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*Due Diligence, Business Intelligence, Asset Retrieval, Debt Recovery* TT Business Intelligence Report Vol. 2, No. 51, 24 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 WORLD REFINING ASSOCIATION'S "CENTRAL AND EASTERN EUROPEAN REFINING AND PETROCHEMICALS 6TH ANNUAL ROUNDTABLE" This event (co-hosted with both SNP Petrom and The Rompetrol Group), will take place on 6-8 October 2003 at the Bucharest Marriott Grand Hotel, Bucharest, Romania. For further information, please contact Claire Pallen, tel: +44 (0)1242 529 090; fax: +44 (0)1242 529 060; email: [email protected]; W: www.wraconferences.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 PRESIDENT LUKASHENKA FIRES SEVERAL MINISTERS Belarusian President Alyaksandr Lukashenka marked the ninth anniversary of his election as president of Belarus by dismissing his fourth prime minister, Henadz Navitski. Along with the premier, the Belarusian strongman sacked Deputy Prime Minister Alyaksandr Papkow, who was responsible for the agricultural sector in the cabinet, and the agriculture minister, Mikhail Rusy. The official reason for the 10 July shakedown was the government’s failure to carry out Lukashenka’s order that all debts to farms and villagers for milk and meat be paid by 1 July, but critics are calling it part of a campaign to distract the population from larger problems within Belarus and ensure success in any referendum he may hold to extend his term. Speaking at a government conference on 8 July, Lukashenka said that although Navitski had “glibly reported” that all problems had been solved, data provided by the State Control Committee and the Ministry of Statistics testified to the contrary. “The recent failures to pay wages and to pay farmers for produce supplies and--what was especially intolerable--the falsification and distortion of facts do not give me confidence that the cabinet will provide effective economic leadership,” Lukashenka said. First Deputy Prime Minister Syarhey Sidorski will head the cabinet until a new prime minister takes office. Under the constitution, Belarus’ prime minister is nominated by the president and should be approved by the lower chamber of the National Assembly. Most opposition leaders believe that the cabinet reshuffle is part of Lukashenka’s preparations for a referendum on changes to the constitution that would allow him to be president more than two terms--a vote they predict could be held as soon as this fall. (TOL 14.vii.03) BOSNIA AND HERZEGOVINA UNIONS DISAGREE WITH DRAFT ACTION PLAN FOR RESTRUCTURING The BiH Electric Energy Union stated on Tuesday that it disagrees with the Action Plan for restructuring and privatisation of the electricity sector. The union protests against the fact that it was not allowed to take part in the elaboration of the document, which was recently approved by the Federation of BiH (FBiH) government and forwarded to parliament. This has resulted in the lack of social components in the document, according to the syndicates. According to them, the status of workers that will lose jobs after the restructuring needs to be resolved. They also insisted on co-ordination with the action plan for the restructuring of the coal mining industry. The union requests that the plan should be improved to include a development strategy for the sector. Assistance in resolving has been sought from the World Trade Union and the High Representative. (IntelliNews 23.vii.03) BULGARIA PARLIAMENT'S ENERGY COMMISSION ADOPTS REPORT ON HYDRO ENERGY DEVELOPMENT The parliamentary energy commission adopted on Wednesday the report of the energy ministry for the development of Bulgaria’s hydro energy potential. According to the document, about 40% of the hydropower potential of the country has been realised so far and there are investment opportunities for building new capacities that can produce a total of 10,000 GWh of electricity annually. At the same time, deputy energy minister Angel Minev stressed that the construction of new hydro power plants (HPPs) is irrational, as the electricity produced by the latter is expensive and impacts negatively on the prices for end-users. Recently the State Commission for Energy Regulation (SCER) has raised the purchasing price of electricity from HPPs to BGN 0.80 per MWh. If Bulgaria observes the EU directive stipulating that renewable energy sources should have about 18% of the overall power output until 2007, it would mean too high end-prices of electricity, warned Minev. Last year, HPPs produced 2,778 GWh, or 6.4% of the country’s power production. Electricity purchase from small-sized HPPs reached 354.6 GWh in 2002. The National Electricity Company (NEC) runs 51 HPPs. 14 of the large sized plants work within four cascades - Belmeken-Sestrimo-Chaira, Batak, Vucha and Arda, making up over 88% of the hydro energy facilities in use. HPPs are most actively participating in covering shortages and peak periods. Over USD 500mn is envisaged for the rehabilitation and modernisation of existing hydropower capacities and the establishment of new ones. Part of the financing is provided under loan agreements with the IFIs. (IntelliNews 17.vii.03) CROATIA IS CROATIA PREPARING TO SEND TROOPS TO IRAQ? "Vecernji list" reported on 23 July that representatives of the Croatian Defense Ministry are holding talks in Washington on several aspects of bilateral cooperation, including defining terms according to which Croatia might send 50 troops to Iraq to serve under U.S. command in the Baghdad area. The Zagreb daily added that the U.S. attitude toward Croatia's reported offer is believed to be favorable. The Croatian government is aware of widespread public opposition to involvement in Iraq but feels that the Croatian military stands to gain many benefits in training and other fields by participating in a peacekeeping mission, "Vecernji list" noted. The government expects that it can put together the necessary two-thirds majority in the parliament to approve such a mission because the opposition Croatian Democratic Community (HDZ) is a firm supporter of U.S. policies in Iraq. (NewsBase 24.vii.03) CENTRAL BANK PLANS NEW MEASURES TO RESTRICT BANK LENDING The central bank announced new measures to constrain bank lending, as the current measures did not have the desired effect on credit growth. Since the beginning of the year, the central bank set thresholds on bank has lending growth, limited to 15% y/y, with possible penalties for exceeding this amount. However, most of the existing commercial banks have failed to comply with this requirement, mostly on the back of sustained expansion in consumer demand. The results are not surprising, given the robust real growth rates reported in retail sales and net wages in the first months of the year, growing steadily above 4% y/y over the last few months. Nevertheless, tourism enterprises protested against the plans of the central bank, claiming that its policy had had effect mostly on the corporate sector. The approved credits to tourist enterprises since the beginning of the year have reached just HRK 78.7mn (EUR 10.5mn), which was visibly lower than the previous year. There could be some truth in those statements, as bank lending has grown mostly on the back of consumer loans, reporting a real boom since H2 of 2002. (IntelliNews 21.vii.03) CZECH REPUBLIC PARLIAMENT TO VOTE ON FISCAL REFORMS TODAY Parliament will vote on the legislative version of the public finance reforms today. During yesterday's discussion ODS representatives accused the government of trying to damage small business owners and criticized the general increase in prices, which will be a direct result of transferring services and construction labor into a higher VAT category. KSCM members criticized the impact of the reforms on the socially weak. In his speech, PM Vladimir Spidla hinted that he would possibly accept certain minor adjustment proposals. (PBJ 24.vii.03) TELECOM RIVALS FOR UOHS CONDITIONS ON EUROTOL BUY-OUT Alternative operator Contactel has filed a complaint with the Czech competition watchdog, the Office for Protection of Economic Competition (UOHS), about the acquisition by Czech Telecom of the 49 percent stake that it doesn't already own in Eurotel, the country's biggest mobile phone company. The complaint alleges that the deal will strengthen the dominant position on the local market of Telecom, the country's former fixed line monopoly, Contactel spokeswoman Romana Tomasova said. "We told UOHS that if it approves the merger then Telecom should be forced to accept certain conditions that will secure competition on the market," she said. Contactel has since, at the request of the UOHS, provided details of the conditions that it would like imposed on Telecom for the deal to be cleared. These include around 12 demands that would prevent Telecom and Eurotel from merging their fixed and mobile operations, thus creating a Czech telecoms giant. Among the restrictions, Contactel has proposed that the two companies be prevented from sharing their databases of clients and that cross subsidies between the two companies be banned. Contactel also is demanding that no common tariffs for fixed and mobile services be offered by the companies at the same time. This last condition would prevent the companies from offering joint incentives, such as advantageous call-up rates for customers who use both Telecom and Eurotel. The competition office has also cast around for comments from other telecoms companies on the deal that would create a "Super Telecom." Cesky Mobil, which operates the network Oskar, the last mobile operator to enter the Czech market and still the smallest, confirmed for PBJ that it was approached by the competition office about the proposed acquisition. "We have been approached by the UOHS with very specific questions about the deal, but at this time I cannot reveal what these were about," said Igor Prerovsky, the new vice-president for brand and communications at Cesky Mobil. (PBJ 21.vii.03) FINANCE MINISTER PROTESTS EU 2004 BUDGET CUTS Finance Minister Bohuslav Sobotka at the meeting of EU ministers on 16 July protested against the member countries' intention to make cuts in the EU budget for 2004 aimed at reducing the administration of central EU bodies. Sobotka was supported by EU Commissioner Michaele Schreyer, as well as some other EU candidate countries. Sobotka said that if the proposal is passed, the European Commission especially will not be able to cope with new tasks and new countries will not have sufficient representation in it. "We will strive for a change in the proposal, that is for securing a successful enlargement and our chance to deploy in EU structures as many Czech staff as possible," Sobotka told journalists. In April the European Commission proposed a considerable, nearly 10% rise in next year's administrative costs to $6.1 billion. Thrifty EU member countries led by Germany have so far cut the sum by more than $8 million, which will mainly affect the creation of new jobs at the European Commission for officials of new EU member countries. (NewsBase 18.vii.03) HUNGARY STUDIES CALL FOR CUTTING RED TAPE Bureaucracy is the main problem with doing business in Hungary, according to three separate studies by professional organizations. The most important short-term task is to make public administration more service-oriented, according to a study published July 17 by the Hungarian EU Enlargement Business Council (HEBC). “The government should give top priority to this question, since it is within its own competence and results could be spectacular,” says the study. “Hungary’s ability to attract capital is of great significance for competitiveness.” “It is good that the HEBC does not voice complaints about investment opportunities in Hungary but focuses on the tasks in hand,” Foreign Minister László Kovács told the BBJ at the launch of the report. “It sends a [useful] message to both Budapest and Brussels.” A study published July 14 by the German-Hungarian Chamber of Industry and Commerce concluded that reducing bureaucracy is the top priority. This study asked the opinion of 144 German companies operating in Hungary. Meanwhile, the American Chamber of Commerce issued the first in a series of position briefs about the Hungarian economy on June 19. It argues that establishing an efficient government institution dealing with foreign investors is an essential step toward attracting more foreign direct investment. (BBJ 21.vii.03) HUNGARIAN PREMIER SETS 2008 TARGET FOR ADOPTION OF EURO Speaking at the press conference following a 16 July cabinet session, Premier Peter Medgyessy said Hungary aims to adopt the euro on 1 January 2008, MTI news agency reported. He added that Hungary intends to join the ERM-II exchange-rate mechanism when it joins the EU in May 2004. The premier said the introduction of the European currency to replace the forint is a "national issue" and will symbolize the completion of the economic transformation. He predicted that Hungary's adoption of the euro will result in new jobs, low inflation, and economic growth. At the same press conference, Hungarian National Bank Governor Zsigmond Jarai said the central bank supports the 2008 target for the euro's introduction, but he warned that such a goal will require stricter fiscal policies. (RFE/RL 17.vii.03) KAZAKHSTAN IPI: DRAFT MEDIA LAW DEEPLY FLAWED A proposed media law introduced by the Kazakh government contains provisions that can only lead one to view the draft law as an attempt to control and intimidate the media, warns the International Press Institute (IPI). According to the 14 July IPI report, the draft media law is flawed and should be reviewed by local journalists and international organizations. The report also stated that "the government of Kazakhstan needs to work harder at incorporating international standards on freedom of the press and of expression, particularly regarding the proper definitions of press freedom, limitations on this right, secrecy laws, journalists' confidentiality, censorship, freedom of information, and media activities during elections." The proposed media law, IPI believes, would give authorities the right to fire journalists and editors, to bar owners from establishing media organizations, and to shield politicians from public scrutiny. (RFE/RL 18.vii.03) SOKOLOV-SARBEI MINING COMPLEX PROFIT DOUBLES Y/Y IN 2002 Sokolov-Sarbai mining complex net profit amounted to USD 22.7mn in 2002, or doubled y/y, KASE informed. The shareholders’ equity amounted to USD 157mn, or up by 16% y/y, due to retained earnings. The assets totaled USD 181mn, or up by 17% y/y as a result of higher assets and accounts receivable. Net working capital was USD 24.6mn, or increasing by 33% y/y. The liabilities were USD 24mn, or hiking by 64% y/y. The sales revenues were as high as USD 179mn, or up by 7% y/y, whereas cost of goods sold was USD 125mn, or down by 4% y/y. The company is engaged in extraction and production of iron. The main clients of the company are Russian enterprises, including Magnitogorsk metallurgy complex, as well as Chinese buyers. The company plans to increase its output to 14.6mn tons in 2003 as compared to 13.1mn tons in 2002. On a different note, government has recently announced on its intention to sell its 39.5% stake in Sokolov-Sarbai mining complex. It is planned that the 4% stake will be sold through KASE. The balance of 35.5% will be sold in a single lot to legal entities through tender. (IntelliNews 18.vii.03) LATVIA RUSSIAN SINGER-PARLIAMENTARIAN DECLARED PERSONA NON GRATA The Latvian Foreign Ministry declared Russian Duma member Iosef Kobzon persona non grata, according to media reports on 4 July. Latvian Interior Minister Maris Gulbis reportedly signed an order blacklisting Kobzon on 20 May. The reason given was that Kobzon posed a "threat to Latvian national security." Kobzon told "Vesti segodnya" of 8 July that the ban humiliated "all of Russia and all Russian compatriots in Latvia" and will negatively affect Russian-Latvian relations. He told the Russian-language Latvian newspaper that the action came in response to his participation in a 9 May Victory Day performance organized by the Russian Embassy in Latvia and his criticism of Latvia's treatment of Russian veterans and of plans to make Latvian the primary language of instruction in schools. Kobzon, a member of the Russian Duma who is therefore immune from prosecution, has been characterized as the "Godfather of the Russian Mafia" by former FBI officials quoted in the book "The Red Mafia" by Robert Friedman. Kobzon is a popular Russian singer from the Soviet era who has been suspected of connections to numerous criminal enterprises in Russia. Kobzon is banned from traveling to the United States and has asked that a committee of Russian notables be formed to appeal this ruling. In early 2003, he hosted a television special celebrating the "Year of Russia in Ukraine" that was sponsored by Lyudmila Kuchma, the wife of the Ukrainian president. After this special presentation, a bill was proposed in the Donetsk city council in Ukraine to erect a monument to Kobzon in the city square. The bill was sponsored by Yefrem Zviahilsky, the former acting prime minister of Ukraine who fled the country to Israel after being accused of stealing $22 million. Zviahilsky returned to Kyiv after three years and resumed his position atop the Zasiadko coal mine. He has not faced prosecution on the earlier charges of theft of government funds, and is presently a member of parliament and as such is immune from prosecution. The bill to build a monument to Kobzon has been tabled for future consideration. (RFE/RL 18.vii.03) LITHUANIA TO RAISE MINIMUM WAGE The government decided on 16 July to increase the monthly minimum wage for most workers from 430 litas ($140) to 450 litas as of 1 September, "Lietuvos rytas" reported the next day. The hourly minimum wage is to be increased from 2.53 litas to 2.67 litas. The action was taken on the recommendation of the Trilateral Council, which comprises representatives of the government, trade unions, and employers organizations. According to the Lithuanian Statistics Department, slightly more than one-sixth of the workers in Lithuania earn only the minimum wage, which had not been changed since June 1998. However, the monthly minimum wage will remain at 430 litas for agricultural workers, politicians, judges, public officers, and civil servants. (RFE/RL 17.vii.03) POLAND MILLER, BRAZAUSKAS TO ASK EU FOR ELECTRIC GRID FUNDING Prime Minister Leszek Miller and Lithuanian Prime Minister Algirdas Brazauskas plan to ask the European Commission for €260 million to finance a proposed inter-connection of the Polish and Lithuanian electrical power grids. In a letter obtained by the Business Journal, Brazauskas and Miller tell Romano Prodi, the president of the European Commission, that "the implementation of such a project would require approximately €434 million." The prime ministers go on to request a 60-percent grant to make the project commercially viable. The letter, which is also addressed to the president of the European Bank for Reconstruction and Development (EBRD), Jean Lemierre, does not indicate where the money is expected to come from. Connecting the Polish and Lithuanian power grids was originally proposed in 1995. The economic windfall of an inter-connection between Poland and the three Baltic states has been estimated by a feasibility study at approximately €1.94 billion within a 20-year period. The power grid operators of Poland and Lithuania, Polskie Sieci Elektroenergetyczne S.A. (PSE) and Lithuania's Lietuvoa Energija AB, have met to discuss the creation of a Project Development Company (PDC), whose business plan will depend heavily on the EU's as-yet-uncertain attitude toward providing the grant. Some optimism about the anticipated response from the European Commission and the EBRD stems from the fact that the feasibility study for the project, completed in January, received the financial and organizational support of the EBRD. Energy consultants Ian Pope Associates (IPA) of Scotland were selected to lead the study. According to IPA, the project falls in line with the EU's general energy policy goals. But the deputy director of PSE's international affairs department, Hanna Trojanowska, says that the inter-connection is a difficult undertaking for PSE because "it is not economically viable without the help of EU funds." (WBJ 21.vii.03) CREATION OF LOTOS GROUP TO BE CONCLUDED WITHIN THREE MONTHS The creation of Lotos Group (formerly Rafineria Gdanska) through merging three smaller oil refineries in the south of Poland (Glimar, Jaslo, and Czechowice) and the exploration company Petrobaltik into the Gdansk refinery is to be concluded within three months, Maciej Gierej, President of Nafta Polska (NP) said. The rules of merging the refineries were not decided on yet, but most probably, this process should be carried out through a capital increase in the southern refineries, Gierej said. Earlier last week, the Treasury decided to reject the bid made by the consortium of Poland’s largest oil concern, PKN Orlen, and UK’s company Rotch Energy for a 75% stake in Lotos Group, and build up an alternative oil group based on Lotos. (IntelliNews 21.vii.03) EU REBUKES POLAND OVER PREPARATIONS TO ABSORB FUNDS The European Commission criticized Poland on 16 July for delays in Warsaw's preparations to absorb EU structural and cohesion funds from early 2004, PAP reported. The commission's report predicted that Poland will not be ready by the end of February with a computer system to sort out projects seeking EU funding, and regulations on public procurement, among other obstacles. It also cited the need for amended laws on public aid to industry, greater coordination among ministries, and delays in plans to employ 2,000 additional workers in local-government administration. The commission warned that if the problem is not tackled soon, Poland will have a limited ability to absorb EU funds. (RFE/RL 17.vii.03) ROMANIA PRIVATISATION AGENCY STILL TRYING TO SELL PART OF AILING STATE ENTERPRISES The head of the privatisation agency [APAPS], Ovidiu Musetescu, said quoted by Adevarul daily that “Roman lorry maker, Aro offroad vehicle producer and Siderurgica steel maker are not to be liquidated but privatised”. Indeed, media sources indicate today that Siderurgica was already put up for sale while Musetescu added that the other two will also be given one more chance today. Sources close to the privatisation agency explained earlier this week that APAPS intends to sell most of the three companies’ assets such as to settle enterprises’ debts and keep a small part of them with a view of selling them easier as functioning units. Therefore the last attempt to privatise the three enterprises is seen as an effort to prevent the tough liquidation procedure which is likely to result in mass lay-offs. The solution of the case with the ailing companies is one the commitments of the government under the stand-by arrangement with IMF. In case the liquidation is inevitable, the government would most likely make the related layoffs under ordinance 8/2003 providing generous severance payment such as to curb the social impact. This issue is probably to be discussed with the IMF. (IntelliNews 23.vii.03) SECURITATE KILLERS FLEE JUSTICE Two former high-ranking police officers are on the run after being sentenced to 22 years in prison each for the 1985 beating death of dissident Gheorghe Ursu. The two men’s escape from justice, short-lived though it may turn out to be, only serves to underline the erratic progress in recent years toward coming to terms with the activities of the communist security forces, especially the Securitate secret police. Police issued a national arrest warrant for the two and warned border guards not to let them leave the country. The men fled their homes in Bucharest before police arrived to take them to prison. Bucharest police chief Marian Tutilescu said on 18 July that the two, Tudor Stanica and Mihail Creanga, were thought to be still on Romanian soil and traveling together. On 21 July police spokesman Ionel Voiculescu confirmed that the two were still at large. In 14 July a Bucharest court found the two men, both former officers in the regular police, guilty of the murder of Ursu, a dissident who fell foul of the authorities for keeping a diary critical of the regime. Ursu never attempted to publish it, but friends and colleagues who knew of the diary informed police. Ursu died in police custody. (TOL 21.vii.03) RUSSIA EXPORTERS GET $500M GUARANTEE The government on Tuesday pledged to help exporters of finished industrial products increase foreign sales and become more competitive in international markets. Deputy Prime Minister Boris Alyoshin told journalists that Russian exporters would receive $500 million in export guarantees in 2004 along with $50 million in guaranteed credits. "This will allow exports of [finished] industrial products to increase by $2 billion in 2004," he said. Since the collapse of communism Russia has been unable to maximize export revenues because it sells mainly unfinished goods or raw materials abroad instead of more profitable finished machine goods, and building and transport materials. Exporters of such finished goods have suffered in the past because they have been unable to obtain long-term financing. Prime Minister Mikhail Kasyanov said on television that finished industrial production account for only 10 percent of Russian exports, or $10 billion. "That is a very small part of the structure of our exports. The rest are metals, chemicals and half of them are raw materials," he said on Rossia. "Unfortunately the structure of exports is not changing and one of the goals of our program of development is to change the structure," he added. Alyoshin said Russia was mainly interested in expanding sales to countries without investment ratings, including the Commonwealth of Independent States, Cyprus, Mongolia and China. The Finance Ministry will take the final decision on the guarantees.The Economic Development and Trade Ministry said that the nation's trade surplus grew 38 percent in the first half of the year to $28.5 billion. Exports climbed 28 percent to $61.2 billion, boosted by rising prices for oil and metals. The average price of Brent crude oil, the benchmark oil for Russian exports, rose 19 percent in the first six months from the year-ago period. The country's imports increased 21 percent to $32.7 billion, fueled by economic growth and after the ruble advanced against the dollar, the ministry said. (The Moscow Times 23.vii.03) GOVERNMENT APPROVES 2004 PRIVATIZATION PLAN A 17 July cabinet meeting approved the state's draft privatization plan for 2004-06, the government announced in a press release on its website (http://www.government.ru) the same day. The state, which hopes to earn at least $1 billion a year from privatization, plans to get rid of most stakes of less than 25 percent in 2004, followed by stakes of less than 50 percent in 2005. The state's remaining 7.6 percent stake in LUKoil, now worth approximately $1.1 billion, is likely to be sold off in 2004. Off the list for now is a 40 percent stake in Siberian utility Irkutskenergo, in which aluminum producers Rusal and Sual already hold a controlling stake. The state might be looking to exchange some of its stake for the utility's grid holdings, "Vedomosti" reported on 18 July; grid assets nationwide are slated to become part of the Federal Grid Company in the course of ongoing energy reforms. Troika Dialog analyst Lauri Fillantano told "Gazeta" of 18 July that Rusal and Sual are likely to strike a deal with the state, with the only question being how much of its stake the state surrenders in exchange for Irkutskenergo's grid holdings. The privatization discussion took place amid unease over the results of privatizations past, with the Prosecutor-General's Office currently holding a top Yukos shareholder on charges involving a 1994 privatization deal. Clearly mindful of the controversy, Prime Minister Mikhail Kasyanov stated, "The results of the privatization of past years are unshakable and will not be reviewed," "Kommersant-Daily" reported on 18 July. Deputy Property Minister Aleksandr Braverman added an asterisk, however, telling journalists on 17 July that "individual privatization deals" could be open to review, RosBusinessConsulting reported the same day. (RFE/RL 22.vii.03) FSB AGENTS INTERCEPT CAR BOMB IN GROZNY Federal Security Service agents discovered a car wired with explosives near the headquarters of the Kremlin-backed Chechen administration less than two weeks after the building was reopened following a truck bombing, an official said Monday. The discovery of the car bomb in Grozny on Sunday underlined the violence and disorder that afflict the city despite a large military presence. Elsewhere in Chechnya, six federal soldiers and six rebels died in a shootout in the mountain hamlet of Dyshne-Vedeno that began when rebels attacked a military patrol, said Colonel Ilya Shabalkin, a spokesman for the military in Chechnya. An official in the Kremlin-backed Chechen administration, however, said eight soldiers were killed in the clash. The official, who spoke on condition of anonymity, said a total of 18 Russian servicemen were killed and 26 wounded in Chechnya over the previous 24 hours. Shabalkin told news media that Federal Security Service agents had found an automobile containing a bomb about 70 meters outside the perimeter of the administration complex. The bomb, consisting of about 120 kilograms of plastic explosive, was neutralized, he said. The Chechen administration complex was heavily damaged in December when suicide attackers drove two truck bombs through the security cordons and detonated them, killing 72 people. Akhmad Kadyrov, the head of the pro-Moscow Chechen administration, hailed the building's July 10 reopening as a sign of determination to bring stability to the region. Meanwhile, an envoy of Chechen rebel leader Aslan Maskhadov said he discussed prospects for peace in Chechnya with State Department and Pentagon officials, congressmen and senators during a five-day trip to Washington last week. Salambek Maigov said he traveled to Washington at the invitation of the American Committee for Peace in Chechnya, co-chaired by former National Security Adviser Zbigniew Brzezinski. Maskhadov appointed Maigov this year to kick-start negotiations with Russian officials. However, the Kremlin has rejected the idea of talks with Maskhadov, calling him a terrorist. The Kremlin has called an Oct. 5 election for the Chechen presidency -- with Maskhadov excluded from the ballot -- which it hopes will serve as a political solution and help end the daily attacks on federal forces. Maigov said the vote would solve nothing. (The Moscow Times 22.vii.03) RUSSIA AND UKRAINE SIGNS AGREEMENT ON EXPORTING ARMS TO THIRD WORLD COUNTRIES The Russian and Ukrainian governments have signed an agreement entitled "On Mutual Cooperation on Exporting Arms to Third [World] Countries". The document will allow the parties to implement a coordinated trade policy on the arms export market. The two countries will soon create an intergovernmental working group to decide before each tender of potential interest which country is to take part. The ROSVOORUZHENIYE and UKRSPETSEXPORT state arms exporters must send their tender applications to the working group. Some Ukrainian officials believe the agreement is more favourable for Russia, which exports far more arms than Ukraine. In 2002, for example, Russia exported arms worth $4.7 billion, versus Ukraine's mere $550 million. (NewsBase 22.vii.03) MOSCOW EXTENDS CASPIAN HAND TO IRAN Russia is offering Iran half of a $1 billion investment project to develop offshore oil and natural gas fields in an area of the Caspian Sea claimed by both Iran and Turkmenistan, Moscow's special envoy to the region, Viktor Kalyuzhny, said Friday. Turkmenistan would own the other half of the four fields, Kalyuzhny said at a news conference in Moscow. The fields contain 2.9 billion barrels of oil and 300 billion cubic meters of gas. "There is no final decision yet on Iran, whether it will join the project as an equal partner," Kalyuzhny told reporters. Russian and Western oil and gas companies are competing to develop the Caspian region. The area's proven reserves of 220 billion barrels are enough to supply the world for eight years. Disputes over dividing up the oil-rich Caspian seabed have delayed projects to explore the region. Of five Caspian states, Turkmenistan and Iran have not agreed on dividing the seabed. Two Russian state-owned companies, Rosneft and Zarubezhneft, together with privately owned Itera, Russia's second-largest natural gas producer last year, set up a venture called Zarit to operate Turkmenistan's part of the project, Kalyuzhny said. The partners had planned to extract about 9 bcm of gas per year, according to Itera. Itera and Rosneft each are holding 37 percent of Zarit, with the remaining 26 percent held by Zarubezhneft. The partners plan to start exploring the fields in the second half of this year, Zarubezhneft said in a statement posted on its web site. Iran has said that it is opposed to the division of the Caspian and supports using the sea's resources together, which was the approach followed before the fall of the Soviet Union. (The Moscow Times 21.vii.03) INDICTMENTS FILED AGAINST SENIOR RUSSIAN POLICE OFFICERS Russian prosecutors filed charges on 2 July against six senior law-enforcement officials, including Lieutenant General Vladimir Ganeev, who were arrested on 23 June for extorting large sums of money from individuals who allegedly had compromising evidence placed on them and were then forced to pay money to the ring in order to have charges dropped. According to "RFE/RL Newsline" of 3 July, Ganeev maintains his innocence and is not cooperating with the investigation. He is demanding that his case be transferred to the Military Prosecutor's Office in order to minimize publicity. Emergency Situations Minister Sergei Shoigu, Ganeev's boss, said he has doubts that Ganeev is guilty. "Only the courts can decide this," Shoigu added, according to ORT on 2 July. Prosecutors also brought charges against the other six officers involved: Yevgenii Taratorkin, Yurii Samolkin, Igor Ostrovskii, Aleksandr Breshchanov, Vadim Vladimirov, and Nikolai Demin. The six face seven-count indictments on charges ranging from ordering murders to extortion and fabricating evidence in criminal cases. They reportedly face a maximum sentence of life in prison. (RFE/RL 18.vii.03) OMSK RACE BEGINS WITH LAWSUIT Omsk Governor Leonid Polezhaev officially informed the oblast's Election Commission on 14 July that he plans to participate in the region's 7 September gubernatorial election, "Kommersant-Daily" reported on 15 July. He also filed a defamation lawsuit against his probable competitor in that race, Communist State Duma Deputy Leonid Maevskii. An unidentified source in the oblast's Communist Party branch told the daily that Maevskii does not have a lot of money to conduct his campaign. One way to further reduce his campaign coffers, the daily suggested, would be to force him to wage legal battles. Polezhaev is currently seeking "moral damages" from Maevskii for an article in a local newspaper in which the legislator drew a conclusion about Polezhaev's "closeness to criminal activities." Polezhaev is seeking 200,000 rubles ($6,600) from Maevskii and 100,000 rubles from the author of the article. (RFE/RL 18.vii.03) SERBIA AND MONTENEGRO TELECOM PRIVATIZATION INVESTIGATED Serbian Justice Minister Vladan Batic said in Belgrade on 11 July that an investigation has been launched into the 1997 privatization of Serbian Telecom, which he called "the robbery of the century." Former Serbian President Slobodan Milosevic sold 80 percent of the company's shares to Italian Telecom and 20 percent to Greek interests in an apparent effort to fund his 1997 election campaign for the Yugoslav presidency. The Italian buyers reportedly paid at least part of the purchase price into dummy companies run by Milosevic out of Cyprus. The Serbian government bought back the Italians' shares in early 2003. (RFE/RL 18.vii.03) DSS TO WIN PARLIAMENTARY ELECTIONS, KOSTUNICA FAVOURED AS SERBIAN PRESIDENT The Democratic Party of Serbia (DSS) is most likely to win the next parliamentary elections in Serbia, even though by a small margin, according to the latest poll of the MBI polling agency. DSS is leading the polls with support of 16.3%, followed surprisingly by Miroljub Labus’ G17 Plus party, while the major partner of the ruling coalition, the Democratic Party (DS), comes third with 14.5% support. It is worth noting that public confidence has been transferred mostly to the DS, while the rest of the DOS coalition lags behind with 7.4% support, but still in front of the socialists, who gather 6% favour. Quite surprisingly, the poll shows that the Serb Renewal Movement (SPO) is also likely to enter parliament, accompanied by the Serb Radical Party (SRS). If the elections were held today, DOS (if DS is included) would have won the vote with 83 seats or 33.2% in parliament, which would allow it to form a coalition government with G17 Plus, hoping on 55 seats (as much as DS) or 22% in parliament. Meanwhile, the DSS leader Vojislav Kostunica remains to be the most preferred politicians for president of Serbia, backed by 18.9% of the inquired. Miroljub Labus, leader of G17 Plus, follows closely behind with support of 17.3%, while Boris Tadic, federal minister of defence, is ranked third with 8.1%. It is worth noting that the gap between Labus and Kostunica has narrowed, given that Kostunica won convincingly at the latest attempt for presidential elections, but the results were considered void because less than 50% of the votes went to the polls. Finance minister Bozidar Djelic was considered the person who contributed the most to economic reforms, backed by 16.4% of the polled, while central bank governor Mladjan Dinkic and PM Zoran Zivkovic follow with 5.3% and 4.5%. Nevertheless, the prime minister’s performance was approved by 34% of the inquired. At the same time, support to EU membership has reached even a higher level, as 85% of the people approve Serbia and Montenegro’s accession to EU, while just 9% are against it. Membership in NATO’s Partnership for Peace programme received high support as well, 72% approving this course of the government. However, the attitude towards NATO is still very negative, with just 38% of the public in favour of Serbia and Montenegro’s membership in the pact, while 51% being against it. (IntelliNews 16.vii.03) SLOVAKIA DEPUTY PREMIER DENIES THAT SLOVAKIA IS WORST PREPARED TO RECEIVE EU FUNDS Deputy premier in charge of EU accession, Pal Csaky, has again denied that his country is the worst-prepared EU candidate for receiving EU funds. Referring to a European Commission report published last week, Csaky said the report "does not reflect clear-cut positive changes" that were eventually acknowledged after his talks in Brussels on July 18th with Commissioner for Enlargement Guenter Verheugen. Csaky admitted, however, that the European Commission is "perfectly right" in reproaching Bratislava that "not much" was done between August and December 2002. He said Slovakia was caught in pre-election "political uncertainty" at the time. Csaky expressed confidence that Bratislava will catch up with other candidates by the time the European Commission issues its annual report in October 2003. Meanwhile, Smer (Direction) Chairman Robert Fico said his party may initiate a new no-confidence motion in the deputy premier. A motion to dismiss Csaky failed in parliament on June 20th. (NewsBase 23.vii.03) PMU HAS APPROVED THE PRIVATISATION OF SAD PRIEVIDZA The Anti-trust Office PMU has approved the privatisation of public bus transport company Slovenska Autobusova Doprava Prievidza a.s. by Zilina-based company Advance, a.s. The PMU decision became effective on June 25th, Sme reported. The cabinet approved the sale of a 49% stake in SAD Prievidza to Advance company for 89 million crowns in August 2002. After meeting the terms of the privatisation contract, the investor will have an option on a further 17% of the company shares for 30.869 million crowns. The Advance company should pay the purchase price for the 49% stake in SAD Prievidza by the end of June 2004. Share assets of Advance, a.s. are 19.2 million crowns. Last year it reported sales of 25.4 million crowns and realised a profit of 2.7 million crowns. Over the next five years it plans to modernise the bus fleet of SAD Prievidza, optimise municipal and suburban commuter transport and increase labour productivity. In August 2002 SAD Prievidza reported the balance-sheet total of 285.8 million crowns and share assets of over 175 million crowns. Earlier this year the company increased its share assets to over 186 million crowns. The government has been gradually transforming and selling stakes in all seventeen regional SAD companies to support the modernisation of ageing buses operating in urban and suburban transport. (NewsBase 21.vii.03) UKRAINE SIGNING OF OIL AGREEMENT WITH RUSSIA IS POSTPONED Ukraine and Russia postponed signing of the agreement on transit of Russian oil via Ukraine till August, Russian PM Mikhail Kasyanov said after the 9th sitting of Ukrainian-Russian commission on co-operation. Kasyanov explains delay in signing the document with uncertainty on conditions of operating Odessa-Brody pipeline. Russian PM expressed hope that the issue will be solved in a month. In June, cabinet put off signing of the oil agreement due to uncertainty on direction of oil transportation via Odessa-Brody oil pipeline. On Wednesday, cabinet decided to postpone taking decision on direction of oil transportation via Odessa-Brody in order to consider Russia’s proposition on transit of oil in reverse direction to Odessa. Initially Ukraine planned to transport oil in direction Odessa-Brody but Russian Transneft and TNK proposed to transport 9mn tons of oil per year in direction Brody-Odessa for 21 years. Meanwhile, US Ambassador to Ukraine Carlos Pascuale repeatedly called on Ukraine to give up idea of transportation of oil in reverse direction Brody-Odessa. According to him transportation of Caspian oil to Europe is more attractive for investors and more profitable for Ukraine in long-term outlook. The ambassador reminded that oil refineries in Germany and Czech Republic are interested in Odessa-Brody project since it allows reducing costs and terms of oil delivery. The construction of Odessa-Brody, the first section of Odessa-Gdansk pipeline, was completed in August 2001. The capacity of the first section of the pipeline makes up 9-14.5mn tons oil per year and it is planned to increase it up to 40mn tons of oil per year. (IntelliNews 21.vii.03) FOREIGN MINISTRY SUGGESTS SUSPENSION OF FLIGHTS BY STATE-OWNED AIRCRAFT The Ukrainian Foreign Ministry has suggested temporarily suspending the flights of state-owned aircraft to Belgium, France, and the USA, until the issue of an An-124-Ruslan's recent seizure on court orders in Canada is solved, the Foreign Ministry's spokesman, Markiyan Lubkivsky, has said. The three countries recognised the decision of the Stockholm court of arbitration, according to which the Ruslan transport aircraft was seized in Canada, so there is a danger of seizure of another Ukrainian aircraft by the three countries' authorities. The Ukrainian embassy in Canada is going to notify the Canadian Foreign Ministry that the aircraft belonging to the Antonov Airlines state company was seized in Canada without sufficient legal foundation. (NewsBase 18.vii.03) 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. 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