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TT Business Intelligence Report Vol. 2, No. 41, 5 March 2003 Business Intelligence, Crime, Corruption and Debt in C&E/SE Europe and the FSU  UPCOMING CONFERENCES ADAM SMITH INSTITUTE'S "THE RUSSIAN AUTOMOTIVE SECTOR" To take place on 18-19 March 2003 at the Marriott Grand Hotel, Moscow, Russia. For further information, please email enquiries to [email protected] or call Louise Pasha on tel: +44 (0)20 74903774; W: www.asi-conferences.com B.E.M.'S "THE CASPIAN BANKING & FINANCE SUMMIT 2003" To take place on 19-20 March 2003 at the Hilton Convention Centre in Istanbul, Turkey. For further information, contact Daniel Morrissy, Director of Caspian Region, BEM on direct tel: +44 (0)20 8951 1563; or email: [email protected]; W: www.bemltd.com I.P.C.'S "NEW DEVELOPMENTS IN ANTI-MONEY LAUNDERING MEASURES AND SOLUTIONS" This event will take place on 29-30 April 2003 at the headquarters of Raiffeisen Zentralbank, Vienna, Austria. Further information, tel: +44 (0)20 7529 8902; fax: +44 (0)20 7387 4647; email: [email protected]; W: www.ipc-conferences/vienna BELARUS RUSSIA, UKRAINE, BELARUS, KAZAKHSTAN AGREE ON JOINT ECONOMIC ZONE President Putin and the presidents of Ukraine, Belarus, and Kazakhstan held an unexpected meeting in the Moscow suburb of Novo-Ogarevo on 23 February, after which they announced that they had reached agreement in principle on the creation of a "joint economic space" covering the four countries, Western and Russian news agencies reported. Speaking to journalists after the meeting, Ukrainian President Leonid Kuchma said the countries will prepare an agreement on the project by September and take measures to coordinate their economic policies and legislative environments. Putin said the four countries have agreed to create a supranational commission on trade and tariffs that will be based in Kyiv and will be initially headed by a representative of Kazakhstan. He said this commission will not be subordinate to the governments of the four countries. The ultimate goal of the economic alliance will be the creation of a regional-integration organization that will be open to other countries that might want to join, Putin said. Kazakh President Nursultan Nazarbaev said the new economic zone will not replace the CIS, but represents a new form of integration under which economic ties will have priority over political relations. (RFE/RL 24.ii.03) BOSNIA AND HERZEGOVINA BiH, OPEC'S FUND FOR INTERNATIONAL DEVELOPMENT SIGN ACCORDS FOR PROTECTION OF INVESTMENTS The BiH Minister of Foreign Trade and Economic Relations, Mila Gadzic, and the Director-General of OPEC's Fund for International Development, Seyyid Abdulai, signed yesterday in Sarajevo an agreement on encouragement and protection of investments. According to Gadzic, the ten-year accords will create a legal framework for the bilateral economic co-operation and guarantee free transfer of funds. Thus far, BiH has signed similar agreements with a total of 35 countries. (IntelliNews 05.iii.03) BULGARIA PUTIN PLEDGES ECONOMIC COOPERATION AND DEBT REPAYMENT Putin told a joint news conference with President Parvanov on 2 March that investment in the Bulgarian energy sector is of key interest to the Russian economy, BTA reported. The transit of Russian gas via Bulgaria to neighboring countries is to be increased by one-third, according to Putin. The Russian president also spoke about Russian gas giant Gazprom's interest in the privatization of the state-owned Bulgargaz company and in the expansion of the Bulgarian pipeline network. Parvanov added that Russia is also interested in participating in the proposed modernization of the Kozloduy nuclear-power plant and in the construction of a planned second nuclear-power plant near Belene. Finance Minister Milen Velchev said after meeting with his visiting Russian counterpart Aleksei Kudrin that Russia is ready to repay in cash those debts to Bulgaria that cannot be settled in kind because of price differences. (RFE/RL 04.iii.03) E.B.R.D. TO PARTAKE IN ACQUISITION OF STATE TELECOM B.T.C. The executive board of the EBRD is expected to approve EUR 80mn financing to the privatisation of the state telecom BTC on April 1, according to a press release of the bank. It is expected to secure a EUR 70mn loan to the preferred buyer Viva Ventures and additional EUR 10mn for direct participation in the shareholders' capital of the telecom. Meanwhile, the privatisation agency confirmed that Viva Ventures agreed to improve its price offer and investment plan for BTC. Unnamed sources from the agency rumoured last week that the bid would be raised from the initial EUR 200mn for 65% of BTC to at least EUR 210mn. The agency expects to finalise the deal within 3-4 weeks. The telecom is included in the list of 15 companies that should undergo a separate privatisation regime but the law amendments are not published yet in the State Gazette and it is expected that the deal would be completed under the non-amended legislation and would not have to receive a parliamentary approval. (IntelliNews 04.iii.03) CROATIA CROATIA STILL TO RECEIVE GUARANTEE FROM MECHEL (RF) FOR SISAK IRONWORKS Economy Minister Ljubo Jurcic on Monday informed the heads of the ruling coalition that the government still had not received any guarantee from the Russian company Mechel for Sisak ironworks, unofficial sources reported following a meeting of the ruling five-party coalition. The source reported that the government did, however, receive a bounced cheque even though it had requested that the Russian company offer sufficient funds to cover six month salaries for workers should the Russians decided to pull out of the ironworks deal. The ruling coalition leaders were informed of the current status of the privatisation of the INA oil company even though no concrete details were released. (NewsBase 05.iii.03) C.O.E. SECRETARY GENERAL SCHWIMMER: CROATIA SHOULD BE ABLE TO BECOME E.U. MEMBER BY 2007 CoE Secretary General Walter Schwimmer met with a number of state officials yesterday, during his official visit to Croatia. He congratulated Croatia in submitting EU membership application and expressed his belief that Croatia should be able to become full EU member by 2007. President Stjepan Mesic stressed on the need to fully co-operate with ICTY court in Hague. Croatia is ready to extend regional cooperation and it would need to solve all open issues with its neighbours before joining EU, Mesic added. Nevertheless, it should be accounted that the CoE has only an informal role in the decision of the EU to start accession negotiations with a given country. Indeed, we believe that Croatia has all chances to begin talks at the beginning of next year. Furthermore, we are convinced that if the country had submitted a membership application along with the other candidates, it would be in the first expansion wave. However, pressing issues as the Iraqi crisis might delay a EU decision to start talk with Croatia, which would respectively offset its prospective entrance date in the Union. (IntelliNews 05.iii.03) CZECH REPUBLIC FITCH UPGRADES CESKA SPORITELNA RATING The international rating agency Fitch has upgraded the long-term rating of obligations of savings bank Ceska Sporitelna (CS) from BBB to BBB+. The improved rating stems from an increased capacity of parent company Erste Bank for solving possible CS problems. The rating of CS short-term obligations F2 and the individual rating C/D have remained unchanged. The rating outlook also remains stable. (PBJ 05.iii.03) KLAUS LISTS E.U. ENTRY, REGIONAL TIES AS PRIORITIES IN HIS FOREIGN POLICY The newly elected Czech President Vaclav Klaus announced that the main priorities of his foreign policy would be the co-operation with neighbouring countries, EU integration and relations with USA and other overseas countries. He pledged to conduct a policy of openness towards the country's partners. However some pointed to the Klaus's firm attitude towards the Sudeten Germans and his justification of the Benes decrees in the past as factor that could hamper the accession efforts of the country. As recalled, EU demanded from Czech Republic to abolish the decrees, under which ethnic Germans were deported from former Czechoslovakia and property was confiscated. Klaus on his turn announced he would stick to the Czech-German declaration he had signed six years ago, which reads that the two countries will not translate past problems into their current relations. He also said he would be realistic in his approach to EU talks. He pledged to work for the unity of the nation. (IntelliNews 03.iii.03) VLADIMIR ZELEZNY ACCUSED OF FURTHER CRIMINAL OFFENCES Senator and director of the commercial television channel Nova Vladimir Zelezny has been accused of further criminal offences, according to deputy city state attorney Marcela Kratochvilova. Zelezny has been prosecuted since Wednesday 26 on points of evading payment of tax, fees and another similar mandatory charges in connection with the transfer of his stake in CET 21 and of further harming a creditor. Besides Zelezny and his former lawyer Ales Rozehnal charges have also been brought against four CET 21 shareholders. They are suspected of having stripped the state of more than 53.5 million crowns. Kratochvilova said that there was no reason to remand the accused in custody. Rozehnal's defence lawyer Radek Jilg said that those persecuted for tax evasion besides Zelezny are Rozehnal, Peter Huncik, Vlastimil Venclik, Fedor Gal and Josef Alan. "I expect all the accused to lodge a complaint because this is no criminal offence," Jilg said. According to the police Zelezny had agreed with his companions that they would transfer to him 43.3% of the stake in CET 21 worth about five million dollars. Though Zelezny paid them, they pretended through consequent transactions that they had reached settlement through shares of the CET 21 joint stock company created for this purpose. They did not state the truth in their tax returns for 1996, the police say. (NewsBase 28.ii.03) ESTONIA PRIME MINISTER SAYS COUNTRY MUST BE ON THE SIDE OF U.S. ON IRAQ In an article in the daily "Postimees" of 11 February, Siim Kallas expressed support for the United States in the current dispute with Iraq, BNS reported. "I do not want war.... But I believe we must pick a side. And I believe it is the side where the United States is," he said. Kallas claimed that Iraq has weapons of mass destruction and the missiles required for their delivery, adding, "The danger will disappear only after [Iraqi President] Saddam Hussein has been removed from power." He said Estonia's fate might be affected in that, if a new Stalin were to gain power in Russia, "isn't it absurd to imagine that hiding behind the wardrobe and wagging a reproaching finger at America would better ensure our defense from Stalin Jr. than being an outright and public friend and ally of the United States?" Kallas criticized a recent open letter to him from the People's Union that called for a neutral position on Iraq, saying it is naive to believe that Estonia can avoid taking sides. Russian Foreign Ministry spokesman Aleksandr Yakovenko expressed regret on 13 February that Kallas in the article evaluated relations with Russia "not from the point of view of real good-neighborliness and mutual understanding but through a prism of the instigation of fear and mistrust," BNS reported. (RFE/RL 28.ii.03) HUNGARY GOVERNMENT UNDERGOES FIRST RESHUFFLE AMID PLEDGES OF MORE TRANSPARENCY Last week brought the present government's first reshuffle amid pledges of more transparency following a corruption scandal surrounding Chancellery Minister Elemer Kiss. Following Kiss' resignation, Prime Minister Peter Medgyessy said he had initiated legal amendments to regulate ethical issues of this nature. He also obliged all government ministers to publish a list of enterprises in which they have held stakes during the past five years. This is little more than a good start, according to Zolna Berki, chairman of the local branch of Transparency International, an international anti-corruption organisation. "To enhance transparency, we recommend that these issues be examined at each ministry to see whether there are conflicts of interest," Berki said. "We also recommend establishing a business principles code of ethics." Kiss submitted his resignation after the daily Magyar Nemzet revealed that three large state-owned companies - national airline Malev Rt, motorway operator National Motorway Rt and official gazette publisher KozlonykiadoKft - contracted the law firm Forgacs and Kiss, which is co-owned by Kiss. Kiss initially denied knowledge of the contracts, but later submitted his resignation. (NewsBase 05.iii.03) MOL SELLS Ft 20 Bln IN ONE-YEAR BONDS Hungarian oil and gas company MOL Rt said it sold Ft 20 billion nominal value of its 2004/A/001 one-year discount bonds at a stock exchange auction on March 3. MOL received bids to a total of Ft 30.092 billion nominal value bonds against the offered minimum of Ft 1 billion and maximum of Ft 20 billion bonds. The yield in accepted bids varied between 6.60% and 6.85% and the average yield came to 6.72%, all down from a maximum acceptable yield of 7.09% set for the auction. The minimum auction bid for the bonds was Ft 1 million. The bonds will be introduced on the Budapest Stock Exchange on March 6. MOL said earlier it plans to use cash generated from the bond sale to finance daily operations. (BBJ 05.iii.03) KAZAKHSTAN CHINA PRESSES FOR INCREASED KAZAKH OIL PRODUCTION The head of Kazakhstan's state oil-and-gas firm, Lyazzat Kiinov, told Interfax on 27 February that China would like to start importing oil from Kazakhstan this year. But when the question of building a pipeline was raised, the Chinese side said that current Kazakh production levels are too low to justify the expense. China would like to import 50 million tons of Kazakh oil annually, but at present Kazakhstan is able to produce only 47 million. According to Kiinov, China is asking to participate in larger projects in Kazakhstan in order to raise financing for a pipeline. The two countries agreed in 1997 that China would fund construction of the pipeline. Kazakhstan would also like to export gas to China, as would Turkmenistan, using a pipeline through Kazakhstan. (RFE/RL 28.ii.03) LATVIA LATVIA AND LITHUANIA BACK POSTPONEMENT OF E.U. CONSTITUTION On the initiative of Hungary, six European Union candidate states on 21 February proposed delaying the adoption of the new EU constitution until after the organization expands next year, thus allowing new members to participate in its drafting, AFP reported. Slovakia, Poland, Lithuania, Latvia, Hungary, and the Czech Republic signed a "contribution" to the EU Convention on the future of Europe, which is tasked with drafting a constitution by June. Peter Balazs, Hungary's representative at the 105-member convention, said, "It is essential to have an appropriate reflection period" once the convention finishes its work. The draft constitution proposed by the convention will then be considered by an intergovernmental conference. Italy, which will hold the rotating EU Presidency in the second half of 2003, is keen for the constitution to be adopted in time for a summit in Rome in December. (RFE/RL 04.iii.03) OFFICE FOR PREVENTION AND ABATEMENT OF CORRUPTION INITIATES PROCEEDINGS Latvia's top anti-corruption unit opened up its first case on Tuesday against a minister who allegedly abused his previous position prior to being appointed to the Cabinet. The Office for Prevention and Abatement of Corruption, OPAC, initiated legal proceedings against Health Minister Aris Auders, who is being accused of neglect while working at a Riga city hospital that allegedly accepted bribes from patients in the out-patient and orthopedic wards. An OPAC official said that an investigation revealed that the hospital provided false information on expensive surgical operations to insurance companies, causing approximate losses of 200,000 lats (E318,000) to the state. OPAC is continuing to gather evidence in order to send the case to the Prosecutor General. The case is seen as a litmus test for the government of Einars Repse, which campaigned last year on an anti-corruption platform. Auders, a Repse appointee, himself asked the interior ministry in January to check on possible financial violations at the hospital's two wards. (NewsBase 27.ii.03) LITHUANIA EUROPEAN COMMISSION'S SECRETARY-GENERAL VISITS VILNIUS David O'Sullivan arrived in Vilnius on 20 February and held talks the next day with Foreign Minister Antanas Valionis and Foreign Ministry Secretary Rytis Martikonis, who is in charge of European integration, ELTA reported on 21 February. They reportedly discussed Lithuania's participation in the work of European institutions and proposals for EU institutional reform being discussed by the EU Convention on the future of Europe. In talks with Interior Minister Juozas Bernatonis, O'Sullivan discussed the opportunities for Lithuanians to find employment in EU institutions in Brussels, noting that there are no requirements for national experts to have a record of diplomatic or public service. They also talked about the development of the civil-servant training system in Lithuania and the provisions of the national anticorruption program. (RFE/RL 04.iii.03) STANDARD & POOR'S UPGRADES CREDIT RATINGS Standard & Poor's (S&P) has upgraded Lithuania's currency ratings, BNS and ELTA reported on 18 February. The country's long-term foreign-currency rating was increased from BBB to BBB+, the short-term foreign-currency rating from A3 to A2, and the long-term local-currency rating from BBB+ to A-. The outlook for both local- and foreign-currency ratings is stable. "The upgrade reflects Lithuania's progress in consolidating public finances and its very healthy economic growth, while successfully containing external imbalances," S&P credit analyst Moritz Kraemer said. Among the favorable statistics mentioned were economic-growth rates of 5.9 percent in both 2001 and 2002 despite the global economic downturn, as well as Lithuania's good prospects for keeping its national debt at about 23 percent of GDP. (RFE/RL 04.iii.03) POLAND B.Z. W.B.K. TO BE A PLAYER IN THE CONSOLIDATED BANK SECTOR Allied Irish Bank (AIB) owned Bank BZ WBK yesterday said it expects to participate in a wave of sector consolidation over the coming years, emerging as one of five big banks set to dominate the market. According to AIB President Gerry Byrne, mergers were likely to happen between the large players but the Irish bank, which holds a 70.5% stake in BZ WBK, would want to keep a controlling stake in any new entity. Mergers or acquisitions were also unlikely to happen this year, he said, as strategic investors in large banks seem keen to hold on to their stakes. BZ WBK is the seventh largest bank by assets, ran king behind Pekao, state-owned PKO BP and Citibank's Bank Handlowy. (WBJ 05.iii.03) K.G.H.M. FORECASTS NET PROFIT IN 2003 Copper and silver mining concern KGHM expects to turn to a group net profit in 2003 thanks to government debt relief for its loss-making telephone unit, but its core business will suffer due to a stronger zloty. Chief Executive Stanislaw Speczik said that under the management's annual financial plan, the company's unconsolidated net profit would drop to 154 million zlotys, $40 million, down 40% from 255 million zlotys in 2002. Net profit at the consolidated level is seen reaching as much as 550 million zlotys against a loss in 2002, the size of which is due to be announced on Monday 24. Last year KGHM far exceeded the management's earlier full-year goals thanks to well-managed hedging transactions. "We have made very conservative assumptions and our plan for this year is to have an unconsolidated net profit at 154 million zlotys," Speczik said. "But at a group level, we are expecting a very large profit due to conversion of debt at Telefonia Dialog," he added. KGHM, the world's seventh-largest copper producer and number two by silver output, assumes an average annual zloty exchange rate of 3.8 to the dollar against last year's 4.15 while average copper prices are seen at $1,625 per tonne, said Speczik. The zloty, which has been rising against the dollar since mid-2002 on foreign inflows into Poland's high-yielding treasuries, was trading around 3.89 to the dollar on Thursday 27. State-controlled KGHM expects its wholly-owned fixed-line telecom Telefonia Dialog, which has long been a drag on the group's finances due to its heavy debt and losses, to have a positive impact on group results for the first time this year. Despite several attempts in the past few years, KGHM failed to find a strategic partner for the operator to ease the burden on its balance sheet and is now trying to merge Dialog with a local peer to cut operating costs and bring it to profitability. The government, which owns 44% of KGHM, recently agreed to write off fixed-line operators' licence fees in exchange for investment commitments, hoping to kick-start a telecoms market that has grown slowly despite liberalisation. (NewsBase 28.ii.03) ROMANIA E.C. RESERVED ON ROMANIA'S CHANCES FOR "FUNCTIONING MARKET ECONOMY" The European Commission does not consider Washington's decision of acknowledging Romania as a "functioning market economy" as being politically grounded on Bucharest's support in Iraq crisis, according to Mediafax quoting EC's spokesperson, Jean-Christophe Filori. However, Filori avoided hinting whether the EC shares the same view with the US in this regard, saying that "it is a bit earlier to say whether we have the same opinion as the United States". The EC is currently reviewing Romania's performance and a final decision will be included in this fall's Progress Report, he added. Romania is to be granted the status of functioning market economy by the US, implying better conditions for the country's exports on the American markets, while the EC is completing its own analysis on Romania's economy, carried in broader terms, in the accession process. A positive conclusion to be included in this fall's Progress Report is critical for Romania's accession in 2007. (IntelliNews 05.iii.03) EURO NOW THE REFERENCE CURRENCY AGAINST WHICH THE LEU IS REPORTED The euro is now the reference currency against which the Leu is reported, according to the decision of the National Bank of Romania (BNR). The BNR Board has decided to calculate the reference exchange rate for the domestic currency against the euro, rather than the US dollar, starting March 1. BNR Governor, Mugur Isarescu, said that the decision is to be linked to the consolidation of the influence of the European currency on the Romanian trade and acclimatising the population towards the Euro. The decision should also be considered a response to the demand of the Central European Bank in this respect. (NewsBase 05.iii.03) RUSSIA IVANOV: RUSSIA IS UNLIKELY TO ABSTAIN Moscow upped the stakes in the diplomatic horse-trading over the Iraq crisis Tuesday with Foreign Minister Igor Ivanov saying for the first time that Russia is unlikely to abstain if the UN Security Council votes on automatic use of force against the Saddam Hussein regime. "Abstaining in this situation is not the policy we should follow," Ivanov was quoted by Interfax as saying in London during a BBC interview. "Russia is unlikely to abstain, Russia will take a particular position." Ivanov's remarks went against the general consensus that Russia would abstain to avoid falling out with Washington should the United States and Britain force the Security Council to vote on their resolution authorizing war with Iraq. In the past both Ivanov and President Vladimir Putin have voiced opposition to the use of force but have given no clear sign as to how Russia would vote. In addition to Russia, the use of force against Iraq is opposed by France and China. These three countries along with the United States and Britain are permanent members of the Security Council and have the right to veto any resolution. Should none of the members exercise its veto, the United States and Britain would still need nine of the 15 Security Council votes for their resolution to pass. It remains unclear whether Russia would vote for or against the resolution put forward by the United States and Britain together with Spain. But Ivanov's comments Tuesday are a clear sign that Russia is putting pressure on the United States either to bypass the Security Council altogether or to produce solid evidence that Iraq is not complying with UN resolutions, thus allowing Moscow to reverse its opposition to the use of force. Either development would allow Russia to save face, according to Ivan Safranchuk of the Washington-based Center for Defense Information and Alexander Pikayev of the Moscow Carnegie Center. (The Moscow Times 05.iii.03) RENAULT INKS MOSCOW PRODUCTION DEAL France's Renault signed a deal with the city of Moscow on 26 February to invest $250 million into a production facility for affordable family sedans, RBK reported the same day. The city of Moscow, which owns 38 percent of the Avtoframos joint venture, in return will provide tax breaks and cheap rent, "Vremya MN" reported on 27 February. French engineers are still at work on the X90, which is targeted at Eastern European markets with a sticker price of approximately $10,000. Renault hopes to churn out 60,000 X90s a year in Moscow by 2007, "Kommersant" reported on 27 Feburary. Moscow Mayor Yurii Luzhkov even talked about boosting annual production to 120,000, "The Moscow Times" reported on 27 February. The investment marks the largest commitment to date by a foreign carmaker to a production facility in Russia, outstripping the $130 million that Ford invested in its plant outside St. Petersburg and the $100 million that General Motors put into its AvtoVAZ joint venture. A 27 February editorial in "Vedomosti" cautioned against viewing the project as a victory for the protective tariffs on imported used cars that Russia introduced earlier this year, noting that Renault was more likely lured by reduced tariffs on the imported parts that it will use to assemble the X90. (RFE/RL 04.iii.03) IRAQ ENERGY PARTNERSHIP Tekhnopromexport, a top power engineering construction company, is continuing to build power plants in Iraq, its deputy chairman Andrei Klimenko was quoted by Interfax as saying. "Work on power engineering projects under construction in Iraq has not been frozen so far, but there is 100 percent readiness by the company for full evacuation of all Russian specialists if large-scale hostilities begin," he said. Klimenko said more than 400 Russian specialists are currently working at power plants under construction. Tekhnopromeksport is building a steam power plant with a capacity of 400 megawatts in Harthar, and one with a 1,680 megawatt capacity in Yusufiyah. (The Moscow Times 04.iii.03) GUNMEN TARGET CHECHEN ADMINISTRATION HEAD Akhmed-hadji Kadyrov escaped uninjured on the evening of 1 March when gunmen opened fire on his motorcade in the town of Argun, Russian news agencies reported only after a two-day delay. Three Chechen police officers and four of Kadyrov's bodyguards were reported killed in the attack, together with several of the attackers. Chechen Prosecutor-General Vladimir Kravchenko initially told Interfax that Kadyrov was not traveling in the motorcade, but Kadyrov later confirmed that he asked his driver to halt when the motorcade ran into what he termed an exchange of fire. The "Guardian" on 4 March quoted unnamed Chechen officials as saying that radical field commander Shamil Basaev was behind the assault. If the gunmen's intention was indeed to kill Kadyrov, it would be at least the sixth attempt to assassinate him since he was named as Chechen administration head in June 2000. (RFE/RL 04.iii.03) AMERICAN FIRM TO TAKE OVER MOSKVA An icon of Soviet architecture beside Red Square, the Moskva hotel, is to be demolished and then restored and controlled by an American firm, Deputy Moscow Mayor Iosif Ordzhonikidze said. The obscure Decorum Corp., which won a tender to restore the hotel in 2001, is to solely finance a $350 million demolition and reconstruction of the Stalin-era hotel, after which the corporation will hold a 51 percent controlling stake, Interfax quoted Ordzhonikidze as saying last week. The Moscow Development Co., which is owned in equal shares by developer ST Group and the Moscow city government, will hold the remaining 49 percent stake, the report said. Neither Ordzhonikidze's office, the Moscow Tender Center, the hotel's management nor ST Group were able to provide contact details for Decorum. The American Chamber of Commerce has no information on Decorum. The U.S.-based company does not have an Internet site. Some market insiders say the company is a front for offshore Russian investors. (The Moscow Times 04.iii.03) RUSSIA'S BILLIONAIRE CLUB BOOMS Seventeen Russians made the "Forbes" magazine list of the world's 476 billionaires, the magazine reported in its March issue. Yukos CEO Mikhail Khodorkovskii ranked 26th with an estimated net worth of $8 billion, followed by Chukotka Autonomous Okrug Governor and Sibneft co-owner Roman Abramovich (49th with $5.7 billion); Alfa-Group President Mikhail Fridman (68th with $4.3 billion); and the chairman of the board of Tyumen Oil Company, Viktor Vekselberg (147th with $2.5 billion). Other Russians on the list include Norilsk Nickel CEO Mikhail Prokhorov, Sistema CEO Vladimir Yevtushenkov, steel giant Severstal head Aleksei Mordashov, Sibneft's Yevgenii Shvidler, Yukos's Leonid Nevzlin, and several major Yukos shareholders. "Kommersant-Daily" noted on 28 February that, although the total number of billionaires globally is declining, Russia's tally has grown. Three years ago, there were no Russians on the list, while there were seven in 2001 and six in 2002. Russia currently places fourth in terms of its number of billionaires, after the United States, Germany, and Japan, and ranks first in terms of its billionaire-club growth rate. Twelve of Russia's billionaires come from the oil sector, and "Forbes" explains the rapid growth in the country's billionaire club both in terms of rising global energy prices and of the increasing transparency of Russian companies. (RFE/RL 03.iii.03) RUSSIA COULD SUPPLY 15 PERCENT OF U.S. OIL NEEDS Yukos CEO Mikhail Khodorkovskii said on 26 February that Russia hopes to become one of the leading suppliers to the U.S. oil market, ITAR-TASS reported. Russia could ultimately supply between 1 million and 2 million barrels of oil a day to the United States, about 15 percent of that country's current demand. Khodorkovskii said that currently the main constraint on Russian oil exports is a dearth of export-pipeline capacity. However, that problem is being solved by projects to build a pipeline from western Siberia to Murmansk and another from Angarsk to Datsin in China. The Murmansk project is intended to boost exports to the United States, while the Datsin project is targeted toward China and the Far East. Khodorkovskii said the cost of transporting oil from Murmansk to the East Coast of the United States is about $8 a barrel, which is comparable to the cost of transporting oil from the Middle East to the United States. He added that Russia is capable of extracting 9 million to 10 million barrels of oil per day for the next 30 years. "Argumenty i fakty," No. 8, wrote that before the end of the year, Yukos -- Russia's largest oil company -- and U.S.-based Exxon will sign a multibillion-dollar strategic partnership similar to the one signed earlier this month between British Petroleum and Russian oil majors Sidanko and Tyumen Oil Company. (RFE/RL 27.ii.03) YABLOKO WARNS OF THREAT TO PRESS FREEDOM The political party Yabloko issued a statement on 25 February expressing serious concern about the fate of freedom of the press in Russia, RosBalt and other Russian news agencies reported the same day. According to the statement, the party has noted a pattern of overt actions since 2000 in which law enforcement agencies were used to exert pressure on journalists and the owners of private-media outlets. The statement also decried selective changes to media legislation, the use of state-controlled media to discredit political opponents, and the rise of self-censorship practices among owners of private media outlets. Press freedom in Russia is "contracting" rapidly, the statement says, and defending that freedom should be the top priority for the country's democrats. Yabloko's statement was prompted by the recent dispute at "Novye izvestiya." The party believes these trends might intensify in the run-up to national Duma elections in December, Interfax reported. (RFE/RL 27.ii.03) MISSING MILLIONS IN ST. PETERSBURG Millions of dollars have disappeared from a project to mark the 300th anniversary of Russia's second city of St. Petersburg, audit officials were quoted as saying by the BBC on 23 February. Criminal proceedings have begun aimed at explaining why only half of 59 planned projects to celebrate the occasion will be completed by the middle of the year. In one case, more than $30 million allocated for the construction of new roads was "simply hidden in the bushes," according to the chairman of the Russian Audit Chamber, Sergei Stepashin. (RFE/RL 27.ii.03) PROSECUTOR-GENERAL WILL SEEK TO COMPENSATE VICTIMS BY SEIZING PROPERTY OF 'TERRORISTS' Vladimir Ustinov announced on 25 February that his office will seek to pay damages to the victims of the 23-26 October Moscow hostage taking by seizing the property of the Chechen fighters who carried it out, newsru.com reported. The Prosecutor-General's Office is attempting to identify and seize the assets of all the "terrorists" killed during the incident and those of anyone convicted of providing them with transportation, weapons, shelter, or other assistance, Ustinov said. Ustinov also said that the actions of the security forces in ending the hostage drama were "proper and justified," though the sleeping gas that they used caused the deaths of 129 hostages. "There were mishaps during the rescue operations," Ustinov said, "but this happened because of the large number of parked cars near the theater that could not be removed because of concerns that they were booby-trapped." (RFE/RL 26.ii.03) LUKOIL JOINS WITH NORWEGIANS TO EXPLORE IRANIAN OIL LUKoil international arm LUKoil Overseas signed a contract on 14 February with Norway's Norsk Hydro to acquire a 25 percent stake in a $137.3 million exploration project in Iran, "Izvestiya" reported on 15 February. The deal is subject to approval from the National Iranian Oil Company, which is expected to be forthcoming. According to LUKoil, the unexplored Anaran block near the Iran-Iraq border might contain reserves of up to 2.6 billion barrels, industry newsletter "Nefte Compass" reported on 18 February. A Norsk Hydro representative told "Vedomosti" on 17 February that project participants will get priority consideration to develop the field once exploration is completed in early 2005. Industry analyst Vladislav Metnev told the newspaper that LUKoil would be better off concentrating on domestic projects, however. Troika Dialog analyst Valerii Nesterov injected a note of caution, telling "Vremya novostei" on 17 February that the Iranians "usually give development rights to their own companies, which is why major players rarely work in the region." (RFE/RL 25.ii.03) SERBIA AND MONTENEGRO FOREIGN INVESTORS PRESENT WHITE BOOK TO SERBIAN GOVERNMENT The Foreign Investors' Council (FIC) presented its White Book for 2002 to the Serbian government. The FIC general secretary Christoph Greussing underlined that foreign investment had reduced considerably over the past year and was very low, compared to neighbouring countries such as Bulgaria and Romania. The White Book presented recommendations to the Serbian government how to attract foreign capital. Greussing said that the Serbian government's most important goal was to create the climate and stable conditions for the influx of foreign investment. He outlined political instability as one of the major problems before major foreign investors. Greussing furthered that the Serbian government should annul the sales tax and introduce the value added tax (VAT) by the end of the year, in order to become more attractive to foreign capital. The OECD head for Southeast Europe Declan Murphy added that Serbia and Montenegro needed at least EUR 3bn in private investment annually, if any idea of development is to be mentioned at all. In a related note, the governor of the National Bank of Serbia Mladjan Dinkic commented it was unrealistic to expect that USD 2bn in foreign investment would enter Serbia this year. He mentioned that a far more realistic figure would be EUR 1bn, given that investment was around EUR 500mn last year. (IntelliNews 05.iii.03) SLOVAKIA FOREIGN MINISTER KUKAN HAS BIGGEST CHANCE TO BECOME NEXT PRESIDENT - POLL Foreign Minister Eduard Kukan has the biggest chance to become Slovakia's new president, according to a survey conducted by state-run TASR press agency. The poll showed that Kukan, nominated by PM Mikulas Dzurinda's Slovak Democratic and Christian Union (SDKU), enjoys 20.1% support among voters. Vladimir Meciar, the former authoritarian PM and head of leading opposition Movement for a Democratic Slovakia (HZDS), follows Kukan with 12.2%, while Jan Figel, the country's chief negotiator with the European Union scored 5.8%. The current President Rudolf Schuster enjoys only 5% support, slightly less than populist Robert Fico, who would win 5.6% of votes. The President - a rather formal post - is to be chosen by direct vote in May 2004. The current President, Rudolf Schuster, has not said whether he would seek re-election. (IntelliNews 03.iii.03) UKRAINE FINANCE MINISTRY TO STRENGTHEN CONTROL OVER USAGE OF E.B.R.D. CREDITS Ukraine's Finance Ministry will appoint certain officials, personally responsible for control over efficient usage of EBRD credits, finance minister Mykola Azarov said while meeting with the delegation of EBRD, which has arrived to Ukraine yesterday to carry out negotiations with Ukraine's government and businessmen on the issues of cooperation in transport, banking and agricultural spheres and reforms in energy sector. According to Vitaly Lukyanenko, advisor to Azarov, EBRD representatives positively assessed this proposal of additional guarantees. Lukyanenko said that the sides continue working on EBRD credit portfolio, and have already agreed on several projects in energy and communal spheres, for which EBRD credits may be disbursed. In total EBRD has invested EUR 1.3bn in 59 projects in Ukraine. (IntelliNews 05.iii.03) INFORMATION PROVIDERS NEWSBASE NewsBase is a leading provider of business and economic news and intelligence from Russia, Central Europe and the FSU. 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