think there was a problem."
As for the friend who introduced Darfi to Fedoseyev, Sergei Gliyants, he went on to produce last year's blockbuster "Boomer," one of the highest-grossing Russian films of all time.
Gliyants could not be reached for comment.
TITLE: Chevron Considers Multi-Billion Stake
AUTHOR: By Catherine Belton
PUBLISHER: Staff Writer
TEXT: MOSCOW - Even as the market waited with bated breath to see whether the government would destroy investors' former darling Yukos this week, the Energy Ministry held out hope Monday for significant foreign investment in the oil sector.
ChevronTexaco is considering investing $5 billion to $10 billion in the sector,the ministry said in a statement issued as Yukos announced default on a $1 billion syndicated loan.
The statement was issued following Energy Minister Viktor Khristenko's meeting with ChevronTexaco CEO David O'Reilly on Friday.
"David O'Reilly told Khristenko that his company was currently considering the possibility of investing $5 to $10 billion in the Russian energy sector," the statement said. It did not give any timeframe.
The world's No. 2 oil major has been sniffing around for possible major investments in Russia's oil sector for some time now, including the possible purchase of a blocking stake in Sibneft.
But analysts said Monday that with the nation's biggest blue chip on the verge of financial ruin as a result of an explosive politically charged standoff between the state and Yukos' owners, any significant investment by a major foreign oil firm any time soon looks unlikely.
"Chevron might have been ready to do this six months ago. But it is not the same now," said Ron Smith, oil analyst at Renaissance Capital. "This statement came from the Energy Ministry, not Chevron."
Chevron indicated Monday that it might indeed be cautious.
"ChevronTexaco is still interested in making additional major investments in Russia that will serve the long-term development of its energy potential," said Nikolai Avdulov, a spokesman for ChevronTexaco's Moscow office, Interfax reported. "But in all potential investment projects that we are looking at all over the world, we are led by such factors as profitability, government stability and also the sanctity of contract conditions."
Avdulov refused to comment to Interfax on which concrete projects in Russia the company had in mind. Calls to his office throughout the day were not put through or returned.
Following the standoff between Yukos, the nation's biggest oil exporter, and the state, few oil majors may be ready to make multi-billion dollar investments in the sector now, analysts said.
"There is no guarantee the firm you buy into will be on the right side of Putin's successor," said Stephen O'Sullivan, co-head of research at United Financial Group, adding that it seemed politics had the power to make or break even the nation's biggest blue chips.
Chevron has already been on the receiving end of what appears to be a state drive to exert greater control over its strategic assets. Last year the government unexpectedly tore up a production sharing agreement Chevron had with Exxon to develop the vast Sakhalin-3 field. Chevron's only other project in Russia is the Caspian Pipeline Consortium, which ships crude oil from the Tengiz field in Kazakhstan to the Black Sea port of Novorossiisk.
Analysts suggested the Energy Ministry may have issued the statement in an attempt to calm growing investor fears over the business climate in Russia because of the Yukos affair. "It does not seem like a coincidence that the statement came out today," O'Sullivan said.
Talk of another boom for investors - like the eternally upcoming Gazprom share liberalization - has also swept the market during bad times for Yukos.
But with most foreign oil majors anxiously looking to carve a way into Russia, one of the few places left where they can boost their reserves, some kind of deal could be inevitable eventually. The only question is when, analysts said.
"Maybe the Kremlin is thinking that Western oil majors are so desperate for reserves that, [the government's hopes for investment] well eventually turn out to be true," Smith said.
TITLE: Preatoni Keeps Construction Project
AUTHOR: By Angelina Davydova
PUBLISHER: Special to The St. Petersburg Times
TEXT: Italian Ernesto Preatoni's construction company has got another chance to complete a building renovation project.
In its last session held Tuesday, the Tender and Investment Committee gave Dom na Moike, a company which is part of Ernesto Preatoni Group, until the end of the week to collect all the necessary documentation in order to continue the reconstruction of a building at Bolshaya Morskaya, 54.
The reconstruction of the building was initiated in 1999 by EVG Holdings, but in 2003 the company transferred its rights to Dom na Moike, which was supposed to receive the governmental permission by August 2003.
However, when the permit didn't turn up, Dom na Moike decided to keep building, said Vladimir Maslov, the company's general director in a telephone interview on Monday.
In April 2004 the State Architectural and Construction Control Committee ordered the construction to stop. Maslov said that it is the prolonged bureaucratic procedure that was to blame for the delay in the construction process, not the company.
The company has already invested $4 million, while the estimated total cost of the project is around $14 million, he said. The reconstruction plans include turning the house into a multi-functional residential complex with a hotel and an apartment block, Maslov said.
Dom na Moike's hotel is due to be run by Domina, an international hotel chain of 4 to 5 star hotels. Maslov said that 19 Italian investors and three Russians have already signed contracts with Domina, acting as future owners of the apartments. They are supposed to eventually sell their property to the managing company, Domina Hotels.
Last week's session of the Tender and Investment Committee was also the last one of its kind, as the system of allocating construction lots in St. Petersburg has changed - instead of distributing the lots, the city administration will now hold tenders for every one of them. Still, the decision regar-ding the Dom na Moike project was made, and the Committee asked the company to collect all the necessary documentation in order to regain the construction permit.
"We're doing our best to pass through all the formalities this time," Maslov said.
Dom na Moike is a member of the American Chamber of Commerce in St. Petersburg. The company has initiated the creation of the Hospitality Committee within the AmCham.
Ernesto Preatoni Group has two companies in St. Petersburg. One of them, Purneco Ltd is the owner of a business center on Zhikovskogo street. Ernesto Preatoni is an Italian businessman, operating several businesses in the Baltic States (including a bank in Latvia, and several shopping malls in the Baltic States.)
TITLE: IN BRIEF
TEXT: $61M Insulation Plant
ST. PETERSBURG (Prime-Tass) - Denmark's Rockwool International is to invest more than 50 million eu-
ros ($60.8 million) in the construction of a factory to produce non-inflammable insulation materials in Vyborg, Leningrad region's administration said Thursday.
The 29.5 hectare construction site was chosen in May 2003.
It will major in production of rolled non-inflammable mineral wool insulation for construction and engineering systems, thermal insulators for wall and ceiling panels, artificial turf, soundproofing and vibration insulation.
Construction is to start this month and the launch is scheduled for January 2006.
TNK Boosts BP
MOSCOW (Bloomberg) - BP's Russian venture, TNK-BP, helped add $7 billion to BP's revenue in the first half of this year and may double in size in the next 10 years, BP CEO John Browne said Friday.
TNK-BP's output probably increased by 14 percent in the first half, Browne said in Moscow as BP, the world's second largest publicly traded oil company released its second-quarter results. TNK-BP output for the full year is expected to grow 12 percent and was pumping 1.45 million barrels a day in June.
"On the basis of the progress we've made in the past 12 months, we believe we can nearly double the size of TNK-BP in the next decade," Browne said. TNK-BP's "reserves will sustain production in the years ahead and they will also encourage investment."
BP last year agreed to pay $7.7 billion to combine its Russian assets with those of Tyumen Oil Co. and to buy a stake in Slavneft to create TNK-BP. The purchase enabled BP to rival Royal Dutch/Shell Group in oil and gas output.
"TNK-BP is now an important contributor to global energy security, and it can be an even greater contributor as time goes on," Browne said. "There is no physical shortage of resources across the world."
New Retailer
ST.PETERSBURG (SPT) - European retailer Kingfisher is entering the St. Petersburg market.
During the next 2 to 3 years the company is planning to invest up to $50 million into opening at least two stores in Moscow and St. Petersburg, Interfax reported.
Andrei Medov, PR and development director of Kingfisher Russia said during the Leading Retailers Conference that took place in St. Petersburg Friday that the company is planning to open 50 stores throughout Russia in the next ten years.
Fortum Raises Stake
HELSINKI (Reuters) - Fortum will buy an additional 9.7 percent stake in utility Lenenergo, raising its stake in the company to 30.7 percent, the Finnish energy group said Thursday.
"After the completion of this deal, Fortum will have invested a total of some 150 million euros ($182.7 million) in Lenenergo shares," Fortum said in a statement.
Pensions To Be Indexed
MOSCOW (AP) - Pensions may be adjusted for inflation as of Aug. 1, Health Minister Mikhail Zurabov said Monday.
Zurabov told President Vladimir Putin at a Kremlin meeting with members of the government that the pension system had received more funds in the first six months of this year than expected, Itar-Tass reported.
Zurabov did not say by how much.
The government last increased pensions on April 1 by about 121 rubles to 135 rubles ($4.15 to $4.65) a month.
Currently, the average pension is about 2,060 rubles a month.
TITLE: Accounting Reform Loses Steam
AUTHOR: By Mikhail Balyasny
PUBLISHER: Special to The St. Petersburg Times
TEXT: MOSCOW - A bureaucratic foul-up has caused the government to fall behind the business community in the drive to adopt international accounting standards.
Although Russia's top companies already prepare their books under international standards, the delay could put a brake on other businesses following suit.
The government has spent years planning the accounting reform, but there is still no agreement on a timetable or guidelines, Andrei Sharonov, Deputy Minister of Economic Development and Trade, said at a recent investor conference.
As a result of the failure of the Economic Development and Trade Ministry and the Finance Ministry to coordinate a plan of action on accounting reform, Prime Minister Mikhail Fradkov dissolved the inter-ministerial commission entrusted with the job.
Around the world, companies are beginning to do their books under international financial reporting standards, or IFRS, in an effort to accommodate the global economy.
Next year, for example, each European Union country will have to replace its own accounting rules with standards established by the International Accounting Standards Board.
"Russian [accounting] standards offer investors very weak information. Many financial indicators are unrealistic," Sharonov said.
"Right now there are many nontransparent private companies. We need to strictly make them choose: either they release information like a joint stock company does, or we make them change their organizational structure."
As long as the government has not harmonized its own plans, however, such action will be forestalled.
Russian businesses operating in the global economy aren't waiting.
Most large banks and publicly traded companies have been issuing reports to IFRS for several years as they gear up for a voluntary deadline at the end of this year.
For such companies, adoption of IFRS is both unavoidable and desirable, said Andrei Oskolkov, an aide to the CEO at Gazenergoprombank.
Yet preparing IFRS statements has been a difficult process for many Russian companies.
"The top 5 percent of Russian businesses are well-prepared and have been issuing IFRS reports for a number of years. The rest are at the beginning of the process," said Vitaly Pyltsov, a partner at Ernst & Young.
Reporting under IFRS involves not only a wealth of preparatory work. It also requires "changing the mindset and retraining both the preparers of financial information and financial statements users," said Keith Gaebel, director of international financial reporting at PricewaterhouseCoopers in Moscow.
Retraining employees - from accountants to financial managers and analysts - increases costs.
A further complication frequently cited by Russian companies is the absence of a legal translation of IFRS.
While companies continue to report under Russian accounting standards, or RAS, there has been an effort to improve the substance and reputation of RAS.
Although the level of disclosure and detail has increased, RAS "is still not the same volume or quality of information that the IFRS calls for," said Gaebel.
IFRS cover more accounting areas than Russian standards and require more detail and transparency in reporting results.
Consolidated financial statements have always been a major issue for firms reporting under RAS.
"Consolidation is not addressed in Russian accounting as it is addressed in the IFRS," said Pyltsov.
Most firms do not provide consolidated financial statements - and under RAS they don't have to unless they have a majority stake in a company.
And even when a company has majority ownership of a subsidiary, companies still don't file consolidated financial statements, said Alexander Dorofeyev, a senior manager at Deloitte's audit department in Moscow. "You are risking a very small fine."
Another major difference with IFRS is the handling of a company's financial instruments.
"Russia's accounting standard is almost silent regarding accounting for financial instruments," said Pyltsov.
Under RAS, financial instruments are carried off the balance sheet until their settlement date. So companies are not required to report even significant losses on financial instruments until those losses are settled, which can potentially lead to huge distortions of financial health.
The exigencies of the global economy - certainly not nudging from the government - are pushing companies to overcome these differences.
"IFRS financial statements will provide more transparent and reliable information and ensure Russian companies speak a 'common language' with the international investment community," said Gaebel.
In the meantime, the government is still figuring out how to form a new body to help streamline the process.
TITLE: Russia to Cash In on IT Growth
AUTHOR: By Simone Kozuharov
PUBLISHER: Staff Writer
TEXT: The Russian information technology industry saw rapid growth last year and Russia is well positioned to become a global leader in IT, industry leaders say.
"The market experienced very rapid growth last year with over 50 percent growth in some segments," said Anatoly Karachinksy, president and CEO of industry leader Information Business Systems Group (IBS).
The industry as a whole has grown 30-40 percent over the past three years according to Valentin Makarov, president of Fort-Ross Information Technology Services, a consortium of software developing companies in Russia, Ukraine and Belorus.
Systems integration saw a 35-40 percent rise, the infrastructure market went up by 30 percent, the computer manufacturing and assembly sphere rose by 20-25 percent and the software development market grew 40 percent, Karachinsky said.
"We experienced a huge interest toward Russia and Russia is very well positioned geopolitically," Karachinsky said. "There are projections for stability, for economic growth in Russia."
Over the last two years Russia "became the absolute European leader in implementing the highest level of certification," Makarov said. "None of Europe can compete."
Luxoft, a subsidiary of IBS, was awarded the highest possible certificate recognizing software development.
"Only nineteen companies in the world have this level of certification," Karachinsky said.
Additionally, Russia became the global leader in IT training programs, "which means our higher schools [of education] are the best in the world," Makarov said.
The internal Russian IT market is growing more than 10 percent annually, Makarov said, with an overall 24 percent increase in the IT market as a whole last year.
"More business means better quality of our work," Makarov said.
The Russian government has taken notice of the exponential growth and recognized Russia's potential in the industry, experts said, although they are still crying for more governmental support.
The government itself is working on developing its use of IT internally and has reorganized itself to better handle the growing IT field, experts said.
Formerly known as the Ministry of Communications and Information, the ministry has been renamed and reorganized as the Ministry of Information Technology and Communications.
"The government now realizes it's a very fast-growing, innovative industry," Makarov said.
One reason for Russia's potential IT success is its geopolitical position, Karachinsky said.
Russia's main competitors in the industry are India and China, with India dominating 20 percent of the market share. Russia and China tie for second place, with one percent each.
But where both India and China are viewed respectively as unstable politically and geographically, Russia is a vessel of stability, Karachinsky said.
"There are many aspects in India and China that are unpredictable in different combinations," he said.
"If you look at China, there is a big conflict between the form and the context because their form is communistic, but they are a capitalistic country in every essence.
"And India is very unlucky in its geographic position right now," Karachinksy said, citing the instability in the region with Iraq and Kashmir.
It is unlikely, however, that Russia will overtake or equal India's dominating position for one main reason.
"It is impossible because India has 1 billion people and the English language is widely spread there. So obviously it will always be easier to find people for very cheap work in India and as time progresses, it will be more and more difficult to do that in Russia," Karachinsky said.
However, Russia's future is concentrated in dealing with the industry's complex issues, he said.
"The education level in Russia is much higher, so obviously it will be easier to find specialists who can handle difficult problems and solve complex issues."
Other experts say Russia's future also looks bright on the simple side of the industry that focuses not on technology for giant corporate entities, but on software for everyday use, like shareware.
Shareware is simply software that can be downloaded from the internet for a free trial period. If the user decides to purchase the program, he or she can do so right over the internet.
One company capitalizing on both sides of the industry is Novosoft Russia, a conglomerate including Novosoft, Novosoft Development, Novosoft Novosibirsk and Novosoft Zheleznogorsk.
Located in Akademgorodok, Novosibirsk, the Russian equivalent of Silicon Valley, Novosoft is due to complete a contract with Norilsk Nickel, the global leader in nickel production, and is negotiating further contracts for future participation with the nickel giant, Novosoft founder and president Vladimir Vaschenko said.
"This type of company [Norilsk Nickel] is using a lot of equipment to support technological processes during all stages of metal production so we provide them with a system that manages all these types of equipment," he said.
Once a joint Russian-American venture, Novosoft split with its American counterpart last year, leaving the Russian and American partners headed in different directions.
"Novosoft Inc. declared its bankruptcy in the United States, or tried to declare it, but Novosoft Russia is working successfully here," Vaschenko said.
Although one of Novosoft's major focuses was offshore software development, the company has experienced loss since September 11 and is adapting to the change in demand by shifting its focus to shareware.
"The shareware model of business is to build a small program which costs an average price [of] 30 bucks so people can download it from the internet, install it and use it for free for one month...and then decide [whether] to buy it or not," Vaschenko said. "And you can do everything using the internet only. You can download it, install and make payments on the internet and you don't need to go to any shop."
Shareware is particularly popular because it is simple, inexpensive and can be managed by small companies and even one person.
"A lot of individual developers are doing this business in Russia," Vaschenko said. "I see this as a good direction for growth in this industry, in Russia especially."
TITLE: Investors Take Caution with Internet Brokerage Firms
AUTHOR: By Maria Levitov
PUBLISHER: Staff Writer
TEXT: MOSCOW - In the late '90s, Oleg Babakov lost millions of rubles by making poor Internet trading deals on behalf of Surgutsky Proyekt, where he served as president.
As if that was not painful enough, it soon came to light that most of the money Babakov invested in the Russian securities market was not his to risk.
Babakov had attracted assets from unsuspecting investors through newspaper ads - Surgutsky Proyekt was not even a licensed broker.
While the "Wild East" days of the Russian market now appear to be over, Surgutsky Proyekt, which dissolved in 2002, was not the last company to dupe investors. Last year the demise of Prolog, a licensed investment company, was widely reported in the media. Prolog went bankrupt after mishandling clients' assets and making too many bad deals.
While such scandals are becoming increasingly rare, investors continue to remain highly cautious about trusting Russian brokerage companies with their money. But perhaps the high level of concern is unwarranted.
Some experts believe that a simple round of research could shed light on the quality of a company and help potential investors safeguard against damages.
The first step toward safer investing is gathering information on a given brokerage firm, recommends Maria Semyonova of the National Association of Securities Market Participants, or NAUFOR. "How do they treat other clients?" Semyonova said. "What is their business development strategy? How do they manage risks? These are all important questions to ask."
A more basic question always lies beneath the surface.
"How do I know you are not going to run off with my money?" customers often ask Anton Rodchenko, deputy director of personal brokerage at an investment company called IT Trade. "Greed and fear are in constant conflict when investors make their decisions," Rodchenko said. "But when I mention insurance, they relax a bit."
Rodchenko said that IT Trade partners with Rosno, a large insurance company, to provide optional coverage.
"Depending on each investor's request, the policy can cover all or some of the cases that lead to investor damages,including a broker's sudden flight," Rosno's Dmitry Chugunov said .
Policies also cover a broker's intentional mistakes - which result from a "lack of customer loyalty" - as well as unintended mistakes, such as pressing the wrong key and sending a client's money to the wrong place.
Chugunov explained that the distinguishing feature of this type of insurance, instituted at Rosno in April, is that the policy names one third-party beneficiary - a specific investor - instead of covering all brokerage clients for damages. "It makes this new type of coverage several times cheaper," Chugunov said.
Rodchenko claims that few IT Trade clients opt for the insurance because they are able to track broker's trades online in real time, which provides some amount of peace of mind.
Ivan Kuznetsov, deputy director of the legal department at Aton, an investment company, advises investors to check company ratings in order to avoid problems before they start.
"Seeing how a company is rated and how many years it's been on the market is the primary way to safeguard yourself," Kuznetsov said. He explained that more direct information on a company's risk management strategy is normally unavailable to the public.
Tatyana Guseva, head of the professional activity department at NAUFOR, also believes that brokerage companies' reliability rankings are a good indicator, although "normally, only the big market players get ranked." Guseva said that checking for a valid license - in order to operate legally, brokerage companies must be licensed by the Federal Service for Financial Markets - and reading the fine print on the contract agreement is also critical.
Guseva said that a contract's wording should signal trouble if "a company is trying to displace all risks and responsibilities onto the client." She recommends showing all contracts to a legal expert for advice.
"When signing a contract, it's vital to check who the other signatory is, and what are they covering exactly," Guseva said.
Surgutsky Proyekt was never rated by NAUFOR or any another organization, nor licensed by the former Federal Securities Commission.
Even when a brokerage company is legitimate, however, investors should carefully consider all risks and returns. Brokerage professionals advise clients against betting their "last cent" on the market.
"By law, we cannot guarantee any profits," Rodchenko said. "Our clients are people who have spare money to invest."
TITLE: Accounting Specialist's Stand on Russian Living
AUTHOR: By Irina Titova
PUBLISHER: Staff Writer
TEXT: Foreign businessmen looking to succeed in Russia need to have a healthy dose of "patience and impatience," says James Beatty, a partner at accounting and consulting firm EMG.
"Patience is needed to realize there are things you can't change. Impatience - to constantly push things and fight back," Beatty, a 33-year-old American, said.
Beatty, whose company has been providing consulting services for mainly foreign businesses in St. Petersburg for almost 10 years, says "it's a myth that a business cannot do everything legally in Russia."
He strongly criticizes local police, loves the White Nights and says that it is easier to raise kids in Russia during their early childhood, than in America.
Beatty came to Russia at the dawn of the great changes brought about by the break up of Soviet Union for an accounting internship, following on his major at the University of Colorado.
Six months after his arrival Beatty opened his own business.
EMG offered accounting and consulting services on local tax laws and other country-specific business practices. It soon became quite successful.
"It wasn't so difficult to succeed in this business since many new foreign businesses that opened in St. Petersburg [at the time] needed support of that kind," Beatty explained.
Beatty said that before the 1998 crisis about 80 percent of EMG's clients were entrepreneurs. However, after the crisis, many of them left the country, and EMG's customers changed to a number of Fortune 500 companies.
Nowadays, EMG's biggest clients are Shell, Siegling and Impregilo. However, with the situation in Russia stabilizing, private entrepreneurs are coming back to the country, Beatty said.
"The tax laws have become much more investor-friendly," he said.
Beatty believes the two biggest problems for foreign businesses operating in Russia are the VAT tax law, and the high customs rates.
Beatty said customs rates on importing manufacturing materials are so high that, with the VAT on top, it is often unprofitable to set up production for export in Russia.
"Ultimately, it hurts the Russian economy," Beatty said, adding that if it were up to him, he "would drastically change the Russian customs law."
Beatty said another difficult concept for foreign businessmen to grasp was the difference in the authorities' ways of running business here and in the West.
"They couldn't understand why they had obstacles dealing with customs and tax services...since, as far as they understood, they were doing good for the country by brining business here," Beatty said.
Beatty said he often had to explain to his clients that this logic doesn't work here, and that businessmen should just make sure that their paperwork is correct and not expect any help.
However, among the advice he gives to foreign businessmen Beatty said he stresses the necessity "to operate legally."
"It is especially important for foreign companies because they are more of a target here," Beatty said. "Besides, it's a myth that it's not possible to do everything legally in Russia."
Beatty said that though Russian businessmen may get away with paying salaries "from under the table," it would not work for foreigners.
Beatty said he had to "fight back" in Russia many times. One of the biggest reasons for that was local bureaucracy.
"Our clients always did their best to be transparent, pay taxes and show everything they had. However, certain Russian structures, used to being cheated by a number of Russian companies, did not believe, or pretended not to believe, and wanted to fine our clients," he said.
Beatty, who takes full responsibility for his clients' audits, said he never paid those fines.
Instead, he started court cases and won 90 percent of them.
Beatty feels that the St. Petersburg government headed by Valentina Matviyenko provides more support for foreign businesses.
"This administration seems to be more open to work with us. Besides, people feel more secure working with Matviyenko in relying on law," he said.
"Matviyenko is with Putin. It is perceived as more secure for business," Beatty said.
The current financial situation in the city is much better than before, Beatty said, due to the fact that more federal money comes to St. Petersburg.
"It also boosts investments in construction and real estate. Salaries in the city have become higher recently, as well," he said.
Among the things that Beatty would like to see changed in St. Petersburg is the work of the police.
"I'd reduce the city's current police force by 90 percent and pay the rest of the staff decent salaries," Beatty said.
Beatty, whose Russian wife gave birth to their baby son Daniel three months ago, said he was not planning to leave Russia for another five years, because it is much easier to raise a baby here.
"In Russia they have this wonderful tradition of having grandparents to help take care of the baby, whereas in America it's different. Babushki and dedushki come for free here, and they are very helpful," Beatty said.
However, Beatty said that he'd prefer to send his son to school in America.
"It's not because Russian education is bad. It's very good, in my opinion. But I feel that America can teach my son more independence," Beatty said.
Beatty said he doesn't like the current fad where children of rich people become the so-called 'golden youth' and rely heavily on the help from their parents in their careers and lives.
"In America children are taught to be more independent. After they graduate from a university, no matter what kind of family they come from, they are on their own to decide what they will do in life and how they will achieve it," he said.
"I think, it's a cultural difference. In the US we learn to rely on ourselves at an early age. For instance, we never rely on the state for giving us pensions but save for our pensions ourselves instead," Beatty said.
Curt Stahl, owner of American-British Family Practice medical center, said he knows Beatty as "the most ethical guy in St. Petersburg in terms of business and family life".
"James is exactly the kind of businessman one can trust, and that's very important," Stahl said.
"Beatty works a lot with big-name companies, but he is always willing to work with smaller businesses as well. He likes to help new businesses succeed," he said.
Aaron Bogott, marketing manager of Jensen Group, which manages property and real estate development, said that Beatty provided a lot of help for their company.
"One of Beatty's greatest qualities is his ability to generate ideas. He always has plenty of them," Bogott said.
TITLE: Welfare Reforms: Slashing Support to the Vulnerable
AUTHOR: By Mikhail Delyagin
TEXT: The draft law on replacing social welfare benefits with cash payments was considered by the State Duma in a first reading on Friday.
The government wants to ensure that the bill is approved in its second and third readings at the beginning of August and, in order to do this, deputies will postpone their vacations this year.
The size of the document, which is more than 600 pages long, makes it almost impossible to study in any kind of detail in such a short period of time. Passing the law on the sly in the political "low season" should spare the reformers from being put on the spot to defend the bill.
At the heart of the bill is the monetization of benefits and subsidies. Instead of subsidized or free public transport, sanatorium treatment, medication and use of the telephone for certain categories of citizens, such as pensioners and veterans, they will now receive cash payments.
The monetary value of abolished benefits has been "calculated" so that benefit recipients, upon receiving their cash payments, will have the option of buying their current benefits. Thus, for example, if a Muscovite consumes less than 500 rubles per month in free medication, it is better for him to pay for that medication with his cash compensation and to keep the difference. If he consumes more than 500 rubles per month in free medication then, according to the reformers' plans, he can pay 500 rubles out of his cash compensation and preserve his current benefit. The 15,000 rubles that would be needed for a course of treatment at a sanatorium can be "saved up" by putting aside money from one's cash payment each month.
Those who are less dependent on benefits will win from this reform, while those that are more dependent will lose out. If, for example, a group 2 disabled person uses public transport and needs medication, then there is no way they will be able to afford treatment at a sanatorium, even if their life depended on it.
Given this, only a madman can possibly believe assurances that cash payments will suffice.
Furthermore, according to the bill, cash payments will be introduced at the beginning of 2005, while the option of buying subsidies will only be introduced in 2006. Thus, in 2005 the inadequacy of cash payments for those most dependant on benefits will become fully apparent.
According to estimates made by Duma Deputy and former Social Security Minister Oksana Dmitriyeva, "war invalids" in St. Petersburg receive benefits to the tune of 1,000 rubles to 4,800 rubles per month, and the government will provide them with 2,000 rubles in cash compensation. Disabled children receive benefits of 1,160 rubles to 4,660 rubles per month, but will only receive 1,000 rubles in cash compensation - below the minimum required level. This is probably because they are unable to defend themselves, unlike war veterans.
The government is promising to index cash compensation along with pensions - that means a guaranteed lag behind inflation.
If a benefit recipient is poor, they will not spend the money on the services the cash payments are intended for, but, as President Vladimir Putin suggested, will treat themselves to "a tasty morsel" at the risk of going without vital medication.
The idea of replacing social welfare benefits with cash payments is in itself flawed. Different people, even in the same social category, have different needs. If the government hands out the same cash compensation to everyone in a given category, some will inevitably receive more than they need, while others will not - and their neighbors' additional funds will not make the lives of the latter group any easier. The social welfare benefits system is fundamentally non-market, based on needs not on demand; and the application of standard market logic is completely ridiculous.
Cash payments to so-called labor veterans, those who worked during the war to supply the military and those who suffered repression - 11.8 million out of 25.4 million recipients of welfare subsidies - have been dumped on the regional governments who have to decide whether to preserve welfare subsidies or to pay out cash. Moscow City and Novosibirsk regions have already declared that benefits will be preserved.
Due to the different levels of budget funding in different regions, the funding of cash payments will vary. The attempt to provide an even social support across the regions (and today governors are being coerced into replacing benefits with cash payments), given that the Finance Ministry's draft federal budget for 2005 does not envisage an increase in financial assistance for the regions, will result in regional budget deficits.
Covering these deficits, as with the pre-election increase in wages for state employees in 2002 (when the reformers declared that it was the federal center's job to raise wages, and the governors' job to find the funds), will be achieved by taking money from the only financial reserve that federally-subsidized regions have - funds for housing and utilities. This will result in a catastrophe in this sector, as was the case during the winter of '02-'03 when housing and utilities funds had to be redirected to pay the wages (something that even the government admitted later).
The outcome was that the number of people left without heating or electricity for more than 24 hours grew almost 20-fold, from 116,000 to more than 2.1 million.
The real objective of the reform is to save budget money. Budget obligations to benefit recipients amount to more than two trillion rubles per year; expenditures, according to estimates, do not exceed 500 billion. Replacing subsidies with cash payments will reduce federal budget expenditures by as much as 171 billion rubles - while the regions will have to pick up an extra bill of approximately 100 billion rubles.
The striving to economize is not spurred on by a lack of funds. Just the unused funds (including the Stabilization Fund) exceed $13 billion.
Liberal fundamentalists, as usual, only want one thing: to slash budget expenditures in order to reduce the tax burden on businesses. Although they are responsible for serving society as a whole, they only represent the interests of business - the interests of the socially secure, to the detriment of the socially unprotected.
Furthermore, they are only canceling the benefits of politically disenfranchised social groups (the single exception being the abolition of free public transport for Duma deputies, senators and their aides). The value of the social welfare package that an official or a Duma deputy receives is not under review.
Reformers cannot fail to understand that the slashing of social support to the most vulnerable sections of society will only lead to the accelerated extinction of that part of society, even if it does mean lightening of the burden on the pension and social welfare systems.
Such a reform is close to genocide.
Mikhail Delyagin, head of the Modernization Institute and chairman of the Rodina party's platform committee, contributed this comment to The St. Petersburg Times.
TITLE: Oligarchs to Rule Regions as Forests Open for Privatization
AUTHOR: By Boris Kagarlitsky
TEXT: Russia is bracing itself for the privatization of its forests. The decisive step of this process will be the new Forestry Code, a draft of which is to be considered by the State Duma in the near future.
An initial version of the code, approved by the government in early spring, referred directly to private ownership of forest land. According to Greenpeace estimates, this could lead to the privatization of up to 90 percent of Russia's forests.
The Natural Resources Ministry does not seem to have any objections, apparently believing that the forests will finally fall into good hands. But the real question is: What will those hands do with the land once it's theirs?
There can be little doubt as to the answer: relentless logging and export of timber. The sale of unprocessed timber accounts for more than 50 percent of Russia's exports. If the draft code is passed into law, it will open the way for the sale of some 843 million hectares of forest to private logging companies.
That means big money. Forests, like oil, are one of the country's greatest riches. If private capital comes to rule the industry, the result - as in the oil sector - will be the formation of oligarchic corporations that control not just resources, but entire regions.
The draft code also allows the sale of forest land to foreigners. The only areas off limits to non-residents would be those located in border zones, as with the oil industry. National security, after all, is priority No. 1. The rest of Russian territory, a huge part of which is woods, can be bought wholesale.
The original draft of the Forestry Code stirred up a murmur of disapproval among environmental organizations and the wider public. Then the text underwent some revision and some of the wording was toned down. Government officials now try to avoid the word "privatization." As a result, the document has become extremely ambiguous, but its general thrust has remained unchanged.
The long-term leasing proposed by the code's authors differs little from privatization - after 10 years of leasing, tenants would be eligible to buy the forest land outright. Environmentalists complain of numerous technical flaws in the code and a lack of explicitly defined rules and regulations. There are no provisions for public oversight of the redistribution of forest land, and the Cabinet is even considering the possibility of privatizing nature reserves and protected land.
Under the new code, a leaseholder who annually fells trees covering an area of 1,000 hectares could limit replenishment efforts to an area of one hectare; formally, this would be in strict compliance with the code. However, even if the code contained tougher regulations and mechanisms for enforcement, they would be ignored anyway. Given that the government admits its inability to control what goes on in the country's forests now, clearly this task will become virtually impossible once the forests are transferred to private hands. Incidentally, one of the main arguments cited in favor of privatization is the government's inability to enforce existing laws.
The authorities are unable to prevent illegal felling and the smuggling of timber - so the answer is to legalize them. Imagine if in a few years we are told that the police are unable to prevent burglaries, so it is necessary to pass a new law allowing thieves to enter our homes unobstructed and take whatever they like.
Essentially, what we're up against is the same kind of theft, the distinction being that the goods being stolen are not our private belongings, but our common property.
Even Grigory Yavlinsky, hardly a radical, has noted that "the reforms of the 1990s in Russia have resulted in the creation of an economic system based on the complete fusion of business and officialdom - a system that is anti-environmental in its very essence."
The authorities inability to ensure order in the forests (or, likewise, to protect historical monuments) is not due to a lack of power or funding. When it comes to the war in Chechnya or the maintenance of a giant bureaucracy, the government comes up with the wherewithal, and the same goes for the upkeep of an expensive propaganda machine.
The powers that be are not interested in protecting public goods. Indeed, their aim is quite the opposite: to facilitate the transfer of resources into private hands.
However, the potential impact of this issue extends far beyond the officials in the Natural Resources Ministry and even beyond Russia's borders.
Logging in Brazil has long been a source of concern around the world. Russia's forests likewise are the lungs of the planet, only in the eastern hemisphere. If the planned reform is successfully implemented, its repercussions will be felt throughout the whole of Europe.
Boris Kagarlitsky is director of the Institute of Globalization Studies.
TITLE: Sovietology Strikes Back
AUTHOR: By Yevgenia Albats
TEXT: President Vladimir Putin's meeting with the oligarchs in the Kremlin last week was a real blast from the past.
Closed Soviet political culture with its conspiratorial stances, meaningless words and meaningful gestures, that seemed to have perished some 13 years ago, was clearly discernable in the TV footage of the Kremlin meeting.
It is high time to dust off the sovietological skills of a previous era - reading between the lines of Soviet leaders' statements, noting the proximity of politburo members to the General Secretary during public celebrations on top of Lenin's mausoleum, observing who was invited to top-level meetings and who did not make the cut - in order to peak behind the "bars" of Soviet, and now post-Soviet, politics and to make some sense of things.
Take, for instance, Putin's much ballyhooed statement on Yukos three weeks ago, in which he claimed that the state had no desire to bankrupt the company. Old-school sovietologists would never have taken his words at face value, as the market did in its eagerness for good news; rather, they would have scrutinized the context and ambiguous clauses, in search of hints pointing to what has become apparent in the last few days - that Putin intends to continue the assault on Yukos, to drive down the share price and to make bankruptcy almost unavoidable.
In the same way, Putin's meeting with the oligarchs contained plenty of subtle hints as well as unspoken, but explicit, messages.
It matters little that the room previously used for such meetings by Boris Yeltsin and Putin is named the Red Room, while the room selected for last week's meeting is the Green Room - however, the size of the room does matter. The Green Room was chosen to emphasize the final break with the Yeltsin-style relationship between the authorities and oligarchs. Unlike in earlier meetings, where Russia's super rich sat patrician-like around a large oval table in an airy hall, this time they were squeezed together like sardines, fighting with one other for space and gulping for air.
Putin's cold greeting to the oligarchs, not bothering to shake anyone's hand, carried yet another unambiguous message that the partnership between the state and business is well and truly over.
The drawings on the walls, which cameras repeatedly zoomed in on, were also telling. The icon of the Orthodox saint, Nikolai Ugodnik, (which replaced a portrait of Vladimir Lenin in the former Politburo meeting chambers) behind the president himself, was meant to present the president's real concerns - i.e. unlike the invited guests, Putin is concerned about those in desperate need of his patronage, help and protection.
The central place that the icon has acquired in the Kremlin's official imagery also points to the essence of the Kremlin's new ideology in which Russian Orthodoxy, as the antithesis of Soviet internationalism, is becoming key.
The only other painting in the room suggests that the Kremlin is going to pursue this new ideology in a most rigorous fashion. Ilya Glazunov, who painted the picture is a well-known Soviet artist (inter alia, for his portraits of Soviet leaders). He is a zealous Russian nationalist, who gained notoriety in the mid-90s with his infamous 1994 painting "Russia wake up!" - a remake of a Nazi-era painting, with the same poses and even the same title, which portrayed the then Western leaders as predators eager to destroy Russia, along with Orthodox Jews drinking the blood of a Christian baby. True, the Glazunov painting in the Green Room bore none of those sentiments - it presents a leader surveying his vast land - but the very fact that a painting by an artist with such views and reputation founds it way onto the Kremlin walls and was repeatedly shown by Kremlin cameras is a significant statement in itself.
Finally, the absence of certain names on the guest list, most notably that of Anatoly Chubais, offers an insight into the Kremlin's next steps regarding privatization deals.
Despite repeated assertions to the contrary, the Kremlin is going to review and revise contracts concluded by its predecessors. The feeble excuse for Chubais' absence, that he was on vacation (he was not), did not convince - nor was it supposed to convince - anyone that the onetime privatization guru and CEO of UES had not fallen from favor. It was one more snub to add to the others of recent months: Chubais was not invited to Putin's inauguration in May and more recently his planned electricity utility reform was put on hold by Prime Minister Mikhail Fradkov. The talk of the town is that Chubais will soon follow in Khodorkovsky's footsteps.
In fact, things may not be that bad, but what seems obvious is that in the "best" tradition of Soviet politics, a top official is being kept on tenter-hooks about his future, prompting betrayal and snitching by his close entourage, and the disloyalty of subordinates, and precluding the official from making any opposition statements or moves.
Sovietology is enjoying a renaissance. More's the pity.
Yevgenia Albats hosts a political talk show on Ekho Moskvy radio on Sundays.
TITLE: Legislative Assembly: An Ineffective Representative of Voters
AUTHOR: By Vladimir Gryaznevich
TEXT: Half a year since the new administration took over and with a Legislative Assembly elected at the tail end of the era of governor Vladimir Yakovlev, all evidence points to the depressing fact that the city parliament has had virtually no influence on the lives of the citizens. This has nothing to do with the political influence of Smolny; it is just that those who were elected by the people to perform legislative work are simply ignoring it.
What we can see in practice is that the overwhelming majority of the deputies are not even trying to fulfil their role as lawmakers, despite the tens of millions of rubles put aside precisely for "legislative processes." Cases where the deputies themselves take initiative are rare. On the whole, they limit their work to perusing drafts that arrive from the administration and making insignificant amendments. Laws unpopular with the public are no different. They are dealt with tactically: the more the deputy keeps his eyes on Smolny, the louder his protests at the draft - which he then goes on to approve through a servile (and anonymous) vote. A typical example is the case of reforms to communal housing services.
Just like certain heads of the economic bloc of the administration note, when it comes to the drafting of concrete laws, the assembly assumes a passive role. Deputies seem more drawn to general discussions about fundamental issues: wouldn't it be great to introduce a code for investments, or for the budget, or perhaps some other grandiose matter. Naturally, to save the whole of humanity seems more magnanimous than saving just your neighbor. And simpler too, since no concrete actions need be taken, and hence there isn't any direct responsibility.
In the rare cases when the assembly does try to correct something in a more precise manner, all sorts of confusions occur. Even the civil servants at Smolny were bewildered by the deputies' inclusion in the bill on real estate investment of rules that allowing whole blocks of land to be sold for residential development without open competition. And the fact is, our house-building market is well developed, there is a healthy competition, and the imposed regulations are only going to hand over an unfair advantage to certain companies. Nobody benefits - neither the administration, nor the builders, nor the population that will be affected by the resultant increase in the already-high property prices. Moreover, besides lacking in economic know-how, the amendment is very poorly written.
Despite the loyalty shown to Governor Valentina Matviyenko by all parties, the assembly is by no means united. They sing in unison only with regard to their own private reserves (which are now being "amended according to voter wishes"), whereas the resolution of other, even elementary issues often turns stagnant. For example, the procedures to elect a commissioner for human rights have now been set in motion for the 10th time, and they have come unstuck due to the same little Napoleons, bureaucratic lackeys, and other unsavory opponents as previously. Because of deputy disputes the city's freeman elections fell through. Breaking all deadlines, deputies cannot even enter into the town charter a rule regarding its own composition: how many people the Assembly must admit from party lists and how many should be reserved for independent candidates. Smolny favored a 25/25 mix presenting deputies with a dilemma: either pal up with the governor, and especially Viktor Lobko, head of City Hall's administration, so that in case of total carnage at the elections they can still maintain their bread-and-butter constituency, or, in return for faith and loyalty, keep asking for more lucrative positions. Or the final option: with all haste book themselves a place on the party candidate lists (which explains the emergence of the Liberal Democrat, or LDPR, faction in the assembly).
People in the know propose that the "oddities" that have slowed down the work of the assembly are due to an ongoing struggle between various factions within Smolny (and these are not divided as simply as the reformists and the liberals). Hence, the attempt to remove from office the president of the city finance commission, Yabloko leader Mikhail Amosov - one of the few deputies who has managed to offer constructive criticism of the administration's politics.
A dozen deputies, former allies of Yakovlev, blamed "disorder reigning in city finances" on Amosov and backed up this absurd claim by saying that he is supposedly too concerned with self-promotion! It's as we say, one's own troubles are more keenly felt than those of others. It is as if Amosov is to blame for the majority of the signatories who tried to remove him from office (and among them were former heads of the commission) being of virtually no interest to the media, particular with their orthodox, pro-Smolny stances.
In fact, self-promotion is about the only thing that most of the people inside the Mariinsky Palace are pursuing in earnest. In contrast to Amosov, however, they have little talent for such things. Let's take the example of the Party of Life, which advertised their populist proposals for pensions, welfare allowances, bans on depraved advertisements of beer and tobacco, punishment of bribe-takers, drug dealers, and so on. The best thing about these proposed initiatives is that their authors will never be liable to answer for them since all these issues are regulated on a national level. Lately, one of the main concerns of the assembly has become international affairs. Foreign delegations arrive as if on a conveyer belt. Guests from Poland, Italy, New Zealand, Ecuador, Ghana, and a dozen other countries arrive to be informed about St Petersburg's political system, the vital role that the assembly plays in it, and receive booklets on the Mariinsky Palace.
One thing one can allow the deputies in all honesty is that they have so far excelled at organising an immense number of competitions (children's drawings, songs, essays), tournaments, and even a private airplanes rally. All that's left is to draft legislature to make all these festivities official (and there are about 70), transfer money from the budget for their financing, and then life will be, oh, ever so jolly - inside the Mariinsky Palace and in its periphery.
Vladimir Gryaznevich is a political analyst with Expert Severo-Zapad magazine. His comment was first broadcast on Ekho Moskvy in St. Petersburg on Friday.
TITLE: Chris Floyd's Global Eye
AUTHOR: By Chris Floyd
TEXT: Beggar's Banquet
And so it's come to this. The American people - proud heirs of a bold revolutionary spirit now marking the 228th anniversary of its fiery eruption into the world - have been reduced to thanking the robed Olympians on the Supreme Court for preserving a few crumbs of the nation's once-vast ancient liberties.
Last week, the justices ruled that the unelected strongman they appointed president in December 2000 does not have the unqualified right to arrest people without charges and put them in a dungeon forever - at least not without allowing his victims to float up briefly in some conveniently undefined judicial "process." Not necessarily "a regular civilian court," mind you - maybe a military tribunal, the justices suggested helpfully. And the defendants will be presumed guilty unless they can somehow prove themselves innocent - with only limited, government-monitored contact with their attorneys. But at least the Bushists will have to produce a scrap of paper now and then to justify their body-snatching operations.
Except of course for the countless people now being "disappeared" in secret CIA prisons around the world or "rendered" to the rape rooms and torture pits of Bush's foreign tyrant pals. These wretched souls fall entirely outside the scope of the Court's rulings, which apply only to those areas where the U.S. holds "territorial jurisdiction," such as Guantanamo Bay, legal website Scotus.com reports.
Doubtless there will now be a mass dispersal of the Guantanamo captives to the CIA gulag and other foreign parts. In fact, the newly "sovereign" client state of Iraq - run by the unelected CIA terrorist and ex-Baathist stalwart, Iyad Allawi, now busy preparing martial law for his "liberated" people - could prove invaluable in this regard.
The Supremacists also upheld the L'il Commander's self-bestowed right to use his "enemy combatant" popgun - a sinister novelty, wholly without precedent, which allows him to zap captives into a legal limbo where neither U.S. law nor the Geneva Conventions apply. But they did place some restrictions on how far Junior can spray his little zapper, apparently limiting it to those actually captured on a battlefield - at least for now.
For this week's decisions are only a brief respite. The Court's barrage of complex, multi-layered opinions left plenty of wiggle room for White House weasel-worders to continue their pursuit of unbridled presidential power. After all, the Regime has publicly defined the entire world as the "battlefield" of the war on terror. "Enemy combatants" are everywhere, and Bush's arbitrary power to bestow this mark of Cain on anyone he pleases was not rejected in principle by the Court, which practically begged the Regime's rubber-stamps in Congress to come up with some "enabling acts" to sanctify the Leader's tyrannical longings. Bush's authoritarian claims will simply be slapped with a new coat of paint - a nod to limited judicial review, some butt-covering legislation - then trotted out again.
Still, at this advanced stage in the long decay of the American Republic, even a crumb of liberty is better than no liberty at all. The Court, jealous of its prerogatives - and perhaps piqued at Bush's attempt to hog all the terrorist-bashing fun for himself - has, temporarily and partially, hobbled the Regime's vigorous march toward a 21st century fascism. For this relief, much thanks. Of course, our gratitude might have been greater if the justices hadn't illegally foisted the tinpot tyrant on the nation - and the world - in the first place. Although they've now given their creature a light rap on the knuckles, Bush can hardly be blamed for following their example of partisan lawlessness.
Meanwhile, behind all the somber headlines and earnest commentary on the Court decisions, behind the glittering public facade of august institutions locked in noble agon over constitutional principle, the Bush Regime's true reality - the ugly world of "black ops" - keeps grinding on unabated. Here, in this dank, subterranean realm, where drug-running warlords, private armies, silent assassins, mafia chieftains, terrorist gangs, heads of state and Establishment worthies all mingle in a fog of crime, collusion and double-crossing, the law is a dead letter. Here, no courts challenge Bush's most brazen appropriation of unrestrained power - the arbitrary, unchecked, unbalanced power to kill anyone on earth, without charges, without trial, without warning.
As we've reported here for years (since Nov. 2, 2001, in fact), just after the Sept. 11 attacks Bush initiated a series of executive orders giving himself the authority to order the death of anyone he deems a terrorist - or even a "terrorist suspect." No hearing or evidence or notice is required for this dread judgement; there is no oversight, no appeal. In 2002, he extended this arbitrary license to kill to lower-ranking CIA agents, who can strike on their own iniatative and even add targets - including American citizens - to the hit lists without any presidential supervision, the Washington Post reports.
This runaway murder racket is no secret; Bush himself openly boasted about it in his 2003 State of the Union address. After detailing the number of terrorists he had arrested, he laughingly told Congress that an unspecified number of other "terrorist suspects" - just suspects - "were no longer a problem." The assembled statesmen roared their approval. No public official, in Congress or the courts, has ever challenged Bush's breathtaking assertion of life-and-death sway over the entire world.
So yes, we're glad that the Supreme Court has put a few weak fetters on some of the more blatant aspects of Bush's rampant Caesarism. But the rotten state of the Republic - its once-proud people scrambling for crumbs in the fetid mud of Bush's Murder Incorporated - is not something any patriot could celebrate on Independence Day.
For annotational references, see the Opinion section at www.sptimesrussia.com
TITLE: Sex-Symbol Brando Dies Aged 80
AUTHOR: By Anthony Breznican
PUBLISHER: The Associated Press
TEXT: LOS ANGELES - The words are pretty simple: "Stella!" and "I coulda been a contender ..." or even "The horror ... the horror ..." But these lines, when spoken by the late Marlon Brando, revolutionized the way actors behaved onscreen and ignited a generation of performers to unleash their inner passion before the cameras.
Brando, who died at age 80 on Thursday, revolutionized Hollywood's image of a leading man playing street-tough, emotionally raw characters in "A Streetcar Named Desire" and "On the Waterfront" and then revived his career a generation later as the definitive Mafia don in "The Godfather."
"I was shocked and deepy saddened at the loss of the greatest acting genius of our time. What will we do without Marlon in this world?" said his "Godfather" co-star Al Pacino, one of the generation of stars influenced by his work.
Brando was the bridge between the heroic and upstanding screen purity of earlier stars such as Cary Grant, Gary Cooper and Henry Fonda and a generation of conflicted anti-heroes played by the likes of Robert De Niro, Jack Nicholson and Dustin Hoffman.
"He influenced more young actors of my generation than any actor," longtime friend and "Godfather" co-star James Caan said Friday. "Anyone who denies this never understood what it was all about."
"Marlon would hate the idea of people chiming in to give their comments about his death. All I'll say is that it makes me sad he's gone," "Godfather" director Francis Ford Coppola said Friday.
Brando's attorney, David Seeley, said funeral arrangements would be private.
For generations of movie lovers, Brando was unforgettable as the embodiment of brutish Stanley Kowalski in 1951's "A Streetcar Named Desire," famously bellowing "STELLA!" at his estranged love with a mix of anguish and desire.
Then came his mixed-up, washed-up boxer Terry Malloy of 1954's "On the Waterfront," who laments throwing fights for his gangster brother with the line, "I coulda been a contender ... I coulda been somebody ..."
The key to Brando's craft was Method acting, a practice learned at Stella Adler's renowned Actors Studio in New York. The technique eschewed grandiose theatricality in favor of a deeper psychological approach, often through near-continuous rehearsal that led many actors to behave like their characters even when offstage.
Brando's private life was tumultuous. His three wives were all pregnant when they married him. He fathered at least nine children.
His family life turned tragic with his son's conviction for killing the boyfriend of his half-sister, Cheyenne Brando, in 1990. Five years later, Cheyenne committed suicide, never having gotten over her depression and the killing.
Although he remained a leading star, Brando's career waned in the 1960s with a series of failures. Then came 1972's "The Godfather," which became an overwhelming critical and commercial success.
He maintained a working relationship with Coppola, who chose him for another memorable role, the insane Colonel Kurtz in 1979's "Apocalypse Now," who uttered the line "The horror ... the horror ..."
Most of his later films were undistinguished. A hundred pounds heavier, he hired himself out at huge salaries for such commercial enterprises as "Superman" and "Christopher Columbus: The Discovery."
But the ceaseless spotlight never made him conform.
"I am myself," he once declared, "and if I have to hit my head against a brick wall to remain true to myself, I will do it."
TITLE: IN BRIEF
TEXT: Al-Qaida Warning
CAIRO (AP) - A statement issued in the name of the al-Qaida terror group has warned European states they have only two weeks to withdraw troops from Iraq or face the consequences, a pan-Arab newspaper reported Friday.
Asharq al-Awsat said it had received a statement from the "Brigade of Abu Hafs al-Masri [al-Qaida]," the group which claimed responsibility for Madrid train bombings on March 11.
The statement referred to the three-month cease-fire for attacks in Europe that the leader of al-Qaida, Osama bin Laden, declared on April 15.
Indonesia Goes to Polls
JAKARTA (AFP) - Millions of people across the world's largest archipelago voted Monday in Indonesia's first direct presidential election as frontrunner Susilo Bambang Yudhoyono warned of possible violence if the contest goes to a second round.
"Three cheers for democracy," enthused a Jakarta Post editorial as voters ranging from illiterate tribesmen in Papua province to Javanese rice farmers and Jakarta yuppies seized their historic opportunity.
Ex-general Yudhoyono was certain to top the ballot - a survey last week gave him 43.5 percent support, more than his four rivals combined. But he needs more than 50 percent to avoid a runoff between the top two candidates on Sept. 20.
French Sex Trial Ends
SAINT-OMER, France (AFP) - The sensational trial in France of 17 people accused of gang-raping children ended Friday with several tough sentences but seven acquittals and major questions about the investigation process.
Thierry and Myriam Delay - the couple at the center of the scandal that shocked the nation - were sentenced respectively to 20 and 15 years in prison om multiple counts of rape and renting out their own four sons for sex.
Thierry Delay was found guilty of raping nine children, carrying out sex attacks on six, pimping his sons and corrupting 12 children. His wife was sentenced for the rape of seven children, sex attacks on 10, pimping her four boys and corrupting 11 other children.
Their neighbors in the northern town of Outreau, David Delplanque and Aurelie Grenon, received sentences of six and four years on similar charges while lay-priest Dominique Wiel got seven years.
Five other defendants also received prison or suspended.
Winnie Avoids Jail
PRETORIA, South Africa (Reuters) - Anti-apartheid icon Winnie Madikizela-Mandela avoided going to jail on Monday when a court partly upheld an appeal and reduced her prison sentence for fraud to a suspended sentence.
Madikizela-Mandela, 67, was sentenced last year to a total of five years in prison for a fraud scheme involving bogus bank loans, but was freed on bail until her appeal was heard.
Her lawyers say she was not motivated by personal gain when she signed letters seeking bank loans for bogus employees of the African National Congress Women's League, which she then headed.
TITLE: Champion Armstrong Rides Cautiously in First Stage
PUBLISHER: The Associated Press
TEXT: CHARLEROI, Belgium - Lance Armstrong took a cautious approach in the first stage of the Tour de France, meticulously avoiding a series of crashes in windy and rainy conditions.
Armstrong is pacing himself in the grueling three-week race, content to allow speedsters such as winner Jaan Kirsipuu to slug it out for early glory. The five-time champion will wait for the mountains and time trials to make his move.
While the 34-year-old Kirsipuu won the first stage Sunday, Armstrong and 176 others clocked the same time of 4 hours, 40 minutes, 29 seconds.
Kirsipuu, an Estonian who won his fourth stage ever and first in two years, powered to the finish ahead of fellow sprinters Robbie McEwen of Australia and Norway's Thor Hushovd.
The stage gave Armstrong and others a chance to shake off first-day jitters and test the field.
"He always dislikes the first couple of days," said Jogi Mueller, spokesman for Armstrong's U.S. Postal Service team.
Mueller said the strategy for the first week is to stay near the front of the pack to avoid crashes and keep a close eye on breakaway riders.
Armstrong rival Tyler Hamilton, who rode most of last year's race with a double-fractured collarbone, had a small crash that left him with "a little boo-boo," but he easily rejoined the race, coach Jacques Michaud said.
Armstrong took no chances, and wore a windbreaker against the rain for part of the 125 1/2-mile stage from Liege, also in Belgium.
The 32-year-old Texan is third overall behind Fabian Cancellara. The 23-year-old Swiss rider won the time trial prologue Saturday in the third-fastest speed in the history of that event. Armstrong was second, two seconds slower.
Sunday's stage started with a series of moderate hill climbs but leveled out toward the end, allowing the speeding pack to swallow up a pair of riders who tried to make a late breakaway.
Bonus time awards granted to Hushovd for his sprinting allowed him to take second place in the overall standings, four seconds behind. deficit. Armstrong is 10 seconds back.
Armstrong's top challenger, Jan Ullrich of Germany, remains within easy striking distance, 15 seconds behind Armstrong.
Several crashes marred the race. Those who fell but rejoined the racing included Mario Cipollini, making his Tour comeback after four years away, Spain's Oscar Sevilla and French rider Guillaume Auger. Sevilla needed a new bike.
Austria's Bernhard Eisel also had a momentary lapse of concentration, touching wheels with a rider in front and falling heavily.
TITLE: Sharapova Dominates News Media
PUBLISHER: The Associated Press
TEXT: MOSCOW - Maria Sharapova not only beat Serena Williams to win the Wimbledon title, she pushed aside some of Russia's top political and business news. She even got a phone call from President Vladimir Putin.
Her swift and efficient victory Saturday received extensive attention on Russian television news shows. Some broadcasts put the match ahead of a law-enforcement raid at the Yukos oil company - whose troubles have been one of Russia's most prominent ongoing stories - and the big dispute for control of the Communist Party.
Putin telephoned Sharapova to congratulate her and "wish her further successes in her sports career," the ITAR-Tass news agency reported.
State-controlled Channel 1 television gave Sharapova top billing on its main 9 p.m. newscast, noting that although she has lived in the United States for the past decade, "she thinks in Russian."
The 17-year-old Sharapova appears to be in for a tidal wave of celebrity treatment. "All the newspapers and channels are going to be writing about the Russian victor. Glorious attention awaits Maria Sharapova ... her career is just beginning," said commentator Andrei Cherkasov on NTV television, which allotted nearly four minutes of coverage to her victory during its afternoon news Sunday.
Monday saw the first indicator of how intense the media coverage may be. The business daily Kommersant sported the banner headline: "Khorosha Masha" (Masha is beautiful).
In the competition for attention Monday, she faced an opponent even more formidable than Williams - the Euro 2004 soccer final. The Russian press reports soccer in near-scholarly detail, and the tournament has dominated sports coverage in recent weeks, long after the Russian team was eliminated.
(See Sports, page 17)