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*Due Diligence, Business Intelligence, Asset Retrieval, Debt Recovery* TT Business Intelligence Report Vol. 2, No. 50, 10 July 2003 Business Intelligence, Crime, Corruption and Debt in C&E/SE Europe and the FSU UPCOMING CONFERENCES EUROMONEY'S "RUSSIA & THE CIS 2003: ECONOMIC CHALLENGES FOR THE 21st CENTURY" This event will take place on 9-10 September 2003 at the Radisson Slavyanskaya Hotel, Moscow, Russia. For further information, please contact Susie Teuton, tel: +44 (0)20 7779 8366; fax: +44 (0)20 7779 8795; email: [email protected]; W: www.euromoneyconferences.com EUROMONEY'S "SOUTH EAST EUROPE: THE 3rd REGIONAL FINANCE & INVESTMENT CONFERENCE" This event will take place on 21-22 October 2003 at the Hotel Croatia, Dubrovnik, Croatia. For further information, please contact Susie Teuton, tel: +44 (0)20 7779 8366; fax: +44 (0)20 7779 8795; email: [email protected]; W: www.euromoneyconferences.com BELARUS BELARUS SHUTS DOWN OFFICE OF U.S.-BACKED IREX IREX, a U.S.-funded organization supporting academic exchanges and independent media development, will have to close its office in Minsk next month after Belarussian authorities refused to renew its accreditation. IREX called the decision politically motivated and said it was the latest attempt to muzzle the independent media in Belarus. "I think this is part of a systematic attempt to intimidate and restrict the independent media in Belarus, and that we're being attacked because we're the largest aid organization on the ground in Belarus providing assistance to the media," Bob Ortega, IREX's representative in Belarus, said Monday. The Belarussian Foreign Ministry decided not to renew the accreditation, which expires Aug. 7, after being alerted to "a discrepancy" between IREX's stated goals and actual activities by the State Audit Committee, spokesman Andrei Savinykh said by telephone Monday. Two state-owned Belarussian television channels aired a documentary last month in which a KGB spokesman accused IREX of having an "irreproachable" gap between its stated goals and true activities. He suggested that IREX might be working for foreign intelligence. IREX receives some funding from the U.S. government and has been operating in Belarus since 1997. It had no problem renewing its registration when it previously expired in 2000, Ortega said. IREX has worked in the former Soviet Union for more than three decades. In Russia, it also has a program supporting the independent media but its main focus is on academic exchanges. Ortega promised to fight the decision in court. "The [audit] committee's findings are wrong in their facts and wrong as a matter of law -- as we pointed out to the Foreign Ministry in our response to the findings back in April," he said in a statement. "This decision to close us down is political in nature, and not justifiable as a matter of law." (The Moscow Times 08.vii.03) BOSNIA AND HERZEGOVINA ASSISTANCE OF EU TO RAILWAYS IN BIH BiH Minister of Traffic and Communications Branko Dokic said on Tuesday that the European Union (EU) has invested approximately eight million Euro in the reconstruction of the railway infrastructure in BiH. Dokic said that the agreement on the joint reconstruction of the bridge in Jasenovac will be signed today with representatives of the Croatian Government, for which the European Commission (EC) invested 2.4 million Euro. He stressed that almost the entire railway direction in BiH is electrified, which contributes to faster and more qualitative railway traffic, particularly on the railway line Bosanski Samac-Doboj-Sarajevo. On the occasion of the completion of reconstruction of the railway infrastructure on the railway line Zenica-Bosanski Samac, a promotion train from Zenica to Bosanski Samac was organized today at the initiative of the EC. (IntelliNews 08.vii.03) BULGARIA BULGARIAN PRESIDENT SIGNS AMENDMENTS TO JUDICIARY ACT President Georgi Parvanov on 7 July signed the amendments to the Judiciary Act that were passed by parliament on 3 July, according to a press release from the president's office. Parvanov underscored that the amendments will fill some of the gaps in the current legislation that developed after some provisions of the act were declared unconstitutional. "On the whole, [with the amendments] a necessary but insufficient step has been made for the reform efforts of the judiciary," Parvanov said. President Parvanov also warned that the amendments could spark new tensions between the parliament and the judiciary, as their adoption by the parliament coincides with the beginning of the election procedure for the new head of the Supreme Administrative Court, according to the 7 July press release from the president's office. Parvanov said the hasty adoption of the amendment leaves the impression that the changes are being made to thwart the election scheduled for 9 July of Constitutional Judge Georgi Markov as new Supreme Administrative Court head by the Supreme Judicial Council. The council reflects the composition of the previous parliament, in which the now-opposition United Democratic Forces (ODS) held the majority. Under the amended Judiciary Act, a three-fourths majority is necessary to elect Supreme Court judges. Parvanov also criticized the Supreme Judicial Council's unsuccessful attempt to elect Markov in a quick procedure before the adoption of the amendments, saying that this might undermine confidence in the judiciary. (RFE/RL 08.vii.03) CROATIA SOCIAL LIBERALS URGE STOPPING PRIVATISATION OF OIL COMPANY Croatia's Social Liberals (HSLS) urged the government on Wednesday to discontinue all privatisation processes until the parliamentary election, especially that of oil company INA, saying that every privatisation process launched by the coalition government had been marked by clashes between the Social Democrats (SDP) and the Croatian Peasant Party (HSS) over who would control the process. HSLS president Drazen Budisa told a news conference the hottest issue in the country at the moment was the privatisation of 25 percent plus one of INA shares. The privatisation processes carried out thus far have shown the government's incompetence and the tendency of the SDP and the HSS to compete over private and not public interests. This is why the privatisation of INA has to be stopped, Budisa said, adding the coalition government no longer held legitimacy for voters. Because of this and political reasons, the government can not embark on the strategically important privatisation of INA, he said. (IntelliNews 09.vii.03) EU CHIEF TO VISIT CROATIA OVER MEMBERSHIP BID Croatia will be given an EU list with questions on the country's political system, its economy, judiciary and other areas that need to be reviewed before it can get EU candidate status, the government said Tuesday. European Commission President Romano Prodi will hand over the list during a visit to Zagreb Thursday, possibly to Prime Minister Ivica Racan. He is also to meet with President Stipe Mesic. Full cooperation with the UN war crimes tribunal, the return of ethnic Serb refugees who fled the country during and after the 1990s war, and regional cooperation are key political conditions that Croatia must meet before becoming a candidate country and joining the EU. Croatia filed its application to join the European Union in February and is hoping to become a full member, along with Bulgaria and Romania, in 2007. (IntelliNews 08.vii.03) CZECH REPUBLIC CZECH GOVERNMENT APPOVES A LAW TO CUT CORPORATE INCOME TAX The cabinet at Monday's extraordinary session approved the amended law which cuts corporate income tax and approved ceilings on the spending of individual ministries as well as a reduction of the upper limit on home-building savings subsidies from 4,500 to 2,400 crowns. The amended law on income tax provides for a decrease in corporate income tax from 31 to 28% from next year. The rate will then fall to 26% in 2005 and to 24% in 2006. The draft will be part of a block of 12 reform laws which the Chamber of Deputies will debate at its extraordinary session on July 22nd. If the amendment is passed in the parliament, businesses will save 33.5 billion crowns in income taxes in the next three years. However, many economists regard the proposed reduction of corporate income tax as insufficient, arguing that a rate closer to neighbouring Hungary should have been agreed. Corporate income tax in Hungary equals 18%, while Slovakia and Poland are planning to reduce it to 19%. The government also approved ceilings on expenditures of individual ministries in order to achieve a state budget deficit of 118 billion crowns in 2004, with overall budget revenues of 736 billion crowns and spending at 854 billion crowns. The finance ministry is due to publish concrete proposals for individual ministries' spending on Tuesday. The defence ministry, for instance, is to get 50.3 billion crowns next year, against this year's 52.3 billion crowns. The government is also cutting the upper limit on support for home-building savings from the current 4,500 crowns to 2,400 crowns a year. The state will favour those who use the money for housing purposes. The government however did not decide on the size of subsidies for these clients. (Newsbase 09.vii.03) CZECH REPUBLIC TO RECEIVE EUR 110 MLN FROM EES MEMBERS The Czech Republic is to receive funding from 3 non-members of the European Union – Norway, Iceland and Liechtenstein – that are part of the European Economic Space (EES), i.e. the common EU interior market. Last week the Czech Republic and the other nine EU candidates signed an agreement on accession to the EES, which should bring in a total of EUR 110 mln (CZK 3.5 bln). (PBJ 08.vii.03) GTS PROPOSES TO UOHS TO CHECK MOBILE OPERATORS Alternative telecoms operator GTS has filed a proposal with the Anti-Monopoly Office (UOHS) for an investigation of the suspected discriminatory conduct of cellular phone operators T-Mobile and Eurotel. GTS believes the mobile operators favor major clients in determining the tariffs for calls from fixed lines to mobile networks. The third cell phone operator on the Czech market, Cesky Mobil, has not been included in the complaint as talks on changes to the tariffs for connecting calls are pending. (PBJ 08.vii.03) HUNGARY HUNGARIAN PREMIER FORESEES NO EARLY TAX CUTS Prime Minister Peter Medgyessy said in a lengthy interview with "Napi Gazdasag" of 9 July that substantial tax cuts are unlikely in the coming years. Medgyessy admitted that such cuts would boost competitiveness but added, "If we want to keep the budget deficit within limits, we can't have a substantial easing of taxes." The premier dismissed opposition talk of a looming economic crisis in the country, saying annualized economic growth in the first quarter was 2.7 percent -- down only slightly from last year's 2.9 percent growth in the same period. He added that analysts are predicting 3.5 growth for 2003. Medgyessy said Hungary might attract $2.5 billion-$3 billion this year in foreign investment. While acknowledging that the present investment situation in Hungary is not satisfactory, he said international trends must be kept in mind, particularly the amount of investment that now goes to China. (RFE/RL 09.vii.03) IBM RELOCATES INTERNATIONAL FINANCE SERVICE CENTRE TO BUDAPEST IBM has relocated its international financial service centre to Budapest. The centre will not only manage its own delivery invoices and financial transactions around the world but will carry out tasks for other companies in the region. This move will have implications for the future workforce level of the centre, which currently employs more than one hundred staff. In future the centre will provide exclusive accounting services along with its Asian and US counterparts. At the centre's official opening, Hans Ulrich Maerki, the European chairman of IBM, stated that Hungary is an ideal location for providing services to international clients. The company has decided to move its focus from simple production and assembly towards new areas. IBM has been present in Hungary since 1936 and is the oldest IBM organisation in the region. The Hungarian IBM group employs more than 2,000. (Newsbase 09.vii.03) ENERGY DEAL IS LARGEST YET Last Monday, oil and gas company MOL Rt and its majority-owned chemicals firm, TVK Rt, signed an electrical power supply contract with German-owned E.ON Hungary Group, the firms announced last week. The value of the contract, which will expire at the end of 2004, is Ft 22.5 billion (€84.6 million). It calls for E.ON to supply 1,036 GWh of electricity a year to 12 units in Hungary and one in Slovakia. The Slovak unit, belonging to MOL-owned Slovnaft AS, will be supplied through Západoslovenská Energetika AS, which is held by E.ON Energie AG. While MOL executives declined to comment on the amount of cost savings they expect from entering the liberalized power market, they said the intention behind the move was to rationalize MOL’s electricity use by selecting a single supplier for most of its network. Regarding the duration of the contract, István Bakács, member of the board at E.ON Hungary, said it covers the longest period of any contract the firm has signed with authorized power users. Such users are entitled to choose their suppliers from the deregulated market as of January 2003. “It is perfectly sensible to sign relatively short-term agreements, due to uncertainties on the liberalized market and a lack of transparency concerning prices,” said Bakács of E.ON. As of January this year, Hungary’s electricity market has been partially liberalized. Electricity consumers that use at least 6.5 GWh of power annually can freely choose their suppliers on the liberalized market. According to information from the Hungarian Energy Office (MEH), Hungary’s total energy consumption was 30 terawatt hours (with one terawatt equaling 1,000 billion watts) in 1999, a base year the office uses for consumption calculations. Of this sum, entitled power users account for approximately 35%, according to Lajos Petróci, responsible for entitled users at the MEH. “As of the end of June, 11.61% of this segment has actually entered the liberalized market, and our expectation for July is 16.63%,” Petróci said. (BBJ 07.vii.03) KAZAKHSTAN OIL EXTRACTING CNPC-AKTOBEMUNUAIGAS STARTS OIL EXPORTS VIA CPC SYSTEM. Oil extracting CNPCAktobemunaigas has started oil exports via CPC system, CPC press service informed. Last year CNPC extracted 4.3mn tons of oil and this year it targets at 5.2mn tons. CNPC-Aktobemunaigas is the 3rd biggest domestic oil producer. CPC has also signed oil transportation agreements with JV Tengizchevroil, Karachaganak Integrated Organization, national oil and gas monopoly Kazmunaigas, Kazakhoil-Aktobe. Russia holds a 24% stake in CPC project, Kazakhstan - 19%, Oman - 7%. Chevron Caspian Pipeline Consortium Company (15%), LUKARCO B.V. (12,5%), Rosneft-Shell Caspian Ventures Limited (7,5%), Mobil Caspian Pipeline Company (7,5%), Agip International (N.A.) N.V. (2%), BG Overseas Holding Limited (2%), Kazakstan Pipeline Ventures LLC(1,75%) and Oryx Caspian Pipeline LLC (1,75%) are private shareholders. (IntelliNews 09.vii.03) CORRUPTION ALLEGATIONS OVERSHADOW KAZAKH LEADER'S VISIT TO CANADA On 27 June, Kazakh President Nursultan Nazarbaev wrapped up a five-day trip to Canada. The visit showed Canada trying to balance concerns about Kazakhstan's worsening democracy and human rights record, which is too egregious to disregard, and its interests in Kazakhstan's hydrocarbon resources, which are too vast to ignore. Strengthening bilateral economic cooperation was the main subject of talks between Nazarbaev and Canadian Prime Minister Jean Chretien in the Canadian capital Ottawa, Khabar news agency reported on 27 June. Chretien pledged to consider increasing investments in Kazakhstan, especially in the high-technology sector, and to help develop its small and medium-sized enterprises. Bilateral agreements were signed on strengthening economic partnership and on mutual legal assistance in civil and criminal cases. Furthermore, Nazarbaev obtained Canadian agreement to assist in reforming his country's judicial system and training Kazakh peacekeeping specialists. According to state-controlled Khabar TV, Chretien praised Kazakhstan's economic and political reforms and opined that they should serve as models for other post-Soviet republics. If true, such remarks set the prime minister painfully at odds with critical voices among Canadian human rights groups, local press, and even some politicians. Jason Kenney, shadow finance minister of the opposition Canadian Alliance, protested in a 19 June letter to Chretien that it was "unacceptable that the government of Canada intends to welcome this man [Nazarbaev] to our nation's capital with open arms. The only result of this visit will be to strengthen the dictator's rule by providing him with another useful propaganda tool." A statement by Human Rights Watch's Toronto Committee was similarly scathing about Ottawa's friendly reception of Nazarbaev. "Kazakhstan's vast energy wealth has made it an important geoategic partner for many countries, but it has not made the country more democratic," the statement said. "As the country's wealth grows, the government is misusing revenue, consolidating power, and closing political space. Kazakhstan is starting to look like another case study in how oil windfalls bolster dictatorships rather than foster democracy." According to the Russian daily "Vremya novostei" on 27 June, the Kazakh president was received in Ottawa at a lower level than would have been expected for a foreign head of state. He was granted a "working visit," rather than a "state visit" due to Canadian reservations about Kazakhstan's human rights record and the so-called "Kazakhgate" scandal, the newspaper commented. The scandal encompasses allegations that Mobil Oil Corp. (now ExxonMobil), which obtained a 25 percent stake in Kazakhstan's Tengiz oil field in 1996 for $1.05 billion, arranged for bribes totaling $78 million to be paid into the bank accounts of two unnamed top Kazakh officials, generally assumed to be Oil Minister Nurlan Balgymbaev and Nazarbaev himself. Merchant banker James Giffen, chairman of the New York-based Mercator Corporation, stands accused of handling the payments. He was arrested on 30 March and charged with violating the U.S. Foreign Corrupt Practices Act. A pretrial conference with prosecutors has been scheduled for 5 September, eurasianet.org reported on 1 July, adding that the arraignment of Giffen is only part of a wider corruption probe by U.S. law-enforcement agencies to investigate the dealings of oil conglomerates in Kazakhstan. (RFE/RL 07.vii.03) LATVIA LATVIAN FOREIGN MINISTRY OFFERS INSIGHT INTO DUMA DEPUTY'S TRAVEL BAN A press release issued by the Latvian Foreign Ministry on 7 July stated that a representative of the Russian Embassy was summoned to the ministry to hear an explanation for Latvia's recent decision to declare Russian State Duma Deputy Iosef Kobzon persona non grata. International media reported on 4 July that Interior Minister Maris Gulbis signed an order on 20 May blacklisting Kobzon because he poses a "threat to [Latvian] national security." News of the ban prompted the Russian Foreign Ministry to demand an explanation from Latvia, although the 7 July statement said Russian Ambassador Igor Studennikov was informed of the action in May. According to the statement, the Russian Embassy representative was told at the meeting that "Kobzon is not permitted to enter Latvia, this decision having been taken based on information available to the relevant Latvian institutions." In addition, the ministry called on Russia to take a "well-considered...approach to relations with Latvia over this issue" and to "avoid the unnecessary provocation of controversial situations." (RFE/RL 09.vii.03) LITHUANIA EUROCOM AIMS TO ACHIEVE ANNUAL REVENUES OF E1.2M ($1.4M) IN 2003 Eurocom, a new player on Lithuania's telecommunications market, aims to achieve annual revenues of around E1.2 million from mobile telephone services in 2003, expecting to attract around 20,000 mobile users by the end of the year. Eurocom, which is controlled by Lithuania's VP Market, the largest retail chain in the Baltic states, has recently signed an agreement to provide mobile services using the network of Bite GSM, the country's second-biggest mobile operator. "At this point, we intend to focus on the business customer segment. For private users, we are planning to offer a pre-paid service," said Kestutis Skrebys, director of Eurocom. He said Eurocom will compete for business customers with Tele2, the country's third-largest mobile operator, rather than with Omnitel, the number-one operator, or Bite. Tele2 boasts the lowest mobile call rates in the country. Eurocom's users will be charged between 0.25 to 0.30 litas per minute for peak-hour calls within the Bite network and 0.45 litas per minute for calls to other networks. The respective call rates for Tele2's business customers are 0.30 litas and 0.45 litas per minute during the peak hours. Skrebys said Eurocom intends to give a high priority to developing integrated services combining fixed-line and mobile communications in the future. Eurocom was the first company to start providing fixed-line telephony services by using the network of Lietuvos Telekomas [Lithuanian Telecom]. The company, which resells services it buys from the former monopolist at wholesale prices, expects to expand its fixed-line customer base to 12,000 by the end of 2003, from the current 4,000 users. Eurocom targets revenues of around E1.4 million from fixed line operations in 2003. This would help it boost total revenues by 66.7% to E5.8 million this year. (Newsbase 09.vii.03) POLAND POLAND MAY MEET MAASTRICHT CRITERIA IN 2007, JOIN EUROZONE IN 2008-2009 At a meeting of the Sejm’s committee, Deputy Prime Minister Jerzy Hausner said that Poland might meet the Maastricht criteria at the end of 2007, so that a decision on joining the eurozone can be made in 2008 or 2009. The National Bank of Poland (NBP) has so far assumed that Poland’s eurozone entry should take place as soon as possible, ie. in 2007. At present, Poland meets most of the Maastricht criteria, except for the budget deficit one (in the currently existing budget draft, prepared by ex-FinMin Kolodko, the general government deficit is to amount to 4.6% of GDP in 2004, as compared to 4.0% expected for this year). Hausner has earlier revealed plans for an increase of the budget deficit in the next two years in order to boost the economy and finance the costs of EU accession. Moreover, he has also spoken about a needed PLN 14bn increase of next year’s central budget gap, which is to push the above-mentioned general government gap by the same amount, other things equal. Hausner also said, however, that next year’s deficit was still not a closed matter and a decision on the budget for 2004 is to be made at the government’s sitting on July 29. On a separate note, Hausner also said that he wanted to continue his dialogue with NBP on creating conditions for the further reduction of interest rates. Talks on the use of NBP’s currency reserves for a reduction of Poland’s foreign debt will be continued next week. (IntelliNews 10.vii.03) TWO POLISH DEPUTIES SURRENDER IMMUNITY Deputy Andrzej Jagiello tendered his resignation from the ruling Democratic Left Alliance's (SLD) parliamentary caucus and from all party functions, Polish Radio reported on 7 July. Jagiello also applied to Sejm speaker Marek Borowski for the lifting of his parliamentary immunity. Justice Minister and Prosecutor-General Grzegorz Kurczuk had already filed a request that Jagiello's immunity be lifted. Jagiello has been accused of having revealed state secrets by warning local party colleagues in Starachowice of a pending operation by the Polish Central Bureau of Investigation. Podlasie Region Senator Sergiusz Plewa (SLD) also announced on 7 July that he will surrender his parliamentary immunity in an unrelated case; Plewa has been accused of causing a car accident while under the influence of alcohol. "I am ready to bear all the legal and political consequences of my behavior, in association with which I resign my senatorial immunity," Plewa said in a press statement. (RFE/RL 08.vii.03) POLAND TO ACQUIRE SUPPLIES OF IRAQI OIL Poland, which sent troops to support the US-led forces in Iraq, has acknowledged its "ultimate objective" is to acquire supplies of Iraqi oil. Foreign Minister Wlodzimierz Cimoszewicz said his country had never disguised the fact that it sought direct access to the oilfields. He was speaking as a group of Polish firms signed a deal with a subsidiary of US Vice President Dick Cheney's former company, Halliburton. The US firm, Kellogg, Brown and Root, has already won million-dollar contracts to carry out reconstruction work in Iraq. "We have never hidden our desire for Polish oil companies to finally have access to sources of commodities," Cimoszewicz told the Polish news agency PAP. Access to the oilfields "is our ultimate objective," he added. Poland is to command more than 9,000 troops in one of the post-war administrative zones being set up to run Iraq, and will be the first time Poland has led such a large multi-national peacekeeping force. (Newsbase 07.vii.03) ROMANIA ROMANIAN PRESIDENT WRAPS UP VISIT TO RUSSIA President Iliescu ended his three-day visit to Russia on 5 July in St. Petersburg, where he attended the opening of a Romanian Consulate he said will serve both a diplomatic and economic role, Romanian media reported. Following his 3 July meeting with Russian State Duma Speaker Gennadii Seleznev in Moscow, Iliescu said that through their basic treaty, the two countries seek to establish a framework to facilitate long-term relationships among their respective government institutions. Seleznev said the Duma will ratify the treaty next fall. The same day, 250 leaders of Romanian companies who were part of the visiting Romanian delegation participated in an economic forum focusing on the possibilities offered by bilateral cooperation. Some 300 Russian businessmen also attended the meeting. On 4 July, Iliescu spoke to representatives of Gazprom and other Russian gas companies regarding the possibility of establishing a joint Romanian-Russian company to transport natural gas from Russia to Romania. They also discussed the possibility of building a pipeline for oil and natural gas from Russia to the Romanian port of Constanta. (RFE/RL 8.vii.03) RUSSIA MDM SELLS 2.9 MILLION PREFERRED SHARES OF SBERBANK The MDM financial group holds about 6% of preferred shares in Russia's SBERBANK. In June, the MDM bank sold to its MDM-TRUST subsidiary 2.9 million SBERBANK preferred shares, which account for 5.8% of the bank's preferred stock, the Russian Federal Securities Commission has said. The market value of the paper is $11.6 million. Although MDM maintains that the group carries out transactions involving bank shares only in the interests of its clients, analysts believe that MDM buy shares for itself. (Newsbase 09.vii.03) RUSSIA MIGHT BAN EU POULTRY IMPORTS AFTER JULY 11 Russia might impose a ban on poultry imports from the EU, if the European Commission lifts its ban on Dutch, Belgian and German poultry, introduced due to the spread of avian flu, an official with the Russian Agriculture Ministry said Tuesday. An official warning about the step has been submitted to the EC. The EC earlier expressed its intention to lift the ban on July 11, saying that there is no longer any danger of the disease spreading. But Russian veterinarians say the step is premature, and Russia cannot run the risk of being exposed to the danger, as the financial losses could be significant. In April and May, Russia banned poultry imports from the Netherlands, Belgium and Germany. There has not been a single case of avian flu registered in Russia in the last 15 years. The EU is one of the major suppliers of poultry to Russia. The EU has been given a quota of 139,900 tonnes for poultry imports to Russia within the 744,000-tonne poultry import quota set for May-December. (IntelliNews 08.vii.03) RUSSIA AND FRANCE TO SET UP TASK FORCE FOR FIGHTING GLOBAL CHALLENGES Russia and France will create a joint task force on fighting new global threats and challenges, Russian Foreign Minister Igor Ivanov told reporters today following a meeting of the Russian-French council for security cooperation. Ivanov said that the force would start working this fall already. He reiterated that some time ago a similar Russian-French task force for tackling non-proliferation of weapons of mass destruction was set up. Participants of today's meeting discussed a number of issues related to promoting global and regional security. Additionally, the parties touched upon outlooks for intensifying cooperation in averting new threats of international terrorism, particularly with regard to recent terrorist acts in Moscow and other parts of the world. Finally, special attention was paid to illegal drug trafficking. (IntelliNews 08.vii.03) LUKOIL, GAZPROM MAY SPEND $12BLN TO TAP CASPIAN FIELD LUKoil said Monday that a Caspian oil and gas field it plans to explore with Gazprom may require as much as $12 billion to develop what the companies expect will be billions of barrels of reserves. LUKoil, the nation's No. 2 oil producer, and Gazprom, the world's top natural gas producer, plan to start drilling at the Tsentralnoye oil field as early as 2007, LUKoil vice president Leonid Fedun told reporters. LUKoil will finance Gazprom's exploration part in the project, he said. LUKoil has said it wants to boost output as much as 75 percent by 2010, focusing on the Caspian area and the Timan-Pechora region in northern Russia. The company this year lost its post as Russia's No. 1 oil producer to Yukos, which has been expanding output at a pace more than 10 times faster. "We expect to discover a very large deposit with several billion barrels of oil equivalent," Fedun said. "The government recommended Gazprom as an investor in this project as Russia had an option to take a 25 percent stake in the venture." There is a 50 percent chance the field will mostly yield oil and a 50 percent chance it will be a gas field, he said. The field saddles the border between Russia and Kazakhstan in the Caspian Sea. LUKoil and Gazprom last week set up a venture, Tsentrkaspneftegaz, which will explore the field with Kazakhstan's Kazmunaigaz. Tsentralnoye is estimated to hold 3.82 billion barrels of oil and 91.7 billion cubic meters of gas, enough to fuel Italy and France for almost three years. (The Moscow Times 08.vii.03) CBR TO LOWER RATE OF MANDATORY FX SALES TO 25% FROM 50% CBR announced it plans to lower the rate of manadaotry FX sales from 50% to 25%, citing the sustained stability of the domestic FX market. Should the high level of stability persist, the rate might be lowered to 5-10%, said deputy CBR chairman Vyugin. This would be the 2nd lowering of the rate from 75% during the 1998 crisis. Mandatory FX sales would be completely abolished starting 2007. Earlier, parliament passed a bill lowering the rate to no more than 30% starting 2004. The fact that CBR went even further signals its market-friendliness and the willingness to deregulate the market. Exporters now sell almost all FX proceeds, due to the higher attractivenes of the RUR, thus CBR’s decision would have a limited effect. At the same time, with the expected recovery in the US and EU (later for the latter), a lower rate would mean lesser inflationary pressure. CBR also plans to cancel the outdated requirement for banks to issue FX exchange certificates. These measures reflect the much healthier state of the economy. (IntelliNews 08.vii.03) PROSECUTORS CHARGE THREE MEN CLOSE TO MIKHAIL KHODORKOVSKY For the first time since the early days of the Putin presidency, a leading Russian business tycoon has been arrested. The detention of Platon Lebedev, a billionaire, is just one of three cases--ranging from embezzlement to murder--brought on one day against men linked to the oil giant Yukos and its director, Mikhail Khodorkovsky, Russia’s richest man. The charges also raise questions over the planned merger of Yukos with Sibneft, the fifth-largest Russian oil company, which would create the biggest oil company in Russia. Sibneft’s majority owner, Roman Abramovich, on 1 July announced that he was buying the English football club Chelsea. The purchase is relatively small--$230 million of Abramovich’s personal fortune of $5.7 billion--but very high-profile, prompting speculation that Russia’s second-richest man is concerned that his closeness in the 1990s to President Boris Yeltsin could also make him vulnerable. Lebedev, who was included in Forbes magazine’s list of the world’s billionaires this year with an estimated personal fortune of $1 billion, is charged with defrauding the state of over $280 million in 1994 by illegally appropriating 20 percent of shares in a Murmansk-based fertilizer producer, Apatit. However, opposition politicians and political commentators believe the prosecutors’ decision to press charges against Lebedev that are almost a decade old and to seize him as he was recovering from a heart attack has more to do with his relationship with Khodorkovsky. Both men hold stakes (indirectly in Khodorkovsky’s case) in the Gibraltar-registered group Menatep, which in turn owns 61 percent of Yukos. The second arrest announced was that of the head of one of Yukos’ security service departments, Alexei Pichugin, who was seized in June for involvement in a double murder in "one of Russia's regional capitals" in November 2002. His lawyer, Georgy Kagener, who called the case "absurd" and a "provocation," says the case relates to the murder of a friend of Pichugin’s in Tambov. Prosecutors also issued an international warrant for the arrest of Ramil Burganov, a former executive of an exploration and production subsidiary of Yukos. He is accused of seizing shares worth 1 billion rubles ($33 million at today’s rates) in Eastern Oil Co. in 1998. (TOL 07.vii.03) PUTIN SIGNS A HOST OF BILLS INTO LAW President Putin has signed into law a number of pieces of legislation recently passed by the State Duma and the Federation Council, the presidential press service told Interfax on 6 July. Among them was a law establishing a new scheme for single-mandate districts for the 7 December State Duma elections. The new scheme will give some regions, such as Krasnodar Krai and Daghestan, an additional district each because of population growth. Other regions, like Murmansk Oblast, will lose districts, as two districts are combined into one. Putin also signed into law changes to Russia's Criminal Procedural Code that will, among other things, spell out the authority of public prosecutors more precisely. Another law signed by the president amends and adds to the existing law on the formation and activities of representative and executive organs of state power in Russia's 89 regions. A fourth law signed by Putin amends the law on the banners of the army, the navy, and other military services. According to the amended law, the banner of the Russian armed forces will feature a five-pointed star; the words "Fatherland, Duty, and Honor;" and a large, golden double-headed eagle. (RFE/RL 07.vii.03) U.K. TO INVESTIGATE ABRAMOVICH OVER CHELSEA The British government will investigate the takeover of Chelsea Village, owner of the west London soccer team, by billionaire Roman Abramovich, British Sports Minister Richard Caborn said Thursday. Caborn said his department would examine whether Abramovich, who has interests ranging from oil and aluminum to frozen food and television, has sufficient business credentials to control a soccer club. Caborn said the probe follows a request from former Sports Minister Tony Banks, who is a Chelsea fan. "I've asked the fit and proper persons test to be done on this," Caborn told the BBC. "There's a wider issue here since the football association is trying to bring credibility to the game." Abramovich, Russia's second-richest man with an estimated $5.7 billion fortune, on Tuesday bought 50.1 percent of Chelsea and made a tender offer at 35 pence per share for the rest. The bid values Chelsea, which has £82.7 million of debt, at £59.3 million ($100 million). The Financial Services Authority will investigate trading in the shares in the days before the bid, the Evening Standard reported, without saying where it obtained its information. The FSA declined to comment. Former Deputy Prime Minister and current Unified Energy Systems CEO Anatoly Chubais once said that "politically, Abramovich is probably the most influential" Russian businessman. Abramovich told the BBC on Thursday that he bought Chelsea just to have fun and says he might not keep a hotel and other parts of Chelsea Village that came with the Premier League club. (The Moscow Times 04.vii.03) MOSCOW PUTS TAX COLLECTION IN BASHKORTOSTAN IN HANDS OF THE OPPOSITION Tax Minister Gennadii Bukaev announced on 27 June that he has appointed Aleksandr Veremeenko as director of the Tax Ministry's branch in Bashkortostan, "Kommersant-Daily" reported on 28 June. Veremeenko, a former general director of Bashtransgaz, is one of Bashkir President Murtaza Rakhimov's chief political opponents. Veremeenko was dismissed as head of Bashtransgaz on 18 June, in part because of his open conflict with republican authorities, according to the daily. Aleksandr Veremeenko's brother, Sergei Veremeenko, who is chairman of Mezhprombank, is considered a likely challenger to Rakhimov in the 2003 republican presidential elections, TVS reported on 20 June. According to "Kommersant-Daily," the local political elite is in shock over Aleksandr Veremeenko's appointment. Aleksandr Veremeenko told the newspaper that his chief task in his new post will be to "struggle for the supremacy of Russian financial laws in Bashkortostan." (RFL/RL 29.vi.03) SERBIA AND MONTENEGRO LIT UP OVER CIGARETTE SMUGGLING An Italian news agency report that the Prosecutor’s Office in Naples had issued a warrant for the arrest of former Montenegrin Prime Minister Milo Djukanovic as part of an investigation into a Balkan cigarette-smuggling ring has caused confusion and consternation in Podgorica and Naples. Last week’s ANSA report, picked up by Montenegrin and other media, claimed to have confirmation from the Naples Prosecutor’s Office that a warrant had been issued for Djukanovic’s arrest. According to the report, preliminary investigating Judge Anna di Mauro had and then dismissed the warrant request on the grounds that Djukanovic has diplomatic immunity. The ANSA report has sparked a flurry of controversy, with the Prosecutor’s Office in Naples issuing a denial of the story. Citing a report from the Prosecutor’s Office in Naples, ANSA said that evidence has been found that Djukanovic had been receiving payments from the Camora crime gang for his help in the transportation of contraband cigarettes through Montenegro. ANSA’s story alleged that Djukanovic and three other men--Paolo Savino, mentioned as the key figure in the smuggling ring; Dusanka Jeknic, a commercial representative in Italy for Montenegro; and Veselin Barovic, a Montenegrin businessman--led and organized the cigarette-smuggling operation. The report contained specific details from the prosecutor’s report, which the agency claims to possess. The Italian news organization said in its story that Savino gave members of the Montenegrin government, including Djukanovic, large sums of money. ANSA cited the judge as saying that Djukanovic's role in the smuggling operation was to provide signed authorizations or licenses necessary for the import of smuggled goods, their storage, and further transport to the territory of Montenegro. Djukanovic has repeatedly denied all accusations concerning his alleged involvement in cigarette smuggling. (TOL 07.vii.03) SLOVAKIA SAMSUNG ELECTRONICS SLOVAKIA OPENS PLANT IN GALANTA South Korea's Samsung Electronics Slovakia officially opened a plant for the manufacture of monitors for television sets and computers in Galanta, Trnava region, on Monday, SMe reported. It is the first Korean manufacturing plant ever in Slovakia and the firm is aiming this year to produce more than 2 million units and employ over 1,100 people. Prime Minister Mikulas Dzurinda praised the investor for having breathed new life into the abandoned and dilapidated facilities originally belonging to the now-defunct West Slovak Furniture Works. "Samsung decided on Galanta in May last year before starting production in November," he said. Galanta Mayor Alexander Mezes praised Samsung's contribution to regional employment. In anticipation of launching production, the jobless rate is falling from 14% to 9%, and will eventually reach 5-6% when the plant is running at full capacity. To date, Samsung Electronics Slovakia has invested some 540 million crowns, E13 million, including 170 million crowns on land and buildings. (Newsbase 09.vii.03) UKRAINE NEGOTIATIONS ON COMMON PRESIDENTIAL CANDIDATE COMMENCE Three parties of the majority including SDPU(u), Labour Ukraine and regions of Ukraine started negotiations on nominating a common presidential candidate on the next presidential elections. According to the results of the opinion poll recently carried out by Kiev International Institute of Sociology, the leader of SDPU(u) Viktor Medvedchuk may receive 4.3% of votes on the presidential elections, leader of Party of Regions PM Viktor Yanukovich - 6.9% of votes (3rd rating and the largest among all representatives of the majority), leader of Labour Ukraine Serhiy Tyhypko - 1.3%. The sum of their votes makes up 13.8%, which only slightly exceeds rating of Communist leader Petro Symonenko (13.6%) and considerably less than the rating of Our Ukraine's leader Viktor Yushchenko (22.6%). At the same time, the member of oppositional Tymoshenko's bloc Andriy Shkil forecasts nominating the common presidential candidate by Tymoshenko's bloc and Our Ukraine bloc pointing out to recent intensification of negotiations between the blocs. According to Shkil the sides may decide on the common presidential candidate in the fall. According to the effective Constitution the next presidential elections will be carried out in 2004. In spite of Kuchma's repeated statement that the elections will not be postponed till 2006 or 2007, Yushchenko recently expressed doubt that the ruling parties are not interested in postponing the elections. (IntelliNews 09.vii.03)http://bbcdbms1021.radio.bbc.co.uk/dream31/process/wwwjobs_merge.asp INFORMATION PROVIDERS - For either a free trial, or for further information on the services of our Information Providers, please contact: NEWSBASE NewsBase is a leading provider of business and economic news and intelligence from Russia, Central Europe and the FSU. Daily bulletins and industry specific weekly reports backed by an archive containing over 10 million words combine to provide a comprehensive service to a global blue chip client base. Contact: Jon Laurijssen T: +44 (0)131 478 8537 F: +44 (0)131 478 7001 E: [email protected] W: www.newsbase.com, www.newsbaseworldmonitoring.com NEW WORLD PUBLISHING New World Publishing is a primary source of business-related information for Central Europe, through its publications the Prague and Budapest Business Journals. Contact: Mark Child T: +420 2 4608 6524 F: +420 2 4608 6501 E: [email protected] W: www.ceebiz.com, www.pbj.cz, www.wbj.pl, www.bbj.hu THE MOSCOW TIMES The Moscow Times offers readers an independent and precise view of the political, economic and business life of Russia. Contact: Andrew Boag T: +7 095 232 3200 F: +7 095 232 1761 E: [email protected] W: www.themoscowtimes.com INTERNET SECURITIES, INC. (IntelliNews articles) Internet Securities, established in 1994, is the pioneering provider of electronically delivered emerging markets business information. 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